16th Parliament · 1st Session
Mr. Speaker (Hon. W. M. Nairn) took the chair at 2.30 p.m. and read . prayers.
– Can the Minister for Supply and Development say. whether any progress has been made with the arrangements for the development: of the Lakes Entrance oil-field ?
– Last ThursdayI had a long discussion of . this. . proposal with Dr.Raggattand Mr. ..Demaine. Some difficulties arose in meeting the decisions previously made. I am hopeful that they will bo ironed out, and that” a complete submission will be’ made’’ ‘to Cabinet, for adoption or rejection, atits meeting next week.
– Has the attention of the Minister for the Army been drawn to the newspaper report that the production of the Owen gun is likely to be interrupted because of a dispute between the inventor of the gun and the Department of the Army? If so, is the honorable gentleman in a position to make a statement on the matter?
– My attention has been directed to the newspaper report mentioned. Some difference of opinion exists between Army Ordnance and Inspection on the one hand, and the manufacturer and inventor, Mr. Owen, on the other hand. In Melbourne next Monday morning, I shall preside over a special conference that I have convened of all the parties concerned. I am sure that a -speedy settlement will be possible.
MrHARRISON.- Is there any foundation for the report published in the Sydney Daily Mirror of the 15th November that the British War Office has rejected the, Owen gun ? If so, can the Minister for the Army state the reasons?
– From the information that I have, this newspaper report is not true. The British War Office has not seen either the plans and specifications or a model of the Owen gun; consequently it cannot have decided to either accept or reject it.
– I askthe Minister for the Army whether royalties areto be paid to Mr. Owen in respect of the 2,000 guns which are on order? If so, what terms will apply to the royalty?
– The question of the payment of a royalty on the Owen gun has not yet arisen, but the honorable member may rest assured that when it does arise it will be determined equitably.
– Has the Minister for the Army read the leading article published last Monday by the Brisbane Courier-Mail, in which the following appeared: -
Now;however, comes the astounding revelation that some members of the Federal Parliament have actually asserted the right-
– Order ! The honorable member may not quote from a newspaper report.
– I shall give the substance of the article. Has the Minister noted the reported astounding revelation that members of Parliament have actually asserted the right to make representations in favour of exemption from compulsory military training, and that the federal parliamentary caucus has lodged complaints about area officers responsible for the enrolment of compulsory trainees because they had not acceded to requests for exemption? Will the honorable gentleman take immediate action to ensure that no member of this Parliament shall be allowed to set himself up as an authority over officers who are responsible for administering the Defence Act, particularly those provisions of it which relate to compulsory military training?
– The honorable gentleman has no right to base a question on the assumption that what he reads in newspapers is true.
– What right has the honorable gentleman to say that?
– It is evident, from the information which the honorable gentleman has sought to give, that he has been absolutely misinformed. Exemption from compulsory military training was granted by previous Ministers in cases. of hardship. Every application for exemption is considered on its merits. In the Department of the Army there if machinery for the investigation of all applications, in order to ascertain whether or not the reasons stated by applicants are true.
– Can the Minister for the Army say whether exemptions from compulsory military training have been granted on the application of employers when no applications for exemption have been made by the trainees concerned ?
– I am. not aware of any exemptions from training having been granted on ..applications by employers only, but under the administration of previous Ministers,aswell as under my own administration,exemptions havebeen granted in cases of real hardship. Those applications have come from representatives of all political parties.
– Is the Minister for Commerce yet in a position to say when a first payment will be made to wheatgrowers who have completed delivery of this season’s wheat to the Australian Wheat Board, and what the amount will be? Can the honorable gentleman also state approximately the sum that will be deducted from the guaranteed price, in order to meet f.o.b., and other charges?
– The making of a first advance in respect of the forthcoming wheat pool is being considered by the Government, and an announcement will be made at an early date. I am unable to ‘State what charges will have to be met in the transport of the wheat from railway sidings and loading it on board.! In the past, the amount has been rather substantial, but I hope that on this occasion, with proper supervision, the costs will be substantially reduced.
-Owing to the extreme fluctuations of the prices of prime lamb, which occur at practically every sale, will the Minister for Commerce bring down legislation which will ensure to producersthe benefit of the price which the Government, of the United Kingdom has contracted to pay?
– My attention has been drawn to the fluctuations of the prices received by the producers of lamb at . the different markets. I am definitely alarmed at the position. If those who are engaged in export trade, and others, are not prepared to . pay a reasonable price, I shall not hesitate to press for the introduction of legislation which will protect the producers in this respect.
– Is it the intention of the. Prime Minister to initiate or allow time for a debate on foreign affairs, before the termination of this sessional period?
– Following, the passage of the financial measures related to the budget, I shall endeavour to find an opportunity to adopt the honorable member’s suggestion.
– Can the Minister for Air inform me whether those members of the Air Force who are under sentence at Benalla have lodged appeals? If so, have their appeals been dealt with, and will the honorable gentleman be good enough to give, me access to the file of papers relating to the evidence against the men ?
– The honorable member for Batman was good enough to inform me that he proposed to ask this question. On the 26th September, 1941, certain, members of the Royal Australian Air Force were tried before a general courtmartial at Benalla, and convicted of an offence against section 1 (4) of the Air Force Act.
The charge against Corporal S. H. de Jersey was that he - aftercoming to the knowledge of an intended mutiny in the Royal Australian Air
Force, failing to inform without delay his commanding officer of the same.
He was found guilty, and the sentence of the court was that he be reduced to the ranks, undergo detention for sis months, and be discharged from the Defence Force of the Commonwealth. He has appealed tothe; Air Board against this sentence.
Corporal . J. L. Truscott, Corporal R. S. Scott, and Corporal F. H. Cant were convicted of similar offences, were given similar sentences, and have appealed.
Aircraftman L. A. Geier, convicted of a similar offence, was sentenced to undergo detention for 150 days, and to be discharged from, the Defence Force of the Commonwealth. Hehas appealed.
Leading Aircraftman R. Wilkie was convicted under section 7 (2) of the Air Force Act, on a charge of - endeavouring to persuade persons in the Royal Australian Air Force to join ina mutiny.
He was sentenced to imprisonment without hard labour for two years, and to be discharged with ignominy from His Majesty’s service. The Air Member for
Personnel, as confirming officer, gave careful consideration to all the circumstances of the case, and varied the sentence of the court, by reducing the term of imprisonment from two years to eighteen months without hard labour, and by substituting a simple discharge for discharge with ignominy. The airman has appealed to the Air Board, which, however, saw no reason to justify variation of the confirming officer’s decision.
As, all of these appeals, other than that of Leading Aircraftsman Wilkie, are at present before . the Air Board, it would not be proper for me to make any further statement at this stage. A further appeal lies in the case of the man who has already been dealt with. I understand that copies of the evidence in cases of this kind are sent to the Attorney-General’s Department, and the Attorney-General will be better able than I am to inform the honorable member for Batman whether it is possible for the papers to be made available for his inspection.
Sale to United Kingdom - . Overseas Price - Appraisement ‘ Centre..’ at Geraldton, Western Australia . - Scouring in Queensland.
– Will the Minister for Commerce take advantage of ‘ ; the presence in London of his predecessor in office, the right honorable member for Cowper (Sir Earle Page), to initiate negotiations with the Government of the United Kingdom with a view to reviewing the price of Australia’s wool clip for next season? ‘
– I shall give consideration to the honorable member’s request. ‘
– Has . the Minister for Commerce given consideration, to the representations, and the evidence submitted to his department, in connexion with the establishment of a wool appraisement centre at Geraldton, Western . Aus: tralia? If so, is he in . a position. to make a statement on the subject,, . and,, if not, will he examine the matter with a view to giving effect to the weight of evidence which is favorable to the establishment of a wool appraisement centreatGeraldton? . >..’.-.:
– I shall go into the matter fully at the earliest possible moment, and shall furnish an answer to the honorable member’s question.
– Will the Minister for Commerce take steps to expedite the furnishing of a reply to a question in my name which has been on the notice-paper since before the present Government assumed office? The question relates to a circular issued to Queensland woolgrowers in connexion with the scouring of wool.
– My attention has not been called to the fact that a reply has not yet been furnished to the honorable member’s question. I shall do everything possible to expedite the supply of the information sought by him.
– Will the Minister for the Navy state whether it is a fact that his predecessor in office commandeered some coastal steamers, including the SS. Allenwood, the only vessel left in the service of the firm of Allen Taylor and Company, for mine-sweeping operations? Is it a fact that this action has caused a serious shortage of shipping, resulting in a shortage of coal in South Australia, and the ruin of the timber trade of Port Stephens, Camden Haven and Cape Hawke? If this be so, and having regard to the need for keeping our sea-lanes clear of mines, will the Navy take over and convert for mine-sweeping the large Manly ferry boats now kept in reserve, and allow the commandeered coastal vessels to return to their own trade?
– I understand that it is a fact that certain of the smaller coastal vessels, including colliers, have been taken over by the Navy Department for minesweeping purposes. This has been done, not, only in New South Wales, but in other States also. I recognize that the taking over of these vessels has had a very, serious effect upon the transport of essential goods, particularly coal, to other States, and that it is a matter for grave concern. I shall go very thoroughly into the suggestion of the honorable member for Hunter, and if there are no technical objections, consideration will be given to the . using of spare Manly ferries for mine-sweeping purposes.
Plans FOR CO-OPERATION
– Having regard to the deterioration of the international situation in the Pacific, and the necessity for the closest co-operation between the Army and the Air Force in action, I ask the Prime Minister as Minister for Defence Co-ordination whether the Government will give the most urgent consideration to a proposal for giving the general officer commanding the Army in Australia authority, not only over the Military Forces, but also over the Air Force, for the defence of the Commonwealth?
– This matter has been under the consideration of the Government, and steps have been taken to ensure the maximum co-operation between the two services. The previous Government decided to arrange for the training of both forces on a joint basis, and we are now carrying out that programme. The lessons of the war have convinced the chiefs of staff and the Government of the wisdom of this course.
– Has the attention of the Minister for the Army been drawn to the fact that the military authorities have commenced the construction of a sewerage system for the Hay Internment Camp at a cost of £22,000, and that the local authorities have offered to provide the same facilities at a cost of £6,000? What does the Government propose to do to prevent the wasting of £16,000?
– The honorable member interviewed me in Sydney regarding this matter, and I have given instructions that an investigation be made. I expect that the report will be placed before me this afternoon, when I shall come to a decision which I shall communicate to the honorable member.
– Is it a fact, as reported in yesterday’s newspapers, that the price of second-grade power alcohol in Melbourne has increased since the outbreak of war from ls. Id. a gallon to 5s. a gallon? Is it true that this grade of power alcohol has not been brought under government control? If so, does not the Minister for Supply and Development think that it should be brought under control, both as regards price and rationing?
– I was not aware of the circumstances referred to by the honorable member. The Government’s policy in regard to the dilution of straight petrol with power alcohol, with a view to increasing the total quantity of motor spirit available, was announced in the House last week. At the time I made that announcement, I was not aware that a second-grade spirit, which did not come under government regulation, was being distilled. I shall have the Government’s fuel advisers examine the position, and shall make the result of their inquiries available for the information of the honorable member.
– In view of the reply given to me yesterday by the Minister for Supply and Development regarding the prices of standard grades of petrol and power alcohol blends of fuel, will the Minister now state whether the users of standard grade petrol in Western Australia will be at a disadvantage until, at some time in the remote future, power alcohol is produced in that State? If this be so, will the Minister undertake to compensate Western Australians for this unfair discrimination, by removing from the price of motor spirit the recently imposed additional charge of Id. a gallon .until such time as power alcohol is produced in Western Australia ?
– It is not right to speak of disadvantages to any State having arisen from action that the Government has taken to supplement the volume of petrol available in Australia. The point that should be considered is how much, and by what means, can we increase the gallonage of liquid fuel in Australia. The more that we increase our stocks, either in the eastern States or in the western States, the greater will be the quantity of fuel available to the general public. That is the consideration which the Government has had in mind in dealing with this subject. It may be that, at the present time, we cannot extend the distribution of power alcohol to Western Australia, but by the use of power alcohol in the eastern States a greater volume of liquid fuel will be released for the western States also. I ask the honorable member to view this matter in the light of . the advantage accruing to the majority of petrol consumers, even though he may consider that there is an unfair imposition in a particular instance. I dp not reproach the honorable member for having raised the subject, but I ask him to consider the problem in the light of the desirability of improving the gallonage available throughout the Commonweal th.
– Has the attention of the Prime Minister been drawn to a statement in a leading article in the Courier-Mail. Brisbane, of the 17 th November, that the Minister for Information (Senator Ashley) has relieved the Chief Publicity Censor of the work of censoring parliamentary debates, and has decided to share this responsibility with the President and Mr. Speaker ? Can the Prime Minister inform the House whether this statement is correct? If it is correct, will the honorable gentleman say whether the system was changed with his authority, and does he agree with the principle of political interference in matters of this nature?
– My attention has not been drawn to the report in the CourierMail, and I do not know what steps have been taken by the Minister for Information regarding the matter. However, I shall make inquiries and inform the honorable gentleman of the position. I assure him that no such thing as a political censorship will be instituted; but there will be a responsible censorship. Regarding the reproduction in Hansard of statements considered to be of value to the enemy, the practice has been for Mr. Speaker and the honorable member concerned to decide, after consultation, what part of the report should be excised in the interests of national security.
– Parliament authorized that.
– That is so.
– by leave - In reply to a question by the honorable member for Wentworth (Mr. Harrison) on the 12th November,I promised to obtain information about the number of strikes that have occurred since the Curtin Government assumed office. I also undertook to provide information as to the number of strikes that had occurred under previous Administrations since the outbreak of war. I indicated in the House on Friday, . the 14th November, that the matter of manhours lost as the result of strikes would also be taken into consideration in my answer.
In his question, the honorable member for Wentworth referred specifically to strikes in war industries. Itis almost impossible to make a clear distinction in many instances between war and civil industry, as this would entail placing such things as shipping, textiles, &c, in one or other of these two categories, whilst, in fact, part of each industry is devoted to war production and part to civil. The information which I am about to give to the House relates to all industry.
From the outbreak of war on the 3rd September, 1939, to the resignation of the Menzies Government on the 29th August, 1941, there were 835 disputes, an average of eight a week. In the 5½ weeks during which the Fadden Government was in office, 74 disputes occurred, an average of 13½ a week. When the Curtin Government took office, five disputes were in progress, and one had been called for the 8 th October.
In my opinion, one dispute at Darwin was provoked by the actions of the previous Government, because the order to use troops on work that had previously been undertaken by civil labour was given on the day when the Labour party was selecting its Ministry, following the defeat of the Fadden Government. I emphasize that that action was taken by a defeated Ministry, which was not responsible for the future government of the country, with the deliberate intention of creating difficulties for the incoming Labour Government. Regarding the dispute at the works of the Commonwealth
Aircraft Corporation, the strike was to begin at midnight on the 8th October, one day after the Labour Government had taken office. As a result of our prompt action, the works never ceased production, and the matter has now been satisfactorily adjusted.
During the period of 6£ weeks ended the 19th November, 1941, there were 23 new disputes, not all of which were strikes, making an average of 3§ a week. By the 14th November, all of them had been successfully settled ; none was outstanding. Had the trend that was in evidence under the Fadden regime been continued, the Curtin Government would have been obliged to cope with nearly 90 disputes. The actual figure, 23, showed a reduction by three-quarters of the amount of industrial unrest. The important fact is that the official records show that to-day no strikes are in progress.
I pass now to the matter of man-hours. In the House last week, the Leader of the Opposition (Mr. Fadden) stated that 12,000,000 man-hours had been lost in industrial disputes since the outbreak of war. I do not know where the honorable gentleman obtained his information, because the Commonwealth Statistician assured me that it is impossible to calculate a reasonably accurate figure. The honorable gentleman’s figure is the wildest of guesses; the correct figure is approximately 20,000,000 man-hours. However, it is possible to make some comparisons of man-days lost in Australia from industrial disputes under the Menzies, Fadden and Curtin Governments. These figures combine estimates which were made by the Commonwealth Statistician, and my own department. The British figures that I shall, quote later were taken from the British Ministry of Labour Gazette. Since the outbreak of war, 2,520,914 man-days have been lost because of industrial disputes. Under the Menzies Government 2,215,025 man-days were lost, an average of 21,300 a week. During the five and a half weeks’ regime of the Fadden Government another 1.S0.000 were lost, an average of 32,700 n week. To date, 126.000 man-days have been lost under the Curtin Government, an average of 21,000 a week. Of this figure for the Curtin Government, 86,000 man-hours are attributable to strikes thai it inherited from the previous regime, notably the strike at the Lithgow Small Arms Factory, and that of the brickmakers in Sydney. Man-hours lost from strikes originating during the Curtin Government’s administration total only 40,000, an average of 6,700 a week.
These figures for man-days include what are termed “ one-day stoppages “, where the stoppage occurs and is settled in one day, but such stoppages are not included in the number of disputes given. The Curtin Government has dealt with a number of disputes which never resulted in a stoppage of work. I instance claims of the glass workers, and of the employees in the clothing trades industry. In the latter, the trouble was satisfactorily adjusted with the co-operation of the Minister for Trade and Customs (Senator Keane), who has a vast knowledge of industrial matters. Thu threatened stoppages at Glen Davis and at Collie, in Western Australia, were also settled satisfactorily without occasioning any cessation of work. Although operations at the Clyde Engineering Works were to cease on- the Monday, the trouble was settled after the Labour Government had worked over the weekend in order to effect an adjustment. On the Sunday we were able to announce to the men that the matter had been settled and that they were to begin work at the usual hour on the Monday morning.
I should like to say one thing further. It is generally assumed that the worker in Australia does not show anything like the same sense of responsibility for war production as does the worker in Britain, about whose unrest flaring headlines have never, very rightly, been written. Over the period from, the outbreak of war to the 30th June, 1941, the average weekly loss in Britain from industrial disputes was 21,700 man-days. While it is clear from what I have said that under the previous Governments industrial unrest was much greater in Australia than in Britain, a comparison of this figure with that of 6,700 for the Curtin Government, even when weighted for population, can lead only to. the most satisfactory conclusions. No one could reasonably say that the workers of England are not pulling their weight, and, equally, this cannot he said of the workers in Australia.
- by leave - The Minister for Labour and National Service (Mr. Ward) has made a statement which will be of general interest to the people of Australia, but I regret that he has allowed political and partisan considerations to intrude. The honorable gentleman, as a Minister, cannot expect to enjoy the licence he had as a private member, and in making ministerial statements he must present a balanced and impartial picture, and not neglect, as he has on this occasion, to give the background which is necessary for a proper appreciation of the situation. Quite apart from the palpable unfairness of his statement to the previous Administrations, the Minister made an unwarranted reflection upon officers of the Public Service, the industrial courts, and the workers of Australia. To assume that the workers are prepared to co-operate in time of war only with a Labour government is a damnable misstatement of their position. All honorable members will agree that there has been a lamentable degree of industrial unrest in this country since the outbreak of war. The blame for that unrest cannot be attached to one particular quarter; it must he shared alike by the workers, the employers and governments. The causes leading to industrial unrest and stoppages are not confined to Australia ; they are common to all countries, and are experienced in Great Britain, Canada, and, to an alarming degree, the United States of America. The Curtin Government has the good fortune of not having to develop the organization, which was developed, under great difficulties, by the Menzies Government, namely, the Department of Labour and National Service. It is almost twelve months to the day since that department was established to deal not only with industrial relations but also employment, the welfare of workers, industrial training, records and analysis, and the national register. In addition to the manifold tasks involved in setting up that department, the Menzies Government had also to deal with day-to-day problems as they arose. Dilution of labour, overtime, shift work, the restriction on the movement of metal trades workers, and maximum wage rates, are matters which are full of difficulties and ‘complexities, and, naturally, they caused industrial friction. The Curtin Administration has not had to introduce one unpopular industrial measure, but before long it will have to do so, and the country will judge it on the success it achieves in procuring the co-operation of the industrial movement in the operation of such measures. Apart from the stoppages which have occurred as the result of industrial changes, there have been other stoppages of obvious political origin. Early this year, for instance, there was a wave of stoppages as a protest against the budget. There were other stoppages because of the internment of Thomas and Ratliff. Repeatedly, in answer to questions, the Minister has in effect admitted the political origin of many of the stoppages during the regimes of the two previous administrations by boasting that the Labour Government has been able to procure from the industrial movement cooperation which was impossible to us. Further confirmation of the political origin of much of the so-called unrest is to be found in the letter written to the Prime Minister (Mr. Curtin) by officials of militant unions in which they promised to use their influence to prevent strikes provided that the Government would meet them on certain matters of industrial and political policy.
The Minister made a great feature of the number of man-days lost as the result of industrial stoppages. In times of industrial and commercial prosperity, we have unfortunately had resurgences of industrial trouble. In the boom of 1929, for instance, 2,314,000 working days were lost in New South Wales alone, more than three times the number lost last year.
– That was because of the coal industry lock-out, for which the bosses were responsible.
– Included in the figures for last year mentioned by the Minister was the three month’s coal strike. I remind the House that, after the formation of the Department of Labour and National Service, the Menzies Government completely overhauled the .method of dealing with industrial disputes. As members of the Advisory War Council, members of the Labour party participated in what was done. The Menzies Government established a system of conciliation commissioners which has succeeded in speedily determining matters in dispute.
– Those conciliation commissioners WOUld, have been operating for years had the political party of which the honorable gentleman is a member not destroyed the legislation which provided for them to be set up.
– I am not answerable for actions of previous administrations. Implied in the statement of the Minister for Labour and National Service is an attack on the Menzies and Fadden Administrations. In answer I point out what the Menzies Government did and how the Fadden Government pursued the same course. In times of industrial and commercial prosperity, we have frequently seen and heard the statement: “Now is the time to go on the economic offensive, because to-morrow we may be an. the defensive”. That has been the policy of some industrial leaders ; I do not say that it represents the views of the great majority of the workers, but that policy has been the cause of some of the stoppages, and if there has been failure to obtain the co-operation of the industrial movement in the applications of the policies of the Menzies and Fadden administrations, the blame must- be sheeted home to not only former Ministers but also to members of the present administration. The present Prime Minister and some of his colleagues, to whom I give credit, repeatedly requested from the industrial movement the maintenance of uninterrupted production. After one of the early meetings of the Advisory War Council, advertisements were published in the press and elsewhere containing photographs of Labour members side by side with photographs of then Ministers appealing for the co-operation of the workers in th’e1 war effort. “ We speak as one to you,” they said. How little weight was attached in some quarters to that joint appeal is shown by the fact that on the very day when Labour assumed office 4,500 ‘men walked out of the Small Arms Factory at Lithgow and stopped out for a fortnight.
In that time sufficient rifles and machine guns could have been produced to equip two battalions of infantry. We all regret that these things have occurred. If the Labour Administration can secure a greater measure of assistance and cooperation from the industrial movement than was accorded to its predecessors - even when it is obliged to do some of the unpopular things that will be necessary - we shall be glad to applaud its success. However, I draw attention to some of the methods which it has adopted in dealing with industrial trouble. The community as a whole is not satisfied merely .to learn that disputes have been settled; it wants to know what methods have been employed to bring about settlements. There is no cleverness in settling a dispute by granting a union’s claims. That is the quickest method of settlement, but. it is likely to lead to further industrial troubles. I have already referred. to the action taken by the Minister for Trade and Customs in connexion with the disputes in the brick and clothing trades in which, apparently, the Prices Commissioner was directed to take into account increases of wages which had “been agreed upon between the employers and employees, for’ the purpose of passing on the additional costs to the “consumers. That was a retrograde step. Increases of clothing prices represent two-thirds of the total of retail price increases since the outbreak of war. Nevertheless, in twelve, months two substantial wage increases have been granted to clothing trade employees. I’ draw attention now to the matter of the claim by fifth-year apprentices, which was referred by the previous Government to the Arbitration Court. This involves the important principle of arbitration, which has been supported by Parliament for many years. Any departure from arbitration practice is fraught with difficulties and embarrassments for the future;’ instead of creating industrial’ peace, it creates industrial turmoil. Although the claim by the fifth-year apprentices had been referred to the Arbitration Court; the Minister, without waiting for:, the court to give its decision, decided ‘ that full tradesmen’s rates should be payable- to fifth-year apprentices, with the result that fourth-year apprentices have now started to clamour for payment at the full tradesman’s rate. I repeat that the real test of Labour’s capacity to handle the industrial situation will come when the Government is obliged to impose some of those unpalatable measures which will be necessary if the community is to be effectively organized for the purposes of war. The rate of movement of labour from the Government’s - munition . factories has doubled in the last twelve months; there are now 1,200 departures monthly. This fact was made a feature of the Government’s case at the recent hearing of the application by the munitions workers for a war loading. Only one witness gave evidence onbehalf of the Government at the hearing, the outcome of which involved £500,000 of the Commonwealth’s money. The Government did not contest the case, “although the departures of labour from government munitions’ factories have reached such alarming proportions that special counter action must be taken. Unless this movement be prevented, the production of munitions and the pegging of wage rates willbe interfered with, and an unhealthy spiral of costs and prices will follow. The Government will face its real test in connexion withthe industrial situation when it endeavours to prevent that movement, to provide adequate supplies of labour for rural areas, and to ensure the production of essential civil requirements without impeding the war effort. In order to succeed, it must act with determination in accordance with a far-sighted policy, which probably will not be acceptable to the mass of the working people, or the employers. It will secure a greater measure of co-operation not only from honorable members on this side of the House, but also from employers throughout the community, if, when making public references to matters of this kind, it states the full facts instead of a partisan political view.
– Will, the Prime. Minister arrange ‘ that, when statement likethat madethisafternoon by the Minister for Labour and National Service (Mr. Ward) are. presented to the House, they willbe followed by a motion that the paper be printed ? All that happened this afternoon was an argument between the Minister and the ex-Minister. Such a procedure savours too much of a private fight.
– I can understand the honorable member for Barker feeling annoyed at having been left out of a fight. I accept bis suggestion that a statement which is of a controversial nature should be presented in such a way as to enable the House to debate it.
– Has the Treasurer seen a statement by the Acting Commonwealth Statistician, which was reported in yesterday’s issue of the Sydney Morning Herald, to the effect that, in the twelve months ended the 30th September, 1941, the note issue increased by approximately £10,500,000, whereas the average increase of the banks’ assets for the quarter ended the 30th September, 1941, was more than £19,000,000? Will the honorable gentleman investigate this statement, and ascertain whether or not the national credit is being expanded by the banks in their own interests?
– I shall make inquiries into the increase of the note issue, which the honorable member apparently regards as- being unusual. In, . regard to the other part of the honorable member’s question, I point out that the whole matter of banking policy is under consideration.
– I ask the Treasurer whether it is a fact that the issue and control of Commonwealth notes is completely in the hands of the Note Issue Department of the Commonwealth Bank, and that the private banks have no control whatever over the issue of notes? I also desire to know whether it is the usual procedure of the Note Issue Department to release an increased number of notes for the convenience of the public during the Christmas shopping a ndholiday period?
-I shall have a full answer to the honorable member’s question prepared.
– Is the Treasurer aware that there is no war-time control over new mortgages? In view of the fact that profiteering in mortgages is rampant, will he ensure that the Commonwealth mortgage bank, when established., shall have power to issue mortgages to all home-builders, whether they be rural, provincial or urban, thus preventing privatemortgage-mongering at rates of interest. ‘ far in excess of what would be fair and reasonable?
– The proposal to establish a mortgage bank is at, present the subject of conferences between officials of the Treasury and State instrumentalities which are engaged in this class of banking. The Government proposes after securing the advice of all of those concerned to frame legislation providing for the establishment of a mortgage bank. I shall give consideration to the other matters of mortgage control mentioned by the honorable member.
Proposalfor Address bysir Thomas Blamey.
– In view of the immense importance to Australia of the war situation in the Middle East, and in view of the fact that the General officer Commanding the Australian Forces in the Middle East, Sir Thomas Blarney, is at present in Canberra, does. . the Prime Minister not consider that if would be1 to, the advantage of honorable members if they were afforded an opportunity to hear from Sir Thomas Blarney at a private meeting a first-hand appreciation of the situation?
- Sir Thomas Blarney met the War Cabinet and the members of the Advisory War Council, but, although members of the Opposition parties were present at the meeting of the latter body, no suggestion was made that he should address private members of Parliament. I assure the House that Sir . Thomas Blarney’s appreciation of the situation, and the facts that he gave to the Advisory War Council and ‘ the. War, Cabinet, are such that a maximumof discretion must be exercised. Sir Thomas’s statements wore made to members who are under an oath of office and of service, and I put it to the House that Sir Thomas Blarney would be placed in an extraordinarily embarrassing position if he were asked to describe the factual situation, since any full description of it might be destructive of security, whilst any partial explanation of’ it would be inaccurate. I submit that it is not a safe or proper policy for a high military official of the nation to be obliged to undergo cross-examination . except by those having responsibility for the safety of the nation.
Mr.JOLLY.- Will the Minister for Civil Aviation have prepared a statement setting out the subsidies now paid to civil air services in Australia? I understand that, in some instances, although subsidies are paid for the transport of members of Parliament by air, they are’forced-‘- to travel by train.
– I shall endeavour to have a statement prepared containing the information asked for.
– In view of the severe losses suffered in the past by the growers of apples and pears as the result of damage by hail, will the Minister for Commerce take early steps to investigate the possibility of inaugurating a compulsory hail insurance scheme on a Common wealth-wide basis ?
– Various matters in connexion with the apple and pear acquisition scheme are now receiving the attention of the Government, and it is hoped that an early decision will be arrived at in regard to the subject mentioned by the honorable member.’
– Is the Minister for the Army aware that members of Australia’s fighting forces are confined to prisons in England for ‘-civil offence’s, manyof which are ofatrivial character? If so, in view of the ‘necessity for increased man-power will he make representations to the Imperial authorities to have those men released, so that they may take their places with other members of the forces in the various theatres of war?
– I am not aware of the allegations contained in the honorable member’s question, but I shall have investigation made, and shall supply an answer to the honorable member.
– Will the Minister for Social Services inform me whether any decision has yet been reached concerning the payment of child endowment to institutions such as those controlled by the Far West Children’s Health Scheme of New South Wales?
– Yes ; the claims of that organization, and others of a similar nature, have been considered and an agreement has been reached. I am surprised that the honorable member is not aware of the decision, but I shall see that a statement thereon is forwarded to him.
– Will the Prime Minister inform me whether a reporthas yet been made to the Government by the Prices Commissioner on his investigation of the prices and profits- of Australian Consolidated Industries Limited? If so, has the Government reached any decisions on the subject, and will the report be made available to honorable members?
Mr.CURTIN. - I have not seen a report, but I shall refer the question to the Minister for Trade and Customs.
Profits and Prices
– I ask the Prime Minister whether he has yet received a report from the Prices Commissioner following upon that officer’s investigation of metropolitan press profits and prices? If so, will the report be made available to honorable members.
– I am not aware whether the Prices Commissioner has made an inquiry onthat subject, although I know that he has agreed to certain increases of prices in respect of specified newspapers. I shall inquire whether a report exists, and, if so, whether it can be tabled.
– I ask the Prime Minister whether he is of the opinion that it is socially and economically desirable that a fair balance should be preserved in cost-of-living increases as they fall upon primary producers and wageearners? If so, has his attention been directed to the fact that the Prices Commissioner has refused to make a decision on an application for an increase of the price of butter ? Is the honorable gentleman aware also that the price of butter has not been increased for three years despite the fact that production costs have increased considerably during that period? Will the Prime Minister instruct the Prices Commissioner to review the price of butter immediately and make a decision upon it?
-As to the first part of the question, relating to the social and economic desirability of a reconciliation of the cost of living-
– That calls for an expression of opinion, and such question’s are not in order.’
– As it is only a matter of opinion, my answer to that part is “Yes”. I shall ask the Prices Commissioner to give consideration to the making of a. declaration respecting the price of butter.
-Iask the Prime Minister whether there is anything in the legislation that has a bearing on industrial peace in- the United States of America? . As the . name “Bridges” seems to have caused some trouble in America, and as we are deeply interested in the preservation of industrial peace in that country, Iask the.Prime Minister whether . he thinks it would be wise to insist upon ‘ the. Minister for Labour and National Service going to the United States of. America to see whether he can achieve the results there which he has claimed to have achieved in Australia ?
Question not answered.
Motions (by Mr. Beasley) agreed to -
That he have leave to bring in a bill for an act to provide for the Validation of Collections of Duties of Customs under Customs Tariff Proposals.
That he have leave to bring in a bill for an act to provide for the Validation of Adjustments in Duties of Customs under Customs Tariff (Exchange Adjustment) Proposals.
That he have leave to bring in a bill for an act to provide for the Validation of Collections of Duties of Customs under Customs Tariff (Special War Duty) Proposals.
That he have leave to bring in a bill for an act to provide for the Validation of Collections of Duties of Customs under Customs Tariff (Canadian Preference) Proposals.
That he have leave to bring in a bill for an act to provide for the Validation of Collections of Duties of Customs under Customs Tariff (New Zealand Preference) Proposals.
That he have leave to bring in a bill for an act to provide for the Validation of Collections of Duties of Excise under Excise Tariff Proposals.
Bills brought up, and read a first time.
Debate resumed from the 29th October (vide page 50), on motion by Mr. Chifley -
That the bill be now read a second time.
.- The expressed intention of the measure now before the House is, first, to implement certain budgetary proposals; secondly, to adjust anomalies; and, ultimately, to increase the revenue by way of direct taxation. The Opposition has given careful consideration to the various provisions of the bill, and proposes to offer constructive criticism of many of them. That criticism will not be of a carping nature, because we are fully aware of the responsibility of the Treasurer during the trying times through which we are passing for gathering the maximum amount of taxation from the nation. In his second-reading speech, the honorable gentleman outlined nine major amendments, adjustments, or methods by which he proposed to obtain the additional taxation required. I intend to refer to most if not to all of them, and, in addition, to express the views of honorable members on this side of the House in connexion with the remaining clauses of the bill. This measure introduces into the field of Commonwealth taxation at least two new principles, first, taxation on the proceeds of the sale of capital assets and, secondly, what can aptly be described as a marriage tax - the aggregation of the incomes of man and wife, but only if living together. I shall touch on the disadvantages of that proposal when I come to the particular clause which embodies it. The first amendment contained in the bill extends the secrecy provisions of the principal act. Successive Parliaments and successive Treasurers have maintained inviolate the secrecy provisions of our taxing legislation, accepting the principle that the contents of returns of income upon which assessments are based shall be known only to the specific officer designated in the act. I realize that circumstances and conditions have been altered by the exigencies of the war, and that, in order to exercise scientific control over prices, and to discharge his duties adequately and fairly, the Prices Commissioner must necessarily have access to certain income tax returns. The Opposition does not quarrel with the extension of the secrecy provisions of the act for that purpose; but it wishes to avoid the possibility that ministerial interference may follow. In no circumstances should the files of taxpayers be made available to a Minister of the Crown.
– There is no provision in the bill which would enable that to be done.
– I am aware of that, but it is the duty of a vigilant Opposition to see that the secrecy provisions of the act are not unduly widened.
Clause 6 proposes to amend section 44 of the principal act by discontinuing the exemption hitherto allowed to resident shareholders on dividends paid by companies out of exempt ex-Australian profits. Having regard to the existing principles of the taxation of mining companies and their dividends there can lie no quarrel with the recommendations and observations contained in the report presented last night by the committee appointed to inquire into this subject. It i.< opportune, however, that I should stress the necessity for a full and wise review of the taxes imposed on dividends earned from mining ventures. I do not propose to touch on that subject at this stage, because the bill deals only with the dividends earned by investors in overseas companies. The report of the committee shows how the investor in overseas companies is placed at a disadvantage compared with investors in Australian companies. As the recommendations of the committee are, I understand, to be adopted in their entirety, double taxation will be avoided. Clause 6 b deletes from section 44 of the principal act a very important sub-paragraph which provides that companies shall not be taxed in respect of dividends paid out of the sale of assets. This amendment will operate very harshly indeed on companies which are reluctantly compelled to dispose of their assets .as the result of the compulsory acquisition of their business for governmental or other purposes. It introduces a new principle of taxation into Commonwealth legislation. In order to demonstrate how harshly it may apply, particularly to a private company, I have only to point to the affairs of a company, particulars of which were recently brought to my notice. This company was formed in New Guinea in 1932. It carried on trade for some time, and acquired assets by accretion and otherwise; but in November, 1940, owing to the ‘ serious position in the Pacific, it went into voluntary liquidation. Had distributions been made before the 30th June, 1940, they would not have been taxable, but, owing to the accident, of liquidation twelve months ago, hut during the income year, the whole of the accumulated income will bc assessable under the measure now before us, and the combined rates of Commonwealth and State tax will amount to approximately 25s. in the fi. A statement was published in the press recently that it is the intention of the Government to remove the retrospective action of clause 6 so that the taxation imposed incidental to the winding up of a company shall apply only as from the current year. If that be so, an anomaly will be removed; but if the clause be allowed to stand as at present drafted a definite hardship will be inflicted on many companies, particularly those which, owing t<> circumstances over which they have no control, have been compelled to dispose of their assets, very often through compulsory acquisition by a government instrumentality.
The repeal of the adjustment condition under clause 7 will mean that taxfree, or concessional, bonds will not be taken into consideration in apportioning the exempt portion of a dividend. At present, a company is allowed to take into consideration a portion of its income available for dividend purposes which includes interest from concessional bonds. The proposed amendment introduces a very bad principle into our tax legislation because, in order to overcome the. disadvantage, a company must necessarily dispose of such bonds. That will place them in the bands of the individual, where they will be more valuable than in the hands of a company subject to this impost. Another aspect is that such bonds, on account of the concession, will have a greater market value than current and future loans, and companies will thus be discouraged from subscribing to loans. I know the view which the Labour party has always taken of the taxable field constituted by the income from tax-free bonds; but I submit that- the Government had an excellent opportunity to adjust this matter more equitably. In my budget I proposed a compulsory loan scheme whereby bond interest was to be levied simply for the purpose of providing post-war credits. I did not propose to tax that interest, because my Government would thus lay itself open to a charge of repudiation. I intended to enter into this field merely in order to compel holders of such bonds to contribute to the exchequer by way of post-war credits. However, the present Government has not accepted that opportunity. The Minister for “War Organization of Industry (Mr. Dedman) is smiling. He should smile, having regard to the speeches he -has made in this House, and the manner in which he has run away from his responsibilities in this matter. Now that he is a Minister, he has failed to urge the Government to adopt a method of adjustment that would have been of greater advantage than this proposal.
Under clause 10, the taxpayer will be required to furnish information, upon the lodgment of his current return, as to the reasons why he acquired certain property - whether for speculation, profit-making, investment, a hobby, or any other purpose. That obligation should not be placed upon the taxpayer at all. His rights under the act should be preserved to him. Discretion should not be placed in the hands of the Commissioner to come to a decision as to the reasons why a taxpayer acquires property. All of us realize that a man may acquire property to-day for certain purposes, but in the course of a year, or so, may utilize that property for other purposes. This obligation should not be placed upon the taxpayer simply because the Taxation Department may suspect that a person who acquires property ostensibly for one purpose may utilize it for a different purpose. All taxpayers should not be hanged, as it were, because one criminal is discovered in their midst. I admit that this is a machinery provision : but it constitutes another pinprick for the taxpayer and should be rejected.
Clause 12 proposes a very important amendment. I am surprised that many honorable members opposite have associated themselves with ‘this proposal to delete an advantage now operating with respect to calls made particularly by mining and afforestation companies. No necessity has arisen for the removal of that advantage. All of us realize what the mining industry has done for Australia, and what it is capable of doing. We realize the important part which it must play in our post-war reconstruction, particularly when we have regard to the fact that to-day industrial activity is being diverted from the country to the city, thus accentuating the tendency to centralization. We should not lessen any economic influence which tends to encourage decentralization. On the contrary, every encouragement possible should be given to the mining and afforestation industries, because they mean so much to the development of the country. The cities to-day are enjoying exclusively the advantage of the expenditure of millions of pounds on the manufacture of munitions and war materials. The rural- areas do not participate in that expenditure in any way whatever. Consequently, any factor that encourages investment in country industries should not be removed by new methods of taxation. If this amendment be agreed to, we shall only accentuate the problems which are already arising owing to centralization of industry in our cities. If there is one thing which we need more than another in our economic make-up it if a. policy of decentralization, particularly vin . view of the fact that decentralization must form the basis of our post-war reconstruction. The goldrnining industry has contributed materially to our economic welfare. Last year the sum of £1,370,000 was collected by way of gold tax. Any tax that will discourage investments in that industry can only be regarded as retrogressive and unwise. That observation applies with equal force to afforestation and other activities which give a fillip to the rural economy. This matter should b<? carefully considered by every honorable member who represents a country electorate, or an electorate in which the goldmining industry is established. Existing conditions which tend to maintain an equitable balance between urban and rural industrial activity should not be altered.
The proposal to disallow concessional deductions for children in respect of whom the parent is entitled to child endowment, is not only very important, but also introduces not a little humour into this debate. A similar proposal was made by my Government. In order to obtain approximately £1,800,000 to finance the child endowment scheme, which was estimated to cost £13,000,000. we proposed bo disallow concessional deductions except in respect of the first child. That provision was regarded as inseparable from the financial measures required to finance the scheme. No criticisms of this proposal were then made by the Opposition; there were no protests, and no division was taken in this House. Naturally it was assumed - it was impossible to assume otherwise - that the adjustment necessarily was to take effect upon incomes for the year ended the 30th June, 1941. However, when Parliament rose protests were received from all over Australia. I shall quote what was said by some honorable members opposite. On page 112 of Hansard, of the 21st August, 1941, appears the following statement by the present Minister for Supply and Development (Mr. Beasley) : - . . This scheme of child endowment has proved, upon examination, to be in the nature of a trick perpetrated upon the community. . . Now we learn that, instead of making endowment payments a real benefit to the people as we believed they would be, the Government has offset the amount which the workers receive in respect of their children by disallowing the concessional taxation deductions in respect of all but the first child in any family under the age of sixteen years. . . I direct attention to what is being done with regard to taxation assessments for income earned during the year 1940-41. In respect of this income, the Taxation Department proposes to permit concessional deductions for only one child in each family. The argument advanced by the Taxation Department in support of this action is that taxation assessments are based upon the previous year’s income. I admit that that is the general guiding principle of taxation, but its application in respect of the child endowment scheme for this year is entirely wrong. In the first place, the child endowment scheme did not come into operation until July, 1941. Therefore, even if there bc any merit in the department’s argument in favour of exclusion of the concessional allowance of £50 each for all but the first child under sixteen years of age in any family, the practice cannot equitably apply to the 1940-41 year of income when child endowment was not paid. Why is the Government, through the Taxation Department, robbing taxpayers of their concessional rights! The child endowment scheme has been rigged against the workers. . . . Furthermore, in respect of the year 1940-41, the Government is doubling back over a period when child endowment did not apply. I arn confident that when this matter is fully examined by Parliament, even the supporters of the Government will disapprove of its actions.
The following report appeared in the Sydney Morning Herald, of the 5th August, 1941: -
The Federal Labour party is certain to fight the bill which the Treasurer, Mr. Fadden, proposes to introduce to provide for the disallowance of claims by taxpayers for £50 exemption for each of their children after the first.
Although this disallowance was contemplated under the child endowment scheme, it is pointed out that the scheme was not in operation in the financial year 1940-41 when the income from which taxation is now being paid in weekly instalments was being earned On the income tax return forms for this year, taxpayers are invited to claim for the usual £50 allowance for each of their children.
At that time also, according to a newspaper report, the present AttorneyGeneral (Dr. Evatt) expressed the following opinions: -
Dr. EVATTS VIEWS.
Dr. Evatt, M.P., pointed out yesterday that endowment payments to parents were only now beginning. If they were regarded as part of the family income, that income was being increased only from the present time onwards. “It follows,,” he said, “That, if it is thought just to deprive the family income of the deductions of £50 for each dependent child, after the first, deprivation should operate in fairness only in respect of the income year which recently began.
Therefore, the disallowance of the £50 deduction should apply only in respect of the income for the year now beginning, that is the year ending 30th June, 1942.
But the proposed bill will take away the £50 deduction in respect of the year ending 30th June, 1941, although no endowment wa> paid in that year. I do not see how it iipossible to justify such action.
It is true, as the Treasurer points out, that child endowment is to be financed to gonn* extent out of taxation collected this year.
The answer to this argument is that tinbulk of the fund from which endowment wi’1 be paid comes from the pay-roll tax, which is paid in respect of current wages in, salaries.”
Obviously, there has been a radical change of front and reversal of form since honorable members opposite gained possession of the treasury bench. When this proposal was made by the previous Government it was described as a confidence trick and an attempt to rob the workers, but now that greatness has been thrust upon the Labour party its supporters find virtue in this clause. It is just as well to remind honorable members opposite of what they said only a few weeks ago, because they are apt to forget these things. The opinions of the Minister for Supply and Development in August last are also quoted in the following newspaper report: -
Mr. Beasley, M.P., said be was certain that Parliament would not agree to the bill. The Government’s proposal, to make tax deductions this week from wages of workers entitled to exemption certificates under the law as it stood at present, was illegal. “ The present Income Tax Act provides a deduction of £50 for each child. Any taxpayer who, by virtue of claiming this, brings his income below £200, is not liable to pay tax,” he said.
He, therefore, is legally entitled to a certificate of exemption, and the Taxation Department has no authority to withhold it.
If Mr. Fadden ‘s bill is passed by Parliament a large proportion of the child endowment benefits will be eliminated.
It is extremely unlikely that Parliament would consent to that.
Take the case of a man with two children on an income of £350 a year. At present he is free from federal income tax.
If the deduction for his second child is removed, he will pay £616s. 8d. tax, and receive £13 in child endowment. This means that the total amount he will receive will be about half that to which he should be entitled.
The collection of taxation on a basis that has not been approved by Parliament is illegal. The Taxation Department has no authority to collect taxation under such circumstances.
It therefore is competent for all wage and salary earners affected to insist on their legal rights, and, where entitled to do so, insist on being granted exemption certificates.”
It is the same clause, the same bill, but a different Mr. Beasley. The present Minister for Labour and National Service (Mr. Ward) is reported as having said that Labour, members with whom he had discussed my proposal were determined to fight it. According to the Daily Mirror, of Tuesday, the 5th August, 1941, the Prime Minister (Mr. Curtin), then Leader of the Opposition, said -
The child endowment legislation was introduced as an alternative to what otherwise would have been a substantial increase in the basic wage.
It costs employers less than if the court had proceeded to make a wage adjustment instead of postponing delivery of judgment’ for six months. Two million pounds from Consolidated Revenue by the Commonwealth is no greater burden on its resources than the payroll tax is on the State Government of Commonwealth finances. Child endowment has nothing, and should have nothing to do with taxation. This means that a man getting £600 or £700 a year gets nothing back at all.
The same report continues -
Dr. Evatt, M.H.R., said in Sydney that an unfortunate feature of the proposal was that the middle and lower income groups would be the hardest hit. Dr. Evatt discussed the case of a child who was supported by its parents up to 30th June, and for whom a tax deduction of £50 is allowed under the present laws.
If this child ceased to be dependent on the 1st July last, or subsequently, no endowment whatever would be paid to the parent in respect of the child.
In other words, the parents are deprived of the deduction of £50, although the child hat been supported for the past twelve months, and they would receive no corresponding compensation in the form of endowment. “” I am hopeful that Mr. Fadden will not persist in the proposal,” Dr. Evatt added.
The then Deputy Leader of the Opposition (Mr. Forde), now the Minister for the Army, is . reported as having said that he considered it most unfair to abolish the £50 deduction in respect of income earned during the last financial year to meet the costs of child endowment to he paid during the present ‘year. . As the proposal was so obviously unjust and clearly indicated that the Government was determined to place an additional and unexpectedburden on the masses of the people, he felt confident that Parliament would refuse to pass ‘ it. Once again, what a reversal of form! What a change of front when responsibility is cast upon honorable members opposite to find the wherewithal to financethe child endowment scheme! The Labour party has been consistent only in its inconsistency, and to-day we have the very same clause- before us, a clause which meets with my approval entirely, a clause which the Opposition parties would have introduced had they remained in office, and which they would have had the courage to defend against all criticism. ,
Clause 14 refers to the adjustment of certain deductions in respect of premiums for leases. This is a very complicated matter, and will have to be carefully watched when the bill is being considered in committee. The Opposition will then endeavour to safeguard those who it considers will be unduly and harshly affected by the suggested amendment, such as persons who have held leases for many years, and have been allowed to claim as a deduction the provision they have made in respect of sinking fund, in addition to which they have had the advantageof a very much lower rate of tax byreason of their having had alower taxable income.
Clause 15 relates to the assessment of the income of the estate of a deceased person, which would have been taxable had it been received during his life-time. The Opposition finds no fault with this, hut sounds the note of warning that the application of the tax must be watched in connexion with the imposition of estate duty; because, if there be taken into account the amount of income earned but not collected, particularly by people who render their returns on what is known as a cash basis, the incidental tax liability also must be taken into account for the purposes of the determination of estate duty. I have little doubt that the necessary provision will be made in the Estate Duty Bill.
Mr.FADDEN. - An adjustment will have to be made. Subject to such a provision, the Opposition has no quarrel with this proposal.
Clause 16 deals with recoverable trusts. Certain views in respect of it will be expressed in due course.
The most obnoxious portion of the bill is that which relates to the introduction of a marriage tax; the Opposition will strenuously oppose this. We recognize, of course, the necessity for a safeguarding provision in order to prevent the unfair and dishonest diversion of income. There are means by which that object may he achieved. But bona fide transactions should not be treated as though they are in the same category as definite evasion. The Opposition will not give any encouragement to evasion. The exchequer has to be protected, and the national income maintained. Taxation, after all, is only a community impost, and if Peter does not pay his due proportion, Paul has to pay more than a fair share. We submit that the method adopted by clause 17 is not only harsh and inequitable but also exceedingly foolish; it will give rise to a state of affairs which will not be in the best interests of the nation. The clause sets out to exempt a man and wife who are not living together, because of a judicial separation, or a divorce. But aman and wife who are living together bringing up a good Australian familyand maintaining a good Australian home, are to be penalized severely. I shall give concrete instances in order to show the degree to which the Government is inflicting a marriage tax upon a man and his wife by aggregating their separate incomes. Take the actual instance of a wife with a taxable income from property of £1,600. The property was not. bestowed upon her by her husband, but was left’ to her as a legacy under her father’s will. The income derived from it last year was £1,600. The husband had an income from persona] exertion of £1,100. Under the act as it now stands, ‘the federal tax would be £500 on the income of the wife and £202 on the income of the husband, a total of £702; or, with State tax added, a total of £1,079. Under the proposed tax, the wife will pay £84.0 and the husband £492 to the Federal authorities; with the addition of State tax, a total of £1,709. The income of the wife is in her own right by virtue of the provisions of the Married Women’s Property Act, the specific purpose of which is to remove from the wife the ignominy of being a chattel of the husband.
Let us compare the effect upon a married couple and a single person : The husband has an income from personal exertion of £1,000, the wife an income from personal exertion of £500, and the single taxpayer an income from persona] exertion of £500. At present, the husband pays £166 13s. 4d., but under the proposed tax will pay £250. The wife now pays £41 13s. 4d., but under this proposal will pay £125. The single taxpayer, who is possibly living with a woman but not maintaining a home, will pay £41 13s. 4d. The result will be to place a married woman at a disadvantage of £84 6s. 8d., although she is living honorably with her husband. Will the Australian community stand for that? Compare the discouragement of respectable married women thus caused with the encouragement given to the mothers of this nation by the £13,000,000 child endowment scheme.
Let us take the case of a husband with an income’, from’ personal exertion”, of £3,000, .his wife with an income of £400, and a single taxpayer with an income of £400. Under this proposal, the tax of the husband will increase from £1,125 to £1,580 17s. 7d.; the wife, instead of paying £26 13s. 4d., will pay £210 15s. 8d.; and the single taxpayer will pay £26 13s. 4d. A widower with an income of £3,000 will pay £1,125, and a widow with an income of £400 will pay £26 13s. 4d. The married woman, because she and her -husband have a composite income, will have to pay £184 2s. 4d. more than the single taxpayer with the same income. Is that justice? Is it sensible? Is it in the best interests of the nation and of morality? I know that this proposal had its origin in the English law. We are told that it has been in force in England for over twenty years. Rule 17 formed a part of the English Income Tax Act 1918, but corresponded to the Income Tax Act 1842, which has been repealed. Consequently, the rule was in force nearly a century ago, many years before the enactment of the Married Women’s Property Act. At the time of the enactment of the original section, a married woman was regarded as a chattel, and was incapable of owning any property in her own right. Therefore, it was logical to make her husband pay tax on her income. However, the historical reason for such a section does not apply at present, and the grafting of a century-old English section on to Australian law, without historical justification such as originally applied in England, is a retrograde step. The Senate Finance Committee of the United States of America decided on the 25th August against the proposal to require husband and wife to file joint returns. The proposal had been defeated by a substantial majority in the House of Representatives, according to a report in the New York Times. It should not be necessary for me to cite further examples or to emphasize my point with greater force, in order to make a responsible Government recognize the duty that it owes in connexion with this particular clause, and to awaken it to a realization of the harm which will b’e done to human life and the economic wellbeing of Australia by the imposition of a marriage, ‘ tax; which will operate as I have described. . .
In connexion with the taxation of private companies, the Government is moving very rapidly towards the implementation of the basic principles of its policy, namely, the nationalization ot socialization of industry.
– At least one honest and straightforward Minister admits, that the sole objective of the taxation measures we are being asked to consider is the nationalization or socialization of industry. The aim is to drive people out, of their businesses in order that the Government may acquire them, with the result that every body will be placed on the one level and socialism will prevail. Even if the Minister for War Organization of Industry (Mr. Dedman) had not said “ Hear, hear “, the examples I have cited would have demonstrated the point with even greater force. Is any one prepared to say that the formation of companies in this country has not played an important part in its economic welfare and development? Both private and public companies should be fostered. Of what are our companies composed? They consist of hundreds of small holders of stocks, with an investment of £100 or £200, the aggregation of which has resulted in the biggest companies that we have in Australia to-day. The greater the subscribed capital of a company, the greater is the number of shareholders with a small average holding. The proposals of the Government will drive these concerns out of existence. That is the objective of the Minister who has just interjected. The honorable gentleman would tax them to such a degree as to put them out of business, or at least force them to invest the money resulting from their liquidation into Commonwealth loans. A private company is to be called upon to pay a flat rate of 3s. in the £1, but if the individual shareholders have a sufficient taxable capacity, they will be required to pay 16s. 8d. in the £1. If their proportion of the income constitutes the equivalent of £2,000 a year, the private company will pay 19s. 8d. in the £1 in Commonwealth tax alone. Only 4d. in the £1 will be left to the company, out of which to provide for State tax, reserves for bad seasons, dividends, sustenance, sinking fund, and depreciation. This is socialism with a vengeance! The contributions are more drastic than they would he under a communistic system, under which the Government, the group or the clique would at least be responsible for the management and control of the company, whereas under the taxation proposals of this Government that responsibility is evaded. Something will have to be done about the matter, and nobody knows that better than the discerning Treasurer (Mr. Chifley). He recognizes that we cannot have the level of taxation provided for in the present schedules, and at the same time enable public and private companies to exist. Of course, they will be forced into liquidation. The Government is driving people out of. private companies into partnerships, and probably, in th next budget, partnerships will be taxed on the same basis as private companies are to-day, in order that the objective admitted by the honorable member for Corio may he achieved.
I recognize that the Treasurer must get revenue, but I hope that long before the next budget is introduced, the whole position of company taxation, and particularly private company taxation, will be conscientiously surveyed with a view to alleviation of the burdens of companies. Otherwise the revenue cannot possibly be maintained, because people will be forced to divert their capital into Commonwealth loans. Who would put up with the difficulties and disadvantages of private enterprise and company control for a residue of 4d. in the £1, if he could invest his money in Commonwealth loans that return Z per cent, and are free of income- tax ?
A grave anomaly arises to-day in comnexion with certain companies, particularly those engaged in war production. A special depreciation allowance should be made in respect of assets used for war activities, since those assets will probably be of no use at the termination of the war. Special consideration should be
Ifr. Fadden. given to those companies which have installed plant in connexion with war production. In determining the amount of their distributable income, companies may deduct the amount of tax paid, but I contend that they should be permitted to deduct either taxes paid or taxes payable, whichever happens to be the greater amount. Administrative difficulties should not stand in the way of granting relief in this direction, having regard to the disabilities of those who have to provide the tax. In conclusion I quote for the benefit of the Treasurer the following remarks in the House of Commons many years ago by Edmund Burke: -
Our- resources may be as unfathomable at they are represented. Indeed they are just whatever the people possess and will submit to pay. Taxing is an easy business. Any projector can contrive new impositions; any bungler can add to the old. But is it altogether wise to have no other bounds to your impositions than the patience of those who are to bear them?
– I do not intend to follow the Leader of the Opposition (Mr. Fadden) in his analysis of the Government’s taxation proposals, because the matters mentioned by him can be dealt with most conveniently at the committee stage. In his concluding remarks, he took exception to the proposed taxation of companies. Honorable gentlemen opposite wax very indignant when a government trespasses on the preserves of the big companies. The Leader of the Opposition said that there were no big companies in Australia, but that there were aggregations of small shareholders.
– Such as in the Broken Hill Proprietary Company Limited.
– Nobody, no matter how much money he had at hit disposal, could buy a controlling interest in any of the big monopolistic companies or banking institutions in this country. The history of limited liability companies reveals the system of production foi profit in its worst form. As a limited liability company became a huge monopoly, it doled out a few shares to individuals, so that persons like honorable gentlemen opposite might “ squeal “ about the poor widow and the orphan’s mite. Monopolistic companies invariably made sure at the outset that they had secured for themselves a controlling influence over the governments of the countries in which they were operating. Small shareholders will not suffer much as the result of the measure now before the House. The Leader of the Opposition stated that, after paying Commonwealth income tax, a company, under certain conditions, would have only 4d. in the £1 left with which to meet all other commitments, but that is not so, because, in respect of either individuals or companies the Commonwealth and State tax together may not total more than 18s. in the £1.
The Leader of the Opposition spent more time in reading extracts from the speeches delivered by various Government members, who expressed their individual opinions, than in analysing the provisions of the bill. I have always contended that, since Commonwealth taxes have reached a high level, the only members of the community who have really enjoyed child endowment are the wealthy. To the person who paid income tax at the rate of ls. in the £1, the deduction of £50 for a child represented an allowance of £2 10s., whereas a wealthy man who paid 10s. in the £1 in tax got a child endowment of £25 a year, or, roughly, 10s. a week. The Labour party has always claimed that the deduction from, taxable income of £50 for each child was a concession to the wealthy rather than to the small taxpayer, and certainly not a concession to those who paid no income tax at all. The right honorable member for Yarra (Mr. Scullin) has consistently directed attention to that fact.
The Leader of the Opposition referred to the deductions previously permitted of calls paid in respect of shares in mining companies. I point out that the new provision will not operate retrospectively, but from the date when the budget was introduced. The honorable gentleman spoke of calls on mining shares as though the Government proposed to tax them, but those payments are not to be taxed as such. They are capital investments. If a person invests money in mining shares, and is successful in that venture, he is in a similar position to that of a person who succeeds in building up a business. The Govern ment considers that calls on mining shares should not be deductable from taxable income.
The Leader of the Opposition also objects to the taxation of calls paid on shares in afforestation companies; but the honorable gentleman, when Treasurer, or when supporting previous Governments, took no exception to the value of the growing crops of the primary producers, and the wool on the sheep’s back, being taken into account for income tax purposes. I see no reason why an afforestation company should be picked out for special exemption.
– But is it not in the nature of expenditure to earn income?
– The act provides that expenditure incurred to earn income is an allowable deduction, but the assets which are created by the development of an afforestation scheme are themselves taxable. I thought that the Leader of the Opposition was going to object to the proposal to allow the Prices Commissioner to examine income tax returns, but apparently he agrees to that. He feared, however, that the Government might, in the future, allow Ministers also to examine the returns. I assure him that the Government does not intend to do anything of the kind. He also spoke of the disposal of assets by a company and the taxation of the proceeds. A great many people have been evading taxation in this way. If a man invests £100 in a company, and he receives £1,000 when the company is wound up ten years later, surely £900 of that amount must be regarded as income upon which he may be taxed.
The Leader of the Opposition objects to a taxpayer having to inform the Commissioner at his first lodgment of an income tax return whether he is engaged in certain ventures as a speculation or not. Men have been backing race-horses for years. They were successful for a while, and then they incurred losses. One such case came before the High Court. A man lost £5,000 in one year, and he claimed exemption for that amount in his income tax return, although in other years he had made a profit of several thousands of pounds. The taxpayer cannot have it both ways. If he wants to include his losses in his returns, he must include his profits also, and pay tax on them. Taxation officials say that this provision is necessary so that people may be prevented from defrauding the revenue as has happened so often in the past.
Now we come to what hasbeen described as the “ marriage tax “. The Leader of the Opposition said that, in the interests of morality, the Government should abandon this proposal. His remarks constituted a veiled insult to the womanhood of Australia. They amounted, in effect, to a suggestion that women will use marriage as a commercial proposition, and will marry only if there is some financial advantage accruing to them. Taxation authorities know that many taxpayers have for years been evading taxation by making a part of their income over to their wives.
– The taxation officials have tried this on every Treasurer for the last ten years, but. this Government was the first one that fell for it.
– The only persons whom this provision will affect materially are those on higher incomes. It is proposed to introduce an amendment that will have the effect of liberalizing the provision so far as lower incomes are concerned. This provision has been in force in Great Britain since 1914, and I do not think that honorable members opposite will suggest that Great Britain is seething with immorality. In fact, honorable members opposite are always telling us to tune in to Britain, and, when they seek justification for something they wish to do, they do not hesitate to go back to the time of King John, or even William the Conqueror, in search of precedents. In New Zealand, the joint assessment of husband and wife has been in operation since 1939, but let us confine the comparison to Great Britain, the country from which we have inherited our democracy and our parliamentary system. I have here a series of extracts from a report of the Royal Commission on the United Kingdom Income Tax, dated January, 1920. The extracts, which are taken from pages 56 to 59 inclusive of the report, are as follows : - 248. The correct method of assessing married persons has received a great deal of public attention bothbefore and since the appointment of this commission. The matter has been freely ventilated in the press and has been raised on several occasions in the House of Commons. In the course of our inquiry a considerable volume of evidence on the subject has ‘been presented to us, and we have examined witnesses from representative women’s societies; we have also received a large number of letters in connexion with this part of our investigation. 254. It was pointed out that if the allegation is correct that joint assessment is conducive to. immorality (an allegation unproved in the course of our inquiry and characterized by one of the women witnesses as being neither reasonable nor probable), the logical, even if not the practicable, remedy is to render liable to joint assessment the income of two unmarried persons living together. 258. The question involved should not be regarded as a political question, but purely asone offinance and revenue, and we are satisfied that it must be decided, not on anr theoretical grounds of equality of citizenship, but in accordance with the outstanding principle of “ability to pay”, which we recognize as,, governing all questions of taxation. In the application of this principle we must regard the social conditions of the country in which the taxation is imposed. The great majority of married persons live together and use their several incomes for common purposes, and this common menage and joint dependency is recognized, to the benefit of the wife, for otherpurposes of taxation, e.g., legacy and succession duties payable by a widow are less than those payable by a person unrelated to the deceased. 259. The aggregation for income tax purposes of the income of husband and wife is not dependent upon any mediaeval conception of the subordination of women. . . . The income are aggregated because the law of taxable capacity is the supreme law in matters of taxation, and taxable capacity is, in. fact, found to dependupon the amount of the income that accrues to the married pair, and not upon the way in which that income happens fortuitously to be owned by the members of the union. It is beyond question that in the immense majority of cases where the wife has separate means she contributes to the common purse either by actual merger of her income with her husband’s or by bearing expenses which in less fortunate households fall upon the husband. 200. We have given a great deal of time and attention to this subject and have considered with the utmost careall the arguments, that have been put before us, and we have been forced to the conclusion that the grievance complained of is more vocal than real, in other words, that it is a grievance rather than a hardship. We therefore recommend that the aggregation, of the incomes of wife and husband should continue to be the rule.
It is proposed, when the bill reaches the committee stage, to move certain amendments, and to introduce some new provisions. The principal amendment will provide an abatement of tax in any case where the effective combined rates of Commonwealth and States taxes on incomes exceed 18s. in the £1. In any such case, it is proposed that relief shall be given by the .Commonwealth to, the taxpayers concerned, according to the proportionate weight of tax imposed respectively by the Commonwealth and by the State. For example, if the combined weight of the tax on each £1 of income is 21s., composed of 14s. Commonwealth tax and 7s. State tax, the relief to be given by the Commonwealth will be 2s. on each £1. It remains for the States to contribute their portion of the tax abatement so that the combined Commonwealth and State taxes shall not exceed 18s. in the £1. The proposed rebate will be applicable to companies as well as to individuals.
I shall move also to modify the provision in the bill relating to the rates of tax in assessments of husbands and wives. Under the new proposal, a taxpayer will be required to pay income tax on his or her taxable income at the rate appropriate to the aggregation of the taxable incomes of the taxpayer and the spouse in excess of £200. For example, where the husband has a taxable income of £700, and the taxable income of his wife is £300, the husband will pay tax on £700 at the rate appropriate to £800, and the wife will pay tax on £300 at the rate appropriate to £800. Incomes will not be aggregated for rating purposes unless the separate taxable incomes of both the husband and the wife are in excess of £200. By this modification, possible hardships will be obviated.
Another amendment is designed to correct certain anomalies in the exemption from income tax of pay and allowance of members of the forces.
It is also proposed that the removal of the exemption on dividends paid out of exempt ex-Australian income of companies, and the disallowance of calls paid to mining companies, shall apply only to dividends and call’s paid after the 29th October, 1941.
Another amendment will give to private companies the right to elect that, in calculating the distributable income, ordinary Commonwealth income tax payable in respect of income of the year of income shall be deducted in lieu of ordinary Commonwealth income tax paid during the year of income. A full explanation of the proposed amendments to the bill will be circulated for the information of honorable members.
.- The amendments which have been foreshadowed by the Minister assisting the Treasurer (Mr. Lazzarini) do, in some measure, meet the objections to the bill that were expressed by the Leader of the Opposition (Mr. Fadden), and to that degree I welcome them. The provision which will limit the aggregation of Commonwealth and State taxes to 18s. in the £1 will be gladly received, particularly after the criticism that the Leader of the Opposition directed to it. What amazes me is the scrappy way in which criticism voiced by members of the Opposition has been met by the Minister. As this legislation deals directly with the individual, and a heavy responsibility devolves upon the Ministry to meet its financial commitments, I expected the honorable gentleman to answer the contentions of the Leader of the Opposition in the order in which he made them. In his speech, however, the Minister made no real attempt to counter that criticism.
I welcome the statement of the honorable gentleman that the bill will not have a retrospective effect.
– Only on matters of new taxing proposals.
– We are told that there is to be no retrospectivity, but this is a question of degree, and it will be important to crystallize the view of the Ministry regarding these matters as we examine them.
I shall analyse the bill in the order in which the Leader of the Opposition dealt with it, and I hope to avoid undue repetition in dealing with the subjects to which he referred.
Clause 3 amends section 16 of the Income Tax Assessment Act 1936-1940, under which the Commissioner of Taxation is authorized to make available to the Commonwealth Prices Commissioner information from taxation records. The Minister, by interjection, declared that no doubt whatever exists under section 16 that a Minister does. not possess the right to acquire this information. I am not satisfied with that statement. Subsection 2 of section 16 of the Income Tax Assessment Act 1936-1940 reads-
Subject to this section, an officer shall not either directly or indirectly, except in the performance of any duty as an officer, and either while he is, or after he ceases to be an officer, make a record of, or divulge, or communicate to any person any such information so acquired by him.
That means that he is protected when revealing, in discharge of his duties as an officer, information that is the basis of sub-section 2. Sub-section 4 indicates the persons to whom the Commissioner of Taxation is permitted to divulge information, and sub-section 5 provides that -
Any person to whom information is communicated under the lost preceding sub-section, and any person or employee under his control shall, in respect of that information, be subject to the same rights, privileges, obligations, and liabilities, under sub-sections (2) and (3) of this section, as if he were an officer.
The only interpretation that I can place on that sub-section is that a person to whom information is conveyed under subsection 4 has the right, in the performance of any duty as an officer, to divulge that information to a person to whom, in the discharge of his duty, he is entitled to speak. It is open to the gravest doubt whether any officer such as the Commissioner of Maternity Allowances, the Director-General of Health, the Commissioner of Pensions, the Repatriation Commissioner, or the Commonwealth Prices Commissioner would not be at perfect liberty, having obtained information from the Commissioner of Taxation, to reveal it to his Minister, in the performance of his duty as an officer. Honorable members on both sides of the chamber desire that information in the possession of the Commissioner of Taxation should be carefully kept within a restricted circle. I ask the Minister to accept an amendment to insert a proviso to the clause so as to make it clear that the enabling provisions of sub-section 4, which permit the Commissioner of Taxation to make available information to the officers named therein, shall not entitle them to reveal it to their Ministers.
The next subject to which reference was made is clause 6, which amends section 44 of the Income Tax Assessment Act 1936-1940. In my opinion, the Minister followed a very proper course in referring the proposed elimination of paragraph a of sub-section 2 to a committee which comprised Mr. J”. L. Gunn. Mr. E. V. Nixon and Mr. Trebilco. The paragraph reads -
The Treasurer, when making available to the House the recommendations of that committee, indicated that the Ministry will adopt them. I welcome them so far as they go, because they definitely eliminate some of the vice in this proposal. But I doubt very much indeed whether, on giving consideration to the matter, the committee realized sufficiently the importance of Australian investments in gold-mining and mining generally overseas. I should have thought that the committee would have realized at the present time the necessity for increasing our dollar resources abroad. One way in which they can be augmented is by goldmining, where there is a substantial Australian control of the operations, as in Fiji or other places. Reading the report of the committee, I conclude that the most casual consideration was given to this matter. I realize, of course, the obligations of the Ministry, at the present juncture to seek various avenues of revenue. As the result of its policy not to increase taxation upon incomes under £1,500 a year, the field available from which the Ministry can obtain finance is very limited. Whilst I realize that it is idle, in the face of the recommendation of the committee, to ask the Government to reconsider the claims of gold-mining companies aud other mining companies, I do impress on the Minister the advisability of introducing a provision to permit amortization in respect of moneys received as dividends from companies operating overseas. To clarify my meaning, I point out that it is true that an ordinary company, when distributing a dividend, pays the money out of profits; but the dividends of companies operating as mining enterprises include the repayment not only of income but also of capital, because of the wasting nature of the venture.
– In fairness to the committee, I remind the honorable member that that matter was considered. The committee decided that a company can make that provision before it declares a dividend.
– That is the answer which is usually given to this claim, but if one has the specific provision in an act which enables a company, according to a particular formula, to deduct a certain sum of money in given circumstances, that is more definite and of greater value to the income taxpayer than the provision to which I have drawn attention. I ask the Minister to give careful consideration to this matter.
In my opinion, a distinction cannot be drawn between a gold-mining company and an ordinary mining company, though some persons hold the contrary view. It is difficult to justify granting to a company operating overseas a concession that is not given to a company operating in Australia. But I suggest that it is most important to encourage Australian capital to seek investment abroad, because one way in which a great nation is made is by the ability of its wealth to develop resources overseas, the proceeds of which are ultimately attracted to the country. I ask that serious consideration be given to this problem, if not in this bill, then immediately after the House rises.
The foreshadowed amendments to the bill provide for the new proposals to take effect on and from the 29th October, 1941. An Australian shareholder will be required to include as assessable income only the net amount which he receives, or is entitled to receive, from abroad as a dividend. From that provision I assume that the proposed amendments will provide that the act will apply only to dividends declared on and after the 29th October, 1941.
– That is so.
– That is satisfactory. Will the Minister inform me whether the actual dividend which has to be accounted for is the dividend, less taxation, at the source?
– Yes, it is the net income which is transmitted to Australia.
– That meets my objection. Regarding my objections to retrospectivity, it seems to me that the above considerations should have equal application to sub-paragraphs (i) and (ii) of sub-section 2 b. By this provision, they will be eliminated.
Clause 6 provides that section 44 of the Income Tax Assessment Act- 1926- 1940 shall be amended, first, by omitting paragraph a of sub-section 2, and, secondly, by omitting sub-paragraphs (i) and (ii) of paragraph b of the same subsection. My submission is that again, the retrospective provision should apply only to dividends declared on and after the 29th October, 1941. In my opinion, the reasoning which has been followed in respect of sub-paragraph a is equally good in respect of each of the paragraphs b (i) and b (ii).
– The retrospective provision applies to all three.
– I am gratified to have that assurance. It meets another of my objections.
– The retrospective provision applies to any new taxing proposal in the bill.
– The report of the committee does not make the position clear, but the Minister assisting the Treasurer, and the right honorable member for Yarra (Mr. Scullin), have now assured the House that the same consideration applies to sub-paragraphs (i) and (ii) of sub-section 2 b. I realize, of course, that the committee did not deal with them. To a large degree that will remove the vice from the proposal.
I now direct my remarks to subparagraph (ii) of paragraph b, which will be omitted from the principal act. It reads -
Profits arising from the sale or compulsory resumption for public purposes of assets not acquired for the purpose of re-sale at a profit.
The claim of the Leader of the Opposition that to tax profits arising in the way set out in the foregoing sub-paragraph is a capital levy cannot be disputed, because it is not income in the proper sense. It relates to property that has been acquired but not for the purpose of re-selling at a profit. If sold at a profit, such profit is treated as assessable income.
– It is profit.
– That is true, but the tax is still a capital levy, because the profit made is a capital profit. To tax that profit is equal to taxing the increased value of’ an asset.
– Why should that not be taxed ?
– If the Government seeks to tax the increased value of capital, it will strike at the roots of our society, because the people are already experiencing increasing difficulty in paying the ordinary heavy income tax, and they will find it impossible to pay a capital levy.
– Such profit is not income.
– Of course not. Why is this proposal limited to a company? Why are not partnerships or individuals brought within its ambit? My experience as Treasurer makes me realize that the taxation officials will shortly say that an anomaly exists - created probably in the first place by their advice - because private companies, which, in most cases, are incorporated partnerships, are subjected to the tax, whereas partnerships and individuals are exempt.
– Is the honorable gentleman still talking about profits from capital ?
– But this is a tax on the dividends received by shareholders.
– Of course it is. I know the argument advanced by the Treasury and by taxation officials that a company is something quite different from shareholders.
– That principle was affirmed by the Government of which the honorable gentleman was a member in its last budget.
– I quite agree, but the point at issue is the lengths to which that principle is carried. This provision is the thin end of the wedge which will open the way to the imposition of a capital tax on individuals. It is clear that some administration, probably this one, early next year will be told that there is an anomaly which can be removed by taxing the profits made on any property sold in similar circumstances to sales made by a company. This provision cannot be justified.
– The honorable gentleman established the principle.
– I did not. I did adopt the principle that there is a distinction between a company and individuals, but I did not say that the principle inherent in that distinction can be applied to whatever lengths are desired.
Clause 7 of the bill proposes to repeal section 45 of the principal act which reads -
Where a company has derived income from interest to which section 20 of the Commonwealth Debt Conversion Act 1931 applies, or from interest to which sub-section (2) of section 52b of the Commonwealth Inscribed Stock Act 101 1-1932 applies, and has paid in the year of income any portion of that income in dividends to its shareholders, the proportion of each dividend for that year which has been so paid out of such income should be free from income tax to the same extent as interest to which section 20 of the Commonwealth Debt Conversion Act 1931 applies.
This proposal is a repudiation of an undertaking given many years ago by the right honorable member for Yarra as Prime Minister that the interest on Commonwealth bonds would be free of income tax above a certain limit. If a private company has bought bonds and distributed the interest earned thereon as dividends amongst its members as members of an incorporated partnership suck members would be called upon to pay income tax upon interest which was to be free of tax.
– It is not correct to say that we propose to take any more income tax on the interest paid on those bonds than was provided for when the Commonwealth Debt Conversion Act of 1931 was passed.
– I agree that, in a legal sense, the right honorable gentleman’s contention is correct, but, substantially, the Government proposes to do precisely that. The Government’s only argument is that the people were not told in direct terms that that would be the position. It is most dishonorable for the Government to try to shuffle out of its obligation to those companies in the way that it proposes. Thousands of private companies consisting of from two to seven or so active members working as a partnership exist. If a partnership bought Commonwealth bonds the interest thereon would be free of income tax, but because a group of people have incorporated themselves into a company they are to be caught.
– They have their remedy; they can wind up their companies.
– What kind of an answer is that ?
– The right honorable gentleman would destroy the companies.
– More than that, destroy confidence in the word of governments.
Mr.Scullin. - There is no breach of the word of the Government.
Mr.SPENDER.- Legally the right honorable gentleman is correct, but substantially he is not correct.
– Section 45 of the principal act was inserted by the Lyons Government as an amendment.
– For the purpose of carrying out the undertaking given by the right honorable gentleman.
– The right honorable gentleman has more than once resisted the urgings of Labour members, particularly the honorable member who is now Minister for Supply and Development (Mr. Beasley), that the interest on certain Commonwealth bonds be brought within the income tax field.
– I shall still resist.
– I know that; so I say to the right honorable gentleman and to the Government which he supports that in substance this proposed amendment of the principal act is a repudiation of the spirit of the undertaking given by the right honorable gentleman. Unless the people are able to rely on the word, not merely the legal interpretation of the word, but the substance of the word, ofthe Government, the Government will be distrusted and the voluntary financial effort which it has espoused will fail.
Clause 8 of the bill proposes to amend section 46 of the principal act by -
Omitting from sub-section (1) all the words after the words “Taxable income” and inserting in their stead the words “ the rate of tax payable by companies for theyearof tax.”
Now, section 46 of the principal act is governed by section 45, a section which the Government proposes to omit. I urge the Government to reconsider the proposed amendment. I do not know what revenue is involved.
Clause 10 of the bill was mentioned by the Leader of the Opposition and 1 do not think that need exists for his words to be supported except to say that it would appear that the proposal is made merely in order to meet the convenience of the Commissioner of Taxation. The clause roads -
I see no reason why this power should be given to the Commissioner of Taxation. If a taxpayer wishes to contest such a matter, why should it be left to the commissioner to say “I otherwise direct”, thereby forcing upon the taxpayer the obligation to go to a court of review?I strongly agree with what was said by the Leader of the Opposition in that respect
Clause 12 proposes inter alia to omit from section 78 of the principal act the concession extended in sub-section 1 d -
Calls paid by the taxpayer in the year of income on shares owned by him in a mining company or syndicate carrying on mining operations in Australia for gold, silver, base metals, rare minerals or oil, or in any company carrying on afforestation in Australia as its principal business.
To disallow as deductions calls of that kind at a time like this is a short-sighted policy, and I cannot understand any Western Australian member supporting the proposal to remove what has beena great encouragement to the gold-mining industry.
– What did the honorable gentleman’s Government do to the gold-mining industry? Who imposed the gold tax?
– The question is what the Labour Government proposes to do to the industry. How can the honorable member salve his conscience if he votes in favour of this provision? Is he to return to his electorate and excuse himself by saying that he did wrong because somebody else did wrong also ? The honorable member is well aware of the importance of this deduction to many residents of Western Australia. I can realize how provocative it must be to him to be obliged to support a ‘Government which strikes a direct blow at an industry vital to his own electorate. The Government has shown lack of foresight by taking this action in order to derive a miserable amount of revenue through the elimination of the deduction, particularly in view of the serious effects that it will have upon industries throughout Australia. Mining and afforestation should be encouraged, even to the degree of giving them preferential treatment. I hope that the Government will, after reflecting upon this problem, omit the clause which seeks to eliminate the deduction. I am informed by the Minister (Mr. Lazzarini) that the provision is intended to apply only to calls made on and after the 30th October of this year. Nevertheless, I urge the honorable gentleman to have this matter reconsidered by the Government with a view to withdrawing the proposed amendment.
I refer now to clauses 16 and 17. Clause 16 relates to income from trusts for children, and clause 17 to the aggregation of the incomes of husband and wife. I shall deal first with clause 17, which proposes to aggregate the taxable income of a wife with that of her husband for taxation purposes, irrespective of how that income is produced. It will not matter whether the income is produced as the result of a post-nuptial settlement or as the result of a nuptial settlement made 20, 30 or 40 years ago ; it will not matter whether a woman has, by her own efforts before marriage, created her own income from business activities; it will not matter whether she goes out into industry, or business, and earns a separate income by virtue of her own ability. I cannot see any justification for such a provision. This Government has adopted an amazing attitude towards the rights and status of women. When it first came into power, we heard a great deal from the Minister for Air (Mr. Drakeford) in particular, and other members of the Government, about what they proposed to do to the various women’s auxiliary war services. Those honorable gentlemen had not, at that time, realized the problems of mainpower with which the Government had to deal. .Since they assumed office, however, they have retreated from their former position, largely as the result of pressure brought to bear by women’s organizations. Now the Government is seeking to go back 70 years, and treat women as the chattels of their husbands. One of the reasons for aggregating the taxable income of a woman with that of her husband was stated by the Treasurer in his second-reading speech as follows: -
This proposal is made for two main reasons - first, additional revenue will be raised with little extra burden or hardship, as the combined incomes are available to meet the domestic needs of the parties.
If that is to be the only reason, every family should be taxed as an incomeearning unit. I know of many instances in which sons are earning large incomes and are living with their parents. They contribute to the domestic expenses of their homes. Why should we not tax those families on the aggregation of their incomes? But that is a horse of a different colour in the view of the Government. Although it strikes at wives, it has not struck at women living in immorality with a man. Such a woman may have an income separate from that of her consort, but yet not be subject to this form of tax. Why should that be so? If the method be proper in one case, it must be proper in another. There are also many instance* of a mother living with her children, or a father living with his children. But these family groups will not be affected by this proposal. The only justification for the aggregation of the income of hueband and wife is the prevention of the avoidance of the payment of tax by mean* of interspouse transfers of incomeproducing property. But there are other ways of achieving that end. This method of taxation cannot be justified in the case of a wife who earns income by her own endeavour. It can be justified only when property has been transferred by a hutband to his wife. Nevertheless, this clause strikes at the income derived by a wife from any source whatsoever. The Government’s excuse for this is that the combined incomes are available to meet the domestic needs of the man and wife. I! cannot imagine a more shallow pretext for such a scheme. The Government could achieve its purpose by including a provision similar to that contained in the taxation legislation of New South Wales. The Labour Government in that State recently consolidated its taxation laws, but it did notgo so far as this Government seeks to go. Its provision for the taxing of the aggregate income of man and wife relates, in the case of the wife, only to income which accrues from a post-nuptial settlement made by the husband on or after the 30th September, 1915. In order to be perfectly fair, section 136 of that act states, in substance, that this provision shall not apply unless it be clear that the transaction was for the purpose of evading or avoiding taxation. I draw the attention of the House also to section 260 of the Commonwealth Income Tax Assessment Act 1936-40. It reads -
Every contract, agreement, or arrangement made or entered into, orally or in writing, whether before or after the commencement of thisact, shall so far as it has or purports to have the purpose or effect of in any way, directly or indirectly -
altering the incidence of any income tax;
relieving any person from liability to pay. any income tax or make any return ;
defeating; evading, or avoiding any duty or liability imposed on any person by this act;
preventing the operation of this act in any respect, be absolutely void, as against the Commissioner, or in regard to any proceeding under this Act, but without prejudice to such validity as it may have in any other respect or for any other purpose.
If that does not go far enough to satisfy the requirements of the Government, it could add after the word “ arrangement “ the words, “or any settlement, or transfer of property”. That would strike at the vice which the Government wishes to eliminate - interspouse transfers. To seek to bracket the taxable income of a wife, no matter from what source it may come, with that of her husband, simply because of the allegation that such transfers are made with the purpose of evading taxa tion, is to reduce women to the position of chattels. I protest against such a retrograde step. I do not defend any attempt to evade or avoid taxation, but it would be wrong to permit the Commissioner of Taxation to range back over the last 30 or 40 years in search of transactions which have produced income for the benefit of a wife, irrespective of whether or not they were made for the purpose of avoiding taxation. That could not be justified. The Opposition will resist this proposal to the utmost of its ability. Inany event, it should have no application whatever to any transaction which occurred before the bill comes into operation. The Minister has said that he does not wish any provision of the bill to be made retrospective. Yet, if it be allowed to go through, this clause will have retrospective application, even back to the creation of whatever property a wife may have in her own name. Even if the Government could justify its action in making the provision retrospective, it would have no right to make it apply to property acquired earlier than the date of the outbreak of the war, since when there has been a steep increase of income tax rates. My proposition is that the proposal should be rejected by the House. But if it should not be rejected, I submit that the clause should apply only to income derived from property transferred to a wife, after the commencement of the operation of the bill, for the purpose of evading or avoiding taxation. Certainly the provision should not apply to income earned by a woman through her own ability. To continue with this proposal would be to reject the right of women to take their place in the community as individuals, and to make them appendages of their husbands, which right has been secured as the result of struggles which lasted for many years. Even though the clause provides for the aggregation of the incomes of a husband and wife, it makes no provision for any loss sustained by one party to the marriage. For instance, a wife might sustain a loss as the result of her business operations in one year. Under this clause that loss would not be debited against the income of the husband. Why should that be so when the Government’s expressed intention is that tax should be levied upon the aggregate income of a man and his wife, because such income is available for the domestic needs of the parties. 1 have the greatest respect for the Commissioner of Taxation and his staff, but they have fixed ideas. They want the system df taxation to run smoothly for themselves, and they adopt a completely detached, and sometimes unreal, attitude towards taxpayers. The taxation authorities have been seeking to sell this idea of taxing the aggregate incomes of man and wife to every Treasurer for the last fifteen years. Finally they caught the present Treasurer as he came fresh into office, and’ he adopted the scheme. It is obvious that the Minister has not examined this particular provision in detail, and I doubt very much whether any other members of the ministerial party have done so.
I now turn, to clause 16, paragraph p of which introduces a new provision. If it is to be introduced at all, I ask that it shall apply only to trusts which are created after the commencement of this act. I believe that the principle contained in the clause is wrong although there are not the same strong ‘objections to it as there are to the aggregation of the incomes of husband and wife. It is wrong to put an impediment in the way of men who, in years that have passed, sought to protect their children by making some personal sacrifice. What is wrong with a father, say a professional man, making provision against the possibility of his earning capacity becoming less? [Extension of time granted.] In his early married life such a man might have been prepared to set aside a proportion of his income to create a fund for the future education of his children or for some other legitimate purpose in their behalf. He may have divested himself of dominion over property, in which event it is no longer his, and he may not recall it. Unless that be so, he is caught under clause 16 a to which I have no objection. Where the settlor has divested himself of dominion over certain property it is wrong to say that the income from that property shall be accumulated with the income of the settlor irrespective of whether he has or has not made any use of it during recent years. This provision should apply only in respect of trusts created after the passing of this act, and then only in respect of trusts which are designed, or whose primary purpose is, to evade or avoid income tax. In cases in which dominion over the property has been parted with, there can be no justification for such a provision. I draw attention to the provisions of section 260 of the principal act and to the observations which I made in respect of the proposal to aggregate the taxable incomes of husband and wife.
I do not know whether it is possible for people who are engaged in commerce to secure a rural property .merely for the purpose of offsetting their losses on such, property against their business profits, but I do know that numbers of people who have not previously been associated with rural industries art acquiring rural properties with the idea, so I am informed, of carrying on a pretended rural business. These properties they intend to improve to the full extent of allowable deductions. In that way they seek to diminish the incomes from their real callings. In New South Wales this practice is provided’ against, I believe, by what is colloquially described as the “ hobby farm ‘” provision. It is said - I do not know with what degree of truth - that some people have in this way doubled their capacity to avoid income tax. For such I have only contempt. It would be wrong to allow these smart people to evade in this way the payment of taxes which other people cannot avoid paying. This is a matter to which I suggest the Government should give attention.
The Opposition has endeavoured noi to direct captious criticism to the bill, but to point to matters which it regards as of serious moment. I am confident that the Government realizes that on: object is to give every assistance, consistent with adherence to our principles, in meeting the difficult problems which face the country at this time, and therefore I ask that my observations be given careful consideration.
– I do not propose to speak at length on the second reading of this ‘bill, as. although it is true that certain important principles may properly be discussed at this stage, the measure is essentially one for consideration in committee. As honorable members know, I have not engaged in controversy to any great degree lately, but I rise now to deal with one phase of this subject so that there may be no misconception regarding it in the minds of the people. At least, I hope that by rising at this stage, the views of the Government will be placed before the people immediately following the remarks which may give rise to misconception. I share with many other honorable members a feeling of sensitiveness in relation to any charge of repudiation. I lived through stirring times when talk of repudiation was in the air. 1 have suffered politically in. consequence of my resistance to any suggestion of repudiation. To-day, the honorable member for Warringah (Mr. Spender) has laid a charge of repudiation against the Government of which I am a supporter, and therefore I rise to answer that charge. It has reference to a clause in the bill that deals with the payments of dividends by a company some of whose profits are obtained from interest on bonds in respect of which certain promises were made when the big conversion took place in 1931. I shall relate briefly the circumstances associated with that conversion. During the depression period, when reductions of income were general, bondholders were called upon to accept their share of the sacrifice. Other persons who derived income from property were taxed fairly severely, bondholders who volunteered to reduce their income by 221/2 per cent, were offered the inducement that they wouldnot be subject to the special tax upon property that was then being imposed. I confess that, at that time, I did not visualize, nor did any one else, I think, the astronomical figures that taxation would reach. I thought then that we had reached practically the maximum of taxation on income from property, but, obviously, I was a bad prophet. I did not foresee a world war. I believe that very few people who had experience of the war of 1914-18 expected that the world would ever be insane enough to engage in another such struggle. That was the financial outlook at that time. The Government of the day gave the undertaking that I have mentioned. As Prime Minister I, personally, promised that no additional taxes would be imposed upon bondholders. Honorable members will observe that I have emphasized the word “ bondholders “. I have done so because that was the contract. That undertaking has been observed since 1931 - a full decade. A few years later, after my Government had gone out of office, the Lyons Government inserted aclause which it declared was the logical outcome of the undertaking of 1931. That clause provided that if any dividends paid by a company included interest from bonds the dividend paid to a shareholder should carry with it the concession that the company received on its bonds. Let us examine that provision. Individuals held bonds, as also did companies. The contract was entered into with bondholders. In such cases, a company was considered to be a bondholder: but the Lyons Government introduced an amendment extending the undertaking given when the bonds were converted in 1931. The argument advocated was that because the company got a concession, it ought to be able to pass it on in the dividend. In support of that contention it was argued that the profits of the company were the property of the shareholders, and there was no separate entity. That view was accepted at” the time. Since then Parliament has declared unanimously that there is a separate entity. The principle which was enunciated when that clause was inserted by the Lyons Government, was thrown overboard a year ago when this Parliament unanimously declared that that principle was unsound.
– If the Parliament did not agree, then the honorable gentleman has repudiated what he agreed to last year.
– That is notso. It has a different application.
-I well remember that, two years ago, when I was sitting in Opposition, I said to the honorable member for Warringah, who was then Treasurer, that the Government was giving rebates on company taxation to individual shareholders, but that it was not rebating equitably. I then pointed out that the full amount of the company tax was rebated to a shareholder who paid an individual rate of tax equal to, or exceeding, the company rate, but that the smaller shareholders who had either a small income tax rate or no income tax at all were not receiving the rebate. I pointed out again and again that men and women who were shareholders in companies which were paying a tax of1s., or 2s., in the £1 received no rebate because they were too poor to be taxed, whilst rich people received the full company rebate. I contended that unless the Government could give an equitable rebate it should not give any rebate at all. The then Treasurer indignantly contested my suggestion. In the following year, the present Leader of the Opposition (Mr. Fadden) was the Treasurer. With the consent of his Government, of which the honorable member for Warringah was a prominent member, he introduced a proposal declaring that the company and the shareholder were separate entities. That proposal received the unanimous approval of this Parliament. A decision of the House of Lords was cited to support that view. The result was that the rebate was wiped out. The then Government said, in effect, “ We have imposed on the company the company tax, and we shall make no allowance to the dividendholder”. It claimed that that was not double taxation, because they were separate entities. When the then Government did that it annulled all of the arguments that were advanced for the amendment introduced by the Lyons Government with respect to concessions on bonds. All we are doing in this bill is to revert to the terms of the contract entered into by the Scullin Government in 1931. So the charge of repudiation is repudiated. The separation of a company’s profits from a shareholder’s dividends, and the constituting of the two as separate entities for taxation purposes was effected by the government in office a year ago. The proposal was made by the present leader of the Opposition (Mr. Fadden), and was accepted by the Parliament, that when dividends are declared by a company the concessions and privileges enjoyed by the company are not transferred to the shareholder who receives the dividend. This Government is simply restoring the position that obtained after the big conversion operations in 1931. I was responsible for the contract that was made at that time; 1 have resisted every effort to break that contract, and I shall continue to do so. I have read a strongly worded article in a recent issue of the Sydney Morning Herald in which it was asked whether we could continue this concession. I am well aware that in the midst of a war such as that now being waged it is likely that the question will be asked repeatedly whether the country can still adhere to the contract. I have held my ground because a contract was definitely made, and I shall not be a party to the breaking of it. Further, I do not believe thai there are any individuals in the community whose income consists only of bond interest. Bond interest permeates practically all incomes of any size, and goes to swell such incomes to figures which bring them into the high taxation field. It would be a poor thing, in my opinion, if we had to repudiate contracts in order to find funds to fight this war. I definitely deny the accusation of the honorable member for Warringah that this Government has been guilty of repudiation.
I go now to another argument of the honorable member which impinged upon this principle. He argued that because a company’s profits on the sale of property were distributed to its shareholders as dividends and were taxed as income, the Government should necessarily apply the same prinicple to individuals. That might have been sound had the Government of which the honorable gentleman was a member not established the separate entity principle. He referred a dozen times or more to what he termed a legal right and a substantial right. Only a legal practitioner could appreciate the distinction he endeavoured to draw. Thehonorable gentleman on another occasion cited a decision of the House of Lords in support of the principle he is now denouncing. That decision declared that legally a company and a shareholder were distinct entities. The Government which I had the honour to lead made a definite contract in 1931 under which companies and individuals were subject to certain concessions in return for a reduction of interest, and this Government is today taking steps to provide that that contract shall be observed. All we are doing is to leave the position as the
Scullin Government left it in 1931. The Leader of the Opposition and the honorable member for Warringah protested against another clause in the hill. What this Government is proposing to do is to call upon companies which buy property to indicate at the time of the purchase whether they are doing so for the purpose of resale or for the purpose of occupation. Companies which buy and sell property as a trading enterprise add the profits made in particular sales to their other profits and declare dividends on their total profits. It is therefore proposed to treat income earned from such transactions as taxable income. Apparently the honorable gentleman desires to treat such profits as accretions of capital and thereby to change entirely the complexion of such profits. I cannot see that there is any injustice in requiring a company to indicate, when it purchases a property, whether it is doing so for resale or for use. Is there anything wrong with that provision? Surely the purchaser of a property knows the purpose for which it is being purchased. We all know that persons or companies buying properties regularly as a trading enterprise have their plans well laid. If a property is sold at a loss the loss is deductible; if it is sold for a profit the profit is taxable. A man who buys himself a home and subsequently suffers a loss on the resale of it is not allowed to deduct the loss from his income for taxation purposes ; and if he sells it at a profit he is not required to add the profit to his income and be taxed upon it. There is, however, a logical distinction between persons and companies who buy properties for trading purposes and those who buy them for occupational purposes. All that the Government is proposing to dp is to require that the purpose for which properties are purchased shall be stated at the time of the purchase. That is a simple proposition. To use the word of the honorable member for Gippsland (Mr. Paterson), we are asking the purchaser of a property to tell us which pen it is in. No honest man will object to such a request; but a man seeking to evade taxation would probably object to it. If the honorable member for Warringah were in a law court as an advocate for a tax- evader I could perhaps understand his attitude; but as he is in Parliament as a representative of the people, I cannot understand it. A man who is earning income from the buying and selling of property should be prepared to pay the appropriate tax on the income so earned.
.- In view of the relatively brief period of time before the suspension of the sitting I would like to say a few words, first, on the point that has been discussed by the right honorable member for Yarra (Mr. Scullin) in connexion with clause 7 of the bill. On that clause, I want to say at once that I thoroughly agree with the view put by the honorable member for Warringah (Mr. Spender). There is no repudiation of contract in form ; there is no repudiation of contract in point of law ; but there is, I believe, a very serious departure from the true merits of the case when the clause inserted by the Lyons Government is now sought to be repealed. The facts can be stated very simply. I take leave to draw the attention of honorable members to what was provided in the Debt Conversion Agreement of 1931, which was ratified by this Parliament, and to which, as the right honorable member for Yarra has pointed out, he was the signatory onbehalf of the Commonwealth. Clause 10 of the agreement reads -
The interest on the new securities to be free from the present Commonwealth super-tax of 71/2 per cent., and from any further taxation which may be imposed by the Commonwealth or by any State, but to be subject to other existing Common wealth and State taxes.
Honorable members will note that the phrase used is “ The interest on the new securities “. It is a phrase of perfectly general application to every security that was to be converted. The agreement did not provide merely that the interest on the new securities, where those securities were held by individuals or partnerships, was to be free; it provided in general terms that the interest on the new securities was to be free. That meant the new securities, in whatever hands they might be. Subsequently, it was no doubt pointed out to the Lyons Administration that some special provision was needed to meet what otherwise would have been in substance an evasion of the bargain, and a special provision was put in, which, as we see, was that where a company derives income from securities which were the subject of that contract, and that interest forms the whole or part of the dividend paid by a company, then,’ to that extent, it is not to be subject to the tax beyond the terms of the contract of 1931. The present Government comes along, and through the Treasurer (Mr. Chifley) and the right honorable member for Yarra says, “ Oh no, you must understand this: All that we promised to do in 1931 was that wo would not tax the interest as interest”; but they go on to say, “ If you happen to be a company that owns these bonds, and you collect interest from them, we shall not tax the interest as interest. As between ourselves and you, there will be no taxation beyond the 1931 level”. However, themomentthecompany tries to use that interest so that some human being can get it, and the only way it can be used is by the shareholder being able to get it, the Government says, “ We do not feel we can let you off now. So long as you do not use the interest on these bonds, it is tax-free; the moment you use it we make it subject to the tax “. I do not want to bandy words with my distinguished friend, the right honorable member for Yarra, and I stop short of saying that, in point of law, this is a breach of contract; but in point of merit it is a gross breach of the whole spirit of the 1931 agreement. Suppose when the Government of that time was issuing its prospectus and calling upon the people to convert - and if honorable members will turn their minds back they will remember that the conversion was a vast undertaking, involving hundreds of millions of pounds worth of securities - the prospectus had said in plain terms, “ We want to make it clear that where these bonds are held by incorporated bodies the protection we are now offering in relation to future taxation will be illusory, because it will be protection only as between the Grown and the company. There will be no protection of that interest as it finds its way into the pockets of the shareholders”. Is it thought that, in those circumstances, these companies would have converted their holdings with the same readiness as they then exhibited?
– There was talk of a compulsory conversion.
– My friend the honorable member for Ballarat (Mr. Pollard), who has none of the reservations about repudiation that torture the soul of the right honorable member for Yarra, says, in effect, “ It is easy. If they do not convert voluntarily, we shall compel them to convert.”
– Every United Australia party government in Australia was a party to repudiation. The right honorable gentleman, I admit, was consistent and objected.
– I understand the honorable member’s position perfectly. He says, “ Of course, it is a lot of silly, old-fashioned nonsense to talk about sticking to a contract. If itis inconvenient, wipe it out by force of law”; but he is not standing on the same ground as the right, honorable member for Yarra, who is opposed to repudiation. A brief examination of the facts indicates clearly that if it be not repudiation in point of law, it is getting mighty near to repudiation in point of moral fact, If you say to these people, “ Please understand now that the excess taxation is not to apply to you only if you keep your dividends sterile; but the moment you use them, and you put them in the form of dividends into the pockets of the shareholders, we shall forget all about the agreement, of 1931 and impose taxation to the limit of whatever the law may provide “. That is all I have to sayonthat clause.
Sitting suspended from 6.13 to8 p.m.
– I revert to clause 6 in order to mention two points which seem to me to arise on it. The first point touches the case of the nonresident company. The provision includes non-resident companies engaged in, for example, gold-mining operations. I shall not discuss in detail the position of any particular company; but I direct the attention of the Treasurer to the fact that there is a gold-mining company carrying on operations inFiji - a company whichIunderstandis composed entirely of Australian shareholder’s, the profits of which are derived by Australians, and the gold won by which goes .into the total Empire pool of gold and is, therefore, of great importance in relation to dollar exchange. The shareholders of that company, as the result of this provision, will immediately become taxable to the limit provided by the law; whereas another goldmining company carrying on operations in New Guinea, which happens to be a mandated territory of the Commonwealth, will have shareholders who will escape tax altogether because of the preexisting state of the law. That is a very sharp distinction to produce quite suddenly between two gold mines, each of which is operated outside the ordinary limits of Australia, one of which happens to be in a mandated territory, and the other in a Pacific island not very remote from this country. There are, in addition, general considerations touching gold-mining and, I should imagine, all other mining, to which I direct attention. What [ am about to say is not actuated by a desire to be critical of the Government. The considerations that I am now about to advance might well have presented themselves to me when I was in office, but I confess that they did not. Gold-mining, which I take as au example, is not a business undertaking in which the dividend paid year after year is, in the true sense, the fruit of an industrial or a commercial operation. If a certain commodity bc manufactured, then the dividend paid by the company which conducts that operation is, in the truest sense, the annual fruit of the capital invested, and the skill and labour directed to it. But in goldmining, the capital itself is extracted and distributed. Every gold raine, of necessity, has a relatively short life. The more efficiently it is worked - as you, Mr. Speaker, know from your intimate knowledge of the problem - the more quickly it. is worked out. That means that, year by year, the payments to shareholders must include a substantial amount which, properly considered, is a return of capital. The capital has been invested in order to develop the mine. There is a limited supply of gold. The yield of gold determines the annual dividend, .and the size of the dividend determines the point of time at which the whole of the operation will expire. Consequently, I put it to the Treasurer and the Government that here is a case, well worthy of consideration, for taxing such operations on a different basis; or, perhaps, more accurately, for determining the taxable profit on a different basis, by allowing a substantial annual provision for the writing-off of what is truly a wasting asset, In other words, instead of making a mere provision for writing-off costs of development and depreciation of machinery, I should have thought that there was a strong case for the writing-off of something in respect of capital, having regard to the computed life of the undertaking. If that were done generally in relation to mining, not only would it be a considerable relief, and, therefore, encouragement to mining in Australia, but it would also go a considerable distance towards meeting the ex-Australian companies to which I have referred.
Another point that arises in clause 6 has been very well dealt with by previous speakers, namely, that the tax upon profits arising from the sale or compulsory resumption for public purposes of what is not required for the purpose of resale at, a profit is, in substance, although not, I agree, in legal form, a tax upon capital. I shall not repeat what has already been said, and shall thus avoid the risk of weakening the force of the argument advanced. But honorable members will see that this particular tax, now created, is a tax in relation to companies. That seems to give rise to the most astonishing anomalies. I know - I suppose that every lawyer knows - that a corporation has a legal entity of its own. J was rather surprised to learn this afternoon that it had become necessary for the House of Lords to decide such a point. Everybody who is familiar with business undertakings also knows that a proprietary company is, in effect, an incorporated partnership. The difference between the company and the partnership is, of course, perceptible, and in some legal ways is of importance, but as a matter of commercial substance T should hare thought that the principles of taxation might bear on each substantially in the same way. It is not proposed that if a partnership resells at a profit assets that have not been acquired for resale, the partners shall be liable to bring the profit into account; but it is provided that if a proprietary company does so, the amount must be brought into account as profit, and be taxed as such. That is a distinction which is quite unjustifiable. If to that be added a trend of policy which is perceptible in this bill, there will be no difficulty in coming to the conclusion that a previous speaker - I forget whether it was the Leader of the Opposition (Mr. Fadden) or the honorable member for Warringah (Mr. Spender) - was quite right when he said that there is a really noticeable policy towards eliminating proprietary companies altogether. Companies can be prohibited just as effectively by being taxed out of existence as by formal prohibition in terms.
I am not clear as to whether the tax that I have just been discussing, for which provision is made in clause 6,’ is to operate retrospectively or not. I know that some provision against retrospectivity has been promised. Doubtless the matter will be cleared up in committee. I therefore content myself with merely mentioning the point.
I turn briefly to clause 12, which deals with calls paid to mining and afforestation companies. 1 have two comments, at least, to make in respect of that matter. The first is that at this stage it is a dubious policy to withdraw permission for the deduction of calls paid to mining companies, particularly to gold-mining companies and companies which are engaged in mining or prospecting for oil. For the last two or three years at least there has been in Australia a well-settled policy in the direction of encouraging the production of those two commodities. My esteemed friend from Kalgoorlie (Mr. Johnson) complained this afternoon about the gold tax; but that was a mere ripple on the surface of the stream, because in reality his mind is filled with gratitude for the gold bounty, and he knows quite well that if Government policy during recent years be taken as a whole it has served powerfully to encourage the production of gold, and that one of the things which has helped has been this permissible deduction of calls paid to mining companies. That concession is now to be withdrawn.
– I interjected that it was a Government of which the honorable member for Warringah was a member which imposed the gold tax.
– I have no quarrel with the honorable member’s interjection - I heard it and understood it - but I thought that it was most remarkable for what it left unsaid.
– I could not now understand his sympathy.
– The whole matter could be brought to a head if I were able to take my friend outside and say to him “ Whatever the honorable member for Warringah has done will not matter in Western Australia ; are you going back to that State to tell them that you have voted—
– I shall answer for my own sins.
– That is what I am discussing with the honorable member. How will he answer for this sin? The matter of retrospectivity arises also in relation to this clause. I put it to the Minister .assisting the Treasurer that where calls have been paid by a shareholder to, say, a no-liability goldmining company, the payment therefore being optional, at a time when the payment was an allowable deduction, it would be grossly unjust to come along a year later and say “It is true that you paid those calls believing that they were a permissible deduction; it is true that you had an unfettered choice as to whether you should pay it or not, and that you exercised the choice in favour of payment. In spite of that, we are now going to turn back on you, and say that what you then thought was deductible is no longer to be deductible “.
– That is not so.
– That would be a case of retrospectivity of the worst possible kind.
– That too, will be cleared up in committee, I think.
– If that means that the concession will be restored, I shall be quite happy.
– I hope that the right honorable gentleman will not take the credit of having made the suggestion.
– I never either take or am given credit for anything. I am operating politically on an entirely cash basis.
I turn from the modern problems that £ have been discussing to the mediaeval problem presented to us by clause 17, which has been admirably described by the Leader of the Opposition as a marriage tax. Here we have, in the year 1941, a provision for the aggregation of the incomes, however derived, of husband and wife, living together, subject merely to some trivial exemption for which provision is made in an amendment just circulated. I am the least controversial of men, but I should like to put a few questions without notice to the Ministers concerned. For example, I should like to know why it is that, when a husband with an income derived from personal exertion and a wife with an income derived from personal exertion, living together under the family rooftree, are taxed as one, the Government finds it unnecessary to tax as one a brother and sister living in the same house, and each deriving income from personal exertion, or a father and son living in the same house and each deriving income from personal exertion.
– That will come next.
– I do not think it will. I have no such optimism. If the principle is to be that when people live in the same domicile their incomes are to be aggregated, it will hit many thousands of workers in this country, including a great many munitions workers, and that will present a political problem which, I have no doubt, even the Treasurer would not be willing to face just yet.
But the Treasurer says - I say the Treasurer says, but so impressed have I always been with his real benignity that I am sure that these must be the words of some one else put into his mouth - that the husband and the wife are to have their incomes aggregated and treated as one income for the purpose of computing the rate of tax. In other words, he says that a married woman who earns an income by her own personal exertion is to pay more in tax than a bachelor earning the same income with the same amount of exertion. That would be the effect of this provision. I do not know what justification there is for it. I cannot imagine that any one living in the twentieth century is prepared to support a piece of legislation which puts the status of woman back at least 60 years. What is the reason? If the reason is that a man may evade tax by putting property in his wife’s name, then let the Government deal with that case, but it has not done so. It has said that even if the wife had the property 20 years before she was married - she would be a somewhat elderly bride, but what of it? - the moment she enters the disadvantageous bonds of matrimony - from her point of view - she is to be taxed at a rate much higher than that which would apply to one who chose to remain a spinster, and had the same amount of property.
– A penalty imposed on marriage.
– Yes, a penalty on marriage. It has been said by this Government - the essentially Tory character of which is revealed by this proposal - that it must be all right because there is a similar provision in the English law. If the Government has not said this, I have no doubt that some of those mightier than the Government who sit behind it have made this statement. I had a look to see what the English law was on this matter, because I found it difficult to believe that a civilized country like Great Britain was penalizing the institution of marriage and, that the English law regarded this problem of the wife’s income from the husband’s point of view, and not from the wife’s point of view. I found to my sorrow that the English law was as stated - there is no doubt of it. The Income Tax Act of 1918 does say substantially what is put before us in this measure. I wondered how this survival of the Dark Ages could have found its place in an English act of 1918; so I traced it back and discovered the original in the old, leather-bound volume of Statutes at Large, 1842. If my distinguished friend, the Attorney-General (Dr. Evatt) will give himself the pleasure of looking it up in 5 and 6, Victoria, c. 35, section 45, he will find there what is an almost exact duplicate of the provisions incorporated in the English act of 1918, and in subsequent acts. Well, then, I had a look in that learned work, which has now become a classic, Eversley on Domestic Relationships, a document which has been frequently quoted to the AttorneyGeneral, but, I venture to think, never more fruitfully than by myself at this moment, and I found in the fourth edition, at page 390, the following : -
It has been the practice of the Inland Revenue Department to treat the separate “ profits “ (including therein “income”) of a married woman as part of the income of the husband where they were living together (whether such income was derived from business profits or investments), though to do so now is contrary to the spirit and letter of the Married Women’s Property Act, 1882.
It might well be said that it is contrary to the spirit and the letter. When this English rule of taxation was instituted, the Married Women’s Property Act had not been heard of. At that time, a wife’s rights to personal property were very sketchy, and her rights to real property were hardly better defined. At that time, if a woman wanted to establish her proprietary rights she had to desert the ordinary courts of law, and venture on the uncertain waters of the Court of Chancery. In other words, she had to be a very rich and very brave woman in order to establish her right. Then, in 1882, the British Parliament passed an act which revolutionized the proprietary rights of the married woman, which took her from her position of near tutelage, and gave her full dignity and independence for the first time in the history of our race. That act was copied in every State of Australia within a very brief period. The Married Women’s Property Act, which had not been dreamt of when this wretched piece of legislation of 1842 was passed, identifying the wife with the husband for these purposes, provided that -
A married woman shall, in accordance with the provisions of this net, be capable of acquiring, holding, and disposing by will or otherwise, of any real or personal property as her separate property, in the same manner as if she were a feme sole
The act went on to elaborate this notable provision by referring especially to Activities in which a married woman might gain profit by the exercise of literary, artistic or scientific stillThat was regarded as the great charter of the independent proprietary rights of women in this country until the present Government produced this bill. Those, responsible for the Married Women’s Property Act will be remembered with real pride, but those who, in 1941, say to the married woman that she is to lose the real identity of her property when she enters marriage, that she is to be worse off because she is married, cannot lay any great claim to immortality or future gratitude. If a special rate of tax is to be levied upon a woman because she has an income, and is married, does the Government propose to tax at a special rate .the unmarried man because he has an. income and is unmarried ? Is this to be the first instance of discrimination in taxation - discrimination against women? This is not mere discrimination against husbands, although it is put that way. We are told that yon add the wife’s income to the husband’s, and then work out the rate of tax. The matter is discussed as if it was merely proposed to load the husband with something extra. The truth is that it is proposed to subtract something from the wife, and it is being done because she is a wife.
– And living with her husband. If she lived away from her husband this provision would not apply.
– It is not only a tax on marriage, but also a tax on correct behaviour.
– The wives of the workers do not enjoy independent incomes.
– I have known workers’ wives who were worth their weight in gold and who, if they earned an income of their own, were certainly entitled to it. I remember appearing once years ago in a piece of litigation of a characteristic kind. I mention it because it fell within my own experience, but I have no doubt that the facts can be paralleled in thousands of instances. A man had a wife who was, to adopt the phrase used by my colleague, “ the better man of the two “. She was a woman of extraordinary ingenuity, extraordinary capacity, and great frugality. She was allowed by her husband, who had a relatively small income, a certain amount for housekeeping, and out of that amount ‘she not only maintained a proper home but also saved money, and gradually acquired from that source, and no other, a substantial property, which the court found to be her property. Are wc to say to a woman of that kind - and they are. not rare in this country - “ Though you have done all of those things in the sweat of your brow, by the exercise of your ingenuity, and by your own selfsacrifice, yet because you have a husband, and because your husband is not unemployed you must be prepared to pay on the income from that property perhaps twice as much as would be paid by an irresponsible bachelor earning exactly the same amount of property.” That would be a monstrous provision. Where a married woman has brought to the marriage property derived not” from her husband but from other sources - from her own family, for instance - there is an irresistible case for not lumping their incomes together for the purpose of computing the tax. But let us consider the commonest form of all, the case in which a man earning an income in the ordinary way transfers a certain amount of property to his wife, who becomes the owner and begins to derive income from it. The cynic looks on retrospectively and says, “ That is a mere device for escaping taxation.” True, it does result in the husband “ escaping “ some taxation, but look at the substantial merits of the ©ase. The wife is devoting her time to the affairs of the household, her children, and her husband, and if there be a person in this world who works so that we all should admire her, that person is the loyal and faithful housewife and mother. Her husband transfers to her a certain amount of property so that in any contingency, regardless of what may happen to him, she will have a small income available to herself. What is wrong with that? Is not that, in fact, a magnificent thing? Should not that be encouraged, instead of being penalized? If that woman, instead of devoting herself to the affairs of her household, went out, took a position and earned her own income, most honorable members, left to their own devices, would agree that to aggregate her income with that of her husband would be to commit an injustice. It is equally unjust so to treat the separate ‘income of the wife who, instead of going out to earn her own money, has been treated by her husband as something more than an unpaid domestic servant in his home, as a person entitled to her separate dignity and independence. Properly considered, this wretched provision should be tossed out by Parliament. But if the Government fears a growing tendency on the part of husbands to transfer property to their wives in order to evade taxation, it has the remedy. Let the position be dealt with in a comprehensive provision, which will touch, all of these matters and make it clear that a husband who transfers his property, in future, in order to avoid his liabilities to the State, will not be permitted so to avoid them. -Honorable members could understand such a provision as that. But to deal with this problem as the Government proposes to do, is to turn our backs on every conception that our grandfathers at least were fighting for in relation to the status of women, and go back stupidly to the middle ages of humanity.
– A number of the matters which the right honorable member for Kooyong (Mr. Menzies) discussed will arise in committee. Provision has already been made by the Government to meet two at least of his contentions. Even the provision to which he devoted the greatest attention will be modified in its operation by an amendment to be submitted in committee.
I rise for the specific purpose of disposing of the very serious statement that in clause 7 the Government is repudiating the Debt Conversion Agreement of 1931. I shall briefly state the position to honorable members in order to have their view.* upon the matter. Whilst realizing that I can add little to the precise contentions of the right honorable member for Yarra (Mr. Scullin), I must refer to one or two features of his eloquent speech.
The Debt Conversion Agreement, which provided that the interest on the new securities was to enjoy a defined measure of freedom from taxation, was signed by the Prime Minister of the Commonwealth and by the Premiers of the (States in 1931. Section 20 of the Commonwealth Debt Conversion Act 1931, gave effect to the agreement. It was never suggested at the time that the section did not completely and adequately carry out the agreement. Every party in the House agreed to it, and the legislation was passed practically without a dissentient voice. It was not until 1932 that the protection which was given to interest in the hands of the bondholder, in this case the company, was extended to persons who received money from the company, namely, the shareholders. Section 45, which the Government now proposes to repeal, was inserted in 1932, not by the Scullin Government which passed the act of 1931, but by the United Australia party Government. It provided that, where the company had derived income from interest to which the provision of the section applied and had paid in the year of income any portion of that interest in dividends, such proportion of each dividend should also be free from income tax in the hands of the shareholders. In principle, there is no more reason why, in the case of interest which is paid in the form of dividends, such dividend should be free from tax to the statutory extent, than if the interest had been paid by the company in rent, or in salaries. The interest from the bonds is received by the company, which has the full benefit of the Debt Conversion Agreement and pays no taxation other than that which is permitted by section 20. Subsequently, after that money had gone into the pool of the company’s receipts a dividend was declared at the end of the year. Why, in principle, should the fact that a certain portion from that pool of receipts go to the shareholder, exempt the shareholder from taxation any more than it would exempt other persons to whom the company has to pay a proportion of those receipts, in rent or salaries ? It seems to be a startling proposition.
– Surely the AttorneyGeneral realizes the utter futility of the proposal. What is to prevent a company from selling those bonds, and their being bought by private individuals, who will not be taxable to the full degree?
– That does not affect my answer to the allegation of repudiation. [ rose for the purpose of convincing the
House that the Government’s proposal contains no element of repudiation.
– I referred to the futility of the proposal.
– The futility of the proposal is another matter. My purpose is to refute the charge of repudiation, which is a most serious allegation to make at this time, because of its effect upon the credit of the Commonwealth. I do not believe that the right honorable member for Kooyong intended to make it as a charge - he mentioned it as he went along? - but he certainly used the word “ repudiation as other members of the Opposition did before him.
I should like to refer to the report which was made on the subject by Mr. Justice Ferguson, one of the greatest common law judges of this country. Every word of it applies to this suggestion of repudiation. As a member of the Royal Commission on Commonwealth and State Taxation, Mr. Justice Ferguson supported the proposal of the Government. He said -
It may be contended that this proposal violates the undertakings given to the holders of Commonwealth loans who agreed to conversion during 1931. In our opinion, this contention cannot be maintained. These undertakings were in effect, firstly that the interest on Commonwealth loans which by the terms of the prospectus had been issued free of tax, should continue to ‘be free of tax during the balance of the period for which they were issued,, and secondly, that in respect of loans converted, the rate of tax payable in any subsequent year should not exceed the rate of tax payable in 1930.
The precise charge which has been levelled against the Government is that the bill will violate this undertaking. Mr. Justice Ferguson, and the other members of the royal commission, added -
It should bc noted that it is not suggested that the undertaking given should be varied in any case where the interest on such loans is received by any taxpayer, whether that taxpayer be an individual or a company. The first recipient of such interest will still continue to enjoy the concession granted by the Commonwealth Debt Conversion Act. The proposal relates only to dividends paid wholly or in part out of such interest. A perusal of section 20 of the Commonwealth Debt Conversion Act 193.1 will show that it waa intended that the limitation of the rate of tax payable should apply to the “ interest derived by any person “. In accordance with section 22 of the Acts Interpretation Act 1901-30 “person” includes a body politic, or corporate, as well as an individual. Originally, no exemption was granted in respect of interest derived from converted loans included in any dividend, but as a result of representations to the Government, the act was amended to 1932, to provide that the concessiongranted to companies in respect of interest derived from such loans should also be extended to dividends distributed out of such interest.
He concluded -
In our opinion, the amendment of 1932 should be repealed. If the concession be restricted to the company first receiving the interest, and not extended to shareholders who receive dividends out of such interest, it cannot be said that either the letter or the spirit of the Common wealth Debt Conversion Act is violated.
Obviously the letter is not violated. I submit that, in regard to the spirit of the agreement of 1931, the royal commission was in a perfectly good position to come to a conclusion. But our case proved more by the facts themselves than by citing such an authority as I have done. It is proved by the fact that the debt conversion agreement, which, in 1931, converted over £500,000,000 of securities, was carried into effect with the unanimous consent of the Parliament of the Commonwealth and of the Parliaments of the States. It was not until subsequently that the privileges granted under section 20 of the act were extended to persons who received money from the company or from any particular bondholder.
– Why was that privilege extended ?
– Because the government of the day thought it desirable that the receivers of dividends should enjoy the benefit granted. But that does not prove that it was a part of the debt conversion agreement, and that the privilege should still be enjoyed.
– The privilege was granted because the government of the day thought that it was just and equitable to give it.
– The government of the day thought that it would be desirable to do so. Does the Leader of the Opposition (Mr. Fadden) suggest that the act of 1931 did not give full effect to the principles of the debt conversion agreement ? Of course it did ! In other words, this Government is not departing in any respect from the letter of the law or, what is equally serious, from the spirit of the agreement. That answers the charge of repudiation. It is negatived by the facts, by all the circumstances, and by the opinion of the very distinguished royal commission which recommended the repeal of section 45. Clause 7 of the bill gives effect to that recommendation. Whatever may be said of the very different contention of the honorable member for Gippsland (Mr. Paterson), no case has been made out to support the suggestion of repudiation. 1 apologize to the House for repeating some of the contention of the right honorable member for Yarra, but this matter is most important. Whatever may be said about the merits or demerits of the legislation, it should not go forth to the world that there is the slightest element of repudiation in the proposals of the Government.
.- It falls to my lot again to provide the anti-climax after high legal luminaries have held the House spellbound while they have explained subtle legalities which are beyond the ken of ordinary laymen. I hope to. lead the House away from matrimonial tangles and from the complexities of interest on war loans. I propose to spend the major part of my time in making a plea to the Government that, before this bill proceeds to the committee, it will reconsider the clauses relating to the taxation of private companies. I am not speaking of those large, wealthy concerns like the Broken Hill Proprietary Company Limited, which the Minister for the Army (Mr. Forde) said when he was in opposition would be taken over by the Government, but which has not yet been taken over. My remarks will be directed to the smaller companies which constitute the large body of Australia’s industrial and trading activities - some of them very small concerns, but not necessarily what are known as one-man companies. Thousands of such companies are situated all over Australia. They are the modern counterpart of the old firm or partnership upon which was built Australia’s trading system. For various reasons, they have adopted the limited liability form. It may be that the proprietors sought, as they are entitled to do, the benefit of limited liability. It may be that three, four, five or more people, desiring to invest thier money, would not do so unless the limited liability system was adopted. It may be that firms or partnerships, desirous of securing finance, were obliged to adopt the limited liability system, in order to give the form of debenture security which can be provided by a company. But for one or all of those reasons, many concerns trading in Australia are limited liability companies, and they are unfortunately made the subject of a special system of taxation. lt is evident, from what has been said by previous speakers, that certain amendments will be introduced when the bill is in committee. I hope that the Government, even now, will alter its plans as expressed in the bill with regard to private companies. There is some history attached to the present method of taxing private companies in Australia. This time last year, an all-party committee was constituted in this Parliament for the purpose of considering a bill which bad been introduced by the Government led by the right honorable member for Kooyong (Mr. Menzies). That legislation related to the taxation of companies under a war-time company tax. l t was very evident to that committee, of which the right honorable member for Yarra (Mr. Scullin) was deputy chairman and a prominent member, and of which I was a member, that private companies could not, with fairness «t all events.,be subjected to the war-time company tax. That conclusion arose from the nature of their transactions in many cases and from the fact that their income is frequently derived from transactions of personal exertion. In other words, it is personal exertion income, on many occasions income which cannot always be related to the capital, and that made it impossible to subject them to a form of taxation that is related to the capital and steeply taxed companies which make more than a certain percentage of profit. That principle was agreed to and, as the result, there emerged from the committee a suggestion that the private’ company should be taxed upon the basis of a;partnership. If the private company had been taxed entirely as a partnership, there would be nothing for mc to say now, but: unfortunately, as happens in many of these proposals, it ended in compromise. It ended in the private company being taxed partly as a company, on the flat rate of tax, and partly on the rate of tax which would apply if the income were distributed to the shareholders. That was the position last year when the maximum rate of tax for personal incomes over a certain amount was 10s. in the fi, and, even at that rate, private companies suffered severely; but this year the position changes very considerably. The maximum rate of tax now upon private individuals has increased to a maximum of 1.6s. Sd. in the £1 .and the effect of that upon private companies is such that I fear for the future stability of the private limited liability system in Australia. I do not ask that the . private limited liability company should have any advantageas compared with a partnership, a firm or a sole trader, but I do ask that private limited liability companies shall be placed at no disadvantage as compared with a partnership, a firm or a sole trader, >and, if that is not conceded to the private companies, it is possible that the company system will disintegrate and, in doing so, impose great disadvantage upon so many people who depend upon it to-day.
– What does the honorable member say about proprietary companies ?
– Private companies for the purpose of my. remarks are the same as proprietary. ‘ companies. The terms are synonymous. Reference is made to the private company in the income tax law. Victoria was the State which led the way in regard to private companies and in that State, a private company was called a proprietary company. In other States those companies are sometimes referred to as private companies. For all practical purposes a private company is a proprietary company. The honorable member for Bourke (Mr. Blackburn) interjects that in the income tax laws certain companies, described as private companies, may not be registered as proprietary companies, but. for all practical purposes they are the same. I ask the Government to introduce a new system of taxation for thos? companies. They are far more numerous- than are public companies, and, indeed, should make an appeal to honorable members opposite. I do not share those views, but opinions have been expressed as to the desirability of encouraging continuance of the large public company. I do not think, however, that the private or proprietary company would have any enemies in this House. All honorable members realize that it is an essential feature of the trading activities of Australia. Many honorable members would like to see more and more private companies extend their operations throughout Australia.
I propose briefly to illustrate whatI have said by applying a few figures to the results which will flow from the operations of this legislation. I shall not cite actual cases. A number of specific cases has been sent to me, and I have no doubt the same applies to other honorable members. Some of those are extreme, and they do not necessarily represent the average application of the legislation to the private limited liability companies. But I shall take a case which might be indeed a standard application of the principles involved in this legislation and of the rates that will apply. I ask the House to assume with me the operations of a company for a period of four years. I assume that it made a loss of £5,000 in 1939-40. I assume that in the following year, 1940-41, the same company made a profit of £20,000. It will have no deduction from the £20,000 in respect of taxes, because no taxes were paid on the loss of the previous year, and, therefore, in the year 1940-41 the company would be obliged to meet first the Federal and State flat-rate taxes, then the State tax on the undistributed profits - and they rise to a maximum rate of 16s.8d. in the £1 - and then a State tax on undistributed profits, and, in addition, the tax at personal rates that would be paid by shareholders if the profits had been distributed. In that case I compute the tax liability of the company as £18,500. The company has made a loss of £5,000 in the first, year and profit of £20,000 in the second. If, in 1941-42 the company repeats its performance of the previous year and makes a profit of £20,000 it will have the advantage of deducting the heavy taxation paid in respect of 1940-41 and in that year the company’s tax payments will amount to only £11,600. If, in the next, year, 1942-43 the company reverts to a loss of £5,000, it will not have the benefit of deductions, because you cannot deduct tax from losses. In four years the company will pay £30,000 tax on a net income of £30,000. Honorable members may think that I have fixed the circumstances of this assumed company in order to provide an illustration. Believe me, that is not the case. Honorable members may work it out for themselves and discover that the application of the flat rate of tax up to 6s. in the £1 - the present position I believe - and the further imposition of the personal rate of tax up to16s.8d. as well as the State tax on undistributed profits, must result in an unsound taxing system.
– The honorable member knows, that this Government does not propose to alter the position of private companies.
– It does. It altering the personal rate of tax from 10s. to 16s.8d. in the £1. If it had remained at 10s., although the private company was at a disadvantage as compared with a public company, I should not have this to say to-night. Because of the increase of the personal rate to 16s. 8d. in the £1, the obligation now rests upon the Government to devise a new method of taxing private companies.
– It was because of the representations made to the taxation committee appointed by the previous Government that private companies were removed from the ambit of the War-time Company Tax Act.
– I have been careful to make it clear that private companies could not be allowed to remain subject to the War-time Company Tax because of the unfair incidence of that tax in the peculiar circumstances in which private companies frequently make their profits, which have no relation to capital. In order to remove privatecompanies from the operations of the company tax it was necessary to tax them in this manner. But we did not tax them as partnerships; we taxed them partly aspartnerships and partly as public companies. I ask the Government to consider this matter before. the bill proceeds to the committee stage. I do not believe that the Government and its supporters wish to do an injustice to companies of this kind, but the system of taxation, as it now stands, can only lead to confusion and unfairness, and the position must become worse with the passage of time. Unless this matter be dealt with now, a grave injustice will be done to these companies in 1942, and at this time next year the Government will be obliged to retrace its steps. I do not suggest that the Government has purposely picked on the small companies, but it has drifted unconsciously into this position. I could not bring myself to believe that Labour’s policy is to place small companies at a disadvantage as compared with large companies, but that will happen if the legislation, and the rates of tax, are allowed to remain as they now stand. The solution that I offer to the Government regarding the treatment of private companies is, first, that no flat rate of tax should be applied to them, and, secondly, that they should be taxed upon the whole of their incomes as though they were partnerships - that is to say, the net income of such companies should be divided ratably amongst the shareholders according to their holdings, and the individual shareholders should be taxed in a similar manner to that which would apply if the company were a partnership.
– Would that apply to salaries ?
– It would apply to the whole income. I could not, in any circumstances, see the need for a deduction unless it were in the case of a partnership consisting of a number of members, in which it was necessary, for the purpose of adjustments ‘amongst the members, to fix a managerial salary. In that case the residue should be divided amonstst the shareholders. The method of finding the money for income tax would be a. matter between the shareholders and the company. My point, is that the tax liability ofsuch a company should be that which would apply if it were conducted by a partnership or a firm. The Government mightnot suffer any greatloss of revenue if it employed that method. It would affect the incidence of tax as between different companies, and the net effect of the re-arrangement might be some loss of revenue to the Government. But, having regard to the fact that the whole of the company’s income would be taxed at the personal rates instead of at only 14s. in the £1 of the income, my proposal is well worthy of consideration. It is not financially impracticable.
I refer now to taxation administration. During the budget debate the Treasurer (Mr. Chifley) referred to statements which I had made with regard to public administration. I am afraid that the honorable gentleman believed that my remarks had a personal implication. That is not the case. I hope that I shall never use my position in this House to make personal remarks about anybody. But my position does justify me in making observations, in the public interest, upon methods of pub ic administration, and I shall do so whenever I consider such comment to be necessary. I make these remarks now because of the position that arises under this taxation measure. It is evident that this Government, in common with all governments, is obliged to rely upon the advice that it receives from administrators as to the class of legislation that shall be introduced and as to amendments that must be made from time to time to that legislation. The men who advise the Government are highly specialized. They are experts in their class of work, whether it be taxation, army administration, or anything else. Obviously those who advise the Government in regard to taxation are steeped in taxation lore. They have studied the subject for ypars. They sleep with it, drink it, eat it. They have developed single-track minds with regard to taxation - and I do not say this in any unfair sense. That is not their fault. It is the fault of governments - all governments. There should be behind there minds another mind that sees the need to relate the taxation system properly to the country’s industrial system. Mr. Brennan. - The honorable member eliminates the lobbyists altogether.
– Does the lobbyist exist? The honorable member has been a member of this Parliament so long that he is almost the father of the House. Surely he must have had some experience that would justify him in referring to such a person as a lobbyist! I mention this matter because I see the need for governments to superimpose on the mind of the specialist another mind that has regard to the balance that should be preserved between taxation and the industrial system. What does this industrial system mean to us ? What does it mean to members of the Government and its supporters, who believe that the people belonging to this industrial system vote for them at elections - although I believe that some of them often vote for me and for other non-Labour candidates. However, those who live on wages, salaries and small incomes in this country, depend very substantially upon the stability and continued existence of these small companies. With all our public works’, and all of our special war-time expenditure, the fact remains that the company system, as it operates in Australia, provides the great bulk of the bread and butter for the homes of Australia. Apart from the future of our country and its development, it is important that we should ensure that nothing shall be done to throw any doubt upon the future security of the industrial system. For that reason I believe that the whole system of taxation should be reviewed, not from, the point of view of its mathematical incidence, but from the point of view of its application to the company and industrial systems. I do not believe that Labour is desirous of socializing the industrial system. One or two members of the Government party might do so if they had the opportunity, hut I believe that, when the responsibility came to their hands, they might change their minds. In any case, most honorable members opposite are not prepared to interfere with the industrial system. That being the general attitude of the Labour party, I ask the Government not to allow itself to do unconsciously something unjust which would sow the seeds of future disruption.
– That is not the general attitude of the Government and its supporters.
– I am giving those honorable members the benefit of the doubt. I have been careful to say that one or two of them might wish to socialize our industrial system; but I do not believe that any of the more responsible leaders of the Government party would consciously do anything that would react against the interests of Australian working men and women. Nevertheless, they will do so if they permit companies to be taxed in the manner proposed in this measure. Therefore, I ask the Government to review its decision. I assure the Minister (Mr. Lazzarini) that, if the bill be passed in its present form, there will be nothing but confusion amongst private companies in 1942. The honorable gentleman may have received protests direct in the past few days. The application of the proposed rates of tax will cause him a great deal of trouble in the future.
I refer now to the interesting discussion which took place this afternoon between the right honorable member for Yarra (Mr. Scullin) and the honorable member for Warringah (Mr. Spender).. I shall not enter into the controversy upon repudiation; sufficient has been said on the subject already by several speakers who have ably analysed the position. However, from my company experience, I say this to the right honorable member for Yarra : There is a difference between the removal of the rebate that formerly was given to shareholders in respect of profits made by a company, and the removal of the rebate in respect of interest paid upon tax-free bonds. The former rebate was removed in December, 1940, by the Government led by the right honorable member for Kooyong (Mr. Menzies). That was a rebate of tax previously paid by a company. The honorable gentleman may, if he likes, say that that constitutes double taxation as it is now rearranged. But, if it is double taxation, it can by no means be called repudiation. It is a different thing altogether from the removal of the rebate in respect of interest paid upon tax-free bonds. In that connexion, the taxing of the interest in the hands of the shareholders amounts to the taxing of revenue, which, supposedly, should be free of tax wherever it goes. While it. is in the hands of the company it is’ free of tax, and the freedom from taxation should follow it when it is distributed in the form of dividends to individuals. The removal of the rebate that was introduced by the Lyons Government, and which has been granted until now, is not in any sense comparable with the removal of the other rebate. If that distinction is accepted by the right honorable member for Yarra, I believe that he will not proceed with the discussion along the same lines as he followed this afternoon. I had intended to say something about the Government’s proposal to tax profits from the sale of capital assets, but I judge by remarks made to-day that certain amendments are likely to be introduced in this connexion, so I shall withhold the expression of my views until the committee stage of the bill is reached.
The Government’s proposal to remove the present immunity from taxation of calls paid to mining companies, needs some comment. I shall not deal with the issue in relation to gold, for the honorable member for Kooyong covered that ground effectively this afternoon. I am particularly interested in the effect that this amendment is likely to have on the investment of capital in projects for the development of the oil resources of this country. No one in Australia has yet made any money out of the oil-search companies operating here, although a lot of money has been expended in the effort to discover oil supplies.
– Efforts are being made now to raise additional capital to promote the search for oil.
– That is understandable, for the discovery of oil would mean a great deal to Australia. It is unfortunate, therefore, that just now the Government should introduce a proposal to discontinue the tax exemption in respect of calls paid to mining companies, including companies searching for oil. Everything possible should be done at this stage of our history to discover oil. I hope therefore that the Government will review this provision of the bill.
I urge that due regard be paid to all the appeals that are being made by honorable gentlemen on this side of the chamber for the reconsideration of various provisions of the bill. In consequence of the publicity afforded to certain views expressed by the Opposition, we have been given to understand that the Government is reconsidering certain of its proposals. About this time last year the then Government was paying great heed to the submissions of honorable gentlemen opposite who were at that time sitting on this side of the House. I appeal to the Government to give similar attention to the submissions which the present Opposition is making. We have no intention to oppose bills introduced by the Government merely because the Government has introduced them, and I appeal to the Government not to disregard the view? expressed by members of the Opposition merely because the Opposition is voicing them. We fully realize the difficulties which the Government will have to face in making its arrangements for the current financial year, and we also appreciate that this is not the time to seek tax concessions, yet it is desirable that anomalies shall be removed. Otherwise serious results may accrue, to the financial and trading structure of the country.
.- I shall confine my remarks to an examination of the provisions of the bill which relate to calls made by gold-mining companies. During the debate this afternoon the honorable member for Warringah (Mr. Spender) endeavoured to make some political capital at my expense. When I repudiated, by interjection, the accusations that he was making against me, 1 was threatened by the Chair with suspension from the service of the House. I interject less than any other honorable member in the House, but I considered that as my name was mentioned by the honorable member for Warringah, and as he was making accusations against me, I was entitled to reply to his remarks. The fact is that I have already made a plea to the Government for reconsideration of the position of gold-mining companies which are obliged to make calls for additional capital. I arranged for a deputation to wait upon the Treasurer, and invited every honorable member representing a Western Australian constituency to associate himself with it. I have also taken the opportunity to state the facts in this House from the point of view of the gold-mining companies likely to be affected. The honorable member for Warringah would not be likely to know anything about that, for he is rarely in his place in this chamber. I was surprised to see the honorable member weeping crocodile tears over the treatment being meted out to the gold-mining companies. What is the history of the taxation of these companies? What sympathy was extended to the companies by the Government with which the honorable member was associated? How comes it that only a month after that government vacated office the honorable gentleman is showing such marked sympathy with these companies? The fact is that in 1939 the anti-Labour Government of the day imposed upon the gold-mining companies the most iniquitous tax that has ever been inflicted on companies in Australia, for it provided that 50 per cent, of the value of the gold won by the mining companies in excess of £9 per oz. was to be paid to the Commonwealth. The tax was to be levied on all gold produced, before even working costs were deducted. Paying and non-paying mines alike were subject to the impost.
– The government of the day also endeavoured to impose a similar tax on small quantities of gold won by prospectors.
– That is so. Only after a vigorous fight by the Opposition did the Government agree to exempt from the tax the first 25 ounces won in any year by prospectors. The speech of the honorable member for Warringah was not at all helpful. In that respect it was in marked contrast to the speech delivered by the honorable member for Robertson (Mr. Spooner), who made a reasonable appeal to the Treasurer to reconsider certain provisions of the bill. The speech of the honorable member for Warringah could be described as a direct attack upon the Treasurer. Such tactics are not likely to bear fruit. It was unworthy of the honorable member to cast insinuations against another member of this Parliament who was doing what he considered best in the interests of his constituents.
I have realized increasingly during my twelve months’ membership of this House that the gold-mining industry is suffering under a grave disability. Its progress is being hampered by heavy taxation and by inability to obtain the necessary plant and equipment to increase the output of gold. These difficulties could be minimized, if not altogether overcome, by a greater measure of co-operation between the Commonwealth and State Governments. Month aftermonth I have requested that the Man-power and Re sources Survey Committee should visit Western Australia in order to investigate the man-power position there, but it was not until a Labour government assumed office that a definite date was suggested for this visit. I am glad that the committee proposes to make an early visit to Western Australia.
I appeal to the Government to give more consideration to the difficulties of Great Boulder Gold Mines Limited, the greatest gold-producing company of Western Australia. The operations of that company are being seriously hampered by the failure of the Commonwealth Government and the Government of the United Kingdom to agree to a more equitable adjustment of the taxes to which it is liable. The company is registered in Great Britain, and therefore its profits are taxable under British laws. The Government of the United Kingdom has decided that any profit in excess of that made in 1936, which is regarded as the basic year, shall revert to the Government. In that year the Great Boulder company made a small profit, chiefly because it had been giving effect to a vigorous developmental policy instituted two or three years earlier. In other words, profits were being used for developmental purposes and were not being distributed as dividends. The shareholders had beenrequested to wait for returns. By 1939-40 the new policy of the company had begun to result in increased profit, but the whole of the amount, in excess of the profit of 1936 is being taken by the Government of the United Kingdom under its Excess Profits Tax Act, because the company is registered in Great Britain. The Government should begin negotiations with the British Government in regard to that matter, because the Great Boulder mine is. now compelled to restrict its developmental work and its production. A3 the right honorable member for Kooyong (Mr. Menzies) has pointed out, gold-mining is a wasting industry, ore is taken out of the earth, but nothing is put back into it. The Great Boulder mine is a very valuable asset, to Western Australia and the Commonwealth as a revenue-producer. I trust that an effort will be made to arrive at a decision which will be far more equitable than the existing taxation.
.- In view of the far-reaching effects of this measure, it is the duty of Parliament to examine its provisions very closely, because what may seem a simple and innocent amendment may cause injustice and hardship. As the Commonwealth has now to rely for its revenue very largely on the field of income tax, a bill of this kind plays a most important part in the national economy. I appreciate the view advanced by the honorable member for Robertson (Mr. Spooner), that the Government has largely to rely on its expert advisers in a matter of this kind; nevertheless, the taxpayers expect their elected representatives to scrutinize proposals very closely before giving them their approval.
I am not altogether satisfied with the statement that it is not intended to make retrospective the proposed amendment contained in clause 6 for the withdrawal of the exemption of dividends paid out of profits derived by companies from the sale of capital assets.
– The necessary provision will be drafted into the commencement clause.
– I thank the Assistant Treasurer for that information. I should like to know whether a taxpayer will be allowed to set off against dividends received from ex-Australian sources any loss that he may sustain in connexion with a business in which he is interested outside Australia. Section 77 of the principal act provides that a taxpayer is not entitled to claim as a deduction any loss made outside Australia. As ex-Australian income is now to be taxed, the taxpayer should be entitled to the deduction of any such loss.
Clause 11 states that a company which contributes to a pension fund is not to be allowed to deduct so much of the contribution as is attributable to the provision of benefits for any person who is both a shareholder and employee or director of that company. I take it that that will not apply to a nominal shareholder who has only one share, which was taken up at the commencement of the company, in order to enable it to be registered. I hope that the Minister will make the position clear. 1 support the contention of unfairness in respect of the application of the proposed disallowance of the deduction of calls paid to gold-mining companies. As the right honorable member for Kooyong has pointed out, shareholders in noliability companies would not have paid calls had they known that they were not to be allowed to claim them as a deduction. It would be unfair to make the provision retrospective, and I trust that the Minister will consider the matter.
In connexion with the provision for the aggregation of the incomes of husband and wife for the purpose of arriving at the rate of tax to be paid, I repeat what I said during the budget debate, namely, that the Government has overlooked the fact that under this proposal the tax to be paid by many taxpayers whose incomes are less than £1,500 a year, will be considerably increased. Take the case of a husband and wife, each with a taxable income of £300. If taxed separately, they would pay £50, but under this provision the tax will be £75 10s. On an income of £500, if taxed separately, they would pay £104 3s. 4d., but with the incomes aggregated, the tax will be £208. The Government has been careful to assure all taxpayers whose incomes are under £1,500 a year that their tax will not be increased ; yet, under this provision the increase on income’: of £300 and £500 will be considerable. A married woman separated from her husband, and receiving a separation allowance of £750, will not have any additional tax to pay, yet husbands and wives living together are to be called upon to meet a considerable increase. I sincerely trust that the Government will consider particularly those whose incomes are under £1,500, in order that they will not be required to pay an unfair additional tax.
There is another aspect. Let us assume that the husband has an income of £3,000 and the wife an income of £500 and both are taxed at the rate applicable to £3,500. Next year, the husband sustains a loss of £2,000. In all fairness, the wife should not be called upon to pay any tax, because aggregation of the incomes would return a minus sum. The object of the amendment is to regard husband and wife as one entity for income tax purposes. If the wife or the husband is to be placed at a disadvantage when the income is large, neither should be called upon to pay tax when the combined incomes show a loss.
I agree with the honorable member for Robertson (Mr. Spooner) that the most equitable way of dealing with private companies, if it were possible, would be to regard them as partnerships. A private company is taxed to-day as a partnership in respect of undistributed profits, as well as a flat rate of 3s. T appreciate the argument of t!he honorable member in reference to the position of certain companies which, having suffered a loss in one year, are called upon to bear a very heavy burden of tax in the following year. A little while ago, 1 mentioned in this House a private company which had a net profit of £4,830, and was called upon to pay Federal and State income taxes amounting to £4,350, because in the previous year it had not made a very large profit, and, consequently, had not paid much by way of State income tax or State development tax which it could deduct. Consideration will have to be given to private companies, otherwise a large number of them will be forced out of business and eventually will revert to partnerships. It would be most unfortunate, and not in the best interests of this country, if the operations of private companies, which have been so successful, were hampered in any way.
Public companies are now called upon to meet a heavy impost. There is one aspect that we are rather inclined to overlook. The proposed increase will place the ordinary shareholders at a distinct disadvantage. The preference shareholders have their dividends fixed, but the ordinary shareholders are in the unfortunate position that they can get a dividend only out of what is left after the payment of taxes, and after dividends have been paid to preference shareholders. Because of heavy taxation, many ordinary shareholders in public companies in Australia will find that the return on their investments will be a very poor one. I submit that, in those cases where the Commissioner has not been able to issue assessments before the end of June, the taxpayers should not be placed at a disadvantage. I offer these suggestions to the Government, and hope that amendments embodying them will be accepted in committee.
– I do not propose to discuss the bill at length because it bas been debated very fully by other honorable members, but
I desire to say a few words on clause 17 under which it is proposed that the incomes of wife and husband shall be aggregated for the purpose of fixing the rate of tax. On the 17th September last, the present Prime Minister (Mr. Curtin) made this statement -
The Labour party’s platform provides civic and economic equality for the sexes. Labour is opposed to major burdens being placed on women. We stand for full and complete partnership of Australian people in meeting problems of war and its aftermath. Women are equals and partners of men in everything we have and hope for.
The Government’s present proposal is not in .accordance with that statement, nor with what other honorable members have said on the subject of equal pay for the sexes. They have always supported the principle that every woman, whether married or single, should have the right to earn an income, and that she i> entitled to receive for her work the same pay as would be given to a man doing the same kind of work. However, when it comes to taxation the Government says that women, to whom we must look to bear the children who are so badly needed in Australia, are to be penalized. It is not proposed to do this in the case of ordinary commercial partnerships, but only in the case of the sacred partnership of marriage. I agree that steps should be taken to prevent the deliberate evasion of taxation by the settling of property by a husband on his wife, but I cannot agree that both husband and wife should be penalized because- a wife has inherited money or property from her family, or is earning income of her own. The British Parliament was moved to pass the Married Women’s Property Aci because of the notorious case of a woman novelist who was married to a waster who, as fast as she earned money by her writings, spent it by tipping it down his throat. By passing that act, the British Parliament recognized that a woman hada right to own property, that a wife was not just a piece of furniture about the house to he treated by the husband as he would treat any other of his possessions, but was a human being possessing rights equally with the man. It is unfortunate that we should have gone back to an English act of 1842 for inspiration for present-day legislation. Why should we copy the mistakes of the old world? Why should we deal so harshly with this one partnership made and sealed at the altar ? A partnership between a man and woman living together out of wedlock is not treated so harshly. . I beg the Assistant Treasurer (Mr. Lazzarini) to go into this matter with a view to introducing an amending clause in committee to prevent the evasion of tax by settling property on a wife, but not penalizing a wife who has inherited property, or who earns income by her personal exertion.
Question resolved in the affirmative.
Bill reada second time.
In committee :
Clause 1 agreed to.
Section five of the principal act is amended by inserting after the words “Division6. - Trustees.” the words “Division 6a. - Husband and wife”.
Amendment (by Mr. Lazzarini) agreed to -
That all the words after “principal act” be omitted with a view to insert in lieu thereof the following: “ is amended -
– Trustees ‘ the words ‘ Division
b ) by omitting the words ‘ on income taxed abroad and on business income’.”.
Clause, as amended, agreed to.
Clause 3 -
Section sixteen of the principal act is amended -
by omitting from paragraph (e) of sub-section (4) the word “or”;
by omitting from paragraph (f) of sub-section (4) the words “the Territory for the Seat of Government”, and inserting in their stead the words “ the Australian Capital Territory or of the Northern Territory”; and
by adding at the end of sub-section (4) the following word and paragraph: - “ ; or (g) the Commonwealth Prices Commissioner.”
Amendment (by Mr. Fadden) agreed to -
That at the end of paragraph (b) the word “ and “ be omitted.
– I move -
That the following new paragraph be added after paragraph (c): - “; and
by inserting after sub-section (5.) the following sub-section: - (5a.) For the purposes of sub-sections (2.) and (5.) of this section, an officer or person shall be deemed to have communicated such information to another person in contravention of those subsections if he communicates that information to any Minister.’”.
The purpose of the amendment is to safeguard the secrecy provisions of the Income Tax Act. The Assistant Treasurer (Mr. Lazzarini) assured me this afternoon that it was not the intention of the Government to allow those provisions to be violated, and it is to make this legally certain that I have submitted my amendment.
– We are prepared to accept the amendment.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 4 -
Section twenty-three of the principal act is amended -
by inserting after paragraph (k) the following paragraph: - ” (ka) payments by way of endowment under the Child Endowment Act 1941;”; and
by inserting in paragraph (g), after the word “derived” (second occurring), the words “, and the Commissioner is satisfied that the tax has been or will be paid “.
– I move -
That all of the words after” 1941 “ be omitted with a view to insert in lieu thereof the following paragraphs: - “(c) by adding to paragraph (q) the following proviso : -
Provided that this paragraph shall not apply to exempt any income unless -
where there is a liability for payment of income tax in the country where that income is derivedthe Commissioner is satisfied that the tax has been or will be paid; or
where the outgoings incurred in producing that income exceed that income - the Commissioner is satisfied that the tax would have been paid in the country where it is derived if the income had exceeded the outgoings;’; and “(d) by omitting paragraph (s) and inserting in its stead the following paragraph : -
in the case of any person enlisted in or appointed to the Defence Force the pay and allowances earned by him as a member of that force -
out of Australia;
in Australia if, within twelve months after the close of the year of income he embarks for service out of Australia or serves in a sea-going ship, and -
1 ) during the period of twelve months immediately following the date on which he embarks or commences to serve is, for a period of, or periods which aggregate, not less than six months, on service out of Australia or borne, in a sea-going ship; or
returns to Australia or is discharged from his ship owing to injury or illness; and
in Australia until the expiration of the period of three months immediately following his resumption of duty in Australia if he is a member whoso pay and allowances have been exempted under the preceding provisions of this paragraph:
Provided that sub- paragraph (ii) or (iii) of this paragraph shall not apply to exempt the pay and allowances -
earned by a member of the Defence Force who is not appointed as a member of a body, contingent or detachment of that force out of Australia; or
earned by a member of the Defence Force prior to the date of his enlistment in or appointment to that force for service beyond the limits of the Commonwealth.
For the purposes of this paragraph -
Australia ‘ does not include any
Territory of the Commonwealth which is not part of Australia;
Commonwealth ‘ includes any Territory of the Commonwealth; and sea-going ship’ does not include a depot ship or a ship principally employed on or in connexion with port or harbour defence;’”.
As is explained in the memorandum issued in connexion with the bill, income derived by a resident of Australia from ex-Australian sources is assessable, if that income is exempt from income tax in the country where it is derived. The amendment to section 23 q proposed by clause 4 of the bill was designed to cause Commonwealth income tax to be payable by a resident of Australia in any case where the ex-Australian income tax was not paid or would not be paid on the exAustralian income, although, technically, that income was not exempt from income tax in the country where it was derived. Conversely, it was intended that where, in one or more years, ex-Australian income was taxed by the Commonwealth under the new provision, any losses in subsequent years would be allowed as deductions. The amendment proposed by the bill is open to the construction that ex-Australian losses made by Australian residents shall be allowable deductions irrespective of whether ex-Australian income is exempt or taxable for Commonwealth income tax purposes. The amendment now moved is designed to indicate more clearly the ex-Australian losses that shall be allowed as deductions.
– This measure is most important, and should have the consideration of all honorable members. Accordingly, I direct attention to the state of the committee.
– I direct your attention, Mr. Chairman, to the fact that the honorable member for Griffith (Mr. Conelan) is leaving the chamber.
-I remind the honorable member for Griffith that he is not permitted to leave the chamber when a quorum has been called. [Quorum formed.]
Amendment agreed to.
Clause, as amended, agreed to.
Clause 5 agreed to.
Clause 6 -
Section forty-four of the principal act is amended : -
by omitting paragraph (a) of subsection (2.) ; and
by omitting sub-paragraphs (i) and (ii) of paragraph (b) of sub-section (2.)
Section proposed to be amended - 44.-
The assessable income of a shareholder shall not include dividends -
received from a company that does not carry on business in, or derive income from sources in, Australia;
paid wholly and exclusively out of one or more of the following: -
The amount remaining after deducting from income derived from sources out of Australia (not being income, which under this or the previous act is or has been assessable income of the company) any losses or outgoings incurred in gaining or producing that income which would have been allowable deductions if that income had been assessable income;
profits arising from the sale or compulsory resumption for public purposes of assets no’ acquired for the purpose of resale at a profit; or
.- I move -
That, in paragraph (b), the words “subparagraphs (i) and (ii) “ be omitted with a view to insert in lieu thereof the words “ subparagraph (i) “.
I submit that amendment in anticipation of making a second amendment later when that which is now before the Chair has been carried.
– I suggest to the Minister assisting the Treasurer (Mr. Lazzarini) the advisability of reporting progress at this juncture in order to give himself an opportunity to examine the effect of the amendment.
The following papers were pre sented : -
National Security Act - National Security (Prices) Regulations -
Declarations Nos. 63-70.
Declaration (Papua) No. 6.
Orders Nos. 418-489.
Order (Papua) No. 10.
House adjourned at 10.13 p.m.
The following answers to questions were circulated: -
Australian Imperial Force: Members Stationed at Darwin.
Pomeroy Explosive Bullet.
y asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follows: -
n asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follows : -
Saleof Australian Lamb in Canada.
l asked the Minister for Commerce, upon notice -
Mr.Scully. - The answers to the honorable member’s questions are as follows : -
Commonwealth Grants Commission.
n. - On the 14th November, the honorable member for Melbourne (Mr. Calwell) asked the following question, upon no tice : -
What salaries, fees and travelling expenses were received by each member of the Commonwealth Grants Commission for the financial years1939-40 and 1940-4 1?
The following information has been obtained : - -
Oil Tanker off Queensland Coast.
– On the 14th November, the honorablemember for Wide Bay (Mr. Bernard Corser) asked, without notice, whether an 11,000-ton American tanker had been lying off the coast of Queensland for some weeks, and was unable to discharge its cargo because of lack of storage facilities.
I am now in a position to inform the honorable member that a full inquiry has been made into this matter and the oil companies have assured me that the position is not as stated by the honorable member. The facts are that there is ample accommodation in seaboard tanks for motor spirit at each seaboard installation throughout the Commonwealth, and no difficulty whatever would be encountered by any tanker in the prompt discharge of its cargo.
I am informed by government authorities located in Brisbane that a tanker with a. full supply of petrol arrived off Brisbane Heads on a certain night about a fortnight ago, but there was insufficient water on the crossing to permit the tanker to enter. Instructions were therefore given for the tanker to “hove to” until 12 o’clock the following day, when a flood tide permitted entry. The petrol was then discharged without delay into the various companies’ storage tanks.
It would appear, therefore, that the honorable member has been misinformed, but if he will be kind enough to furnish further particulars, I shall have a more complete investigation made.
Price of Matches.
y. - On the 5 th November, and again on the 14th November, the honorable member for Dalley (Mr. Rosevear) brought to my notice restrictions placed by grocers in some of the suburbs of Sydney upon the sale of matches. My colleague, the Minister for Trade and Customs, has now furnished the following information : -
The rationing of matcheshas been voluntarily undertaken by Federal Match Company,
Sydney,and Bryant andMay, Melbourne, on account of shortage of raw materials, principally potassium, chlorate. Efforts aro being made to secure supplies of potassium chlorate from the United States of America and Canada, which are the only sources of supply under present conditions.
Coder the Prices Regulations, manufacturers and traders are not permitted to refuse supply without permission, and from time to time the Prices Commissioner has made inquiries into the supply of matches to ascertain whether manufacturers, or traders were withholding supplies with a view to building up stocks in the event of a rise in theprice. No, instances have been disclosed where traders have withheld stocks with a view to obtaining unjustifiable profits. As regards manufacturers, the whole of their trading accounts have come under repeated review by the Prices Branch and no advantage could accrue to any manufacturersby the adoption of a profiteering device, which could easily be detected by skilled investigators.
Safety matchboxes with two striking surfaces. - Reasons given to account for occasional pre-appearance of the double-surfaced boxes are - ( 1 ) Bryant and May Proprietary Limited havebeen releasing small quantities of old stocks of specialbrands (Brymay Ark, Magic Square, Telephone, Kookaburra)., which are not in great demand - stocks on hand the8th September,1 941, approximately 4,000 gross. (2) Wholesalers and retailers - New stock generally stacked in front of old stock. As a few gross are generally held on hand, old twosurfaced stock may only be utilized when stocks are almost exhausted. (3)Government Stores Department still holds stocks of two- surfaced boxes, as do some retailers who sell mainly in single boxes. A check in Sydney in six suburbs revealed only one shop holding stock of two-surfaced . boxes. (4) “Bell’s Waterproof . Strike Anywhere” matches are not classed as safety -matches, although packed in two-surfaced boxes of a similar appearance to safety matches.
y. - On the 5-th November. the honorable member for Moreton (Mr. Francis) askedme a question, without notice, regarding the issue of licences for importation of tinned plate from Great Britain.
I have now been advised by the Minister for Trade andCustoms that exports of tinned plate from the United Kingdom are controlled bythe Government of that country, but if permission is given for the export of any particular quantity of tinned plate from the United Kingdom to Australia, a licence will be issued by the Department of Trade and Customs.
Censorship of Parliamentary Debates.
n. - This afternoon the honorable member for Darling Downs (Mr.
Fadden) askedmethe following question, without notice : -
Has the attention of the Prime Minister been drawn to a statement in a leading article in the Courier-Mail, Brisbane, of the 17th November, that the Minister for Information. (Senator Ashley) has taken from the Chief Publicity Censor the work of censoring parliamentary debates, and has decided to take this responsibility upon himself and to share it with the President and Mr. Speaker? Can. the Prime Minister informthe House whether this statement is correct? . If it is correct, will the honorable gentleman say whether the system is changed with his authority, and does he agree with the principle of. political interference in matters of this nature?
In the course of my reply I stated that I would ascertain the steps which have been taken by the Minister for Information regarding the matter, and that I would inform the honorable gentleman. The Minister for Information has furnished me with a copy of the instructions which have been issued by him to the Chief Publicity Censor in thefollowing terms : -
Tasmanian Shipping Service.
n. - Yesterday the honor able member for Wilmot (Mr. Guy) asked me a question, without notice, as to whether I would ascertain why the censorship authorities would not permit the fact of the hold-up in the Tasmanian shipping service to be published. I have had inquiries made of the Chief Publicity Censor, who has furnished the following report : -
No censorship instruction has been issued preventing publication of the central fact that the Tasmanian shipping service has been interrupted. The only action associated with thecensorship of this matter occurred at 1 a.m. on 19th November, when the Tasmanian censordelayed publication of a short paragraph ‘ which disclosed the identity of the vessel concerned. This action was in accordance with standing instructions based on a special request received some time ago from the Department of the Navy. Steps have since been taken to release the item in Tasmania subject to the deletion of the ship’s name.
Cite as: Australia, House of Representatives, Debates, 19 November 1941, viewed 22 October 2017, <http://historichansard.net/hofreps/1941/19411119_reps_16_169/>.