House of Representatives
9 May 1940

15^th Parliament · 2^nd Session

QUESTION
- COAL STRIKE
QUESTION
- CENSORSHIP
QUESTION
- ROADS NEAR MILITARY CAMPS
QUESTION
- REFUGEE SETTLEMENT IN KIMBERLEY DISTRICT
QUESTION
- APPLES AND PEARS
QUESTION
- ELPHIN SHOWGROUND CAMP
QUESTION
- NORTHERN TERRITORY SHIPPING SERVICE
QUESTION
- MARGINAL WHEAT LANDS
QUESTION
- EMPIRE AIR TRAINING SCHEME
QUESTION
- SALE OF GOLD RESERVE FOR STERLING
QUESTION
- OVERSEAS SHIPPING SPACE
QUESTION
- DEFENCE PREPARATIONS IN HOLLAND
QUESTION
- DENTAL FITNESS OF AUSTRALIAN IMPERIAL FORCE
QUESTION
- DESTRUCTION OF APPLES
QUESTION
- INGLEBURN CAMP CONTRACTS
QUESTION
- MORATORIUM LEGISLATION
QUESTION
- GREAT BRITAIN AND RUSSIA
QUESTION
- INCOME TAX ON BONDS
QUESTION
- IRON ORE
QUESTION
- SHIPBUILDING INDUSTRY
QUESTION
- A.B.C. WEEKLY
QUESTION
- CENSORSHIP STAFF
ADDRESS-IN-REPLY
- Mr. Speaker,
PETROLEUM OIL SEARCH BILL 1940
WAR-TTME (COMPANY) TAX ASSESSMENT BILL 1940
- Second Reading
WAR-TIME (COMPANY) TAX BILL 1940
PETROLEUM OIL SEARCH BILL 1940
QUESTION
- FINANCIAL STATEMENT 1940-41
FIRST FEDERAL MEMBERS ASSOCIATION
QUESTION
- FINANCIAL STATEMENT 1940-41
ADJOURNMENT
- Marginal Wheat Lands - Allocation of Grants to States
PAPER
ANSWERS TO QUESTIONS
- Cost ok Patent Office
- Barley
- Canberra: Removal of Police Quarters
- Commonwealth Arbitration Cases
- Buffalofly Pest
- Defence Expenditure

Mr. Speaker (Hon. G. J. Bell) took the chair at 2.30 p.m., and read prayers.

page 628

QUESTION

COAL STRIKE

Sir EARLE PAGE:
COWPER, NEW SOUTH WALES

– In view of the great public importance of securing an indisputably accurate expression of opinion from the coal-miners on the question of returning to work under the terms of the award of the Arbitration Court, and the confusion that has arisen because of the different methods adopted by various mass meetings of miners to obtain expressions of opinion, will the Government offer to place its electoral machinery and officers in the seven federal electorates concerned at the disposal of the miners, in order to enable a secret ballot, the result of which could not be questioned, to be held immediately?

Mr MENZIES:
Minister for Defence Co-ordination · KOOYONG, VICTORIA · UAP

– The right honorable gentleman’s suggestion will be considered.

Mr ANTHONY:
RICHMOND, NEW SOUTH WALES

– Has the attention of the Prime Minister been directed to a report of a meeting held yesterday at Wollongong, on the south coast of New South Wales, at which Mr. Orr, the secretary of the Miners Federation, is reported to have said that, although regulations governing free labour were promulgated three days ago, they had not been enforced because the Government was not game to enforce them? In view of the apparent interpretation of the Government’s tolerance as weakness, will the Prime Minister indicate any time limit for the enforcing of such regulations?

Mr MENZIES:

– It is not proposed to issue any further warning statements in the matter referred to by the honorable member. Mr. Orr is once more due for disappointment; and so, unhappily, are the men whom he is leading.

Later:

Mr THOMPSON:
NEW ENGLAND, NEW SOUTH WALES

Mr McCALL:
MARTIN, NEW SOUTH WALES

– Has the Minister for Commerce allocated a grant of . £500,000 for the assistance of marginal wheatfarmers in various : States, excluding Vic- toria, without first submitting the matter to Cabinet ? Does not the Minister think that the allocation of this very large sum should first have been sanctioned by Cabinet?

Mr ARCHIE CAMERON:

– If the honorable member will study the Wheat Industries Assistance Act, he will learn that under it this Parliament authorized the Minister for Commerce to make such a distribution. I made it.

Mr SCHOLFIELD:
WANNON, VICTORIA

– Will the Minister for Commerce intimate to. the House the nature of the calculations which led to the conclusion that Victoria had no marginal wheat lands that should be brought within the terms of the Commonwealth grant?

Mr ARCHIE CAMERON:

– Victoria was omitted from the scheme for the simple reason that the Victorian Government did not submit a case.

Mr POLLARD:

– I ask the Prime Minister whether it is in accordance with established Cabinet practice to allow any Minister, notwithstanding the provisions of anyact, to allocate so substantial a sum as £500,000 without first consulting Cabinet, and obtaining its sanction for such allocation?

Mr MENZIES:
UAP

– It is in accordance with established Cabinet practice for any Minister, upon whom any statutory duty is imposed, to perform that duty and, where discretionary power is given, to perform it according to his own discretion. In certain circumstances a Minister may desire to be reinforced by Cabinet decision, but that is by no means a matter of practice; it depends entirely on the circumstances of the case.

Mr POLLARD:

– In view of the fact that substantial injustice will be done to individual wheat-growers if due consideration be not given to the allocation of these funds, will the Prime Minister take steps to ensure that allocations of funds under the Wheat Industry Assistance Act will, in future, be placed before Cabinet for its approval?

Mr MENZIES:

– I assure the honorable member that I shall continue to conduct the business of the Cabinet to the best of my ability.

page 631

QUESTION

EMPIRE AIR TRAINING SCHEME

Mr SCHOLFIELD:

– Will the Minister for Air give to the House an outline of the main features pf the Empire air training scheme?

Mr FAIRBAIRN:
Minister for Air · FLINDERS, VICTORIA · UAP

– I shall be very pleased to prepare a statement on the main features of the Empire air training scheme, and give it to theHouse to-morrow morning. A good deal of what must be contained in such a statement will be repetition of what has already been given ; but nevertheless, as there has been a good deal of misunderstanding concerning a number of the mainfeatures of the scheme, and as possibly some of them have not been sufficiently stressed, I believe that such a statement willbe inf ormative to honorable members.

page 631

QUESTION

SALE OF GOLD RESERVE FOR STERLING

Mr ROSEVEAR:
DALLEY, NEW SOUTH WALES

– Will the -Treasurer state why the Commonwealth Bank Board refuses to disclose, in answer to a question asked in this House, the estimated loss to the country, due to the rise of gold prices and the fall of sterling, as the result of the sale by the board of the gold reserve for sterling?

Mr SPENDER:
Treasurer · WARRINGAH, NEW SOUTH WALES · UAP

– I have already given an answer toa question ofthis nature. In addition to its not being the practice to answer questions relating to policy, in order tofurnishthe details desired by the honorable member, numerous particulars would have to be obtained, and it is thought that the value of the information would not compensate for the cost involved in obtaining it.

Later:

Mr ROSEVEAR:

– I ask the Treasurer whether the separate transactions involved in the sale of £10,300,000 worth of Australia’s gold reserves would, in his opinion, be difficult to tabulate? Is it not a fact that in spite of the continued increase of the price of gold and of the fall in sterling, the Commonwealth Bank Board persevered with its policy of selling Australia’s gold reserves, and that, as the result of those transactions, it has incurred a loss of £5,000,000? Isthat not the real reason why the Commonwealth Bank Board will not furnish the information for which I have asked?

Mr SPENDER:
UAP

– I have nothing to add to what I have already said on this subject.

page 631

QUESTION

OVERSEAS SHIPPING SPACE

Gristing of Wheat - Hides and Skins - Scoured Wool

Mr PRICE:
BOOTHBY, SOUTH AUSTRALIA

– Will the Minister for Commerce state whether the Government, in order to conserve shipping space and to assist employment in Australia, is prepared to take steps for the gristing in this country of as much wheat as possible, and its shipment as flour ?

Mr ARCHIE CAMERON:
CP

– Every endeavour has been made, whenever possible, to export wheat in the form of flour, in order to conserve shipping space, to maintain employment in Australian flour mills, and to provide a reserve of mill offal for the use of other export industries in Australia. That practice will be continued.

Mr SHEEHAN:
COOK, NEW SOUTH WALES

– What practical steps have been taken by the Department of Commerce to conserve shipping space forthe overseas export of hides and skins ? Have any arrangements been made, or are any contemplated , for the scouring of greasy wool in Australia, thus conserving the shipping space in respect of overseas wool exports?

Mr ARCHIE CAMERON:

– The honorable member may rest assured that the first portion of his question is receiving consideration and necessary attention. I ask him to give notice of the second portion of his question.

page 632

QUESTION

DEFENCE PREPARATIONS IN HOLLAND

Mr THOMPSON:

page 633

QUESTION

CENSORSHIP STAFF

Mr WARD:
EAST SYDNEY, NEW SOUTH WALES

– I ask the Minister for the Army whether Mr. Christie, the president of the Fascist organization known as the Australian Democratic Front, is associated with the firm of T. W. Garratt, Christie and Buckley, solicitors of 14 Martin-place, Sydney? Is Mr. Christie a member of the communications section of the censorship staff in Sydney? Does the Minister consider it proper that a gentleman who belongs to an organization with foreign ideas-

Mr SPEAKER:

– The honorable gentleman is now making an allegation, or, at any rate, an innuendo.

Mr WARD:

– I ask the Minister whether he thinks it proper that a person occupying the position that I have indicated should continue to act as a member of the censorship staff in Sydney?

Mr STREET:
UAP

– Whilst I must disclaim all knowledge of the alleged activities of the gentleman in question, it is true that a Mr. Christie, who was a member of the firm mentioned by the honorable member, was employed as a paid official on the censorship staff in Sydney. He made representations that, in order that he might be able to devote his time to private duties, he be relieved of his position and transferred to the honorary staff. That was done some months ago, and since that time Mr. Christie’s services have not been utilized.

page 634

ADDRESS-IN-REPLY

Presentation to the GovernorGeneral.

Mr SPEAKER (Hon G J Bell:
DARWIN, TASMANIA

– I have to report that, accompanied by honorable members, I waited to-day upon His Excellency the Governor-General at Government House and presented to him the Address-in-Reply to His Excellency’s Speech on the opening of the Second Session of the Fifteenth Parliament agreed to by the House on the 3rd instant, and His Excellency was pleased to make the following reply: -

Mr. Speaker,

I desire to thank you for the AddressinReply, which you have just presented to me.

It will afford me much pleasure to convey to His Most Gracious Majesty the King, the message of loyalty from the House of Representatives of the Commonwealth of Australia to which the Address gives expression.

page 634

PETROLEUM OIL SEARCH BILL 1940

Motion (by Mr. Nock) agreed to -

That he have leave to bring in a bill for an act to amend the Petroleum Oil Search Acts 1936.

page 634

WAR-TTME (COMPANY) TAX ASSESSMENT BILL 1940

Motion (by Mr. Spender) agreed to-

That he have leave to bring in a bill for an act relating to the imposition, assessment, and collection of a war-time tax upon companies.

Bill brought up, and read a first time.

Second Reading

Mr SPENDER:
Trea surer · Warringah · UAP

– by leave - I move -

That the bill be now read a second time.

This bill is designed to obtain from companies a portion of the additional revenue which, it is proposed, should be contributed by them towards the war expenditure. Many proposals were exhaustively considered by the Government and finally it was determined to impose a tax upon the profits of companies in excess of a special percentage as a means of raising the additional amount required. This tax will be known as the war-time (company) tax. This measure may be regarded as an implementing of the resolve of the Government to obtain special taxes from high profits made during war-time.

I remind honorable members of my remarks in the Financial Statement made to the House on the 2nd May with regard to the war-time profits tax which operated during the 1914-18 war. This purported to tax the war-time profits of all traders, including companies, but it signally failed to achieve its intention. The former Commissioner of Taxation, reporting on the effect of this act in his seventh annual report covering the financial year ended 1920-21, said -

The tax is unequal and harsh in its incidence. These features of it are due to its peculiar construction, which, as shown by the figures quoted, permitted escape from the tax of the vast majority of large and oldestablished businesses which have made consistently substantial profits, both in amount and in percentage on capital employed whilst small and struggling businesses, particularly those which wore commenced shortly before or after the outbreak of the recent war were obliged to pay relatively heavy amounts in tax. Many young businesses however, find themselves in positions of technical difficulty, from which there was no relief for them under the law. Some of those businesses had clearly benefited by the war, though it was impossible to ascertain whether their prices had been reasonable or unreasonable. Others of the young businesses had clearly made profits, apart from -war conditions, and would probably have made greater profits if the war had not occurred.

In my financial statement, I referred to the factors which persuaded the Government not to follow the principles embodied in such legislation having regard to the many injustices and anomalies which resulted from it. I refer honorable members to this statement. Notwithstanding the high rates of the tax, it yielded over the whole period of its operation, after allowance of refunds, less than £8,000,000. It affected less than 2 per cent, of the businesses in the Commonwealth.

For the time being it is proposed to limit the tax to companies. This decision has been reached for several reasons. In the first place, it is impracticable to impose a tax upon all individuals. For example, in the case of a business or profession which depends upon the personal qualifications of the owner, there is no conventional relation between capital and earnings, for in such businesses little or no capital may be required. Personal service and brains cannot be capitalized in the same way as material assets. Therefore, as we cannot fairly tax all individuals, we propose to tax none. This decision is justified by the fact that a comparison of the total in-, come taxes payable respectively by a company and an individual shows that when the income is a substantial amount the individual, pays a much greater amount than the company. In fact, figures that have been taken out demonstrate that the total income taxes payable by an individual with a considerable income will exceed the amount payable by a company employing the same capital and earning the same return, even after this tax is added to the income taxes payable by the company.

Another important consideration is that a careful estimate shows that the amount likely to be realized by the taxing of individuals would be relatively small, and, as their inclusion in the measure would materially add to its complexities and increase the cost of administration, it is proposed, at least for a time, to exclude them. It may, of course, become necessary later to reconsider this decision.

In connexion with the exemption of individuals from the scope of the tax, it has been recognized that there are certain types of companies in respect of which there exist almost equal reasons for exemption. These represent the incorporation, for various reasons, of individuals whose income arises almost exclusively from their personal qualifications and ability to render certain types of services which are rewarded by fees, commissions or other similar charges. Capital is nominal or small and the income has little or no relation to the use of capital. It would not be appropriate to bring such companies within the scope of a measure which bases liability upon the productivity of capital. The parity of their position with that of individuals as already recounted is recognized by a special exemption in their favour.

An attempt has been made in the bill to avoid the defects of the previous act. No distinction is made between established and new businesses. The fact that a business has made large profits prior to the war will not exempt it from liability to pay tax on the profits’ it makes during the war. It is proposed to treat all in the same way, namely, to allow them a statutory percentage of 8 per cent, on the capital employed to earn the profits, and to impose the tax on a graduated and progressive rate on the profits in excess of the statutory percentage. If the profits exceed the statutory percentage, it is obvious that as an entity the company has a special capacity to bear additional tax without, impairing its present or future productive power. The first 1 per cent, of capital by which the taxable profit exceeds 8 per cent, will be taxed at the rate of 4 per cent., the second 1 per cent, will be taxed at the rate of 8 per cent., and the rate will increase in steps of 4 per cent, for each further 1 per cent, until the taxable profit reaches 22 per cent, of the capital employed. All profits in excess of 22 per cent, will be taxed at a flat rate of 60 per cent. The imposition of a graduated tax will neither discourage enterprise nor encourage extravagance in order to reduce profits to the .same extent as a tax at a high flat rate. Moreover, it materially simplifies the design of the act, as it reduces the necessity for some concessions which may be justified where a high flat rate of tax is payable. A number of calculations has been made in order to estimate the effect of this tas upon the profits of companies, and I am satisfied that it will not press harshly upon those companies which are earning only a reasonable return upon their capital. The tak will, of course, press more harshly, with an increasing degree of severity, on those companies whose earnings exceed a reasonable return. In wartime it is felt that this class of company is in a position and should be expected to contribute the larger proportion of the amount to be raised by a tax of this kind. It is clear, however, that a graduated rate of tax will press less harshly on companies earning up to 22 -per cent, on the capital employed than would a tax imposed at a high flat rate. The capital employed will be the amount paid up in money or other valuable consideration, together with all reserves and accumulated profits. A minimum capital of £12,500 will be allowed for all purposes of the act. The allowance of 8 per cent, on this minimum capital represents £1,000, so that no business with a taxable profit of less than £1,000 will be liable to this tax. There are detailed provisions associated with the computation of capital ‘which may be dealt with more effectively in committee.

The taxable profit will be the taxable income as assessed for federal income tax purposes, less the federal income tax payable thereon, but not including any tax paid in respect of the undistributed profits of the company. State income taxes paid will have been allowed as a deduction in computing the amount upon which federal income tax is payable.

The bill makes no specific provision for the allowance of losses incurred in prior years, nor it is necessary that it should. Such losses are allowed for income tax purposes and are therefore taken into account before arriving at the taxable profits for the purposes of the act.

Experience has shown that there are certain special cases for which it is difficult to make specific provision in an act of this kind. The act will, therefore, provide for the appointment of an independent board of referees to consider special cases which must arise in the administration of the act; for example, classes of businesses in which the statutory percentage may be too low, having regard to the nature of the risk of loss incidental thereto, and other cases where the capital of the business, as determined in accordance with the provisions of the act, may not represent the true capital employed in earning the profits. ‘ Such cases may not be numerous, but unless some provision is made to deal with them, hardship might result.

It is recognised that primary producers require special consideration, principally because of the variation of seasonal conditions. It would not be fair to tax them on the excess profits of a good year following several years of drought, and it is proposed to embody in the bill provisions somewhat similar to those of the Income Tax Assessment Act, and to average the taxable profit of primary producers over a period of five years for the purpose of ascertaining the percentage of taxable profit to capital. Where the average represents not more than 8 per cent, of the capital employed no tax will be payable. If the average exceeds S per cent, or such higher percentage as may be prescribed for that class of business, the rates of tax applicable to the taxable profit of the year will be the rates which would be applicable to the average taxable profit. The tax will be linked as closely as possible with federal income tax. Ordinarily’ companies will not be required to make any additional returns, as most of the information required can be obtained from those which have been lodged for income tax purposes. The possession of this information will facilitate administration by the department, enable it to collect the tax inexpensively and promptly, and avoid the delay in assessment which occurred under the previous act, with the result that when the tax became payable it frequently could not be paid because the money had been invested in buildings and plant or otherwise expended.

This bill represents legislation of an emergency character, and, arguments which in time of peace might be urged against its principles, cannot be regarded as valid at present. The desire of the Government in raising the necessary money is to have particular regard, to ability to pay, and it is considered that companies making high percentages of profits to capital employed are in a specially favourable position in this regard. It is not thought that the tax will have any serious effect upon dividends except those now being paid at a particularly high rate, and the recipients of these can be expected to accept a somewhat reduced, but still high, rate in these times when each must bear a share of the burden.

As regards shareholders generally, the large majority, who have invested their money in shares in companies regarded as suitable for safe investment, will not be affected by the tax, as these companies do not, in general, make profits in excess of 8 per cent. of the capital employed by them. It is suggested that any who might be disposed to plead that a person who has bought shares in a company at a premium would be unfairly affected by this tax should examine the position closely to see, first, whether the particular company is one likely to pay this tax and, secondly, whether the amount of tax it will have to pay will necessarily affect its dividends having regard to its total profits, both current and accumulated.

In whatever form a special tax is levied upon companies, it diminishes the pool available for dividends., and this tax no more than others. It is conceded, of course, that the scope of this tax is limited.

The distinguishing feature of this tax is that it seeks to obtain the revenue from these companies whose rate of profits to capital is high enough to justify a special contribution in war-time, and this is preferred to one which takes from one and all indiscriminately regardless of any factor other than the actual quantum of profits.

The position of holding companies is specially provided for in the bill. They may elect to have their subsidiaries treated as branches and thus be treated as one company for all purposes of the act. In the absence of any such election, which is irrevocable without the consent of the commissioner, the companies will be separately assessed. In the latter case, it is not proposed to duplicate liability by taxing, first, the profits earned by an operating company and then the dividend paid to the holding company out of those profits, and the bill therefore provides for the exclusion of the dividend from the assessment of the holding company.

Some companies liable for this tax may have to pay the holders of preference shares dividends at a rate in excess of the statutory percentage. In the absence of a special provision, the whole weight of the tax would fail upon the funds available for ordinary shareholders. Provision has, therefore, been made to enable such a company to deduct from the pre: ference dividends an appropriate portion of the tax.

These remarks represent a general survey of the intention and scope of the bill. Like other taxation measures, it contains provisions which may better be dealt with in the committee stage.

It is not inapposite to say that more and more the industrial life of the community is becoming subject to the control of companies and, for this and other considerations to which I have referred, that the companies affected by the proposed legislation should be expected to pay additional taxes in this time of emergency.

Debate (on motion by Mr.Forde) adjourned.

page 637

WAR-TIME (COMPANY) TAX BILL 1940

In Committee of Ways and Means:

Mr SPENDER:
Treasurer · Warringah · UAP

– I move -

That a tax be imposed, at the rates specified in this resolution, on the amount by which the taxable profit of any company exceeds an amount equal to a percentage of the capital employed to be prescribed by the Parliament (in this resolution referred to as “ the percentage standard “ ) .
That in respect of the amount by which the taxable profit of a company which is not a primary producer exceeds the percentage standard -
1. Where the excess is not more than 1 per centum of the capital employed - the rate of tax shall be 4 per centum ; and
2. Where the excess is more than 1 per centum of the capital employed - the rate of tax in respect of the excess referred to in the first column of the following table shall be -
3. on so much of that excess as is equal to the percentage of the capital employed specified in the second column of that table - the rate specified in the third column of that table; and
1. on the remainder of that excess - the Tate specified in the fourth column of that table.

That the rate of tax in respect of every pound by which the taxable profit of a company which is a primary producer exceeds the percentage standard shall be that percentage which the amount of tax which would be payable in accordance with the last preceding paragraph of this resolution if the average taxable profit of the company, ascertained in accordance with a method to be prescribed by the Parliament, were the taxable profit of a company which is not a primary producer, bears to the amount by which that average taxable profit exceeds the percentage standard.
That the tax shall be levied and paid for the financial 3’ear beginning on the first day of July, One thousand nine hundred and forty and for each financial year thereafter.

The motion submitted for the consideration of honorable members sets out the rates of tax which it is proposed to impose upon companies, the taxable profits of which exceed the percentage standard. The percentage standard is an amount equal to a specified percentage of the capital employed. Ordinarily this percentage will be eight but in certain circumstances a special board will have power to increase this percentage.

I explained to honorable members in my financial statement of the 2nd May and in my second-reading speech on the War-time (Company) Tax Assessment Bill that the rate of tax would be graduated commencing at 4 per cent, on the first l.per cent, of capital employed by which the taxable profits exceed the percentage standard. On the second 1 per cent, on the capital employed by: which the taxable profits exceed the percentage standard the rate will be 8 per cent.; on the third 1 per cent, the rate will be 12 per cent, and so on. This is the effect of the rates set out in the motion as applicable to companies which are not primary producers.

If honorable members will examine the fourth column of the table contained in the motion they will observe that the tax increases by 4 per cent, for each 1 per cent, by which the taxable profits exceed the percentage standard until a maximum rate of 60 per cent, is reached. The maximum is reached when the excess of the taxable profit to capital employed is more than 14 per cent., so that where the percentage standard is an amount equal to S per cent, of the_capital employed the maximum rate will be reached when the taxable profit is more than 22 per cent, of the capital employed.

In order to express the rates in the simplest and shortest form for the purposes of the table where the excess of taxable profit over the percentage standard comprises more than 1 per cent, of the capital employed, the rates of tax upon all percentages except the last has been expressed in the form of an average rate. This is the rate which appears in the third column of the table.

For instance, where the excess is more than 2 per cent, of the capital employed the average rate for the first 6 per cent, is shown as 6 in the third column of the table. This represents the average of 4 per cent, which applies to the first 1 per cent, and 8 per cent, which applies to the second. And this procedure has been followed down through the succeeding grades. Any other method of expression would be exceedingly cumbersome and would involve considerable repetition.

In the case of a company which is a primary producer the tax will be imposed at a rate equal to the rate at which tax would be payable in respect of the average taxable profit of the accounting period and the four preceding accounting periods. This rate will be applied to the actual amount by which the profits of the accounting period exceed the percentage standard.

Progress reported.

page 639

PETROLEUM OIL SEARCH BILL 1940

Bill brought up by Mr. Nock, and read a first time.

page 639

QUESTION

FINANCIAL STATEMENT 1940-41

Debate resumed from the Sth May (vide page 616), on motion by Mr. Spender -

That the paper be printed.

Mr THOMPSON:
New England

– I understand that the Treasurer (Mr. Spender) in due course will answer the line of criticism pursued last night by the right honorable member for Yarra (Mr. Scullin).

Mr Spender:

– That is so.

Mr THOMPSON:

– It is not my intention to presume to canvass any of the interesting and in many respects cogent arguments advanced by that right honorable gentleman, who is recognized as being one of the most competent financial authorities in the political life of Australia. If I had any comment to make about his speech, which I am sure greatly impressed honorable members, it would be that generally his criticism was not really constructive in regard to the war-time obligations which now confront this country. The right honorable gentleman did sound a warning about the possibilities of the occurrence of another chaotic condition overseas in the next year or two when we may be called upon to meet commitments which are not provided for in this financial statement. As the right honorable gentleman himself said, he has sounded this warning many times in this House, and before the last degression he was indefatigable in his efforts to awaken the then Government to the dangers that were confronting us in the drain upon our overseas financial resources. I understand from the statement made by the Treasurer that this Government fully recognizes the gravity of the situation which may develop and, whilst it is not able now to bring down proposals for dealing with such a contingency, that it has not lost sight of the risk it is running. Indeed it has given an undertaking that some attempt will be made - it will have to be a practical attempt - to avert any of the dangers foreseen by the right honorable member for Yarra.

Criticism of the proposed increases of taxes is interesting^ but not absolutely necessary or helpful to the Government. There is not the slightest doubt that many honorable members of this House could voice grievances in connexion with many aspects of the taxation measures, but I think it is generally accepted that it is necessary to put up with a great deal in these times of emergency and danger, even if individuals and interests are affected, and even if there are obvious anomalies which would be regarded as intolerable in more peaceful and happier times. I do not think that the criticism expressed by the right honorable member for Yarra is helpful to the Government and, although we must admit its cogency and practical character, we expected something more constructive from him. Generally, his speech was of a destructive character. He did make some reference to a matter of very great importance to the people of Australia; a subject which 13 attracting a considerable amount of attention amongst people not versed in the financial complexities and problems of this country, namely, the reliance that can be placed upon banking resources. I listened very intently to the right honorable gentleman and the impression I gathered was that he showed a tendency to indulge in a little flirtation with inflation; I could read” in his remarks an incitement to the people of Australia to support those “ national credit-ites “ who are virtually asking for the introduction of an inflationary system. I say that, not with any desire to criticize the right honorable gentleman, but merely to indicate the impression which I gathered from his remarks. The right honorable gentleman must be recognized as a leading financial authority and I am afraid that his statements may be regarded as encouragement to a movement which, if it gathers momentum and gets out of hand, would have serious political repercussions on the financial structure of Australia.

The Government’s objective, in a nutshell, is to raise £125,000,000 during the remainder of this financial year, and the whole of the next financial year. The amount which has still to be provided to meet war expenditure in Australia up till the end of June, 1941, is £70,000,000. The interest of this Parliament in the financial statement presented by the Treasurer begins and ends with that proposal: How are we to raise that £70,000,000 to meet visible commitments up to the end of June, 1941? Covering the same period, there will be overseas expenditure estimated at not less than £35,000,000, but methods by which this money is to be raised are left to the future. The Treasurer has said that we must bear in mind the problem of making provision from Australian sources as early as practicable for at least some portion of our overseas finances. If we are unable to arrange accommodation overseas, the whole of the £35,000,000, plus any unexpected additions, will have to be provided from Australian internal resources.

It seems to me that the two fundamental features of this statement, are: first, the methods by which we propose to raise the £70,000,000, which is the balance left over from the ‘ present provision up to the end of the financial year, 1940-41, and, secondly, what suggestions, or actual proposals, can he put forward by the Government for meeting the £35,000,000 to which we are already committed overseas, plus any additional amount which may be incurred. It is quite clear that the overseas commitments amounting to £35,000,000, constitute a very serious problem for the present Government, and for those who may be responsible for the financial security of Australia during the next fifteen or eighteen months. Yet despite the magnitude of this sum - it is more than half the total which we require for internal expenditure up to the end of next financial year - and the possibility that’ it may grow or even double itself during the next financial year, the Government has made no effort to get down to tin tacks immediately. Peculiarly enough it prefers to leave the matter to the future, and admit that it is bankrupt of ideas on the subject. It seems incredible that such a huge addition to our war-time commitments as is represented by this overseas liability, should not have been provided for by the Government at some earlier stage, or should not have been covered by some scheme submitted to Parliament. I admit that I am not in a position to offer any suggestions, but I repeat that this matter is so serious and important, and may have such repercussions in the financial position of this country in the next twelve months, that it is peculiar, to say the least of it, that more attention has not been paid to it by the Government.

The matter which most vitally interests the people of Australia at the present time is the method by which the £70,000,000 which has to be found before the end of June 1941, is to be raised. In the economic and political life of Australia, it is becoming commonplace to regard the borrowing capacity of this country as being inexhaustible. Allowing, for the moment, that that is so - it has yet to be demonstrated - then, of the £70,000,000 which has to be found £50,000,000 will be raised by means of loans. As -the right honorable member for Yarra said, there is no doubt that it will be raised; in fact, it will have to be raised. If there is any slackness in the willingness of the people to contribute that amount, other methods will have to be tried, and possibly a further revision of the taxation proposals now before this Paraliament will be necessary. When we consider that the total national income for the present year - I am quoting^ statements by certain economists whose opinions have been widely published lately - is not less than £800,000,000 from all sources, overseas and internal, it would appear that the raising of £50,000,000 by way of loans during the next fifteen months will be a small item in our war-time budget. I agree with the right honorable member for Yarra that it will be a mere flea bite, and the people will contribute it without any trouble.

That leaves us with only one immediate problem of direct personal concern to the taxpayers - the £20,000,000 to be raised immediately by taxation. Bills have been introduced to implement the Government’s proposals, and the people now know, not only the total sum asked of them, but also the methods by which it is proposed to be raised. Of that £20,000,000, only half will be obtained by direct taxes, which always is a method of Government finance that attracts the immediate interest of the taxpayers. Although indirect taxes pay ultimately fall more heavily than direct taxes on the general community, that form of impost does not usually interest the people very much. They take the view that indirect taxes are paid by almost every person in the community, and what is every body’s business is apparently regarded as being nobody’s business. The taxpayers, however, concentrate the full force of their attention and the fire of their criticism on proposals for increasing direct taxes.

The main problem of honorable members in discussing the Treasurer’s Financial Statement is to decide whether the Government’s proposals for raising £10,000,000 by direct taxation are fair, and whether all sections of the community are being called upon to make a just contribution to Australia’s war-time expenditure. Without the slightest doubt taxation in Australia is increasing by leaps and bounds. If we put on one side, for the moment, consideration of the war-time mentality that whatever has to be paid must be paid without question, and consider the actual form of the burden that has to be carried by the people, we may be able to determine how much more taxation the people will be able to pay.

– That shows the value of camouflage.

Mr THOMPSON:

– I consider that there is too little recognition of the patriotism of Australians with small incomes. If the Government were to ask them to make an additional direct contribution to its war effort they would do so gladly, and give to the Government credit for having adopted a wise policy.

It would be an easy matter for me to say that I have no objection to an increase of the land tax, because I have not to pay it. It is not sufficient to say that this is a form of taxation which should be exploited to the utmost, because any increase of the land tax is likely to have serious repercussions. I do not say that an increase of the tax is avoidable; but it is not a wise form of taxation at the present time when Ave reflect that three-quarters of that tax is paid in respect of town lands and only one-quarter of it by the owners of country lands. The effect of an increase of that tax on the building industry alone may be considerable; it may result in increased unemployment. Since the outbreak of war, building operations in New South Wales have slumped by 50 per cent., and there is danger of wholesale unemployment in that industry. I cannot imagine any more effective way of intensifying that recession than by imposing further additional taxes on town lands. Without wishing to be an alarmist, I predict that one effect of this additional tax will be a further slump in the building trade, and, therefore, I do not feel justified in giving three hearty cheers. As a means of accomplishing the end for which it was imposed, the land tax has proved to be an absolute failure. It is now practically a confiscatory tax. If we are forced to increase it, we must expect some serious economic repercussions, particularly a heavy decline of employment in the building trade. It will be admitted that the Government has very little choice, because the avenues availableto it for raising additional revenue are severely limited. Therefore, I suppose that we must wait, and see what happens.

If the effect of this tax, which we are told may be the forerunner of further taxes, is to bring about a deflationary movement, we shall have to put up with it. There is danger of a deflationary movement arising from the heavier taxation of companies, particularly the proposal to limit the rate of profit to 8 per cent, after which there is to be a steeply rising rate of tax until 60 per cent, of the profit made in excess of 8 per cent, is to be appropriated by the Commonwealth.

I heard the Treasurer’s statement in regard to shareholders who bought shares at a premium, but he did not deal with the real crux of the problem. Perhaps that was because he could not see any way out of the difficulty. But we cannot get away from the fact that all companies which pay dividends, being profit-earning companies, demand premiums for their shares. The great majority of the shareholders of such companies have bought their shares at a premium, and they will be severely hit by any arbitrary fixation of the rates of profit. Some shareholders who bought their shares at par will do well with an 8 per cent, dividend, but others, who paid as much as a premium of 100 per cent, for their shares, will be hit badly. The effect of this tax will he to frighten intending investors away from new companies which offer alluring prospectuses and promise substantial profits. There may be a deflationary effect in that sphere, but we shall have to take the risk.

We cannot expect any taxation to be satisfactory to every one. I have never heard of an ideal solution of the taxing problem, because there is no ideal solution of it. The Government is at its wits’ end to finance the war, and cannot expend too much time in considering the effect of ite actions on this or that section of the people, or on this or that individual. That there are anomalies is undoubted; some of them have been pointed ‘out by the right honorable member for Yarra and others. Various organizations of taxpayers have also expressed their views. These taxes will hurt the community, and especially certain interests, but we must give them a trial, and see what the result will be. I have sufficient confidence in the Government’s ability and instinct for justice to all sections- of the community, to expect that, if these anomalies prove to be really serious and to have a bad effect on the economic and general life of the community, it will lose no time in trying to effect some improvement.

Mr SPEAKER:

– The honorable member’s time has expired.

Mr PERKINS:
Monaro · Eden

– Last night I listened with great interest to the speech of the right honorable member for Yarra (Mr. Scullin). I compliment him on his speech, and disagree with the honorable member for New England (Mr. Thompson) that it was not constructive. On the contrary, it was a most useful contribution to the discussion, and should be welcomed ,by the Government. The right honorable gentleman pointed out certain anomalies which are likely to occur. His desire was to put the Government on the right track by pointing out the injurious effects of some of its proposals, with a view to remedying them at the start. I do not propose to deal with all of the matters referred to by the right honorable gentleman but I emphasize his remarks regarding the . effect of the heavier burden which will be placed on persons in the middle income range, and the failure of the Government to realize that the men who have most to lose should be called upon to make the biggest sacrifice. As the right honorable member for Yarra pointed out, a man with an income of £40,000 a year will have his tax increased by only 3 per cent., whereas a person in receipt of a salary at the lower end of the scale will have to pay 125 per cent. more. However logical the explanation of the Treasurer (Mr. Spender) may be, the unwholesome fact remains that those who have most to lose should the Allies not win the war are to be called upon to pay the lowest percentage increase of taxation. It is true that the Government has been able to leave untouched single men with an income up to £250, and married men with two dependants whose income is not more than £400. We all hope that the war will end before it is necessary for the Government to come further down the ladder.

Then we come to the middle class of income, which is represented by a fairly numerous body of taxpayers. No particular hardship will be caused to the man who actually pays the tax, but his domestic staff, consisting of gardeners, chauffeurs, utility men and the like, will suffer, because he will consider it necessary to effect economy, and will do so by dismissing those employees. The right honorable member for Yarra rightly stated last night that the whole House realizes that taxes have to be increased in order that the money which the Government needs may be raised. We are all sympathetically disposed to the Government, but we cannot be expected to accept blindly proposals that are formulated by one or two men in the Treasury, and rushed through this Parliament by a new Treasurer, causing anomalies which should be avoided. We must put our heads together, and see that the least harm is done to the community. I am satisfied, from my reading of the figures, that those who are to be hit by these proposals will be hit doubly hard, so hard, indeed, that they will immediately pass on the burden, causing innocent persons to become the victims. Unlike the honorable member for New England, I am not in favour of waiting until anomalies are disclosed, and then attempting to cure them; they should be prevented before they arise. I should like the Treasurer to withdraw these proposals, and make an attempt to propound something better. Let us see that as little suffering as possible is caused to the community.

Mr BARNARD:
Bass

.- I have listened with more than ordinary interest to the debate on the financial proposals of the Treasurer (Mr. Spender). Last night the right honorable member foi Yarra (Mr. Scullin) made a most excellent speech. His analysis of the Treasurer’s proposals was illuminating to honorable members, and I believe that the right honorable gentleman put his finger on the weak spots in them. I am in agreement with some of the remarks of the honorable member for New England (Mr. Thompson), but differ from him when he brushes aside the matter of indirect taxation. Nor do 1 agree with his suggestion that men on lower incomes should have to make a direct contribution to the finances of the Government, either at this particular time or at any other time. The honorable member has said that 80 per cent, of the population does not pay direct taxation. The reason is that their incomes are less than £250 a year. They are not, however, to be allowed to escape a fair measure of taxation under the proposals introduced by the Treasurer. Consisting as they do of persons who have small incomes and large families, they make a substantial contribution to the returns from taxation, and experience considerable anxiety in keeping their families well clothed and fed in order that in later years they may take their rightful place in the community. Greater consideration should be shown to that section of the people.

The Federal Government should be careful to avoid interfering with the taxation of the States. The right honorable member for Yarra very rightly said last night that the Commonwealth should go ahead with its proposals and leave the States to make any adjustments they considered necessary. The view expressed by the honorable member for New England might be all right in the case of New South Wales, but it is an entirely different proposition when applied to the smaller States of the Commonwealth. For a number of years, the matter of severity of taxation ha? caused very grave concern to the occupants of the treasury bench in Tasmania. Because of the attitude adopted by the Commonwealth Grants Commission, which year by year investigates the finances of Tasmania and some of the other States, Tasmania has suffered the loss of a considerable amount, because the severity of taxation in that State has not been up to the average of the mainland States. Some consideration was given to that particular aspect when the Treasurer was framing his proposals. I should bo loath to see any interferenceby the Commonwealth Government with the taxation of the different States. The taxing of higher incomes at a much, steeper rate by Queensland than by Victoria may cause some difficulty to theCommonwealth Government. On theother hand, however, the tax on middle incomes is higher in the southern States than in Queensland. It is a matter of the internal economy of the States, and they should not be interfered with.

At the moment, we should not be unduly concerned in regard to the effect on employment of the imposition of additional land tax or other direct taxation. Sacrifices have tobe made. Money has to be found to enable Australia to continue its wai effort as a partner in the British Commonwealth of Nations. For that reason, there should be a display of patriotism by those who are in a position to contribute to the revenues of the country. There isno fairer way by which money for governmental expenditure may be collected: from the people than by direct taxation. Only during the last few days cases have been cited in this House of lack of patriotism by somebig financial concerns, and of attempts by them to exploit the community. Two particular cases were those of the boot industry and the oil industry.

Those are two that have come to light; probably there are others. It is from these people that money should be extracted. If the sources of obtaining revenue are dried up in Tasmania, and there is little or no expenditure in that State on defence works, its people will have to seek employment on the mainland, and the resultant decline of population will cause greater problems to arise.

Mr Thompson:

– Is the Government not spending much defence money in Tasmania ?

Mr BARNARD:

– Very little.

I wish now to refer to the sales tax and to indirect taxation generally. This aspect of the Treasurer’s statement requires considerable elucidation. I do not regard it as satisfactory in any way. The honorable gentleman went to considerable pains to indicate the field over which this tax would be levied. He said that whereas the sale of commodities in Australia for 1940-41 was estimated to amount to £750,000,000, sales tax would be levied on only £215,000,000 of that total. In referring to exemptions amounting to £98,000,000 the honorable gentleman said -

The goods making up this £98,000,000 have been exempted by successive governments for one of four main reasons, viz.: -

Toavoid taxing foodstuffs and goods which directly increase the cost of living such as tea, coffee and cocoa, pastry, scones, footwear,&c., £24,000,000.

To give assistance to industries which otherwise might have to receive: direct help, viz.,. agricultural machinery, mining machinery, building materials, equipment for the fishing industry, £48,000.000.

To avoid taxing articles used in medical, educational, charitable, philanthropic and religious activities, £12,000,000.

To obviate the necessity of taxing the containers used to market exempt goods; to place manufacturers consumable aids on the same footing as raw materials; and to avoid taxing small manufacturers; £14,000,000.

He added -

The alternatives facing the Government were therefore the re-imposition of sales tax on the goods which had been exempted for the reasons stated with a relatively small: increase in rate or to obtain the whole of the requirements by a somewhat sharp increase in rate.

The exemptions now in force are to continue, although the rate of tax is to be substantially increased with the object of yielding an additional £5,000,000 of revenue. The new rate of tax is to be 81/3 per cent., which is 21/3 per cent. higher than the existing rate; The burden of sales tax falls most heavily upon people with small incomes and large families. The more goods people have to purchase the more tax they have to pay. That is inescapable. It is useless to argue that only 81/3 per cent. will be passed on to the public. The percentage that the people will pay in sales tax will be considerably greater. The increase of sales tax will also fall heavily upon small business houses. I have no doubt at all that some amount in excess of 81/3 per cent. will, in many cases, be added to the retail cost of commodities. Although the existing exemptions are to remain in force, the fact remains that an additional amount of at least £5,000,000 will be collected in sales tax. Wearing apparel will still be subject to the tax and in this respect the poorer sections of the community will bo considerably embarrassed.

Customs and excise duties, another form of indirect taxation are expected to yield an additional £5,300,000. In fact, of the £20,000,000 additional revenue which the Treasurer contemplates raising by taxation, £10,300,000 is to come from indirect taxation and £9,700,000 from direct taxation. I have excluded estate duty from my calculation of the amount to be contributed by indirect taxation; but in actual fact it, while a direct tax, is also, in a sense, obviously an indirect tax.

The honorable member for New England referred to certain anomalies in our land tax legislation, and, in a general way, criticized this method of raising money. Personally I consider the land tax a fair impost. It certainly has been a great money spinner for successive governments since it was first imposed.

Speaking of direct taxation generally I should like to know how the Government proposes to collect the money. An examination of the records for the. last three years shows that a considerable amount of both income and land tax remains uncollected. The following are the amounts outstanding in respect of all assessments at the 30th June, in the last three years: -

As the Government has been unable to collect these taxes at the rates now in force, I anticipate added difficulty when the increased rates are imposed. I offer no complaint against the Treasury officials or the officers of the Taxation Department because these amounts are outstanding. In my experience taxation officers do not miss very much. Nevertheless, last year £3,331,985 of income tax remained uncollected. In these circumstances I suggest that the Government should give a good deal more consideration than it seems to have given to the adoption of the policy applied by the Victorian Government for some time of collecting income tax by instalments. People do not feel the burden of taxation so heavily if they are able to pay by instalments. In fact, under such a system, direct taxes come to be regarded much as indirect taxes are regarded. For example, when I buy my tobacco I rarely think of the amount of excise duty I am paying. Very few people, I imagine, stop to think that when they buy a small packet of cigarettes they are actually contributing -3d. to the Commonwealth revenue. The payment of direct taxes however, is quite a different matter. Under State legislation State income tax is payable within one month from the receipt of the assessment. Under federal legislation Commonwealth income lax is payable within sixty days of the date of the assessment. I know that an extension of time may be obtained in certain circumstances, but the fact remains that a large sum of money has to be found by the taxpayer for this purpose within a limited period. I therefore suggest that the Government would be wise to explore the practicability of adopting a system of payment of income tax and, for that matter, land tax, too, by instalments, for I am sure that thereby it would avoid the carrying over,, from time to time, of large amounts of unpaid taxes.

The British Commonwealth of Nations is at war, and as a member of that Commonwealth, Australia’s future is threatened. Consequently, it is imperative that we play our part in this conflict. For this purpose we must find more revenue, and I agree that taxation measures of this sort must be resorted to in a time of national emergency. The additional taxes, however, should be levied on an equitable basis. I am reminded of the anomaly referred to by the right honorable member for Yarra (Mr. Scullin), who pointed out that in certain circumstances a preferential shareholder will pay no income tax, either as a shareholder or as an individual. That is unfair. I hope that the Treasurer will make an effort to remove such anomalies. The burden of additional taxation on the poorer sections of the community can be eased by reducing indirect taxes as much as possible. At the same time the general basis of taxation should be more equitable.

Mr ANTHONY:
Richmond

.- Realizing the difficulties which confront the Government and the Treasurer (Mx. Spender) in devising ways and means for the raising of the additional revenue required for the prosecution of the war, I congratulate those responsible for the framing of the proposals submitted to the House last week. The new taxes have been very carefully calculated. Whilst they will enable the Government to find a substantial portion of the additional revenue which it requires, they will at the same time, cause very little dislocation of industry. Thb right honorable member for Yarra (Mr. Scullin) in his excellent speech last night, which I am sure was appreciated by all sections of the House, although all of us did not agree with his conclusions, raised certain objections to these proposals. The Government should be given full credit for- retaining the present statutory exemption in respect of income from personal exertion. A person with .a wife and one child, and earning up to £350 per annum, will still remain absolutely exempt from Commonwealth income tax. The Government is to be commended in exempting from income tax the £250 to £350 range of incomes in a time of war, particularly in view of the fact that the number of persons within this range is very large. The right honorable member for Yarra drew attention to what he represented to be the inequity of the rate of increase of tax on certain grades of income. I remind him that a very substantial percentage of incomes in the higher ranges is already being paid by way of State and Commonwealth taxes, and it is questionable whether any further considerable increase of tax could be levied on those incomes at the moment without causing acute dislocation of industry and possibly widespread unemployment. I have already pointed out that individuals whose incomes range from £250 to £350 per annum and who have only a wife and child to support, will remain completely exempt from Commonwealth tax under these proposals. A man with an income of £500 per annum with the same dependents will be called upon to pay only £20 or 4 per cent., of his income by way of State and Commonwealth income tax. In this connexion I am taking Queensland figures in respect of State tax, because in the majority of cases the Queensland rates are the highest of any of the States. Honorable members will agree that an individual in receipt of an income of £500 per annum from personal exertion is generally regarded as being reasonably placed, and not obliged to struggle for his sustenance. He may not be able to enjoy luxury, but he has a reasonable measure of comfort. When the right honorable member for Yarra drew attention to the disproportionate increase of the rate of tax in respect of higher incomes, he neglected to say that Commonwealth and State taxes on an income of £5,000 per annum already amounts to £1,939, or 40 per cent, of the income, which leaves a little over £3,000 to the taxpayer. I also direct attention to the fact that the combined State and Commonwealth taxes on an income of £4,000 amounts to £1,348. Thus on the additional £1,000 between the £4,000 and £5,000 marks the Commonwealth and State Governments levy £600 in tax, leaving only £400 of that £1,000 to the taxpayer. In view of these figures I suggest that taxation has reached such a point, that its extension much further, would make it a very doubtful proposition for a taxpayer to endeavour at all to increase his income and extend business enterprise. The right honorable member for Yarra also pointed out that the tax payable on an income of £40,000 represented a very small percentage of the total income. I should be surprised to learn that many people in this country enjoy so large an income. However, on this amount of income, if it be derived from property, the taxpayer is left with only £12,S40 after paying Commonwealth and State taxes.

Mr McHugh:

– He has sufficient left.

Mr ANTHONY:

– We cannot tax everything a man earns or we shall destroy every incentive in the individual to extend his business activities. On this point, of course, the policy of the Government and that of honorable members opposite differ fundamentally. I believe that individualism is the driving force of progress.

Another point with which I propose to deal is the increase of land tax by 50 per cent. Last night the Treasurer (Mr. Spender) pointed out that the exemption in respect of mutual and partly mutual insurance companies had been lifted because a disparity existed in favour of these companies in respect of the subletting of buildings. I hold no brief for insurance companies, or any other section of the business community, who have the capacity to pay what is in effect a capital levy. I intend, however, to take up the case of those industries, such as the primary exporting industries, which cannot pass on this levy. I refer particularly to the wool and wheat industries. The Commonwealth Wool Inquiry Committee appointed in 1932 dealt comprehensively with the incidence of land tax on wool-growers. It pointed out, as the honorable member for Bass (Mr. Barnard) has. already stated, that outstanding land tax unpaid amounted in 1932 to £714,000, and it is obvious that this tax has not been paid because of the inability of many taxpayers to pay what is, in effect, a capital levy. I have no objection to a tax of this kind, provided that it is levied on people who can afford to pay it. In the wool and wheat industries, however, values during recent years have not even remained stationary. They have declined. That fact must be considered when we are dealing with the ability of these primary export industries to pay a tax of this kind. In its report the Wool Inquiry Committee stated -

Western Australia exempts from laud tax all land- used solely for agricultural, horticultural, pastoral or grazing purposes if improvements have been effected to an amount equal to fi per acre or one-third of the unimproved value of the land, whichever amount is the lesser.

The Commonwealth might adopt that principle in respect of its land tax. In his summary of business statistics the Government Statistician of Hew South Wales shows that on the basis of wholesale values of products in 1911 representing 100 points, the value of nonrural products advanced to 175 points by 1939. The movements in values of rural products in that period were: Butter, 100 to 160; wool, 100 to 132; and wheat, a decline from 100 to 75. It will be clearly seen that while insurance companies and other city property interests, such as brewing companies, trustee companies, &c, have the ability to pass on these taxes, the land tax remains a dead weight on” the exporting primary industries., which cannot, in any circumstances, pass it on. I propose to quote some figures in order to show the_ effect on share values of the low prices of export primary products. The Stock Exchange Index for January, 1940, shows the comparative values of shares in various kinds of enterprises, shares of the value of £1 being shown in the table as 100. The table is as follows:-

This shows that the primary industries are in a very bad state compared with other industries, particularly the export primary industries, and there is need to watch how this extra taxation will affect them.

The right honorable member for Yarra said that the sales tax on flour should be abolished so that the consumers of bread might obtain the benefit of the low price of wheat. I point out, however, that the sales tax on flour is a graduated one, and disappears altogether when the natural price of flour rises to something over £12 a ton, at which price bread can be retailed for 6d. or 7d. a loaf. I ask honorable members how often did the consumers of bread obtain any benefit from the low price of wheat or flour? In country districts, in particular, the price of breads remains, as a rule, at 6d. or 6£d. a loaf,- irrespective of whether the price of flour is £5 or £15 a ton. Therefore, even if the flour tax were removed, the beneficiaries would not be the consumers, either in the city or the country, but the master bakers.

Mr Wilson:

– The tax stabilizes the price of flour.

Mr ANTHONY:

– That is so. Increased taxation, both State and Federal, will make it very difficult for many people, who have not been accustomed to make provision for the payment of their income tax, to meet the payments when the time comes. As the tax rises, one’s personal expenses do not decrease, with the result that, at the end of the year, the taxpayer on a low, middle or even high income will probably experience great difficulty in raising the amount of his assessment. Only this week I noticed an advertisement inserted in the press by the Monte de Piete Company stating that it was willing to lend taxpayers money with which to pay their income tax. Of course, borrowers would have to pay good interest.

Mr Green:

– That is a new industry started by the refugees.

Mr ANTHONY:

– No, the advertisement I saw was inserted by the Monte de Piete Company, which has been established for at least 30 years. I am not taking exception to the action of the company in embarking on that kind of business. I only mention it as evidence that taxpayers find difficulty in raising the money when the time comes to pay, and I say that the Government ought to introduce a system for the payment of taxes by instalments, and should give adequate publicity to the matter. Some taxpayers do try to make provision for the payment of their taxes, and regularly pay something into a savings bank account for that purpose. In many instances, however, before the end of the year, they are tempted to withdraw the money for some reason or other, and thus, when the time comes to pay, they find themselves financially embarrassed. I suggest, therefore, that the Commissioner of Taxation should be empowered to pay at least savings bank rates of interest on any instalments of tax paid into his department.

Mr Paterson:

– That is what it has done.

Mr DEDMAN:

– It has done so to a degree by exempting certain goods, but it has not carried the principle far enough. Here is an example of what I mean : Sales tax is payable on both sewing machines and wireless sets. Sewing machines are a household necessity, and the Government should not discourage their use in the ordinary wor/king-class home. It should, therefore, exempt sewing machines completely from sales tax. But it should by taxation discourage the expenditure of man-power and resources in the manufacture of wireless sets. That is different from putting sales tax on all goods except foodstuffs. My point is that the Government could achieve its purpose far better by increasing the income tax than by imposing a sales tax. Again, for instance - I think perhaps that this is a better example than the one that I gave - sales tax would be payable on corrugated iron roofing and also on the substitute, corrugated fibro-cement roofing.

Mr Paterson:

– Building materials are exempt from sales tax.

Mr DEDMAN:

– Even conceding that, the point that I make is that the Government wants steel and iron for its muni- tions works and it should discourage the use of corrugated iron in buildings. It should, therefore, tax corrugated iron and exempt corrugated fibro-cement. Taxation should operate to discourage the use of those things which the Government needs and encourage the use of the substitutes for which the Government has no use in its munitions programme.

As well as disagreeing with the sales tax, I believe that the Government’s income tax proposals are not progressive enough. The rate of tax does not increase rapidly enough as incomes grow. If one drew a graph of the rate of progression of the new income tax in comparison with the rate of progression of the old, it would be seen that the rate proposed by the Government is not nearly so steep as the ratewhich now obtains. The rate of progression should be far steeper, because those on higher incomes can afford to pay much more than they are being called uponto pay at present.

The exemptions granted are totally inadequate ; they begin too early in the scale of incomes. The allowances of £50 for a wife and £50 for each child are not nearly high enough. Those allowances have stood for a long time, and no consideration whatsoever has been given to the fact that since they were introduced the value of money has depreciated. The allowances to-day have not the same value as they had 10 or 15 years ago, and should be increased to correspond with the decline of the value of money. I, therefore, say that the Government’s proposals in this regard are totally inadequate.

The Government’s taxation proposals in regard to unearned income are not severe enough. I speak of the higher unearned incomes. It is true, as the Treasurer said, that the lower unearned incomes generally represent the savings effected by people to maintain them in their declining years. I agree that those incomes should be let off fairly lightly, but on unearned incomes in the higher ranges the rate of tax should be much higher than is now proposed. The individuals who have those high unearned incomes can well afford to meet the needs of the Government, and I should rather see the tax on them increased than the rate of sales tax advanced. Another consideration - and this affects our war effort - is that, if you tax unearned incomes, you in effect force the holders to seek work. To the extent that that is done, you force people into productive activity, and the value of their work acids to the income of the nation. The taxation of unearned income is an incentive to people to do a job of work which otherwise would not be done. As an illustration of that, I was discussing taxation with two farmers at the conference of the Country party at Geelong. One agreed with my views, but the other said. “That is no good to me. I have a farm which I have built up over ten’ or twelve years. I leased the property only the other day to another man and I intend to sit back for the rest of my life and live on the rent”. I told him that that attitude did not appeal to me, and that no individual should be idle and live on unearned income.

Mr Hutchinson:

– Not even aged people ?

Mr DEDMAN:

Mr McHugh:

– Is not the high taxation in Queensland due, in some measure, to low transport charges?

Mr JOLLY:

– There are, of course, reasons for Queensland’s high taxation, but I cannot go into them now. The figures which I have quoted are in respect of direct taxation paid by the people of the various ‘States.

– The Commonwealth and State governments, I think, might very well consider the advisability of endeavouring to spread the assessments over the year instead of issuing them within the period of one or two months.

Mr Thompson:

– Payment by instalments would be the better method.

Mr JOLLY:

– Under the present system serious difficulties may arise and, in some instances, disturbance of industry may result owing to the necessity for meeting high tax assessments of Commonwealth and State governments at a bout the same time. I urge the Government to’ consult with the State governments as to whether it is possible to spread the issue of various income tax and land tax assessments throughout the year. This course would be appreciated by the taxpayers, and I feel sure that it would benefit industry and commerce generally.

Mr LAZZARINI:
Werriwa

.- I am able to verify the statements of the honorable member for Corio (Mr. Dedman) in relation to wasteful expenditure on defence works, particularly in connexion with military camps. Some time ago the Defence Department incurred considerable expenditure in the construction of acamp at Dapto, in my electorate, and many men were in camp there. For some reason, as yet unexplained, after training had been in progress for a considerable period, the authorities decided to abandon the site and establish a camp somewhere else. The huts were torn down and carried away. Carpenters and other tradesmen have told me that it would have been just as economical for the authorities to set fire to the buildings and burn them on the spot for all the use they would be after they had been moved to a new camp site. Despite anything that the Minister for the Army (Mr . Street) may say to the contrary, I affirm that there has been a great deal of waste in connexion with some military camps. I do not accuse the honorable gentleman of deliberately givingwrong information to this House when he has been questioned on this subject, but I suggest that some of the officers of his department” gave to him misleading replies when they denied absolutely that there had been continual and wanton waste of foodstuffs in the military camp at Ingleburn. I am sure that if the Minister would visit that district and meet some of the local councillors and other responsible citizens, he would be convinced of the truth of the complaints. I have been reliably informed that one man had a room full of bread from the camp, and was using it to feed his pigs; that meat was buried at the camp, and that wholesale scandalous waste was in evidence on every hand. The people who have given me this information are responsible citizens, and are not likely to make accusations which they could not prove. I am satisfied that if a proper inquiry were conducted into the matter, their charges would be substantiated.

Mr Street:

Mr LAZZARINI:

– The honorable gentleman’s former leader, with his con- sent and support, allowed the associated banks to build up a debt of £60,000,000 against primary producers to whom they gave nothing. They “ pyramided “ a debt of £60,000,000 upon the bare right to draw notes from the Commonwealth Bank.

I probably should not have risen had not the honorable member for New England attributed to the right honorable member for Yarra statements which he did not make.

Mr Thompson:

-i did not attribute anything to him.

Mr LAZZARINI:

– The honorable gentleman said that the right honorable member for Yarra was flirting with inflation - that his speech would be welcomed by the “ cranks “ outside.

Mr Thompson:

– I did not say that.

Mr LAZZARINI:

– If the honorable gentleman did not say it, that was what he meant. If the Government wants the maximum war effort of which the people of this country arc capable, it must do more than it is now doing on the home front. Various members of the Ministry, as well as their supporters, tickle the ears of electors at week-ends with statements about the need to build houses for the people. They say that the slums must go, war or no war. By such means they obtain a great deal of publicity, but 1 ask them when they intend to stop talking and do something in the matter. I want some evidence of their sincerity. Homes for the workers can be built, and work provided for many artisans, without any cost to the Treasury. I challenge the Treasurer to prove that that cannot be done. He could introduce legislation to empower the Commonwealth Bank to expend, say, £2,000,000 in the construction of homes. A start could be made with the construction of 10,000, or even 30,000 homes, which could be provided for workers free of interest and other charges, excepting the bare cost of administration, which could be added to the capital cost. When 20,000 or 30,000 homes had been constructed, the cost being repayable in, say, fifteen years, the workers would pay their contributions to the Commonwealth Bank, and the money thus obtained would enable other homes to be built.In that way, a long-range policy of home-building could be embarked upon. All that is necessary is that a start shall be made. The instrument by which this could be done already exists: I refer to the Commonwealth Bank. Bricks and mortar, timber and other materials are a liability unless they are put to good use; but when they are used in the construction of homes they become assets, not only tothe owners of the homes, but also to the community as a -hole. The amount necessary to make a start may be £500,000 or perhaps £2,000,000. I emphasize that all that is required is sufficient to make a start. Throughout Australia homes should be built reasonably close together without overcrowding, so that water, light, sanitary and other services could be provided at reasonable cost. On the South Coast of New South Wales there are many places where a programme of home construction could be carried out. Similar opportunities exist in some of the outer suburbs of Sydney and elsewhere in that State, and, no doubt, in other States also. The construction of these homes would provide work for bricklayers and other artisans, and also for timber workers and others in the mills and forests and elsewhere. Not one penny of additional taxes would need to be raised, nor would the country’s war effort be impaired by such a project. Immediately the work was commenced the Government would be creating assets. The construction of homes for the workers is one of the most urgent needs of Australia to-day. Action along these lines would enable men and women to live in reasonable comfort, and rear children under decent conditions instead of being forced to live in tents and huts not fit for dogs. Anything that is done to destroy the home life of the people does untold injury to our civilization. War or no war, this is something which must be attended to. Any man in this Parliament who will not give serious consideration to this matter, or any Government that says that it cannot be done, is doing more injury to our civilization than is done by even war itself.

Debate (on motion by Mr. Fadden) adjourned.

page 660

FIRST FEDERAL MEMBERS ASSOCIATION

Mr SPEAKER(Hon G J Bell:
DARWIN, TASMANIA

Honorable members will be interested to know that I have received the following telegra m : -

Members of First Federal Members Association at anniversary celebration to-day extend greetings and best wishes to all members present Federal Parliament.

Hume Cook, President,

G. Higgs, Secretary.

Sitting suspended from 6.14 to 8 p.m..

page 660

QUESTION

FINANCIAL STATEMENT 1940-41

Debate resumed.

Mr FADDEN:
Assistant Treasurer · Darling Downs · CP

– I take great pleasure in supporting the Treasurer (Mr. Spender) in the taxation proposals he has brought before this honorable House. I am sure that every honorable member recognizes that the duty of the Treasurer on this occasion has not been a pleasant one, and further, that the money which has to be raised to meet the war expenditure of this nation is indispensable to our needs and has to be taken from the pockets of the people, as a contribution to the protection of Australia, not only as a nation but also as part and parcel of the British Empire. The duty placed, not only on the Treasurer, but also on the Government, has been far from pleasant.

No member of any Parliament derives pleasure from having to increase taxes, especially in the circumstances with which this Government is faced, and to the amount that it is compelled to take. Nol merely as a supporter of Great Britain, but also as a nation itself, Australia has to make the maximum effort. The present situation is sufficiently serious to cause the people to concentrate on the huge task which lies ahead. It must be admitted that, in a period of eight months, immensely important advances have been made by the enemy - we have to face it with frankness and candour. It also must be admitted with courage. The job of the Allies has barely commenced, and it is going to impose a strain on the population of every part of the Empire as well as of France. For this purpose, there must be sacrifices of various kinds. There will have to be personal service by soldiers and civilians, including the provision of finance for the upkeep of the fighting forces. The pockets of the people have to be searched by the Government, and private resources must be utilized. Undoubtedly this will prove painful, but equally it is inevitable. The estimate is that, in addition to the present funds, the Government will require £70,000,000 to carry on the war and the defence programme to the middle of next year. It is proposed to acquire £50,000,000, or just over 70 per cent, of the total amount, by borrowing, and the balance of £20,000,000 ‘by means of further taxation. The fact is, that the Commonwealth taxing machine is only one of seven taxing machines in Australia, all of which have formed the habit of making large collections irrespective of war conditions. There ought to be the hope and belief that there is a willingness on the part of the people to shoulder the burden, knowing that it is part of the price of victory, and there should be sympathy with the Treasurer in his unpleasant duty of making new imposts. There has clearly been an attempt to spread the charges. The sales tax will be felt by every body, In fact, all of the new taxes will -affect the community as a whole, either directly or indirectly, and it is of no use to pretend that they will not be detrimental to the industrial and commercial activities of the Commonwealth. There are to be, quite properly in war: time, special collections from profits made by companies in excess of 8 per cent. In this way, the Government aims at tapping the means of those who, on the one hand, can best afford to pay, and on the ‘ other hand have most to defend in the struggle to preserve Australia from the clutches of Hitler. In this connexion, the enlargement of the land tax, which for the most part reaches only well-to-do individuals or companies, should be accepted with equanimity, particularly as it is only a return to previous rates. The rank and file will be brought into the field of contribution through customs and excise duties, and that small section of the community which may be included among the rich will be caught by means of increased duties on the estates of deceased persons. The small class which consists of direct payers of income tax will have to find the not-inconsiderable additional sum of £3,000,000. Thus, whilst new charges are to be shared by tho masses, it must be admitted that, in framing its financial policy, the Government has by no means permitted to escape those who are considered to be in superior circumstances. Roughly, the new taxation is one-half direct and one-half indirect. In time of war, if not ordinarily, it ought to be recognized that the duty of the nation is the duty of all of its citizens; that, as a matter of justice, none should escape, since every person in the Commonwealth will benefit beyond the possibility of appraisement through the overthrow of Hitlerism, for which this outpouring of so many scores of millions of pounds is both requisite and inevitable. Thanks to the British Government, and more particularly to the Royal Navy for having kept the sea routes open, the export industries of this country are in a relatively strong position and are the principal buttresses to the internal as well as the external economy of the Commonwealth. Information just to hand discloses that from March of last year to March of this year the deposits in the nine trading banks increased by £30,800,000, and the advances receded by £8,SOO,000. The margin advanced during the year from £36,200,000 to £74,800,000” This is not money which belongs to the banks; they are merely the custodians of the funds of their customers. The position suggests that the country is in a sufficiently healthy financial condition to accept the new taxation without shrinking, and also to subscribe to the war’ loans that will need to be launched between now and June of next year. There is evidence of the fact that the Government does not raid the people in order to keep the proceeds in the Treasury, but returns the money to the nation through expenditure on defence and war services. From the aspect of cold economics, these disbursements are unproductive, but from a practical consideration of realities emerges the conviction that they are productive of ultimate immunity from conquest. Hence all classes are required to understand that the Government is taxing them for their own good, for the support of public safety, for the honour of Australia, and for the stupendously important purpose of -financing the cause of the Allies in a war that has to be fought to a finish, if life is to be worth living, and in a struggle which has to be prosecuted to a successful achievement. Heavy as the cost may be in money - more, we sincerely hope, than in human life - it fades into insignificance compared with the value of victory. It was with due regard to these factors that the Government framed its financial policy and the taxation proposals that arc now presented to this honorable House for its acceptance. The Government gave full consideration to the recognized principles of taxation enunciated by Adam Smith. In a report presented by the Royal Commission on Taxation in 1920, seven commissioners representing widely different sections of the community emphasized their full adherence to the four principles of taxation which the Government has taken into consideration. Thee four principles are -

The subjects of every State ought to contribute towards the support of the Government as nearly as possible in proportion to their respective abilities, namely, in proportion to tlie revenue which they respectively enjoy under the protection of the State;
The tax which each individual is bound to pay ought to bc certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought to be clear and plain to the contributor and to every other person.
Every tax ought to bc so levied at tlie time or in the manner in which it is most likely to be “ convenient for the contributor to pay it;
Every .tax ought to be so contrived as both to take, out and keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the State.

The Government, I submit, has paid full and ample regard to these long-established principles in the principles it has brought before this House by virtue of its taxation proposals. Having to find £20,000,000 by means of direct or indirect taxation, it has canvassed and surveyed the whole of the possibilities of obtaining that revenue, and has come to the definite conclusion, by the most scientific means at its disposal, to find one-half from indirect taxation and onehalf from direct taxation. I have always held the opinion that, in the final analysis, the great bulk of taxation is found by the worker and the producer. Those are two terminal points which cannot pass on the imposts. “When I heard an honorable member of this House state this afternoon that the Government had paid no regard to a certain field of taxation on the lower ranges of income* I immediately aroused myself to the fact that the bulk of the £10,000,000 of indirect taxation will bc found by that class of consumer or resident of Australia which is not attacked by a direct form of taxation. The Government had that in mind in formulating its proposals.

Mr Dedman:

– It deliberately wanted to tax the lower class.

Mr FADDEN:

– It did not deliberately want to do that. No government deliberately wants to attack anybody. But in the circumstances in which this Government finds itself to-day, it has to tax the people in order to find the wherewithal to save the very classes and institutions with which we are associated to-day. We are faced with the indespensible necessity of protecting all that we hold dear; all that we define as freedom in our community. I repeat that the Government, being faced with that position, has endeavoured to spread the burden of that indespensible necessity as equitably as possible among all sections of the Australian people. I believe that discerning and fair-minded people will recognize that the Government, having regard to all of the circumstances, has done a very good job indeed.

Mr Holt:

– Is it not a fact that foodstuffs are completely free from sales tax?

Mr FADDEN:

– Yes ; all basic materials and foodstuffs are exempt from sales tax.

Mr FADDEN:

– Do honorable members opposite deny that sales tax was imposed by the Scullin-Theodore Government on building materials, and will they further deny that the cost of housing is a considerable factor in the cost of living ?

Mr Bernard Corser:

– Were agricultural implements excluded from the sales tax by the Scullin Government?

Mr FADDEN:

– They were not; but they are now excluded from it.

I wish to touch upon several matters that were dealt with last night by the right honorable member for Yarra (Mr. Scullin). I have read the report of the speech of the right honorable member, though I did not have the pleasure of hearing him. I always give close attention to any utterance that falls from the right honorable gentleman’s lips in this House. I feel, personally, that his remarks are always worthy of the greatest possible respect. His speech last night was constructive and decidedly helpful in relation to certain aspects of the Government’s taxation proposals, and I am sure that the Government will study his survey with close attention. He has had many years of experience in the matters upon which he touched, and his remarks were arresting.

With regard to the allowance of the rebate in the assessment of shareholders, it must be agreed that there are arguments for its withdrawal as well as for itsretention.

The arguments in favour of its withdrawal were put by the right honorable member for Yarra, and do not require any elaboration. The Commonwealth scheme of taxation has always provided for rebate to be allowed to shareholders in respect of dividends paid out of profits which have been taxed in the hands of the company. It must be remembered that dividend income differs from other property income such as rents and interest by reason of the fact that the dividends have previously borne tax as profit in the hands of the company. Even the allowance of the rebate does not always fully relieve the taxpayer from his liability to tax, as the inclusion of the dividend in his income increases the rate of tax payable on his other income. The withdrawal of the rebate would be particularly hard in the case of holding company in that the dividend would be taxed once in the hands of the operating company as profits and again in the hands

The plain fact is that royal commission after royal commission which has inquired into our taxation system, has recommended the continuance of the rebate system. The last Royal Commission on Taxation, after having taken advantage of all available information on the subject and having made an exhaustive inquiry, came to the conclusion that the company was virtually the agent of the shareholder and was the source from which we get the tax. The company pays a basic standard rate which, in fact, is an instalment of taxation on behalf of the shareholder. The shareholder is taxed on his dividend income and also on other income, but he receives a rebate in respect of what the company has paid, for it is realized and appreciated that the company is his agent. If, in addition to the tax imposed on the company, a tax is also imposed upon the shareholder on the profits that filter through to him, and he is given no rebate, it must be obvious that the same profit is taxed twice - once in the hands of the company, and again in the hands of the shareholder. It is on that account that successive royal commissions have recommended adherence to the rebate system. Formerly the method adopted was to tax the company on the undistributed profits and to tax the shareholder on the distributed profits, but it was considered that that method was cumbersome, and that thepresent method was a decided improvement. I am quite prepared to concede that there are arguments for and against the rebating system, but it would certainly inflict a serious hardship on shareholders at the present time to abolish the rebate without taking into account the conditions under which it is made. Certain taxpayers would be obliged to pay an extremely high and inequitable rate. The right honorable member for Yarra cited the case last night of a preference shareholder in a company who received £1,400 in

A man with an income of £1,400 from preference share dividends who has also £1,000 of other taxable income from rent would pay £385 in tax. He would pay on the £1,000 at the £2,400 rate, and he would also pay on the £1,400, at the £2,400 rate; but in existing circumstances he would receive a rebate of the tax paid by the company as his agent on his preference share income. That would bring his total tax down to £245. If however his income were £1,000 from rent only, and dividend income were not taken into account, he would pay only £87 10s. It must therefore be apparent that it would be quite inequitable to refuse to grant him the rebate now allowable.

Mr Curtin:

– I suggest that that does not follow the Adam Smith principle to which the Minister has referred.

Mr FADDEN:

-I admit that there are anomalies, but we should not try to get rid of an anomaly by means of an inequity. Although a man may obtain a rebate of the 2s. in the £1 already paid by the company and assessed against him, he still has to pay income tax at a higher rate because his income is of a composite character.

For the assistance of honorable members I give the following examples to show the effect of the inclusion of dividends with the taxable income from other sources and the effect of the withdrawal of the rebate on dividends: -

The above calculations are based on the rates proposed to be applied for the next financial year, i.e., 1940-1941.

It is to be noted that the inclusion of £1,400 dividends in the taxable income has the effect of increasing the tax payable on £1,000 rent by £72 18s. 4d. from £87 10s. to £160 8s. 4d.

The above calculations are based on the rates of tax proposed to be applied for the next financial year, i.e., 1940-1941.

The above calculations are based on the rates of tax proposed to be applied for the next financial year, i.e. 1940-1941.

The above calculations arc based on the rates of tax proposed to be applied for the next financial year, i.e., 1940-1941.

The right honorable member for Yarra also complained that a taxpayer receiving income from the profits of a company might receive a rebate of 2s. in the £1 whereas the company may have paid at the old rate of1s.11/8d. in the £1. It is quite true that that may happen, but it is impracticable to follow the apportion-‘ ment of the income to its farthest point. Admittedly there is an anomaly here also, but would it be just to. remove an advantage that a taxpayer with a small income may get, simply because a taxpayer with a big income may obtain some greater advantage? I could prove by numerous examples that men with composite incomes pay at a much higher rate” than persons with incomes from only one source, and I think it will be generally agreed that very few taxpayers who enjoy an income of £1,400 a year from dividends have no income from any other source’. Such taxpayers in practically every instance have composite incomes and because of that fact they have to pay at a higher rate than would otherwise apply. I cannot deny the contention of the right honorable member for Yarra that a taxpayer with dividend income may obtain a rebate of 2s. in the £1 in some instances although the company may have paid only1s.11/8d. in the £1, but I remind the House that the Taxation Commission after fully considering this whole matter came to the conclusion that the difficulty in apportioning the income to the year in which the profit was made was so great that the present method was’ the best that could be adopted.

The adoption of a standard rate of rebate,’ irrespective of the rate at which the company was taxed on the profits from which the dividends were paid, was one of the basic recommendations of the Royal Commission on Taxation presided over by Sir David Ferguson, and was designed to simplify rebate calculations in the interests both of taxpayers and of the Taxation Department. Previously rebates were calculated on the basis of the actual rates of tax paid by the company, and as dividends were often paid out of the accumulated profits of several years, and as the company rate has varied in different years, it followed that various portions of each dividend were subject to a different rate of rebate. In recommending a standard rate of rebate the royal commission considered that the rebate shouldbe the rate payable in the year of assessment. In support of that view, regard was had to the fact that where a shareholder whose individual rate is less than the standard rate is to be allowed rebate at his own rate, the rate adopted is that payable in the year in which he is assessed on his dividends, since that is the rate at which his income is being assessed. To rebate dividends at the rate applicable to the current year in one; instance - where the rebate is allowable at individual rate- and at the rate applicable to the previous year in another instancewhere the rebate is allowable at company rate - would be confusing and without justification. The point taken by the right honorable gentleman was a good one, but, as I have indicated, that’ problem was thoroughly investigated by the royal commission.

Mr Beasley:

– If a company paid 1s. 11/8d. would a shareholder receive a rebate of 2s.?

Mr FADDEN:

– The company has paid 1s.11/8d., but its shareholders would get the rate applicable to the company in the year of assessment, and this year it happens to be 2s. However, the reverse could easily bo the case, and has happened for years. In previous years when the rate of company taxation was progressively decreased, the rate applicable was the last rate, namely, the minimum rate. Consequently this provision cuts both ways. It is anomalous, I admit; but as I have already said, the point was fully investigated by the royal commission.

Mr Beasley:

– That anomaly was corrected in legislation recently passed by the New South Wales Parliament.

Mr FADDEN:

– This matter was in quired into by the royal commission whose main recommendation was that the rebate should be given at the rate applying to the year of assessment.

The right honorable member for Yarra also touched upon the exemption of 25 per cent. of distributable income in arriving at the amount of taxable income upon which the further tax of1s. is payable. He stated that a company, by taking advantage of that provision, could build up reserves and issue bonus shares. If that happened, the company would not escape taxation, because the issue of bonus shares out of accumulated profits is a distribution and, therefore, subject to tax.

Mr Curtin:

– The right honorable member had in mind not so much the distribution of shares as the building up of reserves.

Mr FADDEN:

– A company would not escape tax by that means if it eventually distributed bonus shares. The reason for this 25 per cent. exemption was to bring public companies into line, as far as possible, with private companies. The private company is allowed a reserve of 331/3 per cent. If it does not distribute 662/3 per cent. of its profits that percentage of profits is nevertheless deemed to be distributed, and tax is accordingly levied on that basis. A company is allowed reserves amounting to 331/3 per cent. of its profits. Underthe Government’s present proposal it is intended to reduce that margin to 25 per cent., and also to allow a margin of 25 per cent. in respect of public companies. The reason for this alteration is obvious. Unless it is an old-established and prosperous concern, which has created substantial reserves, a company cannot possibly distribute 100 per cent. of its profits. But there is a difference between the profits of the company and its taxable income. Under the act many companies which can show a loss have, at the same time, a taxable income. Certain debits are disallowed for taxation purposes. The Commonwealth act, for instance, does not allow depreciation on buildings, fencing, &c., but a prudent company will provide depreciation in respect of such items. There is also a disallowance for excessive writing off of bad debts and depreciation of stocks, and other items. Consequently, it ‘is’ deemed advisable to allow a margin of 25 per cent. in respect of reserves in order to enable a company to remain stable by discouraging it from - straining its resources in order to distribute profits. [Leave to continue given.]

Not only the right honorable member for Yarra, but also other honorable members, took the Government to task because of a disparity in the increases in respect of different rates of tax. The right honorable gentleman quoted figures to show that whereas the rate in respect of an income of £350 was increased by 50 per cent., other increases were as follows : £400, 66 per cent.; £500, 25 per cent.; £4,000, 2.7 per cent. ; £5,000, 1.7 per cent. ; and £10,000, 3.7 percent. In arriving at those percentages the right honorable gentleman dealt only with property tax, but, I submit, that it is not a fair basis of comparison. For instance, in the new grades which have been introduced property and personal exertion rates have been brought together more closely in approaching the £4,000 and higher income groups. Previously, these rates were out of all proportion. In order to secure greater conformity with the practice adopted by the States, the Government had to give consideration to not only its own taxing requirements, but also the incidence of taxes levied by the States. Take, for example, an income of £3,000. In respect of personal exertion the previous rate was 21.05d., and in respect of property, 44.69d. These rates have been increased to 35d. and 45. 5d. respectively. However, these figures scarcely provide a fair basis for comparison. I repeat that the Government was obliged to give full consideration to the degree to which the States have entered the fields of taxation available to the Commonwealth. We must appreciate that during the last seven or ten years every State Government has progressively increased taxation, particularly in respect of incomes over the £1,000 mark, so that to-day little or no margin is left to the Commonwealth in this field. The point I emphasize is illustrated by the following comparisons of proposed 1940-41 income tax on a net income of £4,000 with taxes on other incomes : -

PROPERTY INCOME TAX WHERE LOWEST STATE TAX DEDUCTED.

£4,000 is approximately eleven times greater than £350. Tax on £350 is £4, tax on £4.000 is £70”.. £702 tax is 175 times greater than £4. £4,000 is ten times greater than £400. Tax on £400 is £7, tax on £4,000 is £702. £702 tax is 100 times greater than £7. £4,000 is eight times greater than £500. Tax on £500 is £11, tax on £4,000 is £702. £702 tax is63 times greater than £11.

PROPERTY INCOME TAX WHERE HIGHEST STATE TAX DEDUCTED.

£4,000 is approximately eleven times greater than £350. Tax on £350 is £3. tax on £4.000 is £702. £702 tax is 234 times greater than £3. £4,000 is ten times greater than £400. Tax on £400 is £5, tax on £4,000 is £702. £702 tax is 140 times greater than £5. £4.000 iseight times greater than £500. Tax on £500 is £10. tax on £4.000 is £702. £702 tax is 70 times greater than £10.

Mr.Curtin. - I agree.

Mr FADDEN:

– Yet the right honorable gentleman for Yarra quoted figure dealing withhis case. The point I emphasize is that whilst the Government allows a residue of 92.86 per cent. onan income of £350, and 88.8 per cent. on an income of £500, the percentage of residue to net income in the case of the £4,000 man is 62 per cent., 56.72 per cent. in respect of the £5,000 man and 41.81 per cent. in respect of the £10,000 man. If honorable members want a test of ability to pay and of equity, in these taxation proposals, ample evidence is to be found in the residual amounts whichI have cited.

Mr Dedman:

– Equity is only amatter of opinion.

Mr FADDEN:

– The honorable member expressed his opinion this afternoon and I am now giving mine. It is not only a matter of percentage of increases. The House has also to consider the quantum of taxation or its monetary effect, and from whatever angle we view the increases it will be found that the Government’s proposals are reasonable. The following table shows the effect of the Government’s proposed increases on incomes from personal exertion and from property : -

The point that I wish to emphasize is that it is not a matter of the percentage by which the Government has increased the tax on higher income, but the amount extracted as compared with that collected previously. I repeat that State governments have not only successively increased taxes, hut they have also increased taxes on the higher grades of income, such as £1,000 a year and over. The Commonwealth Government, in its original taxation proposals, took the highest possible amount, as I have shown, from the higher grades of income. Previously, on a net income of £350, the Commonwealth Government collected only 30s. less than is now proposed and the variation is clearly shown in the table which I have’ cited. Viewed from every aspect, the Government’s proposals, unpleasant as they are, are absolutely essential for the proper protection of the community, and for the continuance of its war effort. The Government has given full and complete consideration to the ability of the taxpayer to pay. Every section of the community has been asked to carry what is considered its fair burden of sacrifice in order to accomplish this gigantic and unprecedented war effort. I shall cite one or two facts in regard to State finances: [Further leave to continue given.] The Government has kept in mind the financial position of the States which have a very limited field of taxation. Direct taxation is their largest field, but that field could not be tapped to a degree that would be detrimental to the welfare and activities of the States.

The Government is faced not only with financing its war efforts, but also with keeping a properly balanced Commonwealth economy. The States, too, have to maintain their activities in order to provide work and alleviate unemployment. Having these facts in mind, the Government’ had to consider the fields it would tap without detriment to the States and I. consider that it has done its work well.

In the last five financial years State taxation has risen from £34,400,000 to £50,500,000, an increase of 47 per cent., Queensland showing the greatest proportional increase. The expenditure of public moneys by the States in administrative services during this period has shown increasing extravagance although no additional service to the public is rendered commensurate with the’ increased cost. For example, in New South Wales there were 25,000 fewer pupils in the schools in 1939 than in 1931.. In this period the cost of education rose from approximately £4,500,000 to £5,500,000. This is an extra increase of £40 for each unit decrease of school enrolments. In the last financial year the loan money required by the States to carry their budgetary deficiencies amounted to £4,250,000. Further overdrafts were asked from the Loan Council in respect of deliberately planned shortages in the current year, even though some of the State budgets were made after the beginning of the war. The treasurers of theStates, with the exception of Tasmania, designed to spend many millions more than in the previous year, which was during peace-time, and which was a peak year. The expenditure of the States on ordinary services from consolidated funds during the nine months of the present financial year to 31st March, 1940, is approximately £101,000,000. Nine-monthly comparisons since the year 1937 are approximately as follows : -

In the last-mentioned period the public should have been enjoying £13,000,000 worth more of police protection, health, education, transport, etc., than they were getting three years previously. Yet there are fewer children to teach, there is more undetected crime, and there has been no apparent improvement of public health. Although personal expenses of private. citizens must be curtailed so that the Commonwealth Government may be supplied with war funds, the State governments are practising extravagance and setting the worst example possible to the population. Between 1st July, 1939, and 31st March, 1940, including seven months of war, the States increased their consolidated fund expenditures by approximately £1,000,000 monthly and over-spent their incomes by almost as much. Such a situation being disturbing and highly discreditable, even in normal circumstances, the Commonwealth Government, in close co-operation with the State, should constantly endeavour to formulate and carry out an effective financial policy; but the major problem with which we are faced to-day is our responsibility and reliability in connexion with our war effort. That should be of paramount importance, not only to the Commonwealth, but also to the States. In our Australian economy there is no room for undue expenditure or governmental extravagance in any shape or form. There must be closer co-operation in the control of expenditure from the public purse. The figures I have cited show definitely the necessity to take the matter in hand and to arrest any drift that would have a detrimental effect, not only upon the Commonwealth, but also upon the States. The Government is faced with the task of having to find a huge amount for war purposes that could notbe forseen twelve months ago. At present we cannot, see the end, and wedo not know to what further degree weshall have to impose taxes or to depend upon the resources of theCommunity in order tocarry our war effort to a successful conclusion.

Mr CURTIN:
Leader of theOpposition · Fremantle

– I am rather astonished at theliberties which the Assistant Treasurer (Mr. Fadden) took in criticizing the budgetary position and administrative methods of the States of the mainland, Tasmania being excluded. He has said that in recent years therehasbeen a rising tide of expenditure in States which havehad increased revenues, and that that is a development which has hampered, to some degree, the activity of the Commonwealth in dealing with its war effort. I can safely leave a rejoinder to that contention to the Treasurers of the States. But every charge made against the States is a charge which also can be made against the Commonwealth. The Commonwealth has had a rising tide of revenue, and of expenditure, quite apart from the contributions that have, been made from the Commonwealth revenue fund for purposes of national defence. As a matter of fact, last year we had a record tax yield in the Commonwealth and also in the States, but this Government has been prodigal in its expenditure, although it has not provided very much from revenue for defence requirements.

Mr CURTIN:

From the aspect of the banking system, there has been an extraordinary development in its handling of the monetary problems of Australia. The Board of Directors of the Commonwealth Bank has either read the report of the Royal Commission on Banking, or it has been influenced by the present Treasurer who, it will be recalled, was not an endorsed United Australia party candidate at the last federal elections, and for that reason, f.ould naturally be expected to bring to the discussion of financial principles at least some departure from the orthodox methods of his predecessors. It is rather remarkable that the Commonwealth Bank will not only advance money against wheat that is not sold, and which the Minister for Commerce says cannot be sold until ships are found to convey it to the world’s markets, but it will also give a £12,000,000 advance to the Commonwealth Government for the purpose of war expenditure, which is an asset only in the sense that an insurance premium a gai nst fire is a n asset. I repeat that T have no objection to what is being done ; I am merely drawing attention to it. In addition, the Commonwealth Bank made firm subscriptions to the two recent internal loans floated on the Australian market. This is a splendid record of the utilization of national credit by a Nationalist Government in defiance of everything that it said on election platforms. As to the degree to which this can be carried on, that is a matter depending at present on variable factors. I think that the Government is quite right to mix loan programmes with programmes of taxation. There are limits to any one kind of treatment of the financial needs of a nation in time of war ; there are definite limits to taxation ; there are limits to loan possibilities, and there are limits to the issue of central bank credits. The Treasurer says - I am prepared to accept his general hypothesis - that he has struck a balance between the three important sources which arn available to the Government for conducting the war. I would need much more precise information than has been made available to me to find fault with the dissection as between taxation and the total of loan account, but the honorable gentleman does not indicate to us - I do not expect it - what proportion of the £50,000,000 is to be obtained from the public. Probably ‘ the Treasurer will obtain as much from the public as : he can, and then will find out what is to be done as he goes along. He proposes to take £20,000,000 from the people by way of taxation, and I submit that he has divided that amount by means of a stab in the dark. He says that he will take half from direct taxation, and the other half from indirect taxation, but where will that get us? In dealing with direct taxation, the Treasurer has said that we have to take into account all taxes that the States have imposed - that we cannot increase Commonwealth taxation on the higher ranges of income because the incidence of State taxation falls very heavily on those categories. Therefore, he says, we are driven to a greater exploitation of the middle range - as if, in recent years, the States have not been savagely imposing taxation on the middle ranges of income, and indeed on the lowest ranges of income. There is hardly a working man in any of the States who. once he gets a slight margin above the basic wage, is not subject to direct taxation at the source. Because of that, I say to the Treasurer that we are not here to-day to correct all the anomalies of the peace-time systems of direct taxation; it is not our business to reconcile State and Federal taxes and credits, and provide, as it were, a new basis for direct taxation in Australia; we are concerned about contrasting what the position was in time of peace with the obligation now facing this House to find money for the war. We should bring ourselves to set out what increased burden every man in Australia will have to bear as the result of the fact that we are now at war. We are not concerned about rebates or about whether or not some men may have to pay twice. Those matters are relatively unimportant, I venture to say. If in this year of w ar a man has an income of £2,400, then, regardless of how he gets his income or what charges have been made upon it, that £2,400 should be subject to the rate of tax that this Parliament prescribes.

Mr Spender:

– The right honorable gentleman said that the rate of interest did not matter much, because it merely meant taking money from one pocket and placing it in another. That is ridiculous, because the Commonwealth Bank is bound to meet all legitimate demands made upon it for money. If the Bank issues credit for £10,000,000, it creates a debt for that amount against itself. It is compelled by law to pay all demands in legal tender. The note issue is restricted. That, of course, could be altered by an act of Parliament; but we already have sufficient paper money, and the experience of Germany and other countries after the last war should be a sufficient warning of the danger of inflation by an over issue of paper money. The nation cannot be financed in that way. I was amazed recently to receive a letter stating that Hitler could obtain all the money that he needed free of interest, and that the same thing could be done in Australia. That is not so. The following extract from an address delivered in November, 193b, by Doctor Schacht, the great German banker and economist, may be of interest to honorable members : -

In such an economy a great increase in the money in circulation leads necessarily to price and wage increases and thus to a strained state of affairs which in the end causes an economic depression. But NationalSocialism introduced in Germany a stateregulated economy which made it possible to prevent price mid wage increases. This did away with one of the main objections to a financing of production through credit. Awd ho credit was used to produce a greater volume of goods, and the only problem which remained was the determination of just how far thi, money creation could go. For money creation by the State always contains the seed of excess which leads to inflation. The fact that the newly-created money would be covered by newly-created goods was not the only point: the type of goods also had to be considered. Simply expressed, the problem was aB follows: The credit money, made available for the armament program, produced a demand for consumption goods, insofar as it was paid out in the form of wages and salaries. However, the armament manufacturers deliver military goods which are indeed produced but not consumed. This leads to two conclusions: first, care must be taken that in addition to armament production,, a volume of consumption goods is produced which is sufficient for tin’ needs of the population, including all those working for rearmament, and second, the les? is consumed, the more workers can be allotted to armaments; this, however, leads to greater consumption and thus to increased labor requirements on the part of the consumption goods industries. Thus standard of living ami extent of rearmament stand in inverse relation to each other. The less I consume, the more 1 save, and the more I save, the more I can spend on armaments. This means that armaments in the final analysis can be financed not through money creation but only through savings.

This quotation shows the method adopted by Germany to enable it to carry out its great armament policy. By ite absolute control of wages, prices, labour and thebanking system it was able to raise large sums on short term advances from the Reichsbank. As the demands came upon the bank to honour those credits, long-term loans had to be issued to repay the bank and enable it to function. As Dr. Schacht states, “In the final analysis it can be financed, not by money creation, but only through savings “ ; in other words, by loans from the public; and this policy is clearly demonstrated in the report of the League of Nations.

I was amused at the dismal failure of the honorable member for Corio (Mr. Dedman) to expound the principles of social credit and show how the war could be financed by bank credits free of interest. I listened with interest to his recital of his meeting with two farmers at a Geelong conference. One of these men, who had done fairly well out of his farming operations, informed the honorable member that he had leased his land and intended to retire. According to’ the honorable member, the correct thing to do with that sort of man was to confiscate the whole of his property. That is a nice sort of teaching to instill into the minds of the young people of Australia. It is not even good socialism, although I dare say that it is ideal communism.

I wish now to quote from the report issued by the League of Nations on Public Finance from 1928 to 1935. It said with respect to Germany that, although Hitler was able to obtain from the Reichsbank short-term loans free of interest, so soon as demands were made on the bank, he had to issue loans publicly to effect repayment. The report stated that in 1934 a 4 per cent, loan of 300,000,000 reichsmarks was offered at 95 per cent.; that in 1935 a 41/2 per cent, loan of 500,000,000 reichsmarks was issued at 98 per cent.; and that for the two years which ended in 1936 consolidation loans totalling about 3,400,000,000 reichsmarks had been issued at 41/2 per cent. The report reads -

The41/2 per cent., 1935, loan was issued in January, 1935, for a sum of 500,000,000 reichsmarks, and was taken up entirely by the “ Deutsche Girozentrale “ and placed by it among the various savings banks. The issue price was 98 per cent, for the State, while the acquisition price for the savings banks was 981/4 per cent. The repayment of the loan is to be effected within 27 years, from March, 1936. In virtue of a special order of February, 1935, by the Minister’ of National Economy, regarding the liquidity of savings and clearing banks, these institutes are authorized to invest up to 50 per cent, of their liquid balances (20 per cent, of the clearing and 10 per cent, of the savings depositsin the abovementioned 41/2 per cent., 1935, Reich loan.

The report pointed out later that the yield of loans issued at 41/2 per cent, and taken up by the savings banks and clearing banks was used for consolidation purposes, and then went on to state -

Another 41/2 per cent, loan for 700,000,000 reichsmarks was issued for the same purpose. The subscription was. open from the 29th June to the 14th July, 1936. This consolidation of short-dated indebtedness, by its conversion into long-term debt, had reached in June, 1936, about 3,400,000,000 reichsmarks, 1,500,000,000 of which was raised by public subscription; thebalance was taken upby credit institutions as follows: 1,1 25,000,000 by the savings banks; 600.000.000 to 700.000,000 by the insurance companies; and 75,000,000 by the co-operative societies.

The League of Nations made it perfectly clear that what the Reichsbank did was similar to what has been done in Australia. I believe that the Commonwealth has issued short-term loans amounting to approximately £88,000,000. That is in the nature of inflation. I do not say that anything unsafe has been done. On the contrary, I say that while we are at war we may have to take every risk in order to see that funds are provided in order to enable the Government to carry on. The Leader of the Opposition and the right honorable member for Yarra, who have been expounding the policy of the issue of credits by the Commonwealth Bank, should state unequivocally whether they agree with the social credit propaganda. It is known that certain concessions can be granted, not only by the Commonwealth Bank, but also by the trading banks, in order to assist the nation in time of need. These honorable gentlemen should tell the people to what length they are prepared to go in the direction of banking reform. The sooner they do so, the better itwill be both for themselves and for us. The Leader of the Opposition to-night levelled against the Commonwealth Bank a charge in respect of its attitude to the Labour Administration of 1929-31. From his remarks, one would imagine that the Commonwealth Bank had done everything possible to oppress that Government. At the end of September, 1929, the amount which the Commonwealth Bank had invested in government and municipal securities totalled £1,015,000

Mr Paterson:

– In September, 1929, the Bruce-Page Government was still in power.

Mr GREGORY:

– In March, 1930, when the Labour Administration was in power, the amount was £1,019,000 and

At the end of September, 1931, it was £31,440,000. It will thus be seen that during that short intervening period the Commonwealth Bank had provided government and municipal authorities with no less than £30,000,000. From this one would -assume the Government did not try very hard to redeem its promise to the farmers. That, I consider, is a very fair answer to the statement of the right honorable member for Yarra. I hope that the people of this country will not be misled into the belief that the Commonwealth Bank can make everybody happy and prosperous simply by issuing credits. Mussolini once told his people, that he did not see how it was possible for them to make something out of nothing. Those two great countries, Germany and Italy, which have been hard pressed financially during the last ten or twelve years, but particularly during the last six years, although able to obtain from -their banking institutions a certain degree of assistance in the early stages, ultimately had to issue loans publicly in order to enable them to place those institutions in a sound financial position. The Avar must be financed by taxation and loans and we may rely on the fullest co-operation of the Commonwealth Bank in the latter course.

Mr POLLARD:
Ballarat

– 1 am conscious of the fact that the taxation proposals of the Government will give it authority to raise a very large sum from, the taxpayers of this country. I also realize that from time to time, from the revenue so derived, there will be allocations to the States for various purposes. I hope that the degree of. partiality shown .to some of the States under the Wheat Industry Assistance Act will .not be repeated in respect of any allocation that may be made from funds raised by these taxation proposals. Yesterday, the Minister for .Commerce (Mr. Archie Cameron), when asked to make available a summary of the plans submitted to him by the various State governments for dealing with marginal wheat lands and other problems of the wheat industry generally refused to do so. To-day the honorable gentleman also declined to table a copy of the report of the proceedings of the Australian Agricultural Council which discussed the subject.

Mr Anthony:

– Such reports are confidential;

Mr POLLARD:

– Not at all, as the honorable member for Richmond will realize when he has had a longer parliamentary experience. On previous occasions when these reports hae been asked for by honorable members they have been tabled.

Mr Spender:

– What has this to do with the financial statement?

Mr POLLARD:

– A great deal 1 I am asking that the Treasurer shall not follow the unfortunate example set by .his colleague, the Minister for Commerce. Some extraordinary revelations have been made concerning the allocation of the money provided to help in solving the marginal wheat lands problem. We find, first, that no allocation has been made for Victoria ; and, secondly, that the Minister has alleged that the Government of Victoria has submitted no plan for dealing with this subject. The Minister’s statement in that regard was incorrect, as I shall show by referring to his remarks in the House yesterday.

Mr Spender:

– I again ask what this has to do with the financial statement?

Mr POLLARD:

– I am endeavouring to guide the Treasurer away from the path of destruction which the Minister for Commerce seems determined to take.

The ACTING DEPUTY SPEAKER (Mr. Rosevear). - The honorable member’s desire to guide the Treasurer may be laudable; but I can discover in the financial statement nothing dealing with the subject which he is discussing. 1 ask him to confine his remarks to the subject before the Chair.

Mr POLLARD:

– I shall take another opportunity to deal with the matter.

Debate (on motion by Mr. Archie Cameron ) adjourned.

page 684

ADJOURNMENT

Marginal Wheat Lands - Allocation of Grants to States

Motion (by Mr. Spender) proposed -

That the House do now adjourn.

Mr POLLARD:
Ballarat

.- Continuing my remarks, which were interrupted a few moments ago, I point out that an unprecedented position has arisen in connexion with the allocation of Commonwealth funds for dealing with the marginal wheat lands problem. The attitude of the Minister for Commerce (Mr. Archie Cameron) on this subject in relation to Victoria is contradictory. The honorable gentleman said that the Government of Victoria had submitted no plans for dealing with the subject. I suggest that in making that statement he showed his resentment against Victoria and also his desire to victimize that State. In support of my contention I direct attention to paragraph 7 of the statement which the Minister made on this subject in the House yesterday. It reads - . . After the conference in Canberra in November, 1038, the Minister for Commerce asked each State Minister of Agriculture to supply information under six headings regarding marginal areas and State Government measures in connexion therewith. The information sought was as follows:-

Generally, has your State a formulated plan for dealing with marginal farmers? If so, would you furnish this department with lull details?

The Minister then said -

In his reply to this letter on the 9th December, 1938, the Minister ‘ for Agriculture of Victoria advised that the information sought would bc furnished as early as practicable. On the 2nd March. 1939, a further letter was addressed by the secretary, Department of Commerce, to the Director of Agriculture, Melbourne, informing him that replies had been received from all States except Victoria on this subject. The information was furnished by the Director of Agriculture on the 12th April, 1939.

The comment might be made here that nom> of the States at this stage submitted actual plans in connexion with marginal area relief.

The Federal Cabinet has voted £500,000 to New South Wales, Victoria, South Australia and Western Australia towards the cost of transferring wheat-growers from marginal lands.

Mr Archie Cameron:

– That report is inaccurate.

Mr POLLARD:

– It continues-

This, it was announced to-night by Mr. Menzies, would be negotiated between the Minister for Commerce and the State Ministers for Agriculture.

Since Cabinet came to that decision, under which Victoria was to share in this distribution, the present Minister for Commerce has come upon the scene, and has excluded Victoria, to the benefit of the State of which he is a representative. This matter should be fully investigated. The Minister went further than that. To-day, replying to a question by the honorable member for Martin (Mr. McCall), who asked whether Cabinet had approved of the allocation or had considered it, he said that Cabinet had not approved of his allocation, and that he had made the allocation acting under statutory authority. Such action on the part of a Minister is unprecedented. The established Cabinet practice is for any Minister, despite any statutory authority which he possesses, to seek final approval of Cabinet for the expenditure, or allocation, of so large a sum of money. I point out t hat the Cabinet includesthe Minister for External Affairs (Mr. McEwen) and the Minister for the Army (Mr. Street), gentlemen who represent substantial numbers of wheat-growers in Victoria, whilst several other honorable members opposite, including the honorable member for Wannon (Mr. Scholfield) and the honorable member for Bendigo (Mr. Rankin), also represent electorates in which there are large numbers of wheat-growers. And last, but not least, the Prime Minister (Mr. Menzies) represents a section of the people of Victoria whose welfare depends upon the well-being of the wheat-growers of that State. The practice in the past has been for the Minister directly concerned to submit matters of this kind for the approval of Cabinet, in order that other Ministers can ensure that money devoted for this purpose is distributed equitably. In these circumstances, I am astounded to learn that the dictatorial Minister for Commerce has arbitrarily allocated this money, and has excluded Victoria from any share of it. We have been informed, of course, that this money has been allocated purely for the purpose of dealing with marginal areas, and that, in the opinion of the Minister, the plan submitted by the Victorian Government was unsuitable. However, he did not, in common fairness, submit his allocation to Cabinet, and, consequently, denied to other Ministers to whom I have referred the opportunity to express an opinion, or to ensure that the money would be equitably distributed. What are the facts of the case? I have been obliged to obtain them independently of the Minister, who has refused to make the files available to me. The facts are that the Victorian Minister for Agriculture submitted Victoria’s plan only two days after the final plan of New South Wales was submitted. On this point I do not ask the House to take my word. Let us see what the Minister himself has said -

The Minister for Agriculture in Western Australia furnished details of his State’s plan in a letter dated the 31st March, 1940. On the 26th March, 1940, further communications were addressed to the Ministers for Agriculture in New South Wales and Victoria requesting them to expedite particulars of their proposals.

Like Victoria, all of the other States were late with their plans.

– Because there; is a difference of opinion between the Minister for Commerce and the Victorian Government that government is not to receive any aid and the wheat-farmers in Victoria are to suffer. That is an entirely wrong principle. The act does confer certain discretionary powers upon the Minister, but we are entitled to expect from those Commonwealth Ministers who represent Victorian constituencies a statement of their views on what the Minister for Commerce has done. For my part, J consider that it has been clearly established in this Parliament during the present session that many, possibly the majority, of the farmers in Wimmera and other districts in Victoria are in a distressed condition. It has also been made clear by the Minister that no further grant is to be made to those farmers, notwithstanding their distress. ‘That a Government which is dominated by a Country party - although entirely different from the Country party in Victoria - should callously allow the farmers to suffer is to be regretted. I am disappointed that the honorable members for Bendigo (Mr. Rankin); Wannon (Mr. Scholfield), Corangamite (Mr. Street) and other honorable members who have wheat-farmers in their electorates, are content to let this decision go without one word of protest. I am convinced that they really have no consideration for the distressed farmers. One would expect that they would want to know why the Minister has exercised a dictatorial power to cut Victoria completely out of the allocation. There is ample justification for assistance to be given to the farmers in Victoria ; their exclusion is not an effective answer to the criticism that has been voiced. We should try to look at problems from an Australian point of view, but Victorian interests should not be neglected. The Minister for Commerce- comes from South Australia and, when Victoria is deprived of its share of the £500,000, South Australia and the other States must get more. That is the net result of it; the farmers in those other States will get a far greater allocation as the result of the Minister’s act than they would otherwise have done. It is entirely unfair. I represent a workers’ electorate, which pays a considerable amount of flour tax. On behalf of my own constituency I say that Victoria has not had a fair deal. The Minister may attempt to justify his decision, but on the facts that have been presented by the honorable member for Wimmera he has given vent to an entirely unwarranted prejudice against Victoria. I trust that the Minister will review his decision and give Victoria the consideration to which it is entitled.

Mr ARCHIE CAMERON:
BarkerMinister for Commerce · CP

Question resolved in the affirmative.

page 691

PAPER

The following paper was presented : -

Medical Research Endowment Act - Report by National Health and Medical Research Council on work done under the Act during 1939.

House adjourned at 11 p.m.

page 692

ANSWERS TO QUESTIONS

The following answers to questions were circulated : -

Cost ok Patent Office

Mr Gregory:

y asked the AttorneyGeneral, upon notice -

What is the present estimated cost of the buildings now being erected for the Patent Office?
What has been (a) the annual revenue, and (b) the annual cost of this office each year for the past five years?

Mr Hughes:
Attorney-General · NORTH SYDNEY, NEW SOUTH WALES · UAP

– The answers to the honorable member’s questions are as follows : - 1.The present estimated cost of the Patent Office building is £117,000. Accommodation is also being provided in the building for the Supreme Court of the Australian Capital Territory.

The annual revenue and cost of the Patent Office each year for the past five years were as follows: -

Barley

Mr Gregory:

y asked the Minister for Commerce, upon notice -

What advances have been made to producers of 2-row barley in Western Australia?
What are the present prospects of a further advance?

Mr Archie Cameron:
CP

– The answers to the honorable member’s questions are as follows: -

Producers of 2-row barley have received two advances to date, amounting to 2s. 3d. less freight for malting quality, 2s. less freight for No. 2 quality, and1s.9d. less freight for lower’ grade.
The present position of the barley pool does not justify a further advance.

War-time Finance.

Mr Barnard:

d asked the Treasurer, upon notice -

Has he examined the bill introduced into the United States of America House of Representatives on the 23rd January last, which has for its object debt free credit for war purposes?
If not, will he do so with a view to the application of such a measure in financing the whole or portion of Australia’s war effort?

Mr Spender:
UAP

– The answers to the honorable member’s questions are as follows : -

A copy of the bill referred to has not been received by the Government. It is understood, however, that details of a bill which has been introduced by a private member in the United States of America House of Representatives have been published in an Australian periodical.
The published details indicate that the scheme provided for in the bill was for the financing of war expenditure by the issue of currency notes. There is no indication that the bill has been, or is likely to be, supported by the Government of the United States of America. The Commonwealth Government is entirely opposed to any such method of financing war expenditure and the introduction of a similar bill in Australia could not be entertained. The views of the Government in regard to war finance are set out at length in the Financial Statement which I made to the House on the 2nd May.

Canberra: Removal of Police Quarters

Mr Mahoney:

y asked the Minister representing the Minister for the Interior, upon notice -

Will the erection of a new hospital in Canberra necessitate the removal of the police quarters’?
If so, where will the new quarters be established ?

Mr Nock:
CP

– The Minister for the Interior has supplied the following answers : -

The new hospital scheme contemplates the subsequent removal of the police court and its activities to another- site.
The proposal is to erect a new police court and accessory buildings near Civic Centre.

Commonwealth Arbitration Cases

Mr Hughes:
UAP

s. - On the 23rd April, the honorable member for Bass (Mr. Barnard) asked the following questions, upon notice: -

How many cases are listed for hearing by the Commonwealth Court of Conciliation and Arbitration by (a), the Full Court, and (b) a single judge? ‘
What are the organizations concerned?

I then promised the honorable member that the information would be obtained. I am now able to supply the following answers : - 1. (a) 186 cases are listed for hearing by the Full Court. This number includes 175 applications for a review of the basic wage and these applications will be determined in one hearing. (b) 59 part-heard and pending industrial disputes are listed for bearing by single judges of the Court. This number includes applications for variation of current awards grouped to indicate the number of separate hearings necessary for their determination.

The names of the organizations concerned arc set out in the following schedule: -

Names of Organisations concerned in Applications before the Court.

Actors Equity of Australia.

Amalgamated Clothing and Allied Trades Union of Australia.

Amalgamated Engineering Union.

Amalgamated Society of Carpenters and Joiners of Australia.

Association of Railway Professional Officers of Australia.

Australasian Coal and Shale’ Employees Federation.

Australian Institute of Marine and Power Engineers.

Australasian Meat Industry Employees Union.

Australasian Society of Engineers.

Australian Boot Trade Employees -Federation.

Australian Builders Labourers Federation.

Australian Federated Union of Locomotive Enginemen.

Australian Class Workers Union.

Australian Insurance Staffs Federation.

Australian Journalists Association.

Australian Railways Union.

Australian Theatrical and Amusement Employees Association.

Australian Rope and Cordage Workers Union.

Australian Textile Workers Union.

Australian Timber Workers Union.

Australian Saddlery, &c. Workers Employees Federation. . “

Australian Tramway and Motor Omnibus Employees Association.

Australian. Workers Union.

Australian Bank Officials Association.

Blacksmiths Society of Australia.

Boilermakers Society of Australia.

Electrical Trades Union of Australia.

Federated Agricultural Implement Machinery and Ironworkers Association of Australia.

Federated Artificial Fertilizer and Chemical Workers Union of Australia.

Federated Clerks Union of Australia.

Federated Coopers of Australia.

Federated Confectioners Association of Australia. -

Federated Engine Drivers and Firemen’s Association of Australasia.

Federated Felt Hatting Employees Union of Australasia.

Federated Furnishing Trade Society of Australasia.

Federated Gas Employees Industrial Union. Federated Ironworkers Association of Australia.

Federated Liquor and Allied Trades Employees Union of Australasia.

Federated Marine Stewards and Pantrymen’s Association of Australasia.

Federated ‘Mining Mechanics Association of Australasia.

Federated Miller and Mill Employees Association of Australasia.

Federated Moulders (Metals) Union of. Australia.

Federated Municipal and . Shire Councils Employees Union of Australia.

Federated Rubber and Allied Workers Union of Australia.

Federated Ship Painters and Dockers Union of Australia.

Federated Shipwrights and Ship Constructors Association of Australia.

Federated Storemen and Packers Union of Australia.

Federated Stovemakers and Porcelain Enamellers Association of Australia.

Federation of Salaried Officers of Railways Commissioners.

Food Preservers Union of Australia.

Health Inspectors Association of Australia.

Manufacturing Grocers Employees Federation of Australia..

Marine Cooks, Bakers ‘and Butchers Association of Australasia.

Merchant Service Guild of Australasia.

Municipal Officers Association of Australia.

Musicians Union of Australia.

National Union of Railwaymen of Australia.

North Australian Workers Union.

Operative Stonemasons Society of Australia.

Permanent and Casual Wharf Labourers Union of Australia.

Plumbers and Gasfitters Employees Union’ ofAustralia.

Printing’ Industry Employees Union of Australia.

Professional Radio Employees Institute of Australasia.

Seamens Union of Australasia.

Sheet Metal Working Industrial Union of Australia.

TransportWorkers Union of Australia, . ‘

Trustee Companies Officers Association.. .

Vehicle Builders Employees Federation of’ Australia.

Waterside Workers Federation of Australia,

Wool and Basil Workers Federation of Australia.

Buffalofly Pest

Mr Green:

n asked the Minister in charge of Scientific and Industrial Research, upon notice -

What is the present position with regard to the buffalo fly pest . among the cattle in the sub-tropical andtropical portions (a) in the Kimberley district of Western Australia; (b) in Queensland, and (c) in the northern parts of New South Wales?
What success has been made with the experiments to find a means of dealing with the pest, at the station where the investigations have been in progress in the Northern Territory, or elsewhere?

Sir Henry Gullett:
Minister in charge of Scientific and Industrial Research · HENTY, VICTORIA · UAP

– The answers to the .honorable member’s questions are as follows : - 1. (a) Kimberley districts of Western Aus; tralia. - No further information, has been received by the Council .for Scientific and Industrial .Research in relation to this area since that published in the council’s journal in 1931 (volume IV., page 240.) (6) Queensland. - In February last the Queensland Department of Agriculture and Stock informed the Council for Scientific and Industrial Research that the present position in regard to the buffalo fly pest’ was rather alarming, in that the pest bad reached Normanton Common. Subsequently, the Queensland department arranged for one’ of its officers . to spend six months in northern Queensland’ oh buffalo fly work. Prior to proceeding on his investigations the officer discussed the position with the council’s entomological officers at Canberra, (o) Northern parts of New South Wales. - There is no evidence to show that’ the buffalo fly has reached northern New South Wales.

A survey carried, out four years after the liberation of ‘ the parasites bred from those introduced from the orient failed, to discover any evidence that the parasites had increased in numbers or had exercised ‘ any control on the buffalo fly. ‘ The possibilities of biological control have not been dismissed, however, and at the present time information regarding another possible insect enemy of the Buffalo fly, is being collected, and observations carried out on it abroad, with a’ view- to determining, whether >it offers’ sufficient promise to- justify the- expense involved in its introduction to Australia:: y…..

Defence Expenditure

Mr Martens:
HERBERT, QUEENSLAND

s asked ‘ the ‘ Treasurer, upon notice -

Will he ‘state the total amount that has been provided by way of revenue, loan, &c, for defence purposes for ‘the year 1 939-40 f
How much of this money had been spent on the’ 31st March, 1D40?
How much is it anticipated will remain unexpended by the end of this financial year?

Mr Spender:
UAP

– The answers to the honorable . member’s questions - . are as :.11.w . -

The total amount already provided in Australia is £31,000,000, to which must be added the estimated (surplus of £8,000,000. In addition £6,000,000 is available iri London. In my speech it Was estimated that’ a further £7,000,000 would be raised in Australia, while sufficient funds will be advanced by the United Kingdom Government to meet the balance of overseas expenditure to the 30th June, 1B40.
Expenditure to the 31st March against the’ above provision is £32,947,447.
Nil. -‘

Cite as: Australia, House of Representatives, Debates, 9 May 1940, viewed 22 October 2017, <http://historichansard.net/hofreps/1940/19400509_reps_15_163/>.

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House of Representatives 9 May 1940

QUESTION

COAL STRIKE

Sir EARLE PAGE:COWPER, NEW SOUTH WALES

Mr MENZIES:Minister for Defence Co-ordination · KOOYONG, VICTORIA · UAP

Mr ANTHONY:RICHMOND, NEW SOUTH WALES

Mr MENZIES:

Mr THOMPSON:NEW ENGLAND, NEW SOUTH WALES

Mr MENZIES:UAP

Mr JAMES:HUNTER, NEW SOUTH WALES

Mr MENZIES:

QUESTION

CENSORSHIP

Mr JAMES:

Mr MENZIES:UAP

QUESTION

ROADS NEAR MILITARY CAMPS

Mr JOHN LAWSON:MACQUARIE, NEW SOUTH WALES · UAP

Mr STREET:Minister for Defence · CORANGAMITE, VICTORIA · UAP

QUESTION

REFUGEE SETTLEMENT IN KIMBERLEY DISTRICT

Mr GREEN:KALGOORLIE, WESTERN AUSTRALIA

Mr NOCK:Minister without portfolio assisting the Minister for the Interior · RIVERINA, NEW SOUTH WALES · CP

QUESTION

APPLES AND PEARS

Mr HUTCHINSON:DEAKIN, VICTORIA

Mr ARCHIE CAMERON:Minister for Commerce · BARKER, SOUTH AUSTRALIA · CP

QUESTION

ELPHIN SHOWGROUND CAMP

Mr BARNARD:BASS, TASMANIA

Mr STREET:UAP

QUESTION

NORTHERN TERRITORY SHIPPING SERVICE

Mr BLAIN:NORTHERN TERRITORY

Mr NOCK:CP

QUESTION

MARGINAL WHEAT LANDS

Mr POLLARD:BALLAARAT, VICTORIA

Mr ARCHIE CAMERON:CP

Mr McCALL:MARTIN, NEW SOUTH WALES

Mr ARCHIE CAMERON:

Mr SCHOLFIELD:WANNON, VICTORIA

Mr ARCHIE CAMERON:

Mr POLLARD:

Mr MENZIES:UAP

Mr POLLARD:

Mr MENZIES:

QUESTION

EMPIRE AIR TRAINING SCHEME

Mr SCHOLFIELD:

Mr FAIRBAIRN:Minister for Air · FLINDERS, VICTORIA · UAP

QUESTION

SALE OF GOLD RESERVE FOR STERLING

Mr ROSEVEAR:DALLEY, NEW SOUTH WALES

Mr SPENDER:Treasurer · WARRINGAH, NEW SOUTH WALES · UAP

Mr ROSEVEAR:

Mr SPENDER:UAP

QUESTION

OVERSEAS SHIPPING SPACE

Mr PRICE:BOOTHBY, SOUTH AUSTRALIA

Mr ARCHIE CAMERON:CP

Mr SHEEHAN:COOK, NEW SOUTH WALES

Mr ARCHIE CAMERON:

QUESTION

DEFENCE PREPARATIONS IN HOLLAND

Mr THOMPSON:

Mr McEWEN:Minister for External Affairs · INDI, VICTORIA · CP

Mr Beasley:

Mr McEWEN:

QUESTION

DENTAL FITNESS OF AUSTRALIAN IMPERIAL FORCE

Mr JENNINGS:WATSON, NEW SOUTH WALES

Mr STREET:UAP

QUESTION

DESTRUCTION OF APPLES

Mr MAHONEY:DENISON, TASMANIA

Mr ARCHIE CAMERON:CP

QUESTION

INGLEBURN CAMP CONTRACTS

Mr BLAIN:

House of Representatives
9 May 1940

Sir EARLE PAGE:
COWPER, NEW SOUTH WALES

Mr MENZIES:
Minister for Defence Co-ordination · KOOYONG, VICTORIA · UAP

Mr ANTHONY:
RICHMOND, NEW SOUTH WALES

Mr THOMPSON:
NEW ENGLAND, NEW SOUTH WALES

Mr MENZIES:
UAP

Mr JAMES:
HUNTER, NEW SOUTH WALES

Mr MENZIES:
UAP

Mr JOHN LAWSON:
MACQUARIE, NEW SOUTH WALES · UAP

Mr STREET:
Minister for Defence · CORANGAMITE, VICTORIA · UAP

Mr GREEN:
KALGOORLIE, WESTERN AUSTRALIA

Mr NOCK:
Minister without portfolio assisting the Minister for the Interior · RIVERINA, NEW SOUTH WALES · CP

Mr HUTCHINSON:
DEAKIN, VICTORIA

Mr ARCHIE CAMERON:
Minister for Commerce · BARKER, SOUTH AUSTRALIA · CP

Mr BARNARD:
BASS, TASMANIA

Mr STREET:
UAP

Mr BLAIN:
NORTHERN TERRITORY

Mr NOCK:
CP

Mr POLLARD:
BALLAARAT, VICTORIA

Mr ARCHIE CAMERON:
CP

Mr McCALL:
MARTIN, NEW SOUTH WALES

Mr SCHOLFIELD:
WANNON, VICTORIA

Mr MENZIES:
UAP

Mr FAIRBAIRN:
Minister for Air · FLINDERS, VICTORIA · UAP

Mr ROSEVEAR:
DALLEY, NEW SOUTH WALES

Mr SPENDER:
Treasurer · WARRINGAH, NEW SOUTH WALES · UAP

Mr SPENDER:
UAP

Mr PRICE:
BOOTHBY, SOUTH AUSTRALIA

Mr ARCHIE CAMERON:
CP

Mr SHEEHAN:
COOK, NEW SOUTH WALES

Mr McEWEN:
Minister for External Affairs · INDI, VICTORIA · CP

Mr JENNINGS:
WATSON, NEW SOUTH WALES

Mr STREET:
UAP

Mr MAHONEY:
DENISON, TASMANIA

Mr ARCHIE CAMERON:
CP

Mr STREET:
UAP

Mr WILSON:
WIMMERA, VICTORIA

Mr MENZIES:
UAP

Mr DRAKEFORD:
MARIBYRNONG, VICTORIA

Mr MENZIES:
UAP

Mr SPENDER:
UAP

Mr GREGORY:
SWAN, WESTERN AUSTRALIA

Mr NOCK:
CP

Mr HOLLOWAY:
MELBOURNE, VICTORIA

Mr MENZIES:
UAP

Mr THORBY:
Minister for Health · CALARE, NEW SOUTH WALES · CP

Mr WARD:
EAST SYDNEY, NEW SOUTH WALES

Mr STREET:
UAP

Mr SPEAKER (Hon G J Bell:
DARWIN, TASMANIA

Mr SPENDER:
Trea surer · Warringah · UAP

Mr SPENDER:
Treasurer · Warringah · UAP

Mr THOMPSON:
New England

Mr PERKINS:
Monaro · Eden

Mr BARNARD:
Bass

Mr ANTHONY:
Richmond

Mr DEDMAN:
Corio