Senate
18 September 1917

7th Parliament · 2nd Session



The President (Senator the Hon. T. Givens) took the. chair at 3 p.m., and read prayers.

page 2140

DEATH OFDR. CARTY SALMON, M.P

Senator MILLEN:
Vice-President of the Executive Council · New SouthWales · NAT

.- I move-

That this Senate desires to record its profound regret at the loss which the Commonwealth suffers in the death of the Honorable Charles Carty Salmon, who was at one time Speaker of the House of Representatives, and was one of its members at the inauguration of the Parliament and also for many years afterwards, and who was at one time a member of the Victorian Ministry, and expresses its sincere condolence with his widow and the members of his family in their bereavement.

I remind honorable senators that, although the deceased gentleman was not a member of the Senate, he was well known to at least the majority who are present to-day, and not only known, but, I venture to say, held both in respect and with a considerable degree of affection. He had distinguished himself by a long, meritorious public career, in the course of which he revealed that highest type of citizenship which expresses itself with singleness of purpose in association with all things making for the public weal. Therefore, although he was not a member of the Senate, it is fitting, I think, that we should place on record a tribute to his memory, and a sense of the loss which the community suffers by his death and which we personally feel from his companionship being withdrawn from us.

There are, sir, others who are more deeply concerned in the loss of the late honorable gentlemen than ourselves, and that is those who are to-day inmates of a home stricken with grief. I may, in submitting the motion, express the hope that, asit contains a genuine expression of our feelings regarding the deceased gentleman, it may, in some measure, be. accepted as tempering a little the blow which has fallen upon them.

Senator NEEDHAM:
Western Australia

.- On behalf of honorable . senators sitting on this side, I second the motion which has been moved so feel ingly by the Leader of the Senate. I think that most of the honorable senators assembled here knew the honorable gentleman who has paid the last debt of Nature, and whose funeral service we attended to-day. I knew Dr. Carty Salmon well, and I found him at all times to be a man amongst men, high spirited and single-minded, as the Leader of the Senate has said. I believe that his death is another proof that devotion to duty puts an end to life at a much earlier period than would otherwise be the case.

Dr. Carty Salmon was a good man, no matter what duty he was performing. He was prominent in Church and State matters, and in all he wasrespected. I agree with the Leader of the Senate in the statement that the Commonwealth has lost a very valuable citizen but more so the home that is now bereft. His wife has lost, indeed, a good husband, andhis children a good father, and the Commonwealth mourns the loss of a devoted and high-minded public servant.

Question resolved in the affirmative, honorable senators standing in their places.

page 2140

SUSPENSION OF SITTING

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– I venture to suggest, sir, and I believe with the concurrence of honorable senators, that you should now leave the chair, to resume it at 8 o’clock, as a mark of respect to the honorable gentleman whose death we have just mourned.

The PRESIDENT (Senator the Hon T Givens:
QUEENSLAND

– Atthe request of the Minister in charge of the Senate, and I believe in accordance with the wish of honorable senators generally, as a mark of respect to the deceased gentleman, who was a member of the Commonwealth Parliament, I suspend the sitting until 8 o’clock, at which hour I will resume the chair.

Sitting suspended from3.6 to 8 p.m.

page 2140

PAPERS

The following papers were presented: -

Unlawful Associations Act 1916-17.- Regula tions amended - StatutoryRules 1917, No. 219.

War Precautions Act 1914-1916.-Regulations amended, &c. - StatutoryRules 1917, Nos. 190, 194, 196, 210, 222,223, 224, 231, 232.

page 2141

QUESTION

COMMONWEALTH AND STATE TAXATION DEPARTMENTS

Senator FAIRBAIRN:
VICTORIA

– I ask the Minister representing the Treasurer if he will be good enough to state when we are likely to receive the report, which I understand is in hand, and which was promised with regard to the amalgamation of the Commonwealth and State Taxation Departments?

Senator MILLEN:
NAT

– I shall be glad to forward the request on. I understand the honorable senator made reference to some previous promise. If I have given any such promise, and it has been overlooked, I must apologize to the honorable senator.

page 2141

QUESTION

BREAD COMBINE

Senator GARDINER:
NEW SOUTH WALES

– I ask the Leader of the Senate if his attention has been drawn to a statement appearing in the Melbourne newspapers of this day to the effect that a Bread Combine is making arrangements with certain flour millers to prevent other bakers’ from selling cheap bread to the public, and if his attention has not been drawn to the statement, will he have the matter inquired into withthe object of taking steps to prevent any Combine from increasing the price of foodstuffs?

Senator MILLEN:
NAT

– I have not seen the paragraph referred to, but I shall make it my business to read it, and if, after having done so, I find that the contents are such as to render it advisable, I shall follow the suggestion made by the honorable senator.

page 2141

ASSENT TO BILLS

Assent to the following Bills reported : -

Freight Arrangements Bill.

Sugar Purchase Bill.

Invalid and Old-age Pensions Appropriation Bill.

Invalid and Old-age Pensions Bill.

War Loon Bill (No. 2).

page 2141

WAR-TIME PROFITS TAX ASSESSMENT BILL

Public Meeting at Launceston: Communication to the President.

The PRESIDENT (Senator the Hon T Givens:

– I desire to inform the Senate that this morning I received a lettergram from Launceston, Tasmania, purporting to convey to me certain reso lutions and protests passed at a public meeting in Launceston with regard to the War-time Profits Tax Assessment Bill now before this J Chamber, and asking me to read the lettergram to the Senate. I do not propose to do anything of the ‘kind, because it is most improper for any body to try and exercise influence over the Senate, or to try and get the Presiding Officer to exercise any such influence. The proper method to approach Parliament is by petition, and as that course has not been pursued, I have decided to take no action in the matter.

page 2141

QUESTION

AUSTRALIAN IMPERIAL FORCE

Relief of First Division : Withdrawal from Fighting Line : Horses : Defence Employees : Returned Soldiers : Troops in Training.

Senator FOLL:
QUEENSLAND

– Has the Minister for Defence received any further information concerning the question I asked a few days ago with reference to a statement alleged to be made by Mr. Donald Mackinnon in connexion with the relief of the original Anzacs?,

Senator PEARCE:
Minister for Defence · WESTERN AUSTRALIA · NAT

– Yes, I referred the paragraph in question to Mr. Mackinnon, and he has replied that he was incorrectly reported.

Senator GARDINER:

asked the Minister for Defence, upon notice -

  1. In view of the Minister’s answer that the Australians were withdrawn for three months during the latter half of last year, why were the reports of the constant fighting of the Australians appearing in such papers as the Sydney Morning Herald, the Daily Telegraph, the Melbourne Argus, and the Melbourne Age allowed to appear if they were not true?
  2. Why did the Defence Department issue casualty lists, showing those killed and wounded, if the Australians were not fighting?
  3. How many casualty lists were issued by the Defence Department from the 1st July, 1916, to the 31st December, 1916?
  4. Upon what dates were the casualty lists issued during the above period?
Senator PEARCE:

– The answers are - 1. The honorable senator has not correctly quoted my answer to his previous question, but in any case I have seen no reports in the newspapers referred to which are inconsistent with my reply.

  1. The date of issue of a casualty list is no index as to the date when the casualty actually occurred.
  2. Seventy-seven.
  3. July 1st, 3rd, 7th, 13th, 17th, 20th, 26th, 29th; August 3rd, 4th, 9th, 12th, 14th, 17th, 18th, 21st, 23rd, 26th, 28th, 31st; September 1st, 4th, 6th, 9th, 11th, 14th, 15th, 18th, 20th, 23rd, 25th, 28th, 29th; October 2nd, 4th, 7th, 9th, 12th, 13th, 16th, 18th, 21st, 26th, 30th; November 4th, 6th, 10th, 20th, 27th: December 2nd, 4th, 9th, 11th, 14th, 15th, 18th, 20th, 23rd, 26th.

SenatorGARDINER.-Arising out of the Minister’s reply to my first question, I desire to ask him, if ‘the Sydney Morning Herald reported that he had stated that troops were withdrawn for three months, would he say that was an incorrect report of his statement?

Senator PEARCE:

– I do not propose to answer any hypothetical question. I have no report, such as the honorable senator suggests, in my possession, nor have I seen such a report.

Senator Gardiner:

– I shall give it to you on the adjournment, then.

Senator Lt Colonel BOLTON:

asked the Minister for Defence, upon notice -

  1. The total number of horses purchased for the Government for war purposes since the 4th August, 1914, and the average price per head paid for same?
  2. The total number of horses presented to the Government for war purposes sincethe 4th of August, 1914?
  3. The total number of horses shipped overseas for war purposes, showing the number of purchased and gift horses so shipped?
  4. The estimated total cost per head of such horses landed in Egypt?
  5. The total number of employees, including staff, at present engaged in purchase, care of, and shipment of horses for the Defence Department?
Senator PEARCE:

– The answers are -

  1. Forty thousand two hundred and sixty-five horses were purchased, at an average cost of £20 2s. 5d. per head.
  2. Two thousand six hundred and sixty-one horses were presented to the Department.
  3. Thirty-six thousand eight hundred and eighteen horses have been shipped overseas for war purposes, including 1,791 of which were presented to the Government.
  4. It is estimated that the cost of Australian horses landed in Egypt is, approximately, £56 per head.
  5. There are, at’ present, 111 officers and men (including staff) employed in connexion with thecare and shipment of horses for war service.
Senator Lt Colonel BOLTON:

asked the Minister for Defence, upon notice -

  1. What is the total number of employees in Defence Department, showing number in each military district and in Central Head-quarters, including Australian Imperial Force Camp Staff?
  2. What is the total number of said employees who are returned soldiers within the meaning of the Repatriation Act?
  3. What is the total number of troops at present in training for active service in Australian Imperial Force camps?
Senator PEARCE:

– The latest figures available are -

  1. Fifteen thousand four hundred and eightynine.

page 2142

QUESTION

WAR LOAN: INTEREST

Senator McDOUGALL:
NEW SOUTH WALES

asked the Min ister representing the Treasurer, upon notice -

  1. Has any portion of the Australian war loan been subscribed without interest?
  2. If so, how many investors have given notice of not accepting interest, and what is the amount subscribed without interest?
Senator MILLEN:
NAT

– The answers are - 1 and 2. Seven amounts, totalling £630, have been lent free of interest. Of that sum, £400 is to bear interest after the war is over, and £150 after two years. In addition, one person has given a £10 bond and all interest couponsas a gift, while four persons have handed in coupons valued at £18 8s. for payment to revenue. Further sums, totalling £79,627, have been received as gifts. The number of contributors is not known, as in many cases the amounts have been received through newspaper offices.

page 2142

QUESTION

CAPITATIONGRANT: STATES

Senator NEEDHAM:

asked the Minister representing the Treasurer, upon notice -

  1. Is it a fact that the Commonwealth Government refuses to pay to Western Australia the 25s. capitation grant for 35,000 absent soldiers ?
  2. If so, does this apply to the full period of their absence since the outbreak of the war?
  3. Is similar action being taken in regard to other States?
  4. Seeing that these soldiers are still citizens of the respective States, does the Government consider it just to withhold the capitation grant?
Senator MILLEN:
NAT

– The answer is -

  1. Yes.
  2. Yes.
  3. Yes.
  4. Yes. Payment to the States under the Surplus Revenue Act of 1910 is limited to 25s. per head of the “number of the people” of, the State, and “ the number of the people “ is ascertained, according to the law of the Commonwealth, by the Commonwealth Statistician as at 31st December in each year. The law is being complied with.

page 2143

NEW BUSINESS

Motion (by Senator Millen) agreed to-

That standing order No. 68 be suspended until 29th September.

page 2143

PUBLIC WORKS COMMITTEE BILL

Bill read a third time.

page 2143

COMMITTEE OF PUBLIC ACCOUNTS BILL

Bill read a third time.

page 2143

WORKMEN’S COMPENSATION BILL

Motion (by Senator Needham) agreed to-

That leave be’ given to introduce a Bill to amend the first schedule to the Commonwealth Workmen’s Compensation Act 1912.

Bill presented, and read a first time.

page 2143

WAR-TIME PROFITS TAX ASSESSMENT BILL

In Committee (Consideration resumed from 14th September, vide page 2110) :

Clause 9 (Treasurer may agree for apportionment between Imperial and Commonwealth Governments of tax).

Senator PRATTEN:
New South Wales

– This clause provides for reciprocity with other parts of the Empire. If the Imperial Government tax any British company on so much of its war-time profits aa are made in Australia, the Commonwealth Treasurer will be able under the clause to make an arrangement with them to adjust the tax as between Australia and Great Britain. The British tax is now 80 per cent, of the profits, and I am glad to see a reciprocity clause of this sort, because I hope it will mean no double taxation There has been a great deal of duplication and even triplication of taxation as between England and Australia in the past. I have given notice of an amendment for a later part of the Bill to limit the total taxation in Australia to two-thirds of a man’s income. I do not know whether the Government has any sympathy with that proposal, but it will .probably again raise the question of reciprocity.

Senator MILLEN:
New South WalesVicePresident of the Executive Council · NAT

.- Although I recognise the kind of case Senator Pratten has in mind, it is not possible to accept his amendment. The clause, which is iu the direction of reciprocity, merely authorizes the Treasurer to endeavour to obtain it. Unless the Imperial Chancellor responds, the effect of the amendment mentioned by Senator Pratten will be to bar the Australian Government from levying taxation on some of its own people. The Imperial tax represents 80 per cent., and Senator Pratten ‘s amendment will limit our total .taxation to two-thirds. Obviously, as 80 per cent, is more than two-thirds, the Commonwealth would not be able to levy a penny of taxation upon certain people making money in Australia.

Senator Pratten:

– But’ the Imperial tax is only 80 per cent, of the excess profits.

Senator MILLEN:

– I am assured that the amendment would not afford any relief to any one who is merely an Australian taxpayer; but, if it were carried, the Imperial Government would point out to us that there was no need for reciprocity, because they had already taken 80 per cent, of the excess profits, and we had boun’d ourselves not to take more than twothirds, so that there would be nothing left for us to tax. We would, therefore, put ourselves out of court. The object of the clause is to allow the Treasurer to represent to the Imperial Government that we are entitled to a share of the excess profits tax paid by certain taxpayers, and to ask’ them to share with us in some fair proportion the 80 per cent, tax levied by them. The Imperial Government got in first, and we want a lever to approach them with, as a sound argument for asking them to remit some portion of their tax, we also remitting some portion of ours. We must not tie our hands in the matter.

Senator Bakhap:

– Are there cases in Australia where the Imperial Government will levy their war-time profits tax, as well as the one we are going to impose ?

Senator MILLEN:

– Yes; there are firms in business there and here, and the Imperial Government levy on them to the extent of 80 per cent.

Senator Bakhap:

– Eighty per cent, of what they earn in Australia ?

Senator MILLEN:

– No, 80 per cent, of their excess profits. Our tax is 50 per cent. Fifty per cent, plus 80 per cent, makes 130 per cent. ; therefore we would be taking more than the whole of the excess profits. That would be a manifest injustice.

Senator Bakhap:

– It would be a manifest impossibility.

Senator MILLEN:

– It is not an impossibility; because we could collect the extra 30 per cent, upon the profits which were not excess. We must leave the Treasurer free to say to the Imperial Government”, “ If both of us demand our pound of flesh, we shall take more from the taxpayer than either of us thinks fair. As yours is the heavier tax, levy it, but share it with us.”

Senator PRATTEN:
New South Wales

– The amendment which I had intended to move, and which has a bearing on this clause, was as follows : -

The taxation imposed under this Act, together with the Commonwealth and State land taxes, the Commonwealth and State income taxes, and all the other rates and taxes paid in Australia by any business, shall not exceed two-thirds of the profits of that business.

When I gave notice of that, I had not thought of the possibility of complications with the Imperial Government. I gave one or two instances on the second reading of extreme cases where it is possible to make the taxpayer pay, in all, 70 per cent, and over of his total income, and I drafted the amendment to meet them. I shall not move it now, in view of the statement of the Vice-President of the Executive Council, hoping that the Government, in their mercy-

Senator Millen:

– In their regard for, the taxpayers of this country.

Senater PRATTEN. - Hoping that the Government, in their regard for the taxpayers, will bear in mind these extreme cases when they do crop up.

Senator GRANT:
New .South Wales

– I understand that the Treasurer will be authorized by the clause to arrange with the British taxing ‘authorities for the division of the amount of the tax, which shall be the greater of the two imposed by the British and Commonwealth Parliaments. That is, that the excess profits will not be taxed to the maximum under this Act, and, also, to the maximum under the British Act. Is lhat so?

Senator Millen:

– That is so.

Senator GRANT:

– Then, although the whole thing is on a wrong’ basis-

Senator Millen:

– It lacks that simplicity which your system of taxation would have.

Senator GRANT:

– There is nothing simple about this Bill. It gets worse and worse ; but it is’ something to know that the maximum tax will not be imposed by both authorities.

Clause agreed to.

Clauses 10 and 11 agreed to.

Clause 12 (Special provisions as to prewar standard).

Senator PRATTEN:
New South Wales

– I gave notice of an amendment to clause 11. Is it impossible for me to deal with it now?

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– The honorable senator will not be prejudiced by the fact that he did not move his amendment when clause 11 was called on, because its object was really to substitute the plural for the singular with regard to the Board of Referees. He can do that later on, and I would remind him that, under our Acts Interpretation Act, where the circumstances suggest it, singular and plural are alternative terms. I am happy, therefore, to be able to meet him in this matter by substituting the word “Boards” for “Board.”

The amendment which I now wish to submit is one of a series which will follow, and these are covered By certain amendmendts of which, I understand, Senator Pratten has given notice. The object of these amendments is to remove from the Commissioner a great deal of the discretionary power which, under a number of clauses, has been vested in him. Acting on the strong representations of Senator Pratten, I have had a consultation with the Treasurer (Sir John Forrest) and with the income tax officials with a view to dividing into two classes those cases in which discretion rested with the Commissioner. Some of these are obviously of a simple, routine character, and that officer may safely beleft to deal with them. But others involved questions of fact, in which the interests of the taxpayer and of the Government may clash, and I therefore propose to submit certain amendments with a view to doing away with the discretionary power which the Bill now gives to the Commissioner. The proviso to sub-clause 3 reads -

Provided that where it is shown to the satisfaction of the Commissioner that the capital has been decreased during the accounting period through compulsory dispossession, the profits of the accounting period shall not be increased as provided by this section.

I move -

That the words “ it is shown to the satisfaction of the Commissioner that “ be left out.

Amendment agreed to.

Senator EARLE:
Tasmania

– I desire to offer special encouragement to any person or persons who contemplate starting new industries in Australia immediately. It must be quite apparent to honorable senators that, owing to the increased cost of machinery and plant during this war period, any person or persons wishing to establish a new industry may be disposed to postpone its inauguration until the war has terminated. That is manifestly not in the best interests of Australia, and, consequently, it would be wise to give such persons special considerationby allowing them to set off the additional cost of their plant and macbinery against the amount of their taxable profits. There are companies in Australia whch have had to incur a very considerable additional cos in order toget their industries going immediately. That increase has, in some instances, amounted to 100 per cent. I know that, since the war started, the Hydro-Electric Department in the State of Tasmania has had to pay in freight upon its plant from New York £5 10s. per ton as against £2 per ton, the freight in normal times. The cost of machinery has been proportionately high. In such circumstances, it would be only equitable to allow this additional expenditure as a set-off against the levy made upon their profits during the period over which this measure will operate. Consequently, I move -

That the following new sub-clause be inserted: - “ (7) In the case of a new industry, the plant and machinery for which has been purchased and installed during the war, and when it can be shown to the satisfaction of the Commissioner, that the cost of such plant and machinery has been increased owing to the war, the Commissioner shall allow the amount of such increased cost to be deducted from the profits.

Provided, however, that no deduction shall be allowed under this sub-clause unless the’ increased cost exceeds by at least 10 per cent. the amount which the plant and machinery would have cost prior to the war.”

The equity of this proposal will appeal to all honorable senators. We first recognise the grave importance to Australia of getting new industries started at once. We realize that it is necessary that the Commonwealth shall become self-contained. For years we have been pursuing the foolish policy of sending our raw materials abroad to be converted into the manufactured article, thus assisting to build up the very nation with which we are at war to-day.

Senator Senior:

– These arguments did not affect anybody last week.

Senator EARLE:

– The honorable senator’s logic and eloquence affected every member of this Committee. I was seriously moved by his speeches. Whilst I recognise the necessity which exists for securing more revenue, and whilst 1 realize that the Government must obtain that revenue, even if they have to act harshly towards some taxpayers, I hold that we ought to do all that lies in our power to encourage persons to start new industries immediately, instead of waiting for normal times, when they will be able to purchase plant and machinery cheaper than they can purchase them now.

Senator Colonel Rowell:

– Why impose a limit of 10 per cent. ?

Senator EARLE:

– Because I do not wish persons whose machinery has cost them perhaps 5 or 7 per cent. more than it could be purchased for in normal times to harass the Taxation Department by appeals to the Commissioner against the taxation levied upon their excess profits. But, where that additional cost exceeds 10 per cent., we ought, I think, to encourage people to start new industries at once by allowing them to use that extra expenditure as a set-off against their war-time profits.

Senator MILLEN:
New South WalesVicePresident of the Executive Council · NAT

– This is one of a class of amendments which naturally appeals to one’s sympathies.

Senator Earle:

– Sympathy without support) is of very little use.

Senator MILLEN:

– But many of the arguments addressed to the Committee by the honorable senator might with equal force have, been urged in regard to any other tax. No impost which is levied upon any industry can be regarded as other than a handicap upon that industry. But we have to consider the purpose of this Bill, and the peculiar circumstances of the new industries which will be taxed if this clause be retained in its present form. It is quite true that almost all new industries in Australia will have to pay an excess price for their machinery and plant. But the amendment is limited to industries which have started since the war broke out.

Senator Earle:

– And to industries which have yet to start.

Senator MILLEN:

– It is quite clear therefore,- either that they started, or that they will commence, operations, knowing the price which they will be called upon to pay.

Senator Bakhap:

– No; that has been a progressive quantity.

Senator MILLEN:

-HE cannot believe that business people will proceed to establish a new industry without knowing something of the cost of the plant which they have to install.

Senator Earle:

– They did not know that this tax was going to be imposed.

Senator MILLEN:

– The people to whom, the amendment specifically refers are those who have started industries since the outbreak of the war. These individuals, therefore, were not caught “ on the hop.” They knew what they were doing, and if they have paid an increased price for their machinery and plant because of war conditions, they have done so because, as the result of those conditions, they anticipated making larger profits! I could have recognised greater force in the honorable senator’s arguments if his amendment had been limited to those persons who purchased machinery and plant just prior to the outbreak of the war. “ But it is a fair assumption that the individuals who started new industries after the war broke out did so because they believed that, as the result of the war, they would make in creased profits. It does not appear to me that Senator Earle has made out any case for those persons whose special interests would be advanced by the adoption of his amendment. Incidentally, I would remind him that the inflated values to which’ he has alluded will figure in the capital accounts of these new industries, which will to that extent receive consideration. I ask the Committee to stand by the measure in its present form. . Although I admit at once the desirableness of establishing new industries, I would point out that the arguments which have been advanced by the honorable senator might, with equal justification, be urged in regard to the expansion of existing industries. It is necessary, to levy a certain amount of taxation. This Bill proposes to collect taxation upon excess profits, and I am unable to see why people who enter into a business with their eyes open, tempted, it may be, by the prospect of higher profits because of war conditions, should be exempt from the taxation which those engaged in other industries will have to bear under this Bill.

Senator GARDINER:
New South Wales

Senator Earle’s amendment appeals to one’s sympathy, and also to one’s judgment. But I have been impressed rather by the delightful way in which the honorable senator has seized upon the spirit of the BiTT, to submit an amendment which will ada to the confusion, to the list of officials, and to the cost of collection of the tax, which are inevitable under this Bill. I am not so inquisitive as to ask the honorable senator if he had his amendment drafted by the official draftsman, but there is no doubt that it is in keeping with the whole of this Bill. I was startled to hear Senator Millen say that there is going to be more taxation.

Senator Millen:

– Is it not inevitable?

Senator GARDINER:

– When I was speaking on the subject the other day it was suggested that I desired to revel in taxation but I should like now to say that, in my opinion, it would be better to tell the people in a straightforward way ‘hat the taxation necessary is likely to be, than to adopt the course followed by the Government of saying with one breath that they intend tq make the taxation as light as possible, and with the next uttering a vague threat that there will be more taxation. The uncertainty as to what businesses will be taxed, the difficulty of ascertaining the increased cost of machinery upon pre-war prices, the fact that allowance is to be made only in the case of an increased cost ofnot less than 10 per cent., and that where the increased cost has been only9½ per cent., there will be no exemption, makes it difficult for me to support the amendment, because in all these complexities it is so much in keeping with thia Bill. After the way in which my amendment upon clause 8 was received, I am inclined to believe that the more people who are relieved from the operation of this measure the better. All this talk about the starting of new industries, and the development of existing industries, is calculated only to hamper this passing of legislation of this kind.

Senator Bakhap:

– There could not be a more laudable objective for any Bill.

Senator GARDINER:

– I am at present concerned about the inroads which such considerations make upon our legislation, especially when dealing with ‘ a taxation measure. A person well disposed towards a new industry may see a way by which hecan help it by the insertion of a certain provision in a Bill, and while the objection and intention might be excellent, what would happen to our legislation generally if we all followed a similar course? I suppose that no Bill could be introduced in connexion with which Senator Bakhap could not suggest some amendment whichmight be of advantage to an industry in Tasmania.

Senator Bakhap:

– I move fewer amendments than does any other member of the ‘ Senate.

Senator GARDINER:

– That is only to say that the honorable senator refrains from doing what I say he might do. We should not mix up a taxation measure with a measure for the assistance of industries. I realize that we should be careful that our taxation proposals shall not injure industries. I have nob yet made up my mind how I shall vote upon the amendment; but, as I have said, in view of the defeat of my amendment to put all industries on the same footing, I am now disposed to assist in the exemption of industries from the operation of this Bill.

Senator BAKHAP:
Tasmania

– I do not understand where Senator Gardiner is in this matter after the Yes-

No speech to which we have just listened. I was at first disposed to say that I could not agree with either the Leader of the Senate (Senator Millen) or the Leader of the Opposition (Senator Gardiner). I am justified in objecting first of all to Senator Gardiner, because he has not told us where he is, whilst Senator Millen has expressed himself as hostile to the amendment. As the honorable senator is in charge of the measure, I am not disposed to blame him if he desires to see it carried in the form in which it was introduced. I intend to. support the amendment. It struck me that Senator Millen took it for granted that the cost of estab-. lishing new industries in the war period is a definite amount easily ascertained; but I should like to remind honorable senators that freights from the United States at the present time are in many instances designedly left in an indefinite condition. That is to say, no definite standard will be quoted by the people providing freight. As an illustration in point, I may say that a newspaper proprietor told me the, other day that he had great difficulty in getting paper for printing purposes. He had secured the filling of an order which he had given to one of the agents of paper mills in the West British Columbia district, and he had to . pay more for freight from the paper mills down to San Francisco than he had been in the habit of paying prior to the war, from San Francisco to Australia. He had been charged on a previous shipment more than four or five times the pre-war freight, but when he asked what he would have to pay in freight on the last order, he was told that he could not be provided with freight unless he left the cost entirely in the discretion of the company filling the order’.

The CHAIRMAN (Senator Shannon:
SOUTH AUSTRALIA

– I do not wish to unduly interrupt the honorable senator, but I ask him to connect the question of freight with the amendment.

Senator BAKHAP:

– I think the question of freight is clearly connected with the cost of the establishment of a new industry. I am endeavouring to show that in many cases it is at present an undetermined amount, and it is impossible to fix any precise standard.

Senator Millen:

– The same influences are at work in increasing the price of trieproducts of machinery.

Senator BAKHAP:

– We can have no assurance that the prices of the products will be increased in the same proportion. If an enterprise is established, and because of war conditions it is necessary in the purchase of machinery to add, say 50 per cent., to pre-war prices, I am assured by business men and accountants that the very first step necessary in producing a balance-sheet of the business is to write off from the war profits the extra amount which the machinery has cost because of war conditions. If a plant which ordinarily would cost. £50,000 under prewar conditions, costs £75,000 because of war conditions, and assuming that the business earns £50,000 during a year of the war period, from the accountancy stand-point it is essential that the increase of £25,000 on the normal cost of the plant shall be chargeable against the war profit earned. That is perfectly sound, because after the war period comes to an end the enterprise will in all probability have to compete against industries established in the pre-war period with -machinery secured at pre-war prices. I think that Senator Earle alluded to a company formed to establish the carbide industry in Tasmania. I do not think that that company has any prospect of profit for a year or two to come.

Senator Earle:

– I did not1 refer to that company, but to the Hydro-Electric enterprise of the State.

Senator BAKHAP:

– I had the other company in mind, and as the honorable senator is aware, it is contingent upon the State , enterprise referred to, and was originally responsible for that enterprise. The company may not! earn profits at once, but they have paid for a great deal of machinery enhanced prices due to war conditions. If they earn profits, as I hope they will, on a sound ‘ accountancy basis, the increased price of the plant attributable to war conditions must be charged against those profits, because directly after the war is over, the company must compete against others’ established with machinery on a pre-war basis of cost.

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

– With machinery which may not have cost half as much.

Senator BAKHAP:

– Exactly . There is much soundness in Senator Earle’s contention as to the desirability of establishing new industries. What about the eloquence with which some members of Par- liament, and the persistency with which all candidates at the last election, alluded to the necessity for developing Australian industries during the war period? I venture to say that candidates generally, irrespective of party, made allusion to that necessary phase of our national activities. Despite the strictures of Senator Gardiner, I say that no more rational thing could be attempted by the Parliament of a country like this than the establishment of new industries, if war conditions will permit of it.

Senator Gardiner:

– I say “ Hear, hear “ to that. ,

Senator BAKHAP:

– And what greater deterrent £o their establishment could there be than the element of indefiniteness in regard to the cost of plant? After the initial steps have been taken in the establishment of an industry, the necessary plant may cost, before the enterprise is consolidated, 300 per cent, or 400 per cent, more than it would have cost during the pre-war period. Is that increased cost not to be considered? Is it not sane to anticipate that those managing such an industry will write off from its profits that increased cost of machinery? It is a very sound proposal on the part of Senator Earle to ask the Committee ito consent to the setting of the increased cost of plant attributable to war conditions against profits made during the war. Having regard to all the features of the situation, it gives me much pleasure to support! Senator Earle’s very rational amendment.

Senator GRANT:
New South Wales

– I sympathize with the amendment of Senator Earle except as regards the proviso. I think he is on illogical ground when he refuses to let the provision operate at an increase of 7 or 8 per cent.

Senator Earle:

– I am not very keen on the proviso. I thought ‘that the new sub-clause might be more acceptable with the proviso than without it.

Senator GRANT:

– I shall be very glad to support the amendment if the honorable senator will agree to strike out the proviso. I think that with that alteration the amendment would meet his own view better than it does at present.

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

.-^1 think that the proposed new sub-clause will, to some extent, meet the ease which Senator Senior endeavoured to meet last week; but, unfortunately, he was defeated. Every Australian has been looking forward to the establishment of new industries of every kind as a result of the war. If anything is done to hinder or interfere with that purpose we shall do something which Australia will have good cause to regret. I fail to understand why Senator Earle included the proviso in his. amendment.

Senator Earle:

– My natural modesty.

SenatorNEWLAND. - I should recommend the honorable senator to put his modesty on one side and attempt to do what he wishes to do without offering an apology in this way. There is no justification for providing that no relief shall be granted to a man who establishes a new industry or imports new machinery unless the extra cost of the machinery is 10 per cent. There is as much virtue in 2’ per cent, as there is in 10 per cent. 1 believe that all the new machinery imported into Australia during the war, and for a considerable time afterwards, will cost at least 10 per cent. more than it did in pre-war times. The proviso to this amendment might interfere with a manufacturer. It might, for instance, restrain a man who was intending to import machinery. Suppose that a man is thinking of starting a new industry, or, perhaps, a new branch of an existing industry. If he is unable to finance the scheme he must lay his proposal before his bank, or some other financial institution, and state how much money he needs, for what purpose it is wanted, and what his profits are likely to be. The institution would agree to assist the manufacturer if he could show that he would make certain profits and could contribute a certain percentage of the profits every year for amortization or depreciation or renewal of plant. Unless he could show the banker a fair prospect of getting the money back he would not be likely to get the advance he desired. Last week Senator Senior instanced an Adelaide manufacturer who is importing a machine at a cost of £20,000. It would be useless for any purpose except the one for which it is being imported.

Senator GUY:
TASMANIA · ALP

– Is it being imported to establish a new industry ?

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

– It is being imported to establish the industry of motor car body-building. The manufacturer expects to turn out 5,000 motor bodies a year, and, with the importation of another machine, he could more than double the output. At the present time there are practically no motor bodies made in Australia.

Senator Millen:

– What?

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

– I mean that at the present time there is not such a factory here as Ford’s Motor Factory, in America.

Senator Millen:

– I venture to say that more Australian than imported bodies are being put on new cars to-day.

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

– That position has been brought about by the war. This manufacturer in Adelaide is importing a machine to establish a new industry, which will employ a large number of men.

Senator Bakhap:

– Have you any knowledge of the pre-war price of that machine ?

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

– No.

Senator Bakhap:

– I venture to say that it was probably less than half of the present price.

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

– Possibly. I ask Senator Earle to consent to the omission of the proviso, so as to make the subclause more acceptable to the Committee and to the men who are going to engage in new industries. It would be unfortunate if the Senate were to pass any legislation which would hamper any person who desired to establish a new industry during war time, because when the war is over industries in England, America, and elsewhere will turn their plant from the manufacture of munitions of war to the manufacture of various articles required in Australia. I hope that the Minister (Senator Millen) will agree to the amendment, but if he disagrees, I trust that the mover will insist upon going to a vote.

Senator GUY:
Tasmania

.- All taxes are objectionable. The proprietors of old industries may desire to introduce new plant to make their businesses more efficient, and be prepared to spend ever so much more money than a man who wished to establish a new industry. It is proposed to tax one man and to allow the other to come under this provision. Take, for instance, the boot industry. There is machinery which will save labour almost infinitely, and new machines are being constructed almost every year. In fact, it is the same with nearly every industry. According to the terms of this amendment, an industry which is already established, although it might want to increase its effectiveness by installing new machinery, would not get the benefit of the provision, but a new industry would.

Senator Millen:

– The Bill gives a new business a pre-war standard. -

Senator GUY:

– In my opinion, it is accessary to strike out the word “new” if we wish to make the provision effective, otherwise we shall create an. invidious distinction between a business already established and a new business.

Senator EARLE:
Tasmania

.- E must confess that I did not submit this amendment with the object of making any great display of mercy to the taxpayers. My first object is to promote the interests of Australia, and that, of course, depends upon the establishment of new businesses. There may be instances in which an old business would suffer. The expressions used- by Senator Guy concerning old industries’ might be applied to any other taxpayers. We want to induce persons to manufacture those things which hitherto we have imported. I brought forward this proposal to achieve that object, and not to relieve any person from taxation. In deference to the criticism of honorable senators, I ask permission to amend my amendment by deleting the proviso. I realize on maturer consideration that,after all, very few industries would be affected by such a provision. We all know that the cases will be very rare where the machinery does not cost 10 per cent, more than the pre-war standard, and perhaps, , after all, the benefit is more imaginary than real.

Senator Bakhap:

– There is no machinery that has not appreciated more than 20 or 30 per cent, since the war. .

Senator EARLE:

– I think that the honorable senator is quite right.

The CHAIRMAN (Senator Shannon:

– The honorable senator may move to strike out the proviso.

Senator Millen:

– Or ask leave!

The CHAIRMAN:

– He may move to amend the amendment. I rule to that effect.

Senator EARLE:

– I move, then -

That the proviso to the amendment be left out.

Amendment o’f the amendment agreed

Senator FAIRBAIRN:
Victoria

– I am sure all honorable, senators sympathize with Senator Earle in the object he has in view; but we must remember that his amendment strikes at the root of the Bill. At the last election, all members of the National- party were pledged x up to the hilt to support a war-time profits tax. I know I was. I made that announcement on every platform from which I spoke, and no statement was received with ‘greater applause. It is surprising, however, that nobody said a word about this matter until the Bill was about half-way through. I feel compelled, therefore, much as I dislike the measure, to support it, because if Senator Earle’s amendment is carried, it will open the flood-gates for similar amendments, and strike at the roots of the Bill. My view is that new industries will get a 10 per cent, exemption, and if at the end of the war it is found that any are in a precarious position, I am sure that, after the expression of opinion we have had from both sides of the Senate, the manufacturers concerned will get ample protection through the Tariff, for surely there is not now one single Free Trader in the Senate.

Senator Reid:

– Except Senator Grant.

Senator FAIRBAIRN:

– Yes, and possibly that honorable senator has his own way of settling these matters.

Senator Grant:

– It is a very simple way, too.

Senator FAIRBAIRN:

– I feel sure that those people who desire to start new industries in Australia may rely upon getting ample protection by the revision of the Tariff, which cannot now be long delayed. If during the war they get 10 per cent, exemption, and if after the war have sufficient Tariff protection to enable them to make 40 or 50’ per cent. , they will be doing very well.

Senator GARDINER:
New South Wales

– I want to understand exactly what is meant with regard to new industries, because I am not sure if the amendment means a business similar to another industry being already carried on or an entirely new industry. Senator Guy seems to think that the word “ new “ should be eliminated from the amendment, but Senator Earle contends that to be unnecessary.

Senator Millen:

– In the former case mentioned, it would be merely a new business, and not a new industry.

Senator GARDINER:

– I want to be perfectly clear upon the point whether a new industry means what the amendment states - a new industry, and not a new business similar to others carried on in any other part of Australia.

Senator Earle:

– It means a new industry.

Senator GARDINER:

– That being the case, the objection I have to the clause is removed, to some extent; because, in my opinion, it would be unfair if an old business paid no excess war-time profits tax, whilst a new and a competing business would be called upon to pay. As the Government will probably require my vote, I thought it would be wise for me to make a definite statement as to where I stand.

Senator SENIOR:
South Australia

– I am pleased that Senator Earle has moved this amendment, and I wish to intimate that it will have my support, although I unsuccessfully tried to capture his vote for my amendment on Friday last. Senator Gardiner has shown the need there was for the amendment concerning the definition of a “ new industry “ upon which I took a division in the Committee. Senator Millen has said that he saw no reason why a new industry, equally with an old industry, should not pay income tax; but if he will consider for a moment he will realize that a new industry has no prewar standard, and is thus unfairly placed, compared with an old industry, all its profits being subject to increased taxation.

Senator Millen:

– There will be a 10 per cent, exemption as the pre-war standard.

Senator SENIOR:

-. - But a business already in existence may have made profits larger’ than ‘ 10 per cent, prior to the war, and during the war period those profits must largely have increased before it would come under the operation of this measure, so that the new business would have a much heavier load to carry, and provision should be made to allow for writing off the increased cost of machinery owing to war conditions.

Senator Foll:

– If a business could show 10 per cent, on the present high expenditure, it should be able to show a much higher profit during the boom period that will follow the war.

Senator SENIOR:

– The honorable senator is reasoning without knowledge, because there will be no boom period after the war, for the reason that protection afforded to a business during war time will then have been removed.

I am pleased to think that honorable senators are beginning to realize that new industries are really necessary for the development of Australia. I disagree with Senator Fairbairn’s contention that this amendment will strike at the roots of the Bill. At present there is no encouragement to establish new industries, but if, in the initial stages of new industries they are treated as enterprises not able to bear the burden of old industries, they will be encouraged much to the advantage of the Commonwealth as a whole.

Senator Plain:

– Can the honorable senator name a few of the new industries ?

Senator SENIOR:

– I named several on Friday last, and I may mention the difficulty at present experienced in obtaining potash salts for farm use. Prior to the war we imported this article from Germany, but the source of supply is now cut off, nor do we desire it to be available to us. Then there is difficulty in obtaining sulphuric acid for the treatment of ordinary phosphates. If such an industry could be established it would be a very important one.

Senator Crawford:

– Has not sulphuric acid been produced at Broken Hill for a number of years?

Senator SENIOR:

– Yes, but the price charged is prohibitive for our low-grade phosphates. At present imported phosphates are being treated, but if we could lessen the cost of sulphuric acid we would then be able to use our own phosphates. Quite a number of other new industries could be established if the proper encouragement were given; but if we say that directly a business commences to show a profit it shall be treated on the same dead-level as any other business that may have been in existence for ten or twenty years, we shall certainly be discouraging enterprise in Australia.

Senator PRATTEN:
New South Wales

– I do not wish to flog this question of new businesses. The matter was before the Committee in an amendment moved last Friday by Senator Senior. Most honorable senators know that many new businesses have been established in Australia as a result of the war, and I should like to direct the attention of the Committee to a few in addition to the list given last Friday by Senator Senior. Amongst those established since’ the beginning of the war are the making of feather-down, go-cart wheels, cheap kinds of knives, forks, and spoons, bone shields, bobbins for woollen mills, slag wool, many different sorts of chemicals and patent medicines, metal seal to.pg for bottles, some of the better class of glass tumblers and fine glass work, axles and springs, motor car bodies-

Senator Millen:

– Would the honorable senator call that a new industry ?

Senator PRATTEN:

– Yes.

Senator Millen:

– There are bodybuilding factories all over his constituency.

Senator PRATTEN:

– They have been established since the war began, and a motor car has been built in Australia (since the war began, and ran from Sydney to Melbourne the other day.

Senator Millen:

– There were six built before the war began, to my knowledge.

Senator PRATTEN:

– Further new industries have been established since the war began inthe production of roofing tiles (durasbestos) , rabbit traps, safety pins, and wood matches.

Senator Needham:

– But they do not strike !

Senator Millen:

– Then the industry should be encouraged !

Senator PRATTEN:

– Wire drawing has been established, and adjustable pulleys and bag mounts are being made here. There have been many important developments in the direction of making woollen and woollen and cotton mixtures of underclothing; in fact, one may now dress one’s self, and live on all Australian products without having recourse to any importations whatever. I appeal to the VicePresident of the Executive Council (Senator Millen) to give us a bonus for these industrial war babies. I do-not care how he does it, or where, or when, whether by Senator Earle’s amendment or otherwise, but before the Bill is through Committee, I will ask him to consider seriously the necessity to put the war babies, so far as the industrial arena is concerned, upon a better basis than any other. I have read a list of some of the industries that have been started, and there is plenty of room for further development. All sorts of schemes are in the air. There is not only the making of our own copper, zinc, and lead utensils, but there are many other activities going on. It only wants the Government to carry out the public policy they announced at the elections to stimulate Australian industries, to give us a help in a direction that I hope will be a very big sheet anchor and safeguard for our financial future.

I also ask the Government to take into consideration . the question of the depreciation of machinery. That matter is dealt with in a previous clause, and the whole of the Bill outside of these provisions is going to be dealt with on the basis of the present income tax administration. One of the detriments to new industries will be the question of depreciation. Machinery now costs, as Senator Earle pointed out, from 20 per cent, to 100 per cent. more than in pre-war days, and if the Bill is administered on an income tax basis, an enterprising manufacturer who has created an industrial war baby will be able to deduct only 5 per cent. depreciation per year on that machinery. I should like an assurance that these youthful struggling industries will be treated in a special way, and nob penalized because enterprising and progressive men have dared to start them in Australia owing to the depressing circumstances of the day.

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– I admire Senator Pratten’s eloquence, which reached a pitch ait which it nearly brought tears to the eyes of men like myself. When I listen to the story of these poor, unsophisticated manufacturers, I am forming quite a new conception of the tlype. I always regarded them as hard-headed, shrewd men, ‘ but, apparently, they are a lot of financial innocents’, rambling round not knowing exactly where they are, and plunging their money in anywhere without inquiry.

Senator Pratten:

– They are patriots trying to root out German goods.

Senator MILLEN:

– Yes ; patriots with a strong “ £ s. d.” side. Senator Bakhap mentioned a man going into an industry which in normal times would mean an expenditure of £50,000 for plant and machinery, but which because of abnormal war conditions is going to cost him £75,000. That is very probable, but I cannot conceive of a man who had sense enough to acquire £50,000 buying £75,000 worth of machinery with it unless he could see that it was going to return him, not only the 50 per cent, increased cost of his plant, but at least 50 per cent, more in the products of that plant.

Senator Bakhap:

– Quite so, if you let him deduct the increased cost of his machinery.

Senator MILLEN:

– No ; he did it without that, because Senator Earle’s amendment was not before the country when he purchased the machinery.

Senator Bakhap:

– Nor was the Bill.

Senator MILLEN:

– The Bill was, because it was announced two years ago.

Senator Pratten:

– And denounced.

Senator MILLEN:

– Not denounced by Senator Pratten.

Senator Pratten:

– By the manufacturers of Australia, and I was one of them.

Senator MILLEN:

Senator Pratten stood on this party’s platform. I do not want to remind him of the old American saying about platforms being good to get in on but not to stand on. The honorable senator also said, quite rightly, that much of the increased cost of plant was due to the factor of freight, and that freight was an uncertain quantity, the only element of certainty about it being that it has been going up all the time. He said that, therefore, a person about to start a new industry would, in ordering his plant, know that the freight might be a little higher by the time his goods were shipped on the other side. But he would also know that the higher freights went the higher would be the price that he would get for the article that his machinery turned out here, because he was making an article which it would cost more to ‘bring out here. This business man, as I still conceive him to be, in spite of Senator Pratten’s attempt to describe him otherwise - this hard-headed, shrewd business man - would know when he paid the extra price for his machinery that he would be able to recoup himself by getting a more than correspondingly big increase in the price of the thing which his machinery would make. A good deal of this sympathy is altogether ill-bestowed. Senator Guy raised the very pertinent point that there is as much sympathy due to the man engaged in a business of a certain magnitude who decides to extend it as there is to the man who goes into a new industry altogether. But not a word is said here, for him, except by Senator Guy, although he is equally enterprising and equally advantageous to this country. Apparently, we are to leave him to look after himself.

Senator Pratten:

– He does not take the same risk as a man establishing a new business.

Senator MILLEN:

– I have dealt with the risks taken by the man going in for a new business. Another point is : “ What is a new industry ? “ Senator Newland and Senator Pratten are hopelessly at variance with me in the interpretation we place on the term. Senator Newland quoted certain people who were starting motor-body building in Adelaide. That is not a new industry, and therefore would not be relieved by the amendment. There are quite a number of places in this city where motor bodies are being made.

Senator Pratten:

– Only recently established.

Senator MILLEN:

– They have been doing it for years. I owned an Australianbuilt body five years ago. There are as many Ford chassis running in this city with Australian bodies as with imported ones. The same applies to all cities of any size, and many big country towns. Therefore, while a new business may start in Adelaide, it is not a new industry. The honorable senator mentioned the man tempted to start by the high price that he can command for the product of his industry. People like that went in knowing that, although they would pay more for their plant, they would be more than compensated bv the increased price of the article they turned oUt. In the circumstances, I cannot see that any special case can be made out for them as against any other man who puts additional capital into any other business.

Senator KEATING:
Tasmania

– I fail to follow the Minister in assuming that the reasons he has given justify him in taking up an attitude of hostility to the amendment. Indeed, he should have encouraged the submission and passage of the amendment and other provisions similar to it which would stimulate Australian enterprises in various directions. He quoted the case given by Senator Bakhap of a man embarking in a new industry paying £75,000 for machinery which in normal times would have cost him £50,000, and said that that man knew he would be more than compensated by the increased profits he would make under the same abnormal conditions as increased the price of his machinery. But that is an isolated case. There are numbers of industries awaiting establishment in Australia, and now is the time to establish them ; but so long as we handicap new industries in the way we are doing in this Bill, especially in comparison with oldestablished industries, we can expect the establishment of only a tithe, or one-hundredth of those which would come into existence under present conditions. I was somewhat surprised at Senator Fairbairn ‘s reasoning towards the close of his remarks. He said that if a new industry, such as Senator Earle’s amendment contemplates, has to pay a much increased price for its machinery, at the end of the war period, when conditions are becoming normal again, we shall, by .the imposition of a Protective Tariff, secure to that industry a market somewhat comparable with the market which it had during the boom conditions of the war. What is the position? We are handicapping every Australian industry, and we are promoting the exploitation of our market by outsiders.

I propose to give one or two instances of the way in which outsiders realize that we are committing industrial suicide for their benefit. I hold in my hand a circular which has been sent out to numerous business people in Australia since the war began. It comes from Japan, and is addressed to a firm in this city. It reads -

Tokyo, Japan, Sept. 20th, 1915.

Dear Sirs,

Having learned your esteemed name as one of the large importers of the Japanese merchandise, we take the liberty of introducing ourselves as the exporters of them.

Demands for the Japanese merchandises in your market have considerably been increasing of late. This increase is principally due to the decrease of importation . from the United Kingdom and the Continent as a consequent of the. present war, and no doubt friendly feelings shown by the Japanese to your Mother country in this war have caused, to put us in closer relations than before, and assist greatly the furtherance of the trade between Australia and Japan.

Then this firm, patting itself on the back, proceeds -

To our great regret, much complaint have recently been heard about the Japanese goods shipped by unexperienced merchants in foreign trade, or by dishonesty business men. It is our earnest wishes to remove these evil practices.

In recent years the industry has made a great progress, so even after the revival of peace, the market which have at present been occupied by the Japanese goods by the reasons as above stated, will be able to be maintained for ever, should the goods of first quality be sent, on the firm foundation.

We are, therefore, anxious to enter into business relations with such a reliable firm as your good selves by availing of this opportunity. We have so far exported general merchandise ,to England, America, and the South Sea Islands, and this is the first time to try your market; but our long experience in foreign trade will, we feel sure, be able to give you full satisfaction in executing any orders intrusted to our care.

To-day the following goods are largely been exported to your market: - Safety matches, toys, glass wares, cotton crape, hosiery goods; leather suit-case and bags, alarm ‘ clocks, silk goods, stationery goods, aluminium and enammelled wares, &c. If you can see your way to defray the sum of £20. to £30 for samples, we shall be pleased to send you full assortment of samples of these goods. Besides them, if there are any to which you are specially interested, kindly mention them to us, so that we may forward their samples at the same time.

As our commission, we request you to have 10 per cent, on the amounts of goods to be bought through our hands. We trust that this rate will not be high, in consideration of such expenses as freight, shipping, and packing to bc defrayed by us on your good selves.

As to terms, we allow you sixty days’ sight when favoured with letter of credit along with your order sheet. If not agreeable to issue letter of credit, we will settle the accounts by drawing thirty days’ sight documentary drafts. (D.P.)

Trusting to have your favorable reply in duc course, and hoping that this will induce us to the continued and profitable business relations in future.

That is the attitude taken up by Japan in regard to its relations with Australia after peace has been restored. . She does not contemplate that we will maintain a Protective Tariff with a view to fostering new1 industries, and preserving for ever industries that have been established in our midst during the abnormal conditions .of the war period. On the contrary, she says that she will send us goods of first quality which will be able to secure a market here for ever. Senator Plain asked, by way of interjection, a little while ago, what new industries have been’ established here. The circular which I have read, shows the particular goods which are being largely exported to the Australian market. I have another circular that has gone the rounds of a number of merchants in the various cities of Australia, which confirms the position taken up by the previous writer as to the excellent opportunity which Australia now has of allowing Japan to supply her with goods hitherto supplied by America, Germany and Great Britain, and laying a firm foundation for continued trade of that kind in the future - a foundation so firm indeed that, after the war, Australian enterprise will be stifled. This circular reads -

Yokohama, Japan.

Gentlemen,

Your esteemed firm has been recommend to me by the Government officials.

I presume he refers to the Government officials of Japan -

Being one of the largest and strongest exporters in this place, I am repeatedly requested by them, and also by the banks, to write you direct, to see what I can do for you.

Europe is pretty busy with the war, but we arc living so far away from seat of war that we feel rather ennuie leaving too much to surplus energy. Our manufacturing and business world are making rapid strides, and this is the best chance for you to make a start with your specialities with Japanese articles.

This firm does not indicate particular lines of goods which it is willing to supply, birt practically says, “ Give us your orders for anything and we will fix you up.” The circular continues -

Exchange and freight market are in rather unsettled conditions at present, and to avoid too many unnecessary articles I hope that you will kindly give me specific varieties, qualities, sizes, and quantities you are mostly interested, sending me small samples if possible. Exportable merchandise are making rapid changes lately, principally substituting German and Austrian goods, and new articles are daily added, making too wide to take them up all at once. Under these conditions I hope you would first send your type samples most urgently wanted. I will send you larger samples, together with full range of smaller samples, the lowest prices, and particulars.

In such a season of short supplies and inconveniences, you may be able to find some good articles of sure demand, and for which you can give me trial orders outright,’ with limit in prices or conditions. I will spare no effort to give you better satisfaction than any one else. For the first order I will draw on you at sixty days after sight.- (D.P.)

Regarding to my responsibility, you may inquire through usual channels, and you will surely bc satisfied. My business is well and most efficiently managed) and most economically equipped, and df you wish to enter into a long and pleasant business relation with Japan you must connect with me. If so, it is necessary for you to write me immediately ‘ with full particulars.

Please write all letters to me in English language only.

I have read only two of a number of circulars of a similar character which I could produce, and which serve to show that close outside our borders we have an enterprising industrial competitor which sees that there is a market here that is not being supplied as hitherto by the Allied Powers or by the other belligerents. These neighbours seem to think that we are not going to take occasion by the hand. Even in the absence of this Bill, they would be endeavouring to wrest from us our own market for our own productions. If that be the case in the green leaf, what must it be. in the dry ? We are undoubtedly imposing heavy handicaps upon new industries, and I do hope that the VicePresident of the Executive Council (Senator Millen) will yet see his way to accept this small measure of justice to enterprises which have not yet come into existence, but which will do so, and which, in the absence of the amendment, will be heavily penalized under this Bill. I would go further than Senator Earle, and would in every way possible stimulate new activities on the lines I have indicated.

Senator NEEDHAM:
Western Australia

– I cannot support the amendment, and I am somewhat surprised at the statements which have been made by Senator Keating. I remember him as Minister for Home Affairs in a Government which was pledged to Protection. Now, no matter how we may attempt to disguise the fact, if we attempt to protect new industries we must necessarily raise the question of protecting other industries. I suggest that we should increase the protective incidence of our Tariff in the direction indicated by Senator Bakhap, but that we should discuss Protection and . the fostering of new industries under a proposed amendment of the Tariff rather than under a War Profits Bill.

Senator Bakhap:

– This is not a War Profits Bill.

Senator NEEDHAM:

– Well, a Wartime Profits Bill. Senator Keating has told the Committee something about a very near industrial competitor: He has quoted circulars that have been sent out from Japan to business men here. But the honorable senator, when he was a Minister in a Protectionist Cabinet, knew very well that we then had within a few days’ sail of this island continent this same industrial competitor. Yet he was a Minister in that Cabinet which-

Senator Keating:

– Brought in a Tariff.

Senator NEEDHAM:

– A Tariff, I admit, was introduced. But its protective incidence was such that it permitted that industrial competitor so near our shores bo compete successfully with us. She is competing effectively with us to-day.

Senator Senior:

– But there was no war then.

Senator NEEDHAM:

– After the war we may have a flood, after the flood we may have a bushfire, and after the bushfire we may have a drought. Honorable senators opposite always want action to be postponed till after something has hap- pened. In listening to Senator Keating began to think that his remarks were something in the nature of a prostitution of his fiscal faith. To my mind, there is no name which will adequately describe the dastard measure which’ we are now considering. I was very much interested in Senator Keating’s remarks. I listened carefully also to Senator Earle, who desires to protect and foster new industries, and to Senator Senior, who spoke on the same subject last week. I have only to say in reply that this is not the Bill or the time in which to protect new industries. Senator Bakhap has referred to the Win-the-War Government, and I remind him that everything is in their hands. What we have to consider is whether there are new industries in Australia, or will new industries be established here.

Senator Bakhap:

– I hope, so, if they are not strangled at their birth.

Senator NEEDHAM:

– Then the point I wish to make is that we should give a greater protective incidence to our Tariff. If Senators Bakhap, Earle, and others supporting the present Win-the-War Government think that there are new industries in Australia which are not receiving justice, and which are in danger of being strangled at their birth, they should use their influence to induce the Government they are supporting to bring down an amendment of the Tariff. There is any amount of time to provide by an amendment of the Tariff all the Protection that is necessary for the fostering and development of new industries. I am prepared by voice and vote to give all the support I can to the fostering and development of new industries, but I cannot, and will not, do it under this Bill. The responsibility is upon Senators Keating, Bakhap, Earle, and Pratten, who are supporting the Government, to see that an amendment of the Tariff is proposed. If they can persuade the Government to introduce an amendment of the Tariff increasing its protective incidence, they will have my support in every division. This is” not the time, and £. War-time Profits Bill is not the Bill, in which to- give this protection. If we supported all the amendments proposed in connexion with this measure there would be nothing of the Bill left but the paper it is written on, and even the miserable £500,000 revenue which the Treasurer expects to receive from the first year of its operation would disappear as if by magic, and we should have no revenue at all from a war-time profits tax.

Senator BAKHAP:
Tasmania

– I shall not enter into a discussion of the desirability or otherwise of introducing Tariff legislation, but I tell Senator Needham that we might have an absolutely prohibitive Tariff, and, with the existence of a measure like this we should still see no new industries established in Australia. I remarked on Friday that I could not conceive of the Japanese Government being so witless as to introduce a measure of this kind, notwithstanding the fact that Japan is a belligerent, and has incurred extensive war expenditure which it must meet, in addition to a heavy war debt consequent upon a previous struggle. Some Japanese enterprises have returned dividends of 175 per cent, during the war period. I am aware that in Japan there i3 a pretty heavy income tax, but I should like to remind the Committee that the very enterprises which in that country are earning 175 per cent.- are subsidized by the Japanese Government.

Senator Millen:

– Is tha honorable senator holding this out as an example or as a warning to us ?

Senator BAKHAP:

– I submit it as an illustration to elucidate the argument traversed by Senator Millen. Interjections have’ been made in respect to the new industries established, or likely to be established, since the war began. Senator Pratten has been fairly particular in his statement of new industries, Senator Newland contributed to the list, and Senator Senior mentioned that he is aware of several new industries which it is desirable to establish. The other day I was in a very extensive warehouse, where practically all the samples exhibited were of Japanese manufactured goods, and manufactured in such a way, I am bound to admit that they were scarcely distinguishable from goods of the same class which we have hitherto imported from other countries, or have to some extent manufactured ourselves. Surely in this continent we have ample deposits of clay which would enable us to manufacture porcelain or crockery. I have in my possession, made out of Tasmanian clay, several cups and saucers manufactured in one of the pottery counties of the Old Country. Samples of clay from the east coast of Tasmania were sent to Staffordshire, and there made into ‘ cups <and saucers still in the .possession of my wife and daughters. We are importing crockery at the present time from Japanese factories subsidized by the Japanese Government. More power to the Japanese people if they have the wit to seize the opportunities which the war is presenting to them.

Senator Needham:

– Let us put up a Tariff wall against them.

Senator BAKHAP:

– I have told the honorable senator that, with the existence of a measure like this, even a prohibitive Tariff would not avail him anything. Senator Millen has made some reference to an illustration I gave. I suggested the case of a company which would, in prewar times, have had to expend £50,000 upon a plant, but which, owing ito the establishment of its enterprise during the war period’, incurred an additional expenditure for plant of £25,000, making a cash outlay of £75,000. In order to show that I desire to give plenty of margin for profit earning in an enterprise of this kind, I suggested, for the sake of the illustration, that it earned £50,000 in one year on a capital of £75,000. I do not venture to say that there is any industry of the kind in Australia at the present time earning such a profit. There are industries which have been established in Australia since the war broke out, but which are not yet in active production. They are building up their plant and endeavouring. to put their line of production on the actual output level, but have not yet earned profits,

Senator Reid:

– Then they will have nothing to pay under this Bill.

Senator BAKHAP:

– That is so; but is the war going to end to-morrow? Does the honorable senator not see that such a company as I have suggested may be) faced with this position: It may earn profits only in one year of the war period, and if it should earn £50,000 in that year it will have an allowance of 10 per cent, on the cash capital expenditure of £75,000, or £7,500, and of the £42,500 profits remaining, the company would Joe allowed £10,635, making a total allowance to the company of £18,135, whilst the Government would take through taxation, under this Bill, £31,835. The increased cost of plant due to war conditions at the time of its purchase which .the company would have to write off would be £25,000, and against that amount the company would receive in one year of the war period £18,135. leaving a net loss of £6,875, and then, if the war came to an end, it would, with its costly machinery, have to compete against enterprises which would have the benefit of the conditions which would inevitably follow the declaration of peace, and the additional advantage of having purchased their machinery in a pre-war period. lb is easy to see that the company I have suggested would, in com.petition with these enterprises, be placed at’ a material disadvantage. Yet Senator Millen has challenged the pertinence of mv illustration. Very early in the war period I saw, in Martin-place. Sydney, an exhibition of dye stuffs. Honorable senators know the difficulty there was in securing a proper khaki dye.- An enterprising chemist in Sydney got together samples of brown dye stuffs approximating to khak which he had extracted from the barks of Australian trees, from grasses, and so forth.

Senator Needham:

– This Bill is a splendid example of dye stuff.

Senator BAKHAP:

– I wish it would die a natural death, because it is one of the most pernicious measures it has been my lot to peruse in either the Tasmanian or Federal Parliament’s. I hope that the Committee will recognise the dangerous path which we as legislators of a young nation are treading. We have quite wrongly assumed that a similar condition of things exists here as in the manufacturing companies of the Old World or the United States of America. Industries in those countries are well established. I venture to say that the War-time Excess Profits Act on the Imperial statute-book is affecting only long-established industries, such as the shipping and banking industries and industries whose machinery and plant it has been necessary only to adapt for the manufacture of munitions of war.

Senator Needham:

– Is the honorable senator sure of that?

Senator BAKHAP:

– I say that, with very few exceptions, that is the rule in the United Kingdom. When old-established industries have been earning profits 400 and 500 per cent, above normal profits we can well understand the application of war profits taxation to them.

Senator Needham:

– The honorable senator will find that he is wrong as to the operation of a similar measure in the Old Country.

Senator BAKHAP:

– I say that the operation of the measure similar to this in the Old Country obtains the larger portion of the revenue derived by the Treasury from the taxation of the profits of old-established industries. In this new country we should observe the principle of not allowing any taxation measure to operate in its incidence in deathly fashion on industries which have just been established, or which we hope to see established. I think that we, as one of the units of the King’s overseas Dominions, are going in the opposite direction to that favoured by one of our Allies in the present war.

Senator GARDINER:
New South Wales

– I have been confused by th6 arguments of different speakers on this proposal. It was particularly difficult for me to follow Senator Needham. He wants a very high duty. But of what use will a high duty be if 50 per cent, of the profits of a business are to be taken in the first year, and 75 per cent, in the second year ? How high must the duty be which would enable these industries to prosper? The idea of improving industries by a duty means the improvement of some industries at the cost of others. Nearly all the industries which have been improved bv the Tariff have found their raw materials taxed by another growing industry to such an extent that they would have been better placed without the duty. Then we have the great competitor to which Senator Keating, referred. He suggested that we should start to develop new industries to supply this great competitor with raw material. If we did, I venture to say that we should be going the right way to work to establish new industries. The difficulty I felt when Senator Earle proposed the insertion of this new sub-clause was to discover what industries would be affected by its enactment. The onus is now upon the honorable senator to give us ah idea as to whether there are some industries which- it is specially designed to assist; protect, and benefit, br whether he has a vague notion that there may be such industries, and desires to be on the safe side. .

Question - That the proposed new subclause, as amended, ‘be agreed to (Senator

Earle’s amendment) - put. The1 Committee divided.

Ayes … . . . . 10

Noes . . .’ . . . 16

Majority . . . . 6

Question so resolved in the negative.

Proposed new sub-clause negatived.

Senator PRATTEN:
New South Wales

– I have an amendment to substitute “ lesser “ for “ greater “ in sub-clause 3.

Senator Millen:

-. - We have passed that part of the clause.

Senator PRATTEN:

– We are ‘still on the clause, I take it. L

The CHAIRMAN (Senator Shannon:

– The Committee has dealt with an amendment in a later part of the clause. -

Senator PRATTEN:

– Do you, sir, rule that I cannot move the amendment?

The CHAIRMAN:

– Not at the present juncture.

Senator PRATTEN:

– Sub-clause ft has not been before the Committee yet.

The CHAIRMAN:

– The Committee has just rejected a proposal to insert a new sub-clause after sub-clause 6.

Senator PRATTEN:

– I propose to omit from sub-clause 6 the words “ which was so employed for the first time.”

The CHAIRMAN:

– The honorable senator will not be in order at this juncture in moving that amendment.

Senator PRATTEN:

– The Committee has had notice of these amendments.

The CHAIRMAN:

– The honorable senator was in his place, and I took it that he was not going to move the amendments to sub-clause 6.

Senator Bakhap:

– This trouble arises from the clause being much too long.

The CHAIRMAN:

– Order!

Senator PRATTEN:

– Some of these clauses consist of from 50 to 60 lines of print. There are very many questions which crop up in connexion with a clause. If you, sir, rule me out of order, I, of course, must submit, but this is a very important question which I desire to raise.

Senator Millen:

– I will show the honorable senator later how to get to it.

Clause, as amended, agreed to.

Clause 13-

  1. A taxpayer who is dissatisfied with the decision of the Commissioner under this section may require the Commissioner to refer his case to the Board of Referees constituted under this Act, and . the Commissioner shall refer the case accordingly.
Senator PRATTEN:
New South Wales

– I propose to substitute “ a “ for “ the “ in the first line of sub-clause 2. This is a consequential amendment.

Senator Needham:

– How can it be consequential when you were not allowed to submit the proposal on which it would have been consequential?

Senator PRATTEN:

– It refers to the question of the Board of Referees. In view of what Senator Millen has said, I am satisfied to let the matter go now.

Senator Needham:

– You had better get a re-committal of the clause.

Senator PRATTEN:

– I understood that at an earlier hour Senator Millen announced definitely that the Government would insert in the Billa provision for the appointment of Boards of Referees. I take it that when the Bill is reprinted with all the amendments which have been made its verbiage will be altered.

Senator Millen:

– It is not necessary to alter the Bill to give effect to the amendment which I promised to introduce later. Under the Acts Interpretation Act, it makes no difference whether the word used here is “a” or “the.”

Senator PRATTEN:

– All right.

The CHAIRMAN:

– Does the honorable senator wish to move the amendment?

Senator PRATTEN:

– Not after the explanation of the Minister, sir.

Clause agreed to.

Clause 14 -

  1. In the case of any business which by reason of its being unable to pay its debentureholders or creditors is being carried on by a liquidator, receiver, or trustee under the Court, no war-time profits tax shall be levied or paid until provision has been made for the payment of the unpaid debenture-holders or creditors.
Senator PRATTEN:
New South Wales

.- I move-

That the word “ assignee “ be inserted after the word “ receiver.”

At present the clause seems to be unnecessarily narrow. I understand the State law of New South Wales provides for the assignment of estates for the benefit of creditors.

Senator Millen:

– That is the one State which does not.

Senator PRATTEN:

– Then we will say that in five out of the six States the law provides for assignments to creditors. In New South Wales, there are more private assignments for the benefit of creditors than there are persons who go through the Bankruptcy Court in the usual way. The purpose of my amendment is to widen the provisions with regard to these transactions and to make the Bill more in conformity with commercial practice.

Senator Bakhap:

– Would it not be Gilbertian to assume that war-time profits have been earned by a liquidator of a company ?

Senator PRATTEN:

– It would.

Senator Millen:

– But not if you permitted private arrangements to be made.

Senator PRATTEN:

– I submit that I would be labouring the obvious if I said anything further about this matter.

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– The purpose of the amendment is to enable this exemption to be obtained in respect of any arrangement made between debtor and creditor. I am not going to make an imputation against the commercial community, but if we allow a private arrangement over which no one has any control to be made, we shall be opening the door to all sorts of doubtful possibilities. We must consider the revenue, or, at all events, we must not open the door in such a way as to tempt people, by any private arrangement, to defraud the revenue.

Senator PRATTEN:
New South Wales

– The Minister is under an entire misapprehension. My amendment does not concern private arrangements at all. It concerns estates assigned for the benefit of creditors. When a man assigns his estate, the assignee appointed is usually a reputable firm of accountants. This is a well-known method of compromising with creditors, and the object of my amendment is to bring the Bill into conformity with this practice.

Senator FAIRBAIRN:
Victoria

Senator Pratten is quite correct in saying that the assignment of a business to an assignee is not a private arrangement at all, and I think that if he inserted the word “ official “ before the word “ assignee “ his amendment would be more acceptable to the Minister, because I understand an official assignee is responsible to the Court.

Senator Millen:

– A liquidator or a receiver might not be an official.

Senator FAIRBAIRN:

– I do not think that the amendment need trouble the Committee in any way, except that as the Minister has pointed out, it is advisable to prevent any fraud on the revenue, but the practice mentioned by Senator Pratten is one of the ordinary methods of liquidating an estate.

Amendment negatived.

Clause agreed to.

Clause 15 -

  1. Subject to this Act the profits shall be taken to be the actual profits arising in the accounting period from sources within Australia.
  2. Deductions for wear and tear or for any expenditure of it capital nature for renewals, or for the development of the business, or otherwise in respect of the business, shall not be allowed, except such as may be allowed for the purposes of the Commonwealth Income Tax, and, if allowed, shall be only of such amount as appears to the Commissioner to be reasonably and properly attributable to the year or accounting period.
  3. Deductions shall be allowed for -

    1. all losses by fire, accident, robbery or embezzlement which are proved to the satisfaction of the Commissioner to have occurred and to be irrecoverable either directly or by way of insurance ;
    2. alterations (but not additions) to plant, machinery and premises for purposes of the business which have been charged to revenue account; and
    3. all bad debts proved to the satisfaction of the Commissioner to have been written off in the accounting period.
  4. In the ease of a business which uses leasehold property -

    1. upon which the lessee has covenanted with the lessor to expend money on improvements which will revert to the lessor upon the termination of the lease. a deduction shall be allowed of the amount obtained by dividing the sum so paid or to be expended or the value of the consideration so given by the number of years of the unexpired period of the lease at the date the amount was so paid or the consideration so given or in the case of money to be expended within the meaning of paragraph (b) of this subsection, at the date of his entry into possession of the lease.
  5. Any deduction allowed for the remuneration of directors, managers, and persons concerned in ‘the management of the business shall not exceed the sums allowed for those purposes in the last pre-war trade year or a proportionate part thereof as the case requires, unless the Commissioner, owing to any special circumstances or to the fact that the remuneration of any managers or managing directors depends on the profits of the business, otherwise directs :

Provided further that in the case of a business (other than a business in which the prewar standard of profits has been computed under paragraph (b) of sub-section (6) of section sixteen of this Act -

  1. if the business is owned by an individual - a deduction of Three hundred pounds or such greater sum as the Commissioner directs in the case of a business in which the pre-war standard of profits does not exceed Five hundred pounds; or, in the case of a business in which the pre-war standard of profits exceeds Five hundred pounds but is less than One thousand pounds, such sum as represents the difference between One thousand pounds and the pre-war standard of profits, shall be allowed, if the owner devotes the whole of his time to the business;
Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– I move-

That all the words after “ Tax,” in subclause 2, be left out.

This amendment will remove certain matters from the discretion of the Com- . missioner.

Senator NEWLANDS:
SOUTH AUSTRALIA · ALP; NAT from 1917

– What will be its effect?

Senator MILLEN:

– I must apologize if I have not made my purpose clear. A little earlier in the evening, I intimated that, in consequence of a series of amendments moved by Senator Pratten to remove certain matters from the discretion of the Commissioner, I had gone through the Bill with the officials and the Treasurer, and had divided into two classes those clauses containing references to the discretion of the Commissioner. In one class . we placed all those routine matters which the Commissioner might be very well asked to decide, but we resolved that all matters which might seriously affect the interests of the taxpayers should be removed from the discretion of the Commissioner, and if the taxpayer were dissatisfied, he would have legal redress.

Senator PRATTEN:
New South Wales

.- My object was to extend the right of appeal by the taxpayer, not only in clauses 4, 5, and 6, but in clauses 3, 7, and 8 as well, and I would point out to the Leader of the Senate that his amendment takes away that elasticity so necessary with regard to the amount that may be set down as deductions for wear and tear, and makes the clause absolutely rigid along the lines of the present Income Tax administration. I have before drawn the attention of the Committee to the fact that the present Income Tax Commissioner allows only 5 per cent. per annum- for depreciation of, perhaps, intricate machinery, which will wear out in ten years. Under the income tax schedule the Commissioner is debarred from making any allowance for the amortization of leaseholds, or money spent on leases for business purposes. I would mostrespectfully submit to the Minister in charge-

Senator Millen:

– Would you prefer these words kept in the clause?

Senator PRATTEN:

– I would like to see the words “ such amount as appears to the Board of Referees “ inserted. In Part IV. the right is given to a taxpayer to appeal to the Board of Referees if he is dissatisfied at the decision of the Comrnissioner.

Senator Millen:

– Why does the honorable senator say there is no allowance for leaseholds, in view of sub-clause 7 ?

Senator PRATTEN:

– I was talking of returns made under the income tax schedule, and said that no deductions were allowable from the amortization of leaseholds.

Senator Millen:

– Provision is made in sub-clause 7.

Senator PRATTEN:

– Does not this refer to pastoralists’ business?

Senator Millen:

– But a leasehold is a leasehold whatever use it is put to.

Senator PRATTEN:

– Shall I say, then, that the income tax schedule does not allow for deductions in respect of any money spent on leaseholds?

Senator Millen:

– But we are not dealing with the income tax schedule.

Senator PRATTEN:

– This sub-clause refers to the Commonwealth income tax. Personally I do not consider the omission of. the words necessary at all, seeing that in another clause of the Bill the taxpayer has the right of appeal against any decision of the Commissioner to the Board of Referees.I would point out to the Committee that depreciation on the plant and machinery is limited under this proposal, and that will be another handicap on new industries - those war babies that we ought to protect. I would rather that the sub-clause stand as it is, than that it should be contracted within the narrow, rigid lines of Income Tax administration.

Senator Millen:

– The honorable senator has made that statement frequently, but it is not correct in its universal application.

Senator PRATTEN:

– Then for the information of the Committee, I will read what are not allowed as deductions under the income tax schedule:

Additions or alterations to trade or other income-earning premises.

That is to say, ifa man alters his premises in order to do his business more economically or speedily, nothing is to be allowed for that by the Income Tax Commissioner -

Additions to plant and machinery.

That is reasonable.

Senator Millen:

– The honorable senator is wrong. He is allowed 10 per cent. on any additional capital spent in that way- under the pre-war standard.

Senator PRATTEN:

– Why is it printed on this schedule?

Senator Millen:

– That is the income tax schedule.

Senator PRATTEN:

– But sub-clause 2 provides that -

Deductions for wear and tear or for any expenditure of a capital nature for renewals or for the development of the business or otherwise in respect of the business shall not be allowed, except such as may be allowed for the purpose of the Commonwealth income tax.

Those words are very wide. I therefore take up the income tax schedule to find out what sub-clause 2 means, and find that it states specifically that expenses are not allowed as deductions for -

Additions or alterations to trade or other income-earning premises.

Depreciation of buildings, leaseholds, or land and improvements.

Under the income tax schedule, only 5 per cent, is allowed for depreciation of machinery. The manufacturers and merchants of Australia have been up in arms against this for years, but can get no redress. As late as, two months ago representations were made to the Prime Minister (Mr. Hughes) in that ‘regard. Instead of the sub-clause being narrowed I hope it will be widened.

Senator MILLEN:
New South WalesVicePresident of the Executive Council · NAT

– The honorable senator is clearly

Under a misapprehension when he tries to confuse the income tax schedule with the purpose of this Bill. There is no deduction allowed for additions for the purpose of the income tax, which may or may not be desirable; but it certainly ought not to be allowed under a war-time profits tax, because the pre-war standard will be inflated by adding to it 10 per cent, on the capital spent in additions. The taxpayer cannot get it both ways.

Senator Pratten:

– Two wrongs do not make a right. %

Senator MILLEN:

-It is not a case of two wrongs. If ‘ a business man with £10,000 invested in capital spends in the war period £1,000 in additions, Senator Pratten says he ought to take £1,000 off. I say “ certainly not “ ; but what we ought to do to ascertain the proportionate prewar standard is to assume that that £1,000 was invested before the war, and add 10 per cent, to the pre-war standard of his profits. It becomes a simple rule of three to’ ascertain how much profit a man would obtain on a given amount of capital. If he is to have 10 per cent, added to his pre-war standard in respect of money he had not then invested, he cannot also ask . for the deduction of the amount he invested later on. I moved this amendment because Senator Pratten objected to the Commissioner being made an autocrat. I am quite willing to let the clause, stay as it is, if Senator Pratten wishes to leave the Commissioner as an autocrat.

Senator PRATTEN:
New South Wales

– The taxpayer is given the right of appeal under Parts 4, 5, and 6. I was not complaining so much of the Commissioner being an autocrat when the taxpayer has the right of appeal, but I was complaining that the Commissioner might be an autocrat when the taxpayer had no right of appeal. He has no right of appeal in any other part of the ‘ Bill than Parts 4, 5, and 6. As this is the beginning of Part 4, I have no doubt the taxpayer under this clause, if he feels that an injustice is being inflicted upon him by the Commissioner, will exercise his right, particularly if the Board of Referees sits near his place of business. What I said applies also to sub-clause 3, and if the Government will expand subclause 3 I do not think there can be much harm in whatever we do to sub-clause 2.

Senator BAKHAP:
Tasmania

– The clause covers no less than five pages of the Bill. I dare say that the measure has been largely lifted from similar Acts in other Dominions, or from the Imperial Act. Whether that is so or not, a clause covering five pages with practically no marginal notes, in a financial measure is too much of a good thing. Our drafting officers, who I am sure possess ability, could do very much better if they addressed themselves to drafting measures in simpler language, with shorter and less involved clauses, and fuller marginal notes, than if they simply lifted clauses of this description from other Acts. That is all very well for legal men, whose business it is to consider Acts of this kind, and to whom legal phraseology presents no difficulties. I suppose the clause presents elements of clarity to ‘ them, but it does not present them to me. This measure will occupy the attention of the commercial community, and give them the responsibility of doing a great deal in. the way of personal construction of its provisions. Tq have a clause covering five pages is to make confusion worse confounded. I trust that in future, particularly in financial measures, something will be done to secure shorter clauses, ‘ fuller marginal notes, and greater directness and clarity.

Senator PRATTEN:
New South Wales

– The clause . contains 220 lines, and a great deal of extremely important matter. It deals, among other things, with the whole of the mining businesses of Australia. A most important point crops u.n in connexion with the administration of theBill under the income tax regulations. If a firm makes a loss in one year and a profit in another, that loss cannot, under the income tax schedule, be deducted from the profit. If a man lost, £5,000 last year, and made £5,000 this year,he would have to pay income tax on the £5,000 this year, irrespective of the debit to the profit and loss account in the previous year.

Senator Millen:

– I must ask your ruling, sir, as to whether the honorable senator can discuss that question on the amendment before the Committee ?

The CHAIRMAN (Senator Shannon:

– The Ministeris right in claiming that honorable senators should keep as closely as possible to the amendment before the Committee, but the fact that the income tax is referred to in sub-clause 2 gives honorable senators a great deal of latitude in discussing the clause.

Senator PRATTEN:

– The Treasurer (Sir John Forrest) said that the past losses could be recouped from present profits under this Bill. That is not so’ under the Income Tax Act. Will Senator Millen say whether, under this Bill, with a probable currency of three years, a set-off can be made of losses against profits in the aggregate period ? If a man makes a war profit in 1915-16 and in 1917-18 makes a big loss, owing to the slump or aftermath, can he set off that loss against the previous profits?

The CHAIRMAN:

– The honorable senator is getting a little wide of the question now.

Senator Fairbairn:

– That point comes under sub-clause 13.

Senator PRATTEN:

– I intended to bring the matter up under clause 10, but was not quick enough. As the income tax is mentioned in this clause, and the matter is important, I submit that the Committee should have very wide latitude in discussing it. Another question is : Can cumulative losses made during the three pre-war years be deducted before any tax is payable in the three war years ?

Senator Fairbairn:

– Yes, under subclause 13.

Senator PRATTEN:

– But only for pastoralists.

Senator Fairbairn:

– No, for any business.

Senator PRATTEN:

– If the Bill is passed with sub-clause 2 amended as proposed by the Minister, will the Income Tax Commissioner so interpret it that a man making £5,000 excess profits in 1915-16, and losing £5,000 in 1916-17, can set off the loss against the profit, or will the Commissioner levy on the profits of the last year to the extent of 50 per cent., irrespective of any losses made previously.

Senator MILLEN:
Vice-President of the Executive Council · NewSouth. Wales · NAT

– The honorable senator is jumping all about this Bill, and I do not propose to discuss, upon this amendment, questions which should properly be discussed upon other portions of the Bill. The matter to which he referred is properly covered by sub-clause13 of this clause, and that is the place to discuss it.

Amendment agreed to.

Amendment (by Senator Fairbairn) proposed -

That after the word “ fire,” in paragraph a of sub-clause 3, the word “ flood “ be inserted.

Senator Millen:

– I accept the amendment.

Amendment agreed to.

Amendment (by Senator Millen) agreed to -

That the words “ to the satisfaction of the Commissioner “ in paragraph a of sub-clause 3, be left out.

Amendment (by Senator Millen) proposed -

That the words “ to the satisfaction of the Commissioner “ in paragraph c of sub-clause 3, be left out.

Senator Bakhap:

– To whom will these things have to be proved, if not to the Commissioner ?

Senator Millen:

– There will be a board or boards of referees constituted under this measure, and the matters referred to them will be prescribed. Unless they are prescribed, the taxpayer will have his ordinary means of redress through the Law Courts as an alternative to the arbitrary decision of the Commissioner.

Senator PRATTEN:
New. South Wales

– I fail to see why no deductions are allowed under sub-clause 3 except for losses by fire, accident, robbery, embezzlement, alterations to plant, machinery and premises for the purposes of the business, and bad debts. Reading the sub-clause in conjunction with the income tax schedule, I am driven to the conclusion that these deductions have been allowed in order to provide for some of the anomalies that will arise under the Bill. I ask the Vice-President of the Executive Council (Senator Millen) to expand the list of deductions by including depreciation of leaseholds.

Senator Millen:

– Depreciation of leaseholds is already provided for.

Senator PRATTEN:

– The income tax schedule says that no deduction shall be made for losses incurred in any previous year. I ask the Minister to expand the list of deductions in the direction of alterations of trade or income-earning premises so as to provide’ for the amortization of capital without which no balancesheet can be complete.

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– With every desire to furnish the honorable senator with as much information as possible, I cannot see why, in a Bill of this kind, such an allowance as he suggests should be made. Before the tax canbecome operative, a deduction mustbe made of the pre-war standard of profits. The honorable senator now suggests that we should make some other allowance. Let us assume that a man’s pre-war standard of profits is £10,000 a year, and that he is now making £12,000 a year. Senator Pratten says, in effect, “ I wish to take from that £12,000 some deduction which was not allowed in respect of the £10,000.” The result might be to reduce the £12,000 to the pre-war standard of profits, and the individual would thus escape taxation. The honorable senator cannot fairly ask the Government to do that. Upon whatever method the pre-war standard of profits is calculated, the war-time standard of profits must also be calculated, otherwise the Treasury would lose amounts that should find their way into it.

Senator PRATTEN (New South man is making 13 or 14 per cent. on his capital in a flourishing manufacturing business. If he is allowed only 5 per cent. for depreciation, and is in a leasehold building, if he is not allowed anything for amortization of capital-

Senator Millen:

– Why does the honorable senator imply that he is not, when if he will look at sub-clause 7, he will see that he is?

Senator PRATTEN:

– There is a specific line in the Bill which states that no deductions shall be allowed for expenditure upon alterations or business buildings unless covenanted for between the lessor and the lessee.

Senator Millen:

– An allowance of 10 per cent. is made on the capital which he puts into any alterations.

Senator PRATTEN:

– But that is not the point. As the Vice-President of the Executive Council has given a specific illustration, I propose to give another. Let us suppose that a man has a capital of £10,000, and that he borrows another £10,000 from a bank. Let us assume that he is in leasehold premises, and has £10,000 worth of machinery. Under this Bill, if he makes a war-time profit of £4,000, he will pay nearly £2,000 to the Government, another £1,000 for extra depreciation on his machinery and leasehold, and will be left with only £1,000 for himself. Thus the Bill will take, not only 75 per cent. of his excess profits, but will rob him in the direction of administration.

Amendment agreed to.

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

.- I move-

That after sub-clause 4, the following subclause be inserted: - “ (4a) For the purposes of this section ‘ income tax payable in respect of the profits ‘ shall be -

  1. in the case of an individual, the amount of tax that would have been payable if the profits had been the only income derived by him from sources within Australia;
  2. in the case of a partnership, the aggregate of the amounts of tax that would have been payable by each partner if the share of the profits coming to him had been the only income derived by him from sources within Australia; and
  3. in the case of a company, the amount of the tax (if any) paid by the company, together with the aggregate of the amounts of tax that would have been payable by each shareholder if the share of the profits credited or paid to him had been the only income derived by him from sources within Australia.”

The purpose of this new sub-clause is to complete the words which appear in paragraph b, which allows as a deduction the Commonwealth and State income taxes. It is really intended to define the basis upon which those taxes shall be calculated.

Amendment agreed to.

Senator PRATTEN:

– I ask the VicePresident of the Executive Council whether sub-clause 5 means that the payment of war-time profits tax will be allowed as a. deduction from the Federal income tax assessment?

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– In anticipation of the War-time Profits Tax Bill then introduced becoming law, in the Income Tax Amendment Bill which was put through last year provision was made to allow that deduction. There was some little doubt about making provision for the exemption of a war-time profits tax which had not then become law, but those are the circumstances in which the provision to which I have referred was made in the Income Tax Act.

Senator PRATTEN:
New South Wales

– It was my intention, after the word “business,” in paragraph 3 of sub-clause 6, to move the insertion of the words “or in any new business without any pre-war standard,” but, seeing that the Committee has already practically defeated the principle that any new business shall have any special exemption under this Bill, I do not propose, to take up further time in “whipping the cat” on ‘that question. I wish, however, to move an amendment later in the clause. It will be found that under paragraph b of sub-clause 7 a deduction is allowed when the lessee has covenanted with the lessor to expend money on improvements which will revert to the lessor on the termination of the lease. I move -

That after the word “ expend “ in paragraph b of sub-clause 7, the words “ or the lessor has spent “ be inserted.

This refers to the much-discussed question of the amortization of leaseholds. Under the Bill, if a man goes into leased premises and expends money upon their im provement during the period of his lease, unless he has covenanted with the lessor so to do, he will not be allowed any deduction. The purpose of my amendment is obvious, and I ask honorable senators to support it.

Senator MILLEN:
Vice-President of the Executive Council · New South Wales · NAT

– I should like to point out .the effect of the proposed amendment. The paragraph actually provides for what is a sinking fund in the case of leasehold properties, but Senator Pratten puts what is a totally different proposition. The provision of the Bill is that a deduction shall be allowed in the case of a business which uses leasehold property and upon which the lessee has covenanted with the lessor to expend money on improvements which will revert to the lessor upon the termination of the lease, but now the honorable senator proposes that where the lessor, that is, the owner of the leased property, spends money upon its improvement, the tenant carrying on the business on that property shall get a deduction in respect of that expenditure.

Senator Pratten:

– No; I should have used the word “lessee” instead of the word “ lessor “ in my amendment.

Senator MILLEN:

– If it is the intention pf the honorable senator to submit an amendment which will have the effect of practically striking out the words “ has covenanted with the lessor to expend money on improvements,” that will put a different face on the matter.

Senator Pratten:

– That is my intention.

Senator MILLEN:

– Otherwise, the honorable senator will see that he would be proposing to give the tenant the benefit of the expenditure by the landlord.

Senator Pratten:

– That is so.

Senator MILLEN:

– The honorable senator, by his amendment, is raising the same point as that he argued a little time ago. If the lessee spent £1,000 on the leasehold property under his covenant with the lessor, he would get the benefit of 10 per cent, on that added to his prewar standard of profit. That is a fair and reasonable concession, but now Senator Pratten says that we should make a similar allowance where the lessee takes that expenditure upon himself. The lessee cannot have it both ways; if we are to give him the deduction which is proposed, we should strike out the provision which enables him to make up his pre-war standard, on the assumption that the same expenditure occurred before.

Senator Pratten:

– The income tax schedule says not.

Senator MILLEN:

– I do not mind what it says; I am dealing with what this Bill says. In order to determine the taxable amount, we have to take a man’s pre-war income and his war-time income, and the only fair way in which we can determine the difference between them is to calculate both on the same basis. If a man has invested £10,000 prior to the war, and spends, in the way Senator Pratten suggested, £1,000 in the improvement of his leased premises, that makes £11,000. If we take the profit on £11,000 against the profit on £10,000, we shall not arrive at what we are trying to arrive at, and that is, what was a fair profit during the two periods ? Tn this case, although the capital was £10,000 before the war, and £11,000 afterwards, the pre-war capital is inflated by adding the additional £1,000. and on that the owner of the business is allowed 10 per cent. Having done that, we inflate the pre-war standard of capital for the purpose of reducing the amount of difference between the pre-war standard of profits and the profits made during war time. If Senator Pratten succeeds in carrying his amendment, the only fair thing to do will be to deprive the owner of the business of the concession which he is given under another clause of the Bill, which enables him to inflate the pre-war standard itself.

Senator PRATTEN:
New South Wales

, - The explanation given by the honorable senator is satisfactory up to a point; but I again direct his attention to at least two clauses of this Bill, . which specifically say that the profit shall be estimated in accordance with the Income Tax Act.

Senator Millen:

– But profits and excess profits are two different things.

Senator PRATTEN:

– Quite so. Let me give the Committee an illustration to show how this clause would work : Suppose a catering firm take a ten years’ lease of a shop in the city, and spend on’ that shop £1,000 for improvements, in order to facilitate their business. According to all the cardinal principles of business, their amortization fund for that expenditure for that period of lease should be £100 a year. There is no covenant with the owner of the property in connexion with the expenditure of this money. The Income Tax Commissioner will not allow them to deduct it from their profits unless there is a covenant with the lessor, and this Bill does not allow them to deduct it from their profits. It is not capital, but has to be expended out of the current year’s profits.” I ask Senator Millen whether his illustrations provided for that? I do not think they do. I am asking that, in a case of that sort, where the lessee is spending money, he should be covered under this Bill by a fair deduction for his expenditure, just the same as if he had covenanted with his landlord before he went into the leased premises.

Senator MILLEN:
New South WalesVicePresident of the Executive Council · NAT

– He gets the deduction under this Bill. I am glad that Senator Pratten has stated a case in such simple terms. He says that a firm spending £1,000 with a lease of ten years has a right to a sinking fund of £100 a year.

Senator Pratten:

– Yes.

Senator MILLEN:

– That is exactly what they would get under this Bill. I take the case of a firm with a pre-war capital of £10,000. Upon that they are allowed for their standard 10 per cent., which is £1,000.’ After the war, still with the same capital in the business, they invest £1,000 in improvements in the way referred to by the honorable senator. That makes £11,000 capital they have involved. What the Bill says is that in order to determine the difference between pre-war profits and war-time profits, we have to assume that the same amount of capital was employed in both periods, and, therefore, the £1,000 spent on improvements, although it was not spent in the pre-war period, is added to the capital for the purpose of calculating the pre-war capital, which brings it to £11,000. Ten per cent. on that is £1,100, and, although the taxpayer would be only entitled to £1,000 on his pre-war capital, he is given the concession of 10 per cent, on the £11,000, and so has the deduction of £100 a year additional, which actually provides for the sinking fund which Senator Pratten contends should be provided for.

Senator PRATTEN:
New South Wales

.- I point out to the Minister that the £1,000 has to be provided for out of the income. The firm would not raise another £1,000, but out of the income they would spend that sum on the lease.

Amendment negatived.

Senator PRATTEN:
New South Wales

.- I move-

That the words “ if the owner devotes the whole of his time to the business,” in paragraphaofsubclause 8, be left out, with a view to insert in lieu thereof the words “ proportionately to the time the owner devotes to his business.”

This seems to me a very narrow wording. It might be construed that if the owner did not devote the whole of his time to the business he would not be entitled to the exemption. We have passed a clause providing what amount shall be allowed to each individual partner, otherwise I would have had a few words to say on the subject. I do not know how the Minister views this amendment. The hour is getting late.

Senator MILLEN:
New South WalesVicePresident of the Executive Council · NAT

– I cannot accept the amendment. The honorable senator must remember that the purpose of the provision is to make a further concession to the taxpayer. It says that where the owner of a business devotes his time to it he shall be allowed as a deduction a fair amount in respect of what is assumed to be the value of his services- But if we are going to depart from that principle, and say that if the owner sponds a portion of his time there we shall need a detective in his office all the while to ascertain how much time he does devote to the business. T ask the honorable senator not to press the amendment.

Amendment negatived.

Sub-clause 12 consequentially amended.

Senator PRATTEN:
New South Wales

– I wish to refer to subclause 13. I. got back now to the comparison I made between the primary and secondary industries. It is very clear from the Bill that post-war industries can recoup past losses out of present profits.

Progress reported.

HOUR OF MEETING.

Motion (by Senator Millen) agreed to-

That the Senate, at its rising, adjourn until 11 a.m. to-morrow.

Senate adjourned at 11.37 p.m.

Cite as: Australia, Senate, Debates, 18 September 1917, viewed 22 October 2017, <http://historichansard.net/senate/1917/19170918_senate_7_83/>.