8th Parliament · 2nd Session
Mr. Speaker (Hon. Sir Elliot Johnson) took the chair at 11 a.m., and read prayers.
– On behalf of the Chairman of the Joint Parliamentary Standing Committee on Public Works, I present the report and minutes of evidence relating to the proposed establishment of an automatic telephone exchange at Box Hill, Victoria.
Ordered to be printed.
Notice of Motion
– My notice of motion for leave to introduce a Bill for a proposed law to amend the Constitution is at the bottom of the business-paper, and I ask the acting Leader of the House if I may hope that it will occupy a more prominent position before the session closes?
– It is well to hope in a matter of this kind. The position of the notice on the business-paper is not a thing for which I am responsible. Probably the notice is where it is because it was the last handed in. However, I hope that Government business ‘may be concluded in sufficient time to enable the honorable member to move his motion.
– Can the acting Leader of the House give us any assurance regarding the prospects of peace in the Near East? Has he any information to give concerning the conference that is taking place?
– I cannot say more than I have already said, namely, that the news we have received is of a distinctly hopeful character.
– The Prime Minister has not been seen for some time, and the rumour is current that he has been spirited away byhis enemies. Is there any truth in that rumour?
– I explained a day or two ago that the right honorable gentleman is very unwell, and is endeavouring to get a little rest.
asked the Prime Minister, upon notice -
What amount has been paid by the Commonwealth Government in the purchase of shares in the Commonwealth Oil Refineries Limited?
Mr. GREENE (for Mr. Hughes).The Commonwealth Government has paid to date on its 250,001 shares in the Commonwealth Oil Refinery Limited the sum of £112,500 9s.
asked the Prime Minister, upon notice - :
Mr. GREENE (for Mr. Hughes).The answers to the honorable member’s questions are as follow: -
asked the Prime Minister, upon notice -
Whether it is the intention of the Government to purchase theRowancollection?
Mr. GREENE (for Mr. Hughes).I would refer the honorable member to the remarks of the Prime Minister on the 27th July last, -when he said he was personally in favour of acquiring the collection and asked the House to find some means of expressing an opinion.
asked the Prime
Minister,upon notice -
– This is a matter which concerns the Government of New South Wales. They have agreed to conform to the conditions laid down by the Commonwealth Government when making the grant.
Motion (by Mr. Greene) agreed to -
That the House at its rising adjourn until 3 o’clock p.m. on Monday next.
The following papers were presented: -
Northern Territory Acceptance Act and Nor thern Territory (Administration) Act - Ordinance of 1922. No. 11. - Maintenance Orders (Facilities for enforcement).
War Service Homes Act - Land acquired under, in New South Wales, at West Kempsey.
Debate resumed from 2nd October (vide page 2973), on motion by Mr. Bruce -
That this Bill be now read a second time.
.- The Bill is a measure to be discussed chiefly in Committee, but at least three of the important alterations that it is designed to effect are worthy of consideration at this stage. They are the averaging of incomes for taxation assessment, the treatment of bonus shares, and the exemptions. We should, I think, endeavour to make our income tax law as simple as possible, but it is, in fact, complicated and intricate, so that the ordinary person finds it difficult to decide exactly how it applies to his particular income. I do not know that the averaging system will tend to simplicity, and I gravely doubt whether, if adopted, it will prove as satisfactory as many seem to think. My opinion is that it will increase complication in many cases, and, instead of lessening the difficulties of the man on the land, will accentuate them. The Taxation Commissioners appear to have been divided in opinion as to the advisability of assessing on average incomes, and the primary producers seem equally divided as to how the system would work. Many think that it would be better merely to carry forward losses from time to time. They would prefer to have their losses in a bad year deducted, paying income tax on the net amount; and that seems to be preferable to the ‘averaging system.
– The averaging system is not now being proposed for the first time. It was agreed to in an Act dealt with last December.
Mr.CHARLTON.- Yes, but it was then applied only to certain interests, and it is now proposed to extend it so that it shall, embrace, with certain exceptions, all sections of the community. The Treasurer told us the other day that an income which did not reach two-thirds of the average amount for five years would not be taken into consideration for averaging, but would be taxed as it stood.
– It would start a new averaging period.
– That meets, to some extent, my objection to the system. Let me direct attention to paragraphs 11 and 12, pages 51 and 52, of the first report of the Taxation Commissioners: -
Note. -For the first year the income of the year is taken as the average on which to determine Che rate, for the second year the average of the first and second and so on to the fourth. For the fifth and subsequent years the average Is that of the tax-year and the four preceding years.
The figures used in the table are hypothetical ; but hypothetical figures, bo long as they fairly represent a probable experience, ore Just as reliable for purposes of illustration as actual figures, which, as they are never likely to recur exactly, can only be regarded as typical.
However, it seems to me that averaging will not be as satisfactory as might be desired, and that the taxpayers will have as much difficulty in making up their returns as they have at the present time. Taxpayers, especially amongst the business community, have always been troubled to know exactly how the present tax operates.
In regard to bonus shares, I am totally opposed to relieving them from taxation.
– In every case?
– Yes; I am open to conviction, but I cannot see why they should be free from taxation. Companies make profits, a portion of which they distribute in the form of dividends. In time the undistributed profit accumulates to a large amountand is then distributed amongst shareholders in the form of bonus shares. From the interjection of the honorable member for Balaclava (Mr. Watt), I infer that in his opinion there are circumstances in which it would be equitable to exempt such shares from taxation, and
I shall be glad to hear what the honorable member has to say on that point. But at the present time I see no justification for exemption. Since the war, many companies have accumulated large profits over and above the dividends they have paid. By converting these profits into bonus shares, increasing the capital of the company, and giving the shareholders a larger holding free of taxation-
– Taxation has been paid on all these shares at the source in the hands of the company.
– If that were not so, I do not thinkanybody would agree to exempt them.
– That puts a different complexion upon the matter. Unfortunately, I did not have the opportunity of hearing the Treasurer move the second reading of the Bill, and I was not aware that taxation is paid on the shares at the source. Messrs. Farleigh and Duffy, of the Taxation Commission, in a minority report upon the subject of bonus shares, say -
I understand that the Treasurer is not adopting that recommendation.
– Evidently, the object is to place this taxation on an equitable basis. There are many people with small incomes who receive dividends from companies, and the taxation of bonus shares in their hands would raise their incomes above the exemption.
– Bonus shares that are issued out of profits will be taxed at the source, and not in the hands of the shareholders.
– The Treasurer’s explanation removes a misapprehension under which I was labouring.
I am pleased that the exemption is being increased to £200, but I would like the Treasurer to agree to further extend it.
– Should there not be greater discrimination between single men and married men with large families ?
– That is what I am about to urge. An exemption of £200 is very small, having regard to the high cost of living. When the Income Tax Act was first introduced by a Labour Government, the exemption was fixed at £156, although I urged that it should be not less than £250. Since that time the cost of living has increased tremendously, and I think the exemption to-day should be at least £300, at any rate in respect of married men. I agree with the honorable member for Franklin (Mr. McWilliams) that there should be discrimination between married and single men. If single men are to be granted an exemption of £200, a married man should be allowed a further exemption of £100 in respect of his wife, and there should be a greater allowance for each child. The increase from £26 to £30 for each child is not sufficient. In Great Britain, where, generally speaking, taxation is much heavier than in Australia, the income tax exemption is much more liberal. The exemption is £156 in respect of earned income, and £135 in respect of unearned income, whilst the allowances are : - Married men, £100 earned, £90 unearned; eldest child under sixteen years, £40 earned, £36 unearned; each younger child, £30 earned, £27 unearned. A man with a wife and three children thus gets an exemption of £352, as against the proposed exemption of £290 in this Bill. Great Britain is supposed to be more heavily taxed than the Commonwealth, and surely the allowances made by the Commonwealth should be at least as liberal. The Treasurer would be taking a reasonable view if he would agree to increase the exemptions, at any rate, so far as the poorer classes are concerned. When the Bill is in Commit tee we shall test the feeling of honorable members on that point.
The proposal in regard to the taxation of co-operative companies is very unsatisfactory, although the present law is an improvement on that which obtained prior to the last amending Act. Clause 4 of this Bill, in the definition of “income,” excludes -
Any rebate received by amember of a cooperative company based on his purchases from that company, where the company is one which usually sells goods only to its own members.
We all profess to be desirous of encouraging co-operation, but the insertion of the word “ usually “ in the paragraph I have quoted will press harshly on co-operative societies. These bodies work on the same basis as in Great Britain, where, however, I understand, they are free from taxation. Nearly every co-operative society, although selling goods chiefly to its own members, does sell to a limited number of outsiders. The co-operative society with which I am associated sells only to its members; but there are societies with a membership of 2,000 or 3,000 who sell goods to perhaps fifty or sixty persons who are not shareholders. The latter get some rebate, although not as much as is received by the members. The proposal in this Bill will have the effect of rendering liable to taxation all rebates received by cooperators. I do not think Parliament intended that when it passed the existing Act, and the amendment introduced some time ago was intended to exempt members of these societies. I submit that the definition would be more fair if it referred to “ any rebate received by a member of a cooperative company based on his purchases from that company.” That would exempt only the rebates received by members, leaving non-members who received rebates to pay taxation upon them if they have a taxable income. The definition in its present form deprives of exemption the whole of the members of any society which does not sell exclusively to its own members. The co-operative societies are not doing any harm to other people; but this amendment will press very heavily upon old people. The secretary of the society to which I belong has put the position to me in this way: “Many old-age pensioners deal with us because they get a slight rebate, which, at the end of the quarter is helpful to them. They have not the money with which to take up shares. Under this definition, we must either refuse to deal with them, or render the whole of our members liable to taxation upon the rebates received from the society.” I think the Treasurer would meet the wishes of the House if he amended the Bill as I suggest, so that shareholders who are receiving a taxable income shall not be liable in respect of rebates. These co-operative societies, whether formed amongst farmers for the more economical marketing of primary produce, or amongst the workers for the supply of every-day necessities, promote thrift, and should be encouraged by Parliament. Outside these four matters I have mentioned, no great principle is involved in the Bill. The measure contains quite a number of clauses, but as they are mostly for the purpose of consolidating previous income tax assessment legislation, they will provide work for the Committee stage.
.- On the 22nd April, 1920, thi3 House unanimously agreed to the following motion: -
This House is of opinion that the fairest method of calculation for purposes of the Federal income tax ns applied to primary producers would bo upon a basis of five years’ operations. and iia December, 1921, the Royal Commission on Taxation, which had been appointed by the’ Government, having in the meantime recommended the system approved by the House, the ex-Treasurer (Sir Joseph Cook) introduced an amending Income Tax Assessment Bill for the purpose of bringing it into effect. I would like honorable members to realize that the Country party have never contended that the averaging system upon income over a number of years should be confined to primary producers only. In my remarks on the Bill before us in 1921 I said -
I repeat that the measure is altogether an incomplete instrument for the purposes desired and which it was hoped it would accomplish. All that the .primary producer expects is mere justice. I would follow the honorable member for Balaclava (Mr. Watt) when he says that this law of average should apply to every taxpayer. In justice, I concede that that is only reasonable.
Although I voted for the amending Bill <m the ground that the principle of five years’ average we sought to have estab lished was admitted, in concluding my remarks I said -
I know of no injustice in connexion with our legislation that is greater or does more to retard the progress of the country. This Bill is an admission of the necessity for some remedy, and as such I accept it. It is clumsy and inadequate, but it is a step in the right direction, and I hope that the Government will offer an early opportunity to honorable members to consider a revised instrument for the assessment of taxation which will be equitable all round, and not continue the heartburning that is now caused to citizens by the unjust and cruel incidence of taxation.
I am very sorry to say that while I am able to compliment the Treasurer (Mr. Bruce) on the manner in which he has presented this consolidating Bill, I cannot congratulate him upon the method of averaging he has embodied in it. It is clumsy, and does not meet what the House desired; that is to say, it does not apply the averaging system to incomes, but applies it to rates. People do not live upon rates. They live upon their incomes. If the system is to be equitable, it must be based on the average income a citizen has received over the period fixed upon. A Royal Commission which submitted a report to the British Government in 1919 recommended -
No tax can be successfully administered that is contrary to the general sense of justice in the community.
Our Treasurer, when addressing a meeting in Melbourne recently on the subject of taxation, upheld the maxims of A.dam Smith, and one of those he dwelt upon was -
The subjects ‘ of every State ought to contribute towards the support of the Government as nearly as possible in proportion to their respective ability, that is, in proportion to the revenue which they respectively enjoy under the protection of the State.
If the Treasurer and the House agree with that maxim, they must adopt the amendment I propose to submit in Committee, because it will secure practical equity, and will not vary on varying incomes. The Royal Commission appointed by our Government to inquire into taxation matters has said -
If the principle of graduation were dropped out of the Act and a flat rate for all taxpayers substituted - a step which we do not recommend- , , and which I do not recommend - the necessity for a system of averaging would simultaneously cease to exist.
That is so. Honorable members will readily see that when taxes are levied -on a flat rate of, say, la. or 2s. in the £1, it does not matter what the income may be in any one year, it will have no effect on the amount received in another year, and the aggregate of tax over a number of years will amount to the same as it would upon a steady income earned over the same period. Honorable members can . also see that under a gradu-° a ted tax the amount levied on the taxpayer, with an income fluctuating from year to year, may vary to a crushing extent.
If I understood the Treasurer properly when he waa moving the second reading of this Bill, he pointed out that differences are inherent to all averaging systems when incomes rise and fall. -I dispute that. In a table which I have had circulated I have endeavoured to prove that it is not the case. The Treasurer also described the Bill as being the refinement of equity. I dispute that also. I contend that the true average when taken on income, and not on rate, will be nearer the refinement of equity than is the Minister’s proposal. The Treasurer also pointed out that his Bill waa the consolidation of eight previous Acts, but I venture to think that if it is passed in its present form it will soon ha,ve some pups; that is to say, it will require further amendment because of the injustice that will be done to certain taxpayers. The Royal Commission on Taxation in its report says -
In support of the general evidence that impoverished years recur with frequency, there were placed before the Commission, ‘by primary producers and their representatives, actual cases which clearly exhibit the added hardship imposed by the present system of taxation, in which each year is treated as a watertight compartment cut off from its neighbours on either side, and subjected to taxation up to the full limit of its earning, irrespective of what has occurred in the earlier years. The Commission also obtained particulars of a large number of actual cases from pastoral and agricultural finance institutions and other sources, and had under examination also fifty cases prepared by the federal taxation authorities from taxpayers’ original returns, so that they had in all under scrutiny from 130 to 150 actual cases founded on dependable records, in addition to a number of hypothetical cases which were submitted by various witnesses. Only a few of these can be cited here as examples in order to compare their treatment with that which would be meted out in the case of a person of steady income who throughout a corresponding period had received the same aggregate income. These examples may be introduced with an extract from the evidence of a witness representing the Federated Graziers Association of Australia, who said -
An example is, however, given illustrating the actual experience of a grazier in at large way, which will show what the actual result has been in seven years’ operations -
The net result of the seven years’ operations is a profit of £56,447 18s. 6d., or an average of £8,063 19s. 9d. per annum. The assets at stake in the business varied in value from £300,000 to £450,000 . . In the example I have just quoted to you, it has been shown that the net result of seven years’ operations was a profit -of £56,447.
Taking the result of the sixth and seventh years, which showed profits of £55,531 4s. §d. and £45,835 respectively, the unfortunate earner of this income finds that in those two years alone his Federal income tax on those profits amounts to £38,246 16s. 2d. and the State (New South Wales) income tax to £6.961 15s. 2d., that is £45,208 lis. 4d. in all.
The Royal Commission says that hardship only can come to the taxpayer when one year is taken and separated from all other years, without taking into consideration the result of the previous year or the prospects of the year ahead; but in my proposal one year is changed to a term of five years and annually adjusted or assessed. Nature has her laws of average, and my proposal simply falls into line with the laws of nature. In the past we have assessed all the revenue obtained by a taxpayer during a period of twelve months, instead of twelve years. I propose that the assessment be made on the basis of his earnings for sixty months, a period which contains five springs, five summers, five autumns, and five winters. By the adoption of this system we shall overcome 80 per cent, at least of the complaints that now arise. For one thing, difficulty in regard to the calculation of the natural increase in live stock will be overcome, because the increase which, comes into existence during’ the five years will either have died, been sold, or become a merchantable commodity during that period. In that way the natural increase would be brought into the actual possession and enjoyment of the taxpayers. Under the old system of assessment a taxpayer might be assessed on his natural increase of stock and before the next year’s return be came due the whole of that stock might have died as the result of the drought conditions which unfortunately occur so frequently in Australia. In their report the Commission gave a number of comparative tables showing what tax would be payable under the several methods.These they epitomize in the following way : -
The summary shows that in the twelve representative examples epitomized, having an average of thirteen years, the amounts by which the other totals are in excess of the total tax (£46,612 8s. l0d.) payable by taxpayers having unfluctuating steady incomes of equal aggregate amounts are -
The divergencies are 48.22 per cent., 35.09 per cent., 6.70 per cent., and 2.07 per cent. respectively as compared with the tax payable (S.I.) by the recipients of steady incomes of similar volume. The close approximation of the A. M.S. method to the standard of the tax on steady incomes bears striking testimony to its accuracy : it is closely followed by the method(R.A.M.) which for reasons already stated your Commissioners recommend.
This Commission, . which was appointed to propound a scheme that would be equitable in its application to all citizens of the Common wealth, has deliberately recommended a scheme under which a citizen with a fluctuating income would nay 6.70 per cent. more than a citizen who wasfortunate enough to be in receipt of a regular annual income. If that difference were limited to 6.70 per cent., the position would not be so bad, but the amounts which go to make up that average vary tremendously. Some of those variations hit some of our citizens very severely; but undoubtedly in many cases the system recommended is an improvement on that which has hitherto obtained. It is well that we should examine some of the tables which appear in the report. In the summary of examples set out on page 18 of the report, it is shown that, taking the tax payable by a man with a steady income at £20 0s. 10d., a taxpayer with a fluctuating income under the system recommended by them would pay £19 19s. 4d. That would appear to be an advantage in favour of the system recommended by the Commission; but when logically considered it is not, because it is just as serious for, say, a banking institution to have an excess of 10s. in its accounts a3 it is for it to have a shortage of 10s. If necessary, it would spend £100 on the work of finding out where the mistake occurred. Here we have a system where, in certain cases, the amount payable by the taxpayer is less than the mean average ought to be. Taking the next example, it is shown that under the system recommended by the Commission - the “E.A.M.” method - a taxpayer with a fluctuating income would pay £83 13s. 9d. ; while the man with a steady income would pay only £53 15s. 3d. There we have a variation of £30 between the tax payable by two men enjoying the same income. In yet another case, the amount payable by a man with a steady income would be £75 19s. 2d., as against £105 39. Id. payable by a taxpayer with a fluctuating income under the recommended average method. There we have a difference of 25 per cent. That should not be possible. In yet another case, the amount payable under the recommended average method is £124 10s. 2d., as against £127 19s. 2d. payable in respect of steady income. That, I am afraid, is equally wrong. The Commission states -
Our inquiry has led us to the conclusion that harsh and inequitable ‘incidence in the case of widely fluctuating incomes, when each year is strictly segregated from its neighbours, is inseparable from any system of income tax in which steep graduation is a feature, and that escape from the inequity of such a tax can best be secured by a breaking down of the wall of partition between the years -
The only way is to break down the wall of partition between the years and to allow the income to be based on the fire years’ average -
By some method of merging or averaging which substantially mitigates - if it does not wholly remove - the cause, viz. : - the unsound assumption that each year’s income or loss standing alone must determine taxable capacity, whereas the circumstances require that the longest period practically possible be brought into account. When as many years and as many vicissitudes as is practically possible are brought into line through merging or averaging the annual incomes, the true taxability of the subject - that is, his taxable capacity - can be fairly determined. . . . The outcry against, the system of averaging, which has found free, though not universal, expression in Britain, arises largely from this confusion. In our opinion the definite and only necessary function of an averaging system is to determine the taxable capacity of the subject. . . .
What is the taxable capacity of the subject? We are agreed that the segregation of each year from its neighbours is wrong. We have agreed that the five years’ average should be taken, but we are now asked to adopt a method that is not based on an average of five years’ income. I would draw the attention of the House to a . couple of tables which I have had printed, and ase now in the hands of honorable members, and which I think will illustrate my contention as to the way in which it would be possible to arrive at a true system of’ averaging incomes and assessing taxpayers. The Treasurer may say, or his advisers may tell him, that considerable cost would be involved in inaugurating the system which I propose.
– That would be a very natural objection.
– If the Treasurer says that the system recommended by me, and illustrated in a memorandum which I ha.ve circulated amongst ‘honorable members, would involve more cost than that now proposed by the Government, I should like to know from whom (he has obtained that advice. If he has been informed by the Federal Taxation Commissioner that the working of my system would involve greater expenditure, then I draw his attention to a paragraph in the report of the Commission criticising the opinions expressed by that officer -
In view of the statement made by the .Federal Commissioner of Taxation in his Seventh Annual Report that “ The average of income for purposes of an income tax assessment would greatly increase the administrative difficulties and costs by introducing complexities from which the administration is now .free, and it would considerably add to the difficulties of taxpayers in understanding their assessments,” your Commissioners endeavoured to obtain an authoritative estimate of the cost of change, but the information received was bo vague and unsubstantial that we have been unable .to make any use of it. In his evidence before the Commission, the Federal Commissioner of Taxation declared - “ When . I tell you that the averaging of incomes will involve the doubling of our assessing staff, I am not exaggerating the position,” but when specific ‘ requests were put to him to ascertain how his estimates of costs had been arrived at, he was forced to admit “ it is all a guess, I am sorry to say, because we have not the figures.”
He had no figures te support his statement.
The Deputy Federal Commissioner in Sydney estimated the increase at possibly 35 per cent, of the present cost of assessing, ‘but he too was unable to submit any figures in substantiation of his estimate. A witness who had had fifteen years’ experience in responsible positions as a taxation officer gave it as his opinion that “ under an average system there will be a little extra work, but this can be provided for .by strict supervision and reorganization. If the present system of arriving at average cost values of stock is done away with, there will be a great saving, which can be offset against any increases in administration costs consequent upon the introduction of an averaging system.”
In the memorandum I have circulated amongst honorable members explaining the amendments that I propose to move, I ‘have taken from the Treasurer’s memorandum figures setting out certain fluctuations during a period of years, and have tested’ them by his system, as well as by that which I am recommending to the House. In my memorandum I state that-
The method of averaging incomes provided for in the amendment proposed by Mr. Prowse results in making the total taxes paid .by a taxpayer over a period of five years exactly the same, whether his income be received in five equal annual sums, or whether it be received in irregular amounts (whether rising or falling).
The method’ of arriving at the tax payable in each year is very simple, and should take less time in assessing than the method proposed in the. Bill.
In order to carry out the reforms which I suggest, the ready reckoner as at present used by the Taxation Department would suffice. If this Bill is passed, however, there will be required, in order to cope with the fluctuations of rates and amounts, a ready reckoner the like of which is not in existence.
The following tables of comparison show - clearly the’ difference between the results which may be achieved by the adoption of the -methods I propose and of those proposed by the Treasurer. On page 8 of the memorandum to the Bill, which gives examples in connexion with the Bill, honorable members will note that, over a period of five years, a sum of £6,500 has been earned, and in the manner set down in the tables supplied. In respect of the first, the income for each of five successive years is £800, £1,000, £1,500, £1,200, and £2,000. I have applied true average to the incomes shown under that table, and the tax works out at £363 18s. 4d. A steady income over five years, received in equal instalments of £1,300 per annum, also totals £6,500; and the citizen pays £363 18s. 4d., which is the same amount of taxation as under the true average system. That demonstrates the refinement of equity. According to the proposals of the Bill, dealing with exactly the same figures, the tax works out at £328 16s. 6d. upon the total income of £6,500, or £35 below the true average. I present table “A” so that honorable members may perceive the exact comparison. The foregoing is more clearly shown by these tables: -
Steady Income for five years, received in equal payments of £1,300 per annum, equals £6,500, and pays in tax £363 18s. 4<f.
A system which returns to the Treasury less than the proper amount of income tas is just as improper and erroneous as one which forces a citizen to pay more by way of tax than he is entitled to pay. This country requires a system of taxation which shall be absolutely just and equal, in its incidence, upon every taxpayer. On the same page of the memorandum to the Bill another set of figures is submitted by the Treasurer, indicating the income earned by a citizen for six successive years as follows:- £2,000, £1,500, £1,000, £500, £800, and £600-a total of £6,400.
Under” the true average system, honorable members will note in the table of comparisons which I append that the total amount of income tax paid for the six years amounts to £318 4s. . Under steady income, the same amount would be paid by the taxpayer; but, under the credit column appearing in my table, it will be seen that a small refund is made, although in . but one year out of the six, and amounting to only £2 13s. 5d. The refund is made in order to give justice to the citizen concerned. Why the Government should not pay what it owes to the citizens of the Commonwealth - if the Treasurer contends that they should not - I fail to understand or appreciate. According to the Bill, the taxpayer earning the same amount of income in each of the six years mentioned would be required to pay ‘a total tax of £360 7s. 10d., or £42 above the true average. This will be. apparent in the following comparison-. -
Honorable members will perceive at a glance that the proposals in the Bill are wrong,. Why should one citizen be re- quired to pay £42 more than another who has been in precisely the same position from year to year during the six years in question?
I now submit another table, showing the effect of both methods in dealing with rising and’ falling incomes; and I draw special attention to the violent fluctuation in tax under the Government proposals, and to the perf ect agreement with steady income under my true average system. The figures set down, by the way, are not such as appear in the printed memorandum to the Bill : but they are so startling as to form a striking comparison -
It will be seen that the income is taken in each table in respect of aperson earning £10,000 in all, over five years. First, there is the declining income by £1,000 a year, beginning at £4,000 and ending in the fif th year, with nothing ; and, secondly, there is the rising income, beginning with nil in the first of the five years, and increasing by £1,000 each year to £4,000 in the fifth ; making, again, £10,000 in all. Under the method proposed in the Bill the total tax paid on the falling income is £1,0131s: 8d., and, on the rising income, £613. Under my true average system the income paid for thefive years on a declining income amounts to £746 9s. 7d., and, on a rising income, to precisely the same. How manifestly unjust and inequitable it is that a taxpayer suffering from a declining income should be required to pay practically £400 more, over the sameperiod, than another taxpayer whose income is steadily rising - making, for the five years; the same gross total ! This is not a party question. The aim of Parliament should be to devise some instrument which, will mete out equal justice to those two typical citizens, and, in fact, to every taxpayer.
– If the honorable member’s figures are correct, the proposals of the Government- are: grossly unfair.
– Under the true average system honorable members will see that, both in respect of rising and falling incomes, taxpayers are. assessed at precisely the same gross amount as in the case of a third individual who also receives £10,000 income over five years, but steadily, at the rate of £2,000 per annum. When it can be demonstrated that it- is easily possible to assess taxpayers upon an equitable basis. I claim that such a system should be adopted.
– The honorable member is putting- his case as though his “ true average “ were a basis of fact. I entirely dispute that, however; and- I intend to demonstrate that the honorable member is not entitled, toattach the phrase “ true average “. to his system.
– Then I shall be prepared to call my system a just average. I have further tables of > figures which honorable members may care to examine. I have taken the case of a citizen who is earning £5,000 netover a period of five years, and I have treated that total of income in five different ways, as follows:
The first treatment is according to the true and just average; and the total amount of tax, namely, £239 18s. 9d. is precisely the same as in the case of a regular average income. Honorable members will note that the just average works out exactly ‘as though the taxpayer had made the total amount of his income for the five years at the rate of £1,000 per annum. My true and just average table shows, in fact, however, that in the third year he made a loss of £1,000. The table shows how my ‘system deals with such loss; and I may add that that is precisely -how the Treasurer’s system should deal with losses. In the year in which the loss is made, £105 16s. 5d. is refunded to the taxpayer. The Government would act far more equitably if, instead of first relieving the taxpayer of money which they had no right to take -afterwards trying to level up generally by paying out doles for seed wheat and subsidies to cattle owners - they were to impose a -true and just system of levying taxes. In the first year the citizen is taxed on his income for that ‘period, namely, £2,000. In the next year,his income amounts to £1,000. That is to say, for those two years hehas averaged £1,500. The taxableamount due upon £1,500 per annum forthe twoyears is deducted from what the citizen has already paid in hisfirst year, and hepays the difference, so bringing out matters squarely. So far, so good! In the third year, however, the taxpayer sustains a loss of £1,000. That reduces the average of his income, over the three years, to £666 per annum ; and that amount, for the three years, provides a certain taxablesum.Itis deducted from what he has already paid, and , it is found that he has previously paid more than he should have been required to contribute. Therefore, he is refunded - as my just average table demonstrates - £105 16s. 5d. It will be noticed how refunds deducted from the amounts of taxation already paid are necessary to place the citizen on precisely the same basis as a fellow citizen who has earned exactly thesame total of income from year to year. I draw attention now to example “ C.” This demonstrates the position under the old system, ‘before the Act was amended. For the five years - showingfluctuating annual incomes precisely as in example “A” - the taxpayer is required to pay £501 4s. 2d., which is more than double the amount of tax paid by a citizen earning a steady income of £1,000 a year. I cannot conceive of any grosser formof injustice. Such a difference as is revealed bet ween examples “ C “ and “ A “ is not inconf ormity with the findings of theBritish Royal Commissionor ofthe Commonwealth Taxation Commission. Yet, under the Statuteof 1921, and theBill before the House, the same inequitable system is carried on, slightly mitigated in some cases, however and aggravated in others.
My example “ D “ demonstrates what amounts of tax are demanded by the Department under the 1921 Act. It will be noted that the total net tax is £374 9s. 5d. in respect of precisely the same series of fluctuating incomes over the five-year period. Again, I ask honorable members to compare that total with the amount drawn from a regular average income, and on the basis of my average system. My last example, “ E “ shows that, according to this amending Rill, the net amount of tax will be actually higher that under last year’s Act, and will total £381 3s. 2d.
The Treasurer may object that if my average methods are introduced, they will do violence to his. income tax receipts. A burglar who reforms will doubtless do violence to his income.
– Now we have the searchlight being turned on by the police !
– But will honorable members say that the burglar is not doing the right thing in reforming? Of all the projects advanced by thinking men for the taxing of the people, that embraced in the amending Bill is the most unsatisfactory and unfair. It does not provide the modicum of justice which can be and should be given, while the former systems imposed by the Taxation Department have been nothing short of burglary. I should add that, in speaking in this manner, I am merely employing metaphor.
– Well, it is a metaphor I never met afore!
– The honorable member for Batman (Mr. Brennan), when the Superannuation Bill was under consideration, expressed the desire that the Government should make it retrospective to prior to 1920, and he made a statement which completely applies to what I am now endeavouring to show to the House. The honorable member said that finance should not be used as ah argument to support palpable injustice. If the Treasurer, having done justice to the citizens of the Commonwealth in giving them the benefit of a five years’ average, finds that the result does not meet his requirements, there is only one obvious and honorable course open to him. That course is to ascertain, first of all, what amount he will be short in revenue, and then to increase the rate of tax to make up that amount. As honorable members will see, the tax will then be levied equally on the people. To-day the burden is unequally distributed, and, first of all, justice must be done; then, if the whole of the people are found to be not contributing sufficient, the proper course is to increase the rate of taxation in Order to secure the amount of revenue required by the Commonwealth. I cannot for the life of me conceive any reasonable objections to the proposals now put forward. When the Bill is in Committee I propose to move that sub-clauses 2 to 8 of clause 13 be left out, and the following new subclauses substituted: - (2.) In assessments of tax for the financial year beginning on the first day of July, 1922, and for each subsequent year: -
Act by which the rates of income tax are declared, to a taxable income of that amount.
The application of a true average will dispense with 90 per cent. of the complaints that come to the Taxation Department, and prevent the heartburns that are now experienced. One of these complaints has reference to the taxation on the natural increase of stock. My proposal will also remove the difficulty in the way of those who go out prospecting, as we desire people to go, in order to enrich this country. Such people will be able to average their incomes, whereas under the present arrangement they are seized on when they find a little bit of gold, without any regard to the amount of money sunk in obtaining that gold. Such injustices are not likely to attract those immigrants whom we all desire to see come to this country. When a man goes on the land the bulk of his time is occupied in developmental work; he is sowing for a reaping, and the Taxation Department taxes him on his reaping day. The position then is not a fair representation of a man’s taxable capacity, which, as the Royal Commissions, both in England and’ here, have found, is the amount he receives over a certain period. It has been clearly shown that where the graduated scale is in vogue, some form of averaging of income is necessary in order to be just to the citizen, and the averaging should as nearly as possible represent the true position. My proposal is just in regard to rising and falling incomes, so that a man is taxed least when his income is least, and when he makes a loss in his work of developing the country he gets a refund. These are some of the advantages to be. gained, and honorable members will notice throughout the whole of the report of the Royal Commission that there are very few occasions on which a refund is necessary. They are called for only in crushing years like 1914; and is it not better to return a man his own money than to give him a dole, and, in a way, pauperize him ? The system, therefore, commends itself to me, and I think it will give every satisfaction if applied. No honorable citizen can object to be treated on an equal basis with his fellowcitizens who have equal taxable capacity. The computation, I reiterate, is simple, and, so far from causing increased expenditure by the Department, ought to tend to economy. If the principle which I commend is adopted, I am quite confident that there will be very few amendments required in the taxation laws of the Commonwealth for many years to come.
– First, I congratulate the Treasurer (Mr. Bruce) on his excellent exposition of the Bill on the occasion of its introduction. As the honorable gentleman very properly said, the Bill contains but few really fundamental alterations, and of these he favoured us with a clear explanation. I have never yet been able to see any substantial advantage in the averaging system as it obtains under the present law. But the system was considered fully by the Royal Commission, and has been recommended to this House. We must all admit that the honorable member for Swan (Mr. Prowse) has devoted considerable industry to the formulation of the scheme, which with a great degree of earnestness he has submitted. But if my recollection serves me aright that very system of averaging which he has denominated as . true and just has already been investigated by the Taxation Commission, which came to the conclusion that it was not desirable to adopt it - in other words, the Commission rejected it. The system may havemany merits which have been assigned to it by the honorable member, but the fact remains that the Commission was not able to see them. The Commissioner of Taxation, who is an able and experienced expert, says that the complexities and difficulties involved in the proposals of the honorable member, would result in much additional administrative expense. While, as I say, the honorable member has been earnest and zealous in the promotion of his scheme, we dare not ignore the fact that the Taxation Commission, whose special duty it was to investigate and recommend, has seen fit to reject it.
– The Commissioners did not reject the scheme I proposed.
– It rejectedsubstantially thesame scheme.
– It never considered it.
– The scheme rejected is substantially the scheme of the honorable member.
-The schema of averaging, as it obtains in the present law, is in itself very unsatisfactory, but the Treasurer, who has applied himself with assiduity to the question, suggests two or three substantial reforms. The extraordinary anomaly of the averaging system applying only to a section of the community is one that he at once foresaw, and at once determined to rectify. 1 am prepared to agree with him that the suggestions he has made by way of reform of the scheme will be valuable. While the scheme previously had nothing to recommend it, there is, at least something added to it now which may make for improvement. I do not think that the scheme as proposed will prove of great advantage to those concerned, but it may possibly effect some little improvement. If we can devise a proper system it will certainly be of great advantage. There are various views regarding the ordinary system of deducting losses from profits.
– What is wrong about that?
– To me there appears to be nothing wrong, but the point is that it has received consideration, and, for present purposes, at all events, is not immediately before the
House. The Treasurer dealt with the subject of the taxation of companies, which has been exercising the attention of the business community for a considerable time. He placed before us the three systems in vogue. He referred particularly to the Victorian system, which is, perhaps, the most simple of all. That is to say, it is a system of taxation at the source, but it is simple only by reasonof the fact that the tax levied is so low, viz., only1s. in the £1. When we come to deal with taxation of : 2s. 8d., and as now, 2s. 5d. in the £1, then, of course, as the Treasurer has said, any attempt to impose that system without adjustments must work serious disadvantage and injury to a large section of the community. The Treasurer has told us that the effect, without adjustments, would be to tax 200,000 people who are not now liable to taxation.
– That is a very remarkable statement!
– It is a remarkable statement.
-It is in the report of the RoyalCommission.
– The Treasurer also told us that the system would impose additional taxation on 25,000 other people, while it would , giverelief to something like only 2,635 taxpayers. Cinder these circumstances it is quite obvious that the simple Victorian system cannot be introduced. Another system is the British, which I have advocated on two or three occasions in this House. It is a system of taxation at the source with adjustments afterwards. That system has very much to commend it, and has been in force in the Mother Country for a great number of years. A few years ago it was subjected to close scrutiny by a Commission of experts appointed to investigate various income tax questions. (ThatCommission, after a lengthy investigation of the ‘matters referred to it, reported that, having given the matter full consideration, it recommended the continuance of the ‘system of ‘taxing at the source,, together with adjustments. In England there is an Adjustment Department to make necessary refunds. This involves considerable expense, no doubt, but, nevertheless, the British Government has determined to continue the system.
– Itseems to be a system very suitable to the extraordinary ramifications of business in Great Britain, but not necessarily suitable here.
– Not necessarily suitable here, though I am not aware of any special conditions in Australia which would prevent its satisfactory application here. To adopt that system would make a radical alteration of our law. The Taxation Commissioners have recommended the. Treasurer not to adopt it, although the honorable gentleman has, admitted that if it were adopted there would probably be a saving of about £100,000 inthe cost of administration..
– And much greater efficiency.
– Yes. In any case, I do not think it is possible to radically alter the law in this respect at the present time. We can only indulge in the hope that, should our taxation be gradually reduced to, say,1s. in the £1, or thereabouts, the Government would not hesitate to abolish the present complicated system, and would adopt the principle of taxation at the source.
– We shall notbe alive then.
– I do not altogether despair of it. The Treasurer spoke of bonus shares. Of these, there are the bonus shares which are representative of accretions of capital. Bonus shares are also issued on the reconstruction of companies, the sale of: the whole of the assets being made to a. new company, which issues its shares to the shareholders of theold company. Bonus shares may also represent accumulated profits. These f orms of. bonus shares are free from taxation. That was practically decided recently in Webb’s case, under the existing law. That was a case in which a company, whose capital consisted of 200,000 shares, at £1 each, and whose assets, by reason of the accumulation of profits extending over a considerable number of years amounted to something like £800,000, determined to reconstruct. A new company was formed to purchase the whole of the assets of the old company, each shareholder of the old company being allotted four shares in the new company. The Court held that, as the profits had been capitalized, and practically formed part of the capital of the new company, they were not liable to in come taxation, unless severed from the capital of the company.Thus wemay take it that the law. is: that bonus shares of this class, which, have been a source of’ great anxiety to the members of the- commercial and trading community,are exempt from income taxation.
– No; only the share affected by that particular judgment.
– Not at all; that was a strong case, and it may be argued a fortiori that all bonus shares representing accretions of. capital in the way of. increased values are exempt from income taxation. Substantially and practically all the three classes of bonus shares already referredto have been declared’ exempt.
– If that is so, the provisions of this Bill- referring to them are not necessary.
– Some fine distinctions may be drawn, but in the case I have mentioned bonus shares, representing the accumulations of profit which had been capitalized, which were openly issued as bonus shares, were declared free of income taxation. As regards current profits for the year, there is very much in the contention of. the Treasurer that where they have been issued as bonus shares they should not be free from income taxation. The Bill clarifies thepresent law, and that” is of the greatest benefit to the community generally, excepting that most deserving section of it, the legal’ fraternity.
– But the. honorable member says that the Courts have already settled this matter.
– I have cited the judgment in a particular case, but some very fine distinctions might be drawn, based on. that advanced position.
– There is still room for an appeal to the Privy Council.
– Exactly. Still, the Treasurer is to be congratulated on having clarified the law. The honorable gentleman said that where income taxation had been levied in respect of bonus shares refunds would be made. I am glad that the Bill is to be retrospective in this connexion.
– It is not to be retrospective. We are making refunds, because, we do not feel that, we can maintain our position after the decision in Webb’s case.
– The fact remains that the refunds are being made. The honorable gentleman dealt also with that debatable section of the Act known as 16 (2), which provides that -
Where, in the opinion of the Commissioner, a company has not in’ any year distributed to its members or shareholders a reasonable proportion of its income, there shall be included in the income of each member or shareholder, without in any way diminishing the liability of the company, so much of the income of the company which is not distributed in that year asbears to that income the proportion which the interest of the member or shareholder in the paid up capital of the company bears to the paid up capital of the company.
A recent decision in regard to that section caused some little consternation. The intention of Parliament and the general interpretation of the law by the trading and commercial community was that it merely gave the Commissioner discretion in altering the amount of profits which should be distributed, but in what was known as the Cornell case, the decision of a Deputy Commissioner was appealed against. A company had made upwards of £12,000 in profits in one year, but, fearing prospective losses, refused to distribute those profits. When the returns came before a Deputy Commissioner, he declared that the profits should be distributed, and levied taxation on the whole amount. A taxpayer concerned thereupon went to the Court, and the Court held that the effect of the provision was that where the Commissioner is of opinion that less than a fair proportion of the profits of a company have been distributed to the shareholders, the whole of the amount of profits which would be otherwise taxable income of the company shall be deemed to have been distributed to the shareholders. That construction was put on the law by the Pull High Court, consisting of all’ the Justices of that Court, excepting Mr. Justice Powers. The question was definitely put to the Court for decision whether - if the Commissioner is of opinion that a company has not distributed to its shareholders a reasonable proportion of its taxable income - the whole of the taxable income of the company or only a reasonable proportion thereof is to be deemed to have been distributed, and the Court found that the whole of the taxable income of the com pany should be deemed to have been distributed.
– I should like to make it compulsory for High Court Judges to read Hansard regularly.
– Every Judge is obliged to construe the law as it is written.
– Nevertheless, it would be a fine education for the Judges if they were to read Hansard?
– I am sure it would. Clause 21 is introduced by the Treasurer to rectify the existing anomaly and do what Parliament originally intended to do.
– As to future cases.
– Is it not to be retrospective ?
– I think that it should be, but the Treasurer does not take the same view. He now proposes that where a company has not distributed to its shareholders at least 66 per cent. of its taxable income, the Commissioner shall determine what further sum should be distributed. That proportion is too high, and if insisted upon will strike at the financial stability of many companies and substantially check enterprise.
– The honorable member is not forgetting the appeal provision!
– -I am aware that the taxpayer who is dissatisfied with the Commissioner’s decision may require him to refer the case to a Board of Appeal. That- is a valuable safeguard. But my objection is that the clause requires a distribution of 66 per cent. of taxable income, and that is too much. There is a vast difference between taxable income and distributable income. The taxable income is the gross income less only the deductions permitted by the law. . I know of one company whoso taxable income is approximately £100,000, and its distributable income is not more than £60,000. It may be that for the safety of the company a larger depreciation has to be deducted than is allowed by the law, and indeed the Federal income taxation itself must be deducted. Therefore, I say that there is a degree of harshness about this clause. The Treasurer has told us that he is introducing this amendment to remove the harshness and cruelty of the existing law as demonstrated by the Adelaide case to which I have referred.
In other words, he admitsthat the law was opposed to the intention of Parliament, yet he proposes that this injustice and cruelty shall be continued for another nine months, and that no relief shall be given to those unfortunate taxpayers who, in past years, have suffered in this respect. I was hoping that he would see his wav clear to treat these people with that consideration which he is extending to those taxpayers who have paid taxation in respect of bonus shares:
– I shall propose some amendments which, whilst not doing all that the honorable member asks, will go some way towards meeting his objections.
– The Treasurer realizes the hardship inflicted in the past by an interpretation of the law which did not parry out the intention of Parliament. I do not say that the Court’s interpretation was unsound, but it certainly distorted the intention of Parliament, and this Bill is intended to more clearly express the will of the Legislature.
– What is the minimum percentage which the honorable member thinks should be distributed by a company?
– I suggest 50 per cent., or, at the most 55 per cent. As far as my recollection goes, it has been the practice of the Commissioner to insist upon the distribution of 53 per cent. of the taxable income. I am very glad that the Treasurer is trying to remove some of the hardships imposed on taxpayers in the past and is proposing to remit some of the burden of taxation we are at present carrying. I think that remission will be of value to the community, and will result in a stimulus to industry. With the alterations which the Treasurer has indicated by interjection, the Bill is a valuable reform, and will remove many hardships and anomalies which have proved restrictive to trade and enterprise.
.- If the Treasurer had given the same care and thought to his Budget speech as he has evidently given to the question of income taxation, we should have had less fault to find with his financial proposals generally. A person reading the two speeches can hardly believe that they were made by the same individual. Of course, the difference may be explained by the fact that income taxation affects many honorable members sitting on the Government side who are connected with public companies. The Government may be depended upon to look after their interests, and it will devolve upon honorable members on this side of the House to watch closely the provisions of this Bill when it is in Committee. I strongly resent the very limited time that is allowed honorable members to discuss this amendment of the law. No legislation has a greater claim upon the attention of the -people’s representatives than has a Bill dealing with taxation. All the thought and time that can be spared should be given to this Bill, but if the session is to close on this day week, it will be impossible to give proper consideration to the matter of income taxation and the Budget. It should be the aim of honorable members to distribute taxation as equitably as possible over the people, remembering that there is no possibility of extracting taxation from other than those who have wealth.
I have looked into all phases of the averaging system, and I cannot see that it will give either satisfaction or justice. If it is equitable to apply the averaging principle to the primary producer, it should be applied to everybody.
– And the Bill proposes that it shall be applied to everybody.
– If we are to average the pastoralists’ income in order to make allowance for losses of stock, why should we not average the merchants’ income? Suppose a man has £20,000 worth of goods upon which he has £15,000 insurance. If the whole stock is destroyed by fire, his loss of £5,000 must be recovered before the Department can tax him on his profits.
Sitting suspended from 1 to 2.15 p.m.
– The Royal Commission on Taxation dealing with the averaging system says -
While the mode of averaging recommended in the report would afford a useful measure of relief to taxpayers in certain circumstances, in our opinion it would in other circumstances operate unfairly and engender anew the sense of injustice which it is designed to eradicate.
To my mind this system will be open to a good deal of abuse, it will need a large staff to undertake the very voluminous task .of making assessments, and it will not give that satisfaction which is expected from it hy our honorable .friends in the corner. In another [part of the report the Commission says -
We recommend that the Income Tax Assessment Act be amended so as to incorporate in the determination of ‘” taxable income “ ‘the system of carrying forward of losses up to a period of five years unless earlier (extinguished by subsequent profits.
A system- of ‘making provision for losses could easily be provided.’ In fact, the taxpayer .could make. out his own return, showing his losses in one year as an offset against his profits in another year. The honorable member for Swan (Mr. Browse) deserves every -credit for his attempt to introduce a system to meet everybody’s views; but his method would be .complicated. I suggest a much easier system. If a primary producer makes a profit of £50,000 a year one year after sustaining a loss of £20,000 in a previous year, he should be allowed to deduct from his profitable year’s return sufficient to make up the losses in his unprofitable year. The .cash system is easily the best method to adopt. Many business people pay all their income into a bank and draw cheques for all outgoings. It is easy for sUch persons to make up income-tax returns. Unpaid debts are taken into account in .-‘the- following year. I cannot -see -why a pastoralist could not adopt the same’ method. His returns are not in the form of. cash in the strict meaning of the term, but if .he could be called upon to pay his income tax on his income for the year, less ‘his expenditure, it would be a better wa)’ than that suggested by the honorable member for Swan. Taxation upon incomes was first adopted in Great Britain in 1842 in circumstances very similar to ‘those which necessitated the imposition of income taxation in -the Commonwealth. Here we have had Governments spending money most lavishly, careless of -the necessity for- repaying any loans. In Great Britain, from 1830 to 1840, there were wars, labour disputes, and strikes - in those days when people could not get the wages they demanded there were riots and there was much destruction of property - rand the British Government had recourse to income taxation in 1842, and the tax has been collected ever since, although at times the rate was so low, .and the amount collected so small, that the Taxation Office was merely kept in -existence -with .a small stafF so that it might be there if a future emergency required the raising of- additional money from that source. In.. our .system of taxation we should adopt a just scheme which will require -those who can afford to pay to do so.
– Are they ,-not doing it now ?
– I am very doubtful about it. I am sure that the honorable member would not agree to the adoption of a cash basis, nor would the people who are running public companies or pastoral propo-si tiona, because such a system, as, they are well aware, would arrive more readily at their taxable income. . It “is the. truest basis for the imposition of income taxation, as it would require no -payment of tax unless something is earned.
The bonus share system has ‘been open to a good deal of abuse mainly through the conversion of proprietary concerns to companies, and placing of profits into share capital in order to avoid the payment of income taxation. By reconstructing and. adding, to existing capital by money, taken from profits, companies have been able to avoid the payment of taxation on profits. I agree with the Treasurer (Mr. Bruce) in. regard to the proportion of profits that he would permit to be placed to reserve. I would make- practically the whole of the profits derived by a company liable to payment of income tax, and would so arrange matters that a company Would be obliged to declare bigger dividends. I know of a coal company which had a capital of £200,000, but which within a period of two years had increased its capital to £400,000. Thus, when it paid “a dividend at the rate of 10 per cent, on the increased capital it really meant a dividend of 27 ‘pen cent, on £200,000.. The Treasurer would ‘-do right if he insisted .on the profits being distributed among- .the ‘shareholders in the :shape of dividends instead of being used to increase the share capital and so make a dividend appear to be at a lower rate than it actually is.
The .exemption to be just and fair should apply to every one. The British and American income tax laws provide .a greater exemption than we give. There is virtually no taxation on income in America until a ‘.person’s income exceeds £500, .and the rate is not very high in the - case of persons whose incomes are between £500 and £1,000, but beyond £1,000 the rate rises very rapidly . That is a much better system than our own. We have as many cranks on taxation as we have lawyers in Australia, and all sorts of schemes are propounded. Every person in the community pays an equal percentage of the taxation imposed by means of Customs and Excise duties. A man with a wage of £5 or £6 a week contributes as much in that way to the revenue as does a man with a. very much larger income. He pays the Customs duties in respect of not only the material used in the construction of his house, but on everything that he eats and drinks and wears. I think that the Treasurer, unintentionally, no doubt, is doing an injustice to’ those who are in receipt of small incomes by fixing ‘too low an exemption. Every person in receipt of less than £500 per annum should be exempt from the payment of income tax. In practically every country the exemption is much higher than that provided for in this Bill. I think we are entitled to insist upon the Treasurer giving more attention to this phase of the question. If we could lay down a system of taxation that would enable us to raise in an equitable way the revenue necessary to meet the extravagances of the Government during the last few years, it would be a good thing.
I enter my protest against the failure of the Government to give us more time in which to discuss this measure. It is utterly impossible for us to deal properly with it within a week. If ample time were allowed us, we might be able to mould this measure in a way that would be of material benefit to the whole of the taxpayers of the Commonwealth. I would not describe the. honorable member for Swan (Mr. Prowse) as a crank, but I undoubtedly think that the scheme of taxation which he has proposed is, open to very serious; objection. It is a common thing, particularly in Australia, for people who have a prosperous year to spend in that year practically all they make. If the pastoralist has a good season, or the business mana good year, he spends freely, and it is no doubt a good thing for the community that he does so. The trouble is, however, that in the following year they may fall upon evil times; the pastoralist may experience drought conditions, and the business man a falling off in trade, with the result that the income tax then payable by them in respect of the previous twelve months of prosperity presses very heavily upon them. Their position is very like that of the man who complains of his gas account. Every one complains about his gas meter; but, although. I have examined gas meters in England and Australia, I have never found one of them to be wrong. The trouble is that the gas accounts are rendered only once a. quarter, so that the man with a. wage of only £4. or £5 per week finds that the payment of his gas bill makes serious inroads on his weekly wage. And so with the income tax. As members of this House, we are in receipt of an allowance of £1,000 a year. .Next year, when some of us may no longer be members of this Parliament, and when our income will consequently be much less than it is to-day, we shall be called upon to pay income tax on the basisof our earnings during the last twelve months. The complaints made about the amount of income tax that the people have to pay are due chiefly to the fact that when the assessments are sent out, taxpayers, owing to drought or dullness of trade, are not in a position to pay.
– Then the honorable member ought notto object to my system.
– The position would be the same under the honorable member’s averaging system. I know that the honorable member thinks that under his proposal taxpayers would be better able to meet the demands made upon them in respect of income tax. I do not think it would improve the position. One has only to see the average pastoralist and his wife and family at Randwick in a good season to know that in the years of prosperity he does not put much by to meet the requirements of a lean year. That is one of the common failures of life. The fairest and best system we could adopt is that of the cash basis. It is open to less abuse than any other, and enables a careful check to be kept on taxpayers’ returns. Under the cash system all the trouble in regard to taxation in respect of’ the natural increase of stock, and so forth, would be obviated. I hope when we go into Committee, to submit certain amendments, and I trust that we shall be given reasonable opportunities to discuss the Bill.
.- Part of the embarrassment of the present situation in connexion with this Bill is due to the fact that, in addition to being an amending Bill, it is a consolidating measure. I take it that in ordinary circumstances, if the Parliament were not hurrying to its demise, a consolidating measure would be welcome, since we now have seven existing Tax Assessment Acts. This Bill incorporates the vital principles of the whole of them, and, in addition, comprises the amending provisions. It is of doubtful wisdom - the Treasurer has probably already found it so, just as the Attorney-General did when another Bill, which has recently disappeared from the House, was before us - -that we should be asked, in the closing days of the session, to consolidate as well as to amend the existing law. The principles embodied iu the amending sections of the present Bill offer a sufficiently wide field for debate to occupy us very many days; but when, in addition to that .the whole area of incometax incidence is thrown open to us, it 19 not only an invitation, but a temptation hard to resist, to discuss, even at this late hour of the session, the principles involved. I have made it clear before that, while I do not think the taxpayer should be expected to resist concessions such as are embodied in the Bill, it is to me lamentable that the sources of supply are past savings instead of persistent and continual economies. I think the Treasurer himself realizes that now, even if he did not quite so keenly realize it before. There is a very strong sentiment, so far as I am able to judge, in favour of replenishing this source of supply that will be half depleted by the concessions proposed.
– Of course, the honorable member realizes that I have not changed my views?
– I am sorry to hear that, because I had hopes of inducing the honorable gentleman to turn, his mind towards Mecca.
– I have been hoping that the honorable member might so turn his mind.
– I am afraid not. I am sorry to see a possible surplus disappearing with no guarantee, and very little hope, of its being rapidly replenished. However, Mr. Speaker, I do not suppose that you would regard me as in order if I were to continue long on that argument, and I shall, therefore, turn to the provisions of the Bill itself, as distinguished from the Treasury chest, from which the remissions provided for in the Bill are to come.
– What remissions do yos refer to?
– To the remissions referred to in the Budget, some of which are embodied in the Bill. The most notable of the remissions is the raising of the exemption.
– How is that the most notable? It is only about one-third of the remissions in favour of the big people.
– I call it the most notable because, according to the Treasurer’s estimate, it affects 200,000 people, and amounts to £600,000. No other remission, I take it,, amounts to that; in fact, all the other remissions in the Bill do not represent anything like that sum.
It has been appropriately said that this is a Committee Bill, and, therefore, I do not propose to occupy much time on the second reading, particularly as I understand it is the desire of the Government to get the second reading to-day. Whether that will be possible is a matter for the House to judge later. Broadly, from my point of view, the Bill constitutes an honest attempt to remedy a number of anomalies of income taxation, apart altogether from the proposed remissions, and I think it will succeed in doing substantial justice to a number of people who feel the weight of the present Act. The Bill also seems to indicate a welcome reconciliation in views between the Treasury and the Income Tax Department. Very often in the past, although the Income Tax Department is a branch of the Treasury, the Treasury officers and Treasurers have not always seen eye to eye with the authorities of the Department. The present Treasurer, however, is, apparently, in agreement with the Commissioner of Taxation and the Commissioner’s advisers in regard to important amendments of the existing Act. Many of the problems - not all of them, but as many, doubtless, as the Government felt disposed to undertake - have been dealt with satisfactorily, others only partly so, while some are omitted. I should like, before I sit down, to allude to that class of cases in which partial satisfaction has been given, and to others where no attempt at a remedy has yet been notified to the House.
I listened to the remarks of the honorable member for Swan (Mr. Prowse) on the averaging question, which is the most prominent feature of one part of the Bill. It would not profit, at this stage, to discuss the details of the scheme of the honorable member, for the proper time to do so is in Committee, when we deal with particular clauses; it would now become interwoven with many other issues instead of being kept clearly apart. When, last year, it was first proposed to average the income taxation of primary producers, I said that while I thought there would be no violent objection to that course, I saw no real reason why the primary producers should stand bythemselves in such an arrangement. That view was resisted by the ex-Treasurer (Sir Joseph Cook), who said that the primary producers’ incomes fluctuate more violently than the incomes of any other taxpayers in the community; and, therefore, he proposed to apply this remedy to them, and to them alone. The present Treasurer has shown that he does not take that view, but realizes that those who work in other vocations are similarly liable to oscillations of industry and trade which influence their incomes. My own view is that, if we are to keep to the principle, we should welcome this extension of it. Primary producers, such as the honorable member for Swan, apparently realize the logical position taken up in the Bill. All the same, I do not much believe in averaging propositions, whether they are special or general ; and I think that, after a trial, we shall get back to the old system.
– It is impossible!
– If the honorable member’s proposals were eventually adopted and embodied in a Statute, it may be that they would be more acceptable than that in the Bill. But I believe that every year should stand by itself, unless we take a quinquennium or a decade, for example, over which the test may be applied, and in which losses are written off as against profits. I cannot see that the two minor forms of averaging which it is possible to experiment with - that is the averaging of rates or the averaging of incomes - are likely to effect any substantial relief unless we are prepared to allow the losses of a particular period to be written off against the gains of that period. In a prophetic vein, as I am at present, I feel confident that a future Parliament will watch this experiment with interest, and judge it a failure.
– My amendment includes lasses, and refers to them.
– I know; but not quite in the way they were discussed by the Royal Commission.
– It takes the whole of them into consideration.
– If it does it goes further than any proposition that has emanated from the Government last year or this, in nature as well as extent, and is more likely to meet with acceptance and preservation than even this year’s proposition of the Treasurer. But I venture to think that no Parliament with a large debt on it, and with a desire to find money to develop a continent so virgin and so uninhabited as this, is likely to give the huge remissions of taxation which the writing off losses against profits would involve, for many and many a generation. I do not know whether the Treasurer agrees with that or not, but it is clear that if we allow losses to be placed per contra to receipts, it means a huge remission in the rates; and if we are not able to stand those large remissions, the rates will have to be lifted in order to provide the revenue the Treasurer requires.
– It is eminently just, though.
– Even if the rates are. raised in order to provide the requisite revenue?
– Very good, but my point is that to merely make the losses per contra to profits now, without lifting the rates, will not provide the revenue the Treasurer requires. I think, therefore, that the National Parliament is not likely to have recommendations in that direction until our financial position vastly improves, either by reduction of our standing indebtedness or a natural increase of the direct and indirect revenues of the Crown.
– Does the honorable member not see that if to raise the necessary revenue the burden were laid evenly on the shoulders of the people justice would be done?
– Of course ; any tyro who endeavours to examine income taxation would admit that. But it is not for the honorable member to say that his own system is true and pure, and, by inference, that all others are untrue. It is a matter of testing what is an even distribution of taxation on the shoulders of the people. I am not opposing; the honorable member’s proposition, because; as I have said, the place to discuss it is in Committee, where issues will not be confused. Averaging, as it is at present being tried, will not, in my judgment,, be permanent and satisfactory; the. broader kind of averaging will not . provide the revenues which the Treasurer requires. If we do not attempt to carry it, and we lift the rates, there will be a rebellion in the industries which feel the blighting effect of the high rates imposed in order to provide the revenue required. I now leave the question of averaging, because we shall meet it as an old friend when we are in Committee.
The lifting of the exemption is another broad principle embodied in the Bill. I had the temerity, when I discussed the Budget, to utter a sentiment with which I think a large number of honorable members disagreed. To take out of the area of taxation to-day 200,000 people is, I think, a very dangerous experiment.
– Where is the danger in it?
– My honorable friend is a student of taxation, although he does not often favour the House with his views on it. He realizes the advantage of men feeling that they are called on to pay taxation. I do not necessarily mean high taxation. If we still further restrict, as years go on, the area of people and the area of wealth over which income taxation roams, we shall find that the people outside that area do not care much about the kind of income tax imposed. Conversely, the wider you spread the net of income taxation the more interest we excite amongst the people, because when a. man has to pay, he is a little more careful as to the expenditure of the money that results from the tax. While it may be popular to exempt 200,000 people, and remit £600,000 of taxation, I think that some day’ Democracy will take the opposite view, and take it fearlessly, and say that a man ought, to have a visible interest in keeping down taxation and expenditure before he is given the full privileges of citizenship. That may be a heterodox doctrine to preach, but I am sure that in our own affairs we realize the truth of it-. The most careful people in the community in the handling of money are the wives of our working-class men. And why? They know how, little they have, and how far it has to go. They are the domestic economists, and they look at every shilling. They have to meet the man to whom the rent is paid, and the butcher, the baker, and the grocer. They are the most thrifty people; and I would that every person in our midst had to meet the tax collector in the same way, for they would then take more care about the expenditure of the national revenue. That feeling would run right through every rank of the people until it infected municipalities, corporations, and Governments, much, I think, to- the advantage of. this’ community. However, the Treasurer has made up his mind to conduct this gigantic experiment and to narrow the area of income taxation. If the proposal goes to a division, I shall vote against the raising of the exemption, because I think that the matter should be tested, should that be possible under, the Standing’ Orders. No doubt, at this stage the Treasurer’s view will carry the day, and I regret that it. will ; but on some future, day it will have to be reviewed, and the area of taxation again extended.
Now I come to oneor two comparatively minor matters which, I think, should be dealt with in passing. Let me refer broadly to the treatment of companies. In this connexion I might be permitted to deal with the question, Where should dividends be taxed ? I do not wish to follow the’ long’ arguments already given to the House; but I think that it is time that we reviewed some phases of this matter. I have always been against tapping dividends at their source for the enrichment ofthe national exchequer. I think that .it is far wiser and better to tap them at their destination, as -the law at present requires, .and as the Bill proposes shall continue to be done. There are. many arguments for the system of tapping at the source with adjustment, but I cannot understand the proposal to tap at the source without adjustment. I do not know whether honorable members have analyzed the share registers of any .of ‘ the great joint stock companies of Australia. If they have, they will know how widespread is the share interest in some of the biggest of these concerns. A few years ago a member of the Parliament of New South Wales analyzed the shareholdings of some of the biggest companies in Australia. - among them, the Bank of New South Wales, Dalgety and Company,, and the Australian Gaslight Company, of Sydney. His object was to ascertain how the share interests in those companies were distributed, and he astonished his hearers by showing what a large number of small holders there are in the greatest of these corporations, and how small is the average dividend collected by the shareholders. It was found, as it would be found on an examination of the share lists of any of the principal . companies doing business in this city, that if the dividends of companies were taxed at their source before distribution a large number of persons would be taxed who, under the present income tax law, are directly exempted from income taxation. That would be unfair, and to many a rank injustice. It would be par5ticularly harsh for such women and children as were beneficiaries under wills and trusts. It would also be a great deterrent to the proper growth of joint stock companies in Australia.
– You will find the same names on the registers of the Colonial Sugar Company, the Bank of New South Wales, Dalgety and Company, and the Australian Gaslight. Company, of Sydney.
– That may be true of the nairn eta of the larger shareholders, but you will also find, with respect to the registers of such companies as have been mentioned, that a large number of persons hold only 50, 100, or 200 shares, and draw in dividends amounts less than £100 per annum. They are often the holders of shares resulting from the investments of their parents or of other testators who have bequeathed their wealth , to. them. In marry cases- these .small dividends form a substantial portion of the income of those who draw them. To tap the dividends of companies at the ‘source without adjustment’ not only would be ‘Unfair to taxpayers, whose wealth was .gathered up before they touched it, and who would otherwise have been exempt from taxation, ‘ but also would be destructive of joint-stock investment. If a man put £1,000 into a grocery business and made 15- per cent, on his money, he would not be taxed on that interest if his sole income . were only £150 a year. But if his brother’ had invested the same amount in the shares” of a company, he would be taxed, under the system of taxing, dividends at the source, notwithstanding the statutory exemption of incomes below £150 per annum.- It is clear that such a law would deter investment in the shares of companies, driving capital away from joint-stock corporations. Some honorable members may think that that would be well, but I think that it would not. The more we survey the industrial and financial world of Australia, the more must we believe that a country such as ours can be best developed by jointstock enterprises properly. undertaken. A dozen men possessing. £1,000 each mighthave insufficient capital to start any tolerably, big enterprise acting individually, but if they joined together and formed a joint capital of £12,000 they might, in safety, embark on that enterprise. Jointstock investment tends to encourage, on proper scale, the operations of manufacturing, importing, exporting, and exchange which are the life fluid of the commerce of a country like ours.
– It is really a principle of co-operation.
– Yes, conducted under laws which protect the interests of those involved, and of. the public at large. There are big enterprises in Australia which have been established within the last ten years, which would have been altogether beyond the scope of individual capital, .so great are their requirements. They have become possible, and are highly beneficial iri their development, by the conjunction of small sums, of capital in company holdings. TheTreasurer, who, doubtless, sees all this, has wisely, in his company arrangements in this Bill, endeavoured to give fair play to companies where, under the provisions of the old Act, they are badly hit. He, doubtless, sees that the effect of this will be to stimulate industry, stability, and employment, and so increase the productivity and prosperity of the country.
– Share investments have been very popular of late years.
– That illustrates no mere accident, but is evidence of the realization by individuals who have saved money of the advantages of putting it under proper control in manufacturing or other enterprises. The more we can encourage this, the more likely are we to bring about big operations in this country, and to lead to the prosperity and contentment of both the capitalist and the worker. Several of the big concerns of Australia are at present closed down. Certain reasons are assigned for this; but the effect is that the individuals associated with them in managerial or operative capacity are suffering. If they could be re-opened and their operations restored, it would bring contentment to those persons and their families. The more we extend the enterprise of joint-stock companies, the better it will be for the persons concerned.
On the subject of bonus shares, I do not agree - although I speak as a layman, and, therefore, with some deference - with the honorable member for Kooyong (Sir Robert Best), who. said that the exemption of these shares has been settled by a recent decision of the Court. I do not think the Treasurer agrees with him. That decision, as I read it, made certain features plain. It laid, down certain principles that appeared to be correct, but I think the Treasurer realizes that some phases of the matter are not covered by the Webb decision,- and, therefore, he proposes to boldly face and deal with the situation. I think his treatment of it realizes the exact position and settles it. I divide bonus shares, for the moment, ratio two classes. There are those that are distributed in lieu of pro.fits which have accumulated in the past, and have either been brought to reserve or added to capital, and on which, therefore, tax has been paid. This is not realized by some persons. Let me take the case of a company with a capital of £500,000 which has’ thought it wise, through a series of years, to place, say, £100,000 to reserves. It may have distributed a good part of its profits, but, iri addition, it has accumulated reserves to the value stated. Its shareholders might then say to their directors, “ You do not need this money. Why not give us one additional share for every five that we now hold, making the capital of the company £600,000, which is what the actual capital now is?” The £100,000 that has gone into reserve has paid taxation, State and Federal, at the rates applicable to companies during the years through which it has been accumulating. It has not escaped taxation. It would be improper that such profits should escape taxation.
– But it has been taxed on a flat rate of 2s. 8d. in the £1, whereas Rome of the shareholders ought to have paid, on their part of it, at a much higher rate.
– As I have Decently said, the spread of company shareholding through Australia is in smaller parcels than is generally known. Although some of the shareholders would probably have been taxed at a higher rate had the accumulated profits been distributed annually, others again would have escaped taxation altogether, or would have paid on a lower rate.
– That is not equitable.
– In any case, (it is la matter for the shareholders themselves to decide. Should a majority of them decide that the distribution shall be by cheque instead of by scrip, they may c say so, and make the Board do what is desired. But, if they allow profits to be placed to reserves, and subsequently to be distributed as bonus shares, those profits do not escape taxation. That is the point that I. am making.
– The predominating shareholders whose incomes are large would pay taxation at a higher rate if the distribution were annual.
– Such shareholders could determine the method of dealing with the profits only if they had control; and if my honorable friend were to inspect, as he could, the list of shareholders furnished every six months by public companies, he would see that not many of the companies are in the control of a few large shareholders. Large parcels of shares may be held in them by a few shareholders, but seldom is the control of them in the hands of a few large shareholders. My experience is that the few large shareholders cannot “ bulldoze “ on vital matters the majority of the shareholders, unless they hold over 50 per cent, of the shares.
– That, is the position in many companies.
– Speaking from memory, I do not know any such companies in Victoria.
– I should think that the Colonial Sugar Refining Company was one such company.
– 1 do not think that the honorable member’s remark holds good if applied to that company. It was one of those whose share list, on being analyzed, was found to contain the names of a large number of small holders.
– There are the big Sydney newspaper companies, like the Sydney Morning Herald.
– They are, I think, what we term in Victoria proprietary companies. I am dealing with public companies. When we talk of bonus shares we have in mind the bonus shares of the ordinary joint-stock companies.
– The Bill applies to all bonus shares.
– We are talking primarily of public companies, because the honorable member for Yarra referred to large shareholders and small shareholders. Honorable members speak lightly of a 2s. 8d. rate, but it is a very heavy rate on big capital.
– Plus 2s. 6d. in New South Wales.
– I am talking only of the Federal rate. I remember - and the honorable member for Melbourne (Dr. Maloney) was in the State Parliament at the time - when the first income tax was imposed in Victoria, about 1895 or 1896. The highest rate was ls. in the £1 on capital, and the newspapers of the1 day were full of denunciations of the rate as coercive and destructive of capital. We have progressed so far since then that to-day we are inclined to look on 2s. 8di as a light rate.
– What did the ls. rate destroy ?
– The figures were given eventually, and they proved that this impost had had the effect of driving capital out of Victoria, but that was possible only because there were other States near Victoria with lighter taxation. To-day there are few countries, certainly very few of our partners in the late war, that can offer lighter taxation than does the Commonwealth; therefore, we are safe, but 2s. 8d. is still a very heavy rate.
– Does the honorable member believe in his statement about driving capital out of Victoria, or is that merely a figure of speech ?
– I have said what -I believe. I was informing the honorable member of the historic opposition shown by the newspapers of the day. I propose to refer briefly to another matter that has evidently caused the Government and the Treasurer considerable thought, and that i3 the operation of section 16, sub-section 2, which relates to the insufficient distribution of capital by companies. Broadly speaking, the cure proposed by the Treasurer is fair and proper, and with the amendment to clause 21, which he has since circulated, any injustice that might have been left in the Bill as introduced will be practically removed. But this is another matter, in regard to which there is a good deal of misconception. The honorable member for East Sydney (Mr. West) expressed the opinion that companies should distribute at least 75 per cent, of their taxable income. If the honorable member will study the affairs of some Australian companies, he will find that, on the average, 66 per cent, of taxable income, as provided for in the Bill, is nearer 80 per cent, of actual distributable income. Since the Bill was in- troduced I have obtained figures of distributable, or net incomes, as companies call them, to compare, with the taxable incomes, and they show that 66 per cent, of taxable income represents a very much higher percentage of real income.
– Probably more than 80 per cent.
– It is suggested that the average, would be about 85 per cent. In one case a company’s net income on the year’s operations, after the disallowance of deductions by the Commissioner, was so much below the taxable income that if they had had to distribute 65 per cent, of the taxable income, they would have’ had to pay out ‘more than they had netted for the year.. That is one case, and, doubtless, honorable members are aware of numbers of similar instances. I do not believe that it is a sound policy to compel companies to distribute all their income.
– Hear, hear!
– I think the Treasurer has endeavoured to recognise that principle in the Bill, and the amendments he has indicated. I have known a man to start in , a small way of business, which later was -formed into a. little company. That company grew and lived on short commons for years, and capitalized all its earnings, and by that very abstinence from consumption and postponement of enjoyment, builtup a great industry. And that should be encouraged. If that were not done, none of these small businesses would spread as a grain of mustard seed spreads, until it grew into a big. flourishing concern. We should encourage small businesses to live frugally in their earlyyears, to husband their resources , and thus finance their growth into great enterprises. If, by taxation we unduly penalize companies, whether private or public, we shall only be injuring trade and commerce. Therefore, I say that any proposal to increase the 66 per cent. referred to inthe clause is founded on misconception. In factI would further liberalize thelaw by making the test a distribution of 50 per cent. and that could be done with perfect safety. . I do not press that suggestion at this moment, because the Treasurer has provided two correctives. There is to be an Appeal Board, and the aggrieved taxpayer who feels that he has been unduly penalized by these provisions can appeal to it, and the Commissioner and the Board will then have to take into account the material facts of the case. I am sure that will prevent injustice. The time will come when we shall encourage people to save money and keep it in their businesses, but if we find them doing that for purposes of evasion we shall devise another means of bringing them to account.
Section 16, sub-section 2, of the old Acthas been a bugbear to the Taxation Department. Parliament, when it passed the law, never intended itto be operated in the way that it has been ‘worked, and the Full High Court’s decision as to the meaning of the law came as a grave surprise to some of us who had watched its operation. The Governmentwould never have proposed the law in that shape if they had anticipated the results which have followed; they would have submitted . a fairer proposition, and I think that the amendment which the Treasurer is introducing is a partial cure for most of the troubles that have arisen.I hope that next year the “Treasurer will carry this relief a’ stage further by providing that if a company distributes 50 per cent. of its taxable income -and satisfactorily explains why -it is saving the balance it will not be penalized.
– Might not the view of the Commissioner be that the companies were distributing only a small proportion of their taxable income with a view to watering their stock?
– No. I think the Commissioner took this view. A partnership of two men made a profit of £100,000, distributed only £10,000, and saved £90,000. They had to pay on £90,000 on their individual schedules, perhaps at the rate of 8s. in the £1. A company might be doingthe same thing, and yet be paying only 2s. 8d. in the £1. He saw the need for equation, and I think section 16, sub-section 2, was designed to bring about equation between the two classes of taxpayers, but its operation is harsh. The Treasurer sees the necessity for holding the sword of Damocles over companies which tryto evade taxation by non-distribution of profits, and at the same time the necessity for building a sort ofbridge between these people and the private company in order to provide equity in the taxation system.
– What would happen if a company carried its profits to reserves this yearand in the following years distributed them as bonus shares ?
– On any amount reserved in one year the company would pay a flat rate, Which at present is 2s. 8d., and in future will be 2s. 5d. That amount in reserve will not be taxed again, whether it is kept in reserve or distributed as bonus shares, but the profits accruing from it will be taxed in the following years.
Mr- Scullin. - But a company might make a habit of carrying profits to re- serves and distributing them in the following year in order to evade taxation.
– There must be some power in the Bill to deal with evasion of that kind.
– There is a great difficulty in evading in that way, because in clause 21. we prevent companies from keeping in hand more than a reasonable proportion of their profits.
– There, again, I fear that the period through which we have passed has induced practices that probably are not normal, but have proved highly beneficial. Encouraged by either the Tariff or. war conditions, industries have been started with insufficient capital, and those engaged in them have been prepared to postpone enjoyment of the results of their work in order to increase their capital; others have started on overdrafts, which have to be reduced, and in many cases a capitalization that looks unreasonable is really being applied to a reduction of the overdraft. I have discussed this matter with bankers in the city who have had to put pressure on such companies. If a company can show that in not distributing its profits it was acting on the recommendation of its financial’ helpers or advisers, it surely has done nothing wrong; yet, under the existing law, companies are subject to a penalty of taxation on 100 per cent. on their assessable profits. It is clear that a. remedy had to be applied, and I think that the remedy provided for the future is a wise one and can be further liberalized next year, or later, by decreasing the 66 per cent. to, probably, 50 per cent.
– What about making the amendment retrospective?
– The Treasurer is clearly faced with difficulties in regard to past cases. When this Bill becomes law there will be three classes of cases to consider - (1) the man who has been assessed and has settled with the Commissioner; (2) the man who has been assessed but has not paid, and whose case is pending ; and (3) the man who has not been assessed, and who, when the Bill is law, will get the advantage of the amendment, whereas the other two men will not.
– There are anomalies under every law.
– I know that hard cases make bad law, and I am aware of the difficulty of making any law retrospective, but if classes two and three are to escape scot free, an injustice will be done to the man who cheerfully accepted the fiat of the Commissioner and paid. The Treasurer has not dealt with this problem. The Bill presupposes that we cannot cure the past, but that we can cure the future.
– Would not the existing law in any year apply to the incomesin that year?
– There must be many cases that have been the subject of correspondence, review, and dispute; and doubtless there have been also a number of back assessments under section 16, subsection 2.
– The point is that there are a great number of cases in respect of prior years, some of which are finalized and some. not. All we have to do is to see that in respect of those years everybody is treated in the. same manner.
– Should not the provisions of the existing Act apply to incomes earned in those years?
– That is rather severe upon cases that are pending.
– It would make the application of the law equitable.
– The law says that if a company has not distributed a reasonable proportion of its income it shall pay on the whole of its assessable income. Sixtysix per cent. of taxable income is sometimes much more than is enjoyable, and if a company has to pay on the whole of its assessable income at a penal rate, as the decision of the Court requires, industry will be hard hit. We shall not be helping it, but hurting it. It is also unfair between individuals. I would go further than the Bill or the amendment circulated. I do not urge it on the Treasurer, who has his own responsibilities but it is worthy of consideration by the House, and at a later stage in Committee. I do not think that there can be too many cases that have been settled - the Treasurer will probably tell us the number in Committee - or that it would involve a considerable sum in making adjustments if we put all these men under the provision in the new Act. The Treasurer admits that the existing law is unfair, and has operated harshly, and that a large sum of money is likely to be involved in respect to cases already settled and those in which assessments have been made but which still remain unsettled.
– The Bill as drafted contemplates that every case shall be dealt with under the law as it was at the time of the assessment, hut I have now circulated an amendment which affords some relief. In Committee we might consider whether it meets or does not meet the case.
– I quite agree with the Treasurer that the proper place to deal with this question is when we are studying the amendment in detail in Committee ; but I think it proposes to apply the .66 principle in regard to those assessments that have yet to be paid.
– No. We cannot re-open and determine the exact justice of every ease which has gone, but we will regard it as if the maximum under the law as it was at the time of the making of the assessment had been 66 per cent. Every case that paid 100 per cent., as they all did, will be reduced to the 66 per cent, as provided for in the Bill.
– The remedy suggested is a substantial one, beni? to the extent of one-third, and at the proper time I will ask the Treasurer how many cases are involved.
– It would involve between 1,000 and 1,500 assessments. The cases that would need to be completely reopened would be about 100.
– It is worth while the Treasurer and, later on, the Committee considering whether substantial justice will be granted in the manner proposed.
– The most important point is what amount of “money is involved.
– We cannot tell that yet. We do not know what the Commissioner of Taxation will decide is a fair penalty to apply in relation to each particular assessment. All I am saying is that while the amendment notified by the Treasurer clearly acknowledges the difficulty in regard to retrospective cases, and meets them to the extent of one- third, it is a question for the Government and Parliament to consider whether they should not go to the full extent. Because, if we meet the difficulty to the extent of onethird we acknowledge the injustice of the remainder. In other words, the remedy provided for the future acknowledges the impropriety of what has been, done in the past. I do not urge this on the ground that because the Treasurer has given an inch I demand an ell. I admit that I do not know what class has suf fered, but I do know that the provision in the Act has worked out in almost the opposite direction to that intended by Government and Parliament, and therefore I claim that we should afford relief.
I had intended to deal with the valuation of live stock question, but I think it is a matter than can be left to the Committee stage. The Treasurer has endeavoured to provide a remedy. Whether it will work out as he hopes is a matter for consideration.
In regard to the valuation of other stock, I think it will be necessary to introduce some amendments in order to make sure that the three modes which the Treasurer has provided - cost price, replacement value, or selling price - are to apply to individual articles to a fuller extent than the clause seems to compel. The’ proper way, I take it, of valuing stock, and what any honorable member conducting a business would do for income tax or balance-sheet purposes, is this: He would say, “Here is a line of stock that cost me bo much. It is well bought. I will leave it at what it cost me, because I shall not anticipate profits before sale. Here is another line that is bought at a price above current rate. I value it down to its replacement value, so that I may have the whole of my stock on a proper valuation. Here, again, is a line that has some old features about it, and I value it according to its selling value.” Then he would say to himself that his stock was properly valued, but he must do this in regard to every article; and this the Treasurer knows, as well as does any other honorable member in this House.
– It is all a question of interpretation. That is the intention of the provision in the Bill. We can value individual lines under any one of the three methods.
– I am pleased to hear the Treasurer say so. It settles the doubt I had as to the effect of the provision; but I hope that tho draftsman will consider whether it is not possible to make the clause a little clearer.
In regard to interest on dividends derived from debenture stock, we have a phase of income taxation which, if not carefully looked at by the Government, will inflict disaster, at any rate very grave injury, on some interests.
– It is not a new provision.
– I know. The trouble is that wo do not know what will happen under it. If the provision is to be operated in the future as it has been administered in the past, there will be no trouble. The legal effect of it is that a company operating a highly important service in Australia, and receiving debenture money from abroad, and contracting, as some companies have done, to pay interest on debentures less all taxation, is severely hit if the section of the Act is rigidly applied. I think that we might bring in an amendment to safeguard the matter, because money that comes into Australia in this way is beneficial to the development of Australia, and we should not discourage it, nor those who reach out for it.
– If the honorable member will suggest an amendment which, while safeguarding me against the scoundrel, will give relief to the honest, respectable man, I will gladly accept it.
– The Treasurer wishes me to attempt the old task of preventing a coach from being driven through an Act, while allowing the decent controller of traffic to get through. I promise him I shall endeavour to do it.
The next point I wish to deal with is the manner of treating companies with agents abroad. The Bill attempts to cure what has been complained about in this House scores of times. I will not mention any names, but one company has been talked of as having been guilty of gross evasion of the Income Tax Act; but the trouble is that, in attempting to provide a cure, we may hit honest and useful traders. In this matter also, when we are in Committee, I shall endeavour to see that the honest man is safeguarded without allowing larger traders to avoid the payment of their proper taxation.
There is one other matter which I do not find specially mentioned in the Bill. I take it that the Taxation Office regards it as being more a matter for regulation. 1 refer to ox-Australian profits, which, no doubt, the Treasurer has taken into his consideration. Australian manufacturers exporting to South Africa, China, Java, New Zealand, or anywhere else find that they have a double taxation proposition that impedes trade, and, in fact, kills it in some instances. I have had to examine certain phases of the question, and the Treasurer himself suggested in his introductory speech that the remedy lies in making reciprocal arrangements in relation to double taxation between the Dominions, as we have succeeded in doing between Australia and Great Britain. When we arrange a reciprocity Tariff with another Dominion in the hope that our trade will spring into being or increase in these countries, we ought to be careful that our taxation methods do not take back with the one hand what we have given with the other. That is precisely what is taking place. At the present time there is a case before the Courts regarding the export of gold, upon which a decision will shortly be delivered, which may, like the Webb case, settle a portion of this problem although not all. But whatever the settlement of that case may be, I ask the Treasurer to consider whether he ought not at some stage of this Bill, if the decision comes along in time, to give us some amendment in a direction which, will be fairer to Australian traders. When I was dealing with this matter as Treasurer and as the framer of an Income Tax Assessment Bill, I -tried to secure a remedy, but I could not, and neither could the trading community find one for me. Ordinarily, one would say that the Australian price was the freeonboard price of Australian exported goods, and if there were a free-on-board price that could be accepted; but, unfortunately, in some cases we are manufacturing goods which have no local market, and are produced for export only. Therefore, we cannot take their free-on-board price as representing Australian value.
– What class of Australian goods would have no freeonboard value?
– Frozen mutton is a case in point. It is not consumed here, and there is no local market for it, yet we do a large export trade in frozen mutton in good seasons. It is very hard to say what is the local market price for frozen mutton. If a company manufactures goods in Australia, and sells them in another country where it has to pay heavy income tax on its business there, it should not be hit heavily on that portion of the profits earned by it in the selling country when they coane back to Australia. Yet that is what is being done in respect of a trade which we ought to encourage, and only by means of which Australia can become the centre of a huge circle of manufacturing and commercial activities for the islands of the Pacific and many of the coastal countries of Asia, and possibly the eastern coast of South Africa.
– The British. Government have reciprocated with us in that regard.
– Yes, after a lot of trouble in arriving at a proper basis; but I am not sure that it will be as easy to get such a reciprocal arrangement between the various parts of the Dominions, because it would mean the sacrifice of revenue. Britain was very generous to Australia in its arrangement in that regard.
In conclusion I may say that I hoped the Treasurer would have been able in this consolidating measure to take the curves out of his tax, because they are too mysterious and quite unsatisfactory to the taxpayer:
– No one understands them.
– No one has been able to explain them. I remember the Prime Minister (Mr. Hughes) endeavouring to explain title difference between a curve of the first and a. curve of the. second degree. No one in this House could tell whether he was right or wrong. We could only trust the mathematicians who prepared the system, among whom was Mr. Knibbs. However, it is vital to the taxpayer that he should be able to say, when he knows what his income is, how much his taxation will be. I defy any one short of a senior wrangler in a. mathematical class at the University to tell me what my tax is upon my income.
– He could not do- so without a reference to the official handbook which I asked Lord Forrest to furnish to honorable members.
– I suppose not. If, instead of curves, we were to make stairs, there would be, of course, one disadvantage, namely, that the man near the top of a step and the man just above the top of the step would show a slight disparity, at which one of them would growl; but the very simplicity and calculable quality of the method would remove that disadvantage. I hope, therefore, that the Treasurer in the Tax Bill will be able to throw out the curves without injuring the revenue or permitting injustice.
– Mr: Knibbs satisfied me that the curve system was the fairest method.
-Then I would like to hear the honorable member explain it. I am sure that other honorable members would willingly miss their trains to hear the honorable member for East Sydney do so on the motion for the adjournment of the House. I have studied it closely, but have never been able to understand it.
I have made a much longer speech than I had intended. The subject is a very interesting one, and I have been somewhat lured from my base by the interrogatories put to me, particularly by the honorable member for East Sydney (Mr. West), who is such an accomplished financial student that it is tempting to follow him. I do not desire to offer any obstruction to this Bill, because I think it is a welcome measure introduced, in the right spirit, by the Treasurer, and surrounded by healthy provisions.
– This House has the same obligation to thoroughly examine methods of raising revenue as it has to thoroughly examine methods of spending money. During the speech just delivered by my right honorable friend (Mr. Watt), the thought ran through my mind that had. we not had so much hasty war legislation, in connexion with the several Income Tax Acts passed by the Commonwealth Parliament, and had some of the sentiments expressed here this afternoon been placed upon the statute-book sooner, there would have been a great gain, not only in equity, but in the temper, and time, and expense of the taxpayer. I think the Treasurer has pointed out that, since the inception of this method of Federal taxation, we have had seven amending Acts. It has been evident to every student of income taxation that these many Acts, however well meant, and however well intended,have made, on the whole, so far as income taxation is concerned, confusion worse confounded. We started with curves of the third degree, and we have had well-intentioned amendments of the principal Act to simplify collection, and to adjust alleged injustices. On the whole, however, the incidences of these Acts clearly have not been understood. What has been meant to simplify has really resulted in complexity. I give one illustration of hasty legislation in connexion with Federal taxation methods. I do not wish in any way to be personal, or to allude to any particular Treasurer, but I would .instance the w.ar-time profits legislation as -being of ia character that was extremely . hasty. What actually happened? An Act that was passed by the British Parliament, and designed deliberately to catch munition and shipping profiteers, of whom there were many in the Mother Country, was lifted and dumped down here in exactly the form in which it was intended to apply in the Old Country. We had Jew, if any, munition profiteers, and few shipping profiteers at the time, and the incidence of .that Act was in the considered opinion of those who have <studied it, .to prevent the development of Australian manufacturing, industrial, and primary enterprises which, at the ‘time, >would have
Deen so valuable to us. The War-times Profits Act did not do what it was intended to do. I refer to it merely as an illustration of the necessity of considering the incidence of all taxation imposed.
Our Income Tax Commissioner has been given a greater discretion than .any other public servant. I, unfortunately, ha<ve been the conduit through which many complaints of the injustice and the inequity of our direct taxation have had to come. ‘Complaints have been made, many of which this Bill is attempting to adjust. Others have been made of the academic action of .the Commissioner, and, without the fullest consideration by Parliament of the incidence of taxation, the Commissioner has no .other .course to adopt but to keep to the strict letter .of the law, even if it is not the spirit of parliament. Within my own personal experience there have been many cases of grave injustice, hardship, -harshness, and inequality in -connexion with om1 income taxation. The report of the Royal Commission has been alluded to in the course of the debate on this measure, and I think that, for the purpose of approaching a right consideration of what we are doing in connexion with this legislation, the principles with which the Commissioners started for their guidance should always -be before us. Those principles were that they should inquire .and report upon -
After a good deal of experience of the harshness and inequalities of the present method of direct .taxation, I want to say that I believe that this Bill is a sincere and intelligent attempt towards a, greater simplicity and a. greater, finalization of direct taxation,, ;o.nd I .go so far as to say deliberately that this is the .first time an ‘ attempt has been made to give the taxpayer ,a fair deal. I know that there are many matters connected with a system of taxation that involves many of cur commercial, industrial, and primary complexities which must be gripped in any effort made in connexion with taxation I am not going to say that this Bill is going to rectify all inequalities, but it gives, I think, at all events, a rough justice that previous Bills never .gave. I admit that if we talked for another month we should not be able to” -readjust all the technical inequalities that even this measure will create. But by means of this Bill we go a great distance on the way to do a fair thing to the taxpayer.
So far as I can see the. Bill itself is not intended .to reduce taxation. It is intended rather to re-adjust taxation, because it does not attempt, and will not place im the hands of the Commissioner the .power to attempt, to collect taxes that were never due under previous legisla- “tio.il. To show that the Bill will not reduce taxation, but will re-adjust it more equitably, I draw the attention of the House to the figures as to income tax collected last year. There was a total of £16,790,000 collected during the last income tax year. The Treasurer in his Budget statement estimates that this year he will collect £l-5,250,<000, a reduction on last year’s collection of £1,540,000. But although there is a reduction of £1,540,000 as between the amount collected last year and the amount that it is estimated will ‘be collected this year, we have to remember that that is after taking into consideration a reduction of 10 per cent, in rates amounting to £1,300,000, and the giving of exemptions amounting to £600,000. I think that clearly proves that in the opinion of the Treasurer, or his officials, at all events, the provisions of the Bill, in the aggregate, and on the average, will not reduce, but only readjust taxation.
I desire now to offer a few observations upon a subject which I do not think has yet been fully touched upon, and that is the incidence of the exemptions from taxation and the question of further deductions in respect of the children of taxpayers. In October, 1920, in answer to an inquiry I made in another place, the Treasury officials were good enough to set out in tabulated form what in certain circumstances would be the effect of giving increased deductions for children and higher exemptions for the average taxpayer. It was stated by them that the total amount allowed for the year 1919-20 as deductions from income for children - that is to say, with a deduction of £26 for each child - was £7,000,000. If an exemption of £39 were allowed for each child the loss of income from the field of taxation would be £10,500,000, including the £7,000,000 I have just mentioned’, with a consequent loss of tax at that time of £125,000. If an exemption of £52 were allowed, the loss of income from the field of taxation would be £14,000,000, including the £”10,500,000 that I have previously shown, with a consequent loss of tax of £260,000 a year in all. That is to say, if in that year the increase in. the allowance for children had been made from £26 to £39 a year, there would have been a loss to the revenue of £125,000, and had the allowance been increased from £26 to £52 there would have been a loss to the revenue of £260,000. That brings me to the question of the exemptions of income that are proposed by the Treasurer (Mr. Bruce). I must confess to have listened to the remarks of the honorable member for Balaclava (Mr. Watt) with a good deal of sympathy. I must confess, too, an inability to see why single men should be placed upon the same plane, so far as income taxation is concerned, as married men. Previonsly the exemptions were £100 and £150 odd respectively. Now it is proposed to treat single and married men alike, and give both these classes an exemption of £200.
I would have preferred to see some differentiation made between the two classes, and the incidence of the differentiation - if the Treasurer has determined to rebate £600,000 of revenue - made, in the direction of the single men helping to increase the exemptions for children.
A good many things have been mentioned m the course of debate that we shall have to deal with in Committee. I ;do not intend, on the second reading of a Taxation Bill, to argue the details of the principles that we should follow in connexion with certain incidences of taxation. With regard to the much vexed question of bonus shares, the Commissioner, in my opinion, by his action in attempting to tax those distributions of all sorts, practically attempts to create a method of taxing capital. I shall not be a party in any shape or form to attempting to tax capital unless it is the deliberate decision of this Parliament. In this matter some 70,000 or 80,000 shareholders in the State of New South Wales are concerned, and many instances have come under my notice whereby, if this taxation had been insisted upon, very grave ‘and cruel hardships would have been perpetrated - so cruel and grave as to force persons, in some cases of which I have personal knowledge, into the Bankruptcy Court. In one instance, a man who had never received more than £700 or £800 in the year in cash received an assessment notice in connexion with alleged bonus shares demanding the payment of £4,000 odd in cash within thirty days. I am very pleased that the Treasurer has grasped the nettle and made a job of the matter. I do not think it was righteous that the Commissioner should have attempted to impose this tax in the way he did.
The ^question of averaging has been alluded to. That is a proper matter to deal with in Committee. I am not yet convinced, despite the remarks of the previous speaker, that we cannot have rough-and-ready justice by a method of deducting losses from profits. The taxpayer has a right to simplicity. He is entitled, before he pays, to be able -to reasonably understand the process under which he is taxed. I do not intend to say more upon the old and vexed question of section 16 (2) than that I agree that the Treasurer has promised a reasonable and fair attempt to give justice all round.
I desire to direct attention to another matter that has not been touched upon. There are sundry exceptions intended - I think the Treasurer has said - as matters of international courtesy. I quite agree that visiting artists and pugilists, or anybody else, should be taxed on the amount of money that they make in Australia; but on the question of it being within the power of the Commissioner to withhold passports from residents of Australia, I hope that the Treasurer will see that that power is not exercised provided that the intending visitor abroad has paid his assessment up to date. Within my personal knowledge a demand is often made by the Income Tax Office upon reputable residents of Australia who desire to take a trip abroad to send in a return of their income up to the date of leaving. I hope the Treasurer clearly sees that that is not intended by the Act, and that no power is given to the Commissioner in this regard. I ask leave to continue my speech on a future occasion. ‘
Leave granted; debate adjourned.
Assent to the following Bills reported : -
Land Tax Bill (No. 2).
Northern TerritoryRepresentation Bill.
Bill returned from the Senate with amendments.
Service upon Members of Civil Process.
.- I desire to raise a matter of privilege. During the sitting of the House to-day I was summoned from the chamber to meet in the Queen’s Hall a gentleman, who, acting on behalf of a legal firm in Melbourne, handed me certain papers which I found to include a summons to appear in connexion with the pastoralist strike. I desire to know from you, Mr. Speaker, whether it is competent for persons representing legal firms to enter this House and deliver documents of such a character?
– The honorable member informed me a little while ago that he intended to mention this matter in the House. Bourinot points out that -
Members are protected in their attendance on Parliament, and guaranteed against all restraint and intimidation in the discharge of their duties, and it is a general principle of English parliamentary law that “ at the moment of the execution of the indenture (or return) the existence of the member, as a member of Parliament, commences to all intents and purposes.” This privilege continues in full force whether a member is absent with or without leave of the Assembly, and only ceases when the member resigns, accepts an office of emolument, or is expelled. The privilege has been always held to protect members from arrest and imprisonment under civil process, whether the suit be at the action of an individual or of the public; but “it is not claimable for any indictable offence.” This privilege of freedom from arrest on civil process has been allowed for forty days before and after the meeting of Parliament. It continues during the whole session, and is enjoyed even after a dissolution for a reasonable and convenient time for returning home. Members may, however, be coerced by every legal process except the attachment of their bodies.
I think the House will regard with grave disapproval the service of a summons on a member within the precincts of Parliament, especially while the House is. sitting. A similar case, which occurred in the House of Commons precincts, was declared by a Select Committee to be a breach of privilege, though no action was taken against the offender. It will be a matter for the House to deal with if the honorable member submits a motion regarding the incident of which he complains.
– There is a reference in May to this subject, as follows: -
Again, on the 26th November, 1888, a complaint that an attempt had been made to serve a summons, also issued under the abovementioned Act (Criminal Law of Ireland Act), upon a member in the outer lobby of the House, was brought before the House in Committee. Report of progress was made, the Speaker resumed the Chair, and a Select Committee was appointed to consider the matter. The Committee reported (8th December) that the attempted service of a summons upon a member within the precincts of the House, whilst the House was sitting, without the leave of the House first obtained, was a breach of the privileges of the House; but that the Committee did not recommend the interposition of the House in any proceedings against the constable who had made the attempted service, as the Committee were satisfied that no violation of the privileges of the House was intended; and subsequently (13th December), when upon the consideration of the report a motion was made’ “ That this House doth concur in the report of the- Committee,” an amendment was carried, . “ That the House do now proceed with the Orders of the Day.”
There is a footnote, as follows : -
The case of Brogo de Clare, who cited the Earl of Cornwall, in Westminster. Hall, during Parliament time,18 Edw. I. (1290), and who, in consequence, suffered fine and imprisonment, is the earliest example of breach of privilege by the service of a citation in a royal palace, and not of freedom from arrest, p. 109, n. 4, 1 Rot. Parlt. 17. It has been doubted whether a writof summons to appear in a civil action can be served upon a member within the precincts of the Houses of Parliament; but, as it is only a- process upon such action, it would appear to be warranted by the Statutes cited above. But “ no arrest can be made in the King’s presence nor within the verge of the palace of Westminster, nor in any place where he resides, nor in any place where the King’s Justices are sitting.”
X do not know exactly what was the nature of the summons served on the honorable member for Darling (Mr. Blakeley), but I think that, when it is necessary to serve such documents, those concerned ought not to serve them while the House is sitting in any way that might be regarded as an interference with the movements of honorable members , in the House. We are all concerned in the protection of the privileges of Parliament ; an injury to one member in this regard is an injury to all.
– Why did not the Government interfere when the military entered this House-?
– On that occasion the House was not sitting; the cases are quite different, and we can get no assistance from the resurrection of the past. In the case I have cited, the Select Committee found there was no intention to violate the privileges of the House.
– I claim that in my case it was intimidation.
– Are the papers connected with some breach of the Arbitration Act?
– That is so; they wish to take from me certain privileges I have as an officer of the Australian Workers Union.
– I do not wish to express an opinion without a full knowledge of the facts.
– Here is the summons.
– The honorable member is entitled to bring the matter under the notice of the House, as the rights and privileges of honorable members must be fully protected.
– In view of what has happened will the Attorney-General con sent to look into the matter?
– I shall do that. I have already mentioned that, in a similar case, where there had been a violation of the privileges of members, the House of Commons decided not to take any action.
– I claim that there lias been intimidation.
– That is the question of fact.
– Will the Minister look into the matter and report to the House later ?
– I cannot report on the facts unless I know them. All I can say is that, in thecase referred to in England which was investigated, the House of Commons came to the conelusion that there had been a violation of privilege, but. it did not consider it necessary to take action. Irrespective of that, however, those intrusted with a process have ample opportunities of acting without coming within the precincts of the House when sitting, and it is a practice to be reprehended, because the freedom of honorable members; irrespective of party, in carrying out their duties should be preserved. The very essence of an honorable member’s position is to be free to carry outhisduties on behalf of those who sent him here, and in the interest of the nation. If the honorable member for Darling so desires, I shall look in to the matter:
Sugar Industry - Rowan Collection - Naturalization - Ventilation of the Chamber.
Motion (by Mr. Greene) proposed -
That the House do now adjourn.
.- In view of the early termination of the present Parliament, and no mention having been made concerning the Government’s intention regarding the sugar industry, I would like to ask the Acting Leader of the House (Mr. Greene) if the Government intend taking any action in connexion with renewal, in a modified form, of the sugar agreement. In view of the uncer- tainty occasioned in this industry, and the fact that this agreement will expire in April, or when the present crop has been garnered, will he state whether the Government intend to do anything in regard to the matter ? The growers and workers in the industry ought to know the conditions likely to prevail to enable them to receive some inducement to produce sufficient to meet our requirements. If there is to be any other additional cost incurred over and above what is a fair thing - we have not the report of the Joint Committee of Public Accounts, and we do not know when it will be available - those closely concerned should know. We must protect the growers and the workers, and the consumers must obtain supplies at as reasonable a price as* is consistent with the successful carrying on of the sugar industry of Australia.
Mir. RILEY (South Sydney) [4.25].- Will the Minister make a definite statement as early as possible as to the attitude of the Government in connexion with theRowan collection of paintings now under offer. Iunderstand that a communication was sent by the Prime Minister (Mr. Hughes) to the effect that an offer would be made, and that it was only a question of submitting the question to Parliament. It would be much better for the Government to secure the paintings instead of allowing them to be distributed amongst numerous buyers. I trust the Government will take immediate action in the direction of securing the collection for the Commonwealth.
.- I desire to bring under the notice of the AttorneyGeneral (Mr. Groom) the position of aliens who have been naturalized in the Commonwealth. Certain papers are submitted in which it is clearly set out that such persons are to obtain certain privileges, included in which is the franchise. The Solicitor-General (Sir Robert Garran) has submitted his interpretation of certain sections of the Nationality Act, under which aliens who have been resident in the Commonwealth for many years have been deprived of the franchise. I know of a Turk who has been resident in Australia for thirty years, and whose son served with the Australian Imperial Force in the Great War. This man has been a respected citizen of the Commonwealth all that time, and has been denied the privilege he is supposed to possess under our existing law. I should, therefore, like to know if the Nationality Bill, which will, we understand, be discussed during the coming week, will include a provision in the direction I have indicated, so that the disability will be removed.
– Will the honorable member supply me with the name of the person?
– I shall do so.
– I desire to add to the remarks of the honorable member for South Sydney (Mr. Riley) in reference to the Rowan collection. Speaking as one who has visited the majority of the greatest art galleries in Europe and some of those in America, I may say that I do not know of a single collection of paintings so magnificently artistic and so representative of a determinedspirit as those of the late Mrs. Ellis Rowan. This great artist visited many unfrequented spots, including places in Papua where no white man had previously been, in search of art. It would be a great loss to our beloved Australia if her splendid works were distributed amongst collectors and private ‘individuals. Our present High Commissioner. (Sir Joseph Cook), when Treasurer, expressed his high admiration of the paintings, and the hope that Australia would secure the wonderful collection.
I have been empowered to use the name of thehonorable member for Cowper (Dr. Earle Page) in connexion with another matter which I wish to bring before the House, and that is in relation to the unhealthy condition of the atmosphere in this chamber. Speaking medically - although I may not be so uptodate in my knowledge as my esteemed friend, the honorable member for Cowper - I may say that we have both come to the conclusion that the atmosphere in this chamber is absolutely deleterious to honorable members and also to the representatives of the press. Why the members of the press have not complained more than they have, I do not know. I understand that many experiments have beenmade, and that Colonel Owen and many others have endeavoured to overcome the difficulty. But, surely, if there is not a Government architect who can suggest alterations which would be the means of making this chamber more healthy, in the name of common sense why not call in some one else?
– Is the honorable member anticipating remaining here?
– He is thinking of the interests of the State Parliament and those who will succeed us.
– Surely there are architects and engineers who can suggest a means of. overcoming the difficulty, so that we can hand the building over to the State authorities in a better condition than it is at present, and any improvement we may make will be but small compensation to the Victorian Government, which has given us this splendid pile of public buildings free of rent or rates for twenty years. I wish to impress the necessity for an improvement upon the Government, because you, Mr. Speaker, realize, I know, the necessity, more particularly as one of your predecessors died in this chamber. Another member died at the north-east corner of the statue of Queen Victoria that stands in the Queen’s Hall ; the late Mr. James Page is a third instance, and there have been others. There is something wrong with the chamber. I am keeping out of it as much as I can, and will continue to do so until the defects which make it unhealthy have been remedied
– With reference to the matter spoken of by the honorable member for Corio (Mr. Lister), if he will give the Minister the name of the man, the place of his birth, and other necessary particulars, I have no doubt that the case will be looked into.
There is not one of us but regrets that a conclusion was not come to about the Rowan collection before the death of the lady who was most interested. No doubt it was her dying wish that the collection should be acquired by the Government, and I feel sure that that will ultimately be sanctioned by this Parliament. The matter, however, is in the hands of honorable members. It is for them to determine whether this valuable col lection shall be secured for the nation.
As to the declaration of the intentions of the Government about sugar, all I can say at the moment in reply to the Leader of the Opposition (Mr. Charlton) is that the matter is receiving, and has been receivin g for some time past, the serious consideration of the Government. The representatives of the State of Queensland waited on the Prime Minis ter in a body quite recently to urge that the Government should declare its intentions at the earliest moment. Ministers are fully alive to the need for making a definite “declaration at an early date. A considerable time must elapse between the planting and cutting of cane, particularly in the southern districts, where the interval of preparation for a harvest is nearly two years. Therefore, it is right that the growers and those directly interested in the sugar industry should receive at the earliest moment an indication of what is to succeed the agreement now in existence, under which thepresent crop will be harvested. The Government is fully alive to the position, and I hope that in a short time it will be possible to make a definite declaration as to the course proposed to be taken.
Question resolved in the affirmative.
House adjourned at 4.34 p.m.
Cite as: Australia, House of Representatives, Debates, 6 October 1922, viewed 22 October 2017, <http://historichansard.net/hofreps/1922/19221006_reps_8_101/>.