12th Parliament · 1st Session
The President (Senator the Hon. W. Kingsmill) took the chair at 3 p.m., and rend prayers.
– On the 22nd July, Senator Cooper asked the following questions, upon notice: -
I have now been supplied by the Minister for Home Affairs with the following answers to the honorable senator’s questions : -
New South Wales Collections - Assistance to Western Australia, South Australia and Tasmania.
– On the 16th July Senator Dunn asked the following questions, upon notice-: -
The answers to the honorable senator’s questions are as follow : - 1 and 2. The proportion of revenue contributed by the various States cannot be satisfactorily ascertained. It is possible to make only an arbitrary allocation. On that ‘basis figures are available for two years only. To obtain them for other years would entail a great amount of work and expense. The years for which information is obtainable are -
– Again I have to remind honorable senators that there are some questions which, obviously, should be submitted in the form of a motion asking for a return to be prepared. If honorable senators will observe this rule the Senate will have an opportunity to say whether or not the return is in its nature needful or the cost of preparing it is justified.
– by leave- The following is a telegram dated the 23rd July, received by the Prime Minister from the Premier of New South Wales : -
Replying your telegram, twenty-second July, if this State agrees accept responsibility payment interest on its public debt, to remain in Loan Council and to effect economies agreed to by recent Premiers’ Conference, will moneys be provided to meet State’s requirements during July, August and September. Necessary that five hundred thousand pounds required for July be provided immediately.
The following is a telegram sent to the Premier of New South Wales to-day : -
Majority of Loan Council approve following reply to your telegram of 23rd July, Begins. On receipt of your undertaking to accept responsibility for payment of interest on New South Wales public debt and to join Loan Council and on your Government passing and putting into operation Premiers plan including 20 per cent. reduction in adjustable expenditure as compared with adjustable expenditure in 1929-1930, Loan Council will approve issue of Treasury Bills for July requirements and will approach bank to make available amount necessary for July. Requirements of all Governments for August will be dealt with at Loan Council meeting in August. Requirements for all Governments in subsequent months will be dealt with by Loan Council from time to time as required. Reply ends.
Scullin, 28/7/31 For Chairman Loan Council.
– by leave - During the course of the debate on the budget last week, I had occasion to refer to what I considered to be the under-production of wealth in this country, and I cited, the case of the New South Wales coal-miners who went on strike againstthe acceptance of a wage of £2 a day. SenatorRae took me up very warmly and in a very spirited fashion disputed my statement. On the adjournment of the Senate, he also took occasion to return to the attack and tried to make it appear that my statement was wholly incorrect, if not false. The basis of my statement was this : - During a controversy in New South Wales between the officials of the coal-miners’ association and those of the engine-drivers’ association, Messrs.Rees and Davies, secretary and official respectively of the coalminers’ association, stated publicly that, if the reduction took place, it would mean a loss of 4s. a day in the case of the lowest paid man, and of 10s. a day in the case of the highest paid man. As we all know, and as every one knew at the time, the reduction was only 12½ per cent. Having thus two terms in a simple proportion sum, the loss on the one hand, and the percentage on the other, it was quite an easy matter to ascertain that the amount of the wage was practically £2 9s. a day for the average coal-miner to whom I was referring. My statement was thus on the generous side. I would have no purpose to serve in giving inaccurate or false figures to the Senate. I. have not done so at any period in my life, and am not doing so on this occasion. 1. have quoted the figures of responsible officials of the New South Wales Coal Miners Association, and, if SenatorRae has any quarrel at all, it is not with me, but with those gentlemen. As an old trade unionist of 40 years’ standing
– I remind the honorable senator that in making a personal explanation ho must not indulge in a general debate.
– I was about, to conclude by saying that as an old trade unionist of 40 years’ standing I have no interest in finding fault with trade unionists unless they are wrong.
The following papers were presented : -
High Commissioner For Australia in Lon don - Report for 1930.
Cotton Bounty Act - Return for 1930-31.
Flax and Linseed Bounty Act - Return for 1930-31.
Iron and Steel Products Bounty Act - Return for 1930-31.
New Guinea Act - Ordinance No. 20 of 1931 - Companies.
Papua Act - Ordinance No. 1 of 1931 - Native Labour.
Papua and New Guinea Bounties Act - Return for 1930-31.
Power Alcohol Bounty Act - Return for 1930-31.
Public Service Act - Regulations amended - Statutory Rules 1031, No. 89.
Sulphur Bounty Act - Return for 1930-31. Wine Export Bounty Act - Return for 1930-31.
– On 24th July, Senator Rae asked the following questions, upon notice : -
I am now in a position to inform the honorable senator as follows : -
As regards members of the Militia Forces the Defence Department has no record of the membership of the organization. Personnel of the Militia Forces, however, when not actually undergoing training and in uniform, cease to be controlled by the Military Board and are citizens with the full rights of citizenship.
Minister representing the Prime Minister, upon notice -
– The answers are -
.- I move-
That the bill be now read a second time.
The object of this measure is to provide for the establishment of an Australian wheat pool to control and regulate the movement and sale of wheat in Australia, and to arrange for the orderly marketing of wheat for export.
The need for control and organization is self-evident by reason of the fact that it is estimated that this season there will be an exportable surplus of 162,000,000 bushels. It is proposed that one representative from each of the State Wheat Boards, together with one representative chosen by the Commonwealth shall form an Australian wheat board. The proposal, therefore, does not postulate a board controlled by the Government. On the contrary, control by the growers is assured. The functions of this board will be the control of wheat exported, and also to control the interstate movements of wheat. The board will thus be able to prevent any State which, has not come into the pool from dumping wheat into a State- subscribing to the pool arrangements. The State boards to which I have referred will have the important task of fixing a uniform price for local consumption. Without affecting the price of bread both Queensland and New South Wales have been able to fix the price of wheat for local consumption at 4s. per bushel. The price of wheat in Victoria and South Australia is about 2s. 6d. per bushel, but the people in those States pay much the same price for bread as is paid in New South Wales and Queensland. That means that the people in Victoria and
South Australia are no better off, and the farmers are worse off. It is also proposed that there shall be only one government nominee on the State Wheat Boards. The benefit accruing to the growers by virtue of a fixed price of 4s. per bushel for local consumption is estimated, to be 6d. a bushel on all wheat estimated to be grown next season. This represents the difference between export parity and local consumption price.
With the prevailing price of wheat so low, and no prospect of any substantial recovery in price at present, this additional 6d. a bushel would be of the greatest assistance to the wheat-grower. In fact, his plight is such that it is almost a necessity if he is to continue to produce. It is expected that at least three States- - Victoria, South Australia, and Western Australia - will come into the scheme. A necessary adjunct to the success of the scheme is the power to control sales of flour, bran, and pollard. For the export flour trade the millers will, of course, be supplied with wheat at world parity prices. The whole plan is one for the wheat-growers to accept or reject as they think fit. Those directly interested will have an opportunity of expressing their opinions concerning the proposals, and a ballot will be held in each State for the purpose of obtaining their decision onthe question of the constitution of State Wheat Boards in their respective States.
In effect this measure is the same as that introduced in 1930 with the exception that the provisions with respect to a guaranteed price have been omitted.
Attempts have been made previously to take action along these lines, hut they have been more or less opposed by those who are directly interested in the production of wheat as well as by other powerful influences in Australia, with the result that the farmer has never been able to reap the advantage of the handling of his product by a well-organized machine; consequently, he is at the mercy of certain influences which the Government believes are not acting in his best interests. For that reason, the Government is endeavouring to arrange for the growers themselves to control the marketing of this necessary cereal, thus enabling the producer to derive the fullest possible benefit from a machine that to all intents and purposes has been created by himself. That should ensure the greatest satisfaction being afforded to those who are carrying on this important work in the interests of Australia. Personally, I have never been able to understand why the Opposition has prevented the attempt being made to do something along these lines. I believe that similar organizations could handle other products as well as wheat. Wool, for example, if it were pooled, might be handled much more advantageously even than wheat. I merely mention this to illustrate what the producers lose by not having efficient machinery to market what they spend so much time and energy in producing.
– Wool is marketed under the most efficient organization in the world.
– If that be so, I have a wrong conception of the situation. I understand that at the present time wool is publicly auctioned, and that the prospective buyers put their heads together, decide the price that will be paid, and determine the lots that each shall take.
– That is absolute nonsense.
– I am informed on very fair authority that that is so. I am further informed that were the Government to handle that product as this bill proposes that wheat shall be handled, it would be in a position to fix a price for it that those who wanted it would be compelled to pay.
– The Government has been so successful in its handling of everything, has it not?
– Unfortunately, the Government has not been allowed to handle anything of importance; consequently, it has not had an opportunity of demonstrating to the people of this country the possibilities of organizing for their benefit.
– The handling of the Government Savings Bank of New South Wales cannot be commended.
– That matter is being adjusted at the present time. In any case, the Commonwealth Government is not responsible for the closing of that institution, and, in common with others, very much regrets the circumstances that brought about such an event.
– The Minister need not take any notice of irrelevant interjections.
– What is to become of the 1930 bill ? I understood the Minister to say that that bill was. to be repealed.
– I am not quite sure what the proposal is with regard to that measure. I understand that if this measure is carried it will operate independently, and without interference from any other machinery.
– What is the proposal with regard to seed wheat ? Is it to be sold at export parity price, or at the price fixed for local consumption?
– I am not quite sure. Seed wheat would be used for local consumption, and if it passed from one person to another in all probability it would be dealt with at the local consumption price.
Debate (on motion by Senator Sir George Pearce) adjourned.
Debate resumed from the 23rd July (vide page 4263), on motion by Senator Barnes -
That the bill be now read a second time.
Senator Sir GEORGE PEARCE (Western Australia) [3.27]. - This is a most unpleasant bill, and I feel sure that we would all be very much happier if we could see our way to reject it; but, unfortunately, in the existing circumstances of the country, that is impossible. I suggest, however, that there are certain phases of the measure which the Government might very well consider with a view to seeing whether some adjustment cannot be made so as to effect a little more of that equality of sacrifice about which we hear so much. The bill embodies a number of very severe inequalities.
Lately we have heard a good deal regarding economists and experts. I propose to quote the views of one economist in regard to this measure. He is Professor Carslaw, of the Chair of Mathematics, University of Sydney. I quote the following from the daily pres3: -
Professor Carslaw, of the Chair of Mathematics, University of Sydney, referring yesterday to the Income Tax Bill, which was introduced into the House of Representatives on Tuesday, said that the public would be relieved to learn that a simpler form of graduating income tax rates was embodied in the bill.
The paragraph went on to say - “ But “, asked Professor Carslaw, “ has the public noted that the special tax of 10 per cent, is not a tax of one-tenth of the present ta.x, but one-tenth of the taxable income? For example, a taxable income of £500 from property is quoted in the second table as now to pay £10 13s. 4d., exclusive of special tax. But this special tax is no common tax. To this sum of £1(5 13s. 4d. has to hu added a sum of £50, which is one-tenth of £500. Therefore, the tax will be £t>(i 13s. 4d., whereas the tax on an income of £500 from personal exertion will be only £12 15s. 2d.”. . “ Why”, asked Professor Carslaw, “should property income be so heavily taxed, compared with earned income? This seems a crushing impost. It is mid to be a special impost ‘ for one year only but special taxes ‘ for one year only ‘ have a habit of becoming permanent, and increase with the years “.
I suggest that that statement reveals an alarming inconsistency between the tax on personal exertion and the tax on property.
Another statement that I have received has been compiled by Mr. Richard Linton, M.L.A., Parliament House, Melbourne. It is a most informative document, relating to the operation of Federal and State taxes. Ail the States have similar income taxes. We have to consider the cumulative effect of these taxation proposals. In an interesting table, Mr. Linton shows how these burdens will fall upon the average taxpayer with a wife and two children, and whose income ranges from £50 to £3,000. I do not propose to quote the whole of the table, but shall confine my attention to one or two examples which are very well worthy of consideration, because they demonstrate the alarming increase that has taken place in taxation.
I invite attention, in the first place, to the position of the taxpayer with an income of £312. If that income is earned from personal exertion, because . of the operation of the statutory exemption provisions, he will escape Federal or State taxation, but if his income is from pro- perty he will come under the new federal rate, and be required to pay £2 6s., and the demand on his income will equal 73 per cent. But, in addition, in Victoria, he will be subject to the existing State unemployment tax of £3 10s. 2d., the proposed new rate £5 5s. 3d., the total present State and the proposed Federal unemployed tax on personal income, amounting to £3 10s. 2d., or, at the new rate, £5 5s. 3d., representing a demand equal to 1.68 per cent, of his income. On property income the total present State and the proposed Federal and present unemployed tax at the old rate would be £5 16s. 2d., and at the new rate £7 lis. 3d., or 2.42 per cent, on his income.
I come now to the figures dealing with an income of £500 from personal exertion. The present State tax is £3 15s., and the Federal tax £4 2s. 8d., making a total of £7 17s. 8d., or 1.51 per cent, of the income. On a property income the State taxation for 1931-32 is £7 10s., and the new Federal rate £37 10s., making a total of £45, or 9 per cent, of the income. Then there is the additional State unemployment tax of £5 12s. 6d., the proposed new State tax of £8 Ss. 9d., the present State and the proposed Federal and present unemployed tax at the old rate £13 10s. 2d., the personal exertion proposed new rates, Federal and unemployment tax, £16 6s. 5d., or 3.26 per cent, of the income. The total of the present State and the proposed Federal and present unemployed tax at the old rate on that income is £50 12s. 6d., and at the new rate £53 8s. 9d., or more than 10 per cent, on an income of £500. The figures relating to an income of £750 show the same differentiation, and indicate that the total amount payable will be £143 7s. 6d., or 19.11 per cent, of the income.
Mr. Linton works out another interesting table, which shows that a taxpayer in Victoria, with an income of £312 a year, will work for the Federal and State Governments for three and a half days in order to pay his taxation on income, if it is from personal exertion, and for one week if his income is from property. If he has an income of £500, he will work nine and a half days to pay taxation on income from personal exertion, and five and a half weeks to pay the taxation on property. If his income is ?750, lie will be required to work three and one-third weeks to pay taxation on income from personal exertion, and ten weeks to pay his tax on property income.
There is a further interesting table indicating the number of taxpayers who are bearing this burden in Victoria. This point should be borne in mind when we are dealing with all taxation proposals. In Victoria, the individual taxpayers paying taxation from property incomes number only 154,972, and companies, 3,991; or a total number of 158,963, who were assessed in December, 1930, to pay taxation amounting to ?2,901,101. ‘The number of electors in that State at the 30th June, 1931, was 1,037,344. Dealing now with the Commonwealth taxation, the return shows that 267,000 taxpayers were assessed in December, 1930, to pay federal taxation amounting to ?9,841,000, and the number of electors at the 30th June, 1931, was 3,603,169. These figures show that a considerable proportion of the burden of taxation is being borne by a comparativelysmall number of our people.
I wish now to direct attention to certain criticisms which appeared in the public press relating to this system of double taxation. In the financial columns of the Sydney Morning Herald of the 27th instant, there appeared some comments by Mr. J. Y. McGrath, who stated -
As was expected by every one who has watched tin; trend of taxation legislation for some years past, it is proposed in the amending taxation bill now before the Federal Parliament to overcome the recent decision of the High Court, in the taxation case of Douglas v. The Federal Commissioner of Taxation. The unanimous decision of the court in that case definitely was that the Commissioner had misinterpreted the provisions of the act in regard to the allowance of rebates of tax in the assessment of shareholders of companies where dividends were received by the shareholders from companies who had paid tax on the profits out of which those dividends were declared. Furthermore, the decision indicated clearly that the Commissioner’s interpretation was contrary to justice and equity.
Mr. Justice Dixon, in his judgment, said, “Justice seems to require that lie (the shareholder) should receive an allowance in respect of so much of his taxable income as would not exist but for the inclusion of the dividend in assessable income “.
Mr. McGrath goes on to say
The object of the legislature was, in the words of Mr. Justice Rich in the above-men tioned case, “ to avoid double taxation and to make some just allowance of the tax already paid or payable when profits which had borne or were liable to bear tax fell again to be taxed”.
Mr. McGrath’s comment upon that was
And it seems petty and mean of the Government to refuse to make an allowance in a shareholder’s assessment of the whole ‘of the tax paid by the company on the dividends received by that shareholder.
To me it seems only reasonable to argue that once a company has paid the tax its shareholders should be allowed to make a deduction of the amount already paid by the company in respect of the profits from which dividends are paid.
When we were discussing the Commonwealth Debt Conversion Bill I understood that the insurance companies had agreed to what is generally known as “ the plan “. Accordingly when Senator Duncan proposed an amendment, I quoted from a joint letter sent by a number of insurance companies in New South Wales in which I thought they conveyed that impression. I have since had some correspondence with one of the companies concerned, and from it I learn that the plan of which the companies approved was not the one then before the Premiers Conference; but that which had been put forward by a committee of experts, comprising UnderTreasurers and professors of economics. There were two committees - the committee of experts referred to, and another committee comprising those experts and Sir James Mitchell, of Western Australia, Mr. Jones, of Victoria, and Mr. Hill, of South Australia.
It is important, when dealing with taxation, to remember that these insurance companies have contributed ?71,000,000 to Commonwealth and State loans, and that they will suffer a reduction in their income from those loans to the extent of 22$ per cent. The taxation proposals now before us increase the taxation on the reduced interest that they will receive from those loans. When this correspondence from Mr. Inch reached me it was then, too late to do anything, because the bill had been passed. I, therefore, now suggest that as the insurance companies which have been such big contributors to Commonwealth loans will be so badly hit by the general reduction of interest, we might give them special consideration in this measure. I propose to read from a memorandum which has been handed to me by Senator McLachlan, in order to show that these companies are in a different position from other bodies in respect of interest. The case for insurance companies is so well put in the memorandum, a copy of which has been sent to the Prime Minister, that I ask the indulgence of the Senate to read from it the relevant paragraphs -
The Mutual Life Assurance companies, witu head offices in Victoria, take the opportunity afforded by the presentation of Income Tax Bills to the Commonwealth Parliament, to draw attention to the necessity for altering the basis of taxation of Mutual Life Assurance companies.
A very strong claim ibr exemptions from income taxation can be made by the Mutual Life offices, which, under present circumstances they do nOt desire to press, although it is not unreasonable to remind the Prime Minister that in his policy speech at the last elections he announced the intention of his party if it assumed office, to repeal the provisions of the Income Tax Act which imposed income tax on Mutual Life offices.
That is well known. The Bruce-Pago Government imposed taxation which the present Government, when in Opposition, promised to repeal if it was placed in power. These companies do not wish to escape the whole of the taxation; they merely ask that their ease shall be considered in the light of the representations which I shall now read. They point out that -
Income tax in the general case is applied to interest after all proper charges and obligations falling upon it have been met. Thus in the case of interest earned by the use of borrowed or deposited money taxation falls not on the gross interest received but upon the interest remaining after deducting the interest paid or credited to the lender or depositor of the money. A bank or a deposit society is therefore taxed on the interest it receives after allowing for the interest for which it is liable to set aside for the service of its deposits and other contracts.
Under the present Commonwealth law, a Life Assurance company is assessed for taxation on its gross interest income without regard to the obligation under which it rests to set aside the greater part of that interest income to meet its obligations.
The real nature’ of the ease is obscured by the manner in which the accounts of Life Assurance companies are presented in Australia. These accounts display an accumulating assurance- fund, from which it may quite erroneously be inferred that the company concerned is benefiting to the full extent of the interest received after allowing for expenses whereas in reality almost the whole of the accumulating fund at any time represents an accumulating liability under policy contracts analogous to the accumulating deposit liability of a savings bank.
In the accounts of some companies in other countries, the amount of interest which it is necessary to set aside to meet accruing liabilities is actually shown as a disbursement on the expenditure side of the revenue account. Thus the analogy with the cases of banks and deposit societies is recognized and no doubt is left regarding the proper basis ‘for any income tax applied to interest revenue.
The analogy is complete when a payment for u matured policy or for a surrendered policy is made out of the funds of a Life company, for tiran the interest credited to the fund, in respect of the liability under the particular policy is actually paid away just as in the case of a savings bank the interest credited to a depositor’s account is paid away when the deposit is withdrawn.
It is essential to the solvency of the companies that interest at a minimum rate should be exempt from taxation, and that, subject to proper allowances for expenses, any tax should apply only to the excess interest received over and above the minimum rate. Having regard to the circumstances of all offices the minimum rate should be 4. per cent.
I commend to the consideration of the Government, the suggestion that, “Having regard to the circumstances of all offices, the minimum rate should be 4 per cent.”. The letter goes on to say -
According to the latest figures available the amount of interest received per annum in Australia by all Life Assurance companies in the case- of holders of ordinary policies is equal to £7 per individual, and if holders of industrial policies be included it is under £3 per individual.
It may be added that Superannuation funds, Widows and Orphan’s funds, Friendly Societies, and all similar organizations for thrift are exempt from income tax, and it is anomalous that Mutual Life Assurance companies which are not conducted for profit, and which are in fact large public Superannuation, Widows and Orphan’s funds, should not also be exempt instead of being as they are subject to taxation in a most dangerous form.
The opportunity is taken to draw attention to a possible anomaly affecting mortgages in general.
Under the Premiers Plan the reduction of 22J per cent, in interest on bonds is taken to include the special property income tax which was imposed so that the reduced interest shall be free of this tax and of all taxation in excess of that which obtained prior to the reduction in interest. Any other interest reduced by 22J per cent, should, therefore, correspondingly be free from the special property tax and from taxation in excess of present rates.
That argument seems to be irrefutable. As the cases are exactly parallel, I suggest, therefore, that the treatment should be the 3ame. If we are to have the goodwill and loyal co-operation of these insurance companies in the conversion loan, which we all desire, we should remove any ground for the suspicion that they have been unfairly treated. I suggest that something more in the nature of justice should be meted out to these life insurance companies.
Senator Sir GEORGE PEARCE.That is a point for the Government to consider. If the solvency of these mutual insurance companies were endangered it would be a calamity to this country. I repeat my suggestion that at the proper stage in committee we report progress so that the Government may have time to consider the point I have raised.
.- I urge the Leader of the Government in the Senate to follow the course proposed by the right honorable the Leader of the Opposition (Senator Pearce). I have had an opportunity to peruse the memorandum from which the right honorable senator has quoted extensively, and it seems to put up an unanswerable case for full consideration by this Senate. When the Income Tax Assessment Bill was before this chamber last year I drew attention to the statements made by the Prime Minister in his policy speech at Richmond, in which he very definitely promised the mutual life policy-holders exemption from taxation if his party should be returned to power. Where the previous Government chastised these people with whips the present Government is chastising them with scorpions instead of giving them the relief promised on that occasion. And now we have an additional impost upon them. While we are asking these thrifty institutions to come to the assistance of the Government by voluntarily converting their large holdings in stock and by submitting to certain reductions in interest on their investments, we are putting additional taxes on them.
The memorandum quoted by Senator Pearce indicates that friendly societies, superannuation funds, widows and orphans’ funds and such like organizations are, as a matter of public policy, definitely exempted from taxation, in order to encourage self-help and thrift in the community.
This bill, which was hurriedly put through another place, may not be the appropriate place for an amendment such as has been suggested. It contains the rate of the tax and an interesting mathematical formula showing how the rate to be applied in each case is arrived at. I do not know whether the man in the street understands this formula. I confess my utter inability to do so, and I urge again the plea I put forward a year ago that our taxation laws should be made understandable by the man in the street. Taxpayers should not be called upon to employ expert and professional assistance in order that they may know what to include in their taxation returns, and the ordinary individual should be in a position to know what his rate of tax is likely to be.
– We have been asking for that for years.
– I know that it has been said in this Parliament for many years past and that it is difficult to depart from a certain basis once we have adopted it.
We are proposing in this bill to raise additional revenue as part and parcel of the Premiers’ plan, but it is possible the Prime Minister did not have an opportunity to study the memorandum submitted to him by the mutual life offices in Melbourne, representing institutions in Victoria, before the bill went through another place. Considering the number of people who are affected, and the fact that they represent those who are endeavouring to act on the principle of self-help, to make provision for themselves and their dependants, and to exhibit in their actions that sturdy spirit, of independence, forethought, and carefulness which we so much applaud. I think that the memorandum submitted should be carefully and fully considered by the Government. If we agree to the second reading of this bill it seems a simple matter for the Leader of the Government in the Senate to have progress reported so that he may make a statement later on as to the attitude of the Government on the point, and the measure of consideration which has been given to the representations of the mutual life insurance offices. These people are asking, not for the complete immunity they were promised by the present Prime Minister in his policy speech, but that there should be a change in the method of the assessment of taxation upon them; that the peculiar circumstances of mutual life offices, and of the contracts and obligations into which they have entered with their policy-holders should be given due consideration when the method of assessment is being determined. Their request that they should not be assessed on the gross profits, but on the surplus profits after providing for obligations and contracts, seems so eminently fair and reasonable that I cannot conceive the Government taking up an attitude of adamant opposition to it.
Speaking generally on the bill, I want to repeat what I said on a previous occasion. The combined taxation, Commonwealth and States, is becoming absolutely confiscatory and burdensome. It is a handicap to industry. It is stifling enterprise, and hindering production. Unless we can get back to more frugal ways in government, and avoid levying such exacting imposts on the people we shall not have in this country the progress and development we have a right to expect. Not long after the war it was my privilege to visit Great Britain on behalf of the State of Victoria, and while I was there I had an opportunity to meet a number of very interesting people, some of them leaders of industry. I well remember a conversation I had with one leader of industry. He was asking me about the taxation in the State of Victoria. I had gone to London on a financial mission, and the subject had come up in general conversation. I gave him some indication of taxation imposed in Victoria at that time. It was then lower than in any other State.
– I think it is still so.
– I believe that it is.
– But it is catching up with the others.
– With added income tax and unemployed relief tax we are rapidly catching up to the other States.
– The figures quoted by Senator Pearce related to Victoria.
– Yes ; they were prepared by Mr. R. Linton, M.L.A., and gave an indication of the amount of taxation to which the citizens of Victoria are now subject. Getting back to my story, this leader of industry congratulated Victoria on the happy state of affairs I had indicated to him, and proceeded to tell me of the growth of his own industry - how it had been launched, and had succeeded from year to year. From year to year there had not been a distribution of all the profits among the shareholders of the company. They had adopted the policy of devoting part of their profits to plant additions, and extensions of buildings for increasing production. Each year only a reasonable return on the shareholders’ capital was distributed in the form of dividends. The balance of the profits were used by the company in making for greater efficiency in production, providing up-to-date plant, and importing into its enterprise the latest that science and improved engineering methods could give. That is the way in which to provide greater scope for employment. It is a simple method, and one which could be applied with equal force, not only to the particular industry to which I have referred, but to many kinds. of manufactories and forms of production. This manufacturer then said that the taxation necessarily imposed in Great Britain after the war was so heavy that they were now working for the Government, that their profits had been reduced, and that all the additional money previously available for the purpose of extending their works and increasing the opportunities of employment for the people of Great Britain was going to the National Exchequer. It was taken away from them in the form of income taxation. The truth of that is obvious. My remarks may be regarded as being mere platitudes, but it is wise now and again to demon strate the position to those who on the soap box and on public platforms speak about hitting “ the heads “ and getting the most out of the hides of the plutocrats.
– And cutting down the tall poppies.
– Tes. The suggestion is made that taxation should be equitable. In this instance taxation is becoming absolutely vexatious, and almost confiscatory. In the circumstances that prevail there is no enthusiasm or enterprise in industry. It is only right and proper to give an incentive to enterprise instead of frustrating the efforts of those engaged in industry. Unless that is done, we cannot get the same results from the community and trade and industry will not progress and develop as it should. If the taxpayers realized that they were making a fair contribution towards the maintenance of public services, and that the money was being used for legitimate purposes of government they would not object.
Presumably, the Senate must accept this measure and pass it as a matter of painful necessity, but I venture to say that if we go on applying screw after screw, we shall be setting back the hands of the clock of progress. We shall not be rendering a service to the community. I know that we must balance our budgets. We are facing a period of grave financial emergency. That is the only justification for many of the measures which have been passed during the last fortnight. The more I study many of those measures the more I dislike them, but I realize that in a time of national crisis the first step that governments must take is to balance their budgets. By means of taxation in this form, and by their calls upon the funds of the community for governmental purposes, governments are stifling industry and increasing unemployment. We must radically change that policy and impose taxation upon an entirely different basis. I trust that the Government will give full consideration to the representation so ably presented by the Leader of the Opposition in this chamber (Senator Pearce). It should take sufficient time to consider the position and when this measure or a complementary measure is under consideration in committee, state whether certain necessary amendments are to be made.
I should like some information from the Minister as to whether the deductions allowable in the matter of State income taxation paid during the preceding year are also to apply to payments in the form of unemployment relief taxation. Will that form of taxation be an allowable deduction?
– Is it not deducted at the source?
– In Victoria, unemployment relief taxation is assessed in the same way as the ordinary income tax; it is true that it is paid by some in the form of a stamp duty on wages, but in the case of others, it is assessed as ordinary income taxation. There are quite a number of exemptions allowable under the ordinary income tax law which are not allowable in respect of the unemployment relief taxation. As unemployment relief taxation is in. the nature of income taxation, it seems only reasonable that it should be allowed as a deduction in the same way as State income taxation is allowable. I do not know whether the requisite amendment should be moved in this measure or the one which is to follow; but as the two are complementary, I trust that the suggestion will be considered by the Minister and dealt with at the proper time.
– I welcome this instalment of relief from that method of calculation which used to make our heads reel when we endeavoured to ascertain the actual amount of income tax we had to pay. I have contended for a number of years that a simpler method should be devised for arriving at one’s income taxation, and while there is some ground for the complaint made by Senator Lawson, that the schedules are still somewhat complex, we should congratulate Professor Giblin upon having induced the Government to embark upon the highway to simplicity in the matter of taxation measures. The old methods dealt, with problems in higher mathematics, and I feel that what has been suggested by the Acting Commonwealth Statistician is a great improvement, notwithstanding that some would prefer even a simpler form than that now proposed.
It is essential that our income taxation laws, which touch practically every one, should be as simple at possible, not only in the language employed, but also in the methods provided for ascertaining the rate of tax payable. The old method of the curve of the third degree would test the skill of even a Senior Wrangler. The action of the Government in this case is another instance of a bureaucracy bending its head in response to common sense and the will of the people.
The points raised by the Leader of the Opposition (Senator Pearce) and Senator Lawson are of considerable importance and complexity. The position is not as simple as it might at first appear. I agree entirely with what has been said by the Leader of the Opposition and Senator Lawson in regard to the position of life insurance companies. The proposals of the Government in this instance have an important bearing on the success or failure of the proposed conversion loan. If these companies feel that an injustice has been done to them, they will stand to the strict letter of the law. For reasons which J gave when speaking on the second reading of the Debt Conversion Bill, some companies will be compelled to adopt that, attitude against their wishes, since they are dealing, not with their own money, but with moneys held in trust for others. Because of the provisions of that measure which has already been passed by this Parliament, I have some difficulty in supporting the observations made by the Leader of the Opposition and Senator Lawson. The marginal note of clause 20 of the Commonwealth Debt Conversion Bill reads. “ Interest on new securities to be free from further taxation “. It is quite cleaT that such securities are to be free of income taxation under the laws of the State, but the position in regard to Commonwealth income taxation is not quite so clear. I have conferred with thai paragon of clarity, the Leader of the Opposition, but he is unable to wrest,1, with the complexities of clause 20 of the Commonwealth Debt Conversion Bil) which reads - (1.) Notwithstanding anything contained in the Taxation of Loans Act 1923 or in any other act or State act, the interest derived by any person in any financial year from new securities exchanged for existing securities (other than interest which in accordance with the provisions of section fourteen of this act is free from Commonwealth and State income tax) shall be free -
Paragraph 6 relates to income tax under a law of a State, and is quite clear, but paragraph a makes one’s head reel. The intention of the Government is well expressed in the plan adopted at the Melbourne conference, where it was decided that any person who converted his holdings and suffered a 22½ per cent. reduction should not have to submit to any further taxation imposed by the Commonwealth or by a State. I do not know whether that has been definitely provided, so far as the Commonwealth is concerned, although I think it was the intention to do so under clause 20 of the measure which I have just quoted. If that is so, a part of the objection raised by the Leader of the Opposition has been removed. In dealing with this subject, another point emerges. If this measure imposes taxation upon these companies, the position of life insurance companies is obscure. I have pointed out to the Leader of the Senate (Senator Barnes) that unless something is done to safeguard the position, our last state may be worse than, our present. It is bad enough for the Government to be financially embarrassed, although from the point of view of the body politic, it may be a good thing that it is; but if you produce a crisis in the affairs of institutions that have stood for all that is best in financial management, the position will become perilous, not only for the Government, but also for the community generally. Before the bill goes into committee, the position that has been visualized should be considered by the
Government; because, once the measure passes out of the control of this chamber, something more than we are capable of doing may be required to remedy the defect. If the position be as I understand that it is under section 20 of the Commonwealth Debt Conversion Act, some portion of our objection may disappear. But the fact cannot be escaped that at the present moment a tremendous degree of misunderstanding exists as between the insurance companies and the financial rehabilitation scheme upon which we have embarked. At both the Melbourne and Sydney ends, these bodies do not know . exactly where they stand in relation to the matter. There are some boards of directors of insurance companies who calculate their liabilities on such a basis that they need not worry; but in the case of the remainder, the only safe course to adopt - the only course that will render the directorate immune from personal liability - is to say “ I won’t “. That is not a pleasant position to be placed in; and it is due to the ineptitude that has been displayed in the control and management of this scheme.
– The Commissioner of Taxation accepts the honorable senator’s view in regard to what is expressed by section 20 of the Commonwealth Debt Conversion Act.
– On the first point I feel easy, because the insurance companies will be relieved of that extra charge. But there is something even more vital than that. The Government scarcely seems to have realized the magnitude of the operation in which it is engaged at the moment. The Prime Minister has told us that this is the greatest and most difficult conversion that has ever been attempted, and that in a country where there are six different State Parliaments dealing with the same set of circumstances. The trustees, who are only one class, have taken steps to protect themselves in the two States in which I am interested ; they have had counsel settling adequately protective clauses in the corresponding State laws. But what of insurance companies? Not one word has been enacted in New South Wales, nor is it proposed to enact it.
– Mr. Lang gave an undertaking that he would do so.
– Up to as late as yesterday, nothing had been done ; and no attempt has been made to facilitate the consummation by this Government of what is so much desired.
– The honorable senator heard the telegram that was read by the Leader of the Government (Senator Barnes) expressing Mr. Lang’s agreement.
– I want an act of Parliament rather than an agreement. Insurance directors stand in the position of trustees. No man who stands in that position will allow himself to be shot at for a breach of trust. The only way in which he can be protected in that respect, as the law stands at present, is by the introduction of State legislation granting him immunity from the consequences of his acts.
It is the duty of this Government to see that the way is paved for what we hope will be in every respect a successful conversion. I consider that undue haste has been displayed in the matter. This Parliament and the State Parliaments will have- to come back time after time to fill the gaps that will emerge. We know that the trustee companies of Australia have been active in this matter in all the capital centres.- Three or four weeks were occupied in settling the constitutional difficulties that arose in connexion with the financial agreement, with the assistance of the most eminent counsel in the: country. These complexities to which I have drawn attention affect not only millions of pounds, but also hundreds of thousands of people. The insurance companies are merely custodians, for the time being, of the savings of the people. In many cases that money is set aside in a separate fund, so that there will be sufficient for the discharge of liabilities on the most approved actuarial basis over a period of years. If it is made clear that my contention in regard to the law is right, and something is done to give a measure of protection to insurance companies, I do not think that they will feel the hardship or the loss to the extent that has been visualized in the communication which has been read by Senator Pearce. The right honorable gentleman drew an analogy between insurance companies’ and banking institutions; and it is quite a true one. If a banker pays interest on the money that he borrows, and receives interest on that which he lends, the one i3 set off against the other; and, if the latter should exceed the former, it is his income. An insurance company, on the other hand, is always hit with respect to the income that it receives, while no consideration is had for the calculation which periodically has to be made as to the amount by which the liability has increased. That is the gravamen of the charge that the mutual companies have made against the Government. While I know that this is part of the plan, I feel that some consideration at least is due to these mutual societies in particular. If anything can be clone before the measure gets into committee, or even at a later stage, it should be done, because thereby the tension would be relieved, and the scheme that we are all anxious shall prove successful would be helped along.
– Does the honorable senator consider that the adoption of the plan will make trustees responsible for acts for which they were not responsible before its adoption?
– Of course! Let me give an extreme case. A’ person is entrusted with money for the purpose of earning an income of £100 or £200’ per annum, and sets aside a certain sum, basing his calculation on a minimum return of 4-J per cent. The reduction of the interest rate prevents bini from obtaining that yield, and, if he is not indemnified by the States, he is liable for a breach of trust. That is the case of these insurance companies. Where the liability of an insurance company begins and ends is somewhat uncertain ; but there is a liability, and it should be remedied. I deprecate the haste with which the plan has had to he prepared. I suppose that the Minister will say that that was inevitable. I appeal to him. however, as other honorable senators have done, to consult the proper authorities, even before he replies to this debate, to see if some provision cannot be inserted in the bill so that those who feel that they are bound to dissent from the proposed conversion will, at all events, have a chance of reviewing the position in the light of the legislation that we have passed.
.- I regret that, in submitting a measure of this kind, the Government did not recognize the wisdom of accompanying it with a very important measure which must follow later. I understand that we shall have to consider a bill dealing with the various matters which surround the levying of income tax, without which it is very difficult for one to discuss the position of insurance companies, State savings banks, and similar institutions. I take it that, no matter what one might say on those points, it could have no effect in relation to this measure, which rs purely a taxing bill. The Income Tax Assessment Bill also ought to be before us, and we should have been given at least a week to consider the two measures, and make preparations to deal with them.
I keenly regret that the Government, in its unwisdom, has seen fit to introduce a measure of this kind. Last year, when we had before us a similar measure, I expressed the view that, if it were put into operation, it would have a very adverse effect upon the whole community, but especially that section which depends on work for its daily bread. My words have come true, to the extent that, unfortunately, there has been no diminution, but rather an accentuation, of the unemployed problem.
– Taxation will never reduce unemployment.
– That is what I am endeavouring to show. There are only two reservoirs from which funds may be drawn. The first is the Commonwealth Treasury, which, unfortunately, is practically dry. The other consists of the savings of the people of Australia, and it is that which has assisted Australia to carry on in a modified manner during thu last year or two, and the Government is rapidly draining that reservoir. There is a definite limit t6 the taxation which may be levied upon the individual, for we depend upon the surplus of all incomes, after providing for the personal requirements of the taxpayers concerned, for investment in industry and the employment of our people. As a general rule, the person with a margin over and above the amount necessary to provide for his every-day needs does not dig a hole in his back yard and bury the money.
– It is reported that many are doing so to-day.
– But that is not the general custom. The average person either places his surplus money on deposit in a bank or invests it in some industrial concern, so that he may obtain some return in the way of interest or dividends. Unfortunately, in these taxation proposals we are having a repetition of our experience of last year. In introducing the bill the Leader of the Senate (Senator Barnes) said that it would provide for the rates of income tax to be applied in assessments for the present financial year, and would give effect to the Government’s proposals to increase the normal rates now existing. I invite honorable senators to mark this reference to the so-called normal rates. The existing rates are abnormal; as a matter of fact, they are as high as or higher even than the rates levied during the war. The taxation imposed by this Government is so burdensome that many people, especially those of small means who are not able to add to their incomes in any way, have become seriously embarrassed. Last year, in addition to the 10 per cent, super-charge on income tax from personal exertion, and 15 per cent, on incomes derived from investments, the Treasurer imposed a flat rate of ls. 6d. in the £1 on income from investments and property. The right honorable the Leader of the Opposition (Senator Pearce) this afternoon, quoting from a letter to the Sydney Morning Herald, written by Professor Carslaw, showed that this flat rate of ls. 6d. did not represent an addition of 7% per cent, to the existing rate, hut 7£ per cent, on the total assessable income from property. The Treasurer now proposes to increase this flat rate to 2s., thus making the additional impost 10 per cent, on the total assessable income from property. Apparently, this Government is ignoring the necessities of the various States which, as we all know, find it impossible to balance their budgets. I have been reading some of the criticism that has appeared in the press recently with regard to proposed legislation in the various States, and I gather that a taxpayer who is called upon to pay a federal tax of 2s. in the £1 on property income, is also paying a State tax of1s. 6d. in the £1 on the same income, and, in addition, an unemployment tax of 3d. or 6d. in the £1, thus bringing his total taxation up to 4s. in the £1. Now the Federal Treasurer intends to impose an additional 2s. in the £1, and, in one State at least, there is a proposal to reduce by 4s. 6d. in the £1 all income from investments on mortgages. If this is done the total taxation on that class of property income will be11s. in the £1. What incentive will there be for any person to engage in business if governments absorb more than 50 per cent. of the profits of enterprise? These increasing taxation burdens will make it much more difficult for people of thrifty habits to provide financial assistance for future governments. I have never yet heard any argument to convince me that there is any justification for such a marked differentiation between the rate of taxation levied upon incomes from so-called personal exertion and incomes from property, because, as is well known to all, although some men may enjoy an income of perhaps £1,000 a year, they never do a tap of work to earn it, while others, whose capital is invested in various business enterprises, not only are exposed to the risk of losing their capital, but also have to work extremely hard to earn their capital. Yet they are singled out for especially heavy taxation. In every country, as far as I have been able to gather, some differentiation is made in the rate of taxation levied upon income from personal exertion as compared with income from property ; but as a rule the differentiation is not nearly so wide as in the present Treasurer’s proposals. Why should John Brown, who has an income of £300 from personal exertion, be called upon to pay only £11s. 8d. tax, while his neighbour, John Smith, whose income of the same amount is from property, has to pay £17 6s. 3d. ? This differentiation cannot be justified unless the Government is prepared to abandon all pretence to political morality. In the case of a man whose taxable income is £600, the pro posed tax at the personal exertion rate will be £13 14s. 9d., but if the income is from property, he will be called upon to pay £83 10s. on the same income. If his income is £1,000 a year the proposed personal exertion rate will be £3811s., as against the proposed property tax, including the super tax, of £162 10s. I have never yet heard any justification for such a wide differentiation in the rates of taxation upon the respective incomes. In 1930 a person whose income from property was £300 paid £1 in taxation. The special tax of1s. 6d. in the £1, and the super tax, made the amount payable last year £21 12s. - an increase of 2,000 per cent. Contrast that with the £11s. 3d. payable by a person who, from personal exertion, received an income of £300! Nothing can justify such a differentiation. If that unjust imposition is not entirely removed, I shall move that it be substantially reduced. I shall not be a partyto grinding down those persons who, in their best years, used their energy to provide the means whereby they might secure reasonable comfort in their old age. They will be among the first to agree to the conversion of their present holdings. It is not right that they should suffer more than others in their effort to rehabilitate this country. Nothing can justify such a tax. We have made a differentiation between the rates, and that should be sufficient. It was not fair to impose a flat rate of 7½ per cent, in addition and now to increase it to 10 per cent.
– What does the honorable senator suggest?
– In view of the serious financial position of the country, we should abstain from destroying the source from which the funds necessary for rehabilitation must come.
– What would the honorable senator do to bring about an adjustment ?
– As a nation, we must turn over a new leaf. The people’s money mustbe diverted into reproductive channels. Unfortunately, we see very little result for the money which, goes into the Treasury.
I deplore the undue haste with which this measure has been introduced. Only recently have the majority of the taxpayers of this country paid their income tax on last year’s income. Then we had the budget presented to us. Now, even before the budget had been debated fully, this very important taxation measure comes before us. It is presented to us just when we are about to launch an appeal to our people to convert their holdings. We should do nothing which might, in any way, jeopardize the success of that conversion loan, or place heavier burdens on persons already overweighted with taxation. We should, at least, bo given time to consider what this bill means. Only this afternoon some very important matters have been raised - the levying of double taxation on certain incomes; the attempt to validate action which has been taken in she past in relation to certain phases of taxation ; the effect of income tax on life insurance and other societies which are not out to make profits for individuals, but use their profits to meet their obligations. Those matters require careful consideration. I have not yet had sufficient time to look into them. I have merely had time to sound a warning note regarding the danger of unduly burdening the people especially at a time when the Commonwealth is passing through a period of financial stress.
– For the greater part of the year those persons in the community whose incomes are subject to taxation are glad that their incomes are as large as they are ; but when the season arrives for them to render returns of their incomes, and especially when the time comes for paying their taxes, their satisfaction diminishes. At certain periods of the year there is probably no man in Australia who is so much abused as is the Commissioner of Taxation. He, however, bears up with Christian fortitude, knowing that he is acting on behalf of the Parliament of the country. Nevertheless, this measure is welcome in that it simplifies the formula by which the amount of taxable income is arrived at. Previously, it was beyond the scope of the ordinary citizen to work out his taxable income. Indeed, it was almost more than the experts could do. Even in the Taxation Department confusion has arisen from time to time in connexion with income tax payments and refunds, largely because of the intricate nature of the computations. This bill so simplifies the formula that it ought to be possible for ordinary citizens to compute the amount of taxation for which they are liable. To that extent it is a great advance upon earlier legislation.
While the bill removes certain existing anomalies, it provides for a differentiation between incomes from property and incomes from personal exertion which cannot be defended on any ground whatever. Professor Carslaw, of Sydney, who has contributed some fine articles to the press on the subject of taxation, regards this differentiation between the two sources of income as a blot on the measure. As there appears to be no necessity for such differentiation, I should be glad to hear from the Minister the reasons why income from property is treated differently from income from personal exertion. The Government’s proposal, which Senator Payne referred to as an attack upon income from property, is likely to be disastrous, not only to the taxpayers, but also to the future development of the country, because it will, to a great extent, divert capital from property to other investments not so liable to heavy taxation.
SenatorO’Halloran. - What type of investment would be exempt from income tax?
– There areother forms of investment which would not be so heavily taxed as is income from property under this measure. I am afraid that this staggering imposition will further depreciate property values at a time when they should not further depreciate. Throughout Australia, as a result of the depression, property values have fallen immensely. These heavy imposts will further reduce property values, and thereby deepen the existing gloom. It may even have more disastrous effects than that. It is true that under the bill the tax is limited to one year, but I should like to know what prospect there is of its removal at the end of the year. It is much easier to impose taxation than to reduce it. I cannot see any reasonable? prospect of this imposition being removed until the financial position ofthe
Commonwealth has considerably improved. The position of many thousands of taxpayers is indeed desperate. Out of greatly reduced incomes, they are being asked to pay taxation on last year’s income. To many who are already finding it a difficult matter to maintain an existence, this further taxation will be a burden hard for them to bear. I do not say that these heavy impositions are unnecessary. Unfortunately, I believe that this taxation must be levied, and for that reason, although I point out its probable effect, I feel that I cannot vote against the bill. I fear, however, that the proposals contained in it will force under some persons who otherwise would be able to carry on, although on a lower standard than hitherto. As one honorable senator has pointed out, it is a serious thing to impose taxation so heavy that in order to pay it, money will have to be drawn from other avenues by which the community generally benefits. In that connexion, we must take into consideration the taxable capacity of the people of Australia, which I think it will be agreed by everybody is now considerably less than it was last year or the year before. It is falling each year. From time to time, certain States have rightly pointed out that their taxable capacity is not nearly that of other and more powerful or wealthier States, and the special consideration they have asked from this Parliament has been granted to them. But, to-day, the Commonwealth Government seems to be losing sight of the fact that the taxable capacity of the people is steadily falling, and it is heaping big imposts upon them; it is taking more from them than they can well afford to pay. That policy cannot be continued indefinitely. We are committed to this plan, and pledged to see it through, but we must watch very carefully the effect of this taxation upon the people, and upon the possibility of that restoration we want to see evident in our community. If this taxation is not achieving the object aimed at by the Government, the whole matter will have to be reconsidered by this Parliament at an early date. The Government hopes to receive a certain revenue from the taxation imposed by this bill, but, in certain cases, it may be so high that instead of the revenue being increased, it may eventually be reduced. That is a point we should watch carefully, and, if necessary, remedy.
I appreciate the explanation -the right honorable the Leader of the Opposition (Senator Pearce) has made about the position of certain insurance companies. I brought up the matter when another bill was before us, and I felt sure, at the time, that the right honorable gentleman was labouring under a misunderstanding. To-day he has, in an honorable way, cleared it up, and 1 join with him and other honorable senators in asking the Government to reconsider the liabilities of these companies under this legislation. It would be wise to meet the representations of these companies. As has already been suggested, the further consideration of the bill might be adjourned so that at a later stage, when the Government has the benefit of a full knowledge of all the circumstances, it may perhaps be able to provide the relief which these companies seek, and to which they are justly entitled.
I shall vote for the second reading of the bill, not because I. like it, or because I am enthusiastic about it - I am by no means enthusiastic about it - but because? I feel that at this stage it is essential for the Government to have more revenue, and that that revenue should be gained from those who are best able to provide it. I also support the bill because it is part of the plan for the rehabilitation of Australia to which we all are pledged.
– While one can readily agree with the expressions of honorable senators regarding the heavy imposts which will lay upon the people, we are all unanimous upon the point that only the circumstances in which the country finds itself to-day justify the desperate remedies that have to be applied.
– Why does not the Government extend the field of direct taxation?
– I think that the Government is exhausting the field of all taxation imaginable. It is necessary in order to put the country on what we hope to be the right road.
I understand that the point raised by the right honorable the Leader of the
Opposition, relative to mutual provident societies, has been fully answered by Senator McLachlan. In the Debt Conversion Bill, provision is made to avoid any injustice being done to those societies.
– What was actually provided for in the section read by Senator McLachlan?
– My advisers tell me that it fully protects these companies from any of the dangers feared by the right honorable senator, and as a layman, it seems to me from a perusal of the provision that that is so.
– The insurance companies also complain about the method of assessing taxable income. They are now taxed on gross profits, but they claim that they should be taxed on surplus profits. That point is not covered by the Minister’s explanation.
– At a later stage I hope to be able to relieve the honorable senator’s uneasiness on that point also.
Question resolved in the affirmative.
Bill read a second time.
Clause 1 agreed to.
Clause 2 - (2.) The Income Tax Assessment Act 1922-30 is in this act referred to as the Principal Act.
Request (by Senator Barnes) agreed to-
That the House of Representatives be requested to amend the clause by leaving out the figures “ 1930 “ and inserting in lieu thereof the figures “ 1931.”
Clause agreed to, subject to a request.
Additions New Works, Buildings, Etc
Debate resumed from the 23rd July (aide page 4279), on motion by Senator
That the papers he printed.
– Although upon this question the margin for discussion is fairly wide, there is only one aspect with which I wish to deal. It arises mainly out of some words which appear in the concluding paragraphs of the budget speech, and some observations made in general terms by Senator Daly, followed, upon the same lines, by Senator O’Halloran. The Treasurer in his budget speech said -
The outstanding causes of the trouble have been beyond the control of the Government . . . All our attempts in the past twelve months to stimulate a recovery of trade, to maintain the stability and usefulness of our credit structure, to restore employment, and to secure to the workers and the primary producers their assured reward, have been frustrated by external events and influences.
The view put by Senator Daly and elaborated by Senator O’Halloran was that the embargoes and the high duties, which shocked even the most ardent protectionists of Australia, were necessary and that they did something, if not to relieve the existing conditions, at any rate to prevent them from getting any worse. The view was further put by the Assistant Minister (Senator Daly) that had we continued to drift as we were then drifting we should have found ourselves in a much worse position than we actually are. I desire to deal with the point as to whether the present Government did continue to drift. It can be said, I think, that it did only one specific thing, and that was to impose certain embargoes and high customs duties. Has the imposition of these embargoes and high duties done anything in the direction that was indicated? Have they done anything to relieve unemployment ? We have had the latest figures issued within the last few days, and unfortunately everything points to the fact that they have gone from bad to worse - that unemployment was never worse than it is to-day.
– The figures might have been worse if the customs duties had not been increased.
– That is always the argument with which we are confronted. It is impossible to meet an argument of that sort, because no one can look at the present and say what the position would have been if something had not been done in the past.
– It is conjecture, not argument.
– Yes; one can conjecture that things would have been worse; but one has no reason to think they would have been. It has to be remembered that these embargoes and high duties were imposed with the purpose of reviving trade, and diminishing unemployment ; whereas in fact they have done neither. Trading conditions were never worse than they are to-day.
We have then to ask the further question: Did the Government take any drastic action to stop the drift ? The only action it took was in connexion with the imposition of embargoes and high tariffs. In regard to everything else it continued to drift, and so far as we are able to determine, would have gone on doing so until the position had become irretrievable, but that it was brought up by an intimation from the Commonwealth Bank that it could not continue to finance the Government after a certain date unless steps were taken to improve its financial position. What followed? Did the Government say, “ Here we are, faced with a very serious position. Our bankers, who have no interest in the matter except to point out to us the grave peril that confronts us, have warned us of the position we are in, and we must retrace our steps “ ? No. What they did was to attack the banks and the bankers; to say that the banks were seeking to run this country; and to complain that no government could longer tolerate it. And so this Government introduced a measure for the purpose of obtaining political control over the banking institutions of this country. I venture to say that the Senate rendered a great service to Australia when it rejected the measure introduced for that purpose. . Had it not done so there can be no difference of opinion that our position to-day, bad as it is, would have been infinitely worse. The people of Australia have good reason to be thankful, and to sleep more comfortably in their beds with the knowledge that they have a Senate to protect them, because, as far as we can see, our friends on the Government bench are still unrepentant. Senator O’Halloran, in the course of his observations, said that the position, which is intolerable, could have been avoided had the Government been allowed to go on with its banking and financial policy. Later he said that had the Government been permitted to give effect to its monetary policy much of the unpalatable legislation which has been introduced could have been avoided. That indicates that not only did the Senate perform a great service when it rejected the Government’s original financial proposals, but also that it stands as a bulwark between the Government and the monetary policy which apparently it still has in mind.
With other honorable senators I am unable to follow the reasoning which lies at the basis of the speeches of Senator Daly and Senator O’Halloran. Last week the Senate discussed the Canadian trade agreement which was brought about by the present Government. When that agreement came before this chamber it was received with general applause from both sides of the chamber. Why was it applauded? I can understand honorable senators who sit on the same side as I do - I refer not to any physical lines which separate us, but to those moral and political lines which so sharply divide one section of the Senate from the other.
– I presume the honorable senator does not place too much emphasis on the word “ moral “.
– No ; I emphasize the political side. I can understand why honorable senators on this side rejoiced, and received that agreement with open arms, because it opens up fresh avenues of trade with the great sister dominion of Canada. We are glad that this agreement has been adopted, not merely for sentimental reasons, but for practical and business purposes. But how do Senators Daly and O’Halloran reconcile their attitude towards that agreement with the speeches in which they deplore our trade with other countries? It will be remembered that Senator Daly selected quite a number of commodities the importation of which he regarded as examples of bad government. Last F,rid ay, Senator O’Halloran said that millions of pounds worth of goods which could be manufactured in Australia have been imported. The evil of that kind of argument is that it is specious and extremely likely to mislead. In the first place, it is based on a number of fallacies. Senator Daly constantly complained of the quantity of goods that we “ bought “ from other countries and created the impression that in doing that we sent out of this country currency of some sort to pay for such goods. Every one who knot’s anything about our affairs realizes the only currency that we have sent out of this country recently is gold to the extent of £5,000,000 which we had to ship to Great Britain to meet certain commitments there. It is an utterly misleading expression to speak of having “bought” these goods from France. We do not buy in that sense. We trade, and trade is mutual. Unless we import something from France we cannot export goods to that country. Senator Daly did not direct attention to the patent fact, which goes almost to the root of the prosperity of the Commonwealth, that we export to France nearly £12,000,000 worth of wool and £2,500,000 worth of sheepskins alone. Against those exports to France he quoted a number of small items, such as perfumery, gloves, hosiery and a few thousand pairs of shoes which we import from that country. Figures such as those cited from the long and formidable list with which he supplied me, but which I have not now before me, should be considered not absolutely, but relatively, to the extent of the trade between the two countries. For instance, he deplored the fact that we imported from France £15,000 worth of confectionery. That is a good round figure and no doubt an appreciable amount if the Taxation Commissioner could levy income taxation on it; but before it takes any importance at all, it has to be considered in connexion with the value of our own output of confectionery, which is over £7,000,000 annually. Olive oil from Italy was another of the import items which affected Senator Daly.
– He almost wept over it.
– He almost, wept over the fact that we imported £17,500 worth of oil from Italy. But if the figure were worked out with that minuteness which Senator Payne would employ, it would be found it is equal to about only $d. per head of the population per annum. He also complained of the fact that £124,000 worth of boots were in the year under review imported from the United States of America; but our total production of boots is valued at about £10,000,000 per annum. As Senator Payne pointed out, we supply 94 per cent. of our own requirements of boots.
If we are to appreciate the extent of our importations we have to study them in comparison with those of other countries.
I suppose that the most ardent of the high protectionists or prohibitionists would look to the United States of America as a great example of the country to be followed. And well it ought to be, because if there was ever a country favorably situated for carrying out a complete policy of prohibition, it would be the United States of America. It embraces all climates and forms of production within its borders - from the tropics down at Florida to the ice-bound regions in the north. It is rich in almost all kinds of natural products, and is favorably situated for carrying out any experiments in the matter of prohibition and to make it what the Leader of the Government in the Senate (Senator Barnes) terms a self-contained, selfsufficient country. But what do we find? In 1929 the United States of America imported £858,000,000 worth of goods, and in 1930 £769,000,000 worth of goods. Apparently, that is its idea of “ a selfcontained and self-sufficient country “
I put it that this Government, so far from deploring the things that are beyond its reach, would have been better employed if, instead of building a wall round Australia, by means of embargoes and high duties, it had done with other countries what it has done with Canada - it would have done better had it tried to open, up some trade with them. The Government and, in fact, all parties, should recognize as a fundamental principle that we depend upon our natural products such as wool, wheat, meat, sheepskins, and such commodities to solve our financial difficulties. We have read in the newspapers during the last few days of the enormous stocks of gold locked up in the vaults of the Bank of France. If my memory serves me rightly, the figure mentioned was £460,000,000. That is the second largest supply of gold held in the world, the United States of America being the heaviest holder. We might be better engaged, in these times when money is so badly needed, in despatching some sort of delegation or embassy to France, to try to arrange for the loan of some of that gold which is lying in the vaults of the Bank of France and is not fructifying, we, in return, agreeing to take some of her perfumery and other small items that are important to her but are of really no importance to the manufacturers of Australia. That, however, is a digression.
I have raised the question of trade with other countries merely for the purpose of asking, since when has it become a crime for Australia to trade with other countries? Trade has gone on from the earliest dawn of civilization, not merely from the days of Tyre and Sidon, but from days that are long anterior. It is a bad argument that does not cut both days. If it be a good argument on our part that we should regard with horror the goods that we import from other countries, it must be an equally good argument on the part of other countries to regard with horror the goods that they import from us. As Senator Foll has asked, where would we be if France raised the cry that there should be no imports into that country of wool, sheepskins and other commodities from Australia?
– Senator Foll does not object to an embargo on the importation of sugar into Australia.
– That interjection may embarrass Senator Foll or other honorable senators who come from Queensland ; it certainly does not embarrass me.
– It destroys the value of the honorable senator’s authority.
– It does not destroy the value of the argument. There is a saying by a very old doctor, “ Attend to what was said, and not to who said it “. Whatever may be said of Senator Foil’s views as a general rule, or on the question of sugar in particular, in this connexion I venture the opinion that his views are perfectly sound. The logical outcome of the attitude adopted by honorable senators opposite is that, not only should we become self-contained, but that every other country should do likewise.
– Our view is that we should make an effort to pay our way.
– We can pay our way only through the medium of the natural products of the soil of Australia. Those products must be exported to other countries; and to achieve that end, we must agree to accept in exchange some of the commodities of those countries. May [ ask where my friends opposite hope to lead us? What country is it that they wish to emulate? The Leader of the Senate (Senator Barnes) spoke of a selfcontained and self-sufficient country.
– China, I think, at the time when she built the Great Wall; or Thibet as it is to-day. I understand that it is still unsafe to cross the Himalaya Mountains to Thibet. Although I believe that that country imported one motor car the year before last, she has now given up that bad habit. Or, maybe it is Greenland - where, I understand, the igloos are constructed entirely of blocks of ice manufactured on the premises, none being imported from the equator !
While Senator Payne was speaking, Senator Daly interjected that we should spend our money more profitably. Who are the “ we “ to whom the honorable senator referred ? What that interjection means when one resolves it, is that other people should spend their money in the way that Senator Daly thinks is more profitable. Where, I ask, are we likely to get if we give legislative sanction to the theory that one set of people has a right to direct the views of another set? Such a theory, I venture to say, involves us in a hopeless position, which ought to appeal to my friends on the Government bench, because they embody the very height of democracy.
– I would not describe it as “ height “.
– I always like to be complimentary to those whom 1 am-
– About to destroy.
– Yes, about to destroy. The principle of democracy is, “ One man, one vote “. It is said that every man in the community is equal. I agree, if that does not mean that every man is” equal mentally. Every man has equal rights before the law, and in the making of the law.
– Every man has an equal right to live.
– I admit that that is so. The position taken up by the advanced democrat is that, in the election of a parliament, whose duty it will be to make the law, the great democracy cannot err; its instincts are right, and it elects the right people. But once the great democracy has elected the right persons, apparently its instincts to do right vanish entirely. Its members then have to buy and sell as the government directs. The instinct which guided them to make the right choice of legislators apparently can no longer guide them to make the right choice when they are buying or selling or dealing with the every-day affairs of their lives. That is a variant of a well-known statement by Edmund Burke - that it involves the short but discouraging proposition, that we are a very bad people, but we have a very good parliament; or, varying the phraseology, that we are a very foolish people, but we have a very wise Parliament. I put it that that runs contrary to the well-known statement that a stream cannot rise higher than its source. Parliament has no right to regulate the daily lives of the people, and would be acting foolishly if it attempted to do so.
– How far should the principle operate ? There must be some restriction on the freedom of the people.
– I quite admit that. But the placing of restrictions on the freedom of the people is entirely different from the total regulation of their daily lives; and that is the tendency of modern socialism in government. “We are told that the present system has broken down. I venture to assert that our present system has never been tried. That is not an Hibernianism, but an epigram. I mean that what people think is our present system has never been tried. It has broken down, not because it is individualistic, but by reason of the fact that it is overloaded with socialism. One has only to study the figures quoted by Senator Elliott last week to realize that that is so. They show that our costs of government amount to £234,000,000 - more than 52 per cent, of the total national income.
– How much of that represents the cost of services rendered by governments, such as developmental railways?
– As will be readily understood, I am unable a.t the moment to supply the honorable senator with details. I am merely showing that the costs of government are immensely high, that the services rendered are too great, and that the tendency is for them to become even greater. The point which I desire to make is that this country can be saved only by the gradual withdrawal of governments from socialistic enterprises, leaving the people to work out their own salvation. The prime duty of the Government is, not to make the people rich, but to protect them while they are making themselves rich.
– Make no attempt to provide railway communication for the settlers in the back-blocks so that they may market their products?
– I do not concede that there is no room for government enterprise, especially in a young country like Australia, which has to be developed. But unfortunately experience appeal’s to have proved that, on the whole, government enterprise is not altogether inseparable from abuse. In spite of those abuses, however, there has to be some reasonable measure of government interference. But what I object to, and what I feel strongly has contributed materially to our present difficulties, is the idea that nothing can be done properly unless it bc done by governments. Only this afternoon, in his speech upon the Wheat Marketing Bill, the Leader of the Senate deplored the fact that the Government had .not gone in more extensively for marketing organizations. I deplore the fact that the Government has assumed as much responsibility as it now holds. I hold strongly the view that, until it retraces its steps, we shall never be free from our present troubles. We may escape from them temporarily, but we shall drift back into them.
– The producers are asking for this legislation.
– I do not believe that that is so. Gilbert Chesterton has said that the modern democrat’s idea of progress is “ being moved on by a policeman “. That is an idea of progress which does not appeal to me in the least degree. The principal point that I desire to make is that our present position has been brought about largely as a result of too much government interference in the affairs of the country. If the answer to that is “ But the conditions that are being experienced in Australia to-day are world-wide I retort, “ Although they are world-wide, if our country had been prudently governed, if our people had been trusted to work out their own salvation instead of governments working it out for them, so far from Australia being the bad example - as I am afraid it is - of financial stress, it would have felt those world-wide conditions less than any other country.”
I believe that the view generally held is that we are not so far out of our difficulties. We have turned our heads, so to speak, in the right direction ; but, to use the figure of speech that was used a few weeks ago by the Lieutenant-Governor of Victoria, we are still on a lee shore, and still greatly concerned as to whether the anchors will hold. We hope that the anchors will hold until the financial storm abates. Some honorable senators, I suppose, are old enough to remember the thrilling escape of the British warship Calliope from the harbour of Apia, during the terrible cyclone’ in 18S9, when several American and German warships were driven ashore and destroyed. The captain of the Calliope ordered steam to be raised, the anchors lifted, and, in the height of that fearful storm drove his ship out of the port into the high seas, and to safety. I am afraid that we have not at present a Captain Kane on the bridge to take the good ship Australia safely out into the high seas, but that, at all events, is what is needed. If we are to weather this storm we must have less of this coddling of individuals and industries, and leave more to the energy and enterprise of our citizens. If governments interfere less with the activities of the people, the country is rich enough and the people are energetic enough to one day bring us hack to a condition of prosperity.
Debate (on motion by Senator Kneebone) adjourned.
In committee: (Consideration resumed from page 4425).
Clause 3 (Imposition of Income Tax).
– Earlier in the day the committee reported progress on this clause, so that I might be able to give some assurances on points that were raised by the right honorable the Leader of the Opposition (Senator Pearce) and Senator Lawson. I have endeavoured to obtain the desired information, and I am now in a position to say that the Government will take every precaution to see that no injustice is done to any section of taxpayers. This legislation is somewhat hurried, but because of the circumstances in which wo find ourselves, that is unavoidable. If, subsequently, it is discovered that certain provisions require further consideration, they can be dealt with in the light of experience. I hope that honorable senators opposite will accept my assurance.
Senator Sir GEORGE PEARCE (Western Australia) [5.53]. - I am at a loss t» understand what assurance has been given by the Minister. As to his plea of urgency, I point out that the financial position of the Government would not be prejudiced if the passage of this bill were delayed for a month, because the taxation to be derived under it will be obtained from last year’s income. I could understand his plea of urgency as applied to certain other proposals such as the conversion loan, but not as applied to this bill. Both Senator Lawson and myself raised certain points with regard to the position of life insurance companies, and the Minister has given us no undertaking or assurance about those matters.
– He has assured us that the Government’s intentions are good.
– I suggest that we shall be able to dispose of this measure just as quickly if the Minister will postpone further consideration until to-morrow, and in the meantime obtain a considered statement dealing with the points that have been raised. I am sure that the Commissioner of Taxation has not yet had time to read the speeches delivered here this afternoon, and advise the Government with regard to them. If the Minister will agree to report progress, he can bring before the Acting Treasurer (Mr. Scullin) the representations that have been made and to-morrow present a statement of the government’s view. If we continue the further consideration of the bill this afternoon, we shall have an interminable discussion and certainly will not be able to make progress.
– If the committee passes this clause, I shall report progress.
.- I do not think that the committee should pass this clause, because it provides that income tax shall be imposed “ at the rates declared - in this act “.
– We shall still have to deal with the schedules.
Clause agreed to.
Senate adjourned at6 p.m.
Cite as: Australia, Senate, Debates, 28 July 1931, viewed 22 October 2017, <http://historichansard.net/senate/1931/19310728_senate_12_131/>.