10th Parliament · 1st Session
Mr. Speaker (Hon. Sir Littleton Groom) took the chair at 11 a.m. and read prayers.
– In view of the impending sale of the Australian Commonwealth Line of Steamers and the consequent dissolution of the Australian Shipping Board, will the Prime Minister say how it is intended that Cockatoo Island dock-yard shall he controlled in the future?
– At the moment I cannot indicate how Cockatoo Island Dockyard is to he controlled- in future. The whole matter is under consideration.
– In view of the tension which now exists on the waterfront throughout Australia and the possibility that it may become more serious, will the Prime Minister take steps to introduce the amending Arbitration Bill of which mention has already been made by him?
– It is proposed to introduce an amending Arbitration Bill at an early date, but the Government’s intention to do so is not dictated by the present situation on the waterfront. I have made it clear on several occasions that it is the Government’s intention to introduce this legislation.
– Is the Prime Minister in touch with the State Governments with a view to providing employment for the large number of people who are at present out of work? If not, will he get in touch with them with a view to carrying out. works whioh will provide such employment?
Mr.BRUCE. - The question of providingemployment is one for the consideration of the State Governments, and the Commonwealth Government does not propose to take any action on the lines indicated by the honorable member.
– On the 23rd instant I asked the Minister for Customs a series of questions relating to the taxable value of imports. Can the Minister tell me when he will be in a position to supply me with the information forwhich I asked?
– From memory, I think that the information asked for by the honorable member would take a considerable time to prepare, but I shall have enquiries made to see if the answers can be expedited.
– I ask the Minister for Markets and Migration if he has seen, in last night’s Melbourne Herald, the following article: -
A warning that the Argentine and America may soon attempt a monopoly of the Euro pean market for apples, with a view to the exclusion of supplies from Australia or the other Dominions, is issued byF. W. Moore & Co., London, fruit merchants, in their October review. This competition, they state, may be promoted by a skilful extension of the period over which United States apples are placed on European markets, and by a large increase of Argentine production, similarly handled.
As the vote of the apple growers of Australia is averse to the formation of an apple pool, is it the intention of the Minister to initiate some other form of organization among them to effectively meet the American and Argentine competition, and will he convene a conference to discuss the subject of organization?
– It is not proposed at present to initiate a fresh scheme of organization. Obviously Australia must expect to have to enter into keen competition with other nations supplying the same market.
– I ask the Prime Minister if he has been in touch with the new Government of New South Wales with regard to the building of a bridge over the Clarence River, and if he has, I should like to know what is the present position in regard to the building of that bridge.
– I have not been in communication with the newly-formed Administration in New South Wales in regard to the building of a bridge over the Clarence River, but the honorable member will recollect that he asked a series of questions on this subject during the tenure of office of the previous Government of the State, and that that Government eventually gave an undertaking to proceed with the work.
– Will the Prime Minister ask the present Government of New South Wales if it proposes to honor the undertaking given by the previous Government ?
– The matter to which the honorable member has referred is of vital importance, because when the railway from Kyogle to South Brisbane has been constructed, a link will be wanting in the coastal line between Sydney and Brisbane until the bridge over the Clarence River has been built. I can promise the honorable member that I will again take up the matter with the Government of New South “Wales.
– In the absence of the Treasurer, I wish to ask the Prime Minister whether the reply given by the Treasurer to the honorable member for. Forrest, as reported in yesterday’s press, is correct. The Treasurer is reported to have said : -
Whore there had been any alteration of the rates of tax between the different years of assessment included in any five-years’ period, the tax which would have been payable in previous years been equal to the average income, would not be correctly ascertained by merely multiplying the tax on the average income for the subject year by the number of years for the period, but for each subject year the tax for each preceding year of the period must be calculated on the average income arrived at each year at the rate of tax applicable for each of such preceding years.
I should like to know, if that report is correct, when this system will be put into operation, why, and for what purpose?
– If the honorable member’s question is one which arises out of a debate which took place yesterday on the Income Tax Assessment Bill, the proper time to submit it is when the House is again in committee on the bill.
– It has nothing to do with the committee, and I cannot ask for the information then. I am merely asking if the report in the press is correct, and if so, why, when and where the system outlined in it will be put into operation.
– In the regrettable absence of the Treasurer, who is ill, I am not in the position to say whether the statement he made yesterday has been correctly reported; but if the honorable member will put his question on the notice-paper, I shall see that he has a reply,
– .Will the Prime Minister take into consideration the necessity for appointing a royal commission to enquire into the reasons for the existence of so many commissions and boards?
– Certainly not. The admirable work which is being done by the commissions now in existence is sufficient justification of their appointment.
– I should like to know if it has yet been determined in which State, and in which locality the first geophysical survey will be made?
– No. The question cannot be determined until the experts arrive in Australia.
asked the Minister for Works and Railways, upon, notice -
– The information will be supplied at a later date.
Home Consumption and Exportation
asked the Minister for Trade and Customs, upon notice -
– The information is being obtained, so far as is possible.
asked the Minister for Home and Territories, upon notice -
– The information is being obtained and will be supplied at a later date.
Cost of Hotels - Banks - Transport Service
asked the Minister for Home and Territories, upon notice -
– I am inquiring into this matter and shall advise the honorable member as soon as possible.
asked the Minister for Home and Territories, upon notice. -
With regard to his reply to the question by the honorable member for Hunter on 4th November (Hansard, page 986), in connexion with banking facilities at Eastlake -
Are the Commonwealth Savings Bonk and the State Savings Bank of New South Wales permitted to have branches at Eastlake?
Have any other banks applied for permission to operate branches at Eastlake ?
Is it a fact that the largest business interests at Eastlake are branches of Queanbeyan firms; if so, is it a fact that if banking facilities at Eastlake are curtailed a good deal of banking business will be transferred from the Federal Capital Territory to Queanbeyan?
– The information required by the honorable member is being obtained, and I shall advise him this week.
asked the Minister for Home and Territories, upon notice -
– I am having enquiries made and shall advise the honorable member during the next few days.
asked the Minister for Trade and Customs, upon notice -
– I am making inquiries into the matter and will furnish the honorable member with a reply at a later date.
Classification - Basic Wage Increase
asked the Prime Minister, upon notice. -
When will the classification for the clerical staff of . the engineer’s branch of the Postal Department be published?
– The information is being obtained and will be furnished as early as possible.
Cost of Living Increases
asked the PostmasterGeneral, upon notice -
Will he moke available, before Christmas, to post and telegraph officers, the increases due to -
those officers who are entitled to the same on account of an increase in the index figure of the cost of living;
those officers who are entitled to an increase on account of the raising of their status to the assured maximum ?
– Payment will be made as early as possible, and before Christmas if practicable.
asked the Treasurer, upon notice -
– The answers to the honorable member’s questions are as follows : -
asked the Minister for Home and Territories, upon notice -
– The answers to the honorable member’s questions are as. follow : -
asked the Minister for Trade and Customs, upon notice -
Whether the Tariff Board’s report upon the brushwork industry has been received, and, if so, when will it be laid upon the table of the House.
– The report will be tabled to-day.
Aerodromes at Bundaberg and Rockiiampton.
– Yesterday the honorable member for Capricornin asked the following questions: -
I am now in a position to furnish the following replies : -
South Australia - 4, located at Adelaide, Swan Reach, Loxton, Renmark.
Victoria- 4, located at Melbourne, Echuca, Rochester, Milduro.
New South Wales - 14, located at Sydney, Harden, Cootamundra, Narrandera, Hay, Balranald, Deniliquin, Broken Hill, Newcastle, Grafton, Ballina, Parkes, Nyngan, Bourke.
Queensland - 13, located at Brisbane, Morven, Cunnamulla, Charleville, Tambo, Blackalt, Longreach, Winton, Mackinlay, Cloncurry, Mount Isa, Camooweal, Normanton.
In addition emergency landing grounds have been established as follows: -
– On 23rd November, 1927, the honorable member for Kalgoorlie, (Mr. A. Green), asked me when I would be able to lay on the Table of the House the report of Dr. Cook on the inspection of natives in the north-west of Western Australia. I now inform the honorable member that it is probable that owing to pressure of work at the Government Printing Office, the publication of this report will be delayed until early next year.
Yesterday the honorable member for Capricornia (Mr. Forde) asked the following questions of the honorable member representing the Minister for Defence -
I am now in a position to furnish the following replies : -
Mr. PRATTEN on the 29th November the honorable member for Lilley (Mr. Mackay) asked the following questions : -
What was the quantity of cotton production in bales and pounds weight in Queensland and North Australia for the years 1924-25, 1925-26, and 1926-27?
What was the price paid to the growers?
What was the quantity of cotton imported ?
I am now able to furnish the honorable member with the following information:
– On the 28th November, the honorable member for Yarra (Mr. Scullin) asked the following question : -
Will he furnish aturn showing the importations into Australia for the past five years of -
Yarns - knitting and weaving.
Piece goods - woollen, worsted and cotton tweeds.
Other knitted goods.
I am now able to furnish the honorable member with the following information. : -
Item (d) covers socks and stockings only.
Items (e) and (f) cover underwear knitted and other knitted goods.
Mr. Pratten presented reports by the Tariff Board upon acetates for use in the manufacture of acetic acid, bounty on copper, brushware, doors of wood, undressed feathers, and tool handles of wood, and moved -
That the reports be printed.
.- In view of the fact that the debate on the tariff proposals is to be resumed this week, I should like to know from the Minister when the many voluminous reports by the Tariff Board will be available to honorable members. It is unfair to ask us to give consideration to the various items in the tariff schedule unless we are in possession of the board’s reports and recommendations. I understand that many of the reports are already printed, but not circulated. I have previously complained of the inordinate delays that occur between the presentation of reports and their distribution to honorable members.
– I understand the motion for the printing of the reports is only a formality, the reports being already in print. “Will the Minister ask the Government Printer to expedite the supply of copies to honorable members?
.- No doubt the reports are available to those honorable members who ask for them; at any rate, I have secured copies of those in which I am specially interested. The convenience of honorable members, however, would be met if the reports were automatically circulated as soon as the order for their printing was given by the House. Will the Minister outline the procedure that will be followed in connexion with the forthcoming discussion on the tariff schedule? Will only a few speeches be heard before the discussion is closured, or will ample opportunity be given to all honorable members to set forth their views? The matter is of vital importance, and a full, and even protracted, debate may prove advantageous to the Minister and the subject generally.
– So far as I know the usual procedure will be followed. I have made what is equivalent to a second reading speech on the tariff schedule and the general discussion will proceed nominally on item No. 1. After, that is disposed of, discussion will be confined to the individual items as they are dealt with seriatim.
For four or five weeks I have been anticipating the desire of honorable members by getting the Government Printer to print extra copies of tha Tariff Board’s reports. A few days ago, I paid a well-deserved tribute to the Government Printer, Mr. Fargher, and his staff for the very fine work they have done; I understand that most of the important reports of the Tariff Board are already printed, and 150 of each is available for the use of honorable members. There remains only one important report to be laid on the table, namely, that relating to the iron and steel industry. Honorable members will require to consider it in conjunction with the departmental reports and dissections, and as they cover certain confidential information, I cannot disclose them without the consent of the parties interested. I am trying, however, to obtain that consent, and as soon as possible I shall make the whole of the information available to honorable members. I shall consult with the the Clerk of the House to see what further can be done to meet the wishes of honorable members in regard to copies of reports.
Question resolved in the affirmative.
In committee (Consideration resumed from 29th November (vide page 2231).
Postponed clause 9. (What is included in income).
Section 16 of the principal act is amended -
Section proposed to be amended -
– The purpose of this clause is to amend section 16 of the principal act, in order to remove a flaw that was revealed by the judgment given this year by the High Court in the Weatherly case. Section 17 relates to what are known as walk-in and walk-out sales, and provides that a profit made by the sale of trading stock or live stock in a walk-in, walk-out transaction shall be taken into account for income tax purposes, as is quite proper. Breeding stock, however, were regarded as capital assets, and the proceeds of the sale of them were not to be included for income tax purposes. The section was intended to cover only walkin walk-out sales, but the High Court held that it had a general application. Sub-section 1 of section 17 upon which the High Court delivered its judgment, reads : -
The proceeds derived from the sale of the whole or part of the trading stock of any business after the thirtieth day of June One thousand nine hundred and twenty-one (whether on the sale of a business as a going concern or in any other manner for the purpose of discontinuing the business) shall be assessable income.
It was intended by Parliament that the words in parenthesis should impose a limitation, but the High Court held that they were not words of limitation, and that the section meant that the proceeds derived from any sale of live stock or trading stock should be assessable income, and that the exemption in favour of breeding stock should be allowed in connexion with every sale. In the Weatherly case portion of the land on which a pastoral business was carried on had been sold, and the proceeds of the sale of breeding stock were held to be exempt from income taxation. That was not the intention of Parliament, and the purpose of this clause is to make the intention clear. Perhaps it is desirable that I should state what are the proposed amendments. Clause 9 proposes to repeal section 16, which defines assessable income, and to substitute provisions which honorable members will find on page 4 of the bill. It is now proposed to add the following paragraph : - “and (h) in the case of any person who sells or otherwise disposes of to another person (otherwise and by way of testamentary disposition ) -
The first amendment which I shall ask the committee to make is to leave out the words “ whole of his “ in paragraph a. The provision will then apply in the case of a person who sells either the whole or any part of a business carried on by him for the purpose of putting an end to the business. This legislation is principally of importance to those engaged in the pastoral industry, but it will apply also to other avocations. If this amendment is accepted by the committee the provision will then apply to a pastoralist who owns stations in, say, Queensland and Victoria, and desires to sell his Queensland property. I move -
That the words “ whole of his “, proposed new paragraph (h) sub-paragraph (a), be omitted.
Amendment agreed to.
– I move -
That the words “ his business “, proposed new paragraph (ft) sub-paragraph (6), bt omitted with a view to insert in lieu thereof the words “ a business carried on by hiin “, and that the word “ his “, second occurring, be omitted, with a view to insert in lieu thereof the word “the”.
Here again it is desired to make it clear that each separate business shall be treated separately.
Amendment agreed to. 1’rovided that the assessable income of the person who has so sold or disposed of assets for the purpose of putting an end to the whole of his business shall not include any amount in respect of any live stock, included in the assets so sold or disposed of which, in the opinion of the Commissioner or a Deputy Commissioner, wore ordinarily used by that person for breeding purposes except that when such live stock includes sheep in the wool there shall be included in the assessable income of that person the amount which, under the provisions of the next succeeding section, is found or determined as the price or value of the wool as distinct from the sheep:
– I move -
That the words “ his business “, be omitted with a view to insert in lieu thereof the words “ a business carried on by him or in consequence of the acquisition or resumption of land, used by him for a business carried on by him, under the provisions of any law of the Commonwealth or a State which contains provisions for the compulsory acquisition or resumption of land “.
This amendment proposes to extend the exemption to breeding stock to another case will apply in the case of a pastoral property that is resumed compulsorily or resumed under a notice to treat by agreement in an act providing for the compulsory acquisition of land. If part of. a property is resumed its carrying capacity is thereby reduced and stock are sold. This amendment extends the exemption of the act to breeding stock in such cases.
The proviso, however, makes an exception in the case of sheep in the wool. It states that there shall be included in the assessable income of the person owning the sheep, the amount which, under the pro- visions of the next succeeding section, is found or determined as the.price or value of the wool as distinct fr.om the sheep. Clause 10, which seeks to amend the next succeeding section, provides for the division of the sale of sheep in the wool into two transactions - a sale of sheep and a sale of wool. Since that provision was drafted, representations have been made on behalf of persons interested, and I propose, later, to move an amendment in that clause, the object being to substitute a new provision to make the division of a sale of sheep in the wool into two transactions optional at the desire of the purchaser. It will not affect the vendor. If the purchaser does not wish to have the transaction divided in the manner suggested, he can come under the present system. It is obvious that it would be exceedingly difficult to divide the transaction in every instance, because of the difficulty in assessing the value of two or three months’ wool on a sheep. To meet the views of those who have made representations to the government it is proposed to make the division of the sale optional so far as the purchaser is concerned.
– Why confine the provision to the purchaser?
– -Because the vendor brings his stock to account at cost or market value, and on the other side of his account shows his sale of both stock and wool, the vendor is not affected.
– I suggest to the Attorney-General that it is advisable that we should discuss both clauses in order to determine the principle involved.
.- The meaning of the first portion of the proviso is perfectly clear, but honorable members reading the latter portion of it will be in some doubt. All reference to what is intended to be done in respect of sheep in the wool should be included in a separate paragraph. It would be easier to read.
– I think that if the word “except” were altered to “ provided,” and a new paragraph begun, the difficulty would be overcome.
Amendment agreed to.
. - We now come back to breeding stock, and I have a verbal amendment to move. I move -
That the words “ under the provisions of the next succeeding section “ be omitted with a view to insert in lieu thereof the words “by applying the provisions of sub-sections 2 and 3 of section 17 of this Act.
Section 17 (1) of the principal act depends on the exercise of an option. Only sub-sections 2 and 3 require to be applied. They deal with the method of distributing the purchase price between the wool and the sheep. This particular amendment is merely a drafting and verbal matter. The substantial question refers to breeding stock, and clause 9 provides for the exemption of the proceeds of the sale of breeding stock from inclusion in income in the case of walk-in walk-out sales. It also provides that when the livestock sold includes sheep in the wool, even when they are breeding stock, money received for the wool shall be included for the purposes of income tax.
– Would not the option given in clause 10 govern that?
– No. Speaking generally, wool is the income derived from sheep. The annual clip includes wool from breeding as well as from other stock, and always goes into income. It is considered that wool from breeding stock should go into income, in the same way upon a sale of the breeding stock as in any other case.
– Does “ breeding stock “ necessarily mean stud breeding stock ?
– No, breeding ewes and rams. Wool is income, and not capital. Breeding stock may be regarded as a machine that produces income in the form of wool. The words after “ except “ produce this result. While the machine that provides the income is exempted from taxation in respect of any accretion in value, the wool which the machine produces should pay income tax in the ordinary way. The proposed legislation provides that where sheep are sold in the wool the value of the wool is to be ascertained in the manner provided in sub-clauses 2 and 3 of clause 10. That method is, substantially, that the sale price of the sheep is to be worked out according to any contract specifying the value of the sheep, otherwise on the market value, or in other cases according to the determination of the commissioner.
– I take it that the effect is to limit this exception to a complete disposal of a business, and that it will not apply to a part sale?
– That is so, to get over such a case as Weatherly’s.
– Will the honorable gentleman say on what ‘grounds breeding stock will be exempted, when there is a complete sale, and denied exemption when it is a part sale, as in the Weatherly case?
– It is accumulated capital, acquired over a number of years. Studs do not grow in a day.
– I am not posing before the committee as an expert on the pastoral industry, and what I say is subject to correction. We can all understand and identify the sale of the whole of the stock on a station, but it would be very difficult to apply the principle to sales of a portion of the stock on a station, in view of the culling that takes place every year from breeding sheep. There is no reason why there should be an exemption on the sale of culls, or why there should be an exemption’ on ordinary commercial sales of breeding stock. Frequently breeding stock is sold by pastoralists and there appears to be no reason why there should be ‘an exemption in such a case, which is trading in the ordinary course of business, as distinct from walk-in walk-out, or compulsory acquisition. To a large extent it is a matter of practical business. If the exemption were extended, it is difficult to see where it would end.
.- One is confronted with a difficulty when dealing with clauses 9 and 10. I take it that, on the amendment of the Attorney-General, we are confined to a debate on the sale of breeding stock on a walk-in walk-out basis, or on a compulsory acquisition. It is impossible to discuss the sale of breeding stock on a walk-in walk-out or compulsory acquisition basis, which involves the separation of the wool from the sheep, without trespassing on the provisions of clause 10.
– The clauses are quite distinct. The first provides for the exemption of. breeding stock, and the second deals with an exemption in which a distinction is drawn between the wool and the sheep.
– I favour the amendment of the Government so far as it applies to breeding stock; but the clauses are inter-related, and cannot be separated because the basis of assessing at the sale price, or the conditions governing the sale, open up the question of separating the wool from the sheep.
– In the one, is it not a matter of whether the wool is part of the capital or not, while in the other wool is a commodity actually being sold, which is quite a different proposition.-
– There is something in the contention of the Prime Minister. There is also involved the task of computing the value of the wool on the back of the breeding sheep. At the present time, without the innovation of the new system of separating the wool from the sheep, the purchaser is able to protect himself as to price, and so forth, because the wool on the sheep that he purchases passes with the sheep into his year of accounting, and he thus makes his assessment of the value of the sheep, knowing that he will have to account for the wool, which may be quarter, half, or say threequarter wool. The vendor is asked to account, in some instances, for the wool in the taxable period, -plus portion of the new clip that passes on to a second person, where the vendor has incurred some of the costs of production in the second period. He may be landed, in his income, with the whole of the cost of the production of the previous clip, plus a proportion of the cost of the new clip.
– He has sold his wool and received money for it.
– I am not referring to the sold clip.
– He has sold it on the back of the sheep.
– He may sell it, but the option does not apply to him. I ask that the option shall be equally applicable to the vendor and purchaser, and that for income tax purposes, it may be recorded as an option if declared and accepted.
– The objection to that is that there would be the possibility of the whole of the wool being kept completely out of the income tax returns by a perfectly legitimate exercise of the power given under clause 10, of declaring the option.
– That is why I contend that it is difficult to discuss and arrive at a decision on this matter without a consideration of the next clause. While I am certain that the taxation commissioner and the Government desire to render relief under clause 10 and to separate the two commodities as far as possible, at the date of sale, it will be found, in practice, that the operation of this machinery would be most involved and difficult. I do not think it will be workable. I know of no practical system of appraisement that can be adopted, and, as there are at least 848 different types of wool in Australia, the scheme will be almost impracticable.
– It will work out all right in practice, in the same way that it now works out in respect of stock, and land.
– It may be easy enough in theory, but, in my opinion, it will be difficult in practice. At first, 1 was inclined to favour the proposal, believing that it was an attempt to help taxpayers; but, on further examination, I have come to the conclusion that it will not work. Let us suppose that a taxpayer whose year ends on 30th June, shears in October, and that on the 30th April of the following year he sells out. He will be taxed in the year of sale on his 12 months’ wOOl clip, shorn in October, and also on that part of the purchase money represented by the six months’ wool on the back of his breeders, whereas his expenses will only cover the period from the 30th June to 30th April. I submit that in practice it would be un-‘. wise to separate the wool from the sheep.
– If he carried on the business only until 30th April, he would not be entitled to allow expenses incurred after that date.
– The purchaser of the sheep is able to protect himself, whereas the vendor is not. In one taxable year the vendor is landed for eighteen months’ expenses.
– He will be taxed on a clip and a half, if he sells a clip and a half.
– Yes ; and unmatured half clip. I think that the Attorney-General will find that in practice his proposal will not work out as on paper it would appear to do. It would be better to leave the sheep with the wool until the next shearing time comes round, and to let the man who reaps the harvest declare the whole of his expenses. He should be able to bring his clip and his expenses into account. Surely the trading community is the best judge of how to buy sheep ! This “ rule of thumb “ system will only confuse the stock and trading community. The honorable the Postmaster-General (Mr. Gibson) shakes his head; but I remind him that the vendor must take into account his transactions over a period of eighteen months. To a great extent that is an interference with the free process of negotiation between vendor and purchaser in respect of one of our greatest national assets - our live stock.
– It only applies in the case’ of walk-in-walk-out sales.
– That is so. That is what we are discussing.
– I take it that the honorable member’s desire is that no income tax should be paid until the wool has left the sheep’s backs.
-My desire is that the trading period shall be allowed to terminate before the income is brought into account. I do not know whether strong representations have been made to the Government regarding this matter. I cannot think that they have been, nor do I know that the Government is actuated by other than a desire to help woolgrowers ; but I am afraid that the remedy “it proposes will prove a block to transactions on a walk-in-walk-out basis.
.- Like the Attorney-General (Mr. Latham) I do not claim to have had much experience as a pastoralist; but I am beginning to understand the position of the pastoralist from a taxation point of view. I take it that the general principle embodied in clause 10 - and this matter can scarcely be discussed without referring to that clause - is to relieve the taxpayer who has purchased sheep in the wool. If he purchases sheep in the wool, the price he pays for them must necessarily include the value of the wool on their backs. Later, when he shears the sheep and sells the clip, he pays income tax upon the proceeds. Surely, in that case, he is entitled to some deduction for what he paid for the wool. That is the whole point. If a person buys stock from a wholesale merchant, and sells it, he must take it into account at the price paid for it. If he pays for the wool on the sheep’s backs, and later, shears the sheep and sells the clip, he should be entitled to deduct the price paid for the wool before his income can be ascertained.
– He would take that into’ account when making the purchase.
– I suggest to the honorable member that if he had sheep with wool on their backs to sell he would not be willing to sell them for the same price that he would accept for them immediately after they were shorn. What chance has the purchaser to protect himself when he is buying sheep with the wool on their backs?
– The purchaser is the one man who is able to protect himself.
– Unquestionably he will pay income tax on the whole of the clip, although he has paid cash for the wool on the sheep’s backs. Let us now deal with another aspect of the question. The honorable member for Wannon (Mr. Rodgers) argues along lines which would have a serious effect on our revenue. There are two considerations before us. The first provides for the total exemption from taxation of breeding stock where there is a complete winding-up of a business on the walk-in-walk-out basis.
– Except the wool.
– Let us, for the moment, leave the wool out of our consideration. A man sells the whole of his flock, of which his breeding stock maycomprise the greater portion.
– He will probably have as many ewes as wethers.
– Sometimes more.
– How do we distinguish between ewes and wethers for taxation purposes? Wethers are kept chiefly for their wool. Surely the wethers are as much an asset as the ewes. A wether cannot be treated as capital, because it is not beeding stock. In the case of a clearing sale, only breeding stock is regarded as capital. I could understand this exception being made in respect of stud stock, but not in the case of ordinary ewes which are kept largely for their wool. Ewes are kept both for breeding purposes and for their wool. The wether is as much an asset as is the ewe, but because of the fine distinction made, revenue is lost. I do not strongly object to that. The honorable member for Wannon, however, goes further, and says, that if a flock of ewes is sold at the winding up of a business, no account should be taken of the wool on their backs. I point out that if the sale was not effected those ewes would be shorn, probably the next month, and on the clip obtained from them the owner would have to pay income tax. The honorable member cannot have it both ways. We cannot allow a purchaser of stock to deduct the price he pays for the wool on the backs of the sheep, and also, when he sells those sheep later at a clearing sale, to get an exemption from taxation for the wool on the backs of breeding stock.
Mr.Rodgers. - I am not suggesting that.
– Let us assume that a pastoralist was selling out. If, at the beginning of an accounting period, he took his sheep into account at a certain value, the wool which they had grown while in his possession, would add to their value no matter to what extent it had grown. If the sheep are in the wool in each case, there will be no income tax payable on the increased value of the sheep. But if a man buys sheep soon after they have been shorn and keeps them he should pay tax on the value of the wool obtained from them. The purchaser is protected; but a man who buys sheep at a fairly low price because there is no wool ori them, and after a period of six months sells them in the wool, and receives an entire exemption from taxation because they are breeding stock, is obtaining a benefit. If he retains them a little longer, and shears them, he will have to pay income tax on the price received for the wool. The principle underlying the department’s suggestion that the purchaser shall be allowed to deduct from the price obtained for the sheep, the value of the wool on their backs insists that in the case of a clearing sale the two things must be separated.
. -The reasoning of the honorable member for Yarra (Mr. Scullin) is sound; but I should like the Attorney-General to say why his proposal applies only to walk-in - walk-out sales and compulsory sales. The necessity of assessing the wool, as distinct from the breeding ewes, should apply to every sale.
– Special provision for walk-in walk-out sales is necessary, because it is arguable whether in the absence of similar provision the proceeds of such sales are income at all. In the case of other sales, the ordinary provision as to sales applies; the clip from the whole flock, including the breeding stock, is taken into account. Unless there was a special provision dealing with walk-in-walk-out sales, the court might hold that taxation should not be imposed upon any moneys resulting from the sale of a business as distinct from the carrying on of a business. Income is earned in the carrying on of a business. If a man sells his business, then, prima facie, it is not an income-producing operation; it is a realization of assets. At least, it includes the sale of capital assets. It was held in the High Court that in a walk-in and walk-out sale no income tax was payable in respect of the year in which the sale occurred, although, of course, what was sold included the annual produce. Therefore, it is provided that after a walkinwalkout sale the proceeds from ordinary trading stock or live-stock shall be taxed; but a distinction is drawn between capital assets and other assets. The sale of capital assets is not an income-producing operation. If it is a profitable sale, it may make the seller wealthier than he was before; but only by a fortunate sale of capital assets. It is thought proper that, when trading stock of any description, whether sheep or the stock-in-trade of an ironmonger or any other trader is sold for the purpose of putting an end to a business, the proceeds should be regarded as income; but an endeavour is made in this clause to distinguish between sales of capital assets, such as breeding stock, and other sales, and to provide that any profit on the sale of capital assets shall not be regarded as income. This clause is based upon the view that the proceeds of the sale of wool growing on breeding stock is in the nature of income.
.- It seems to me that, in a walk-in and walkout sale, not only the sheep but also the wool on the sheep’s back is part of a pastoralists capital assets. I cannot conceive of separating the wool from the sheep, because, on the average, the wool on the sheep would represent 40 per cent, of the value of the animal, if it were in full wool. Purchasing a sheep is like buying a store and paying, say, £1,000 for the building, and £500 for the stock that is in it. It would be necessary for the seller to - debit his wool account 40 per cent., and credit his sheep account by that amount, in order to keep his accounts in perfect order and see that he was taxed in an equitable manner. If in a walk-in and walk-out sale, a man sells his sheep in full wool, he disposes of part of his capital assets. If he realizes on the wool, he gets a return for it while he is in business; but when he sells his sheep he sells the sheep and wool. Therefore, I say unhesitatingly that he sells part of his capital assets.
– I have with interest heard the learned discussion on this matter, and I cannot help wondering what the ordinary breeder of sheep would have made of it if he had been listening. A number of honorable members know something about sheep, and I do not think that even they are too sure of the effect of the provisions under consideration. It .seems to me that the provision at the end of clause 9 is proposed to be inserted in the act merely with the object of seeing that, in the case of a walk-in-walk-out sale, the seller shall not escape paying a certain amount of income tax, which may easily be a negligible sum. That principle is carried into the next clause, which makes a distinction in detail as between wool and sheep. I should like the AttorneyGeneral to make it clear whether this distinction is the result of definite recommendations to the Government by any authorized and reliable body of pastoralists, graziers, or sheep-breeders. If it is not, I am opposed to it. If there is reputable authority for considering that the provisions are workable, and that any authorized body of sheep breeders supports them, I shall be prepared to consider them. But, otherwise, it seems to me, after listening to what has been said, and after reading the clause myself, that they are highly legal provisions, which are simply the despair of the man on the land. Goodness knows, he has to make enough returns already. He has to declare the- number of fruit trees growing on his property, and I am not sure that he has not to estimate the number of eggs that his fowls will probably lay .in the next year! Men at sales in the country know little of legal details. Their business is simply to buy or sell stock. It seems most unwise to pass any law the effect of which we are not quite certain, and which may embarrass them. I must say that, on the whole, I think that the amendment suggested by the Attorney-General is an improvement on the bill as originally drafted. Clause 10 provides for the repeal of section 17 of the principal act and the insertion of a new section. Subsection 1, as. proposed to be amended, will read -
When sheep in the wool are sold or otherwise disposed of* by one person to another person, the sale or disposal may, at the option of the purchaser to be declared upon making his return, for all purposes in connexion with the assessment of the income derived by the purchaser, be deemed to be a sale of sheep and wool as distinct from each other.
We all know that, in walk-in-walk-out out sales, it is customary for different values to be placed upon . the land with, of course, the buildings, and also separately upon the stock. I remember that some fifteen years ago it was held - I think in a Queensland case - that, unless it was agreed at the time of the sale that the various goods should be separated, the separation for taxation purposes was not valid. In other words, if a lump sum was offered for the whole lot, the purchaser had to pay tax, or at any rate stamp duty, on the whole amount - on the value of the stock, as well as on the value of the land and the buildings erected thereon. The point is that the agreement had to be made at the time. But, under this provision, the unfortunate nian on the land who sits down perhaps months afterwards to fill in his return, will need to calculate what percentage of wool was on the sheep six months previously. My remarks are not intended to embarrass the Government in any way. I am sure that the clause was drafted in order to avoid double taxation, and was intended to be of assistance to the man on the land. But I put it to the Government that the existing provision is good enough. It is better to leave the law as it stands than bring about some difficult legal position, which is not understood even by honorable members.
– This is a most important matter. In the first place %ve must appreciate the distinction between breeding stock and the wool upon their backs. Following up the argument of the Deputy Leader of the Opposition (Mr. Scullin) as to whether breeding stock should be regarded as a capital asset, I point out that it has been the practice for some time to adopt that view, and exempt the proceeds of their sale from income taxation. Breeding stock has been taken as part of the capital assets of the pastoralist, in the same way as machinery is regarded as among the capital assets of the manufacturer. But the position in regard to the wool is a very different one. ‘In the event of a walk-in-walk-out sale, the value of the wool is taken into account, and it is treated as part of the ordinary trading profits of the pastoralist, income tax being charged upon the profit from its sale. At the time of a walk-in-walk-out sale, there is, pos sibly, ten months’ wool on the sheep, and the wool would have been shorn very soon afterwards and brought to account. Obviously it is not part of the capital assets. I have had considerable discussion on this matter with the representatives of the pastoralists, who, I can assure honorable members, have taken all the points that could be raised to show that the capital assets consist of the sheep plus the wool. One of the points they make is that the wool is not physically detached from the animal that produces it, and that, therefore it still remains part of the capital asset. The Government cannot accept that view. We come then to the consideration of the position in regard to the wool. It may be said that it does not matter so long as somebody pays tax upon it, and that the Government should not worry about it at all. ‘ The sale consists in the disposal of the capital asset plus part of the ordinarytrading asset, namely, the wool on the sheep, and this is sold to somebody else. If the way the pastoralists had to treat the wool was to bring it in as income at the purchase value on the one side of their account, and bring into account the asset in the sheep on the other side, using the principle of the purchase price to determine the value on both sides, the revenue would receive that to which it was entitled with regard to that particular wool. Pastoralists are now allowed the option of bringing the sheep in when they are purchased in the wool on the one side, or of bringing the wool in at the sale price on the other side. They can separate the two. But if the suggestion now made were’ adopted in the case of a walk-in-walk-out sale, the seller or somebody else would not have to account for the wool, with the result that the revenue would lose the whole of the income tax due on the profits from the sale of the wool which is clearly a trading asset the moment it is separated from the sheep. It is obvious that nobody would suggest that it is drawing. on the capital asset to separte the sheep from the wool. We have had to accept the idea of separating the sheep and the wool in the case of a walk-in-walk-out sale. In that case it only applies to the vendor. The position of an ordinary purchaser in a walk-in-walk-out sale presents no difficulty, for he can keep the sheep and the wool intact if he pleases until the end of the term or he can separate the two. The Government has had a full discussion of this matter with the pastoralists’ representatives. The honorable member for Boothby has asked whether representations have been made for the wool to be taken into account separately from the sheep in the case of the vendors. The reverse is the position. The pastoralists’ representatives have naturally said: “No; certainly this should not be done,” and they have tried to maintain that the sheep, plus the wool on it, is part of the capital asset. The vendor, or anybody else who is likely at any time to be interested in a walkinwalkout sale, would naturally maintain that the sheep plus the wool is part of the capital asset, and try to draw it in as such capital asset. I venture to say that it is only possible to substantiate the case that the sheep itself and not the sheep plus the wool, is part of the capital asset. The Deputy Leader of the Opposition has asked how far we can allow breeding stock to be taken into account as the part of the capital asset, or, in other words, as part of the machinery of manufacture of the pastoralists. We have accepted the principle that breeding stock shall be so regarded; but we cannot .accept the suggestion that the sheep plus the wool in the case of sales on a walk-in-walk-out basis shall be taken as part of the capital asset.
– I venture to suggest that all stock must already be accounted for in taxation returns at a specified value. Could not the amount for taxation in respect of the sale of such stock on a walk-in-walk-out basis be taken as the difference between the price realized at the sale and the valuation at which the stock appears in the departmental returns ?
– The only point that the Government is firm upon is that it cannot allow the trading asset which has been added to the capital asset to be included in the capital asset, for that would have the effect of adding the value of the wool to the capital asset. There must be a statement separately as ‘ to the value of the wool on the sheep.
.- I feel that the two great principles involved in this issue have not been clearly followed by the committee. The first point is that income tax is levied on the total amount of the income in a given period, less only part of the cost incurred in the same period in making it. The case I cited was clearly put. I instanced the case of a clip and a half, or a clip covering a period, of one year and ten months, passing into the accounting period in respect of which the costs of only one year had been taken into consideration. In such a case the vendor would be treated inequitably if he were allowed to deduct only the costs in respect of the twelve months period. The basic principle on which income tax has always been imposed in this country is the calling into account of all income for a fixed period of twelve months and the deduction of the cost of raising the income over the full accounting period, without any overlapping. If this proposal is agreed to, a departure will have been made from that established principle.
– Expenses up to the point of sale would be allowed. If in the preceding year the clip was not sold, a greater amount would be allowable for expenses ; so that the thing would balance itself.
– I am afraid that it would not do so. If the income from the sale of wool or station property were as fixed as the salary of honorable members it might be possible to apply this machinery to it with some equity; but under existing conditions that cannot be done. The great pastoral industry of Australia, as every one knows, is subject to many vicissitudes of climate and circumstance. There are periods of depression in which the value of stock falls seriously, and these are often followed °y good times in which prices rise suddenly. In the first case the seller may lose heavily under enforced sale while in the second eventuality the purchaser would benefit materially by a sudden rise without having been debited with a material proportion of cost.. Immediately we depart from the fixed period of income and expenditure we step on to dangerous ground. If the principle of altering the period is right in respect of growing wool, it surely is right in respect of growing crops; hut would any honorable member suggest that in the case of a sale of land the value of a growing crop on it should be taken into account, for income tax purposes, by the vendor up to the day of sale? We are dealing now with what I may call the two breasts of the nation, her agricultural and pastoral industries. We have deliberately said that the principle upon which the collection of our income taxation shall be based in respect of them is that there shall be a fixed term in which both income and expense shall be placed side by side. If we depart from this principle, as it is now proposed that we shall do in the case of walk-in walkout sales, we shall place ourselves in a most difficult situation. For instance, it may involve the orchardist who disposes of his property while his fruit is forming.
– Partly ripened oranges may be involved.
– That is so. If we begin over-reaching and overlapping in our accounting periods, we shall never know where we are. I suggest that if our taxing master, for the purposes of simplifying his accounting methods, is able to obliterate from our income tax legislation the great principle of the fixed period, he will place us in an extremely difficult position. I cannot see any reason why the taxing master should fear that the country will lose revenue by the continuation of its present practice. The Attorney-General, and to a lesser extent the Prime Minister, in discussing this subject, expressed fears that losses of revenue would be sustained if this alteration were not made ; but I cannot see why that should be so. It is certain that a provision of this kind will seriously complicate the operations of our stock and station owners, and the great houses which control our stock and station business; and I hope the committee will hesitate before approving of it. I submit that if we continue our fixed accounting period, the position will right itself. We have had no experience which in any sense justifies us in making this great departure from settled practice.
.- The honorable member for Wannon is, in my opinion, quite wrong when he says that we shall not lose revenue by persisting in our present practice. He mentioned the case of a growing crop. If we were to amend the act to provide that a man might deduct the extra price he pays for land because it has a growing crop upon it from the price he receives from the crop when he harvests it, we should certainly lose revenue. The honorable member must have it in either one way or the other. If the proposal in clause 9 is not proceeeded with, the concession given by clause 10 must be withdrawn, thus leaving the law as it stands at the present time. We cannot give the concession on the one hand and refuse to allow the deduction on the other.
– I stand to what I have said. I am not responsible for the bill.
– No ; but the honorable member wishes to escape from what is a natural corollary of the provision in the succeeding clause; to work from one standpoint on clause 9 and from another standpoint on clause 10. He desires the concession to be given to the purchaser and at the same time not to. be taken away from the vendor. He cannot have it both ways. To me, the merits of the question are very clear. By clauses 9 and 10, we propose to give two concessions. One is that breeding stock may be sold on a walk-in walk-out basis, and be treated as an asset, and not be taxable. The Prime Minister (Mr. Bruce) has stated that breeding stock is always treated as a capital asset. It is not so treated when it is sold in the ordinary way.
– No ; what I said was that we have recognized that principle in relation to walk-in walk-out sales.
– It must be admitted that ordinary breeding stock are not a very much greater asset than the other portion of the flock which produces wool. They produce wool and also breed; the others merely produce wool.
– If you were to dispose of them you would no longer be able to grow wool.
– I am not contesting that question for the moment. We grant that the breeding stock, when sold at a winding-up sale, shall be regarded as an asset free from taxation. We also permit the pastoralist who purchases that stock to deduct from the sale price of his wool the value of that which was on the backs of the sheep at the time that he purchased them. If that principle is fair and sound - and I submit that it is - you must say to the pastoralist who sells on a walk-in walk-out basis “ You cannot claim an exemption from taxation in respect of the wool on the breeding stock.”
Amendment agreed to.
Clause, as amended, agreed to.
Sitting suspended from 12.49 to 2.15 p.m.
.- Before the luncheon adjournment I was waiting to move an amendment to clause 9. I heard the Chairman put to the committee the amendment that was then before it, but I had no knowledge of the clause being passed. I had previously given notice that I intended to move an amendment at the end of clause 9.
– Could not the clause be re-committed?
– I suggest that clause 9 be re-committed later, so that the honorable member for Swan may have an opportunity to move his amendment.
Postponed clause 10 -
Section seventeen of the principal act is repealed and the following section inserted in its stead: -
– 1.) Where sheep in the wool are sold or otherwise disposed of by one person to another person, the sale or disposal shall, for all purposes in connexion with the assessment of the income derived by those persons, be deemed to be a sale and purchase of sheep and wool as distinct from each other. . . .
Section proposed to be amended -
– (1.) The proceeds derived from the sale of the whole or part of the trading stock of any business after the thirtieth day of June One thousand nine hundred and twenty-one (whether on the sale of a business as a going concern or in any other manner for the pui1pose of discontinuing the business) shall be assessable income.
Clause verbally amended.
.- I move-
That the following new section be inserted - 16a. Where any person acquires any trading stock or live-stock, otherwise than by purchase, in any manner specified in paragraph(h) of section sixteen of this act he shall be deemed to have purchased that stock and the purchase price shall be deemed to be the amount which under that paragraph is found or determined as the price or value at which that stock was disposed of.
The amendment relates to disposals of trading stock other than by way of sale and purchase, and provides that they shall be brought into account in the subsequent year in the ordinary and normal manner. Supposing, for example, there was a gift of stock, it is plain that there would be difficulty in accounting for it unless it was required to be brought in at its value.
Amendment agreed to.
.- I move-
That proposed new sub-section 1 be omitted with a view to insert in lieu thereof the following proposed new sub-section: - “ (1) Where sheep in the wool are sold or otherwise disposed of by one person to. another person, the sale or disposal may, at the option of the purchaser to be declared upon making his return, for all purposes in connexion with the assessment of the income derived by the purchaser, be deemed to be a sale of sheep and wool as distinct from each other.”
The provision in the bill would have made it necessary to make the calculations required in all cases of sale of sheep in the wool. Further consideration has led to the proposed amendment.
– It is the same principle that we debated for some time in connexion with the disposal of breeding sheep on a walk-in-walk-out basis.
– It is an application of that principle. The subsequent new sub-sections provide for the apportionment of the price of sheep and wool either in the terms of the contract of sale, or on the market value of similar sheep off shears, or, if that is not applicable, the value is to be determined by the commissioner. New sub-section 1 in the bill required that this method should apply in all cases. The purchaser is now to be allowed, if he thinks fit, to separate the sheep and the wool. The vendor i3 unaffected in any case. The ordinary law applies to him in respect of ordinary trading sales, or sales on a walkinwalkout basis.
– The principle is being applied to sheep sold beyond the accounting period.
– No; to all sheep bought or sold at any time. No change is being made in the case of the vendor.
– When would the purchaser declare his option?
– The purchaser, when making his return, would exercise the option of having the wool regarded as sold separately from the sheep. If that is inconvenient, then the purchaser will not exercise that option, and will be in exactly the same position as he is in today.
.- It is quite probable that the opportunity given under this clause will not be largely availed of. In days gone by, however, before the averaging of rates and other methods were adopted, the law inflicted a hardship, as I can show in the case of a client of mine. This man bought sheep heavy in lamb and in full wool at 38s. 3d each. It was just before the end of the year, and he brought his return to me. I naturally put the stock in at the cost price, which allowed him, on account of having other stock sales that year, to show a profit, and he was liable to income tax amounting to about £25. During the next year, after the return had gone in, the commissioner wrote to my client to the effect that he was liable to this tax; but, in order to give him an option to come under the lower provision, the commissioner pointed out that if my client liked to bring in the stock at the rate then fixed - 9s. or 12s. - instead of having to pay £25 he would have to pay nothing. I was away at the time, and my client, thinking that I had made a mistake, put his stock in at the lower price and paid no tax. During that year the sheep had lambed, and the natural increase was shown at 9s. in his next return. TI e sheep had also been shorn, and the wool showed a return of 12s. This made a return of 21s., but on account of the dry spell he sold the grown sheep for 15s., bringing his gross return or credit to 36s. That meant that he had made a loss of 2s. 3d. on each sheep. In furnishing his return for the second year he had to start with the sheep at 9s. - for which he had paid 38s. 3d. - and his return was 36s. as shown, this meant he made a paper profit of 27s. His tax on that amounted to £111. He came to me and complained, and on inquiry I discovered what had happened. That clearly shows the value of the provision in the bill. If that man had been able to separate his sheep and the wool, he would have put his wool in” at 12s. and sheep at 26s. when he bought, and the subsequent difficulty would not have arisen. I might say that on representations being made to the commissioner the tax was reduced. There will be little need for this clause, because of the provisions in the acts of 1924 and 1926. If a purchaser were forced to separate his wool and sheep there would be tremendous difficulty in accounting in some cases, especially if the sheep were bought a few months off shears; but there would be no difficulty when buying sheep in full wool. However, there is no compulsion, the buyer can do as he likes. The seller has nothing to do with it. The option allows the purchaser time to consider what todo. Under this provision if a man buys sheep in the wool he will be able to get a proper debit for both wool and stock, and a proper credit for the stock at the end of the taxation period. When a man buys up to the middle of the year, say six months after shearing, he will not gain much advantage, because he will enter the sheep at the average value, which will include the price of the wool. There is then not much difference between the first price at which he buys and the price at which the sheep will be valued on his return.
.- I suppose there is no use in attempting to do anything more than register my protest against this provision, seeing that the Opposition and the Government are in agreement. I do so because it is a dangerous practice to bring into account a partiallygrown crop of any description. I can foresee a great deal of trouble and disappointment ahead of primary producers.
If this principle is admitted as proper in respect to a wool clip, it might, with equal justice, he applied to a growing crop of wheat or corn, to a maturing fruit crop, to the sugar fields in Queensland, to maize, to tobacco, or to any of the agricultural products of the country. Since this country, like every other, is invaded periodically by hordes of pests that attack the growing crops, it is not possible to pre-assess the value of a crop before it is actually harvested. To attempt to do so is to make trouble both for the contracting party and for the taxation department. Naturally, I expected opposition from the Deputy Leader of the Opposition to any measure which would be for the good of the pastoralists of Australia. Never has anything affecting the pastoral industry been before this House when the Deputy Leader of the Opposition has not taken the opportunity to assail the industry. Yet the pastoral industry might be said to-day to be the bright spot in the nation’s finances. I think he has had some past experience of the ills endured by workmen under the old pastoral conditions; but he ought not to bring those forward at the present time. The pastoral industry is now providing some of the best conditions in Australia for the working man. To the extent which the principle is the same in this section of the bill as in the last, I am not going to blow hot and cold, and support the principle when it suits me, and to reject it when it does not. I do not think we should have stepped over the border of a new year and anticipated the return to be derived from a growing clip especially when we cannot bring into account the corresponding costs which the taxpayer would have to bear.
.- The honorable member for Wannon was entitled to make his protest, and let his view be known; but I would advise him not to make himself look ridiculous. He gave an indication this morning that he did not understand this section, and he has proved it this afternoon. If he understood the first principles of the proposal he would know that itwas specially designed to benefit the pastoralists;
– I am not going to accept the principle in one case and reject it in another.
– The honorable member should know that this provision was a special concession to the pastoral industry, and, when I support it, it cannot be said that I am assailing the industry. I throw the lie back in his teeth. I regard the pastoral industry, and all the other industries of this country, as interwoven one with another. I look upon wool-raising as one of the staple industries that will keep this country solvent. If the honorable gentleman was not obsessed with some strange illusion, he would not have given utterance to the stupid charge which he made this afternoon. This is a concession to the pastoralists to save them from being doubly taxed on their wool clips. I have given it my warm support because it is just, but I would not support any attempt, whether by pastoralists, agriculturists, joint stock companies, or private individuals, to avoid paying their just share of taxation. When taxation is evaded it always means that somebody else has to pay more.
– The honorable member does not know any instance- in which the existing system has worked an injustice.
– I know that it would be possible for it to do so. I pointed out to the honorable member that this clause is a concession that had to be balanced by the conditions in the previous clause. Whatever he might say about my attitude in regard to these clauses, it is absurd to say that this one will inflict anyinjury on the pastoralists, when, as a matter of fact, it is specially designed to save them from being doubly taxed. It gives him the right to choose under which system he is to be assessed. It is evident from his remarks that the honorable member does not understand the clause.
Amendment agreed to.
Clause as amended, agreed to.
Postponed clause 11 (Taxation of companies).
Section twenty of the principal act is amended -
1 ) the words “ or as rebates basedon purchases by shareholders from the company “;
Section proposed to be amended -
– (1.) In calculating the tamable income of a co-operative company there shall be deducted……. so much of the assessable income of the company as is distributed among its shareholders as interest or dividends on shares. (2.) In addition to any other income tax payable by it, a company shall also pay income tax on -
the interest paid or credited by the company to any person, who is an absentee, on money raised by debentures of the company and used in Australia or on money lodged at interest in Australia with the companyand
interest paid or credited in respect of debentures payable to bearer the names and addresses of the holders of which are not supplied to the Commissioner by the company as if the total amount so paid or credited were the income of an individual :
Provided that a company shall be entitled to deduct and retain for the use of the company from the amount payable to any of the persons referred to in paragraph (6) of this sub-scatwn such amount as is necessary to pay the tax which becomes due in respect of that amount.
– The first amendment of the principal act provided for in this clause, is designed to deal with cooperative societies. The amendment will rectify anomalies brought under the notice of the department in regard to distributions among their members by co-operative societies. The definition of income in section 4 of the act lays it down that income does not include any rebate received by a member of a cooperative society or company, based on purchases made by that member from the society or company. Rebates are excluded from the income of a member because they are regarded, not as income, but as reimbursements of overpayments made for goods. Under the law, as it now stands, however, a company or a co-operative society is not at liberty to deduct the amount paid in rebates from its income. The object of this amendment is to allow that
– Paragraphs b and c.of clause 11 link up with the proposals that were contained in clause 23 of the bill which was very fully discussed last night. The debate was adjourned until we had an opportunity of taking this clause and considering the whole matter in the light of the wider issues raised under these two paragraphs. Before dealing with these particular paragraphs, however, I wish to make a personal explanation as to certain views I expressed with the greatest possible confidence last night, and which I now find do not represent the actual position : I refer to my exposition of the law of Great Britain with regard to the taxation of absentee shareholders. I can only plead in extenuation that I concluded my remarks on that occasion by saying that I “ understood” that the position was as I had outlined, or I hope I did so. The position is not as I indicated last night. In Great Britain they do take very much more definite action in regard to the income of absentees than I gave the committee to understand. The need for inserting paragraphs 2 and 3 of this clause arose out of the process of expansion going on in regard to the dividends of companies owned and controlled outside Australia, those owned outside Australia, but controlled here, and those registered and controlled inside Australia. In the case of the external company, that is, the company with its capital owned abroad and controlled abroad, the position is that up to the present time we have not been getting taxation from absentee shareholders. In the second case, that of the company registered abroad, with a good deal of the capital owned abroad, but controlled in Australia, and declaring its dividends here, we have not in the past utilized one of the sections of the act so as to make it pay the tax of those shareholders who are resident abroad unless the dividends were declared in Australia. Recently an English judgment showed that the dividend had to be paid in full to the absentee shareholder and the company had to bear the tax instead. It is considered unfair to levy from the company for income tax payable by its shareholders money which could not be recovered by it from them. Having come to the conclusion that exemptions should be allowed in those two cases, we are now faced with the case of a company registered and controlled in Australia, which has shareholders who are resident outside Australia. “We believe that if the other classes of absentee shareholders are to be exempt from taxation, the absentee shareholder in the Australian company should not be placed in a worse position than they. Having decided to exempt shareholders of this type, Ave had to consider the position of persons who lent money to a company on debentures or on deposit. After considerable thought, the Government decided that it was desirable to exempt also those lenders for the sake of encouraging the investment in Australia of capital which would assist in the general promotion of industry. We would not have gone to this length in regard to interest on debentures but for the unjustifiable anomalies that exist in regard to share interest. During this discussion many honorable members have indicated that their object is to take the maximum toll of people who are investing capital in this country. The Government, on the other hand, regards such investment as essential to the opening up of the country and the promotion of new industries.
– Nobody said otherwise.
– Although at first sight it may appear that the exemption of certain capital from income taxation means a loss of revenue and a resultant heavier burden on the Australian taxpayer, that is not the ultimate effect, if a greater inflow of capital is stimulated. Such money will be utilized for the establishment of industries and the creation of employment, and will cause a general increase in prosperity. And as new industries are established, and employment is found for more people, the volume of revenue flowing into the Treasury will increase. In the long run the actual effect would be to relieve the local taxpayer.
– Would not that apply also to locally provided capital?
– Certainly; but if Australia is to develop at the rate which its national circumstances demand, its capital requirements cannot be provided from the annual excess of income over expenditure. We must get money from abroad to accelerate development and the influx of new population. I agree that all monies employed in industry and creating new avenues of employment will be of great advantage in reducing the burden of taxation upon the people as a whole. But there is another angle from which to view this problem. Very often the question is asked, “Why should foreign investors take toll of Australia in the form of interest and dividends on the capital they have invested ?” It is suggested that all the benefits that arise from such investments are reaped by the people outside Australia, and that we are entitled to recover from them as much as possible. Sight is lost of the fact that the great bulk of the money is employed in the creation of new industries or the extension of existing ones; these will increase the wages bill, and the money will circulate throughout the country to the benefit of all sections. Only a small percentage will be utilized for the payment of interest or dividends to the foreign shareholder. Money sent into Australia from abroad is of benefit to the country, and not detrimental, as some short-sighted people seem to believe. ‘ We all feel considerable resentment against foreigners who trade in Australia, and by the manipulation of subsidiary companies appear not to earn any profits and so escape taxation. These unscrupulous methods are applied nearly always in distributing businesses; it would be difficult to apply them in manufacturing and productive enterprises. If people do resort to these methods, it is clearly our responsibility to find means of defeating their machinations. Cases of this kind do not, however, affect the fundamental fact that the investment of new capital is of benefit , to the country. Recently I prepared an estimate of the capital requirements of Australia. The figures disclosed that, if we could afford to be content with the present growth of population by natural increase - and the excess of births over deaths in Australia compares favorably with the natural increase in any other country - and the corresponding expansion in trade, commerce, production, and industry, we should be able to provide out bf surplus wealth the whole of the capital -we need. But, unfortunately, possessing an enormous continent and being faced with the necessity for populating it and accelerating its development, we cannot be content with what in an older country would be considered a very satisfactory rate of progress. Consequently, having regard to the inequalities that arise under the taxation law as between absentee shareholders in different classes of companies, the Government came to the conclusion that all should be placed on the same basis. It then decided to extend the concession to moneys lent by way of debentures or on deposit to companies. However, the discussion last night made clear a consensus of opinion in the committee against the action proposed by the Government in regard to shareholders. The committee apparently is not prepared to go so far as the Government proposes in the direction of bringing absentee shareholders into line irrespective of the type of company in which they are interested. The Government accepts that decision. It would be unwise, therefore, to take the further step contemplated in regard to debenture interest. I do not reflect upon the views expressed by honorable members, but I repeat that the basis of the Government’s proposals was the necessity for attracting capital into the country. This legislation appeared to the Cabinet to be one justifiable method of accelerating the inflow of new capital to develop our industries and increase our capacity to absorb new people. I recognize that our attitude may be misrepresented; the suggestion may be made that the purpose of this legislation is to favour the big companies and the wealthier sections of the community. I hope that that course will not be adopted, and that this issue will not be clouded with prejudice, for, whilst the Government recognizes the will of the committee, it is convinced that at some future time this Parliament will adopt action of the nature suggested in the bill. If, in the meantime, the matter is surrounded with prejudice and political animosity, the task of any government not necessarily the present Government - that may attempt similar action to that proposed on this occasion will be made more difficult. The Government does not propose to press paragraphs b and c of clause 11, nor will it, when clause 23 is reached, persist with its proposal.
.- The Government displayed very much greater wisdom in withdrawing from an untenable position, than it did in inserting this provision in the bill. The withdrawal proves that the criticism of the Opposition last night was justified. I remind the committee that it required continual hammering from the Opposition before the Government “ saw the light.” I am glad that the Government has displayed greater wisdom at this stage than it did earlier in the debate; but we cannot allow the matter to remain where it is. The Prime Minister endeavours to make it appear that the provision is withdrawn merely because he has a majority against him, but that he is right and we are wrong. The Prime Minister spoke of the different angles from which he approaches the subject. I suggest that his argument was triangular. First of all the right honorable gentleman spoke of the difficulties of collecting the tax, and of ‘ the companies from whom it is impossible to collect it. He concluded by stating that the whole principle underlying the clause is the great need to attract capital to Australia, and he gave us a lecture on the desirability of encouraging imported capital to develop the country, urging that the money that comes from abroad is very beneficial. That is arguable. Some investments from abroad have certainly assisted to develop Australia, and to that extent are beneficial; but others have merely exploited the country and drained our resources. I suggest that we set aside all considerations as to whether imported capital is beneficial or otherwise. Surely the right honorable gentleman does not contend that Australian capital invested in this country is not as beneficial as that from overseas! Yet he proposed to tax profits on local investments and exempt those on investments from abroad. It is impossible to advance a sound argument in favour of exempting profits made on investments of foreign capital in Australia and at the same time taxing the profits on local capital invested in this country. We have had to thresh this matter out since last
Monday, and no doubt we shall be told that the Opposition has held up the business of the country. I venture to say that this withdrawal would not have taken place had the guillotine been applied last night; absentee shareholders would then have been exempted from the tax. It is fortunate for Australia that the Opposition was able to “secure an exhaustive debate on the matter. We were able to place our views before the Government, and honorable members supporting the Government were also induced to ventilate their opinions. The Prime Minister said that he hopes that an attempt will be made to view the subject free from party influence. I ask the right honorable gentleman to analyze the records of Hansard, feeling confident that ne will find that the case of the Opposition has been presented on a high plane, and has dealt merely with the merits of the proposal. It is futile to insinuate that the proposal was withdrawn for fear that pressure would be brought to bear. The Government was forced to abandon its position simply because of the strength of our arguments against an iniquitous proposal.
.- The Opposition cannot claim all credit, if credit is due, for the withdrawal of this proposal. I am glad that the Prime Minister has indicated that the Government does not intend to press it. I believe that there are other ways in which capital may be attracted to Australia. At the same time, I am of the opinion that the Government was perfectly honorable in its intentions, and was actuated by the desire to encourage capital to come to Australia. No one, however, should be permitted to make profits in Australia and not contribute to the revenue of the country. I remind honorable members that, early in the session, I suggested that the Government would encourage the investment of capital in Australia, if it placed the rate of property taxation on a basis similar to that which , applies to personal exertion. I was glad to hear the honorable member for Dalley (Mr. Theodore) advance a similar recommendation yesterday. The investment, of money from abroad in our industries must be retarded if people have . to pay nearly double rates on. profits made out of their investments in Australia. The higher property rate will also increase the interest rate and house rents in Australia, and will be of general disadvantage. If the Government takes from the individual only, it places an impost on the whole community. The country would be better off if there was freer investment in Australia, not only of local, but of outside capital.
Mr. WEST (East Sydney [3.10]. - I offer my sympathy to the Government. It must be very galling to learn that the Opposition possesses infinitely greater wisdom than do the combined cabinet, and honorable members sitting behind it. One would gather from the remarks of the Prime Minister that those who wished to invest in or lend money to Australia were benevolent societies, merely seeking to benefit us. Theirs is merely a business interest, and they are anxious to make profits. Our present financial position is very serious, and we should endeavour to propound a satisfactory solution. From time to time I have advocated that, instead of raising new loans, we should have a conversion loan, and place the money in consols at the existing rate of interest. Had that been done recently, instead of raising a new loan of £36,000,000, the country would have been saved at least £325,000 a year for 33 years over the existing rate of interest. It is regrettable that 75 per cent, of the £10,000,000 loan was left on the hands of the underwriters; it could have been raised in Australia. While we have giltedged securities available in Australia under the present conditions people are not likely to invest their money in industry. Two considerations that led me to come to Australia were the low price of land and the low rate of interest, and I have no doubt that other people would come here if the price of land and the rate of interest were as low as formerly. I am not the only person in the community who believes that the rate of interest payable on gilt-edged securities is a hindrance to our development. A gentleman who was formerly connected with the Treasury, but who, for some reason which I have never heard explained, lost his position, is also of that opinion. Speaking before the Adelaide
Chamber of Commerce some time ago he made it quite clear that the rate of interest on our war and other loans would have to be reduced before this country could make any substantial progress in its primary and secondary industries. We had a useful discussion in Melbourne some years ago on the taxation of absentees, and I would advise the Prime Minister o instruct his officers to look it up. Many honorable members pointed out, on that occasion, that absentees received numerous benefits from this country, and therefore they should contribute something to the cost of government. I am glad that the Government has recognized the justice of the case made out by the Opposition and others for the taxation of absentees.
.- I have sufficiently recovered from the lecture which I. received from the Deputy Leader of the Opposition to join him in expressing appreciation of the action of the Government in agreeing to withdraw this proposal. It may be inexcusable for me to have the temerity to disagree with the Deputy Leader of the Opposition, and if anything I have said has injured his personal feelings I regret it. I assure him that I am looking forward with great interest to his speech on the Land Tax Assessment Bill, and I shall judge him afresh after I have heard his remarks on that measure. I do not take the view of many honorable members opposite that this proposal of the * Government was made as a concession to capitalists. It was not intended as such. I am of the opinion that we ought to do all we can to encourage capital to come to this country, but I agree with the view of the Prime Minister that we are in some danger of certain foreign companies setting up great distributing organizations here with the object of participating in our prosperity without interesting themselves in the development of our country by paying reasonable taxation. It is for that reason I commend the Government for having withdrawn this proposal. Nevertheless, certain British interests have done a great deal throughout the years to develop pastoral Australia also North and Central Australia. They have used their money during many years without draw ing much interest, and often making losses. I hope that the Government will endeavour to find some way to give them greater encouragement than they have had in the past, for if their capital were withdrawn it would be detrimental to Australia.
.- As I did not speak on the motion for the second reading of this bill, I had intended to address myself at some length to this question, but the Government having withdrawn its proposals, it is not necessary for me to do so. The members of this Cabinet will go down to history as the finest political quick-change artists that Australia has known. The abject way in which they abandon policies which they have put forward is, at times, bewildering to us. It is, however, a tribute to the effectiveness of the criticism of honorable members on this side of the chamber who regard their legislative duties a good deal more seriously than some honorable members opposite appear to do. The Deputy Leader of the Opposition, the honorable member for ‘Dalley, and other honorable gentlemen on this side of the committee may be specially complimented on having caused Government supporters to realize the iniquity of its proposal to discriminate in favour of foreign investors. Quite apart from the fact that the Labour party stands for equity and natural justice in regard to taxation, honorable members opposite * would have found it most difficult to justify this proposal to certain manufacturing and other interests which stand behind the Government.
– I thought we were discussing this matter on non-party lines.
– The Prime Minister has suggested that it is necessary to cause additional capital to come to Australia, but if, in consequence of the Government’s invitation to outside capital to come here, a big British manufacturing organization like I. and A. B. Morley and Company should come here and enter into competition with established Australian companies, and be relieved of taxation on its English capital invested here, honorable members opposite would be placed in a most embarrassing position. I am of the opinion that taxation proposals are placed before this Parlament in a very unsatisfactory manner. It is well known that expensive and protracted litigation follows almost every amendment that we make to our taxation laws, and our taxpayers and the Government are thereby involved in legal costs which amount to many thousands of pounds annually. The ambiguity of the amendments that are made to our taxation laws from time to time, shows the necessity for the appointment of a standing committee of the Parliament to examine taxation proposals before they are submitted to honorable members. The suggestion that such a committee should be appointed has been made on a number of occasions, and as the Government delegates far less important matters to standing committees for consideration, it should be prepared to appoint a standisg committee to deal with this important subject, which affects the economic well-being of the whole community. If such a committee were appointed, it would be possible - and I say this in reply to the interjection of the honorable member for Forrest (Mr. Prowse) - for us to examine taxation proposals in a non-party atmosphere.
– I agree with the proposal of the honorable member that a standing committee should be appointed for the purpose.
– The Prime Minister has stated that there are well nigh insuperable difficulties in taxing foreign companies, but I refer him to legislation which was passed some little time ago by the Lang Government in New South “Wales, with the object of taxing the profits of foreign motion picture interests, which has been the cause of an appeal to the High Court.
– That matter is sub judice.
– The court delivered its judgment on Monday.
– It expressed an opinion on certain matters, but new pleas are to be filed.
– In view of that statement I shall not discuss the matter further than to . say that the experiment, which the Lang Government made in attempting to tax the profits made by these foreign companies, was justified. Doubtless, the measure will be the subject of litigation before the Privy Council. As to the practicability of imposing taxation upon these interests, honorable members are surely aware that there are more ways of killing a cat than by choking it with cream. I suggest that the Government should introduce a federal company law in spite of declared constitutional difficulties, either with or without consultation with the States. Foreign companies, which make profits on business which they do in Australia, should undoubtedly contribute towards the cost of government here, and legislative control over companies is a means to that end. That seems to me to be the most effective method of taxing the profits of companies. In regard to a company law, Sir Robert Garran, when giving evidence before the Royal Commission on the Constitution, said -
It is not at all certain, in view of later decisions’ of the High Court, that a law regulating companies would be held to-day to be invalid.
Enormous sums are being taken out of
Australia by picture companies, motor car companies, oil, and other interests every year, and it is very necessary that some action should be taken by the Government to levy income tax upon them. I am pleased that the supporters of the Government have seen the wisdom of bringing pressure to bear upon their leaders to drop the vital provisions of the bill now before the Committee.
Paragraphs b and c omitted.
Clause, as amended, agreed to.
Postponed clause 22 -
Section sixty-two of the principal act is amended by inserting after sub-section (3) the following sub-section : - “ (3a). Where, in respect of the estate of any deceased taxpayer, probate has not been granted or letters of administration have not been taken out within six months of his death, the commissioner may cause an assessment to be made of the amount of tax due by the deceased, and that assessment shall be conclusive evidence of the indebtedness of the deceased to the commissioner, and the commissioner may issue an order in the form in the second schedule to this act authorizing any member of the police force of the Commonwealth or of a State or of a Territory of the Commonwealth or any other person named therein to levy such amount with costs by distress and sale of any property of the deceased, and upon the issue of any such order, the member or person so authorized shall have power to levy such amount accordingly.”
Upon which Mr. Latham had moved by way of amendment -
That all the words from and including “ and that assessment” to the -end of- the clause be omitted, with a view to inserting in lieu thereof the following: - “ (3b) The commissioner shall cause notice of the assessment to be published twice in a daily newspaper circulating in the State in which the taxpayer resided. “ (3c) Any person claiming an interest in the estate of the taxpayer may, within forty-two days of the first publication of notice of the assessment, post to or lodge with the commissioner an objection in writing against the assessment stating fully and in detail the grounds on which he relies; and the provisions of this act relating to objections and appeals shall thereupon apply in relation to the objection as if the person so claiming an interest were the taxpayer. , “ (3d) Subject to any amendment of the assessment by the commissioner, or by the board of review or by a court, the assessment so made shall be conclusive evidence of the indebtedness of the deceased to the commissioner. (3e) The commissioner may issue an order in the form in the second schedule to this act authorizing any member of the police force of the Commonwealth or of a State or of a Territory of the Commonwealth or any other person named therein to levy the amount of tax due by the deceased, with costs, by distress and sale of any property of the deceased. “ (3f) Upon the issue of any such order the member or person so authorized shall have power to levy that amount accordingly in the prescribed manner. “(3g) Notwithstanding anything contained in the last three preceding subsections, if at any time probate of the estate of the deceased is granted to, or letters of administration of the estate are taken out by a person, that person may, within forty-two days after the date on which probate was granted or letters of administration were taken out, lodge an objection against the assessment, stating fully and in detail the grounds on which he relies, and the provisions of this act relating to objections and appeals shall thereupon apply in relation to the objection as if that person were the taxpayer.”
– This clause provides a method of collecting tax when there is no executor or administrator of a deceased person’s estate. I stated yesterday that it was necessary to make some amendments to improve the provisions of the clause. I have added to those amendments a subclause to meet the point raised by the honorable member for Batman (Mr. Brennan ) .
.- I have had barely time to read the amendments proposed by the Attorney-General, but I understand that action respecting the enforcement of an assessment will be deferred, and the estate saved from realization or forced sale, which frequently sacrifices the equity, a thing which we all wish to protect.
– The point mentioned by the honorable member is met in the initial words of the clause, which enact that “ “Where, in respect of the estate of any deceased taxpayer, probate has not been granted, or letters of administration have not been taken out within six months of his death, the commissioner may “ take certain action.
Amendment agreed to.
Clause, as amended, agreed to.
Postponed clause 23 -
Section 65 of the Principal Act is amended -
by adding at the end of sub-section (1.) the following proviso: - “ Provided however that a company shall not be required under this section to pay any tax in respect of a dividend which is or may become payable to a shareholder who is an absentee.”
Section proposed to be amended.
– 1. The Commissioner may require -
any person to pay to him forthwith . . . the money or so much thereof as is sufficient to pay the tax due by the tax-payer or the fines and costs (if any ) imposed by a court on him, in respect of an offence against this act.
Amendment (by Mr. Scullin) agreed to-
That paragraph e be omitted.
Clause, as amended, agreed to.
Postponed clause 29 (Application of Act).
– This clause was postponed because it referred to other provisions in the bill which had not then received the approval of the committee.
Clause agreed to.
Amendments (by Mr. Latham) agreed to -
That the following new clauses he inserted - “ 1a. Section two of the Principal Act is amended by inserting before the word schedule ‘ the word ‘ First ‘ “. “ 2a. Section five a of the Principal Act is amended by omitting from sub-section (1.) the words ‘Northern Territory by a resident of that Territory prwr to the first day of July, One thousand nine hundred and twenty-seven ‘ and inserting in their stead the words ‘ Territory of North Australia or of Central Australia by a resident of either of those Territories prior to the first day of July, One thousand nine hundred and thirty-two’ “. “27a The schedule to the Principal Act is amended by inserting after the word ‘the’ the word ‘ first”.
Title agreed to.
Rill reported with amendments.
Motion (by Mr. Latham) agreed to -
That the bill be now recommitted to a committee of the whole House for the reconsideration of clauses 9, 12, and 16.
– (By leave) - I desire to lay upon the table the report of the Australian delegation to the Eighth Assembly of the League of Nations which has been laid upon the table in another place, and to move -
That the paper be printed.
– I ask leave to continue my remarks at a later date.
Leave granted; debate adjourned.
In committee (Recommittal).
Clause9 (What is included in income).
.- I move -
That the following paragraph be added: - and (i) Income derived by any person resident in Australia from investments outside Australia-
I am sure that honorable members must have been impressed with the statement made by the Prime Minister to-day that there was great necessity to encourage capital “to come to Australia. We cannot have progress in a huge country like this un less we have capital to help us. I agree with the honorable member that everything possible ought to be clone to encourage the investment of capital within Australia. When our people become wealthy, and amass capital, they should, if. they invest that capital outside Australia, be subject to taxation by the Commonwealth; of course, with such limitations as might be necessary on account of taxation imposed elsewhere. Australia should obtain some benefit from incomes earned overseas by Australians resident here. Millions of pounds lave been invested in tin mines in the Malay Peninsula, and in the timber resources of Borneo and elsewhere, and from the profits made out of those investments not one penny is collected in income tax from shareholders in Australia. About twenty companies - of which the paid-up capital exceeds £100,000 - are operating in this way, and , their dividends paid range from £542,200 down to £95,000. Millions of pounds are being paid to Australian shareholders by tin-mining companies alone, and yet the Commonwealth obtains nothing by way of income’ taxation from those dividends. The Royal Commission on Taxation stated in its report -
In preference to any general increase in income taxation in Australia, or the introduction of new forms of taxation, we recommend the taxing of incomes derived from abroad.
There is nothing new in that proposal. In Great Britain, any person residing in the United Kingdom must pay income tax in respect to his “ profession, trade, employment or vocation, whether carried on within the Realm or not.” Similar provisions operate in Canada and India. I agree that if taxation is imposed on incomes in the countries in which they are earned, it would be reasonable to make some reduction on account of that taxation, but I do not think that people who believe so little in their own country as to invest their money outside it should be entirely free from income tax simply because they derive their incomes from abroad. We need to bring capital into Australia. I come from a large State - one that requires an enormous amount of money for its development. I would rather see money coming into this country to develop it and build up our industries, than
Lave the Government borrowing money for that purpose. Tremendous sums were borrowed for soldier settlement, and already £10,000,000 has been written off. Better returns are always secured from money spent by private corporations. The coming of additional capital to this country would induce more production which, in return, would lead to greater prosperity and more employment.
.- There seems to me to be one objection to this amendment, and that is that it embodies the principle of double taxation. If the honorable member for Swan could see his way clear to allow concessions to be made in respect of taxation paid abroad, his amendment would be less open to objection. I do not think we should discourage people from investing their money abroad, even if they do live in Australia. If people who invested their money abroad did not pay any income tax to the country where the money was invested, there would be no double taxation; but if “they do pay such taxation abroad, the amount of it should be deducted from that collected in Australia. I have no objection to the amendment if the honorable gentleman will agree to such an alteration. I am opposed to the system of double taxation. Ever since I can remember there has been an outcry against double taxation, as it operated between Great Britain and Australia. We have now adjusted that matter to some extent, and we do not want to introduce the principle elsewhere. I cannot agree that, because an Australian is drawing his income from another country, he should pay full income taxation in that country, and pay full taxation again in Australia. Such a provision as that would hinder the free flow of capital. Supposing a man drew income from India, and was taxed there on that income; it would not be fair that he should be assessed here at full income tax rates in respect of the same income. If he is paying no taxation in India, there would be no objection to his being taxed here. That is a fair proposition, and if the honorable member for Swan is prepared to admit it, I will support his amendment.
– I am surprised that the honorable member for Swan (Mr. Gregory) should have proposed an amendment of this kind. We have, I think, always been opposed’ to the principle of double taxation, and yet he is deliberately proposing to introduce it here. I cannot understand why any one in Australia who invests his money abroad - as he is perfectly entitled to do - should be compelled to pay taxation both in the foreign country and in Australia. The adoption of this pro-, posal would amount to a most iniquitous grab on the part of Australia for money to which it was not entitled. We should be most inconsistent if we supported this amendment, and I hope the committee will turn it down.
.- I cannot agree with the honorable member for Riverina (Mr. Killen). If a man lives in this country and invests his money outside, no matter what taxation he may pay to the country in which he has invested it, he has no right to enjoy the benefits of Australian citizenship without meeting his obligations , in the way of taxation. If he enjoys the privilege of Australian citizenship, he must accept his responsibility in regard to Australia’s war debt, and the maintenance of the governmental services.
– He does that from his investments in Australia.
– Not necessarily. A man may live here and enjoy the privileges of citizenship, and not have one penny invested in Australia. I think we ought to devise a system such as that operating in Great Britain. Double taxation would then be prevented within the Empire; but if a man invested his money in a foreign country he would be subjected to double taxation, and rightly so. It seems an extraordinary thing to me that Australia should abstain from this system of taxation. We are practically the only advanced country in the world which does so. The honorable member for Swan (Mr. Gregory) has quoted instances in which this form of taxation has been adopted, and in practically all other parts of the Empire, and in most foreign countries, residents are taxed on incomes drawn from abroad. Our omission to do so is a blot on our taxation system and an injustice to Australians who invest their money in the country, and endeavour to promote local industries and maintain Australian rates of pay and standards of living. The honorable member for Swan (Mr. Gregory) has pointed out that millions of pounds of Australian capital is invested in tin dredging enterprises in coolie countries. Persons who thus invest their money and draw huge dividends from cheap labour enjoy all the privileges of living here without contributing anything towards the maintenance of government. I hope that the amendment will be seriously considered.
– I agree with the honorable member for Henty (Mr. Gullett) and the mover of the amendment. Although I am against double taxation as a general principle, particularly as I suffer so much from it, I do not think Australians should be encouraged to send their money abroad. My sisters, brothers and I have spent hundreds of thousands of pounds in erecting mammoth buildings in Sydney. We pay Federal and State land taxes, municipal taxes, and State and Federal income taxes. Somebody living alongside us may be drawing huge dividends from the capital they have sent to foreign countries, and they pay not a penny towards the government of Australia. It is a sound principle that all profits a man re-, ceives shall be subject to taxation. Let us treat all citizens on an equal footing. If a man invests money in a foreign country he deserves to “ get it in the neck “ - to pay the foreign tax if one is imposed, and the Australian tax also. Let each of us pay something for the protection we enjoy under the flag and for the services we receive in the country in which we live.
– The amendment is of a farreaching character, and, if carried, would have a tremendous effect upon the finances of the Commonwealth. The principle it embodies received very serious consideration from the Government when the draft of the bill was before Cabinet. Certain proposals in the measure were designed to attract capital to Australia, and obviously it is illogical to allow simultaneously native capital to flow out of the country. The two policies are irrecon cilable. We were faced with the increasing exodus of capital from the Commonwealth, and had to consider whether steps should be taken to check it. The effect of this is illustrated by the manner in which government securities have been almost hawked in Australia, the Government being obliged to make the income from them tax-free as an extra inducement to the Australian people to lend their money to the Commonwealth. The Government realized, however, that a fundamental alteration of the system could not be proposed without very much greater investigation. The Commonwealth income tax law, when originally framed by a Labour Government, was based on the logical and just principle that taxation should be levied on income actually derived within the country. Abandonment of that principle would be a very radical change, especially at a time when the principles that govern income taxation are being exhaustively considered by all the nations of the world. The matter was dealt with at Geneva, and whilst finality has not been reached, the trend of opinion is towards recognition of the principle that taxation on investments should be levied only by the country in which the capital is controlled. There is another consideration that must be thoroughly investigated before we completely reverse our taxation policy in this regard. Australia is vitallyconcerned in increasing its import trade, of which all us would like the secondary industries to contribute a bigger proportion. To illustrate the probable effects of the proposed amendment, I remind the committee that H. V. McKay and Company have, by their enterprise and initiative, succeeded in establishing themselves in a paramount position in the South African market. The profits ‘derived from that trade are not now subject to Australian income taxation, and we should hesitate before doing anything that . would be calculated to discourage them and other Australian manufacturers from building up a profitable market abroad. There are also grave questions involved in connexion with the export of wool and wheat.
– Would the amendment apply to them?
– It would apply to all profits earned anywhere.
– It should in principle, but according to the wording of the amendment it would apply only to income from investments. Therefore, traders would be free. I assume that that is not the intention of the honorable member for Swan.
– The word used in the amendment is “ investments.” I discussed this matter with the income tax commissioner, and, contrary to the legal opinion we have just heard, he expressed the view that the amendment would apply to all moneys invested outside Australia, irrespective of the nature of the investment. So much is involved in the amendment that the Government cannot accept it
Without further investigation. I assure the mover that the point he has raised has already been exhaustively examined by the Government, and that it will be further probed. Australia cannot afford to allow its own capital to drain away to other countries when it is so hardpressed for money that it has to offer special inducements to foreigners to subscribe to its loans. “We all are agreed as to the desirability of keeping as much of Australia’s surplus wealth in the country for the development of its resources as is practicable; but I urge the committee not to make, by this simple amendment, a fundamental and farreaching change in the taxation system. Moreover, the adoption of the proposal would completely upset the finances of the Government. Nobody can say what would be its effects.
– The Government might even get too much revenue.
– It is perfectly certain that it would enormously increase the revenue.
– The Government could then reduce the tariff duties.
– The honorable member for Swan cannot be allowed to achieve his freetrade objective by a side wind. The Commissioner of Taxation has informed me that it would be impossible, without careful research, to estimate the effect of this alteration upon the revenue. I appeal to the committee not to accept the amendment. The matter is being carefully examined by the Government, and, in view of the necessity for retaining Australian capital for internal development, it may be necessary, when all the facts are ascertained, to take some action to achieve that result.
.- The Prime Minister was right in saying that the amendment involved a change of a fundamental and far-reaching nature. I am sorry that the honorable member for Swan (Mr. Gregory) did not circulate it some days ago. The Prime Minister said that the amendment, if carried, would probably lead to an enormous increase in revenue from income taxation. That proves that the Commonwealth is losing a lot of revenue now. The only sound argument that can be urged against a government having too great a revenue is that it is taking from the pockets of the people an undue amount of money, which might be put to better use. That objection does not apply in this case, because, if we tax the profits of those who have invested their money abroad, we leave them less money with which to carry on that undesirable policy, and we do not lessen the amount invested in Australia. %
– We might chase them out of Australia altogether.
– There is a very strong case in favour of the amendment. I certainly agree that if we did impose this class of taxation, which could be subjected to reciprocal arrangements similar to those now in force between Great Britain and Australia, it would be beneficial. The Prime Minister expounded an argument that was exploded when the subject was discussed before the royal commission on taxation, that the provision would penalize men who were making products locally, and sending them abroad .to Argentine, Africa, and other countries, to exploit their market, such as Hugh Victor McKay. The difficulty could be overcome by introducing a proviso to exempt such profits. The right honorable gentleman also mentioned wool exported for sale on the foreign market. We tax that wool producer on his full income.
– There are companies who purchase wool on consignment and sell it at an enhanced price.
– That could be overcome by the operation of section 18 of the principal act. We should certainly tax the man who is resident in Australia and has his capital invested abroad, particularly the man who has his money invested in tin-mining and other ventures in cheap labour countries. The principle upon which we impose the rate of taxation is ability to pay. There are two main considerations governing the collection of taxation ; one the service that the country renders the individual as a member of the community. The Prime Minister refers to it as the “ protection of the flag.” The other and greater consideration is the protection that the country gives to the industry from which the individual makes his income. We have the right to impose a tax on the resident of Australia who earns his money in this country, and that also gives us a claim on the absentee who earns a portion of his income, in Australia. That justified, too, the stand taken by the Opposition in regard tothe proposals that were to be applied to absentee shareholders. We haw an even greater claim on those individuals, who, while resident in Australia, are exploiting undeveloped countries, where government may not be solid. Great Britain has frequently taken responsibility for the safeguarding of persons engaged in such ventures. It is right that those people should contribute to the revenue of the country that protects them, and in which they reside. The royal commission on taxation was very guarded in its report. It made some recommendations, but hedged later. It indicated that it would prefer to see a tax imposed on profits earned abroad rather than increase the existing tax in Australia. I suggest that that was not considering the principle, but rather the expediency, of the matter. To-day, whilst Ave are reducing income tax and other direct taxation, our general taxation per head of population is increasing. It would be possible for us to relieve our people from indirect taxation to the extent of many millions of pounds
Avithout affecting the protective effect of the tariff except to improve it, leaving revenue duties frankly imposed as such. On thewhole, I find myself in agreement with the amendment. This committee can only affirm general principles, and a principle is affirmed in clear and definite language by the amendment. If the amendment is carried, the Governmentwill have to consult its advisers, and probably in another place, insert the proviso necessary to meet objections that may be raised on such points as the taxing of exports. It may be necessary to alter the verbiage to include capital expended abroad for trading purposes, as well as investments. When one considers that theflow of capital from Australia abroad is groAving, one realizes the need to impose a check. The honorable member for Swan instanced “ shadow “ companies that are exploiting Australia and evading taxation here. We have peoplewho are shareholders in such companies, actually making profits here, but crediting those profits in another country. I instance the operations ofan American film company, producing films in Australia. Those films are sold in Australia at such a price that the Australian section of the business makes no profit. But profits are made by the parent company, and the shareholderswho are resident in Australia receive their proportion of those profits. Why should Ave encourage that sort of thing and penalize Australian taxpayers? If Ave imposed a tax on such activities, itwould at leastwake up Australian shareholders and make them fight for their end of the stick, probably resulting in the introduction of reciprocal taxation arrangements between Australia and the United States of America. I appreciate many of the points raised by the Prime Minister, but the right honorable gentleman is responsible,with his Government, to see that these provisions are extended in such a way that they will increase our revenue enormously. That will reduce the taxation that falls so heavily upon ourown people, and will still allow us to put into effect protective dutieswhich will encourage and stimulate our industries.
– I direct the attention of the committee towhat is involved in the amendment in relation to the drafting of the bill and the form of our present act. The honorable member for Yarra (Mr. Scullin) said that the amendment might properly be carried by the committee, and that it should then be left to the Government to produce other amendments to fit into the scheme of the act. I consider that the committee should appreciate the real significance of the amendment in that regard. Our act was deliberately drawn upon the basis of the taxation of incomes derived from sources within Australia. The definitions in the act are based upon that principle. The governing sections of the act are based upon that principle, as are the description of income, in section 16, and the deductions. To accept this amendment and to combine with the principle of taxation upon income derived in Australia, the principle of taxation upon income received in Australia from investments abroad would involve a re-casting of a very large portion of the act. For example, income from personal exertion is defined as certain moneys -
Derived from sources in Australia, consisting of earnings, salaries, charges, commissions, fees, &c. . . . Income from property means “ all incomes derived from sources in Australia and not derived from personal exertion.”
And so on through the definition section. Section 13 is the governing section of the act, and it provides - “ Subject to the provisions of this act, income tax shall be levied and paid for each financial year upon taxable income derived directly or indirectly by every taxpayer from sources within Australia. . . .”
Section 16 provides that assessable income shall include certain specified matters. It occupies more than four pages of the statute. As an. example of the difficulty that arises, I mention the trouble there is in dealing with profits which have been distributed in Australia in the form of bonus shares. A complicated set of provisions has been worked out to deal with that subject, which depends in part for its administration upon the date on which certain profits were earned by the companies concerned. The provisions are being applied to Australia, but to apply them to foreign companies would be impracticable. It could not be done, except by sending inquiry officers abroad to ascertain whether and when and out of what moneys foreign companies distributed bonus shares. Provision is also made for the deduc tion of certain losses and outgoings’; but this likewise has been devised to meet Australian conditions, and could not be applied to ex-Australian income. Everything in the act has been put there with the object of collecting tax on income derived from all sources in Australia, and the measure would have to be entirely re-cast to make its provisions applicable to income earned outside Australia. It is, of course, open to the committee to adopt an entirely different system. I have not risen to speak on the merits of the amendment. I suggest that the wise course for the committee to pursue would be to allow the Government to continue its examination of the question, and not create difficulty, and perhaps chaos, by inserting in the act an isolated amendment of this character.
.- I listened with attention to the remarks of the honorable member for Swan (Mr. Gregory). His proposal is fundamental in character. This subject has been considered recently in Great Britain, the United States of America, and Canada. The Senate of the United States of America has been specially concerned about the practice of certain Southern Europeans who migrate to America of hoarding their savings until a time of depression occurs, and then taking them back to their native land. It has also given consideration to ways and means of meeting the financial problems which arise from the practice of wealthy Americans of taking large sums out of the country when they go abroad on holidays. Australia is not greatly concerned with that aspect of the matter, for we have numerous visitors from other countries who bring considerable wealth here. The discussions that have arisen in Great Britain have turned on a different aspect. On Monday last I asked the Prime Minister, upon notice -
Exchequer is in accordance with economic facts, and whether it would apply in the case of Australian loans?
The right honorable gentleman replied that he had no information on the subject, but in spite of that off-handed way of dealing with it, he will have to give some earnest consideration to it before long. The question was raised at the Economic Conference at Geneva, but as that was a freetrade body it also evaded the issue. It appears to me that something along the lines of the proposal of the honorable member for Swan will have to be done sooner or later. At present a large amount of capital is being taken out of Australia annually, by persons resident abroad. It is well known that the members of the Tooth and Allen families draw very large incomes from their interests in Australia. They are not consumers, and do not assist in relieving the cost of government. This money should be taxed. “We shall eventually have to treat this question as one of major importance.
– I was pleased to hear the Prime Minister express the opinion that there was a good deal to be said in favour of the amendment of the honorable member for Swan on the grounds of national sentiment, necessity and obligation. This country is badly in need of capital, and we should do all that we can to see that Australian capital is kept here to develop our resources, establish our industries, and provide employment for our people. That the principle underlying the amendment is sound cannot be denied, for it is a principle upon which .British and Canadian taxation rests. I was not impressed by the statement of the Attorney-General, that from the machinery standpoint the amendment is impracticable. I have noticed frequently that while one man is busy saying that a thing cannot be done, another comes along and does it. I can see no reason why we should not provide machinery to impose taxation of this character.
– It could almost be done by a regulation.
– It should be easy to do it. We could include another part in our act to deal’ with it, and make it practically independent of the taxation of income earned in Australia. I was impressed with the statement of the Prime Minister that the proposal was equitable and would enlarge the field of taxation. In my opinion it would exploit a wide and legitimate field which we have a perfect right to exploit. I know of an Australian citizen who, shortly after the outbreak of the war, removed practically the whole of his capital from Australia, although he remained under the shelter of the Australian navy and army and the protection of the British flag. It is no part of our business to shelter individuals of that description from dual taxation. The amendment moved by the honorable member for Swan has much to commend it, but at the same time it would not be prudent at this stage to graft it upon our present act. That would be a somewhat precipitate and almost a clumsy method of dealing with this proposal, because it certainly requires more consideration than we can give it to-day.
– The honorable member is raising the difficulty that was mention by the Attorney-General.
– Not at all. There are no insuperable machinery difficulties in respect to this amendment, but it would be unwise at this stage to graft it upon our taxation laws without giving it mature consideration. I have not the slightest doubt that the Commissioner of Taxation could soon frame new machinery to make the amendment workable, and I suggest that he should prepare a measure to give effect to it. With reference to duality of taxation upon Australian manufacturers who export, the Prime Minister has given one of very few instances in the whole of Australia, and that is the Hugh V. McKay Manufacturing Company. That case, of course, can be met by a special provision dealing with such export products. There is the possibility that, unless we carefully frame our legislation,, we may tax capital employed in our primary industries, and therefore legislative machinery must be specially drafted. But if the principle is right, the details are a minor consideration. The overwhelming sentiment of the Australian people is that we should exploit every legitimate field of taxation before we increaseits incidence upon our already heavily burdened community. I am aware of another citizen holding vast properties that are to-day almost unproductive, and he is paying high land taxation, both Federal and State, and other imposts, including municipal rates. His holding cannot be further developed at present, and there it remains as his monumental investment in Australia. Could he use capital that has been put into his property, say, in America, he would be receiving nearly treble the return that he is getting from his Australian investment, but he is content to go through this difficult stage of Australia’s finances until conditions improve. There is little profit to-day to the man who is controlling industry. Our economic conditions are bad, and we are passing through a difficult stage. This is the time when we should see that those who are controlling liquid funds do not take them out of Australia to be used in countries in which’ there is a big reward for investment in industry. Our first obligation is to Australia, and we should do all we can to safeguard its interests and keep capital in this country so as to build un our resources, increase our population and protect our people from the increasing incidence of taxation, by first exploiting this legitimate field of income taxation that is now available to us.
. - I hope that the honorable member for Swan will persist in his amendment and that it will be carried by the committee. The AttorneyGeneral raised some technical difficulties under the present act respecting the amendment, but I venture to say that they could be overcome by delaying the bill for 24 hours so that it might be redrafted. The operation of this amendment it has been estimated would bring in a revenue of £2,000,000 a year. It is a large sum, and well worth collecting, and not one argument has been advanced impugning the wisdom of imposing this form of taxation. It is remarkable that it has not been proposed before. Those who derive income in Australia from investments abroad have enjoyed the benefits of citizenship in Australia. They had the protection of our army and navy during the war, and yet have contributed little or nothing toward the revenue of this country.
We have now the opportunity to make them bear their fair share of taxation. If it were possible, I should go further and make the taxation retrospective for a few’ years. I certainly would not delay levying the tax for another year. These . people have not been good citizens. Rather than assist to develop Australia, they have invested their capital in other countries, and are receiving large profits from the employment of black labour. They care not who won the war, or who paid for it. Australia is to-day badly in need of revenue. There are thousands of returned soldier settlers in this country who, unless they receive immediate assistance, will be forced to leave their holdings. Here we have an opportunity to assist them. The Prime Minister said that there was a difficulty in levying this form of taxation, especially in respect of the firm of Hugh V. McKay. I have no wish to tax that firm in respect of its export trade, but, after all, its founder, when he died recently, left nearly £2,000,000. The difficulty mentioned, by the Prime Minister could easily be overcome; and as for the technical difficulties enumerated by the AttorneyGeneral, they are not worth a moment’s consideration. I commend the honorable member for Swan for bringing this proposal before the committee, and I sincerely hope it will be given effect.
.- I do not know whether the honorable member for Swan (Mr. Gregory) intends to persevere with the amendment, but I trust that, in view>of the support that he has received from both sides of the committee, there will be no backing down. Revenue is badly needed in this country, and we have to meet many liabilities. The honorable member for Forrest (Mr. Prowse) has shown that in the next five years we must redeem half of our national debt, close on £500,000,000. Therefore, we cannot afford to allow the opportunity to pass to obtain revenue from persons who can well afford to pay for it. The honorable member for Yarra (Mr. Scullin) has indicated that this is a method by which we can relieve the great body of the people of a portion of taxation, and at the same time not affect the protective policy of this country. Duties have been imposed for revenue purposes only, and it is the mass of the people that bear them indirectly. The honorable member for East Sydney (Mr. West) has intimated that this form of taxation has been receiving attention in other countries. I have with me an American record of various taxation systems. The Congress of the United States of America authorized an inquiry into the forms of taxation in operation in various countries, Including Great Britain, and no difficulty has been found in imposing a tax upon residents who invest their capital in other countries. Why should we not follow such an excellent example? It may be said that this tax will injure our manufacturing export trade, but that difficulty is easily overcome. I quite agree with the honorable member for Yarra that there should be no duality of taxation, particularly within the Empire. Great Britain has already made provision for that, because it has a reciprocal arrangement with the dominions.
– That provision is embodied in our own act.
– There is at Newark a company that manufactures and exports dredging machinery. The firm of Thompson’s, at Castlemaine, manufactures boilers, and other machinery. We have no wish to injure that trade, but rather to develop it. Vast sums of money have been invested overseas by wealthy Australians, and we should be recreant to our trust if we did not impose a tax upon them. The Government may say that there is notime to graft this amendment upon the bill, but I suggest that between the time the bill leaves this House and is received by the Senate, the proper machinery provisions could be drafted. The precedent for this tax has been established in other countries. Some of these moneys invested outside of Australia employ black labour on tin-fields in various countries and on mining fields in South Africa. When our own kith and kin receive large profits from overseas through the employment of black labour, it is time that we imposed a legitimate tax upon them. I hope that a vote will be taken upon the amendment, and that it will be carried.
.- I compliment the honorable member for Swan (Mr. Gregory) upon having brought forward this amendment, but I’ agree with the Prime Minister and the Attorney-General that it oannot be incorporated in the legislation of this country in a moment. I feel sure that the honorable member for Swan will recognize that, having introduced the amendment, and having secured from the Government an intimation that it is considering the matter seriously, it is not necessary for him to go further with it just now. The question is not so simple as it appears. We do not possess that measure of control over our citizens and their investments outside Australia which some honorable members seem to think. This system of taxation might prove to be a two-edged sword. I believe that people with plenty of money, even if they are living privately, are of advantage to Australia, and they are taxed in other ways than through the income tax. If we impose such taxation as is here suggested, we might drive such people out of the country, and thus do more harm than good. However, I feel that much might be done along the lines suggested in the amendment. There are oil companies operating in Australia under conditions which would bear very close investigation. I think it will be possible to frame legislation so that we might tax those whom we wish to tax; and avoid taxing those whom we do not. By this means relief might be afforded to the heavilytaxed citizens of the country.
– We cannot treat this proposal for altering the whole basis for levying taxation in quite as casual a way as certain honorable members seem to suggest. We did not start out on a’ system of income taxation in Australia without very exhaustive inquiries being made as to the best method on which to base taxation. I would point out to honorable members opposite that it is not quite fair to their predecessors that they should treat the existing system of taxation as one which is obviously defective. The system which appertains in Great Britain to-day and which it is suggested we should adopt, namely, that of taxing a resident onhis income, no matter whence it is derived, was in existence when a Labour Government instituted our present system of taxation. I agree that the British system was probably examined, and that due consideration was given to other systems before the present one was adopted. After such consideration, the Labour Government came to the conclusion that the best system was to tax incomes derived in Australia. But circumstances have altered, and I have already indicated that the Government has given serious consideration to whether, without criticism of those who framed the present system, i’: might not be extended to cover investments of Australian citizens abroad. Before this Parliament could commit itself to such a principle, however, we must have much more information as to the possible repercussions of such an alteration of the law. This idea of taxing incomes derived from abroad was not, I presume, brushed aside as unworthy of consideration when the original system was evolved, but it was not thought wise, at that time, to adopt it. We are now considering whether it is not necessary to make some alteration, and we are collecting facts as to the probable effects on revenue if such an alteration were made. When we are in possession of those facts, it may be possible to recast our whole system of taxation. I suggest that, until we have that information, it would be extremely unwise for this committee to pledge itself to a principle which might not produce the advantages that a great number of people believe now it would. The Government fully recognizes the necessity for considering this matter, and has already taken definite action. Therefore, I would suggest that the honorable gentleman withdraw his amendment which, I agree, is one of very great importance.
.- This is one of the most important matters which has been considered during the committee stage of this bill. It has been made clear that there exists a large field of taxation which remains untapped by the Commonwealth. J do not think we are justified in permitting this state of things to continue, in view of the fact that our taxation is very heavy, and may have to be increased in the near future.
No one can claim that it is right for certain Australian citizens, to be able to invest their money outside Australia, and to avoid the payment of income tax on the income received. I believe there are some persons in this country ‘who draw very large incomes from outside sources, and they have drawn these incomes year after year without paying any taxation.
– Most of that money is invested in low-taxation countries.
– Persons with money invested abroad enjoy all the benefits of Australian citizenship, but they avoid the taxation which the other citizens of Australia have to pay. It is hardly fair for the Prime Minister to remind us that the present system of taxation was framed by a Labour Government. It is quite true that the system was introduced in 1915 by a government of which the right honorable member for North Sydney (Mr. Hughes) was a member. It does not follow, however, that those responsible for a taxation system should be condemned because defects develop in it after its introduction, and it is seen that people are evading their just share of taxation. The committee should be given an assurance that the present system will not be allowed to continue unchanged. During the discussion yesterday the Treasurer stated that the removal of the tax on the incomes of absentee company shareholders would give an inducement to capital to come to Australia. The system by which incomes derived from abroad are left free from taxation, gives, however, a direct inducement to capital to leave Australia.
– Is the amount involved considerable ?
– It is difficult to estimate. Some say it is as much as £2,000,000, but that is a matter for investigation.
– It is not possible to obtain any estimate until the basis of taxation is determined upon.
– I agree that it is not possible to arrive at an accurate estimate, but I submit that this committee can affirm, as a matter of equity, the principle that taxation should be paid on income, irrespective of where it is derived.
– Is any taxation paid on incomes derived from Siam and Malay?
– Does anybody know? There are certain local taxes.
– There may be local taxes, but, generally speaking, there is no substantial tax paid on such incomes. If taxes are paid there, and Parliament wishes to do the fair thing, a reciprocal arrangement could be made with the Malay States and other places in regard to the taxation of income.
– That would take years to do.
– Every possible obstacle is being advanced against the introduction of this system. When its opponents fail to show that the system is anything but equitable, the AttorneyGeneral says that, because the bill is set out in a certain manner, any alteration Avould necessitate the re-drafting of it.
– I said that the adoption of the amendment would necessitate the re-drafting of the act. It would be impossible to secure the object aimed at, even were its desirability generally admitted, by an amendment of this kind.
– There is nothing to prevent this Parliament, if it desires to impose this form of taxation, from instructing its law officers to draw up the necessary amendment, which could be inserted when the bill came before the Senate. The bill is not urgent. If the committee decides that those people who have invested money outside Australia should pay taxation on the income they receive, the Government can make provision accordingly. Where there is a will there is a way. If the AttorneyGeneral makes up his mind to effect the amendment, he can do it. The committee can instruct the Government to prepare whatever legislation may be necessary to enable this taxation to be collected. I am aware that the Prime Minister has said that the Government is considering the matter; but how long will it continue to consider it?
– What is done in England in this regard?
– The United Kingdom, America, and other countries do as this amendment proposes that the Commonwealth shall do. We should induce our own people to invest their money in the country and not allow those who choose to invest their money abroad to live here free of income taxation.
– The honorable gentleman will agree that the original act was based on that principle, which he now says is unsound.
– There is no reason why we should not amend the original act in that regard.
– The basic principles of income taxation can be reversed only after full inquiry.
– If the committee is of opinion that this taxation should be collected, there is no insuperable obstacle to the making of the necessary legislative provision. If necessary a new bill could be drawn up and presented to Parliament within a few days. The Government would do well to meet the wishes of the committee, by either making an amendment now or promising that the necessary legislation will be introduced soon after Parliament reassembles in the new year. If the adoption of this principle leads to the collection of £200,000 or £300,000 from a source which is now neglected, the Government will have an opportunity to reduce other taxation.
– I am very pleased to have had such favorable expressions of opinion from all sides of the committee in regard to the amendment. If the carrying of it would lead to the withdrawal of the bill entirely I would be very pleased, for, whilst I have faith in the desire of the commissioner to do what is just and reasonable, the Income Tax Assessment Act is becoming every year more cumbersome and intricate. Probably I would have been better advised had I advocated this amendment at the second-reading stage. The matter could then have been fully discussed, and the Government could have been given an instruction to draft the necessary amendment. I have brought forward the amendment purely as a matter of principle. In a country whose need of capital is so apparent, it is absolutely wrong that such direct encouragement should be given to our own. people to invest their money abroad. Had the Government opposed the principle, and had not the “ . Prime Minister given an assurance of his belief in the need for careful consideration of the proposal, I would certainly have pressed it to a division.
– Why not do it now in order that an instruction may be given to the Government?
– I shall ask the committee to allow me to withdraw the amendment. Many honorable members would like to vote for it, but will not do so at the risk of losing the bill. I agree with the Attorney-General that the amendment involves an alteration of taxation principles; but I wish to see effect given to it.
– Let us take a step forward now.
– We have taken a step forward. Those honorable members who have spoken have expressed approval of the amendment, and the Prime Minister’s statement was sympathetic and encouraging.
– In what circumstances is the proposal to Joe revived ?
– The attitude of the Prime Minister is that any drastic alteration of the taxation law should be preceded by a careful investigation, in order to ascertain its probable repercussions. I am satisfied that this proposal will be beneficial. We know that Australians have invested large sums of money in rubber plantations and tin mines abroad, the profits from which are not subject to income taxation. The Prime Minister, after expressing approval of the principle for which I am contending, promised further investigation of the proposal, and with that I am content.
– The honorable member is building another bridge for the Government !
– No. If honorable members press the amendment to a division, I shall vote for it. Nevertheless, I am afraid that if the vote is against us, we shall lose some of the advantage we have gained. I am prepared to accept the Prime Minister’s assurance that he favours the principle and his promise of further investigation. I, therefore, ask leave to withdraw the amendment.
Honorable Members. - No!
.- The majority of honorable members on both sides of the chamber approve of the principle that those who derive income from investments outside Australia should pay income taxation thereon. I appreciate what was said by the Prime Minister (Mr. Bruce) and the Attorney-General (Mr. Latham), but I am opposed to any unnecessary postponement of this proposal. I suggest to the Prime Minister that in view of the expression of opinion from honorable members, and his own statement, that the Government is further considering the matter, he should at least give an undertaking that it will be brought forward again early next year. It must not be postponed until a further amending bill is introduced probably two or three years’ hence. If the Prime Minister will give such an assurance, I shall not object to the withdrawal of the amendment.
.- It is generally admitted by honorable members that there is a good deal .of justification for the adoption of the principle contained in the amendment. It is difficult to secure an estimate of the amount of money invested outside of Australia, but it is admitted that it is sufficient to yield a considerable revenue if it Were taxed. It is rather remarkable that this avenue should have been ignored heretofore.
– The proposal has been considered many times, but never exploited. When the act was originally passed it was based on the principle of taxing the incomes of the country.
– The point that has been raised is that the Australian citizen who has his money invested in Australia is taxed on his profits, while the citizen who has his money invested abroad pays no tax. That is an anomalous position which should be rectified as early as possible.
– When the original income tax legislation was proposed, the Government of the day was not confronted with this problem; at least not, so far as as I can recollect, in an acute form. The amount of Australian money then invested in Siam and Malay was inconsiderable, though the Tongkah Harbour and Tongkah Compound Tin Dredging Companies are of older date. Now that the subject has been raised, there can be only one opinion. As the principle underlying taxation is that a citizen shall pay according to his income, there can be no doubt about what should be done. We have a most excellent example to follow in the practice which obtains in Great Britain. The Prime Minister, I understand, says that he is prima facie, favorable to the suggested alteration, but has not fully investigated the matter, and is not fully informed of its probable effect on investment and general financial conditions in Australia. The honorable member for Swan (Mr. Gregory), who moved the amendment, is satisfied with the assurance of the Prime Minister that the problem will be investigated forthwith, and desires to withdraw his amendment. I hope that he may be permitted to do so. In the meanwhile I shall make my own position clear. If the Prime Minister has promised to investigate the matter, and has acknowledged that he is, prima facie, in favour of the change, I thinkwe should be very foolish not to allow him to make his investigations. It is extremely doubtful, in any case, that the amendment could be carried in the face of the opposition of the Government. The inquiry should not take very long, as it will be a simple one. But the potential taxpayer should not be allowed to escape the tax on his income for the current year, and, therefore, I would like the Prime Minister to tell us whether he intends that the investigation shall be made with such despatch as to enable Parliament to pass an amending bill early next year that will operate as if it were in force to-day. If not, one might very well object to any delay. In view of the attitude of the Prime Minister I shall not support the amendment, as I firmly believe that the judicious and expeditious course is to accept the assurance of the right honorable gentleman and await his action.
– We have to congratulate the honorable member for Swan (Mr. Gregory) for introducing’ his amendment. This afternoon’s discussion has done good by bringing into prominence a potential’ source of income taxation which should assistiri closing some of the existing gaps in our taxation system. Apparently the Prime Minister has been considerably impressed by the debate, and appreciates the justice of the amendment, but he puts forward the excuse that an alteration of the existing act would involve tremendous complications. The Leader of the Opposition (Mr. Charlton) has advanced the suggestion that if the Prime Minister makes a definite promise that he will introduce an amending bill to cope with this leakage of taxation when Parliament meets next year it would be satisfactory to all. I believe that if the honorable member for Swan insisted upon placing his amendment before the committee it would be carried. It is our duty to see that every citizen pays a fair share of taxation. I urge the Prime Minister to consider favorably the suggestion that he should make a definite statement on the matter.
– I do not wish this amendment to go to a vote without first making my position clear. I am quite opposed to it. I was surprised that such an amendment should emanate from one who, I understand, has always advocated a Free Trade policy. The amendment cannot be reconciled with such a policy.
– Great Britain, which is a free trade country, has a similar system in operation.
– The difficulties confronting the innovation were pointed out at length by the Prime Minister and the Attorney-General, and it is unnecessary for me to emphasize them. The taxation which was imposed in England during the Avar and immediately afterwards created extraordinary difficulty and irritation in its administration. I consider that if the suggested alteration is effected the inevitable result will be to drive capital out of the country. That Avould perhaps not be displeasing to a party that does not desire capital to come in to Australia. There is probably a considerable number of Australian residentswho have fairly big sums invested here and abroad. The inevitable result of the introduction of irritation tactics such as are suggested by the amendmentwould be to cause many of those people to transfer their investments and residence abroad. Capitalwould be driven away, instead of being attracted to Australia. The amendment of the honorable member for Swan was introduced without any notice, and we are expected to pronounce .a final decision within a few hours on a matter which, as the Prime Minister stated, involves a complete re-casting of our income tax legislation. I am opposed to the amendment. I am, of course, prepared to consider the facts in the future, and to examine the subject in fuller detail. I am ready, to, if necessary - but I do not thiink that will be the result - to vary my opinion. I hope that the Government, if necessary, will force the question to a division, and obtain the opinion of the committee.
.- Apparently the Prime Minister does not intend to reply to the remarks of the Leader of the Opposition.
– I am in the embarrassing position of having already spoken twice on the amendment. I should very much like to speak again.
– The principal objection that the Government has offered to this proposal is that it would necessitate a considerable alteration of our taxation machinery; but surely if the principle i’s equitable we should note hesitate to adapt our machinery to give effect to it. The honorable member for Wannon (Mr. Rodgers) spent about ten minutes in telling us that the proposal was sound, and would open up a new and legitimate field of taxation ; then he surprised us by saying that he. would not vote for it. The honorable member for Swan (Mr. Gregory) introduced the amendment, and later gave reasons why it should be withdrawn. One reason that the Prime Minister gave for not accepting it was that previous Labour governments had not seen fit to adopt it.
– I merely said that the present system of taxation had been adopted after considerable investigation, and. that we should give at least equal consideration to any new system before adopting it.
– The right honorable member for North Sydney (Mr. Hughes) told us that the principle was not adopted years ago because the amount of Australian capital invested abroad then was.hardly worth considering. That is not now the position. Huge profits are being made by Australian residents from in vestments such as those referred to by the honorable member for Swan. The Prime Minister has said that full inquiry will be made into the matter. Does that mean that another royal commission will be appointed, and that the honorable member for Swan will be the chairman of it? It appears to be a favourite practice of this Government to evade the responsibility of making important decisions by appointing royal commissions. Possibly it intends to appoint another royal commission on taxation. If so, it will probably use the commission’s recommendations as the basis of a declaration of Government policy just prior to the next election.
– The honorable gentleman seems to be familiar with the way these things are done.
– I am too familiarwith the methods of this Government. The honorable member for Boothby argued that if we adopt this proposal we shall probably drive capital out of* the country. I cannot understand how he arrives at that conclusion. The Government a few hours ago withdrew a proposal not to tax absentee shareholders. It appears to me that persons abroad who derive wealth from investments in Australia, and persons in Australia who derive wealth from investments abroad should be taxed. The Royal Commission on Taxation dealt with the subject of taxation of the income of Australian residents derived outside Australia. Paragraph 35S of its report reads as follows -
The Federal Commissioner of Taxation, in the course of his evidence on the subject of double. income tax, expressed the opinion that “ With’ the disappearance of the double income tax there is no reason why Australia should limit its tax to incomes arising from sources in Australia.” (See also paragraphs 109 and 170 of this commission’s first report.) The Commissioner considered that, upon the elimination of double taxation in respect of incomes taxed both in the United Kingdom and the Commonwealth, Australian residents should be taxed on their total incomes whereever derived on the basis of their ability to pay. He said - “ It would mean that, instead of the Commonwealth losing income tax on large revenue derived by Australians - using the term in a general sense - from such countries as Japan, China, America, and South America, we should get the tax on it. There is no reason, to my mind, why that revenue should not contribute towards the cost of government in Australia.”
– Is that not tantamount to saying that there is no objection to dual taxation?
– I do not think so. An arrangement already exists to eliminate double taxation to a large extent.-
– That is only vis-a-vis Great Britain.
– Exactly ; but Australian residents who have investment* in,, say, the Argentine or the Malay, and had to pay taxation there upon the income that they derive from them, would surely be allowed to deduct from the net income the cost incurred in obtaining it.
– That is not the arrangement that we have with Great Britain.
– That may bc so; but I can see no reason why such au arrangement should not be made in this connexion. I do not think that any one would object to such a deduction. We could evolve machinery to meet these circumstances, although it may take some little time to do it. If the Prime Minister would give an undertaking that the principle would be accepted, I should be satisfied.
– We have had a very favourable reply from the right honorable gentleman. I am afraid that if we divide the committee we may be defeated on the principle. I wish to avoid that.
– The honorable gentleman has advocated the principle, but apparently intends to vote against it.
– I shall do nothing of the sort. I regard the Prime Minister’s reply as satisfactory.
– All that he said was that the matter would be considered.
– He said that it would be favorably considered.
– I said more than that. I said that it is already being favourably considered.
– I am anxious to see the principle adopted. It is probable that this Parliament will sit for only another three months before the election. Neither the honorable member for Swan (Mr. Gregory) nor can I be certain of reelection, and if we do not vote on the issue to-day we may not have another opportunity to do so. I can see no reason why the Government should not immediately undertake to ask the commissioner to devise machinery to collect taxation of this character. It has been said that we have no information as to the amount of money involved; but we know very well that it is considerable, and therefore we are justified in acting. This field of taxation has been left untouched for too long. I should be quite prepared to tax incomes of this character three times as heavily as incomes derived from sources within Australia. I trust that the honorable member for Swan will persist in his amendment, and that it will be carried by the committee.
.- The discussion that has centred round the amendment moved by the honorable member for Swan (Mr. Gregory), has been very interesting. Many honorable members have expressed views favorable to the taxation of profits earned outside Australia. I much prefer to see Australian capital used for the development of Australia. Honorable members have at all times spoken of the wonderful potential resources of this country, and it is not pleasant to realize that large sums of money are being sent away for investment abroad. No blame can be attached to the honorable member for Swan for moving the amendment. Necessarily, he could not beforehand give honorable members notice of his intention to move it, but the discussion that has take place has induced the Prime Minister to promise that this taxation proposal will be investigated. I do not think for one moment that any member would like to see an important proposal like this hurriedly inserted in the bill, and later oh to discover that more harm than good had thereby been done. It is also unfair to ask the Prime Minister to give a definite promise respecting what may take place in the early part of next year. If this proposal to tax incomes from overseas investments is surrounded with many difficulties, as we have been told, it necessarily calls for a close examination. There is also another aspect. We have not been told what taxation is paid by Australian investors in other countries, and we may find that it is considerable. While I believe that we should get some return for the protection that is afforded to Australian citizens, we have to realize that there must be some reason for persons investing their capital outside Australia, and I do not doubt that the heavy taxation imposed by both Federal and State Governments has had a good deal to do with it. I would hesitate about taking any action that would result in driving either individuals or money for investment away from Australia. It is also very important that this legislation should not be delayed pending the inquiries being made as the reductions in taxes apply to the operations of the present year. I think that the committee has made excellent progress in obtaining from the Prime Minister a promise that this taxation proposal will be investigated. The honorable member for Swan, having heard the opinion of honorable members has adopted the right course in proposing to withdraw his amendment, and I ask the committee to support him.
– This discussion has been very interesting; but the manner in which the amendment has been approached by many honorable members has certainly been a great surprise to me. Until I heard the discussion this afternoon, I had always imagined that honorable members, especially those of the Opposition, were of the opinion that Ave in Australia had evolved a better and more equitable system of income taxation than any other country in the world. At the time of its introduction, there were income tax laws operating in a great number of other countries. I was under the impression that those had been examined, and as a result Parliament had deliberately adopted the present basis of taxation upon incomes derived in this” country in preference to the systems of other countries. But to-day quite a different point of view has ‘ been taken. This question is nearly as controversial as the rival policies in this Parliament in the fiscal sphere of free trade and protection. A new light altogether has been thrown upon our taxation methods in Australia. Let me put this point to honorable members. Is not the outstanding feature of our federal income taxation its tremendous com plexity, and yet that is almost entirely due to the desire that Ave have in the federal sphere to mete out justice to the taxpayers. Until to-day I thought that honorable members had insisted upon that complexity in order that absolute justice should be done to every taxpayer. No matter what system of taxation is adopted, there will be complaints about its complexity, and, perhaps, suggestions from those who complain, which would increase that complexity. This gradual leakage of capital from Australia has been occupying the mind of the Government for some time. To some extent Ave have approached the subject from the wrong angle. Honorable members must realize that, so soon as Ave tax incomes derived from overseas investments, Ave completely alter the fundamental basis of the income tax legislation of this country. If Ave changed the principles which Ave have hitherto followed, I believe that we could simplify many of the complexities of the present law and obviate many of the calculations that are necessary under our present taxation system. The leakage of capital is becoming so serious that the Government has been considering whether there is not sufficient justification to alter the principles of our income tax legislation. But it has not embodied any alteration in its financial proposals for the present year, because these, of course, operate only in regard to the income earned last year and do c~ not apply to income earned this .year. The Government intends to make further and fuller investigations before it comes to a decision on a far-reaching alteration of this character. If it decides upon an alteration, it Will not be possible to bring it down to honorable members until the next session of Parliament. I want honorable members to understand that any alteration would not apply during the present financial year.
– Is the right honorable gentleman prepared to apply the alteration to the next financial year?
– I wish to make it perfectly clear that the Government at present is favorably inclined towards taking action in the direction suggested; but if, as a result of its further investigations, it comes to the conclusion that it is not wise nor advisable to make an alteration to our present income tax system, then the Government most certainly will not do it. I am prepared to give honorable members the assurance that the Government will inform them of what it intends to do after it has fully investigated the position. If the Government decides against any alteration, Parliament will have have the remedy in its own hands.
Question - That the words proposed to be added be so added (Mr. Gregory’s amendment) - put. The committee divided.
Majority . . . . 14
Question so resolved in the negative.
Clause agreed to.
Sitting suspended from 6.20 to 8 p.m.
Section 23 of the Principal Act is amended.
by inserting in sub-section 1 after paragraph (p) the following paragraphs : - “ (r) In the case of a person who acquires, in any manner provided by paragraph (i) of section sixteen of this act, any trading stock or live stock (not being live stock whioh in the opinion of the Commissioner was so acquired for use as beasts of burden or as working beasts - the amount which under that paragraph is included in respect of the trading stock or live stock so acquired in the assessable income of the person from whom that trading stock or live stock was acquired.”; and
Section proposed to be amended.
– (1) In calculating the taxable income of a taxpayer the total assessable income derived by the taxpayer from all sources in Australia shall be taken as a basis, and from it there shall be deducted - (a) all losses and outgoings (not being in the nature of losses and outgoings of capital) including commission, discount, travelling expenses, interest and expenses actually incurred in gaining or producing the assessable income.
– I intend to move the amendment as it appears on the printed sheet providing for the omission of certain words, and the insertion of other words in their stead. Clause 12 amends section 23 of the principal act, which provides for deductions. It provides that there shall be deducted from income all losses and outgoings not being in the nature of losses or outgoings of capital, including commissions, travelling expenses, interest or expenses actually incurred in gaining or producing the assessable income. It is proposed to alter the order of the words so as to make it quite clear that the losses and outgoings which are included amongst the items which may be deducted from the assessable income must be actually incurred in gaining or producing it. This is rendered necessary by a decision of the High Court in 1921, which held that the section, as now worded, did not provide for this. Therefore I move -
That after “ amended “ the following be inserted - “ (aa) by omitting paragraph (a) of sub-section 1 with a view to insert in lieu thereof the following: -
all losses and outgoings (including commission, discount, travelling expenses, interest and expenses and not being in the nature of losses and outgoings of capital) actually incurred in gaining or producing the assessable income: ‘”
Amendment agreed to.
Amendment (by Mr. Latham) agreed to.
That paragraph (r) be omitted.
Clause, as amended, agreed to.
Clause 16 (Partners).
– I have asked that this clause be recommitted so as to give the Minister an opportunity of explaining its import more clearly. It must be evident to honorable members that the power conferred on the Commissioner of Taxation under this clause is very wide indeed. I listened patiently to the statement made by the Treasurer when he introduced this measure, and if I remember rightly, he stated that even when a wife put money into her husband’s business, there could not be established a partnership between them. The husband could only pay, and the wife claim, interest for the money so advanced. I submit that a man could have no better partner than his wife. If she possesses money of her own, and is entitled to invest it, there is no better way to do it than to put it into her husband’s business. I am, therefore, anxious that Parliament should interpret its will in this regard, rather than that it should impose that power upon any person whatsoever. I recognize the need for the clause under our graduated system of taxation. There is a natural desire on the part of taxpayers to get together in order that they may divide their incomes, and so come under a lower income tax rate. It is necessary that the Government should protect the income tax. act against such bogus partnerships, but the Minister should more clearly define under what circumstances a husband and wife may conduct a genuine business partnership. If the position is as I understood the Treasurer to say, that a wife is not able to enter into a business partnership with her husband, I totally disagree. If a wife owns farming property, and her husband also owns land, there is nothing more proper than that they should enter into a legal partnership in respect of such land, and that they should have their legal rights as partners preserved to them.
.- Section 29 of the act provides that a partnership shall be liable to furnish returns, but that the partnership, as such, shall not be liable to taxation, and that the partners shall be separately assessed. That is a proper provision in the case of a bona fide partnership. This new clause is designed to deal with a fruitful source of evasion. It must be remembered that if a husband and wife are carrying on a business partnership, and have no outside source of income, the tax payable on the income of the business as a partnership is frequently less than it would be if the business were carried on in the name of only one of the partners, because the division of income allows a deduction of £300 from the income of each of them. There are, I admit, many bona fide husband-and-wife partnerships, but there are quite a number which are not bona fide, but which it is extremely difficult to prove are other than they are represented to be. The department has informed the Government that these cases are becoming more numerous. Many cases have been observed in which a business has been carried on for some time by an individual as a sole trader. He then obtains advice from a taxing agent, and thereafter he carries on his business in the form of a partnership with his wife. The business may still trade under the same name, but for taxation purposes it is represented as a partnership. The claim for the existence of a partnership may be based on a specific agreement which is produced, and it is difficult to establish, in such a case, that the partnership is not a bona fide one. If it is necessary to prove in a law court in every case that there is a fraud, these evasions will continue to take place. The section will not affect any bona fide partnership between husband and wife.
– What is the meaning of “ bona fide “ as used in reference to this clause’?
– Whether a partnershipisbona fide or not in relation to this clause depends upon the purpose for which, it was formed. A partnership is not bona fide if it is entered into merely for the purpose of relieving a husband and wife of their taxation liabilities.
– How would the AttorneyGeneral interpret a case in which a woman puts actual money, which she owns in her own right, into her husband’s business on the understanding that she is to be given a partnership in the business ?
– That is certainly a bona fide partnership.
– I understood the Treasurer to say that even in a case like that the wife would be entitled to receive only the current rate of interest on the money which she put into the business.
– The Treasurer was probably referring to another aspect of the matter. If the honorable gentleman will refer to the Partnership Acts, as passed by the different State Parliaments, he will find that the mere lending of money does not create a partnership. This clause would not apply in cases where money had been merely lent. It would apply only in cases in which it is contended that a partnership exists as defined in section 29 of the act, and in which it is found that the partnership has been formed to evade taxation liability. But where there is a contribution of real money to the capital of a firm there can be no doubt that a bona fide partnership in the business may be claimed.
– From the Treasurer’s statement I gathered that money put into her husband’s business by a wife could be regarded only as a loan. There is a distinct difference between lending money and putting it into a business as a partner, when all the risks attaching to a partnership are incurred.
– It must be a partnership if a wife puts her own money into the business and is prepared to bear the risks of a partnership.
– There must be a sharing of risks and profits.
– This clause gives complete discretionary power, without limitation, to the Commissioner. The AttorneyGeneral has explained a good many things which are not partnerships, but he has not laid down a basis for determining what is a partnership.
– That does not matter, because the question only arises when persons allege that they are in partnership.
.- If some declaration of partnership were to be the determining fact I should not object, but there is nothing in the act to define for the guidance of the commissioner a partnership between husband and wife. It is quite common for a wife to hold land in her own name and to work it with her husband, but without any deed of partnership or annual balance-sheet, or distribution of profits. If this taxation is to be left entirely in the discretion of the commissioner a loose family partnership might lead to a charge by the commissioner of attempted evasion of taxation. Frequently it will be found that partnerships do not exist, and the commissioner’s demand for evidence in the form of a deed, an annual balance-sheet, and a statement of profits distributed, might make the partners liable to the highest penalties under the act. The clause is too vague.
– The commissioner has not uncontrolled and arbitrary discretion. His decision is subject to review by the board.
– That is so, but 98 per cent._ of the taxpayers accept the decision of the commissioner rather than appeal to the board. We should require some substantial evidence of partnership - for instance, information as to the terms on which the land has been held previously, or, in the case of a business, the terms on- which the capital of the parties has been invested.
Clause agreed to.
Bill reported with further amendments.
By leave report . adopted, and bill read a third time.
Bill received from the Senate and (on motion by Mr. Bruce) read a first time.
In Committee of Ways and Means :
Motion (by Mr. Latham) agreed to -
That a tax be imposed on income derived from sources in Australia at the following amounts and rates, namely: -
– Rate of Tax upon Income Derived from Personal Exertion.
For so much of the whole taxable income as does not exceed £7,000 the average rate of tax per pound sterling shall be Threepence and three eight-hundredths of one penny where the taxable income is One pound sterling, and shall increase uniformly with each increase of One pound sterling of the taxable income by three eight-hundredths of one penny.
The average rate of tax per pound sterling for so much of the taxable income as does not exceed £7,000 may be calculated from the following formula: -
For every pound sterling of taxable income in excess of £7,000 the rate of tax shall be Sixty pence.
In addition to the tax payable under the preceding provisions, there shall be payable, in the case of incomes in respect of which the tax is calculated under Subdivision A, B. or C, an additional tax equal to eight per centum of the amount of the tax so calculated.
Notwithstanding anything contained in the preceding provisions, where a person would, apart from this provision, be liable to pay income tax of an amount less than Ten Shillings, the tax payable by that person shall be Ten shillings.
For every pound sterling of the taxable income in respect of which a trustee is liable to be separately assessed and to pay tax, the rate of. -tax shall be at the rate which would be payable under Subdivision A. B. or
C, as the case requires, if one individual were liable to be separately assessed and to pay tax on that taxable income.
Subject to the last preceding subdivision -
Standing Orders suspended; resolution adopted.
That Mr. Bruce and Mr. Latham do prepare and bring in a bill to carry out the foregoing resolution.
Bill presented by Mr. Latham, and read a first time.
.- I move-
That the bill be now read a second time.
This is a bill fixing the rates of income tax, and reducing the prevailing rates by 10 per cent. in the case of taxation payable by individuals. No reduction is made in the rate payable by companies. The minimum amount of tax payable has been reduced from £1 to 10s. The bill also makes special provision for the rates to be paid by trustees. A difficulty has arisen in the case of a trustee receiving income from the estate of which he is a trustee, and retaining it. The trustee and not the beneficiary is assessed in respect of that income. It has been held in litigation, under the War Times Profits Tax Assessment Act, that a distinction exists betweenthe case of an individual trustee and a company trustee. The rule is that a beneficiary in a trust estate pays income tax according to the ordinary provisions of the act in respect of the income which he receives, but sometimes the income is retained in the hands of the trustee. The act then provides that income tax is payable by the trustee upon the’ income which is not going to a beneficiary. In a case which came before the court under the War Times Profits Tax Assessment Act, it was necessary to consider and apply legislation from the Income Tax Act, and the court held that where the trustee was a company, the company rate was to be paid, but that where the trustee was an individual, the individual rate should be paid. Obviously that is quite wrong. It brings about the result that, in two precisely similar estates, with identical amounts paid into the hands of trustees, one sum would bear taxation at the company flat rate of Is., and the other sum, because it was paid to an individual instead of a company trustee, would pay either more or less than Is., according to the amount involved. The bill proposes to make the position equitable by making the rate of tax payable by a trustee, as set out in the fourth schedule -
For every pound sterling of the taxable income in respect of which a trustee is liable to be separately assessed and to pay tax, the rate of tax shall be the rate which would be payable under the First, Second, or Third Schdules as the case requires if one individual were liable to be separately assessed and to pay tax on that taxable income.
Apart from the specific alterations to which I have referred, this is an ordinary income tax rates bill.
– I do not intend to discuss the second reading of the bill at length. I must concede that we had a very thorough discussion of the Income Tax Assessment Bill, which covers the whole range of this subject, including the rates to be imposed. That exhaustive debate proved that if we have a reasonable time to discuss a measure a useful result is achieved for the country. Our debate on the Income Tax Assessment Bill produced some good results, although I regret that our remarks in opposition to the -proposal to make a general reduction of 10 per cent., which is embodied in this bill, did not bear fruit. It is not a very popular thing to oppose a reduction of taxation, as is now being done by the Opposition. We take the stand that our financial position is not at all promising. The signs are all around lis that we shall probably have to face a financial stringency, and that we shall need all our available revenues if we are to cope with it successfully. We should be applying our surpluses to the reduction of our debt or to preventing an increase of it. It should be our endeavour to relieve the people where we can from the existing revenue imposts. I refer not to the protective, but to purely revenue duties by which so much indirect taxation is raised. That is the basis of our protest against this reduction, and it has already been discussed at considerable length. We have not met with much success, but the debate has not been altogether ‘ useless. We certainly saved the country at least £200,000 in connexion with, the Income Tax Assessment Act. We cannot move to increase the rate of taxation to the original standard, because that would be against the Standing Orders, and we cannot vote against the second-reading of this bill, because if we were successful, it would result in no income tax being collected. We can merely reiterate what we said on the Income Tax Assessment Act, so far as it applies to this bill. There is one thing which I urge the Minister in charge of the bill to consider, and that is the minimum tax charged. It may seem a very small matter, but the minimum of £1 operated harshly against many taxpayers. The reduction to 10s. will give a measure of relief, but I understand that some of the States collect a minimum of only 5s., and I suggest that we should reduce our minimum to a similar amount. A man may come into the taxable area with perhaps only £1 above the exemption. Legally speaking, under the terms of the scheduled rates, he should pay only a few pence, but ‘the minimum compels him to pay 10s. I suggest that 5s. would be reasonable.
.- For a considerable; time I have felt that this country would do well to impose the same rate of tax upon income from property as that which applies to income derived from personal exertion. No doubt when the differential rate was fixed it was felt that those people who earned their income by the investment of their capital - either by placing it out on loan, or by erecting buildings and collecting income in the form of rent - should pay a greater revenue than the man who works hard for his money. That may appear to be very reasonable, but when we examine it from an economic stand-point, we realize that it merely .causes trouble and places the nation at ‘a disadvantage. An increased taxation on revenue derived from investments in this country means that the interest rate must go up, which is detrimental to the progress of the country. I also submit that under the present scheme the money invested in houses for letting purposes is unduly taxed, so that it is the working man who actually has to meet the higher rate of taxation. Instead of being an advantage to Australia, it is a disadvantage. Foreign investors in Australia are not similarly penalized. Yesterday we had an instance of the considerable cost which is incurred by the Taxation Department in having separately to reckon and compute the averaging system now operating in Australia. It confuses the existing system just about as much as would the system proposed by me, to which the Treasurer took exception. I have no ulterior, motive in urging my contention, but have in mind only the detrimental effect that the present system has upon Australia. I am merely asking for something that would be a great convenience to many taxpayers.
– Would the honorable member apply the scheme to all income tax?
– The existing rate is a graduating one and is very severe indeed on big incomes. A man may have a taxable income of £1,500 from personal exertion, and only £50 or £60 from property or from money that he has on fixed deposit. That amount is brought into calculation at a special and high rate, which must indirectly, affect the interest rate in Australia; a’nd tend to retard our development.
I appeal to the Government to take this aspect into consideration to see whether it is not possible to place this taxation on an economic basis.
.- The honorable member for Forrest (Mr. Prowse) usually directs attention to problems which very few people can properly grasp. I understand that his proposal to-night is that the rate of income tax should be the same irrespective of whether income is derived from personal exertion or from property. Income derived from personal exertion usually represents the wages of a worker in all fields of employment, while that from property frequently comes from a person’s savings or investments or from an inheritance from deceased relatives. It could hardly be expected in these circumstances that the rate of taxation would be similar. It has never previously been suggested that it should be so, at least not to my knowledge. I regret that provision is made in the bill for the imposition of a minimum tax of 10s. The result will be that a person who is liable for the payment of a tax of only ls. or 6d. will have to pay 10s. That appears to me to be a heavy punishment to persons of limited means, and as it is not their fault that their income will not permit them to pay income tax I do not think that it can be justified. If it were not so serious, it would be laughable. As I observed on a previous occasion, such provisions in our legislation bring our proceedings down to the level of comic opera. I trust that the Government will agree to the deletion of that paragraph from the clause.
.- I should not address myself to this measure were it not for the fact that I consider the incidence of direct and indirect taxation of vital importance to our economic life. I should rejoice in the proposed reduction of direct taxation were it not for the fact that it is not a reduction in the totality of taxation, but merely a shifting of the amount involved from a direct to an indirect tax. The maimer in which a country will submit to direct as against indirect taxation is, in my opinion, a test of its intelligence and economic. sense. A nation which prefers indirect to direct taxation is deficient in knowledge of economics. An axiom of taxation is that if a government has to raise £1,000 in taxation very much less economic hurt is done if it clips the amount off a single income of, say, £10,000, than if it takes 50 cuts of £20 each from the recipients of smaller incomes. Our indulgence in this orgy of indirect taxation is having a very bad effect upon our national expenditure. Had I known that to meet the expense of constructing certain works for which I have voted in this Parliament in the last year or so, the electors would have to sign specific cheques to meet direct taxation instead of knowing, as I did, that the necessary money or the interest to be paid on it would be available from revenue duties, I should certainly . not have voted for them. The expenditure of this country would have been at least £5,000,000 a year less than it has been if direct taxation had been as high as indirect taxation is, and indirect taxation had been down to the level of direct taxation. Had we leaned less heavily than we have done on indirect taxation, we should have been less extravagant, and I am convinced that we should not have approved of many of the schemes for expenditure which have been endorsed. It would be in the best interests of this country if in the future we were to depend more upon revenue from income, land and other direct taxes than upon revenue from indirect taxes.
.- I protest against the provisions of this bill. Like the honorable member for Henty (Mr. Gullett) I objected during the budget debate to the manner in which our indirect taxation has increased ; and I wish now to emphasize my views. It appears to me that the Government has adopted the principle of ignoring criticism of its financial policy in this respect. The Treasurer did not refer to it in his budget speech beyond mentioning that the Government intended to reduce direct taxation. He did not examine the incidence of the taxation which is to-day falling so heavily upon the community in general; he did not attempt to explain the policy of the Government in this respect;, and I do not think that he in any way justified the proposed 10 per cent, reduction of income tax. It was pointed out during the budget debate that in the five years that have elapsed since this Government assumed office, indirect taxation has increased by approximately 91 per cent., while direct taxation has been reduced by approximately 33-J per cent.
– Did I understand the honorable member to say that indirect taxation had been increased by 91 per cent ?
– That is what I said. The Attorney-General seems to be astonished. The figure is arrived at in this way. During 1921-22, which was the last complete financial year prior to the assumption of office by this Govern-‘ ment, the receipts “ from the customs totalled £17,328,000, while this year the Government is budgeting for a customs revenue of £35,150,000, an increase of £17,822,000, or approximately 91 per cent. The Attorney-General may say that our customs revenue is not taxation. It may not be imposed as taxation, but the fact remains that the money flows into the Treasury, and the consumers have to pay it as an indirect tax. I feel justified, therefore, in saying that the Government policy has increased indirect taxation by 91 per cent, concurrently with having reduced direct taxation by 33-J per cent. Honorable members cannot ignore the unstable economic position of the Commonwealth in consequence of the enormous flow of imports into the country. “We shall soon be forced to give more consideration to this problem. The Minister for Trade and Customs (Mr. Pratten) will shortly invite lis to discuss the new tariff proposals that he has tabled, and to suggest a cure for the obvious ills from which the country is suffering. We shall have to take drastic measures effectively to protect Australian industries and prevent foreign goods from swamping the country, and such action will inevitably have the effect of reducing the flow of revenue into the Treasury. It will reduce, so long as our legislation is effective, the indirect .taxation, whether the Government desires it or not, and with that prospective reduction in indirect taxation it will be faced with the necessity of getting revenue from other sources. That is an additional argument for care ful consideration before we reduce the direct taxation at this juncture. If the Government is contemplating a continuation of the present flow of money into the Customs House, if it regards the annual increment of customs receipts as a part of its settled policy, then I can understand it reducing direct- taxation or curtailing its revenue in other directions. But if its policy has been set with that in view, it is wrong, and the Government is travelling along the road to ruin, and the country will sooner or later suffer the consequences.
– That is an amazing statement, coming from the honorable member.
– Truth should not be amazing from any one. The simpleminded are very easily amazed.
– The honorable member left Queensland in a maze.
– What is the implication behind that statement?
– What I have said.
– I was Treasurer in Queensland for many years, and I think that I budgeted, if not always for a surplus, at any rate in strict conformity to the principles of sound finance. I realize that this is not an occasion upon which an examination of Queensland finances in the immediate past would be justified, but I have no objection to discussing the subject with any honorable members who are labouring under delusions regarding the stability of Queensland’s finances under my regime. Whatever honorable members may think of the situation in Queensland, the situation of the Commonwealth is unsatisfactory both from an economic and financial point of view - from an economic point of view because of the adverse trade balance, and from a financial point of view because the Government is levying too much indirect taxation, and thus placing a heavy burden on the people who are least able to carry it. At a time when that burden is heavy and inequitable as far as the family man is concerned, the Government is deliberately reducing the burden on the shoulders of those who are best able to carry taxation. The Govern^ ment has not shown that the present system of income taxation is bearing with undue severity upon the shoulders of those *who are contributing it. If it were able to do so, there would be no better argument in favour of the bill and of a reduction in income taxation, but it hai not attempted to show that the income tax is to any extent oppressive. As a matter of fact those who have examined the in,cidence of ‘ Commonwealth income tax will, I think,, arrive at the conclusion that the existing rates are equitable and just. The tax is graduated, and its incidence is progressive. Those who contribute most are best able to do so, but this proposed reduction will give the greatest concession to the wealthy people, and no considerable section of the less wealthy members of the community will get any advantage.
– A lot of small companies will get an advantage.
– Companies that are making losses will not benefit.
– The shareholders will.
– In what way?
– By a reduction in income tax.
– The principle people who will benefit are the wealthy members of the community. There are 11,000 taxpayers, on the basis of the last report of the Commissioner for Taxation, whose taxable income averages £5,000. per annum. They will receive an advantage, although they are certainly in a much better position to continue paying the exisitng rate of tax than are many family men to pay indirect taxation through the customs.
– The majority of the wage-earners in this country pay no income tax at all.
– A great many of the basic wage-earners who have wives and children to support are paying up to £30 a year, indirect taxes, through customs duties. I know that the exact figure is difficult to compute, but that calculation is made upon -the approximate amount of dutiable goods that are consumed by the average family man.
– But the honorable member desires to increase the customs duties.
– I wish to.reduce the customs revenue. I wish ito so arrange the tariff, either by. an increase in-‘.its in* cidence or by some other means as to reduce the flow of goods to this country, and to decrease the contributions to the customs house. We shall have an opportunity of justifying that stand when the tariff proposals are before us. I have taken from the report of the Commissioner for Taxation the total taxable incomes on the basis of the 1925-26 figures, which are the last available. Let me here interpose that the report of the commissioner used, in the old days, to be a comprehensive and analytical document, containing a great deal of useful information for those interested in taxation; but recently, for some reason, possibly for reasons of economy, many of the tables and statistics and information that were included in the old report have been excluded from the present report, which is now a very skimpy document.
– A lot of useful information has been left out of it.
– That is so. Although the old report may have been somewhat costly to compile and to maintain, it was well justified. I find, from an examination of the last report, that the total taxable incomes under the Commonwealth act amounted to £179,000,000 for one year. I do not know whether I have made an error in calculating my figures, but I estimate that the resident taxpayers have a taxable income of £116,000,000, absentees of £2,250,000, companies of £59,000,000, and casual taxpayers of £1,000,000. I do not know whether the amounts for companies and resident taxpayers include to some extent the same taxable incomes, but if they do not, then the total taxable income is £179,000,000 for the Commonwealth. The people who are enjoying these enormous annual revenues are to get the advantage of the reduction in taxation. The taxable income has been an increasing quantity. The taxpayers are exhibiting no distress and showing no signs of ruin or insolvency. Their aggregate incomes have been increasing, and if we measure the prosperity of the general taxpayer on any other system - the increased bank deposits for instance, or the increase in general trade or the bank clearings, or any other commercial test that may be applied - we shall find that generally the taxpayers contributing to the Commonwealth revenue by means of direct taxation have been enjoying increasing prosperity and have not been suffering that distress which would warrant any drastic reduction in taxation. The tax should continue, because those people can well afford to pay it, and are far better able to meet the financial burdens of the Commonwealth than are the unfortunate wage-earner and small primary producer who at present do not rank in the list of income tax contributors. Certain classes of Commonwealth taxpayers will get large concessions under this bill. Taxpayers with taxable incomes of £10,000 a year, and there are quite a number of them, will be given a gift of £191 a year.
– That will suit the honorable member.
– It would suit me as well as any one else if I ‘believed that such an individual should get a remission of tax, but if the honorable member has in his mind some foul implication by that interjection, I wish that he would be honest and let me know what it is. Let us be frank in this discussion. There is no excuse for an interjection that implies more than it conveys. If the honorable member has a suggestion in mind that there is something in my situation or business connexions that should be investigated, let him state it.
– I ask honorable members not to make personal . interjections.
– The class of taxpayer with an income of £10,000 a year will get a material advantage under the bill. The class with an income of £20,000 will get a greater advantage; . they will receive a gift of £491 a year.
– How many taxpayers receive £10,000 a year?
– That is not shown in the report. At one time one could ascertain the number of persons in the different grades classified according to taxable incomes. I know that there are individuals with taxable incomes of £10,000 a year, and also of £20,000 a year, and, of course, there are some with incomes of £50,000 a year. The latter class of individuals will receive a gift of £1,391 a year.
– There are not many in that class.
– Queensland represents about one-eighth of the population of the Commonwealth and, as there are a number of taxpayers in that State with a taxable income of £50,000 a year, there must be a much greater number in the Commonwealth. To examine thoroughly and to understand the incidence of taxation and its consequent effect, we should have more statistics thau are available at present. It will be within the recollection of honorable members that the. Commonwealth ordered an examination of the position of private wealth in Australia in 1916. That was a war measure known as the wealth census. A lot of valuable information was obtained. The census was probably costly, and could not be undertaken every year, but it could, I think, be undertaken during each quinquennial period. In that way useful information would be furnished to the Federal Parliament and to every one interested in taxation and the economic progress of the century. Data could be collected which would be a guide as to the consequent effect of the incidence of taxation, and in respect of a great many other matters bearing upon wealth production and the economic situation of Australia.
Mr.Fenton. - A wealth census is taken by the United States of America every few years.
– Such a census should be undertaken here. Possibly some people concerned in wealth production would be embarrassed by it, but for the sake of the knowledge that would be obtained, such a census would be justified. I do not wish to unduly delay the bill. If it were left to me I should prevent its passage. I do not want to be regarded as an obstructionist. The Government is determined to relieve the wealthy people of some portion of direct taxation while continuing the indirect taxation on the working classes. Nothing that I can say will prevent the Government from doing that. But I wish to call attention to what I regard as a significant development of the Nationalists’ policy as expressed by the Commonwealth Government in its legislative acts and in its policy this session. It has shown a disposition to favour the rich, and a callous disregard for the hardships and distresses of tlie less wealthy section of the community. It has shown a disposition to bolster up capitalistic institutions. It has lessened the effectiveness of the Commonwealth Bank by a deliberate act of policy, thereby enormously strengthening the opportunity of the private banks to exploit the community; it has surrendered the control of the Australian Commonwealth Shipping Line and left the privately-owned shipping companies to exploit the producers and shippers of this country. By an attempt to exempt from ‘ taxation absentee shareholders drawing revenues from Australian companies it was trying to favour another class of wealthy people. In this measure it is making a further concession to the wealthy section of the community concurrently with a continuance of the burdens on those less able to pay the existing taxation.
.- Had I not been deprived of an opportunity during the budget debate to discuss the Government’s financial policy, I should not have spoken on this bill. That opportunity –not having been provided, I am obliged to deal more or less piece-meal with it on the motion for the second reading of this measure. I should have preferred to deal with the operations of the Government in relation to one another, and not as isolated items; but I cannot let this bill pass without saying something on the policy which the Government has adopted. For reasons ‘which may differ materially from those of honorable members, on the other side of the chamber, I think the Government is doing wrong in reducing direct taxation whilst piling up an ever-increasing burden of indirect taxation. In his budget speech the Treasurer, with that joyful expression which reminds one of Little Jack Horner saying “ What a good boy am I,” declared that since 1921-22 the Government had reduced taxation by £8,000,000; but he forgot to men lion that lie had added almost double that amount to our indirect taxation. Therefore, the gift of a reduction in taxation was a very unsatisfactory one. It was really a Greek gift. But the position is really worse than the figures indicate. There is something about indirect taxation which makes its incidence much more severe than that of direct taxation. This applies especially to the iniquitous taxation- levied through, protective duties which send up, not only the price of things imported, but also the price of those things which are manufactured, here. We know that Australia is hi a very serious financial position to-day. It does not behove honorable members to give vent to- alarmist expressions of opinion, but- an honorable member, responsible to the electors of the country, who considers the situation, cannot but feel the deepest anxiety regarding the conditions in Australia to-day.
– Another pessimist.
– If an honorable member in this House refers to trouble before it comes, he is accused of being a croaking Jeremiah, and if he does so after trouble has come upon us, he is accused of having brought it about. If honorable members had faced the position squarely in the past, and recognized the serious position into which the country was drifting, it might have been possible to avert the present danger.
– What is the catastrophe to be feared?
– If the honorable member1 has as little knowledge of finance and economics as his interjection indicates, he is not fit to be in this House. The greatest financial difficulties face the people of this country to-day. The one thing that every one desires is economy - a reduction in the cost of living and in the cost of production, which will enable us to enter into effective competition in industry. What is the Government doing to try to -reduce- the cost of living and! the cost of production?
– I remind the honorable gentleman that we are now dealing with the Income Tax Bill, which fixes the rate of the tax. He will be quite in order in making an incidental reference to other cognate subjects by way of comparison,, but he cannot go deeply into details.
– I am endeavouring to show why this reduction of direct taxation is not justified. To-day there is an insistent demand for a reduction in the cost of living, but the Government is doing practically nothing to bring it about. It claims to be- doing so by this income-tax reduction, but this reduction will have 110 more effect -on the ‘general burden -of high ‘costs than have previous reductions. There will still remain burdens of indirect taxation to weigh the people down. I cannot help feeling that the Government is showing almost a callous indifference to the troubles of the people when it .goes on piling up expenditure, and embarking on schemes which necessitate a large revenue and additional taxation. There is no indication anywhere of an intention to shorten sail. If the Government wishes to relieve the burden of taxation and reduce the cost of living, let it do so in the most effective way, and that is by reducing indirect taxation. “While I am not in favour of this bill, I recognize that it is useless to oppose it, because the Government has its majority and will put it through. We can, however, register our objections to the Government’s proposals.
– The honorable member can vote against the bill.
– I am prepared to do so. If the records of this House are searched it will be found that I have voted in accordance with the way I have spoken more often, perhaps, than any other honorable member. I have never been afraid to back my opinion by my vote, even if, by doing so, I have been placed for the time being in an apparently anomalous position.. The Government should reduce the high customs duties. The burden imposed by customs taxation is not represented merely by the actual amount of revenue which is received by the Government. In the case of income taxation the burden on the people is represented roughly by the amount of revenue which the Government collects, but that is not so with the customs taxation. Tn addition to the amount^ of revenue derived from customs duties, there is a huge, and often little realized, indirect burden laid upon the people, which has been calculated by different authorities to be from four to seven times the amount of the revenue collected. When the Government collects £40,000,000 or £45,000,000 from the people in customs duties, it represents an actual burden upon the country of £150,000,000 or £160,000,000 a year. When a ‘ Government insists upon 6,000,000 people bearing so great a burden as that, it surely indicates a callous indifference om its part to the people’s needs. Instead of reducing income taxation, the Government should dlt down the customs duties. For every £1,000,000 reduction in the customs duties, the people would be relieved, even upon the most conservative estimate, of a burden amounting to £4,000,000. I .recognize that as the Government has huge commitments - some of its own making - for which it needs a big revnue, we should be careful not. to reduce taxation too quickly. The process should be gradual. If the Government wishes to secure a minimum reduction of revenue, with a maximum amount of relief to the people, it can do so by reducing indirect taxation. An honorable member has asked what serious crisis is ahead of us, and why we should use the argument of stern necessity when advocating economy. In the Sydney Morning Herald of this morning, there is a very striking testimony, one of a long list of such testimonies given in this country for some time past, “to the pernicious effect of the present system of taxation. It is because of the evils pointed out by this article that we are required to raise such a huge revenue. I shall read a paragraph from the speech of the President of the Bank of New South Wales, which . held its annual meeting of shareholders in Sydney yesterday. The President said -
The drain on local funds by Government and municipal borrowings appreciably affects the accumulation of deposits, and in turn the funds available for advances, and I desire to state here most emphatically that this continuous drain on our natural resources by the Government throughout Australia must bc stopped if the country is to make headway, for it must be apparent to our thinking public ‘that if the Governments persist in the policy they have pursued t”he last year or so of diverting whatever moneys they can collect to their own use, to the detriment of our grazing, agricultural and commercial development, so will they undermine private enterprise, which is the life-blood of advance: ment in all progressive countries.
That is the utterance of a responsible man at the head of one of our largest financial institutions. He does not stand alone. Similar warnings have been given again and again, yet the Government continues its reckless expenditure, making still further demands upon the people for funds with which to foster this or that enterprise of a socialistic or paternal character. One would think that in the face of these warnings the Government would realize that it was high time to shorten sail, hut, in yachting parlance, instead of taking a rest, it is still running with the wind, with ringtails and spinnakers set, as if indifferent to the rising wind and the leeshore looming ahead.
– Will the honorable member mention one instance of reckless expenditure?
– I should have been glad to go into this matter in detail if I had been allowed to speak on the budget, but the honorable member, having had his innings, was amongst those who refused me an opportunity to speak. The reduction of the income tax and the maintenance of an undue proportion of indirect, taxation is not in accordance with the best teaching of economists and business men. The Government in continuing this policy has accepted a very grave responsibility.there are many aspects of the matter with which I could deal, but I shall not further detain the committee. I know that for the time being my protest is useless, but it is every man’s duty to speak as he thinks. I wash my hands of all responsibility for this shortsighted policy. Thatthe Government has been aware of the approach of the present financial crisis is common knowledge. Three years ago the Prime Minister informed me that in his opinionwe were galloping fast towards a serious financial crisis. What has he done to avert it? He is still expounding schemes for expenditure, still creating more revenues, still piling burdens on the people. I can do no more than enter my protest. It may be ineffective, but there is a growing rumble of discontent in the community; the people are becoming alarmed by the fears and dissatisfaction expressed by the press and responsible leaders of industry. It would be wrong for me to remain silent and disregard the true interests of this country. It is time we. retraced our steps. Over and over again the Prime Miinster has said we cannot do that. That is a declaration of weakness. A strong man, finding that he has made a mistake, will retrace his steps, and will not be afraid to take the responsibility of advising the people as to the course he considers right and proper. The right honorable gentleman has in some States suggested that he agreed with the policy I have enunciated. He has indicated to the people of Western Australia on several occasions that he considers the present tariff policy is wrong, yet, by agreeing to a reduction of income tax he is shackling the high protective policy more firmly on the people. The idea that indirect taxation can be reduced by increasing customs duties is fallacious, and opposed to all experience. Each increase of tariff duty has been followed by a greater volume of importations and enhanced customs revenue. The piling up of duties, instead of reducing customs revenue, has the reverse effect. We have evidence that this iniquitous policy is beginning to cause financial trouble among those manufacturing industries it is supposed to foster and protect. Yet we have before us a proposal to still further extend a system that is already stifling the country, and the Government is consolidating the evil by reducing income taxation, thereby rendering higher tariff duties necessary in order to avoid a shortage of revenue. This policy is opposed to the teachings of experience and the advice of students; but, unfortunately, these matters are not decided after open debate and detailed consideration. During the last three days, we have had the rare experience of listening to a model debate, but on a lot of income tax details which, important though they be, are insignificant in comparison with great principles of taxation and general policy.
– Order! I ask the honorable member not to criticize the debates that have taken place on other subjects.
– I have said that the debates on the Income Tax Assessment Bill were excellent, but that the subject of them was unimportant in comparison with matters of essential policy relating to finance in which the whole principle of government is wrapped up. These greater matters we are hot allowed to debate.
– Three days were allowed for the discussion of one bill, and only one day for the discussion of the Estimates.
– These matters are not voted upon after careful consideration of the vital points which should be freely discussed in this chamber; they are determined by a forced division.
– The honorable member is devoting his time to the criticism of other debates, instead of addressing himself to the bill which is now before the House.
– I bow to your decision, sir. I was objecting to this bill because the proposal in it to reduce indirect taxation implies a further burdening of the people with high protective duties. I have been obliged to speak at length on this measure, because at the time when a discussion of these general questions would have been more appropriate an opportunity to speak was not afforded me.
.- Mr, Speaker-
– I rise to a point of order. I understand that it is customary for you, Mr. Speaker, to call upon honorable members from each side of the House alternately. I have yet to learn that the honorable member for Wimmera (Mr. Stewart) has joined the Labour party, and therefore I contend that the call should have been given to a member of the Opposition.
– The order in which honorable members shall be called upon is within the discretion of the Chair, but the usual practice is to call upon honorable members from each side alternately. Following the speech by an honorable member on the Government side of the House, I called upon the honorable member for Wimmera (Mr. Stewart), because, so far as I have been able to observe, his seat on the Opposition side of the House indicates his attitude to the Government. Even as an independent member, he is still entitled to voice tlie views of his constituents.
– I rise to a point of order! I always understood that it was the practice, after a member had spoken from the Government side of the House, for the Chair to give precedence to a member on the Opposition side. I rose simultaneously with the honorable mem ber for Wimmera. I have no objection to you giving the call to him, for reasons which, if I may say so, were sound, but I think that it was a waste of time for the honorable member for New England (Mr. Thompson) to suggest that he had any claim whatever, because I apprehend that if you had not called upon the honorable member for Wimmera, I might have had a chance.
– The honorable member has raised no point of order. The honorable member for Wimmera!
– At the outset let me say in answer to the point raised by the honorable member for New England that my position in this House is somewhat different from that of any other member of the party to which he belongs, inasmuch as I am the only original member of that party who has maintained the same attitude during the last eight years.
-Order ! The honorable member is entitled to state his own position, but not to reflect upon that of other honorable members.
– My attitude to-day is the same as it was eight years ago.
– Is it the same as it was five years ago?
– If the honorable member for Gwydir (Mr. Abbott), like the boy in a well-known soap advertisement “ will not be happy till he gets it,” I inform him that my attitude in this House is the same as it always was. Apparently he refers to the time when I temporarily sank my own convictions and drifted with the stream upon which today he is drifting, and evidently will continue to drift. I came into this House as a member of an independent party. Individually, I adopted the policy that I did not belong to either the Nationalist or the Labour party. That is still my attitude. The policy of this Government, particularly of recent years, has been such that I have been more often at variance than in agreement with .it. I have taken what I consider to be the honorable course, and have sat on the Opposition side of the House. If I attack the Government I at least do bo from the front and not from behind. Surely my position is clearly defined.
I take the opportunity of joining the honorable members for Henty (Mr.
Gullett), Perth (Mr. Mann), and others in the rather unsual course of protesting against a reduction in direct taxation. Since certain of my honorable friends have interjected, I shall recapitulate the position of the Country party and of the present Treasurer (Dr. Earle Page). We have the extraordinary spectacle of the leader of a party pledged to a reduction of customs duty, one who in the past denounced his present colleagues and leader for extravagance, piling up an enormous revenue in the form of taxation from customs and excise duties. In 3 922 the Treasurer declared that the then Treasurer - the present Prime Minister - was actually budgeting to receive more from customs and excise revenue than had ever previously occurred. The amount that year was £27,000,000. Now we have the same honorable gentleman (Dr. Earle Page) budgeting for £44,800,000 from the same source! I reiterate, for the purpose of emphasizing it in Hansard, that we have here a party pledged to the reduction of customs taxation budgeting for the highest customs taxation on record, and at the same time reducing income tax, land tax, amusement tax, and other forms of direct taxation. And that party allegedly regards customs taxation as one of the most pernicious forms of taxation extant. I invite any honorable member of the Country party to deny that he has pledged himself against increasing customs and excise taxation.
– We are not pledged to do that.
– The honorable member for New England (Mr. Thompson) has either less caution or more courage than has the honorable member for Gwydir (Mr. Abbott).
– We have no pledge at all.
– I pledged myself against it.
– The honorable member for Forrest (Mr. Prowse) belongs to a separate party in Western Australia.
– Anomalous as my position may seem to those honorable members, they do not even know where they stand. We have one heading north, and another south on the fiscal question.
– Where is the honorable member heading?
– I am following the same course that I followed eight years ago.
– -1 rise to a point of order. I understand that this is a debate on a financial bill introduced in connexion with income taxation. The honorable member for Wimmera (Mr. Stewart) is converting it into a discussion on the fiscal policy of the Country party.
– The honorable member for Wimmera is in order. The bill provides for a reduction of income taxation, and the honorable member is contrasting that proposal with the alleged policy of certain honorable members. He will not be in order in discussing the general fiscal issue, but may refer to it by way of illustration.
– I thank you, Mr. Speaker, for again vindicating me in my attitude. In order to put the figures on record, and also to let my honorable friends realize to a certain extent the error of their ways, I shall quote the customs and excise revenue per head of population for the last five years. They are -
An increase in five years of £1 7s. l½d. per head! I shall quote the figures for direct taxation, from Bulletin No. 17 of the Commonwealth Bureau of Census and Statistics. They read -
That discloses a steady policy of increasing customs taxation and reducing direct taxation.
– Which seems to have been approved by the electors.
– We shall see. Surely the honorable member does not consider that the taxation proposals now before the committee were the outstanding issue at the last general elections. I did not intend to speak at such length; but my friends, by their interjections and hostility, have encouraged me, for which I thank them. I shall take an early opportunity to give them some more home truths upon the tariff issue and the taxation derived from that source. These enormous receipts from customs and excise satisfy neither the protectionist who wishes to prevent goods from coming into Australia, nor honorable members like myself, who object to such a form of taxation. For that reason I protest against the principle involved in the present reduction when it means a continual increase of customs and excise taxation, which is the most obnoxious of all forms of taxation to the primary producers.
– The honorable member for Wimmera (Mr. Stewart) has given us another exposition of his friendly feelings towards his ex-colleagues on this side of the chamber. It is not my intention to emulate the example of honorable members who preceded me and to deal wholly and solely with the fiscal question. But, since honorable member for Wimmera has gone out of his way to make a direct charge against members of the Country party that they are deliberately and wilfully ignoring the pledge which they gave to the electors, I take the opportunity to assure the honorable member that no member of the Country party has given such a pledge.
– The honorable member for Forrest declared that he had.
– It is not pari of the constitution of the Country party to give pledges of any kind, and especially pledges on the fiscal issue. Although I and other honorable members of the Country party who think with me on the fiscal issueare very cordial in our relations with the honorable members for Forrest (Mr. Prowse) and Swan (Mr. Gregory), we disagree with them on this issue. Those honorable members and the honorable member for Wimmera have opinions that are well known to this committee. It is quite incorrect for any one to say that any honorable member of the Country party has broken an undertaking that he gave to the electors upon the fiscal issue.
– The Country party has no fiscal policy?
– If, with the permission of the Chair, I can deal with the fiscal policy I shall reply to the honorable member.
– The honorable member would not be in order in doing so.
– I desire to refer to some remarks made by the honorable member for Henty (Mr. Gullett). I am very sorry that he is not in the chamber. He seems always to be about when some of his friends on both sides of the chamber have prepared a studied castigation of the Government or honorable members of the Country Party, but when any of us reply he is missing. The honorable member for Henty is a ball of mystery to all honorable, members in this chamber. A good many of us have endeavoured to fathom the depth of his financial knowledge. I am not now posing as a financial authority - there are quite sufficient of . such people on both sides of the chamber without adding to the number. Last week the honorable member posed as a heaven sent financial authority to act as guide, philosopher and friend to the Government. In the course of his frequent outbursts he has made the most serious accusation that has emanated from any section of this chamber, not excluding the honorable members of the Opposition. The honorable member stated that our present Treasurer is the most tragic Treasurer that this country has ever had. To-night we have had another instalment of the honorable gentleman’s financial wisdom, but it consisted principally of a reiteration of sentiments which he has previously expressed. Boiled down the honorable member’s speech comes to this : he is totally opposed to the reduction of direct taxation. I wish to pin him down to that, as I propose presently to pin other honorable members down to specific statements. It is time that they were stripped of the sham which has lately enveloped them.
– The honorable member for Henty did not say that he was opposed to a reduction of direct taxation.
– He distinctly stated to-night that it was a mistake to reduce direct taxation, and that if there was to be any reduction it should be in indirect taxation. The honorable member for Dalley supported him in that statement. What remedy has the honorable member for Henty to offer for our troubles? He assured us that he had one the other night when he made his attack upon the Treasurer; but, unfortunately, it was lost up his sleeve or under his hat. At any rate he could not find it. He has produced it to-night, and it is “Direct taxation should not be reduced.” We can only interpret the honorable member’s statements to mean that direct taxation should be maintained, and, if possible, increased. He said to-night that it would be more desirable to raise our revenue from direct than from indirect taxation.”’ I ask whether the honorable member -is willing to stand before the electors and1 advocate an increase in direct taxation ?. If he is, I admire his courage, but I do not think that he would receive much support from such newspapers as the Melbourne Ag’e and Argus, which are continually flaunting before the public his financial wisdom.
– Now we hear the statesman speaking!
– The honorable member for Batman always reminds me of a lemon drink without sugar ; he is the sourest thing in this chamber.
– I am told that a lemon drink is more refreshing without sugar.
– If the honorable member for Maribyrnong had as little to say in this chamber as I have perhaps his opinions would receive more serious consideration. Only the other day the very newspapers which boost the honorable member for Henty, castigated the Treasurer for not reducing direct taxation still more than he proposes to do. Every newspaper of any consequence in the Commonwealth has, during the last two or three weeks, complimented the Government upon going as far as it has done in reducing direct taxation. I know that, for I read all the metropolitan newspapers regularly.-
– Is that a boast or a confession ?
– I wish that I had a lemon squeezer here.
– We should get on much better if the honorable member did not yap so much.
– Now we know that the Canberra magpie is inside and not outside this chamber. The Melbourne newspapers have assured us that the Treasurer is doing well in reducing direct taxation.
– The newspapers are not necessarily right.
– That is so; but we must regard them as the indicators of public opinion, and, therefore, we must assume that the honorable member for Henty is out of touch with public opinion on this subject. The honorable member has stated that it is a tragedy for this Government to be deriving an everincreasing revenue from indirect taxation, and he was supported in that statement by the honorable member for Dalley, the honorable member for Perth, and the honorable member for . Wimmera. I have listened patiently to the speeches which those honorable gentlemen, and others who hold similar views, have made in this chamber in the last week or so, and they have not thrown a single ray of light into the stygian darkness. They have nothing to suggest to protect us from the disaster which they say must overtake us if the Government continues to pursue its present policy. The honorable member for Dalley said not long ago that we were not protecting our industries sufficiently, and that he would be prepared to prohibit imports to make the protection effective.
– I said that I would be’ willing to impose an embargo upon certain imports if industries could not be effectively protected in any other way.
– I trust that the honorable member does not intend to hedge. He has posed in this House as the champion of high protection, but his speech to-night was certainly not the speech of such a champion.
– That is nonsense!
– It is nothing of the kind. It would be impossible, however, for the honorable member for Dalley to consort with the honorable member for Perth, and the honorable member for Wimmera, and emerge in the role of the high protectionist. After carefully considering the speeches which have been delivered by the honorable members whom I have mentioned, I consider that the best thing for the Government to do would be to appoint them a royal commission to inquire into and report upon our financial position. I suggest that the following should be members of the commission: - The honorable member for Wimmera, the honorable member for Dalley, the honorable member for Perth, the honorable member for Swan, the honorable member for Forrest, and, last but not least, the honorable member for Henty. «
Honorable members interjecting.
– I ask honorable members not to attempt to cross-examine the honorable member who is addressing the House, but to allow him to deliver his speech in his own way.
– If a royal commission composed of those honorable gentlemen could arrive at a. unanimous conclusion as to the best way out of our difficulties, I feel sure that a majority of the members of this chamber would adopt their proposals. But seeing that the honorable member for Henty desires to increase direct taxation -
– That is not what I said.
– I heard the honorable member say distinctly that it would be better to raise more revenue by direct taxation and less by indirect taxation. The honorable member for Dalley, a high protectionist, said the same thing, and I believe that he meant it. I draw attention to the fact that the honorable member for Perth, a freetrader, said “ Hear, Hear “ to the speech which the honorable member for Dalley delivered this evening.
– I rise to a point of order. During the course of my speech you, Mr. Speaker, prevented me on various occasions from discussing the fiscal policy of the Government. I should like to know whether the honorable member for New England is in order in following that line of discussion.
– The remarks .of the honorable member for New England have so far been in order. He has criticized in turn each honorable member who has spoken on the bill, but he has not entered into a discussion of the merits or demerits of the fiscal policy
Mi. THOMPSON.- Every honorable member who preceded me dealt with direct and indirect taxation, and with that I am dealing now. I am pointing out that certain honorable members, with conflicting interests, have damned this Government for its financial policy, but have supplied no remedy.
– What is the honorable member’s remedy?
– I suggest that the honorable member and his fiscal colleagues should get together and bring down concrete proposals. I would point out to those honorable members who have criticized the Government that’ not one of them will vote for a reduction in direct taxation. The honorable member for Dalley (Mr. Theodore); v and the honorable member for Perth (Mr. Mann) made a bridge for themselves, before they sat down. When 1 asked the honorable member for Perth whether he would vote against the bill he ‘said that’ he would vote in accordance with his principles. Those honorable members have not the courage to vote against the bill. They would not be prepared to stand before the electors and say that they resisted a reduction of 10 per cent, in income taxation. I challenge those honorable members to say whether they are definitely hostile to this Government because it has reduced direct taxation by 33-j per cent, in the last five years.
– This Government has certainly increased the customs duties.
– I challenge the honorable member to oppose this Government on that ground.
– I intend to oppose the measure.
– The honorable member for Henty (Mr. Gullett) spoke of the increase in indirect taxation. The honorable member for Dalley is an exponent of high protection. He desires to see more factories established in Australia, and to keep imports out altogether.
He endorsed the remarksof the honorable member for Henty and of the honorable member for Perth, but no suggestion was made whereby duties could be seduced - not even in one instance. I am protectionist, although I belong to the Country party. But I should certainly not stand in the way of lifting the burden of indirect taxation from the primary producer. No honorable member has shown me how that could be done without injuriously affecting the general policy of this country. When honorable members ask me not to support the Government on the ground that it is reducing income taxation and at the same time increasing indirect taxation, I say that, to put it colloquially, they are “ talking through their hats.” New South Wales is numerically the most influential wing of the Country party.
– That is a reflection upon the three Ministers who belong to that party.
– I ask the honorable member for Wiinmera to cease interjecting.
– The Country party is not pledged to any reduction of duties. If any pledge has been given by the Western Australian members I venture to say that it has been no more than a verbal undertaking. The Country party has no written pledges whatever, and its members are at liberty to give any individual undertakings they like. Although the primary producers complain about their burdens, their real complaint concerns direct, and hot indirect, taxation. Of course, a section of the primary producers suffers severely under indirect taxation, but I claim to know as much about the sentiments of the farmers as does even the honorable member for Forrest or the honorable member for Wimmera. The farmers are more antagonistic to the direct taxation imposed by the State Governments than they are to the indirect taxation imposed by the Federal Government. All State Governments have increased income taxation, yet the Commonwealth Government has decreased it. The honorable member for Dalley knows well that direct taxation has increased enormously in Queensland during the last few years. It is to-day over £5 per head of population.
– It is a straightforward honest tax.
– Is the honorable member advocating more direct taxation ?
– I am in favour of less indirect taxation.
– If the honorable member will say that his policy is to increase the direct taxation on the people of the Commonwealth, we shall know where he stands. If he thinks that this 10 per cent. reduction should not be made, he must be in favour of more direct taxation.
– 1 am in favour of retaining the present direct taxation, and reducing the indirect taxation.
– If honorable members are honest, I think they will admit that the sentiment throughout Australia is in favour of reducing direct taxation. If it is possible to reduce customs duties without affecting the general protectionist policy of Australia, do it by all means, but no honorable member can point out how this is to be done. The exponents of high protection in the Labour party are always shrieking from the house-tops for still higher protection. New we have the honorable member for Dalley (Mr. Theodore) advocating decreased indirect taxation. How can he expect to obtain high protection, amounting to prohibition of imports, without increasing the customs duties. Honorable members know very well that during the last five or six years there have been many increases in the tariff.
Several honorable members, interject ing.
– I ask honorable members not to interrupt the honorable member who is addressing the Chair.
– I rise to a point ot order. This discussion has got far beyond the provisions of the bill. It has developed into a. discussion on the tariff.
– The honorable gentleman has not been criticizing the tariff, but he has repeated his argument several times, and I ask him not to continue to do so.
– I am simply trying to develop my argument. You will admit, Mr. Speaker, that I have had a worse hearing than’ any other honorable member. From both sides of the House there has been a deliberate attempt at obstruction.
– Will the honorable member say–
– The honorable member for Reid (Mr. Coleman) went to a butchers’ picnic the other day, and made a statement which was typical of what honorable members on the other side of the House are always saying outside.
– I rise to order. What has the butchers’ picnic got to do with the matter under discussion?
– Honorable members are not giving the honorable member a fair hearing. He has tried several times to make his point, and I ask honorable members to allow him to continue his speech, and give him the hearing to which he is entitled. At the same time, I ask the honorable member to address the Chair, and develop his own line of argument without turning to honorable members individually and practically challenging interruptions from them.
– Whenever there has been an increase in the tariff, there has been a substantial increase in the revenue derived by the Government from customs duties. How can honorable members expect that there will be less revenue when the customs duties are increased? Failing the remedy which the honorable member for Henty said he had, when, speaking the other night, why should the Government reduce indirect taxation ? All the newspapers throughout Australia have been shrieking for a reduction in direct taxation. Probably 90 per cent, of the small wage-earners of the country pay no direct taxation at the present time. A few years ago the payment of a few pounds’ income tax by the small wage-earners was looked upon as a great hardship. That burden has now been removed by raising the statutory exemption. It cannot be said, therefore, as was claimed by the honorable member for Dalley, that the Government proposes to relieve the wealthy of taxation at the expense of those who are less well off. That is a most unfair statement to make in view of the record of the Government.
– I said that there were 10,000 taxpayers whose average income was £5,000 a year, and who would each be relieved by this reduction to the extent of £191 a year in taxation.
– Many of the taxpayers referred to have their money invested in enterprises which are vital to the welfare of Australia. A reduction of income tax does not necessarily benefit only a few wealthy persons living on private means. It benefits principally small companies. The great majority of companies operating in Australia are not wealthy.
– I referred to individuals, not companies.
– Many of them, nevertheless, have their money invested in shares, from which they derive their incomes. That is the usual form of investment in Australia. Even if they are relieved to the extent of £190 a year as the result of this proposed reduction it is a small amount when one considers the large amount of capital which they have invested at great risk.
– Concurrently with the reduction in income taxation, ‘there has been an increase in indirect taxation.
– If the honorable member can show how we can secure effective protection, and at the same time reduce indircet taxation upon the wage-earner, I shall be pleased to support him. But although I have been a member of this House for five years, I have not yet heard a practical scheme suggested. The Government has acted wisely in reducing direct taxation at this stage. I disagree with the honorable member for Perth (Mr. Mann) that a great catastrophe is threatening Australia. The honorable member did not indicate the nature of that catastrophe. When I asked hiin to do so, he said that I ought to know what it was, and that if I did not, I was not fit to be a member of this House. Statements like that of the honorable member are calculated to injure this country by creating a feeling of pessimism. I do not admit that Aus- tralia is in the parlous condition mentioned by the honorable member. But even if his statement were correct, it would still be better for the Government to reduce direct taxation than to wait until disaster overtook us. By reducing direct taxation the Government has lifted a tremendous weight off industry, particularly’ in view of the fact that all the State governments have increased direct taxation. If the Commonwealth Government, instead of reducing direct taxation, had increased it, the result would almost have been civil war in this country. If the suggestion of the honorable member for Henty (Mr. Gullett), that new direct taxation should be imposed, were carried out-
– I did not suggest any increased direct taxation.
– If the Government decided to sacrifice £10,000,000 through not levying increased revenue duties, and, instead, increased laud and income taxation by that amount, the result would be a collapse of the internal credit of Australia. The majority of companies operating in Australia to-day do not pay more than 7 per cent, or S per cent. If their income tax was increased enormously, as has .been suggested, they would have to go into liquidation. A,t-i the present time one large manufacturing company contemplates going into voluntary liquidation, which would mean throwing 2,000 employees out of ‘ work. If there was a real danger of that occurring, this Parliament would be justified in taking almost any measures to keep those persons in employment. I regard employment as the greatest stabilising factor in any country. The duty of governments, both State and Federal, is at almost any cost to keep their people employed. There is no better way of doing that than by reducing taxation on incomes. Even if a few wealthy people benefit in consequence, what does that matter, so long as a great majority of the people do so? The worst thing that can happen to the workers of any country is that they be thrown out of employment. It does not matter to them then what in-, direct taxation they have to bear; they cannot keep themselves and have to accept charity. But give men employment at the high wages which rule in this country and under conditions approaching the ideal, and they have very little of which to complain.
– I am waiting for the honorable member to connect his re- ‘ marks with the bill before the House.
– I was pointing out that if direct taxation is not reduced, there will be unemployment, and that the worst thing that can happen to any country is for large numbers of its people to be out of work. When workers are receiving high wages, they are not so concerned about the burden of indirect taxation, but it is a different matter when they are out of work. The catastrophe that threatens this country is that of unemployment. If, by reducing taxation, the Government can reduce the risk of unemployment, it will do more to assist the country than any previous Government has done.
– I desire to make a personal explanation. The honorable member for New England (Mr. Thompson) has misrepresented my position as a member of the Country party. I, therefore feel it my duty to make my position clear. I am pledged to a certain fiscal policy, namely, the abolition of protection in favour of a revenue tariff. At every Federal Convention, the Country party has declared itself in favour of the following objective -
Cheapening and extending production by a reduction of duties on the staple necessities of the primary producer, and the admission of their implements and tools of trade free of duty when made within the British Empire.
The constitution and rules of the Australian Farmers’ Federal Organization, provide that among the objectives of the organization is one -
To put into practical effect the platform as promulgated from time to time by the conference of delegates.
Honorable members will recognize that during the eight years I have been a member of this Parliament, I have acted consistently with that platform.
.- I do not desire to make a lengthy speech so late at night. In fact, I come into the debate, as has so often happened recently, as a peace-maker, to pour oil on the troubled water stirred on the other side of the chamber by the course of the debate. The honorable member for New England (Mr. Thompson) has succeeded admirably in saying very little in a long time. He has proved to demonstration what I have long suspected in connexion with this Income Tax Bill - I mention the bill so that my remarks shall not be irrelevant: - namely, that the Country party is not pledged to high duties, to low duties or to middle class duties; to an alliance with the Nationalist party, to its separate entity, to its conjunctivity ; or, indeed, to anything on earth or in the heavens above. In that happy position I am prepared to leave him. The position of members .of the Country party is as understandable as it is deplorable. They are as uneasy as they deserve to be. It satisfies me, Mr. Speaker, that they have the redeeming virtue -
– I rise to a point of order. I understand that we are dealing with a bill for an act to impose taxes upon income. I fail to see the relevancy of the honorable member’s remarks.
– So far, the honorable member for Batman has simply been criticizing the attitude of certain honorable members to the bill before the House. If the honorable member for Richmond (Mr. Green) had been present during the whole of the debate, he would have heard other honorable members address the House in a similar strain. So. long as the honorable member for Batman confines himself to that - and I assume he will - he will be in order.
– I had not intended to confine myself to that, sir, because I had contemplated saying something about the merits and demerits of the bill. I understand that you, sir, with your usual perspicacity and keen observation of the essentials of debate, pointed out that the honorable member for New England had not up, to that point, which was considerably distant from the point of COmmence.ment, touched either the merits or demerits of the measure. The honorable member seems to be suffering from a fatal congestion of mental pabulum. In a moment of inexcusable weakness he admitted that in connexion with taxation bills and all other matters, he studiously reads all the newspapers. In that regard he reminds me painfully, of the chameleon which changes colour according to the colour placed in juxtaposition to it. If that colour is blue, it becomes blue; if the colour is red, it becomes red. Unfortunately somebody, testing it beyond its strength, placed a tartan alongside it and it burst. That has been the fate of the honorable member. I notice that the Prime Minister has entered the chamber, and I feel very uneasy, because I conclude that he intends either to make a speech or to stop one, and neither prospect is very pleasing to me.
Returning to the bill, I am against the reduction of direct taxation - especially that class of taxation which falls, as it should, upon those who by reason of their financial standing are peculiarly able to bear it; - at a time when taxation is being added and super-added by the indirect method to those least able to bear it. “When the budget was under discussion we made frequent requests, backed by strong arguments, for a declaration by the Government” of what it proposed to do to relieve an admittedly most unsatisfactory financial position. And the answer was, “ Not yet.” Since then, and, indeed, before then, the Government has taken certain definite courses of action which have been deliberately designed to pile up the burdens of the poor and lift the burdens from the rich. f
– I object to th’a’t statement, and ask that it be withdrawn.
– The honorable member for Batman is within his rights of criticism. What he has said may’ be an entire misstatement of the facts$ but he is entitled to state what in his opinion will be the general effect of the Government’s policy.
– The honorable member used the words “deliberately designed.”
– Even so, I think the Attorney-General is being rather hypersensitive.
– I certainly had no intention to be offensive to Ministers, and least of. all to my fellow unionist, the Attorney-General. Whatever may be the intention of the Government, it is a curious and almost sinister fact that ever since this Parliament has been sitting in Canberra, the course of legislation has been directed along the lines I have indicated. Now, in the first definite measure with which the House has been asked to deal since the budget was so summarily and ignominiously disposed of by a deliberate declaration, the burdens are being taken off the rich and retained on the poor. I have heard, as the honorable member for New England Heard,, public demands voiced.’ in? the- press- and. elsewhere for- a reduction-, of. taxation, and ¥ ha-v/e heard, in justification of: those- demamds;. references’ to> overflowing revenues.. I am one who would welcome a reductionof all- classes of taxation;, but,, after all, taxation of any kind is> the penalty we have- to impose on. ourselves- for the privilege of. luring, as an ordered commanity. I would cheerfully see taxation- reduced ;. but those people who in the press.and out of it clamour for a- reduction of taxation,, put the- ca-ut before the horse.. What, we have- to do is; to> create conditions whichi will make it possible equitably to reduce taxation. We have to meet- our obligations. If a. man is. confronted, in. hit? personal and private relationships” with, a huge debt,, he has to meet it by labour and sacrifice. Similarly in. public affairs, if we earnestly desire to reduce the terrific burden that is. now saddled, on the ‘Australian- people, we must do it by labour and. sacrifice1 - by rolling up ovfli sleeves and perspiring over the jpb.. It cannot be done by the simple method of passing an act of Parliament which will redli’ce’ a certain class- of taxation,, while, through the medium of borrowing on the credit of Australia,, we are pilingup an ultimate burden which- the people of Australia, will have to bear. I said, on another occasion, and I. repeat it. now,, that Australia, is shirking its obligation’ to meet its indebtedness. It piled upthis burden upon itself during, the war. I was one of those who were against it. but as the majority were against me I am prepared to do my share with that majority in shouldering the burden. I do not wish to be associated with those who1 are - spealeing in a- general and not a’ personal sense - guilty of the craven policy of shirking the duty of meeting this debt?, by handing it d’own. to our children and our children’s children. Posterity will not be responsible for it, and, Yoolcmg hack along the course of history will say; “‘You built: up this debt in your fbfly and fury;, and’ in your cowardice have left us to meet It.”
.- I had no- intention/ of speaking- on, this bill- tOriiight,,. bu4 the.- debate.- has< been, oft such »r character that. I cannot refrain-, from making- my position: perfectly clear:. I had. intended- to- reserve my rev maasksi on the fiscal issue, until the tariff ‘ came- up for consideration^, and I assure the: committee, that, those! remarks, would have been wholly unq.ualified.. I do- not suppose that- an.y persona is displeased that direct taxationis to< be: reduced, but here is a-, bill brought’ forward to,- reduce taxation,, while- a couple of days ago the Minister for Trade and> Customs- placed an increased) burden? upon, the primary producers; audi workers of Australia, through the: mediumi of additional tariff imposts. I ami more- than astonished at the attitude adopted: by the Government.. The honr orable member’ for New England (Mr:. Thompson) brought up. at very peculiars subject for debate, the policy- o£ the Country party in. matters’ of this. sort. Might I remind! the Government and! honorable’ members’ that at the last election every member of the Senate, supporting; the. Government was elected on the. clear and; well! defined issue that’ he would* oppose1 increases- in tariff… Anyone who has. visited1: Western- Australia and studied, its condition* mustrealize how impossible it is- to. carry on> with the cost of production that, existsthere,, as. the result of our heavy tariff. The policy of the Victorian, section of the party is also clearly opposed’ to fur-‘ ther increases. At. the. last conferenceof the Australian Country party I tabled1 a resolution which, was discussed at that meeting,, making, it clear that, if. that resolution were agreed’ to, the policy of the party would be tb f avour a big, reduction of customs duties as they affect production in this country.
Mr.R. Greene. - I rise to a. point of order. I again draw attention to. the* fact that we. are. discussing, an. act that proposes to regulate the rates of incometax. The tariff. wil-L come, on later, for.discussion..
– The honorable member isawarethat, this: is bill- to- reduce,- direct taxar tion,, and. that, it? raises-, tha issue of indirect as opposedi tor direct, taxation-.. Some- honorable . members are’ opposing the bill, because they feel that th’erer is. nor necessity- for av re* duction. of diaseefe taxation;, in view of” the recent-: increase- of indirect taxation!
I understand the honorable member for Swan (Mr. Gregory) to be simply stating bis views generally with regard to direct and indirect taxation, without entering specifically into the merits or demerits of either.
– My resolution at that meetin’ was camouflaged by another resolution to the effect tbat a committee should be formed for the purpose of considering the necessity for such a resolution. 1 have definite ideas with regard to the matter, and I have very little confidence in or respect for one who endeavours to hide his opinions. I express my deep dissatisfaction at the notion of the Government in. reducing direct taxation and tit the” same time imposing additional indirect taxation of such a heavy nature that it will be seriously felt by the community, i endorse the remarks, of the honorable member for Perth (Mr. Mann), who pointed out that all ‘the leading citizens -of Australia have drawn attention to the dangerous position into which we are drifting. Week after week 1 have been hoping against hope that the Government would show courage, realize our position, and adopt a more satisfactory policy than it has done during the last few vears.
– I support this bill, because having regard iO the Federal ‘Constitution, direct taxation should not be imposed except in cases of grave national emergency. That had to be done during the war. During my election campaign at the last general election I drew attention to “the ‘Fact- -that ‘this KSrovernment hud made -several reductions -m direct, taxation, and 1 expressed the opinion that the -electors had a right to expect still ‘further cuts because that Was the policy of the ‘Government. In view of those facts, and because the Treasurer m ‘his ‘budget -speech showed that we can ‘afford this reduction, I support the bill.
Question resolved in th»j affirmative. Bi’ll read n second time and passed
T-hr-ough its renfainTng stages without amendment or debate.
Motion (by Mr. Bruce.) proposed -
That (he House at iits . rising adjoui-Jl until “11 o’clock a.m. to-morrow.
Motion (by Mr. Bruce) proposed -
That the House do now adjourn.
.- Last week, in my absence, several honorable members, particularly the honorable member for Gwydir (Mr. Abbott), and, by interjection, the honorable member for Richmond (Mr. R. Green) made observations concerning myself, and, by way of personal explanation, I take this, the first opportunity I have had, to Tefer to them. I have no desire to indulge in personalities, as did the honorablemember for Gwydir. Most of his remarks were beneath notice, but he asserted that I had made charges against the honorable member for Rivori-wa (Mr. Killen), the honorable member for ifew England (Mr. Thompson), and other honorable members individually. The records of the House, whioh I am not permitted to quote, show clearly what I said, and I well remember my statement. It was that those honorable members had been returned ou the new State issue, and the tactics of their leader had been such that their efforts were barren of achievement. Later in my speech I said that I did not Maine honorable members in the Corner, because they had been unwillingly dragged along the path. The honorable member for -Gwydir inferred that I had made . personal attacks on the honorable member for New . England : and himself:-, but the records do not bear out that assertion. I understandthat the ‘honorable member for Richmond called me a:” rat.” That is beneath my notice; but it is rather strange -that the remark . should have been allowed to pass -unchaillenged. If I bad heard an honorable member so descri’be-1 . in ‘his absence, I should have protested against it. *The onfly other -matter ‘that I desire to mention is tfuut the honorable member for Gwydir -referred >to -my “ infrequent visits “ to : this chamber, and inf erred that >I was neglecting my constituency. I think that the records : of the House, and the -observation of honorable members ‘on both sides, are sufficient to show that I have certainly not neglected the people whom I represent, and that I have displayed no lack of energy in carrying out my Parliamentary duties.
– That is a matter between the honorable member and his constituency.
– It is known that the honorable member has been absent giving a very valuable demonstration in the interest of the farmers of northern Victoria.
– I thank the honorable member. My main reason for rising was not to follow the honorable member for Gwydir down the path that he chose, but to deny emphatically the assertion that I had made a personal attack. I thank the House for the opportunity given me of denying the statements attributed to me.
Question resolved in the affirmative.
House adjourned at 11.0 p.m.
Cite as: Australia, House of Representatives, Debates, 30 November 1927, viewed 22 October 2017, <http://historichansard.net/hofreps/1927/19271130_reps_10_117/>.