House of Representatives
29 November 1927

10th Parliament · 1st Session

  1. House of Representatives
  2. 10th Parliament
  3. 1927

Mr. Speaker (Hon. Sir Littleton Groom) took the chair at 11 a.m., and read prayers.

page 2151

QUESTION

AUSTRALIAN COMMONWEALTH LINE OF STEAMERS

Mr CHARLTON:
HUNTER, NEW SOUTH WALES

-Yesterday the Prime Minister said that he would invite public tenders for the disposal of the Australian Commonwealth Line of Steamers. I ask him if he will place his proposals before the House for approval?

Mr BRUCE:
Minister for External Affairs · FLINDERS, VICTORIA · NAT

– I presume that the honorable member is referring to the form of tender to be issued?

Mr CHARLTON:

– Yes.

Mr BRUCE:

– It would be impracticable to submit tender forms of that character for discussion in the House. The tenders themselves will be based on the statement I have made in the House as to the conditions the Government will require the purchaser to observe.

page 2151

QUESTION

LABOUR AT DARWIN

Mr THOMPSON:
NEW ENGLAND, NEW SOUTH WALES

– Has the Prime

Minister read an article in yesterday morning’s Argus, written by Sir William Sowden, which contains very serious statements regarding the go-slow methods of wharf labourers at Darwin, and the enormous amount that these methods add to the cost of handling cargo? In particular, has the right honorable gentleman’s attention been-drawn to Sir William Sowden’s statement that the wharf labourers responsible for this deplorable state of affairs are mostly Greeks, Italians, Filipinos, nondescripts and halfcastes? In view of this article will the Prime Minister instruct the North Australia Commission to expedite its report to Parliament, and will he ask it to submit a special report, in reference to the statements of Sir William Sowden in the Argus ?

Mr BRUCE:
NAT

– I have not seen the article to which the honorable member refers, but I shall peruse it, and give consideration to the honorable member’s requests.

page 2151

QUESTION

DISCUSSION OF BUDGET AND ESTIMATES

Mr THEODORE:
DALLEY, NEW SOUTH WALES

– Yesterday, in reply to a question submitted by the honorable member for Reid (Mr. Coleman), the Prime Minister said that the Government, in dealing with the Estimates this session had adopted “ the customary procedure.” Does the right honorable gentleman say that it is customary to pass the whole of the Estimates, to receive and adopt the resolutions of committee of supply and committee of ways and means, and to pass the Appropriation Bill at one sitting? Is he not aware that fifteen days are allowed in the House of Commons for dealing with the Estimates and

Supply, and that it is usual in other British parliaments to allow from ten to eighteen days for the consideration, discussion and passage of Estimates?

Mr BRUCE:
NAT

– The honorable member’s question, I suggest, is submitted member had been present when I made my to elicit information. If the honorable more for the purpose of propaganda than reply to the honorable member for Reid, he would have heard me say that on this occasion the time occupied in the consideration of the financial proposals of the government was much longer than has been customary in this Parliament, and certainly compared extremely well with that occupied by similar discussions in many of the States, including the State from which the honorable member has come.

page 2152

QUESTION

ALICE SPRINGS RAILWAY

Mr GULLETT:
HENTY, VICTORIA

– I understood the Prime Minister to say a few days ago that if, as a result of the present financial position and the difficulty of raising new loans, the South Australian Government would agree to the postponement of the construction of the Oodnadatta to Alice Springs railway, the Commonwealth would acquiesce in the arrangement. I should like to know if the right honorable gentleman has made any representations on the subject to the South Australian Government, or if he intends to do so?

Mr BRUCE:
NAT

– The construction of a railway line to the Macdonnell Ranges is part of an obligation assumed by the Commonwealth when it took over the Northern Territory from South Australia. Two or three years ago the present Government, in order to honour that obligation, entered into an agreement with the South Australian Government, and undertook to build this line within a specified time. In these circumstances, and because a contract has been entered into for the construction of the line, it would not be right or proper now for the Commonwealth to approach the South Australian Government, and ask for the postponement of the construction of the line. But if, as a result of the discussions which have taken place here and in all the parliaments of Australia regarding the raising of loans and the present financial position, the South Australian Government approaches the

Commonwealth Government, we shall be quite prepared to consider anything that can be done’ to postpone this particular work and avoid expenditure.

page 2152

QUESTION

CANCER RESEARCH, QUEENSLAND

Mr D CAMERON:
BRISBANE. QLD · NAT

– Can the Minister tell me whether the sum of £5,000, which he announced some time ago would be donated to the Queensland Cancer. Research Fund, is included in the £100,000 to be paid for the purchase of radium, or is it a separate donation ?

Sir NEVILLE HOWSE:
Honorary Minister · CALARE, NEW SOUTH WALES · NAT

– The Government has decided that the £5,000 donation or contribution to the Queensland Cancer Research Fund shall be independent of the £100,000 to be expended on the purchase of radium.

page 2152

QUESTION

LOAN FLOTATION IN LONDON

Mr FENTON:
MARIBYRNONG, VICTORIA

– Is the Treasurer prepared tovouch for the correctness of the cablegram in yesterday’s press to the effect that, the underwriters have had to take over alarge proportion of the Commonwealth £7.000.000 loan now in process of flotation in London?

Dr EARLE PAGE:
Treasurer · COWPER, NEW SOUTH WALES · CP

– I am not prepared to vouch for the correctness of cablegrams appearing in the press. The loan referred to was, of course, fully underwritten by the underwriters, and I understand that from 25 to 50 per cent. of the stock has been actually taken up by the public.

page 2152

PRESS MISREPRESENTATIONS

Mr YATES:
ADELAIDE, SOUTH AUSTRALIA

-I desire to make a personal explanation. I wish to direct your attention, Mr. Speaker, to the following paragraph in Monday’s issue of the Sydney Sun: -

LABOR SONGSTERS.

If the cheerfulness of the Labor Party is any criterion, Federal politics should be distinctly lively as the end of the session draws nearer. For the first time since Canberra sessions have been held, strains of music and merriment from the Opposition room echoed through Parliament House to-day. The favorite Labour song, “ There’ll be pie in the sky when we die “ was sung, and the voices of Messrs. A.E. Green and Yates were dominant. “Solidarity for Ever” and “The Red Flag “ issuing from the party room which adjoins the Speaker’s quarters, drove Sir

Littleton Groom out to a round of golf. Mr. A. E. Green is the musical conductor of the Labor Party.

While I have no objection to my merits as a chorister being proclaimed, I hold that a paragraph like this should at least be correct. It may be very good propaganda to say that honorable members on this side of the House sing songs which some regard as objectionable, but the writer should be correct in his statements. It is true that we sang “ There’ll be pie in the sky when we die,” and even if the words of the song may be regarded as offensive, the melody is most enchanting. They are set to the tune of “ In the Sweet bye and bye,” and I hardly think the hilarity of honorable members opposite is complimentary to the composer of that hymn.

Mr Speaker:
Hon. Sir Littleton Groom

– Order! The honorable member must confine his remarks to a personal explanation.

Mr YATES:

-“ Solidarity for ever “ was also sung and as some day solidarity will be realized, I have no apology to make for the singing of that song. “ The Red Flag” was not sung. We also sang “ The Song of Australia “ but no mention is made of that in the newspaper paragraph. What the paragraph intended to convey is quite clear. I seriously object to my name being included in a statement which is quite untrue.

Mr A GREEN:
KALGOORLIE, WESTERN AUSTRALIA · ALP; FLP from 1931; ALP from 1936

– I also desire to repudiate the statement in the Sydney Sun. No one in the party room sang “The Red Flag.” I have made myself fairly clear as to what my politics are, and I resent the imputation that I have any inclination to sing a song of that character. At the same time honorable members in the party room sang “ The Song of Australia,” “Labour’s Hymn” and other songs. We did so because we are a party with inspiration.

Mr SPEAKER:

– Order! May I suggest to the honorable member that he should confine himself to the particular point upon which heclaims to have been misrepresented.

Mr A GREEN:
KALGOORLIE, WESTERN AUSTRALIA · ALP; FLP from 1931; ALP from 1936

– I am sure, Mr. Speaker, you recognize that a paragraph of this kind going abroad unchallenged is likely . to affect my party politically, although it will not affect me personally, because I am too well known in my electorate. I say, therefore, that I resent anything of this kind, because it will give an opportunity to some honorable members to utilize the episode as propaganda. That was done by the honorable member for Corio (Mr. Lister) and others at a previous election.

Mr SPEAKER:

– An honorable member when making a personal explanation must, so far as possible, confine himself to a statement regarding the misrepresentation of which he complains, and must not enter into an argument upon debatable matter nor make a suggestion implicating any one else. To do so might provoke an explanation in reply, and that might possibly lead to something in the nature of a debate.

Mr A GREEN:
KALGOORLIE, WESTERN AUSTRALIA · ALP; FLP from 1931; ALP from 1936

- Mr. Speaker, misrepresentation in the press, whose representatives are privileged to be here to report our proceedings, is a grave matter that should be dealt with by the chair.

page 2153

QUESTION

DISCUSSION OF BUDGET AND ESTIMATES

Mr THEODORE:

– I wish to make a personal explanation. At the conclusion of his reply to my question I understood the Prime Minister to say that the procedure adopted here in the passing of the Estimates did not differ in the matter of expedition from the procedure adopted in some of the State parliaments and particularly in that of the State from which I came. Presumably the right honorable gentleman suggested that during my regime in Queensland we resorted to tactics which resulted in undue expedition in the passing of the Estimates and in the stifling of discussion. That is not correct. The Standing Orders of the Queensland Parliament provide that in addition to the time provided for the discussion of the budget, fifteen days shall be allowed for the discussion of the Estimates, as well as additional time for the initial consideration of the Appropriation Bill. The Standing Orders also provide an additional day for the discussion of the resolution which comes from. Committee of Supply. In this case the Estimates were only briefly considered after a protracted sitting-

Mr SPEAKER:

– The honorable member is now going beyond a personal explanation.

Mr THEODORE:

– I desire to ask the Prime Minister if he does not think that further time should be allotted for the discussion of the individual departments of the Estimates; because an opportunity should be given-

Mr SPEAKER:

– The honorable member is not entitled to debate, the matter.

Mr THEODORE:

– I ask the Prime Minister if an opportunity will be provided for honorable members to discuss the administration of the departments, thus giving Ministers an opportunity to defend their Estimates. The discussion should not have been confined practically to a general review of the finances of the Commonwealth.

Mr SPEAKER:

– Order! The honorable member is putting his question in an argumentative form.

Mr THEODORE:

– I wish to know whether in future honorable members will be allowed to discuss the Estimates in the ordinary way, unless there is particular reason for expedition. We have devoted some time to a discussion of the finances of the Commonwealth; but have not had an opportunity of discussing the votes for individual departments.

Mr BRUCE:
NAT

– I remind the honorable member that it is not customary to give opinions in reply to questions. The honorable member has, however, asked for my opinion, and it is that the discussion of the financial proposals of the Government and the Estimates was in accordance with the Standing Orders, and the Government does not propose to go back on the procedure it adopted.

page 2154

QUESTION

DISABLED SOLDIER

Case of William Green

Mr COLEMAN:
REID, NEW SOUTH WALES

– I desire to direct a question to the Minister for Repatriation, but before doing so I wish to read the following letter from William Green, No. 2370, 4th Battalion :-

I was wounded on the 19th August, 1916, in France. Sent to England, in hospital there for six months, they could not find out what was wrong with me or where I was wounded. I pointed out to the doctors where I thought I was wounded, but they, used to only laugh and say it was only a scratch. After a hard battle with the Medical Board, I was’ invalided home to Australia as unfit, was kept in the Military Hospital in Sydney for observation. I was discharged as unfit for further service. I was put on 50 per cent, pension, on my military discharge it stated I was discharged through a crushed chest. I was kept on 50 per cent pension for about twelve months, then reduced to 5s. a week, and shortly after, my pension was cut right out as the Repatriation doctors said that I was quite all right, so I had to take their word, but all the time I was in the same state of health as when I returned to Australia. I kept going as well as I could until October 1926, when I was taken to hospital and x-rayed. The x-ray report was a steelcoated bullet to right of my spine. I had the bullet removed at the Military Hospital, Randwick. I put a. claim in to the Repatriation Department for the arrears of pension, after waiting about six months, they granted me arrears at the rate of 10 per cent pension. My disability was worth 50 per cent when I was discharged, and I was suffering the same disability all the following year. The Repatriation Department thinks that ten per cent, pension was enough compensation for me for all those years of suffering I went through, caused through the mistake of the military doctors and Repatriation doctors, and in the finish I had to find out at my own expense to be x-rayed and that it was the bullet that was in me that caused all the trouble. 1 would like you to take up my case with the Repatriation Department and see .if they could not grant me the 50 per cent, pension for seven years that I had to suffer through their mistake. As there is only one person who has any idea what I suffered and that is myself.

Will the Minister investigate the features of this case, which in my opinion calls for much more sympathetic treatment than has been accorded to this disabled soldier ?

Mr SPEAKER:

– For the guidance of honorable members, I may say that neither the reading of lengthy letters nor the expression of opinion, when asking questions is permissible. Honorable members should direct attention of Ministers to the contents of such communications, or read so much only as is necessary to make the question intelligible. If the practice followed in this case were adopted generally, an almost indefinite amount of time would be taken up in disposing of questions without notice.

Sir NEVILLE HOWSE:
NAT

– The honorable member for Reid will recollect that some years ago I promised to review, personally, all cases presented to me by any honorable member. ‘ In from fifteen to twenty instances he’ “has brought .. cases under my personal notice, and I believe he has expressed satisfaction with the careful review of them which has been given. I fail to understand why in this instance he is bringing the matter before the House. In accordance with the promise previously given, I shall certainly carefully review the case, and acquaint him with the result of my investigations.

page 2155

QUESTION

RAILWAY CONCESSIONS TO CANBERRA PUBLIC. SERVANTS

Mr BLAKELEY:
DARLING, NEW SOUTH WALES

– A week or two ago an honorable member asked the Minister for Home and Territories or the Prime Minister, whether it was intended to grant railway passes to public servants who have not yet transferred their families from Melbourne to Canberra and are anxious to visit their homes during the Christmas holidays. I have . been requested to ask the Prime Minister whether the Government has considered the request?

Mr BRUCE:
NAT

– The matter is under the consideration of the Government at the present moment.

page 2155

QUESTION

MAIL SERVICES IN SOUTH AUSTRALIA

Mr PARSONS:
ANGAS, SOUTH AUSTRALIA

asked the Postmaster-

General, upon notice -

  1. Whether, owing to the curtailment of railway services in country districts in South Australia, and consequent less frequent mails, he will have inquiries made as to what methods might be adopted to supplement the carriage of mails by railway?
  2. Does the department pay as much for a twice-a-week mail service as for a thriceaweek service, when such reduced service is consequent upon curtailed railway services?
Mr GIBSON:
Postmaster-General · CORANGAMITE, VICTORIA · CP

– Inquiries are being made as to the effect any curtailment of railway services in South Australia has had upon mail arrangements, and replies to the honorable member’s questions will be furnished as early as possible.

page 2155

QUESTION

CIVIL AVIATION

Aerodromesatbundabergand Rockhampton.

Mr FORDE:
CAPRICORNIA, QUEENSLAND

asked the Minister representing the Minister for Defence, upon notice -

  1. In view of the large sum of money made available for civil aviation during the current financial year, will he have the request for an aerodrome at Bundaberg reconsidered?
  2. Is it a fact that the celebrated aviator, Mr. Bert Hinkler, intends to fly to Australia in the near future, and that, an Bundaberg is his native city, it is his intention to land there?
  3. In view of the importance of Bundaberg and district and the great impetus recently given to civil aviation, will he state who made the report on the proposed aerodrome at Bundaberg and what was the nature of such report?
  4. If the proposed site at North Bundaberg is not suitable, will he issue instructions that a suitable site be selected by an officer of the department?
  5. What is the estimated cost of establishing an aerodrome at Bundaberg?
  6. How many aerodromes has the ‘ Civil Aviation Department established in each State of Australia, and at what centres?
Sir NEVILLE HOWSE:
NAT

– Inquiries will be made, and the honorable member informed as soon as possible.

Mr FORDE:

asked the Minister representing the Minister for Defence, upon notice -

  1. What was the date of the first representations made to his department by the honorable member for Capricornia for the establishment of an aerodrome atRockhampton?
  2. What was the estimated cost of establishing the aerodrome?
  3. Why was it not established?
  4. In view of the large sum of money made available for civil aviation during the current year, and in view of the growing importance of central Queensland in civil aviation, will he reconsider his decision and make a special effort to have a suitable aerodrome established at Rockhampton in order to give the desired encouragement to civil aviation in that district?
Sir NEVILLE HOWSE:

– The information will be obtained, and the honorable member informed as soon as possible.

page 2155

QUESTION

COTTON PRODUCTION

Mr MACKAY:
LILLEY, QUEENSLAND

asked the Minister for

Trade and Customs, upon notice -

  1. What was the quantity of cotton production in bales and pounds weight in Queensland and North Australia for the years 1924-25, 1925-26, and 1926-27?
  2. What was the price paid to the growers?
  3. What was the quantity of cotton imported ?
Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– The information is being obtained.

page 2155

QUESTION

PINUS INSIGNIS

Mr M CAMERON:
BARKER, SOUTH AUSTRALIA · LP; NAT from 1925; UAP from 1931

asked the Prime Minister, upon notice -

  1. Is it a fact that the South Australian Government sent a quantity of Pinus insignis timber to Sydney, to be converted into paper pulp and paper?
  2. If so, was this work conducted under the superintendence of the Commonwealth Bureau of Science and Industry?
  3. Has the result been satisfactory, and is it proved that the manufacture of pulp and paper from Pinusinsignis is a payable commercial proposition in Australia?
Mr BRUCE:
NAT

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

  1. Yes.
  2. Yes.
  3. A full report on the tests which have been carried out is being prepared but is not yet available.

page 2156

QUESTION

PREFERENTIAL TARIFF

Mr FORDE:

asked the Minister for

Trade and Customs, upon notice -

  1. What is the estimated total benefit (a) to Great Britain; (b) to Canada and other dominions annually as the result of the preferential tariff, including the benefits under the new schedule?
  2. What is the estimated total benefit to Australia as the result of tariff preference (a) by Great Britain; and (b) by other dominions?
Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– The information is being obtained.

page 2156

QUESTION

BARREL AND SOCKET BOLTS

Mr THEODORE:

asked the Minister for Trade and Customs, upon notice -

  1. Regarding page 6 of the Tariff Board’s report on kit bag frames, attache and suit case pins, and barrels and socket bolts, where the board refers to barrel and socket bolts being admissible under Item 404 (a) is this an error, and (6) are they not included under Item 208?
  2. Will he consider an increased duty on barrel and socket bolts?
Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– The answers are as follow : - 1. (a) No. The barrel and socket bolts referred to in the Tariff Board’s report, are not ordinary barrel and socket bolts, but are special barrel and socket bolts for use in the manufacture of bags and portmanteaux, and are at present admissible under Tariff Item 404.

  1. See (a).

    1. No public inquiry has been held by the Tariff Board on the subject of the duty on ordinary barrel and socket bolts, and at the present time no steps can be taken to increase the duty.

page 2156

QUESTION

TARIFF REDUCTIONS

Price of Commodities

Mr COLEMAN:

askedthe Minister for Trade and Customs, upon notice-

Is he in a position to enumerate reductions effected in the price of commodities in pro tected industries since the last tariff schedule was brought down, and, if so, will he lay such list upon the table of the House?

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– A number ofsuch instances are available and a statement in connexion therewith will be laid upon the table of the House at an early date.

page 2156

QUESTION

AUSTRALIA, TASMANIA, AND NEW ZEALAND FROM EARLIEST TIMES

Mr THEODORE:

asked the Prime Minister, upon notice -

  1. Has his notice been directed to a new historical work entitled Australia, Tasmania and New Zealand, from Earliest Times, by J . T. Grattan Grey, published by Fraser and Jenkinson Pty. Ltd., Melbourne.
  2. As this work has been very favourably reviewed in the press throughout Australia, and stated to be invaluable as a source of reference, will he consider the purchase of a consignment of the book for despatch to the High Commissioner’s Office for distribution in Great Britain?
Mr BRUCE:
NAT

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

  1. No.
  2. The matter will be given consideration.

page 2156

QUESTION

CANBERRA

Use of Foreign Tractor - Kerbing and Guttering- Investments of Administrative Officers - Social Service Organization

Mr A GREEN:
KALGOORLIE, WESTERN AUSTRALIA · ALP; FLP from 1931; ALP from 1936

asked the Minister for Home and Territories, upon notice -

  1. Is it a fact that a motor tractor of American manufacture is being used by the Federal Capital Commission on road work in Canberra ?
  2. If so, in view of the protectionist policy of the Government, why was not an Australian tractor, such as the “ Jelbart,” or the “Ronald. son-Tippett,” purchased by the Commission?
Mr MARR:
Minister of Home and Territories · PARKES, NEW SOUTH WALES · NAT

– I am having enquiries made and shall advise the honorable member as soon as possible.

Mr CHARLTON:

asked the Minister for Home and Territories, upon notice -

Is he yet in a position to give replies to the questions of the honorable member for Hunter on the 4th instant(Hansard, page 986), regarding (a)kerbing, guttering and footpaths at Canberra, and (b) administrative officers being financially interested in companies operatingin the Federal Capital Territory?

Mr MARR:

– I have given consideration to the honorable member’s request in regard to the kerbing, guttering and footpaths, but I am unable to see my way to ask the Government to take the course suggested.

As honorable members are aware, the lands of the Territory have been vested in the Federal Capital Commission, and that body has been required to accept the liability for the expenditure, including interest, which has been incurred in connexion with the Federal Capital project. The commission is responsible for the conduct of all services of a municipal character, in relation to which it is entitled to obtain contributions, in the usual form, from those enjoying the benefit and use of them.

Many of these services - such as, for example, the water supply system and the sewerage system - have necessarily been designed for a much larger population than can be expected in the Territory for many years to come. The interest and charges thereon are such that it would be inequitable to expect the present population to bear the. whole of them. In assessing the payments to be made for these services the policy has accordingly been to require the existing population to pay only its proportionate share of the annual charges involved.

In the case of kerbing and guttering, however, the matter is quite different. The kerbing and guttering for which lessees have been charged is that in front of their properties, and in all cities it is the custom to charge - directly or indirectly - the occupiers of land for the cost of road-making services.

It is difficult, therefore, to perceive what justification there could be for acceding to the request that the cost of kerbing and guttering should be borne by the nation instead of by the lessees, or what hardship is imposed upon lessees in requiring them to make payments for municipal services similar to those that they would be required to make in other cities.

I am not yet in a position to make a statement in regard to (b),but hopeto be able to do so this week.

Mr MARR:

– On the 24thNovember the honorable member for South Sydney (Mr. E. Riley) asked me the following questions : -

  1. What has been the cost to the Commonwealth up to the end of August of the social service organization controlled by the Federal Capital Commission ?
  2. What has been the cost to taxpayers of social service functions given to welcome civil servants at Canberra?
  3. How much was spent in intoxicating liquor for these and other functions by the social service officer, acting for the commission ?
  4. What has been the cost to date of their monthly journal CommunityNews?
  5. What has been the loss on that periodical?
  6. Is it a fact that, without calling tenders for the blocks used to illustrate the development of Canberra, arrangements have been made for them to be handed over to private individuals to carry on the journal?
  7. If not, what are the exact terms of the agreement or contract entered into, and the names of the persons directly concerned?

I have now received the following particulars from the Federal Capital Commission : -

  1. The cost of the organization from 1925 to the end of August, 1927, inclusive, was £.10,725, including the following categories of expenditure: -

The contributions of the commission comprise subsidies and assistance to the Canberra Mothercraft Society (which has established branches at Eastlake, Ainslie, Acton, Causeway and Molonglo, and operates a baby clinic at Eastlake, and contemplates the establishment of health centres in other localities) ; equipment and assistance in the establishment of the Canberra City Band and Canberra Philharmonic Society, the Canberra Community Library, Ainslie Workmen’s Club, and the Women Workers’ Club and Hostel ; improvements to recreation halls in temporary settlements; the provision of bathing facilities; and assistance in the conduct of the Territorial school children’s annual sports and picnic. The structures erected with the financial assistance of the commission include eight children’s playgrounds, ten cricket wickets, nine tennis courts, six sports pavilions, and a hall at the Causeway settlement, apart from numerous minor services of transport, &c. The Social Service Association has rendered voluntary effort in the development of all projects. The recreational and other facilities provided have been extensively utilized by all sections of the community, and in most cases the expenditure, is represented by substantial assets. The ‘Canberra Social Service Association is not controlled by the Federal Capital Commission. The association was organized and founded upon the initiative of the commission about three years ago with the main object of improving the living and recreational conditions of the commission’s employees and other residents of Canberra, living in temporary settlements, and to generally foster a community spirit in the National Capital. The association is controlled by a council, elected by the members of the association resident in the various dis tricts, and the commission has a lively interest in all its activities, realizing that some assistance was essential in the early life of a community such as that of Canberra.

  1. The following schedule indicates the commission’s contribution towards the cost of welcome functions to Public Servants, and the amount contributed in respect of each by the Social Service Association: -
  1. If by loss is meant the commission’s contribution towards the payment of expenses, the amount is £5731s. 4d.
  2. No. The blocks will remain the property of the commission but will be loaned from time’ to time, as occasion requires, to the Social Service Association in connexion with the publication of the Canberra Community News by that body, provided a satisfactory arrangement is made with the latter to take over the publication of the Journal.
  3. See reply to (6).

page 2158

QUESTION

DERBY-WYNDHAM AIR SERVICE

Mr A GREEN:
KALGOORLIE, WESTERN AUSTRALIA · ALP; FLP from 1931; ALP from 1936

asked the Minister representing the Minister for Defence, upon notice -

In view of the frequent representations that have been made during the last four or five years, and the urgent necessity for the facility, when is it proposed to inaugurate the DerbyWyndham air service, as promised in the budget speech.

Sir NEVILLE HOWSE:
NAT

– This matter is at present under consideration and an announcement will be made as early as possible.

page 2158

TARIFF BOARD REPORTS

Mr PRATTEN:
MARTIN, NEW SOUTH WALES · NAT

– I present the following reports of the Tariff Board : -

  1. Domestic electrical appliances;
  2. Aluminium and enamelled hollow-ware;
  3. Domestic hand food mincers and choppers ; 4.. Straw envelopes for bottles;
  4. Motor cycles;
  5. Fluorspar;
  6. Straw paper;
  7. Storage batteries;
  8. Pressed and blown glassware;
  9. Malleable iron pipe fittings.

Ordered to be printed.

page 2158

INCOME TAX ASSESSMENT BILL

In Committee. - (Consideration resumed from 28th November, vide page 2111).

Clause 12-

Section 23 of the Principal Act is amended -

by omitting sub-paragraph ii of paragraph h of sub-section 1, and inserting in its stead the following sub-paragraph : - “ (ii) gifts exceeding five pounds each made out of the assessable income derived during the year in which the gifts are made to public charitable institutions in Australia, to public universities in Australia or to colleges affiliated therewith, or to a public fund established and maintained for providing money for the construction or maintenance by or on behalf of the Commonwealth, a State or a Territory of the Commonwealth, of a -. public memorial ‘relating to the war which commenced on the fourth day of August One thousand nine hundred and fourteen, if the gifts are verified to the satisfaction of the Commissioner.

For the purposes of this sub-paragraph - “ ‘ Gift ‘ means a gift in the form of money or a gift in kind when the Commissioner is satisfied that the donor has used part of his assessable income of the year for the acquisition of the gift. “ ‘ Public charitable institution ‘ means a public hospital, a public benevolent institution and includes a public fund established and maintained for the purpose of providing money for such institutions or for the relief of persons in necessitous circumstances;”;

Sub-paragraph proposed to be amended: -

ii ) gifts exceeding Five pounds each made, during the year in which the income was derived, to public charitable institutions in Australia, if the gifts are verified to the satisfaction of the Commissioner;

Mr WEST:
East Sydney

.- I move the omission of proposed new paragraph 6. I could never understand why this provision was allowed to creep in. It is most inequitable, and creates an anomalous position. Although many people subscribe to charitable and other institutions merely out of their goodness of heart, a great number of others make similar subscriptions purely for mercenary reasons, with the object of receiving cheap advertisements. Prior to entering parliament I conducted a business, and I know that it is the custom of business men to make donations to hospitals and other charities, merely to have their subscriptions advertised, and to have their names mentioned later in the annual reports of the institutions. There are many people who, in the aggregate, give £20 or£30 a year to charitable organizations, but each donation may be only £1, that being the amount their means would permit. For that they receive no exemption when their income tax is assessed, while an individual who gives only one donation of £5 is permitted to deduct that amount on his income return. I cannot appreciate the reason for the differentiation, and fail to see any justification for the retention of the . provision in its present form.

The CHAIRMAN OF COMMITTEE (Mr Bayley:
OXLEY, QUEENSLAND

– I suggest to the honorable member that he would attain the same end by voting against the paragraph.

Mr WEST:

– I shall do that, but in the meantime I wish to move my amendment.

The CHAIRMAN:

– The honorable member is quite in order in moving for the omission of paragraphs b, but the Chair merely pointed out that he would achieve the same purpose -by voting against it. If it is the desire of the honorable member, I shall put his amendment.

Mr THEODORE:
Dalley

.- I am not quite sure what the honorable menber for East Sydney (Mr. West) will accomplish by the deletion of the whole paragraph. If that were done it would prevent the deduction of all donations made by taxpayers to charitable institutions, and I feel confident that is not what he desires.

Mr West:

– That is what I wish.

Mr THEODORE:

– The honorable member indicated that many taxpayers make donations which, in the aggregate, total considerably more than £5, and receive no benefit under the act. 1 agree with the honorable member. Probably that has been the experience of every member of this committee. I fail to understand why such people are debarred the advantages of the provision. Last night the Treasurer stated that it would be difficult to prove that such small sums had been donated. I remind the honorable gentleman that the onus of proof is on the taxpayer. I believe that in the States, as well as in the Commonwealth, the commissioner requires cheque butts to be submitted to his department as proof that the subscriptions were made. That could apply similarly with smaller donations.

Mr Gregory:

– Would it not be better to eliminate the word “each” which appears after the words “ five pounds “ ?

Mr THEODORE:

– Certainly the advantage should apply to donations of £1 and upwards, when evidence is submitted to the commissioner that the payments have actually been made. Many people make a series of small donations which, in the aggregate, total £20 and upwards, yet are entitled to no deduction. If they were entitled to deduct the amount from their income, it would probably reduce the assessed tax considerably. I hope that the honorable member for East Sydney will not persist in his amendment in its present form.

Mr Mann:

– I rise to a point of order. I ask what procedure will he followed when dealing with these clauses? The usual rule of committee is that an honorable member cannot rise more than twice on each clause ; but we have been treating these paragraphs as though each was a clause. I desire to know what rule will apply to the speeches of honorable members.

The CHAIRMAN:

– If the honorable member will cast his memory back to the last meeting of this committee he’ will recollect that the Chairman then announced that this clause would be taken paragraph by paragraph. Consequently, each member will be entitled to speak twice during the discussion of each paragraph.

Mr WEST:
East Sydney

.- I am a reformer, and all reformers experience difficulty in making others understand their aims. They are persecuted to a certain extent, and their views are misconstrued. I have no ulterior motive in moving my amendment. When I give a donation I ask for no advertisement.

So that the exemption may be made to apply to gifts of £1 and upwards, I shall not move my amendment; but I move -

That the words “ Five pounds each,” proposed new sub-paragraph 6 (ii) be omitted with a view to insert in lieu thereof the words “ One pound and upwards.”

Dr EARLE PAGE:
Treasurer · Cowper · CP

– Honorable members will notice that the scope of this exemption has already been widened. Hitherto there has been a strict limitation as to the institutions in respect of which gifts were an allowable deduction from income. It is now proposed to alter that position, by including not only public universities, but also colleges affiliated therewith. The Government has no objection to increasing still further the exemption by including gifts of fi and upwards. That may mean additional work in checking the payments; but, as the honorable member for Dalley (Mr. Theodore) pointed out, the onus of proving payment rests on the taxpayer. Honorable members may remember that the exemption from taxation of gifts exceeding £5 each was agreed to in 1918 after a long discussion, in which amounts varying from one guinea to £20 were suggested as a reasonable limitation of the exemption.

Amendment agreed to.

Mr MANN:
Perth

.- This, clause exempts from taxation certain gifts to public universities or to colleges affiliated therewith. I desire to extend its scope to cover donations made for the purpose of encouraging education and research. I have in mind a public-spirited movement in Western Australia some years a.go when it was decided to start a new agricultural college. The response was so great that in a short time the sum of £10,000 was raised by public subscription. Later, the taxation authorities ruled that donations to the new college would be taxable. I do not know the later developments, but at one stage a number, of taxpayers withdrew their donations when that decision became known. Honorable members will agree that we should encourage in every way the donation of money for educational and research purposes. The Muresk College, although connected with a public university, was probably not affiliated with it. I suggest that the word “ affiliated “ is too restrictive. There are in Australia numbers of colleges not affiliated with universities, which have been established as a result of private benefactions. I instance the Peter Wai te Institute in Adelaide, a magnificent institution, which is the direct result of Mr. Peter Waite’s munificence. Persons who donate money to colleges to provide scholarships or bursaries to enable children to continue their education should be encouraged in every way. The donation to which I have referred was for the purpose of instituting research into animal and plant diseases. Provision has been made to exempt such donations, but there are other donations which should also be included in the exemption. I therefore move -

That after the word “ therewith,” proposed new sub-paragraph h- (ii), the words “or for encouraging education or research “ be inserted.

Mr FOSTER:
Wakefield

– I support the amendment moved by the honorable member for Perth (Mr. Mann). I do not think that the Govern-‘ ment can reasonably resist the case he has put forward: The Peter Waite Institute to which the honorable member referred is only one of many munificent bequests made by public-spirited men in South Australia.Many of the magnificent institutions on North Terrace, Adelaide, are largely the result of princely benefactions’ by individual citizens. I hope that the Government will accept the amendment.

Mr FENTON:
Maribymong

– It was my intention to move an amendment to exempt from taxation gifts made to technical schools. In Victoria some of the finest technical schools in the southern hemisphere are to a considerable extent the result of gifts by publicspirited men. In this connexion I mention particularly Mr. George Swinburne and Sir- William McPherson.

Mr Mann:

– There may be some difference between gifts made out of capital and gifts from income.

Mr FENTON:

– I take it that if a taxpayer makes a gift to an institution’ in respect of which gifts are deductible, the authorities would allow deduction.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– A large donation, such as that of Sir William McPherson, might not leave much income for the year in which it is made.

Mr FENTON:

– I have no desire to rob the Treasury of any source of income. Generally, I believe that those who are able to contribute their share of taxation should do so. I have not brought this matter forward at the instigation of the gentlemen I have mentioned, but because of suggestions made by men and women engaged in technical education in Victoria who realize the benefit of technical schools in the education of ‘ our young people. No one will gainsay that these technical schools are doing a great work in equipping the youth of this country for the battle of life. Australia has already benefited considerably from these munificent gifts, and the students who pass through the institutions become most useful citizens. It has been suggested to me by the masters and others connected with technical schools that the exemption of such gifts from income tax seems to be a desirable way of recognizing the generosity of the donors.

Dr.EARLE PAGE (Cowper) [12.1].- The spirit that has prompted the honorable member for Perth (Mr. Mann) in submitting his amendment will be generally appreciated; but there is a limit to which the Government can go, and a sharp line of demarcation must be drawn or else the administration of the act will be rendered impossible for the department, quite apart from any problematical loss of revenue. Legislative provision was made in 1924 to exempt practically out of assessable income all gifts for the purpose of encouraging scientific research. Paragraph p of section 23 of the principal act provides for the deduction of so much of the assessable income as the commissioner is satisfied has been donated by the taxpayer, for research into the causes, prevention or cure of disease in human beings, animals or plants, to any authority which the commissioner is satisfied is a public authority engaged in such research. Gifts for scientific research are, therefore, included, and we are left to consider gifts for educational purposes. The Government carefully considered the extent to which it should go in this matter, and it came to the conclusion that, in view of thegenerosity with which the donors ofgifts to charitable institutions were treated, and the wide definition of public donations, which include those for all varieties of war memorials, it could go no further than exempt gifts to universities and affiliated colleges. For that reason I urge the honorable member not to press his amendment.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– I was hoping that the Treasurer would make a clear line of demarcation between gifts from income and those that are obviously made from capital.

Dr Earle Page:

– That distinction is made in the bill, since it exempts gifts made out” of assessable income derived during the year.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– But if an individual happened to have an income of £10,000 per annum, and made a capital gift to the extent of £10,000 for the establishment of an institution, he would have no assessable income for that year, and would pay no income tax. I do not know whether that is the intention of the Treasurer. There is a growing and commendable tendency on the part of welltodo citizens to endow institutions during their lifetime, as well as to contribute largely to their upkeep. The Government ought to define what is a gift from capital and what is a gift from income for the purpose of the maintenance of an institution of this description, as distinct from its establishment. Of course, in either. case the gift would be prompted by the same high impulse; but we should be going a long way if we were to say that a very wealthy citizen, who happened to make one large endowment in a particular year, to the extent of the whole of his taxable income in that year, should be exempt from taxation. If the effect of the legislation were to encourage a donor to avail himself of the exemption, he would be acting only in accordance with human nature if he adopted- that course. I should like the Treasurer to give the committee the benefit of his opinion on that aspect of the matter.

Mr LISTER:
Corio

.- I support the suggestion of the honorable member for Maribyrnong (Mr. Fenton) that gifts to technical schools should . he exempt from taxationAnything that can be done to assist in developing these institutions, and increasing their usefulness, should be encouraged by the Government. At the present time, not only do governments support them, but the pupils pay fees, and if the schools were assisted in the manner suggested, direct benefit would accrue to the institutions and to all who pass through their portals. Tlie imposition of tax on a public-spirited contribution is not conducive to continued generosity.

Mr MANN:
Perth

.- The point raised by the honorable member for Wannon (Mr. Rodgers) is not so serious as would appear on the surface. Suppose a very wealthy citizen makes a large donation for the establishment of a college, and it is as great as, or greater than, the whole of his income for that particular year, will it be a serious matter if he is not charged income tax at all for that year? The same principle is involved when he gives a smaller donation. The exemption takes effect only in the year in which the gift is made. If he saves £1,000 in income tax. on that account, the gift that he makes to the nation is out qf all proportion to the concession received from the Government.

Why should universities and colleges affiliated with them be singled out for preferential treatment? My amendment would meet the case mentioned by the honorable member for Maribyrnong. The Treasurer said that the amendment was unnecessary because the case presented by me was already provided for. But, apparently, the present law has not been considered sufficient in the case of the Muresk College.

Dr Earle Page:

– Is that a public institution ?

Mr MANN:

– It is a new agricultural college that the- Western Australian Government proposed to establish, and; owing to the difficulty experienced in placing; it on a firm financial footing immediately,, a number of leading merchants raised a. fund amounting to £10,000. That happened about two years ago. The following, paragraph is contained in a letter, dated 16th November, 1926, from the secretary of the Taxpayers’ Association of Western Australia : -

We have received complaints from several’ of our members to the effect that they have been advised that the department refuses to allow a donation made to the “ Merchants’ Agricultural Research Fund “ of this State,, as a deduction under Section 23p.

On 7th October we requested from theDeputy Commissioner, information as to the reasons for the decision of the department that the donations referred to cannot be allowed as deductions under the sub-section quoted,, and wherein they fall short of compliance with the terms of that sub-section.

On 12th October, the Deputy Commissioner replied stating that the Commissioner had ruled that such donations do not come within the provisions of the Act.

On 13th October, we wrote tlie Commissioner requesting to be informed: “Wherein do the donations fall short of compliance with the terms of the sub-section quoted ? “

T,o that we have a reply signed by L. S.. Jackson, secretary, and dated 10th instant, advising that in order to “avoid unnecessary duplication of correspondence “ we had better get the information .from the chairman of the fund.

That seems a most unsatisfactory way of dealing with the matter. The fact remains .that the deductions were not al- . lowed in spite of the perfectly clear language of the section referred to by theTreasurer. By that refusal, a grave check was given to a rising tide of public feeling in Western Australia in favour of seeing these institutions advanced. There has been a similar experience in connexion with the university. Of course, through the recent munificent bequests of the late Sir Winthrop Hackett, the University of Perth has been placed in a remarkably fortunate position; but, prior to that, there was a great dearth of prizes and bursaries, owing to financial stringency. Had the Muresk College not been treated in this way, an example would have been set that would have been readily followed. It is extraordinary how on.e public-spirited act leads to others.

Dr Earle Page:

– Is Muresk College affiliated with the Western Australian University?

Mr MANN:

– Perhaps it is thought that it is not. It depends on the definition of “ affiliated. “ The institution was to have been connected with the university in certain ways, but it was not affiliated under it. I think that the Peter “Waite Institute in Adelaide is not affiliated with the university there, although it co-operates with it.

Mr Duncan-Hughes:

– It is part of the University:

Mr MANN:

– Usually technical colleges are not .affiliated with the universities.

Dr EARLE Page:

– That is so.

Mr MANN:

– It may be very difficult to define the meaning of “ affiliated.”

Dr Earle Page:

– We intend to define it in this bill.

Mr MANN:

– I cannot see that there is any reason for making a difference between these cases and those of secondary schools. It often happens that a father who has sent his son to the school which he attended as a boy desires to do something to help his old school by providing funds for a scholarship or in some other way. If he does so he gives the work of the school a distinct stimulus. These schools and colleges all lead to the university.

Mr Foster:

– And any scholarships which are established are a decided help, especially to persons with limited means whose sons or daughters show promise.

Mr MANN:

– That is so. A scholarship often enables the recipient to go right on to the university. I know of cases in which parents have made great sacrifices to enable their children to acquire a thoroughly good education. In some instances the ability of the child to win a scholarship is the deciding factor in their entering the university. Some boys and girls deny themselves a great deal, and work extremely hard to win a scholarship; and it is usually they who get to the top of their chosen profession.

Mr Foster:

– Dr. Richardson is an outstanding example.

Mr MANN:

– It is from students of that class that we often get our best material. I sincerely trust that the Treasurer will reconsider his decision on this matter. I am inclined to test the feeling of the committee on the issue, not for the purpose of resisting the Treasurer, but to ascertain whether a substantial body of opinion in the committee is favorable to the amendment. I have no desire to make this in any sense a party question ; but it is worthy of favorable consideration at the hands of the Government.

Mr DUNCAN-HUGHES:
Boothby

– There appears to be some confusion in the mind of the committee as to whether these gifts have been made from capital or from income. A good many references have been made to large gifts to certain big institutions. I suggest that in almost every case, whether they ‘have been in the “form of money or property, they have been made from capital, in which case they would not be affected by an Income Tax Assessment Act.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– I could mention the particulars of a case in which a man made a gift of £10,090 entirely from income.

Mr DUNCAN-HUGHES:

– There may be exceptions, of course. I would not be prepared to say that it would be impossible for a man with a large income to make a gift of £10,000 from his taxable income, but it would be highly improbable.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– I could give the honorable member particulars of another instance in which a man made a gift of £25,000 from income.

Mr DUNCAN-HUGHES:

– To the extent to which an honorable member could name such cases I would certainly be wrong in my view ; but I believe that the number of such cases is extremely small. The majority of large gifts are made from capital. We all agree with the honorable member for Perth that gifts such as he has referred to should be a great incentive to fv.ivtb.ev gifts to the institutions to which they are made; but a person who is likely to make a gift of this character would not for a moment be deterred from doing so because of the absence of a provision such as that contained in the proposal before the committee for deduction from taxable income. This is really a minor matter which will not affect anybody particularly, and the committee is spending much valuable time in discussing it.

Mr PROWSE:
Forrest

.- In view of the Treasurer’s statement regarding the meaning of the provision in the act relating to research, and the statement made by the honorable member for Perth that the Deputy Commissioner for Taxation has disallowed the exemption in the case of the institution to which reference has been made, I suggest that the Treasurer should inform us definitely what the policy of the Government is in the matter. Research has come into the forefront more, during the life of this Government, than in all the previous’.’;” years of our Australian history. To-day we recognize more than ever the importance of research. Seeing that public-spirited men in the community are willing to provide money for it, we should allow their gifts to remain exempt from income taxation, for they are undoubtedly made for the benefit of the general public.

Mr BELL:
Darling

.- I supported the amendment by the honorable member for Perth. It appears to me that it is highly desirable that we should include in our list of exemptions all gifts made to universities or schools affiliated with universities, by which I mean secondary, technical, and grammar schools which in the past have done so much to assist the great cause of education. Scholarships which are provided from such gifts are of immense value to the children of persons with limited means. I have not heard the full debate on this subject, but I cannot conceive of any sound reason for refusing to agree to the proposed exemption. I submit that gifts of this character encourage those engaged in the great work of secondary education, in the community. We should dp everything Ave can to stimulate the generosity of people who are in the position to make these gifts.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

, - I have no objection whatever to the amendment of the honorable member for Perth; I agree generally with it. If donors of some of the gifts that have been mentioned are entitled to relief from taxation on their donations, it appears to me that donors who will fall within the category mentioned by the honorable member should also share in the relief. My point is that in the years that are ahead of us the Treasurermay find it necessary to conserve every penny of revenue which he can obtain from direct taxation. It is for that reason that I have suggested that some limit should be placed upon the amount for which relief may be given. Large benefactions have been made to many institutions in the various States, and I am of the opinion that the tendency to make gifts of this character will increase rather than decrease. If that should be so, a very large sum may be involved in these exemptions in the future. It is for that reason that I have suggested that a limit should be fixed to the amount of money that may be so exempted. I do not agree with the honorable member for Boothby that this is an inconsequential matter. I suggest that a limit of £1,000 might be fixed.

Mr Foster:

– That would stifle all desire to make the gifts, and it is already disappearing fast enough.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– I disagree with that view. There is a great deal of difference between a gift which is in the ‘nature of an endowment, or is made for the purpose of establishing a particular institution, and a gift that is made towards the annual cost of maintenance of an institution.

Dr EARLE PAGE:
Treasurer · Cowper · CP

– If honorable members would read carefully the amendment of the honorable member for Perth, they would at once realize that the Government could not possibly accept it, for it is couched in the broadest possible terms, namely, gifts to “ encourage research and education.” An amendment of that description would make it almost impossible for us to administer this part of the act, for it would be possible to bring almost any gift within its terms. It is because of the administrative difficulties that at present face the officials of the Taxation Department that a definition of “ Public charitable institutions “ is being inserted in the measure. We have been forced to define the term. The honor- able member for Boothby has said that this is a small matter”, but it will become a very large matter if the amendment is agreed to. What honorable members should consider is whether, if relief from taxation is to be given to these different institutions, this is the right way to give it. I entirely agree that we should encourage our philanthropists to make gifts to promote education and research, but exemption of such gifts from taxation will never be the determining factor as to whether they will be made or not. If a generously-minded man makes a gift of £20,000 or £30,000 out of his capital to a public institution or to a school, he is not likely to be penalized, for the gift is not made from his assessable income. An important point arises in the case of a man who, out of an income of say £10,000 a year, makes a gift of £7,000 to a certain institution. He would obtain exemption not merely for the year in which he made his gift, but over all the years during which his income is averaged hi order to ascertain the amount of his taxation.

Mr Scullin:

– Supposing that a man gave the whole of his income for one year and something over.

Dr EARLE PAGE:

– Such a gift would be considered to be made out of capital. The department deals with every case on its merits. If all gifts to institutions such as those under notice are to be exempt from taxation, the Commonwealth Government will be making a contribution to them to the degree in which it will lose taxation revenue in respect, of them, and the question arises whether it would not be better for us, if we desire to ‘do something more than we are already doing to encourage education and research, to definitely subsidize institutions of which Ave approve. In that way the public would have some idea of the value of the contributions that the Government is making to these purposes;, but there is no way of determining the extent of our gifts when they are made by way of the exemption of gifts from taxation. The question is, can the Government afford to go further than it proposes? The provisions of the act are being very materially liberalized. This concession will embrace such charities as the Lord Mayor’s fund and the bush fire relief fund in Melbourne, and universities that have not previously been allowed to claim the deduction. The point raised by the honorable member will probably be met by the definition of “Affiliated college,” which is “a residential educational institution affiliated under statutory provisions with a public university.”

Mr Theodore:

– That definition will not cover a technical college.

Dr EARLE PAGE:

– I agree that it will not. To include technical colleges might lead to a very substantial cut being made in the revenue. I am quite satisfied that the Government cannot agree to the general exemption that has been suggested ; but I am prepared to discuss with the taxation officials the question of including technical colleges. On the general question I appeal to honorable members to stand by the action that has been taken. The amendment is much too wide from the point of view of, first, the administration, and, secondly, the probable effect on the revenue.

Mr. FENTON (Maribyrnong) [12.32 J. - I accept the assurance of the Treasurer (Dr. Earle Page) that he will give consideration to the suggestion that technical colleges be brought within the ambit of this concession. I have received from Mr. John Carroll, acting secretary of the Technical Schools’ Association of Victoria, a letter in which he states - .

It is understood that the Council of Public Instruction of Victoria has approached the Federal Government in the matter, but I do not know what has been done.

The Treasurer will thus see that my advocacy of the claims of technical schools has not been prompted by the donors of gifts. The teachers in those schools are performing a very valuable work. The colleges associated with universities are limited in number. It would be safe to say that in Victoria they may be confined to Queen’s, ‘Trinity, Ormond, Newman, and perhaps the two Geelong colleges.

Mr Lister:

– Those are not included.

Mr West:

– Is Scotch College included?

Mr FENTON:

– No. The colleges that I have mentioned are within university grounds, and are regarded as being affiliated with the university. I trust that the Treasurer will consent to the inclusion of technical schools, because in that way they can be given very valuable assistance.

Mr ATKINSON:
Wilmot

– I wish to move an amendment to include schools that are not run with ‘the object of making a profit. I refer to public schools such as Melbourne Grammar School, Wesley College and Scotch College. I have received a communication from that source, but I understand that the headmaster o;f Wesley College, Mr. Adamson, has made arrangements with an honorable member to move in that direction. It is proposed to exempt universities “ and . the colleges connected therewith. My proposal would extend the principle only a little further, and thus bring into line the big public schools, some of which are greatly in need of benefactions. Unfortunately too few wealthy persons give a thought to those very fine institutions.

The CHAIRMAN (Mr. Bayley).The honorable member for Wilmot (Mr. Atkinson) may not yet move the amendment to which he has referred, because there is an amendment now before the Chair.

Mr ATKINSON:

– I presume that when. that has been disposed of I shall be permitted to do so?

The CHAIRMAN:

– Certainly.

Mr SCULLIN:
Yarra

.- The discussion that has arisen out of the amendment of the honorable member for Perth (Mr. Mann) has disclosed the unwisdom of extending these exemptions too far. I believe that the Government made a mistake when it decided to include universities and colleges connected therewith. Having agreed to their inclusion, an what grounds may they exclude any other educational institution? If a concession is to be given to the man who makes a donation to a university or a college affiliated with it, why should it be denied to the man who makes a donation to a technical school, a workingman’s college, or even a primary school? Why exempt the man who assists the highest form of education and refuse the exemption to one who extends his patronage to the primary form? If it is inconvenient to avoid discrimination, no person should be given the concession. Public charitable institutions are fairly easily defined, but educational institutions are in a different category. Where is the line to be drawn? I do Dot favour the subsidizing of universities by the Commonwealth if other forms of education are to be denied assistance. This is indirectly a subsidy. I confess an inability to see how this amendment, if agreed to, will be administered. I should not care to be given the responsibility of interpreting the law. It is not right that we should place upon our administrators tasks that are practically impossible of fulfilment. In all conscience it is sufficiently difficult now to interpret the law exactly. The words “ charitable institutions “ were included in a previous amendment of the act, and caused considerable difficulty. If this provision is now inserted, we shall later be asked to state what is meant by “ encouraging education.” To what limits may this not go? I suggest to the Treasurer that he would be on safer ground if he eliminated any reference to education. Class distinctions are drawn when Ave assist universities and the colleges affiliated Avith them, but not other educational institutions. The great majority of our children never see the inside of a university. Why should donations which those institutions receive be singled out for exemption from taxation ? Generously-minded persons sometimes make donations to technical schools, working men’s colleges, and certain forms of primary education, yet they are not allowed to claim a deduction. Instead of endeavouring to make the provision so wide that it will be impossible to either interpret or administer it, we should confine the exemption to charitable donations.

Mr FOSTER:
Wakefield

.- I suggest that the Treasurer ought to go a little further than the promise he has made to the committee to look carefully into this matter to see whether he can give effect to the desire of honorable members. Further consideration should be deferred until he has consulted with the Taxation Commissioner and the Government. I am quite sure that “if the Government gives due consideration to the matter, its decision will be satisfactory to all concerned.

Mr WEST:
East Sydney

.- The question before the Chair is worthy of careful consideration. Are we prepared to extend our vision beyond our immediate surroundings and bring ourselves into line with the progressive thought of the present day - that is, to throw our universities open to the brainiest members of the industrial classes? Some of our greatest students, and those who have been in the forefront in improving the conditions of mankind, have had as parents men who followed manual occupations. If the Government wishes to give relief to our universities, let it take control of them. It would be for the nation’s welfare. A few days ago the Melbourne University approached the Premier of Victoria, Mr. Hogan, for assistance. His reply was, “You are receiving £40,000 a year, and you want £121,000. I can give you no more.’’ Are there in Victoria persons who are willing to make up the difference between £40,000 and £121,000? The Sydney University has been endeavouring for some time to raise £125,000, but so far it lias received only £25,000, and that sum has been given by those who are anxious that it shall continue to be conducted along conservative lines, so that only a certain section of the community may derive a benefit from it. Few persons make big donations to public institutions. I find from an examination of the record of wills lodged for probate that during the last two years substantial sums have been left by wealthy land-owners to their widows and children, little or no consideration having been given to charitable institutions and public universities. We have recently had the sorry spectacle of the Sydney University promoting vaudeville shows and dances for raising funds, and that is certainly not in keeping with the dignity of our principal educational institution. . I ask honorable members not to oppose the clause, because if carried some incentive may be given the public to make donations to public universities and affiliated colleges. The Government has accepted my amendment to strike out £5 and insert £1.

Sitting suspended from 12.50 to 2.15 p.m.

Mr LISTER:
Corio

.- At first sight I was prepared to support the amendment moved by the honorable member for Perth, but upon realizing how far-reaching would be its effects, I have decided to oppose it. I am satisfied that it could create all sorts of difficulties in the interpretation of the law, and would lead to an increase in the administrative costs of the department. I sympathize with every endeavour which has for its object the encouragement of education, but when we start giving exemption from taxation in respect of monetary gifts to educational institutions, where shall we stop ? Thousands of people are assisting in various ways education and research. For instance, the honorable member for Wimmera (Mr. Stewart) has been engaged in extensive research work on his farm for the last seven years; he is, ‘ in co-operation . with the Victorian Government, demonstrating to the people in the wheat belt what crops can be most profitably grown. His work means much to everybody in ‘ the community, but I doubt whether his expenditure in that way could justifiably be deducted from his taxable income. In the secondary industries also are many people who are paying considerable sums in promoting . research and experiment, and if a taxation concession were granted to all these people I am afraid the department’s revenue would be seriously reduced. Universities and their affiliated colleges are in a different category. The Geelong Grammar School, one of the finest public schools in Australia, has received several large endowments, including one amounting to over £100,000 from a former pupil, the late Hon. H. H. Whittingham. If a concession is made in respect of gifts to university colleges, why should not the same’ concessions he made in respect of gifts to the Geelong Grammar School and other public schools which are doing valuable work for the education of the community? But I am inclined to agree with the honorable member for Yarra (Mr. Scullin), that if Ave extend the concessions beyond the institutions supported and maintained by government money, we shall be treading on very dangerous ground. Nevertheless, I hope that the Treasurer will not lose sight of the recommendation made from both sides of the chamber that special provision should be made in regard to gifts to the technical schools.

Mr MANN:
Perth

.- The discussion which has taken place has convinced me’ that my amendment would lead to impracticable limits, and, in view of the Treasurer’s assurance that the particular case I mentioned Will be dealt Avith under the clause as drafted, I ask leave to withdraw my amendment.

Amendment by leave .withdrawn.

Mr ATKINSON:
Wilmot

– I move an amendment -

That after the word “ therewith “, proposed new sub-paragraph (6) (ii), the following words be inserted, “ or to educational institutions not conducted for profit.”

The object of the amendment is to extend the concession to the public schools. The good work they do is not confined to those who are fortunate enough to be their students; the tone of the whole community is uplifted by them. They are stepping-stones to the university, and any man who makes a substantial contribution to their funds is as much entitled to acknowledgment from the income tax commissioner as is a man who makes a donation to a university college.

Dr EARLE PAGE:
Trea- surer · Cowper · CP

– I hope that the amendment will not be pressed. If honorable members persist in trying to extend the concessions given in this paragraph the

Government will be forced to consider whether all gifts to education should not be ignored. It Will be found impossible to draw a sharp line of demarcation between various gifts if .Ave carry the concession further than the clause proposes. I urge honorable members not to persist in attempting to liberalize the bill in that way, because of the enormous difficulties in interpretation and administration that would be involved. The Government considers that universities, which are devoted to only the highest forms of education, are in a different category from primary and technical schools. The establishment of primary schools is completely a function of the State, controlled by the Education Departments, and provision is made for their total maintenance. In most parts of Australia those schools are free.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– The same principle applies to charitable institutions, which are state subsidized.

Dr EARLE PAGE:

– But they are not state controlled, state directed, and state staffed. The tendency in regard to universities, which represent the pinnacle of educational activities, has been to curtail, more or less, the amount of money made available to them through government channels, resulting in their work being considerably limited. If the action non contemplated by the Government will induce people to make more munificent gifts to our universities their scope will be extended, and the object of the GoAernment achieved. It is unnecessary to extend the concession to the whole ambit of educational activities, and I ask the honorable member not to press his amendment.

Mr HURRY:
Bendigo

.- What is the necessity for the words “ out of the assessable income derived during the year in which the gifts are made?” Those words are not in the principal act, which simply states - “ Gifts exceeding £5 each, made during the year in which tlie income was derived, to public charitable institutions in Australia, if the gifts are verified to the satisfaction .of the Commissioner.”

It appears to me that Ave shall not derive any benefit from the new wording. What difference does it make whether a man makes the gift out of his capital or out of his income? How is the act to be policed, if the proposed ‘ wording is retained? The only case in which the Commissioner could say that the gift did not come out of assessable income would be when it was larger than his income for the year. If asked, the individual donor would naturally say, “Yes, I gave that out of my income.” I fail to see any reason for the insertion of the new wording.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

. –I think that generosity of thought has carried many honorable members beyond what is the true function of this legislature. When I spoke previously it was with a desire to encourage gifts of the character indicated by the honorable member for Perth (Mr. Mann). Yet, on reflexion, it is quite clear that if, in this chamber, we start to subsidize State institutions - and most of these bodies are State institutions - we ourselves become contributory donors with every other donor in the Commonwealth of £1 and over. I am therefore glad that the Treasurer has called a halt. I am doubtful whether the houorable gentleman should not make a condition governing bequests to universities, defining as gifts only those that are allocated for the advancement of research work, a field in which the Commonwealth has recently interested itself to a considerable extent. Universities are State institutions, and as such are endowed by the States, and by the denominational bodies which establish colleges and schools in association with them. The money should not be used to subsidize subsidiary institutions associated with the universities.

Mr CHARLTON:
HUNTER, NEW SOUTH WALES · ALP

.- A good deal of time has been taken up in discussing what appears to me to be a very small matter. At a later stage we may be asked to sit long hours in order to put the measure through. After listening to a number of honorable members, I have arrived at the conclusion that the Treasurer has made a mistake in departing from his original proposal that the deduction should apply only to charitable donations. It never enters the mind of any man or woman in the community, desirous of making a donation to any educational or similar institution, that he or she will escape tax by such an action. Yet here, in deliberative assembly, we are taking up the best part of a day. in discussing such a contingency. Almost every honorable member in this chamber gives regularly to different educational and charitable organizations, and he never bothers about recording those gifts in his income-tax return. This remark applies similarly to the community generally, and I fail to understand why we are wasting so much time over this discussion. If we gave the exemption to donations to schools the principle would go on extending and extending.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

– And it would be an extension into the State sphere at that.

Mr CHARLTON:

– Exactly. I am sorry that the Treasurer even extended the exemption to gifts to universities.

Amendment negatived.

Amendment (by Dr. Earle Page) agreed to -

That after the word “ sub-paragraph,” second occurring, proposed new sub-paragraph (b) (ii), the following words be added: - “’ Affiliated college ‘ means a residential educational institution affiliated under statutory provisions with a public university.”

Dr EARLE PAGE:
Treasurer · Cowper · CP

– I wish to make a slight explanation on the following,proposed amendment -

  1. By inserting at the end ofparagraph n of sub-section 1, the following words: - “ This paragraph shall not apply in any case where there is a lease of land to a company from any individual who directly or indirectly controls the voting power of the company, or in any other case in which the Commissioner is of the opinion that, in consequence of the terms and conditions of the lease or of any circumstances associated with the lease, the lessor is in substantial control of the operations of the lessee; “;

The object of this rather important amendment is to protect the revenue against exploitation by freeholders who may erect buildings on their land, through companies specially formed to take leases of the land, or with the assistance of persons who may act as lessees of the land for the sole purpose of erecting buildings on it, and thus secure the deductions which would not obtain if they erected the buildings themselves, without the intervention of a lessee. The object of the provision allowing a deduction is to permit a bona fide lessee to amortize his expenditure on buildings, &c, on the land, so that he shall not pay tax upon what is really a restoration of his capital . The department is critically examining all cases in which there appears to be reason to think thata freeholder is using another individual as a dummy lessee, because it is possible in such cases, not only to checkmate the freeholder in his plans, but to punish him severely for his attempts to evade tax. Such a case would probably fall under 69 of the Principal Act, which reads -

Any person who, by any wilful act, default or neglect, or by any fraud, art or contrivance whatever, avoids or attempts to avoid assessment for taxation, shall be guilty of an offence.

The penalty provided is not less than £50, nor more than £500 plus treble the amount of tax payment of which has been avoided or attempted to be avoided. The position is not the same when a company is formed by the freeholder to take a building lease of his land and erect a building for him out of money supplied by him. The proposed amendment will protect the revenue to a considerable extent against loss in such cases. Further consideration will be given to the subject at some later date, with the object of providing fully effective protection to the revenue in this regard.

  1. By inserting in sub-section 1, after paragraph (p), the following paragraphs: - “and (q) In the case of a person carrying on primary production on any land - expenditure incurred by him in any of the following operations: -

    1. i ) Eradication or extermination of animal or vegetable pests from the land:
    2. The destruction and removal of timber, scrub or undergrowth indigenous to the land; the destruction of weed or plant growth detrimental to the land; the preparation of the land for agriculture; ploughing and grassing the land for grazing purposes ; and the draining of swamp or lowlying lands, where that operation improves the agricultural or grazing value of land so drained. “ For the purposes of this paragraph primary production ‘ means the production resulting directly from -
    1. the maintenance of animals or poultry for the purpose of selling them or of selling their bodily produce including natural increase of the animals or poultry; and ” (r) In the case of a person who acquires, in any manner provided by paragraph i of section sixteen of this act, any trading stock or live stock (not being live stock which in the opinion of the commissioner was so acquired for use as beasts of burden or as working beasts) - the amount which under that paragraph is included in respect of the trading stock or live stock-so acquired in the assessable income of the person from whom that trading stock or live stock was acquired “ ; and
Mr Scullin:

– Why are the words “ the preparation of the land for agriculture” to be inserted?

Dr EARLE PAGE:

– That means making the land ready for cultivation by stumping, and so forth, the cost of which is an allowable deduction from income. A block of land is not ready to be ploughed merely when the timber is felled. That timber has to be either destroyed or removed.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

.- The whole of this sub-clause is a very important one, and affects the primary producers. These concessions are certainly valuable in the aggregate, and they now embrace, as deductions from income, several items that were previously regarded as capital expenditure. The only thing I regret is that, since a great case of equity has been made out from the operation of this sub-clause, the Government and commissioner have not seen fit to make it retrospective over a number of years. That would have done justice to the long sufferings of our primary producers. I commend the Government and the commissioner for doing justice to a great body of men who are endeavouring to make our land habitable. I should like an assurance from the Treasurer that this principle will be introduced into the sister measure - the Amending Land Tax Bill. If the cost of clearing, grading, levelling and generally preparing land for the purpose of deriving income from it may be deducted under these conditions from the income which is ultimately obtained, I think it is a fair thing that it should be taken into consideration in determining the unimproved value of the land. There is nothing inside or outside of Australia that can be so difficult for the Taxation Commissioner to determine as the cost and effect of out-of-sight improvements.

As an illustration, I mention the Tower Hill country in Victoria, which is, I suppose, one of the richest stretches of land in the world. It consists of a great y bed of volcanic soil, upon which grew one of the densest forests that Australia has had. By toil, probably unparalleled in our history, this great stretch of heavily timbered land was converted into wonderfully fruitful fields. It is acknowledged that this was done only by the expenditure of immense toil; but there is no acknowledgment of it in the assessment for taxation purposes of the income of persons who live there. I commend the Government and the Taxation Commissioner for introducing this amendment, and, for the reasons that I have stated, I trust that a similar provision will be incorporated in the sister measure when it is submitted to us.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

.- I should like an assurance from the Treasurer that we shall be given an opportunity to discuss the whole question of the valuation of the stock and wool before the bill is finally passed.

The CHAIRMAN (Mr. Bayley).The Treasurer has circulated an amendment which deals with those matters, and it will come up for consideration when the postponed clauses are being discussed.

Clause, as amended, agreed to.

Clauses 9, 10 and 11 further postponed.

Clause 13 (Deductions not to be allowed in certain cases).

Dr EARLE PAGE:
Treasurer · Cowper · CP

– This amendment is necessary to prevent a double deduction by a person who may traffic in leases, but whose business operations in that respect may not be discovered by the department for several years. During that time he would, as a lessee who had paid an amount for a lease, have been entitled, under the general provisions of section 25, subsection 1, to an annual deduction of the sinking fund to amortize the cost of the lease. When subsequently he became taxable on any profit derived from the sale of the lease, he would be entitled to a deduction of the price which he had paid for the lease, so as to ascertain the profits realized by him. He would thus be receiving a deduction in respect of that cost in two ways. The object of the amendment is to prevent the double deduction.

Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917

.- Has the Treasurer taken into consideration the question of freeing for a further term from land and income taxation lessees in Central Australia who have taken up unattractive Crown lands there with the object of trying to develop them? We are approaching the season of the year when it would be appropriate to give some special relief to settlers in these remote areas. The granting of such relief might cause other persons to settle in that country. It would also be some little set-off against the tremendous cost of transportation that the people there have to face in obtaining supplies and sending their products to market. I trust that the Treasurer will confer with the Commissioner of Taxation to ascertain whether something more cannot be done to encourage the persons to whom I have referred.

Dr EARLE PAGE:
Treasurer · Cowper · CP

– An amendment has been circulated the effect of which is to extend, for another five years, the provision which was included in the act in 1923, which excludes those engaged in primary production in the Northern Territory from federal income taxation.

Clause agreed to.

Clause 14 (Deduction of business losses).

Dr EARLE PAGE:
Treasurer · Cowper · CP

– The honorable member for Forrest (Mr. Prowse) has an important amendment in circulation which relates to the whole question of the incidence of this form of taxation. It might, therefore, be advisable for us to discuss the issue at this stage.

Mr PROWSE:
Forrest

.- I should have preferred to discuss my proposal as an amendment to clause 7. It would have been desirable, I think, to have taken the vote definitely on clause 7, rather than to determine the fate of that clause by pur vote on this one. However, as theTreasurer says, this clause raises the whole issue, so that this is not an inappropriate juncture for us to discuss my proposal. The amendment which I have had circulated is as follows - 6a. Section thirteen of the principal act is amended by omitting sub-sections (2) to (8) inclusive and inserting in their stead the following sub-sections: - “ (2) In assessments of tax for the financial year beginning on the first day of July, 1927, and for each subsequent year: -

  1. the taxable income of the taxpayer shall be deemed to be the total taxable income of the taxpayer in the years (in this sectioncalled average year’) beginning with the first- average year and ending with the year next preceding the financial year for which the tax is payable.
  2. the rate to be applied to such total taxable income shall be calculated under the act by which the rates of income tax are declared as if the taxable income were such total taxable income divided by thenum- ber of average years comprised in the period from the first average year to the financial year next preceding the financial year for which the tax is payable, both inclusive;

  3. from the amount of tax thus calculated there shall be deducted the total amount of tax levied against the taxpayer in the total of the average years comprised in the period from the financial year immediately succeeding the first average year to the financial year next preceding the financial year for which the tax is payable, both inclusive.

    1. In assessments of tax for each of the financialyears beginning on the firstday of July, 1927, the first day of July, 1928,” the first day of July, 1929, and thefirst day of July 1930, the first average year shall be not earlier than the financial year beginning on the first day ofJuly, 1927.
    2. Whenever the taxable income of a taxpayer has been assessed for a period of five average years the rate of income tax to be applied in the next financial year shall be the rate applicable in that year, under the act by which the rates of income tax are declared, to a taxable income of that amount, and that year shall be the first average year in assessments ofhis tax for each financial year subsequent to. the last mentioned financial year for a further period of five financial years.
    3. Any year in which the taxpayer was not carrying on business and was not in receipt of a taxable income shall not be counted as an average year.
    4. Any year in which the deductions allowed in his assessment to a taxpayer engaged in business left no taxable income or produced a loss or in which the taxpayer incurred a loss shall be an average year and shall be taken into account in ascertaining the assessment of tax for any financial year. (7)Where the amount of tax calculated under sub-sections (2),(a) and (b) of this section is less than the amount of tax levied against the taxpayer in the total of the average years comprised in the period from the financial year immediately succeeding the first average year to the financial year next preceding the financial year for which the tax is payable, he shall be entitled to a refund of the difference between the amount of the last mentioned tax and the amount of the tax so calculated.
    5. Where there are not atleast two average years for the purpose of calculating the rate under the foregoing provisions of this section the rate of income tax to be applied in a year to the taxable income of a taxpayer shall be the rate applicable in that year under the act by which the rates of income tax are declared, , to a taxable income of that amount.”

Clause 14 provides for the carrying on of losses which may be deducted from subsequent profits, within a certain period, until they have been off-set. I introduced a discussion on this subject some years ago when there appeared to be a desire for the adoption of some system of averaging incomes over a five-year period in place of imposing taxation upon single-year periods as we had been doing. The honorable member for Lilley (Mr. Mackay) moved a motion in this Parliament about that time, which caused the House to give very careful consideration to the advisableness of adopting an averaging system over five years,andultimately it was decided to approve of that principle in respect of the incomes of primary producers. I did not, at that time, agree to a limitation of the system to primary producers.I was of the opinion that the principle should be applied to all incomes which were liable to variation. The history of this movement is interesting. It shows that we appear to belearning from our experience of the inaccuracies of the systems that have been introduced from time to time. The motion that was carried by this House in 1920, was as follows: -

This House is of opinion that the fairest method of calculating for purposes of the federal income tax, as applied to primary producers, would bc upon a basis of five years’ operations.

In December, 1921, the Royal Commission on Taxation, which was appointed by the Government to inquire into our taxation methods, recommended that the averaging stystem should be adopted, and the then Treasurer, Sir Joseph Cook, subsequently introduced a*, bill to give effect to the recommendation. The Country party, did not at that time, nor has it since, contended that the system should be entirely, confined to primary producers. In addressing myself to the provisions of that bill, I said -

I know of no injustice in connexion with our legislation that is greater or does more to retard the progress of the country. This bill is an admission of the necessity for some remedy, and as such I accept it. It is clumsy and inadequate, but it is a step in the right direction, and I hope that the Government will offer an early opportunity to honorable members to consider a revised instrument for the assessment of taxation which will bc equitable all round, and not continue the heartburning that is now caused to citizens by the unjust and cruel incidence of taxation.

The fundamental base upon which the Royal Commission founded its recom mendation was clearly set out in its report in- the following words -

In our opinion the definite and only neces sary function of the averaging system is to determine the taxable capacity of the subject. I submit that the present system does not determine the taxable capacity of the citizen, and consequently cruel injustice is still being inflicted upon certain taxpayers. It is for that reason that I intend to move the amendment which has been circulated. In 1922 the Treasurer of the day (Mr. Bruce), in order to discredit the system which I advocated, made use of a table which I have had reprinted for the information of honorable members. In the course of his speech on that occasion he said -

I agree with him that he has adjusted the position over five years; but we shall be faced, if we accept his scheme, with exactly the same trouble that we have had to face with regard to taxing on the basis of a single year.

That is a perfectly correct statement. The figures in the first of the tables that I have circulated are those that.were submitted by Mr. Bruce, as Treasurer, in 1922. They do not represent the’ position accurately, and may be regarded’ as misleading. They are as follow: -

Honorable members will notice that those figures deal with the position of a man with a regular income over a period of ten years. I have shown his position, on the same set of figures, under my system, as follows : -

According to the first table, a man is presumed to have a succession of three bad years, in which he loses £3,000, £2,000, and £500 respectively. The. seasons are then assumed to improve, with the result that in the succeeding two years the profit amounts to £1,000 and £1,500 respectively. The net loss over the five-year period is shown to be £3,000, and no tax is paid. If the tax were assessed each year without relation to other years, he would pay an enormous amount. But very rarely does a person have an income of that character. The right honorable gentleman himself admitted that such a position did not occur every day. I should say the case is exceedingly rare. The second period of five years is presumed to be prosperous, with the result that the man nets £18,500. The only taxpayer to whom that man can be likened is one who has a regular income of £3,700 annually over a period of five years. Under my system, he would pay £399 6s. 9d. a year, or a total of £1,996 13s. 9d., instead of £2,135 16s.1d. I submit that £18,500 is the taxable capacity of both of those citizens ; and it was a finding of the Royal Commission on Taxation that the fundamental principle is first to ascertain the taxable capacity and then to levy the tax equally on all citizens. The present Prime Minister, when Treasurer in the Hughes Government, made the following statement ina speech which he delivered before the Rotary Club in Melbourne: -

The subjects of every State ought tocontribute towards the support of the Government as nearly as possible in proportion to their respective ability; that is, in proportion to the revenue which they respectively enjoy under the protection of the State.

If the committee agreed to my proposal the tax would approach more nearly to equity than is possible by any other means. The royal commission which submitted a report to the British Government in 1919 made the following recommendation : -

No tax can be successfully administered that: is contrary to. the general sense of justice in the community.

The following table shows the actual income assessed, since the act was amended in 192.1 :- *1* wish to draw the attention of honorable members to certain fundamental injustices. First of all, however, I point out that the income- from personal exertion is not very irregular. There are many other forms of income that are far more irregular. The table does not show one loss. The second year's income - £2,241 - is the highest over the period. The correct rate to charge on that income is 18.420d., but the Taxation Department charged only 16.094d. The lowest income is £673. The correct rate on that is 7.606d., but the taxpayer is called upon to pay 10.494d. The total amount of tax which properly ought to be paid is ;£19 15s. lid., but under the present averaging system he is called upon to pay £29 8s. 6d. Therefore, the system operates adversely to the taxpayer, who receives a small income. The proposal in the clause is 'a further step forward, but it does not yet cover the ground that ought to be covered. I have shown that the amount of tax if paid on the average income, would be £589 15s. lOd. That may be considered the mean tax. If it were assessed on the one-year system, the total would amount to £669 12s. lOd. Under the present system it is £621 9s. Id; Under my proposal it would be £5S9 15s. lOd. Such a difference between the tax on a regular income and on one which cannot be regarded as very irregular is too great, considering that the taxable capacity is equal in each case. The method of averaging incomes that is provided for in my proposal would make the total tax paid over a period of five years exactly the same whether the income was received in five equal annual sums or in irregular amounts, either rising or falling. It would be a very simple matter to arrive at the tax payable in each year, and less time would be occupied in assessing than is necessary under the method proposed in the bill. No ready-reckoner can be compiled for the calculations that are necessary under either the act or the Treasurer's proposal. That is a very serious aspect of the matter. Even if it were possible to compile a ready-reckoner to calculate the assessments under the act this chamber would not provide sufficient space in which to house it. Considerable expense must thus be involved. I have submitted in the following tables figures showing the effect of both methods on a rising and a declining income : - It will be seen that in one case the amount is approximately £400 greater than the mean, and in the other more than £100 less. Although refunds are involved under my scheme, the amount of tax would be equal to that paid by a taxpayer who earned a regular income of £2,000 a year over the five-yearly period. Those who have an equal taxable capacity should, as far as practicable, pay the same amount of tax. The following table is in the nature of a history of the averaging system : - Example A shows that on an income of £5,000, earned at the rate of £1,000 a year, the taxpayer pays £239 18s. 9d. Example B shows that under the old system the tax on a net income of £5,000 earned over a period of five years was £501 4s. 2d. It was that big difference which led to the outcry for an averaging of income over a period of five years. Example C shows the true and just average to be £239 18s. 9d. Under the system which I recommend, the net tax on the same amount of income would be £239 18s. 9d., which is equal to what would be paid by a man who received a regular average income as in example A. Example D is as follows - That shows the effect under the amended system of 1921, when the right honorable **Sir Joseph** Cook was Treasurer of the Commonwealth. The difference between £374 9s. 5d. and £239 18s. 9d. is too serious to call equitable. Example E is as follows - That example shows the effect under the bill presented by the then Treasurer **(Mr. Bruce),** in 1922. In that case the taxation payable was £381 3s. 2d. as against £239 18s. 9d. Example F is as follows : - That example shows the effect of the proposal by the Treasurer, and the taxpayer will contribute £30611s. 8d. instead of £239 18s. 9d. It will be seen that this is better than the previous system, but it is far from being equitable. The difference of £67 is serious. The following table shows that the carrying forward of losses does not give equity but may cause great injustice - The system proposed by me is as follows - The Treasurer's proposal is as follows - In that case the tax is £1,813 2s. l0d. more than the mean. Although the Treasurer or the commissioner may say that that amount will eventually be wiped out, I contend that it would be unjust to allow it to be appropriated by the Government, without bearing interest, for such a long time. I am sorry that I had not **Mr. Ewing's** criticism of the Treasurer's proposal earlier. I notice that the objection raised to my proposal by the former Treasurer is now raised by the present Treasurer, and it is" an argument which shows thai my proposal favours the taxpayer. The Treasurer is afraid that my system would hurt the taxpayer by making the losses outweigh the profits over a watertight period of five years. The gist of his argument is that it would be far too expensive, and that we should not know our exact position. The following is -a statement by the Taxation Commissioner : - >Under **Mr. Prowse'a** scheme it would be necessary to recalculate the tax every year for each previous year of the five-year period so as to make proper and almost endless adjustments in respect of those variations. > >The complications already mentioned are those which are at present obvious to the departmental officials, and they are not necessarily all that would arise under the scheme if it were in force. It is very probable that other complications would be met with owing to the many differences of circumstances associated with returns and the great variety of bases upon which the assessable and taxable incomes of different classes of business are necessarily calculated. I contend that financial considerations should not be an argument to bolster up or to defend a palpable injustice to our citizens. I personally have a great admiration for the Commissioner, but I feel that judging from his own remarks, and the views of the royal commission that was appointed to inquire into taxation, he had no sympathy with the averaging system. He tried to set the royal commission against any form of averaging on the ground of excessive cost. The figures that I have presented to honorable members this afternoon, show that over a period of five years the taxpayer would under the old system contribute £501 as against £239., It is only fair that any taxation imposed by the Government should fall equitably upon the people. This is not a class or party question, but one of collecting revenue from incomes according to the capacity of the taxpayers. The royal commission must have realized that, because it stated that **Mr. Ewing** did not give it any assistance. The royal commission included this statement in its report - >In view of the statement made by the Federal Commissioner -of Taxation in his seventh annual report that " The average of income for purposes of an income tax assessment would greatly increase the administrative difficulties and costs by introducing complexities from which the administration is now free, and it would considerably add to the difficulties of taxpayers in understanding the assessments," your commissioners endeavoured to obtain an authoritative estimate of the cost of change, but the information received was so vague and unsubstantial that we have been unable to make any use of it.. In his evidence before the commission, the Federal Commissioner of Taxation declared: - ".When I tell you that the averaging of incomes will involve the doubling of our assessing staff, I am not exaggerating the position," but when specific requests were put to him to ascertain how his estimates of costs had been arrived at, he was forced to admit, " It is all & guess, I am sorry to say, because we have not the figures." Those words are not mine, but are contained in a report made to this Parliament by the royal commission on Tasmania. The commission submitted figures showing how difficult would be the working of the proposals that I have submitted to this ^committee, and I want honorable members to examine them dispassionately. I admit that there is complexity in them, and that when income is derived from personal exertion, property, and dividends from companies, the difficulty is increased in the averaging system as well as in other systems. The Treasurer has not submitted to this committee complete figures respecting the present system. I do not want honorable members to mis- understand the position. If the Treasurer receives revenue from the people of Australia according to their taxable capacity, and he finds that he has not sufficient money, it is for him, instead of making certain reductions, as he is now proposing to do, to lay the burden equally upon the citizens by a slight. increase of the rate. In case this committee should carry the amendment, I wish to give him some comfort by saying that it will not affect his revenue for the first year because it will commence with the full year. The honorable member for Maranoa **(Mr. Hunter)** said that Ave should rely upon the advice of our taxation experts; but I should like some other experts to examine the proposals, because I do not wish this Parliament to submit itself to any sort of bureaucracy. I should like a little independent thinking. The honorable member for Maranoa said yesterday that as we knew little or nothing about this subject, we must depend upon the advice of our experts, but in 1922 he made this statement - >I think that the proposal made by the honorable member for Swan **(Mr. Prowse)** is just and equitable. I would not say that it is absolutely the best that, within my knowledge, has even been placed before a Parliament. My business is that of a public accountant. I have been dealing largely with taxation matters for the last twelve years, and, speaking from experience, I think a scheme such as that proposed by the honorable member could be put into operation without very much inconvenience to the department concerned. At the same time, however, we know that as has been shown, the- Treasurer must have a certain amount of money coming in by way of incometax returns. {: .speaker-KIO} ##### Mr Hunter: -- That was quite true then. {: .speaker-KYI} ##### Mr PROWSE: -- If the amendment I intend to propose, in order to arrive at the actual and equitable taxable capacity of the individual for five years, should be adopted and result in a loss of income, the only honorable course open to the Treasurer would be to increase the rate of tax. The original proposal was that the averaging system should apply to primary producers only. If the schedules and reports which the commissioner has prepared have frightened the Treasurer against applying the principle generally, the farmers, at any rate, certainly should be taxed on a regular income basis. Consider the "fluctuations of rural incomes in Victoria and New South Wales during . the last two years - last year the incomes of the fanners were high, this year they are low. These men on the land reap nothing from company dividends or other investments, and their average income could be calculated by any schoolboy - it could be ascertained by means of the ready-reckoner. The object of the amendment I hope to be able to propose is to ensure tlie equitable application of taxation, and I hope that it will not be dealt with on party lines. {: #debate-21-s37 .speaker-C7E} ##### Dr EARLE PAGE:
Treasurer · Cowper · CP -- The clause now under consideration embodies probably the most important concession in income tax law since the averaging system was introduced in 1922 by the present Prime Minister. Under that system the tax paid by persons in receipt of irregular incomes was substantially reduced. Illustrations quoted to the Royal Commission on Taxation showed that in one instance the income tax over the period of five years had been reduced from £120 to £83; in another instance from £139 to £105, and in a third from £146 to £124. Having had five years' experience of the working of that system, the Taxation Department has come to the conclusion that a considerable measure of justice can be given to those people who not merely have irregular incomes, but suffer losses, by introducing the reform contained in the clause now before the committee. The Government asks the committee to adopt its proposals, as a meed of justice that is long overdue. Undoubtedly it is a considerable concession, and will mean the loss of a large amount of revenue. The honorable member for Forrest **(Mr. Prowse)** proposes a different scheme, and it will be for the committee to decide between the two after reviewing the whole of the facts. In 1922, Parliament decided that income tax should be determined by averaging income over a period of five years in order to arrive at the rate, and then applying that rate to the income for the taxable year. In determining the average income for the five-year period, losses were taken into account. The Government now suggests that not merely shall the income rate be ascertained by averaging the income over a five-year period, but that losses shall be offset against the income for the year upon which tax is to be paid. Obviously this will mean a considerable amelioration to men who have sustained big losses. The honorable member for Forrest **(Mr. Prowse)** proposes that a taxpayer shall be required to pay in respect of each separate five-year period, for any subject year the amount represented by the excess of (a) the total amount of tax which would have been payable for the subject year and the preceding years of that period if the tax for each of such years had been assessed on the average taxable income of such years at the rate applicable to such average taxable income, over (p) the total amount of tax previously paid by the taxpayer in- respect of the preceding years of that period, and, conversely, entitling him to a refund of the amount represented by the excess of (&) over (a). Subject to the restriction of adjustments to fixed five-year periods, the aim of the honorable member's scheme is to require a taxpayer to pay exactly the same amount of tax in the aggregate as he would have been required to pay if his yearly income had been of the same fixed amount andequal to his average income. The method proposed has the effect of allowing deduction of losses -occurring within the particular five-year period from profits arising within the same period, as these reduce the aggregate taxable income of the years of the period, and also of taxing the average taxable income of the taxpayer at the rate applicable to the average taxable income; that is, the taxpayer ultimately is not called upon to pay tax in a good year at the rate applicable to the higher income of that year, but is assessed on the average taxable income at the rate applicable to that average taxable income. If the scheme would give the result which the honorable member desires, there would be justification for giving it a trial, no matter what administrative difficulty it entailed. But an investigation shows that in many instances the taxpayer whose income was averaged, in this, way would pay considerably more than the man with a regular income. In these circumstances, is the gain in particular cases worth all the administrative difficulties and undoubted hardship in other cases? The following table included in a pamphlet which has been prepared for the information of honorable members, shows the tax which would have been payable by a taxpayer who derived a net aggregate taxable income of £2,350 over a period of ten years, if such income were derived - *(a)* in equal parts of £235 per annum; *(b)* in varying amounts as indicated and assessed in accordance with the scheme of the honorable member for Forrest - >Under the one scheme the taxpayer pays an infinitesimal amount per annum, and under the proposal of the honorable member for Forrest he would pay almost 10s. in the £1. A system which would produce such a gross inequity requires very close examination before Ave adopt it. {: .speaker-KYI} ##### Mr PROWSE: -- The comparison is between a ten-year period and a five-year period. If my proposal is calculated over a ten-year period, it will give the same results as the other. {: .speaker-F4Q} ##### Mr Scullin: -- A ten-year period cannot be compared with a five-year period. {: .speaker-C7E} ##### Dr EARLE PAGE: -- I am not doing that. I have quoted in connexion with the honorable member's proposal to fiveyear periods, one of which is quarantined from the .other. Apart from that particular illustration, it is easy to find other instances in which, if the losses occur in -a special way, the amount of income tax paid will be very much greater under the scheme of the honorable member for Forrest than under that proposed by the Government. {: .speaker-F4Q} ##### Mr Scullin: -- But in the table which the Treasurer has quoted, one period of five years under the honorable member's proposal is quarantined, and the total profits are divided by five instead of by ten. {: .speaker-C7E} ##### Dr EARLE PAGE: -- How can we divide by 5? Surely the income tax is levied on one-tenth of the total amount. This example deals with the tax of a man who will have to pay, under the system proposed by the honor-able member for Forrest, £1,179. If we are to attain that equity of taxation at . which the honorable member aims, it would be necessary, not to average the taxable income as -he suggests in his scheme, but to average the net assessable income. If that were done, the basis upon which our income tax act has been built up would be destroyed, and it would be extraordinarily difficult to bring into operation any system of rebates or reductions. The following example is given of two men, one A having a fixed income of £900 a year, and the other B a varying income averaging £900 a year: - To secure equity it is necessary to get down to a basis of net assessable incomes, and not taxable incomes and if we adopt the basis of net assessable incomes Ave are immediately faced with tremendous difficulties. {: .speaker-KYI} ##### Mr PROWSE: -1 Does the Treasurer anticipate losing revenue through the operation of my system? {: .speaker-C7E} ##### Dr EARLE PAGE: -- I take it that the position would be similar to the present one. Possible loss of revenue has not influenced our decision in any way. The Government and the commissioner have been influenced by only two factors, practicability and equity. Now we come down to the working of the honorable member's scheme. It might be possible, with a .certain amount of complication and difficulty, to make the scheme workable if, first of all, the Government consistently maintained one rate of taxation. But if that rate of taxation were altered from year to year it is quite obvious that, to obtain an average tax on an average taxable income, it would first be necessary to go into the question each year of what the average income was, and then seek to discover what the tax would have been on the average income for the previous years. That would be one of the simplest parts of the whole problem. Page 3 of the comments on the proposed system gives an illustration of the scheme operating in its very simplest form. Had the department based the illustration on an income operating under the conditions of the last five years, during which there have been reductions of 10 per cent., 12-J per cent., and 10 per cent., it would have been almost too complicated to follow The following is a table showing rates of tax for each year of a five-year period, adopting the 1925-26 rate (Personal Exertion) for the first year, and assuming an increase thereon each year of 10 per cent, on the original rate: - The tax payable for each year in accordance with **Mr. Prowse's** scheme would be arrived at as follows : - Each year necessitates a new and elaborate series of calculations to enable one to determine where he is. That would necessarily increase the work of the de- .partment very considerably. If there were any alteration in the general exemption matters would be further complicated. The basis of the rates and concessions would have to be altered every year. Again, the amendments which pass through this chamber almost yearly, changing and liberalizing the operation of tlie law, would add further to the work of the department and necessitate a new series of calculations each year. Take the rebate provided for by section 10 (6) (iii) - >Section 16 (6) (iii) - At ls. to shareholders whose rates of tax exceed ls. on that portion of the dividend received, paid out of profits derived by the company subsequent to 1st Jury, 1922 (on which profits the company has paid tax at the rate of ls.). Dividends paid out of such profits to shareholders whose rate of. tax is. less, than ls. are. not assessable income in the hands of such shareholder. Take, again, section 20 (4), which provides for a rebate - >Section 20 (4) - On dividends paid out of the profits of a company which have borne tax in the hands of the company at the rate or rates of tax appropriate to the year or years in which the profits were derived. The rate of rebate allowable to the shareholder is that particular company rate or the shareholders' rate in tlie. year of receipt of the dividend, whichever is the lower. When a company draws a dividend for a year from present and past profits upon which it has paid varying rates of tax, the amount of the rebate of tax must be calculated by reference to each rate so paid and to the amounts drawn from tlie respective profits mentioned. One can appreciate, from the wording of that section, what tremendous difficulties there would be in working out the calculations. Take the case of a man who,, by reason of the amount of his total income, finds that his rate drops from 3s.,. which is above the company rate,, to a figure lower than 2s. 8d. and 2s. 5d. at which rates, let it be assumed, certain dividends received by him had already been taxed iu the hands of the company paying the dividends. That would entail a very great deal of extra work. Take even the rebate provided by section 30, in which private individuals are treated similarly to companies in certain circumstances and in respect of 15 per cent, of their business incomes. Again a tremendous amount of work would be involved, and in addition, there are all those rebates which are calculated in accordance with the act in order to avoid double or treble taxation in the United Kingdom and the Commonwealth, or in the United Kingdom, the Commonwealth and a State or States of the Commonwealth, in which cases the higher rate is collected, and the lower rate rehated. If the income is a certain amount one year, it is dealt with in a certain way. If it is lower in another year it is dealt with in another way, while if it is. higher in that year, it is again differently treated. The Commissioner for Taxation speaks in no uncertain way in respect to that aspect of the scheme. He says: - >Under **Mr. Prowse's** scheme it would be necessary to recalculate the tax every year for each previous year of the five-year period so as to make proper and almost endless adjustments in respect of those variations. Whilst as a matter of arithmetic the work could bc done, it will readily be seen that the very great number of assessments which would require such adjustments would involve, in the opinion of the Commissioner of Taxation, -a doubling of the present assessing staffs of the department. We have the honorable member stating that there would be no additional work, and the commissioner assuring the Government that the work of his department would be doubled by the scheme. If it could be operated in such a way that justice would be done to all, there would be some excuse for taking action, but that must be proved beyond question. Until that is done the Government is justified in standing by the opinion of its officers, who contend that the present system, after being in operation for five years, provides a substantial measure of justice to taxpayers, and every effort will be made to remove existing inequalities. The views that I have placed before the committee are embodied in a prepared statement upon the "Averaging System Plus Deduction of Losses from Profits," from which I have largely quoted. I now, with the permission of the committee, add the complete statement for their information - {: .page-start } page 2183 {:#debate-22} ### QUESTION {:#subdebate-22-0} #### AVERAGING SYSTEM PLUS DEDUCTION OF LOSSES FROM PROFITS Before the proposals contained in the bill were adopted by the Government, it was examined in comparison with other schemes, viz. : - {: type="a" start="a"} 0. A suspense credit scheme mentioned in the First Report of the Royal Commission on Taxation, pages 17-18. 1. A scheme proposed by the honorable member for Forrest, **Mr. J.** H. Prowse, M.P., for calculating the tax for a fixed period of five years separated off from the next succeeding period of five years commencing with a sixth year and ending with the tenth year. The scheme of " suspense credits " may be described as one in which the department assesses the taxpayer according to the existing averaging system in a profit year, and contrariwise, the taxpayer, in effect, assesses the department to pay him tax according to the averaging system in a year in which he makes a loss. The royal commission reported that, for purposes of the scheme, a trading loss sustained by a taxpayer should be treated as if it were a profit so as to calculate the amount of tax which the department should pay or credit to the taxpayer as if the department were the taxpayer and the taxpayer were the department collecting the tax. From fhe point of view of the requirements of the annual budget and economical administration by the Taxation Department, this scheme is considered impracticable. Averaging of Incomes Criticism of Mr. Prowse's Proposals **Mr. Prowse's** scheme, in effect, is to require a taxpayer to pay, in respect of each separate five-year period, for any subject year the amount represented by the excess of - {: type="a" start="a"} 0. the total amount of tax which would have been payable for the subject year and the preceding years of that period if the tax for each of such years had been assessed on the average taxable income of such years at the rate applicable to such average taxable income, over- - 1. the total amount of tax previously paid by the taxpayer in respect of the preceding years of that period, and conversely to entitle him to a refund of the amount represented by the excess of *(b)* over (a). Subject to the restriction of adjustments to fixed five-year periods, the aim of **Mr. Prowse's** scheme is to require a taxpayer to pay exactly the same amount of tax in the aggregate as he would have been required to pay if his yearly income had been of the same fixed amount and equal to his average income. The method proposed has the effect of allowing deduction. of losses occurring within the particular five-year period from profits arising within the same period (as these reduce the aggregate taxable in- *(a)* come of the years of the period) and also of taxing the average taxable income of the taxpayer at the rate applicable to the average, taxable income, i.e., the taxpayer ultimately is not called upon to pay tax in a good year at the rate applicable to the higher income of that year, but is assessed on the average taxable income at the rate applicable to that average taxable income. The following comments are, however, offered with regard to the scheme: - {: type="1" start="1"} 0. The scheme in limiting adjustments to five-year periods affords no relief to a taxpayer suffering consistent losses during any . particular five-year period which exceed his profits of that period. As illustrating this fact, the following statement shows the tax which would have been payable by a taxpayer who derived a net aggregate taxable income of £2,350 over a period of ten years if such income were derived: - {: type="a" start="a"} 0. in equal amounts of £235 per annum ; 1. in varying amounts as indicated and assessed in accordance with **Mr. Prowse's** scheme. 2. **Mr. Prowse's** *Scheme.* {: type="1" start="2"} 0. To attain the aim desired by **Mr. Prowae** it would be necessary, owing to the operation of a reducing statutory deduction, to average net assessable incomes and not taxable incomes. Demonstrating that this is so, let it be assumed that the following figures represent the incomes of two taxpayers A. and B. over a period of five years, A. receiving a fixed net income- of £900 per annum and B. a varying net income incomes for each year under the law as averaging £900 per annum. The taxable it now stands would be : - As will be seen, both A. and B. receive over a period of five years the "same net assesable income of £900 per annum. Assuming the rate of tax imposed by Parliament had not been varied during the five-year period concerned, the position would be as follows: - Under **Mr. Prowse's** scheme, i.e., if taxable incomes were averaged A. would pay in tax in the aggregate five times the tax on £800 (£4,000 divided by 5), while B. would pay five times the tax on £773 (£3,866 divided by 5). If net assessable incomes were averaged, A would pay five times the tax on - £900 (£4,500 divided by 5) - £100 (Statutory exemption) = £800. and B. would pay five times the tax on - £900 (£4,500 divided by 5) - £100 (Statutory exemption) = £800. i.e., precisely the same amount as A. {: type="1" start="3"} 0. Where there has been any alteration of the rates of tax between the different years of assessment, included in any five-year period, the tax which would have been payable had the income in previous years been equal to the average income would not be correctly ascertained by merely multiplying the tax on the average income for the subject year by the number of years for the period, but for each subject year the tax for each preceding year of the period must be calculated on the average income arrived at each year at the rate of tax applicable for each of such preceding years. Let it be assumed that over a period of five years the rate of tax imposed by law was each year increased by 10 per cent, on the original rate. Adopting the 1925-26 rate for the first year the rates of tax on the taxable incomes shown would then be as follows: - >The tax payable for each year in accordance with **Mr. Prowse's** scheme would be arrived at as follows: - It should be noted also that, having in view (2) above, any variation between the years of the same period in the amount or rate of diminution of the statutory exemption would have the same effect as an alteration in the rates of tax. {: type="1" start="4"} 0. The work involved by the scheme is only partially exemplified by the foregoing illustrations. The last of the examples is a statement in its simplest form of the work which would be involved in a very large number of cases. Among other complexities connected with the scheme is the necessity to examine each particular dividend received by a taxpayer in each year in order to determine how much of it is rebateable under section 16 (b) (iii), and how much is rebateable under section 20 (4). The rebate under section 16 *(b)* (iii) is on the net amount of a dividend contained in the taxable income, that is the amount left after the dividend has borne its ownpeculiar deductions of the year, together with a proportion of the deductions which may be common to all classes of income in the assessment. The net amount of a dividend in an assessment will vary with each year's income of the shareholder. It "will also be varied by the variations in the character of the funds used by companies for payment of dividends. Under **Mr. Prowse's** scheme it would be necessary to recalculate the tax every year for each previous year of the fiveyear period so as to make proper and almost endless adjustments in respect of those variations. Whilst as a matter of arithmetic the work could be done, it will readily be seen that the very great number of assessments which would require such adjustments would involve, in the opinion of the Commissioner of Taxation, a doubling of the present assessing staffs of the department. There are still further complexities which would, if taken alone, render the scheme impracticable, but superimposed upon all the. others, as may very well happen in any case, they would make it impossible of application. These are: - Rebates under section 30 of the act, where in the case of certain businesses, tax on 15 per cent, of the taxable income is reduced to1s. in the £1 ; and Rebates under section 18, which provides the machinery to eliminate double taxation as between the United Kingdom and Australia. The most difficult of application of all the complexities are those which would arise in the elimination of double taxation. They may be truly described as appalling. The complications already mentioned are those which are at present obvious to the departmental officials, and they are not necessarily all that would arise under the scheme if it were in force. It is very probable that other complications would be met with owing to the many differences of circumstances associated with returns and the great variety of bases upon which the assessable and taxable incomes of different classes of business are necessarily calculated. It may be stated that the scheme proposed by **Mr. Prowse** would necessitate the complete revision of a large number of the provisions of the Income Tax Assessment Act because it would represent a fundamental alteration in the principles of those provisions. Finally, it is observed that the provisions of the present law are only reasonably applicable under a scheme which taxes the actual income of the year without adjustment in respect of payments of tax in previous years. In order to illustrate the difficulties which would be met with in the calculation and allowance of rebates of tax under sections 16 (b) (iii), 20 (4), 18 and 30, let it be assumed that **Mr. Prowse's** scheme had been enacted, and let us place ourselves in the position of the assessor who is about to assess the return of a taxpayer who is entitled to rebates under each of the sections named. For the information of members, it may here be stated briefly that the sections named provide for rebates of tax - Sections 16 (b) (iii) - At1s. to shareholders whose rates of tax exceed1s. on that portion of the dividend received, paid out of profits derived by the company subsequent to 1st July, 1922 (on which profits the company has paid tax at the rate of 1s.). Dividends paid out of such profits to shareholders whose rate of tax is less than1s. are not assessable income in the hands of such shareholders. Section 20 (4) - On dividends paid out of the profits of a company which have borne tax in the hands of the company at the rate or rates of tax appropriate to the year or years in which the profits were derived. The rate of rebate allowable to the shareholder is that particular company rate or the shareholders' rate in the year of receipt of the dividend, whichever is the lower. When a company draws a dividend for a year from present and past profits upon which it has paid varying rates of tax, the amount of the rebate of tax must be calculated by reference to each rate so paid and to the amounts drawn from the respective profits mentioned. Section 30. - To reduce the tax payable under certain circumstances on 15 per cent, of the income derived from a business to1s. (company rate of tax). Section 18 - At rates calculated in accordance with the act, in order to avoid double or treble taxation, i.e., in the United Kingdom, or in the United Kingdom the Commonwealth and a State or States of the Commonwealth. Sections 16 (b) (iii) and 20 (4) relate to income derived from dividends from companies; section 18 to all income liable to double or treble taxation, and section 30 to business income (assessable at personal exertion rates). The rates of rebates on dividends are ascertained in respect of each separate company from which the shareholder has received dividends, and the rate so ascertained applies only to the dividends paid by that particular company. Let it be assumed that the taxpayer was a shareholder in one company only. He therefore would normally receive dividends, probably of varying amounts, each year and rebateable each year at varying *rates* according to the funds of the company out of which paid. Let us also assume that details of the taxpayer's income are as follow: - Let us consider the position under sections 16 *(b)* (iii) and 20 (4). It will be obvious that the average income and, therefore, the shareholders' rate of tax vary yearly, and as rebates of tax under sections 16 (6) (iii) and 20 (4) are calculated having regard to the shareholders' rate of tax, rebates under these sections on each year's dividends from each separate company would have to bereviewed each year for each of the preceding years of the period. In the first year we will assume that he receives a dividend of £3,000, which' is reduced to £2,750 after bearing its share of the deductions applicable to it and allowable in the assessment. £2,750 of this dividend is therefore included in the total taxable income of £6,200 and falls to be rebated at the appropriate rate. The property rate applicable is 49.0208d. The dividend is, let us suppose, rebateable - 50 per cent, not exceeding 2s. 5d, sec. 20 (4). 40 per cent, at1s., sec. 16 (6) (iii). the remaining 10 per cent, being taxable in full to the shareholder. The rebates allowable would thus beSection 20 (4) - 50 per cent. of £2,750 equals £1,375 at 2s.5d., equals £166 2s. l1d. Section 16 (6) (iii) - 40 per cent, of £2,750, equals £1,100 at1s., equals £55. In the second year taxpayer receives a net taxable dividend of £2,000 from the same company rebateable, let usa ssume - 30 per cent, not exceeding 2s. 8d., section 20 (4). 60 per cent, at1s., section 16 (b) the remaining 10 per cent, again being taxable in full to the shareholders. **His** total taxable income was £4,500, thus making £10,700 for the two years. **Mr. Prowse's** scheme requires the tax payable in the second year to be ascertained by calculating the tax which would have been paid on this £10,700 of net taxable income if it had been derived in two equal amounts of £5350, and deducting therefrom the tax paid in respect of the first year. The result is that the dividends included in the taxable income - first year £2,750, second year £2,000 - are now to be taxed, subject to rebate, at the rate applicable to £5,350, i.e., 45.5146. The first year's dividends £2,750 have been rebated at 2s. 5d. and1s., and as the new rate is still in excess of 2s. 5d. and 1s. the rebate remains unaltered. The rebates on the £2,000 derived in the second year are calculated having reference to the rate of tax on the average income 45.5146 and this would be allowable at rates of 2s. 8d. and ls., these rates being less than the shareholder's rate. In the third year the rebates remain unaltered as the shareholder's rate on the average income is still in excess of the company rate. Of course, the rebates allowed would have to be examined to ascertain this fact. In the fourth year, however, the shareholder's rate falls to 25.5469 and, consequently, it is necessary to vary the rates of rebate hitherto allowed under section 20 (4). The dividends are now rebateable under this section at the shareholder's rate, which is less than the company rate at which the profits of the company (out of which this portion of the dividend was paid) had already been subjected to tax in the hands of the company. The rebate under section 16 *(b)* (iii) would still be at the rate of ls. In the fifth year a business loss is incurred which not only wholly absorbs the business profits of the period, but reduces the taxable income of the period derived from rents and dividends. It becomes necessary, therefore, to reduce *pro rata* the dividends previously included in the taxable income of the period. This is done automatically in the average calculation, insofar as the actual reduction of the taxable income of the period is concerned, but in' order to adjust the rebates under section 20 (4) and 16 (b) (iii) each dividend must be reviewed and the rebate recalculated on the reduced amount. The fifth year would conclude a fiveyear period under **Mr. Prowse's** scheme, and the sixth year would start a new period unaffected by the earlier assessments. It should be noted, however, that further complications might have been met with. Had the fifth year loss occurred earlier, the dividends would have been reduced *pro rata,* and the rebates under each section adjusted and allowed on the reduced amounts. If in a later year of the period the loss had been partially recouped, the amount of the dividends would have to be increased to the extent of the recovery of the loss and the rebates, under , each section, adjusted : and allowed on such increased amounts. If, also, the loss had been of such amount as to reduce the rate on property income to less than ls., the portion of the dividends rebateable under section 16 {: type="a" start="b"} 0. (iii) would have to be excised from the assessment entirely, as such dividends in such circumstances do not form part of the shareholder's assessable income. A new average calculation would then be made after excluding such portions of the dividends previously included in the taxable income, and as the rate of tax would be so altered, the rebates under section 20 (4) would have to be reviewed again. If later, subsequent profits raised the rate on the average income to ls. or over, such portion of the dividends would again become assessable income, and require to be included in the assessable income. Further complications would exist if a dividend were received in each of the five years, and not merely in the first two years as shown in the example set out. The practicability of the scheme has so far been discussed from the angles most favourable to it. It has been assumed, for this purpose, that there was no change during the five-year period in the rates of tax or the amount and rate of diminution of the amount of the statutory exemption legislatively fixed, and that dividends were received from one company only. It has thus been possible to take a comprehensive view of the income of the period, and to show the tax each year adjusted so that the whole of the income of the period was taxed at the rate applicable to the average income of the period. But if- {: type="a" start="a"} 0. The rates of tax legislatively imposed varied asbetween the years of a five-year period, *or* 1. The amount or rate of diminution of the statutory exemption were varied, thus producing a corresponding effect to that under (a) by causing a stated amount of *assessable* income to be taxed at different rates each year, the scheme would be impossible from a practical standpoint. Let -it be assumed that, instead of the rate remaining unaltered as above, there is a reduction of 5 per cent, in the second year, and further reductions of 5 per cent, on the original rate in each succeed ing year. The following statement shows the manner in which it would be necessary to proceedin these circumstances: - Let us now consider what would be necessary in order to adjust the rebates under section 16 *(b)* (iii) and 20 (4) if **Mr. Prowse's** scheme were enacted. Take the position as it arises when considering the assessment for the second year. The tax is first calculated on the aggregate taxable income for the two years, viz., £30,700, £5,350, at the rate operating in respect of the first year on £5,350, and £5,350 at the rate operating in respect of the second year on £5,350, i.e., in the second year a rate 5 per cent, lower than that of the first year. It is clear that as in the case where the rate of tax had not altered the whole of the dividends have been taxed, but not now at a uniform rate. Part (£2,375) of the first year's dividend is now assumed to be subject to tax at the first year's rate and part - (£375) - at the second year's rate. It will accordingly now be necessary to review and recalculate if necessary, the rebates under sections 16 *(b)* (iii) and 20 (4) and for each portion of the dividends of the first year taxed at a different rate. Similarly, in the third year the first year's dividend must be assumed to be subject to tax partly (£1,583) at first year's rate and partly (£1,167) at tlie second year's rate and the second year's dividend partly (£416) at the second year's rate and partly (£1,583) at the third year's rate. Each rebate would then have to be reviewed in the light of -the rate of tax assumed to have been paid in respect of each portion. Similarly in the fourth year. In the fifth year, each year's dividend would first bear its share of the fifth year business loss and thereafter the rebates would be reviewed in the light of the rate of tax assumed to have" been paid on the different portions of each year's dividend as reduced by the loss. It is quite probable that parts of a dividend would thus become rebateable at the company rate and other parts of the same dividend at the shareholder's rate. The foregoing relates particularly to a taxpayer receiving a dividend from one company only each year. In practicemany taxpayers receive dividends from ten, twenty and probably even fifty companies each year. The prospect is somewhat appalling when one contemplates the. assessment of a taxpaying business man receiving divi dends from, say, 50 companies with the possibility of his incurring losses reducing the amount of dividends included in his taxable income and of the fluctuation of his rate of tax under and over ls. thus necessitating the excision and restoration of dividends becoming respectively non-assessable, or, assessable and rebateable under section 16 (6) (iii). Section 30 Rebates under Section 30 would require amendment each year having regard to the new rate of tax arrived at. Rebates under this section are allowable under certain circumstances on 15 per cent, of the business income (always assessable at personal exertion rates). The rebate is not always allowable on the full personal exertion income of the taxpayer, and it is probable that where a Section 30 rebate is allowable there would be each year: - " Personal Exertion " Income - . rebateable under Section 30. " Personal Exertion " Income - not rebateable under Section 30. When a loss is incurred it would be necessary to charge the rebateable income with its share of the loss in order to ascertain the lesser amount of income subject to rebate. If subsequent profits recouped this loss either wholly or in part, the amount of income rebateable would be increased pro rata. If the rate of tax legislatively fixed varied each year it would be necessary each year to review each year's rebate separately. The adjustment under **Mr. Prowse's** scheme of Section 30 rebates would involve most of the difficulties already pointed out in connexion with Section 20 (4) rebates on dividends. Section IS. Rebates under Section 18 would need to be readjusted each year and the amount of the rebate would alter with every alteration in the shareholder's rate of tax. The effect of a loss during the five-year period would be to reduce the income of the preceding years of that period, i.e., to reduce the income liable to tax under the federal act, and, consequently, the amount of income liable *to* double and treble taxation. Each year would need to be separately dealt with, as the rates of tax imposed in the several States and the United Kingdom would vary annually. When a loss is incurred it would be necessary. to set off that loss firstly against each preceding year of the five-year period, and then set off the proportionate amount of such a loss attributable to a particular year, pro rata against the several items of assessable income of that year in order to show the particular income liable to taxation under the federal assessment, so that it could be compared with the amount of the same income liable to tax in the United Kingdom and in the States of the Commonwealth. The calculation of Section IS rebates at present involves considerable work and any amendment of the law which will require these to be reviewed and recalculated more than once cannot be recommended. So far as rebates of tax are concerned, **Mr. Prowse's** scheme has been shown to be simplest in its application (if it can be said to be simple at all in this respect) where there is an absence of losses, i.e. (a more or less steady income) and where there is no alteration in the rate of tax from year to year. The aim of the scheme, however, is apparently to give more equitable treatment to the taxpayer with a fluctuating income, i.e. one incurring occasional losses, but it has been shown that its practical application to such an income which is derived partly from personal exertion and partly from property is not reasonably possible. The proposed 10 per cent, reduction in the rate of tax this year and the fact that further reductions in future years might be possible, render the supposed variation in the rate of tax not an unreasonable assumption, and add strength to the objections to the scheme. There is also the great objection to **Mr. Prowse's** scheme - there could not be any finality in any year's assessment until the expiration of the five-year period. In conclusion, I would like to draw the attention of honorable members to the extract from the report of the Royal Com- mission on Taxation, quoted by the Honorable the Prime Minister in 1922, when commenting, as Treasurer, upon **Mr. Prowse's** proposal when first made during the second reading speech on the Income Tax Assessment .Bill 1922. The extract, *vide* First Report df the Royal Commission on Taxation, paragraph 49, folio 14, is as follows: - " Modifications of the British scheme, dealing chiefly with minor phases, were submitted by several witnesses - a full description of which . would swell this report unnecessarily - and were fully discussed and considered, and after careful examination rejected. They included a proposal that a system of five yearly averages be adopted for primary producers, each quinquennium to be treated as quarantined from all preceding and succeeding years, that tax be tentatively collected on the -income of each year as at present, but the whole of the period to be reviewed at the end of the five years, the average income of the period ascertained, such average to be applied to each year as though the income of each year had been an unvarying sum. Amended assessments were then to be made in respect of each of the years of the period and any balance shown when compared with the interim payments was to be paid to or refunded by the department in final adjustment. The sixth year was to commence a second quinquennium to be dealt with exactly like its precedessor and so on. This, being neither in accordance with sound principles nor reasonably practicable in administration, was rejected by us." Statement showing the Income Tax (at 1925-26 Personal Exertion rates), which would be payable under the several methods explained hereunder, by supposititious taxpayers A, B, C, and D, whose trading results over a ten-year period were as indicated. *Explanatory Note -* "Steady Taxable Income." - This column shows the tax payable in respect of each year of the ten years shown if the taxable income for the ten-year period indicated were derived in equal amounts each year. "Bill Proposal." - This column shows the tax payable in respect of the particular year shown, if, as provided in the bill now before the House, in addition to averaging taxable incomes for the purpose of ascertaining the rate of tax in accordance with section 13 of the Income Tax Assessment Act deduction of trading losses be allowed, to the extent of the trading profits of the next four succeeding years. The taxable income thus ascertained for any of those years will be the amount on which tax is levied and also, will be the taxable income for purposes of ascertaining the average *income* by reference to which the appropriate rate of tax will be found: "Present Law." - This column shows the tax payable in respect of the particular year shown, as assessed under Income Tax Assessment Act 1922-1925 (including the averaging of incomes, for the purpose of ascertaining the rate of tax as recommended by the Royal Commission on Taxation). " A.M.S." - This column shows the tax payable in respect of the particular year shown, if, in addition to averaging taxable incomes for the purpose of ascertaining the rate of tax in accordance with section 13 of the Income Tax Assessment Act, in respect of any year in which a loss was incurred, a " Suspense Credit," of an amount equal to the tax which would have been payable in that latter year had the result stood in the income (i.e. taxable income) and not in the loss column were set up and allowed as a deduction from tax subsequently payable. (See paragraph 72 of First Report of Royal Commission on Taxation). (But note that under the "A.M.S." method, such losses are, for averaging purposes, treated as losses, and are carried into all average calculations as such, and increased for this purpose, in accordance with section 13 (8) of the act, by the full amount of the statutory exemption (£300). In the light of our experience of the last five years, since this whole subject was examined and reported upon by the Royal Commission on Taxation, and in view of our recent re-examination of the position, we are satisfied that the concession embodied in the present averaging system, with a deduction of losses from subsequent profits, is more equitable from the point of view of the taxpayer, and will afford, him more substantial relief than he would obtain from the application of the A.M.S. system, the effect of which is shown in the supposititious case set out in the tables in my memorandum. For that reason I ask the committee not to accept the amendment of the honorable member for Forrest. {: #subdebate-22-0-s0 .speaker-F4Q} ##### Mr SCULLIN:
Yarra -- The debate this afternoon has more than justified, the protest that I made yesterday to the effect that it was not fair that memoranda of new systems of dealing with an involved subject, such as this is, should have been placed in the hands of honorable members only yesterday. We should have had them weeks ago. It is impossible for us to decide the matter intelligently this afternoon. I reaffirm what I said in my speech on the second reading of this bill, that if it is possible or practicable to arrive at a system of averaging incomes,, we should make every reasonable sacrifice to adopt it, because there is not the slightest doubt that, under the present method of assessment, grave injustice is suffered by people who are in receipt of irregular incomes, whilst some persons who are in receipt of regular incomes pay less taxation than they should pay. In the case of the latter the taxation depart ment suffers. The injustice in the cases submitted by the honorable member for Forrest of two men whose incomes averaged £1,000 per annum over a period of years, one income being regular and the other irregular, cannot be gainsaid. It is reasonable that a person should be taxed on the average income which he receives over a reasonable period. Mr.Rodgers. - The trouble is that the years in which a producer receives scarcely any income are periods of great trial and impecuniosity to him, and any taxation is a heavy burden. {: .speaker-F4Q} ##### Mr SCULLIN: -- That may be so. Under the scheme of the honorable member for Forrest such a man would probably he due for a refund, if we were to accept the. principle of refunds; but that is another issue. The man with the irregular falling income who pays more than he ought to pay - and it has been ,( established that he does pay more - is suffering from a grave injustice, while the man who, through fortunate circumstances, finds himself with a rising income is in a happy position. I have had only a short time to consider the memorandum submitted by the Treasurer, and have been impressed by it; but I should like to know whether it was prepared under his direction or independently by the taxation officials themselves. It is of distinct disadvantage to us that that point has not been cleared up. I do not wish to say anything of an offensive nature, but I feel obliged to remark that the Treasurer is an adept at preparing a partizan case, and in this instance he has presented all the worst features of a difficult position. If a committee were appointed to investigate this subject, it could interrogate the Commissioner of Taxation and his officers to ascertain the extent to which this is; a fair and honest statement of the position. If I were assured that it was such, I should accept it "without question, but it is hardly reasonable to ask us to accept it as an absolutely impartial statement from the commissioner when it may have been prepared to buttress a particular case which the Treasurer desires to make. The memorandum contrasts the treatment to which a man with a regular income of £235 per annum over a period of ten years, and a man with an irregular income amounting to the same aggregate sum over a similar period, would be sub jected under the scheme of the honorable member for Forrest and that of the Government. I am not satisfied that the comparison has been fairly made. For the purpose of **Mr. Prowse's** scheme two five-year periods have been taken instead of a complete ten-year period. Everybody knows that the shorter the period that is taken the farther away one gets from equity, while the longer the period the closer one gets to it. But it will be evident that although a five-year period might not be ideal, the results over it would be more equitable than the results over a single year.. The total insome of the man with an annual income of £235 per annum for ten years would be £2,350, and the tax to which he would be subjected would total.£45 12s. 6d. For the purposes of ascertaining the effect of **Mr. Prowse's** scheme, it is assumed that the taxpayer with a variable income los.t £5,000, £4,000, £3,000 and £2,000 in each of the first four years ; in the succeeding four years he showed a profit of £500, £3,000, £5,000, £7,000 respectively; in the next year he showed a loss of £250, and in the tenth year a profit of £1,100. So that substracting his losses from his profits his total income was £2,350 upon which he would pay a tax of £1,179 16s. 8d. {: #subdebate-22-0-s1 .speaker-F4B} ##### Mr BRUCE:
NAT -- The tax of the man with the steady income would not .vary. {: .speaker-F4Q} ##### Mr SCULLIN: -- That is so, but it is highly improbable that the income of a man with a variable income would vary' as greatly as in this hypothetical case. {: .speaker-F4B} ##### Mr Bruce: -- In the first five-year period the position ofl the taxpayer under the scheme of the honorable member for Forrest would be all right, but in the next five-year period it would be all wrong. {: .speaker-F4Q} ##### Mr SCULLIN: -- I submit that it is most unlikely that a man would lose £14,000 in four consecutive years, so that the case is not reasonable. The difficulties of the situation, which are recited in the Treasurer's memorandum, are impressive, but not conclusive, for many of them would arise, and do arise, under our present system. I venture to say that if the Commissioner of Taxation and his officers had been asked to prepare a case to show merely the difficulties of the present situation, they could have submitted one which would have staggered us. We should not be asked to pass judgment in a matter of this kind on the statement of either one side or the other. We should be given an opportunity to examine the officers and records of the department. In my opinion,' the wise course for the committee to pursue would be to affirm the equity of the principle of averaging incomes, without committing itself to a particular scheme. Personally I am not prepared to commit myself to any scheme at the moment. In the face of the criticism which the Treasurer levelled against the scheme outlined by the honorable member for Forrest, it would be unwise for us to adopt it - that is, accepting the criticism of the Treasurer as coming from the officials pf the department. We have not reached the point at which we can say the last word on this subject; nevertheless, I feel disposed to vote for the amendment when it it submitted to the committee as an expression of my view that the adoption of an averaging system is desirable. We do not get over our difficulties by merely averaging rates as we are doing, nor shall we overcome them by allowing losses to be carried forward. The part of the Treasurer's memorandum which impressed me most was the table which showed the number of difficulties which varying conditions, rates, and exemptions would bring about. There would be innumerable difficulties in applying the system. But still they would have a ready reckoner to refer to, whereas under the present condition of averaging rates without averaging incomes we have no ready reckoner. It is all very well to average. the rate of tax on the income of a man which may vary from £1,000 this year to £2,500 next year; but we have no ready reckoner to show us what he would have paid at the average rate for £2,500. There would be a ready reckoner with which to calculate the amount of tax once the rate had been ascertained. A number of difficulties have arisen because of the existence of complexities in the law. Those complexities can be removed. The adoption of the company tax in the form in which it has been in operation since 1922 has led to complications. In one of his reports the Commissioner of Taxation said that the amendment of the law which made it applicable to all profits had added considerably to the work of the assessors in the taxation department. These complexities in our company law make possible an evasion of taxation and encourage a large number of people to form companies when in other circumstances they would not do so, because by that means they are able to evade taxation which as individuals they would be called upon to pay. We require a complete overhaul of our income-tax law. If that were carried out, quite a number of these difficulties would' disappear, and it would be possible to put into operation a scheme such as that outlined by the honorable member for Forrest **(Mr. Prowse).** I do not claim to be a great authority in this matter; but I should not care to commit myself or honorable members on this side to the definite statement that any particular scheme should be adopted. If the committee were to agree to the principle contained in the amendment, or to any other principle which confirmed the averaging of incomes, with the object of approaching as nearly as possible to justice, the probability is that when a further amending bill was brought down next year the opinions and the advice of the departmental experts would be placed before us, and it might be possible to evolve some practical scheme. There is no hope of inducing the department to submit a scheme embodying the averaging system, so long as the Government is opposed to that system. {: .speaker-KZA} ##### Mr West: -- The Government must control taxation. {: .speaker-F4Q} ##### Mr SCULLIN: -- Quite so. But so long as the Government makes .that a rigid policy, naturally the department will back it up and provide it with facts and figures which are not available to private members. It would be very much better if every honorable member had an opportunity to examine fully every statement that is submitted to the Government by its experts. First of all it should be ascertained whether this committee approves of the principle of averaging incomes. Personally I do, because I consider that it is a just system ; but if it is impracticable, unworkable, and too costly, I am not prepared to vote for it. In the short time that I have had to study it, I have been impressed with this document that has been placed in my hands, although I do not admit that it is conclusive. {: #subdebate-22-0-s2 .speaker-F4B} ##### Mr BRUCE:
Prime Minister and Minister for External Affairs · Flinders · NAT -- Without dealing at great length with this question, I think I ought to say a word or two about it, first because I was Treasurer at the time that the Royal Commission on Taxation reported to Parliament; and secondly, because I have had some experience of this particular scheme. I say, without hesitation, that if there were a perfect scheme under which every taxpayer, whether he had a- regular or an irregular income, could be taxed alike, there would be an obligation on this Parliament to give effect to it. The first criticism I offer is that this scheme cannot claim to approach perfection. I venture to suggest that no scheme can be perfect which does not cover the whole of the tax-paying life of an individual. Five years would probably give a result nearer to justice than one would give, ten a result more just than five, and fifteen better than either; but absolute equity can be obtained only by taking the whole of the tax-paying life of an individual: It is impossible, therefore, to achieve absolute fairness. There are a number of points with which I could deal, but they have been referred to by the Treasurer **(Dr. Earle Page).** I say, however, that the complexity in administration, and the difficulties which would have to be overcome if the scheme were adopted, are overwhelming. I do not base that statement upon what is contained in the memorandum that has been circulated among honorable members, although I understand that it gives the considered views of the taxation authorities. It was not prepared with the idea of advancing every argument that could be found against the honorable member's scheme. In 1922 I examined that scheme, and the conclusion at which I then arrived was that it was impossible to give effect to it without causing, such an enormous amount of labour and complexity as to defeat the object which the honorable member had in view. I wish now to deal with some of the points that have been raised by the Deputy Leader of the Opposition **(Mr. Scullin)** with respect to the general position in connexion with the averaging of incomes. "We are not, as some honorable members appear to think, attempting to grapple Avith a very difficult problem without the possession of the necessary information. The whole question was reviewed by the Taxation Commission which presented a report to Parliament in 1922. It endeavoured to arrive at a basis that would be as near as possible to absolute equity. It considered the British scheme, with which the Deputy Leader of the Opposition has suggested that he has a considerable measure of sympathy. Under that scheme the income of a taxpayer was averaged over a period to determine the amount upon which tax should be paid. None of the Commissioners made a recommendation in its favour. I have very little doubt that their judgment was influenced to a great extent by evidence that was readily available to them at the time with respect to its disastrous effects on falling incomes. When the trend is upwards, a taxpayer receives the benefit, but when it is downwards, he is handicapped by the higher amount he has earned in previous years. Subsequent to the war, incomes in Great Britain began to drop, and the adverse effect of the system was then made manifest. The Commission recommended another scheme, which was adopted by the Commonwealth, and became law. That was to average incomes for the purpose of determining the rate of tax which should be paid. One of the arguments advanced in support of that system is that a man's capacity to pay is best judged by considering the income of the year in which he makes payment; and that if account is taken of incomes earned in previous years, when determining the rate to be paid, you arrive at a more just method of dealing with irregular incomes. A minority of the commission, consisting of **Mr. Warren** Kerr, **Mr. Duffy,** and **Mr. Mills,** preferred the system of setting off or carrying forward losses. It must be remembered, too, that the scheme which Ave have before us to-day was considered by that commission. The following is an extract from its report - Modifications of the British scheme, dealing chiefly with minor phases, were submitted by several witnesses - a full description of which would swell this report unnecessarily - and were fully discussed and considered, and after careful examination rejected. They included a proposal that a system of five-yearly averages be adopted for primary producers, each quinquennium to be treated as quarantined from all preceding and succeeding years, that tax be tentatively collected on the income of each year as at present, but the whole of the period to be reviewed at the end of the five years, the average income of the period ascertained, such average to be applied to each year as though the income of each year had been an unvarying sum. That is practically the scheme we are now considering, the only difference being that the honorable member- proposes that it shall have a general application and not he confined to primary producers. The report continues - >Amended assessments were then to be made in respect of each of the years of the period and any balance shown when compared with the interim payments was to be paid to or refunded by the department in final adjustment. The sixth year was to commence a second quinquennium to be dealt with exactly like its predecessor and so on. This, being neither in accordance with sound principles nor reasonably practicable in administration, was rejected by us. Itwill thus be seen that the royal commission made a thorough examination of all systems, and endeavoured to arrive at a greater measure of equity between regular and irregular incomes. It had before it this particular scheme, and was able to consider also the principles of taxation that were in operation in other countries. {: .speaker-KYI} ##### Mr Prowse: -- The right honorable gentleman would not contend that it was precisely the same principle. {: .speaker-F4B} ##### Mr BRUCE: -- From what I have read on the subject it is perfectly clear that although there may be minor differences in detail, the essential principles are the same. The members of the royalcommission examined the taxation systems of practically every country in the world, and they had clearly in their minds the principles that should govern a taxation system designed to bring about a greater measure of equity. That commission rejected the proposal of the honorable member for Forrest, and the system that it recommended was adopted by the Government. We have had experience of that system and we are now proposing to add to the recommendation of the majority of the commission thatof the minority by allowing for the carrying over of losses. On the evidence before us, we would be ill advised to pass the amendment moved by the honorable member for Forrest. There is one further factor, and I have no recollection whether the royal commission dealt with it. Possibly not, because it concerns the provision of the financial requirements of this country. The scheme proposed by the honorable member for Forrest, provides, in certain circumstances, for large refunds of taxation. Let me give an example. If a severe drought occurred at the end of five years of prosperity, the consequent losses would more than absorb the heavy taxation collected during that period. In that event, what possibility would there be of the Government meeting the tremendous demand on the revenues of the country for refunds of taxation? I therefore suggest that from a practical and financial point of view the scheme proposed by the honorable member for Forrest would be exceedingly complicated and would involve serious financial danger in time of stress. I hope that the committee will not include it in the bill. {: #subdebate-22-0-s3 .speaker-KVS} ##### Mr THEODORE:
Dalley .- The difficulty that the Prime Minister sees in meeting financial demands that may be made upon the consolidated revenue fund in consequence of one year of distress and the many refunds that may have to be made, I think could be met if it were the only difficulty. It certainly is not one which after full consideration should weigh much with the committee. The Government or the Parliament should make provision for a taxation suspense fund to meet exigencies of that kind. Such a fund would grow into large dimensions and be available when required. I suggest the provision of a reserve or insurance fund. {: .speaker-F4Q} ##### Mr Scullin: -- It would be good policy to have such a fund. {: .speaker-KVS} ##### Mr THEODORE: -- One recognizes that objections would be raised to the Treasurer collecting revenues for that purpose, but I do not think they would be serious. The Prime Minister has endeavoured to show that the principle of averaging incomes is unsound. He quoted an early decision or recommendation of the Royal Commission on Taxation to the effect that the averaging scheme was not in accordance with soundprinciples nor was it reasonably practicable in demonstration. The commission certainly did not show that the averaging system was at variance with any sound principles of taxation. Indeed, all the arguments and facts put forward show the system to be demonstrably sound. I admit that there is considerable doubt about its practicability, and the memorandum prepared apparently by the Commonwealth taxation authorities shows how difficult it would be to operate such a system. We cannot ignore that. I admit that under our present laws its many complexities would probably necessitate a considerable increase in the taxation staff, and many more assessors might have to be appointed. As the Deputy Leader of the Opposition has said, if the system is sound in principle, and if injustice is done in many cases, we should honestly face this problem even if it means the overhaul of the income taxation laws. An examination of the memorandum will show that there are great complexities and overwhelming difficulties arising out of rebates that vary according to the nature of the funds from which dividends are paid. There are difficulties because of the intricacies of primary exemption, and the varying rate of taxation in different years. These will result in great difficulty, because so many taxpayers are concerned. It would certainly be of adadvantage to have our taxation laws more simple than they are to-day. I cannot see any necessity for discriminating between the rates on property income and personal exertion income. Whatever the class of income, whatever the source from what it is derived, it could be taxed at the one rate without doing any great injustice to the community or to the Commonwealth. The lack of a uniform rate is one of the fruitful causes of complexities in operating the system of averaging as proposed by the honorable member for Forrest **(Mr. Prowse).** The honorable member for Yarra **(Mr. Scullin)** has advised the Committee to affirm the principle of averaging incomes, even if it necessitates a complete redrafting of the income tax laws of the Commonwealth to bring them into conformity. If only a few taxpayers were concerned there would not be much justification for the system; but it would apply probably to 90 per cent, of the taxpayers, whose incomes vary from year to year, or at any rate over a five years' period. We should adopt the most equitable system, because income taxation is an important source of revenue to the Commonwealth. That form of taxation will endure, as the Treasurer acknowledged when introducing the measure. We shall remain in the field of income taxation for a great many years, if not always. The law should be made workable, fair, and rational. Under the circumstances I am inclined to accept the advice of the honorable member for Yarra **(Mr. Scullin)** and to cast a vote in favour of the amendment moved by the honorable member for. Forrest **(Mr. Prowse).** {: #subdebate-22-0-s4 .speaker-KIO} ##### Mr HUNTER:
Maranoa .- The honorable member for Forrest **(Mr. Prowse)** referred to a statement that I made five or six years ago respecting his system of income taxation. I absolutely believed in that system at that time, and I still think it is one of the best schemes evolved. But since the Royal Commission on Taxation presented its report and accommodations, new systems, and methods of taxation have been adopted, and anomalies have been removed in consequence. It is a matter of progression of ordinary thought. The honorable member for Forrest deserves credit for submitting his scheme to the Committee. He honestly believes that it is- the best system of income taxation. If I disagree with him - and I do not say that I do - that does not prove that the system then advocated by me was wrong. The figures apparently show that the scheme proposed by the honorable member for Forrest would work out fairly evenly; but, after all, there are few people on so-called fixed incomes that would not at sometime or other have to come under the averaging system. A person who starts on wages knows that his income will gradually increase year by year. Provided that he works hard, his income must increase, and on the averaging system at the end of five years he would really be paying less taxation under the averaging system proposed by the honorable member than he would under the proposal of the Treasurer. A vast number of people 'suffer loss, not through unemployment, but through drought. Losses are sustained also through bad business methods. Pastoralists in Queensland average a loss every four years and in other States, at longer intervals. There is, however, a certain average income. A man about to invest in a sheep or cattle proposition does not buy on the basis of a £10,000 profit in a particular year, but on an average profit of £1,500 or £2,000 as the case may be. In days gone by he paid income tax on the £10,000 in the bountiful year, and when he incurred losses he had no means of getting a refund. In Queensland, particularly in the central and north-western districts, some men sustained losses last year which wiped out not only their profits in the four previous years, but also their entire capital, and they have no possibility of recovering it. People are prone to regard the pastoralists as millionaires, but my intimate knowledge of their industry and the report of the Land Advisory Committee appointed by **Mr. McCormack** convinces me that their average incomes are not nearly so high as the ordinary man is in- clined to believe. Mr.Fenton. - But they have not to pay taxation when they make losses. {: .speaker-KIO} ##### Mr HUNTER: -- No ; but they have already paid it on profits which they have subsequently lost. Under the conditions existing in Queensland to-day the scheme of the honorable member for Swan would fail. Pastoral conditions vary in each State and in different divisions of a State. If taxation computations are to be strictly confined within a five-year period - {: .speaker-KYI} ##### Mr Prowse: -- That is better than a one-year period. {: .speaker-KIO} ##### Mr HUNTER: -- I admit that, but if heavy losses such as have occurred in Queensland were sustained in the fifth year there would be no means under the honorable member's proposal of giving redress to the taxpayer. In the sixth year a new five-year period would commence and the losses would not be carried forward. Under the Government's scheme if there had been an excess of losses over the five-years' period or a loss only in the fifth year, there would be a chance of the taxpayer recouping himself in the sixth, seventh or eighth year. Any one of the schemes mentioned in the report of the royal commission will show benefits on one set of figures and disadvantages on another set. Each and every one has some drawback. Apart from the experts in the Taxation Department, there are professional men throughout Australia whose business is the study of taxation schemes from the point of view of their clients. I received a letter recently from the United Graziers' Association in Queensland containing arecommendation by the Taxation Advisory Committee, the chairman of which is **Mr. M.** S. Herring, who was at one time a solicitor in New South Wales and later became a taxation expert and manager of one of the biggest financial concerns in Queensland. That committee investigated the averaging scheme, the setting off of losses, and the averaging of rates, and this is the recommendation made to the United Graziers' Association : - >The proposed method of carrying forward of losses (in conjunction with the present system of averaging for rate purposes) is considered to be superior to the alternative proposal for the averaging of incomes over a period of five years for the following reasons- > >It will be equally beneficial in its effects in the years following a drought. > >It will generally result in graziers being called upon to pay their share of taxation at the time when they are best able to do so. > >It will not, as in the case of the proposed averaging of incomes, result intaxpayers in a time of drought being called upon to pay heavy taxes in respect of incomes derived some years previously. > >It is more practicable than, the proposed averaging of incomes. The present system has not realized all that was expected of it, but the conjunction of the two - the carrying forward of losses and the averaging for rate purposes - seems to be, in the opinion of experts who have investigated this matter for their clients, the best that can be devised, although other schemes might prove better in particular circumstances. When experts differ it is difficult to know what course to adopt, but in regard to this particular scheme they are unanimous, and we cannot do better than be guided by them. Clause agreed to. Clauses 15, 16, and 17 agreed to. Clause 18 - >Section thirty-seven of the Principal Act is amended - > >by omitting from sub-section (1.) the word " make " and inserting in its stead the words "cause to be made " ; and > >by omitting from sub-section (3.) the words " alter that assessment " and inserting in their stead the words "cause that assessment to be altered." > > *Section proposed to be amended -* (1.) *The commissioner may at any time make all such* alterations *in or additions to any assessment as he thinks necessary in order notwithstan ding that income tax may have been paid in respect of income included in the assessment:* > > *Provided that every alteration or addition which has the effect of imposing any fresh liability, or increasing any existing liability, shall be notified to the taxpayer affected, and, unless made with* **Ms consent,** *shall be subject to objection :* > > *Provided further than an alteration or addition shall not be made in or to an assessment after the expiration of three years from the date whenthe tax payable on the assessment was originally due and payable, unless the commissioner has reason to believe that there has been an avoidance of tax owing to fraud or attempted evasion.* {: #subdebate-22-0-s5 .speaker-C7E} ##### Dr EARLE PAGE:
Treasurer · Cowper · CP -- I move - >That the word " and ", second occurring in paragraph *a,* be omitted, and that the following new paragraph be inserted - *" (aa)* by omitting from the second proviso to sub-section (1.) the words 'has reason to believe that there has been an avoidance of tax owing to fraud or attempted evasion' and inserting in their stead the words ' is of opinion that there has been an avoidance of tax and that the avoidance was due to fraud or evasion.' " This amendment is considered to he very necessary because of the great difficulty experienced by the commissioner in satisfying himself that there has been avoidance of tax by fraud or an attempted evasion, as required by the present wording of the law. Very great delays have arisen in dealing with cases which, prima facie, should be subject to amendment of assessment, because of the necessity for the commissioner to satisfy himself, in order that he might subsequently satisfy the court if so required, that there is reason to believe that tax has been avoided by fraud or attempted evasion. In very many instances tax is avoided by the omission of income, and experience has shown that the omission has been due to intent in some cases, carelessness in others, and ignorance in the rest. It isnot possible for the department readily to discover cases of omitted income, and these frequently are not found out until an investigation is made of the taxpayer's books and accounts. The volume of this class of work is considerable, however, and as the staff of investigating officers available for the work is not large, long delays often take place before underpayment of income tax is discovered. {: .speaker-KVS} ##### Mr Theodore: -- Does the Commonwealth department take advantage of the investigations made by the States? {: .speaker-C7E} ##### Dr EARLE PAGE: -- Except in Western Australia, the State officers do all the collecting work for the Commonwealth. It may not be readily possible to discover evidence which would give reason to believe that avoidance of tax had happened through fraud or attempted evasion, and therefore the taxpayers who have escaped the payment of proper tax cannot be required to pay that which should have been paid, because of the expiration of the statutory time limit, before the discrepancies are discovered in their returns or before amendments of assessments can be made on information collected. The present wording of the proviso is causing considerable amounts of revenue properly and equitably payable, to be lost. It is therefore considered that the amendment now proposed should replace the present proviso. Amendment agreed to. {: #subdebate-22-0-s6 .speaker-KYI} ##### Mr PROWSE:
Forrest .- I move - >That clause 16 be recommitted. The **CHAIRMAN (Mr. Bayley).I** suggest to the honorable member that, as several other clauses have to be recommitted, he makes his motion at a later stage. Clause, as amended, agreed to. Clause 19 agreed to. Clause 20 - >Section fifty-one of the principal act *ls* amended by inserting at the end of sub-section (6) thereof the words "and the board shall, upon the request of the commissioner or a taxpayer, refer to the High Court any question of law arising before the board and the decision of the High Court thereon shall be final and conclusive." > > *Section proposed to be amended.* 51. (6) *The Commissioner or a taxpayer may appeal to the High Court from any decision of the board under this section which, in the opinion of the High Court, involves a question of law.* {: #subdebate-22-0-s7 .speaker-KMQ} ##### Mr MANN:
Perth -- I wish to raise the point which I raised on the second reading of the bill. This clause provides for a considerable variation of the present method of procedure in regard to the Board of Review. It. is well known, that that board is intended to provide an expeditious and cheap method of obtaining the review of assessments. An applicant may appear before the board practically without cost. The board visits the various States, thereby expediting and cheapening the process of hearing appeals. In the course of its duties, the board must necessarily deal with what may be termed questions of law. Whether an assessment is rightly made depends largely upon whether the act has been properly interpreted. There are legal men on the board, and occasionally it has caused important decisions to be upset. I can recall at least four cases during the last few months in which the Commissioner appealed against decisions of the board, and the board was upheld by the High Court. The Government now proposes to alter that procedure, and practically to remove from the board the right to give decisions based on legal interpretations. The proposed amendment provides that - {: type="i" start="1"} 0. . . The board shall, upon the request of the Commissioner or a taxpayer, refer to the High Court any question of law arising before the board, and the decision of the High Court thereon shall be final and conclusive. A case may be part heard by the board, but the Commissioner has power to step in and say, " This matter involves a question of law, and we desire to refer it to the High Court." That is done. The proceedings are held up until the High Court has heard the reference, and the applicant for relief is mulcted in heavy expenses in defending the case before the High Court. {: .speaker-KVS} ##### Mr Theodore: -- In such circumstances, he would surely have the right to withdraw his appeal? {: .speaker-KMQ} ##### Mr MANN: -- The provision could very well be used as a strong lever to cause him to withdraw his application. The prospect of being involved in heavy expense might cause him to prefer such a course. That would deprive him of the relief that he had a right to expect from the board. If the board gives a decision against the commissioner, as was done in the cases to which I have referred, it is competent for the Government to take the case to the High Court. Then it is merely an appeal from the decision of the board, and the applicant for relief is not involved in any expense. That is a very different matter from taking an undecided matter from the Board of Appeal to the High Court, and throwing the onus of defence upon the taxpayer. The High Court may be sitting in one of the eastern States, and the taxpayer resident in Western Australia. He would then either have to bear the expense of proceeding to the eastern State, or wait until the High Court visited Western Australia. The whole object of the clause seems to be to restrict and hinder applications to the Board of Review, and to limit its functions. {: .speaker-F4Q} ##### Mr Scullin: -- Is not the object probably to prevent an appeal to the High Court from the decision of the Commissioner ? {: .speaker-KMQ} ##### Mr MANN: -- The Commissioner now has the right of appealing to the High Court, but that does not throw extra expense upon the applicant. It is most unfair to provide a means of appeal to the High Court, by the Commissioner, before the Board of Appeal has given its decision. The board has worked very well, and its methods have been approved by the High Court. I trust that the proposed amendment will not be proceeded with. {: #subdebate-22-0-s8 .speaker-KZO} ##### Mr LATHAM:
AttorneyGeneral · Kooyong · NAT .- The object of this clause is to save the taxpayers expense. One of the taxpayers' associations has objected to it, and the Government does not wish to press it if there is any considerable objection to it in this chamber. {: .speaker-KMQ} ##### Mr Mann: -- I have not received representations from taxpayers. {: .speaker-KZO} ##### Mr LATHAM: -- The Government has had representations from a taxpayers' association. The Board of Review consists of a' retired police magistrate and two accountants. It is a tribunal ap-' pointed to deal with facts, and not for the purpose of dealing with questions of law, though, as the honorable member for Perth **(Mr. Mann)** said, incidentally, it is necessary for the board to discuss and determine, according to its opinion, questions of law. As the act stands at present, there is provision for an appeal to the High Court from any decision involving a question of law. The new provision is to the effect that reference may be made to ths High Court on a question of law before the board of review has completed its hearing. Either party may exercise this right of appeal earlier than is possible under the existing provision. {: .speaker-KMQ} ##### Mr Mann: -- That makes the High Court the deciding factor. {: .speaker-KZO} ##### Mr LATHAM: -- It is already the deciding factor as to the law; no alteration ' is made in that regard. Only questions of law may be referred to the court. The object of the amendment is to facilitate these proceedings, but if honorable members are of the opinion that it would not be in the interests of the taxpayers to accept it, the Government will not press it. {: #subdebate-22-0-s9 .speaker-F4Q} ##### Mr SCULLIN:
Yarra .- At present there is an appeal to the board of review by the taxpayer - {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- To an amended, board of review. {: .speaker-F4Q} ##### Mr SCULLIN: -- To the best of my knowledge the board was reconstituted only because legal technicalities were encountered. {: .speaker-KZO} ##### Mr Latham: -- That isso. {: .speaker-F4Q} ##### Mr SCULLIN: -- Certain taxpayers tested thelegality of theboard as it was at first constituted and the High Court decided in their favour. The position now is that a taxpayer may take his case before the board and also to the High Court, on a point of law if he desires to do so. {: .speaker-KZO} ##### Mr Latham: -- So may The commissioner. {: .speaker-F4Q} ##### Mr SCULLIN: -- The court in determining a question of law may incidentally determine a question of fact. I do not see that we can deny either the commissioner or the taxpayer the right of appeal to the court on a question of law, but I am strongly opposed to the court determining questionsof fact. We have had certain experiences inthat connexion to which I intend to refer when a subsequent measure is under consideration. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- The fear of the taxpayers is that they may be brought before the High Court on a question of law in order that the board of review may be prevented from deciding favourably to them on the facts. {: .speaker-F4Q} ##### Mr SCULLIN: -- I do not think there is any ground for such fears. It appears to me to be preferable to go to the High Court in the midst of proceedings before the board of review to secure a decision on a question of law than to make it necessary later for one party or the other to appeal to the court against the whole assessment. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- This provision has been inserted because of the judgment in the Weatherley case. {: .speaker-F4Q} ##### Mr SCULLIN: -- And justly so, I think. If the court placed an interpretation upon legislation that we had passed which was not the interpretation that we intended, we have the right to alter the law. The suggestion of the honorable member for Wannon **(Mr. Rodgers)** is that we should not be entitled to alter it; but I consider that it would be our bounden duty to do so. Otherwise the High Court would supercede this Parliament. The decision of the court in the Weatherley case was not in accordance with what I believe to have been the intention of Parliament, and therefore we have every right to alter the statute to give effect to that intenion. In my opinion this amendment will prevent a good deal of unnecessary litigation. I am not impressed by the opposition to it of the Taxpayers' Association. The amendment will undoubtedly lead to a reduction in litigation costs. {: .speaker-KMQ} ##### Mr Mann: -- In what way? {: .speaker-F4Q} ##### Mr SCULLIN: -- If during the hearing of a matter before the board of review a question of law arises, it will be possible for either party immediately to approach the High Court for a ruling on it. It would be infinitely better and less costly for the court to be moved to determine a single question of law when it arose than for it later to have to review the whole assessment. That would be an expensive business compared with the settlement of an incidental point of law. In making a complete review of an assessment the court is almost always called upon to determine questions of fact, and I submit that it is not its duty to do so. I trust that the Government will insist upon the insertion of the amendment. {: #subdebate-22-0-s10 .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 .- I agree with the honorable member for South Yarra **(Mr. Scullin)** that it is the paramount duty of this Parliament to uphold the legislation that it passes and the officers responsible for its administration ; but the individual taxpayer also has his rights. If a conflict of opinion occurs with respect to the meaning of a section of an act which Parliament has passed, the court has every right to say who is right and who is wrong. I submit, therefore, that I was justified in referring to the Weatherley case. The section of the principal act which it is proposed to amend reads - , The commissioner or a taxpayer may appeal to the High Court from any decision of the board under this section which, in the opinion of the High Court, involves a question of law. It is proposed to add to those words - >And the board shall, upon the request of the commissioner or a taxpayer, refer to the High Court any question of law arising before tine board, and the decision of the High Court thereon shall be final and conclusive. That confers equal rights upon the commissioner and the taxpayers. I am of the opinion that the taxpayers would not agree to the insertion of this provision if they could be consulted on the matter, because it has been found that when a case appears, on the facts, to be going against the commissioner a question of law may be raised, which involves an appeal to the court. The result is that taxpayers who approach the board of review for a revision of their assessment may find themselves forced to enter upon costly litigation before the court, or else submit to their appeal being dismissed. I do not think that we ought to make the facilities for approaching the court any greater than they are to-day. {: #subdebate-22-0-s11 .speaker-KVS} ##### Mr THEODORE:
Dalley -- I do not agree that the Commissioner of Taxation is likely, from vindictive motives, to compel a taxpayer unnecessarily to submit his case to the High Court, for he has no axe to grind. I should like the Attorney-General to reply to a point raised by the honorable member for Perth **(Mr. Mann).** It is possible that if a taxpayer lodges an objection to his assessment he may be mulcted in the expense of an unnecessary appeal to the High Court, which he did not anticipate. The taxpayer, it may be assumed, approaches the board of review in the belief that he has a good case, and it is not fair that, whether he is willing or unwilling, he should be obliged to embark upon expensive litigation before the High Court. If the commissioner takes a point of law before the board of review begins the hearing of the case, or even during the proceedings, the ' taxpayer should not be involved in heavy expenses for litigation. To avoid this, I move - >That the following words be added to the clause, " Provided that, if under this subsection a question is referred to the High Court at the instance of the commissioner, the costs of the action in such a case shall be borne by the commissioner. {: #subdebate-22-0-s12 .speaker-KZO} ##### Mr LATHAM:
AttorneyGeneral · Kooyong · NAT -- When a taxpayer lodges an appeal he determines either to see it through or to retire from it. If an important point of law is involved a taxpayer may be taken to the High Court on it just as a person who wins an action in the County Court may find himself compelled to contest an appeal before a higher tribunal. That is incidental to the necessity for obtaining from qualified tribunals decisions on points of law. It is incidental also to the existing system under the Income Tax Assessment Act, and must necessarily be so because either party has the -right of appeal to the High Court, and:..the decision of that tribunal should certainly be sought on important questions of law. It cannot be expected that the .Government, which in this matter is the representative of the public, should accept the decision of a lay tribunal on the point of law. When I say that, I do not in any way reflect upon either the character or the competence of the present members of the Board of Review. The act does not require that they shall possess legal qualifications. As a matter of fact two of its members are not thus qualified, although they are doubtless highly skilled in relation to the matters with which they are appointed to deal. I accordingly suggest that the honorable member for Dalley **(Mr-. Theodore)** has no substantial grounds for making his proposal. {: .speaker-KVS} ##### Mr Theodore: -- It is an intervention. {: .speaker-KZO} ##### Mr LATHAM: -- Tes, but of a perfectly ordinary character. If the honorable member were to apply consistently the principle he has propounded he would propose also that the public should pay the costs of a taxpayer's appeal. What he really proposes is that the costs involved in a reference to the High Court shall be paid by the public ; because undoubtedly in these matters the Commissioner is the representative of the public. {: .speaker-KVS} ##### Mr Theodore: -- Only when the reference is made at the instigation of the Commissioner do I suggest that that course should he adopted. {: .speaker-KZO} ##### Mr LATHAM: -- I agree that that is what the honorable member has proposed. If the soundness of that rule was established, and it was adopted, it would be a remarkable departure from the established custom. The committee ought, therefore, to examine the matter very closely before it comes to a decision on it. We are perhaps apt to look upon the tax gatherer as the enemy of us all, but the fact must not be lost sight of that in these cases he represents the public. Should the public be called upon to pay the costs ? I submit that it should not, but that, on the contrary, the ordinary course should be followed of leaving the matter to the discretion of the court. I believe it will be found that in cases in which the Commissioner appeals for the purpose of obtaining an interpretation of the law in the interests of the general public, and the interest of the taxpayer in the determination of the question is comparatively small, the court when it thinks proper adopts the practice of calling upon the Commonwealth to pay the costs of the taxpayer in addition to its own costs. {: .speaker-KVS} ##### Mr Theodore: -- If the reference were made at the instance of the Commissioner, would not the taxpayer be regarded by the High Court as the appellant? {: .speaker-KZO} ##### Mr LATHAM: -- It would not be an appeal. The Commissioner would occupy the position of a plaintiff or an appellant, and would be called upon to open the proceedings. The person at whose instigation the reference is made is regarded as the person who has invoked the assistance of the higher tribunal. {: .speaker-KVS} ##### Mr Theodore: -- If that is so, the difficulty is met. But I direct the attention of the Attorney-General to the phrasing of the clause. The Commissioner may require the board to refer to the High Court any question of law that arises upon an appeal by a taxpayer. Any subsequent proceedings cannot alter the fact that the taxpayer is still the appellant. {: .speaker-KZO} ##### Mr LATHAM: -- In the proceedings before the High Court the commissioner in a reference at his instigation is what is called in law the actor and is regarded as the person who has moved the court. In the event of his failure to secure the support of the court to the view that he puts forward he would normally be ordered to pay the costs of the reference. Success generally carries costs; it is in the discretion of the court to say by whom the costs shall be paid. I suggest that it is better not to disturb the general rule. {: #subdebate-22-0-s13 .speaker-KZA} ##### Mr WEST:
East Sydney .- I am inclined to the view that has been put forward by the honorable member for Dalley **(Mr. Theodore).** He has stated the case of a taxpayer who appeals against an assessment to the Board of Review, and because the commissioner decides to have tested any question of law that arises he is prevented from prosecuting the appeal until the decision of the High Court has been obtained. The Attorney-General **(Mr. Latham)** argued from the opposite standpoint, and based his remarks on the supposition that the reference to the High Court was made at the instance of the taxpayer. Many taxpayers may be men of humble means, and when they lodge an appeal with the Board of Review they probably give no thought to the possibility of further proceedings before a higher tribunal. It is not fair that they should be involved in heavy costs. I hope that the Attorney-General will give further consideration to the matter. There is another point. The clause states that "the decision of the High Court thereon shall be final and conclusive." Does that mean that an appeal will not lie to the Privy Council? If so, it will be the first occasion on which Parliament has legislated in that way. I am fully in accord with the principle, but the members of the legal profession are opposed to it, because it might affect their earnings. I believe that the majority of the people of Australia hold the view that the High Court should be the final tribunal to interpret the laws that are made by this Parliament. If this provision is agreed to it will be one of the best reforms that have been brought about for many years is in accordance with the policy of the Labour party at present in opposition. {: #subdebate-22-0-s14 .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 .- I hardly think that the AttorneyGeneral **(Mr. Latham)** appreciates the point that has been raised. At the outset I -wish to say that I resent the suggestion that I indicated that the Commissioner of .Taxation would be likely to display vindictiveness. I am the last person who would make such a suggestion. The administration of that gentleman has come under my observation. His fairness and that of his department is creditable, and has never been questioned by me. Honorable members are entitled to place before the committee the viewpoint of not only the Taxation Department but also the taxpayers. The taxpayers have as much right to express a corporate judgment as have followers of the honorable member for Dalley **(Mr. Theodore)** to make their views articulate through unions. Such a practice tends towards clarity rather than confusion. The point I wish to emphasize is that this board was designed to function as a Board of Review in respect of assessments by the commissioner that were called in question by taxpayers, and on the whole it has functioned satisfactorily. Although its decisions have sometimes been tested that has not in any way detracted from its general usefulness. If the clause is agreed to the value of the board to the taxpayer will be largely discounted. I recognize that the right of appeal must rest with both parties. But under this proposal the matter may be taken out of the hands of the board and referred to the High Court before a decision upon the merits and facts has been given. {: .speaker-KZO} ##### Mr Latham: -- The only difference is that that will be done at an earlier stage than otherwise would be the.case. if either party should wish to obtain the opinion of the High Court. Thus a saving will be effected in both time and money._ {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- In the hearing of a case before the board of review a point of law may arise and the proceedings be suspended until the decision of the High Court is given. In that way the usefulness of the board will be undermined, and rather than face litigation the taxpayer will accept what may be considered the arbitrary assessment of the Taxation Commissioner. A period of financial stringency may take place. The commissioner is high and dry above the head of the Government, but there is sometimes consultation between the Treasurer and the commissioner, especially when Treasury funds are running low, as to how much revenue is required and how quickly it may be collected. A suggestion to hurry up may be given to the commissioner, and the fine generosity which the Treasurer at other times has shown to the taxpayers of Australia may possibly cease. In times of stress I fear that the use of legislative machinery of this description may be resorted to, thus depriving the board of review of its effectiveness and the general taxpayers of a cheap and ready means of appeal. It costs the taxpayers nothing to have their cases dealt with by the board. After all, it is the man who provides the sinews of war for this country who should receive our consideration. {: #subdebate-22-0-s15 .speaker-KXQ} ##### Mr PARKHILL:
Warringah , - 1 support the view of the honorable member for Wannon **(Mr. Rodgers).** As I understand the position, the board of review was originally constituted to provide a ready means of redress to taxpayers, and to enable them to approach taxation experts or authorities for a decision. No one will deny that the High Court should be the final arbiter on matters in dispute, and the point for decision by this committee now seems to me to be the time at which the board should intervene. Under the act, the board of review deals with a case and gives its decision; and that, I submit, is- the preferable method. If I, as a taxpayer, approach the board of review, I may find myself suddenly confronted with an action in the High Court and compelled to brief counsel, involving the possibility of considerable expense if the decision is given against me. Of course, in any case, there is the possibility of litigation at a later stage; but I consider that it is preferable that the decision of the board should be given before any appeal is made to the High Court. I am now constrained to this view, as I understand a number of appeals by the commissioner from the decision of the board of review have been decided against him. I suggest that the provision in the act should be left as it stands. {: #subdebate-22-0-s16 .speaker-KMQ} ##### Mr MANN:
Perth .- The AttorneyGeneral has said that the amendment has been inserted with a view to lessening the expense of the appeal to the taxpayer; hut that if the committee does not think that that purpose will he achieved, the Government is willing to leave the decision to it. It seems to me that the matter should he determined solely on that consideration. How can the proposed method of appeal he more expeditious, cheaper, or more convenient for the taxpayer than the present method? It seems to me that it must involve more trouble and expense. What was the object of the review at all? Before the Board of Review was appointed a taxprayer could appeal to the High Court. The board was specifically appointed to lessen trouble and expense, by hearing cases and dealing with facts. As the Deputy Leader of the Opposition has said, its proper function is to determine not the law but the facts. We know that decisions on facts frequently depend upon the interpretation of the law. When a taxpayer puts his case before the board, it gives its decision on the interpretation of the law and the facts connected with it. If its decision is questioned, then an appeal can be made to the High Court. Under the proposed procedure the High Court apparently has no jurisdiction on the facts, but can be referred to on law even before the board has come to any decision on the facts. An applicant may be dragged to the High Court on a point of law, and that court, having interpreted the law, the board must determine the facts. That procedure means delay and expense. The Attorney-General has said that it is of advantage to approach the High Court at an early stage, but the taxpayer regards these matters from a different point of view. The general desire is to keep away from the court as much as possible. The ordinary taxpayer has no idea of how much. his case depends upon facts or upon law until he is before the board, whose duty it is to assist the taxpayer by clearly separating the facts from the law, and giving its opinion accordingly. The case may then he referred to the High Court. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- It is a case of "leave well alone." {: .speaker-KMQ} ##### Mr MANN: -- Decidedly. No good reason has been given for the proposed change. The board as constituted at pre sent is acceptable to both parties as far as I can gather, although either may lose its case at times. The Attorney-General stated that it was intended to make the proceedings cheaper and easier, but the general opinion of the taxpayers is that it will operate to the contrary, and I suggest to the committee that we should not alter the existing provision. {: #subdebate-22-0-s17 .speaker-KFE} ##### Mr GREGORY:
Swan -- A taxpayer may appeal to the Board of Review on a question of facts, and while the board is dealing with his case an appeal may be made by the Commissioner to the High Court. That body may give its decision in favour of the taxpayer, and when the case again comes before the Board of Review, the taxpayer may lose on the facts, and probably have to pay some portion of the heavy costs involved in approaching the High Court. I ask the Attorney-General whether that is not possible under the amendment ? {: .speaker-KZO} ##### Mr Latham: -- It is a possibility. {: .speaker-F4Q} ##### Mr Scullin: -- It applies to both sides. {: .speaker-KFE} ##### Mr GREGORY: -- I suggest that it would be wiser to allow the board to try a case on the facts before there is any appeal to the High Court, otherwise a great hardship may be suffered by the taxpayers. {: #subdebate-22-0-s18 .speaker-F4Q} ##### Mr SCULLIN:
Yarra .- I am astonished at the opposition to the Government's proposal, because to me it seems to be a distinct improvement from the taxpayer's point of view as well as from that of the Commissioner of Taxation. It will certainly alter proceedings in hearing appeals. The honorable member for Swan **(Mr. Gregory)** suggested that it would be possible for the taxpayer to win his case before the High Court on the law, and to return to the board only to lose his case on the facts. The object of having the board at all was that the facts of a case should be considered by experts with a special knowledge of the facts. A decision may be given by the board on the facts, and then some dispute may arise as to the law. An appeal may be made by either side to the High Court which will then determine on the law and on the facts. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- No. The honorable member is wrong. {: .speaker-F4Q} ##### Mr SCULLIN: -- Portion of section 51 a reads - {: type="1" start="5"} 0. On the hearing of the appeal the court may make such order as it thinks fit, and may reduce, increase or vary the assessment. 1. An order of the court shall be . final and conclusive on all parties except as provided in this section. 2. The costs of the appeal shall be in the discretion of the court. On appeals for the interpretation of the law the court has dealt with the facts, and completed the assessments. The object of appointing a Board of Review was to ensure that questions of fact should be dealt with by experts who understand the fine points of taxation, and whose decision would not be challenged by either party. Under the clause now before the committee, only questions of law may be referred to the court.Without this provision one of the parties may appeal to the High Court, which, in addition to deciding the points of law at issue, will assess the tax that is payable. The honorable member for Wannon took exception to a statement by the honorable member for Dalley **(Mr. Theodore)** who suggested that the honorable member had impliedvindictiveness on the part of the Commissioner. The honorable member for Wannon implied elusiveness. He suggested that the Commissioner might appeal to the High Court on a point of law in order toavoid a decision on the facts. I do not believe that the Commissioner would take up that stand. The amendment proposed by the honorable member for Dalley would not achieve the object he desires. If it were made, and the Commissioner asked to have a dispute referred to the court on a point of law and had to pay costs, he would say, "I have a strong legal case. I shall await the decision of the Board of Review and then appeal to the High Court." The clause in the bill is sound and sensible, and I hope the Government will adhere to it. The Board of Review is based on common sense. Judges are not taxation experts, and this Parliament decided that appeals from the decisions of the Commissioner should be to men specially qualified in the valuation of shares and properties and the assessment of income. It is wise to provide that, if during the hearing before the Board of Review, a legal question crops up, it shall be referred to the court, whose decision shall be final. Having got that decision, the board may then complete its review and there should be no further appeal to the court on points of law. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- If the appeal favours the taxpayer, he has still to go back to the board and fight his case on the facts. {: .speaker-F4Q} ##### Mr SCULLIN: -- In what way will his position be different from what it is today? {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- The taxpayer is satisfied with the board. This clause is weakening its authority. {: .speaker-F4Q} ##### Mr SCULLIN: -- No matter how satisfied the taxpayer may be with the board's decision, the Commissioner may still, under the present law, appeal to the court. {: .speaker-KMQ} ##### Mr Mann: -- The taxpayer need not defend that action, but if an appeal is made to the court during the hearing by the board, he must defend. {: .speaker-F4Q} ##### Mr SCULLIN: -- The principle involved in the clause is sound, and I shall press the Government to incorporate it in the Land Tax Assessment Act. I would not support the appointment of a Board of Review under that act unless a provision similar to this clause were made. We cannot deny an appeal to the court upon a legal question which arises during the hearing by the board, but after that question has been decided, there should be no further appeal on points of law, and the board's decision upon the assessment should be final and complete. I urge the Government to eliminate from the act the provisions relating to a subsequent appeal to the High Court. We cannot ignore the quantity of litigation that takes place in regard to taxation - the technical points that are raised to defeat the ends of justice. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- This clause will facilitate that. {: .speaker-F4Q} ##### Mr SCULLIN: -- It will not. It will merely enable questions of law to be decided by the court while the board is sitting, and after that the final decision will remain with the board. It is not the job of the court to " reduce, increase or vary the assessment." That is the job of the specially qualified board of review. {: #subdebate-22-0-s19 .speaker-KIR} ##### Mr HURRY:
Bendigo .- I favour the clause in its present form. An appeal to the Board of Review may involve the engagement of counsel, and the hearing of half a dozen witnesses on each side. Immediately the hearing commences a question of law arises, the decision of which will determine the whole issue. How farcical it is to proceed with the hearing of the evidence and the addresses by counsel while that vital point of law is undecided. Surely the sane course is to have the law clarified before proceeding further with the hearing by the board. The amendment moved by the honorable member for Dalley **(Mr. Theodore)** would not operate fairly. An appellant before the Board of Review should know that if he chooses to appeal to the High Court, he must take the ordinary risks of litigation. Amendment negatived. Clause agreed to. Clause 21- >Section fifty-nine of the principal act is amended by adding at the end thereof the following sub-sections: - " (3.) For the purposes of this section, Liquidator ' means the person who, whether or not appointed as liquidator, is the person required by law to carry out the winding-up of the company. " (4.) Where more than one person arc appointed liquidators or required by law to carry out the winding-up, the obligations and liabilities attaching to a liquidator under this section shall attach to each of such persons: > >Provided that where any one of such persons has paid the income tax due in respect of the company being wound-up the other person or persons shall be liable to pay that person each his equal share of the amount of the tax so paid". {: #subdebate-22-0-s20 .speaker-KZO} ##### Mr LATHAM:
AttorneyGeneral · Kooyong · NAT -- As a general rule a liquidator is appointed to wind up a company, but in some cases the directors may conduct the liquidation. Section 59 of the Income Tax Assessment Act does not apply to persons appointed in this way to discharge the duty of liquidators. The purpose of the amendment is to make it so apply. Clause agreed to. Clause 22- >Section sixty-two of the principal act is amended by inserting after sub-section (3.) the following sub-section: - " (3a.) Where, in respect of the estate of any deceased taxpayer, probate has not been granted or letters of administration have not been taken out within six months of his death, the commissioner may cause an assessment to be made of the amount of tax due by the deceased and that assessment shall be conclusive evidence of the indebtedness of the deceased to the commissioner and the commissioner may issue an order in the form in thesecond schedule to this act authorizing any member of the police force of the Commonwealth or of a State or of a Territory of the Commonwealth or any other person named therein to levy such amount with costs by distress and sale of any property of the deceased, and, upon the issue of any such order, the member or person so authorized shall have power to levy such amount accordingly ". {: #subdebate-22-0-s21 .speaker-KZO} ##### Mr LATHAM:
AttorneyGeneral · Kooyong · NAT -- This clause gives extraordinary powers to the commissioner, enabling him in cases in which probate has not been taken out within six months of death, to make an assessment which is conclusive, and to levy upon the property of the deceased. Against that assessment and levy nobody will have the opportunity to appeal. Upon further consideration I propose to alter that by providing that, when probate has not been granted within six months, the commissioner may make an assessment, notice of which shall be published twice in a daily paper circulating in the State in which the deceased resided. Any person claiming an interest in the estate of the deceased may lodge an objection, and that objection may be allowed or disallowed by the commissioner, or the claimant may fight the commissioner's decision before the Board of Review and the court. The assessment of the commissioner is to be conclusive evidence of the indebtedness of the deceased, subject to objection or any order made by the Board of Review or court. That procedure will allow any person interested in the estate an opportunity to challenge the decision of the commissioner, and after it has been followed the commissioner may levy upon the estate. I move - >That all words from and including "and that assessment" in line 10 to the end of the clause be struck out and the following inserted in lieu thereof - (3b) The Commissioner shall cause notice of the assessment to be published twice in a daily newspaper circulating in the State in which the taxpayer resided. (3c) Any person claiming an interest in the estate of the taxpayer, may, within forty two days of the first publication of notice of the assessment, post to or lodge with the > >Commissioner an objection in writing against the assessment stating fully and in detail the grounds on which he relies; and the provisions of this Act relating to objections and appeals shall thereupon apply in relation to the objection as if the person so claiming an interest were the taxpayer. (3d) Subject to any amendment of the assessment by the Commissioner, or by the Board of Review or by a Court, the assessment so made shall be conclusive evidence of the indebtedness of the deceased to the Commissioner. (3e) The Commissioner may issue an order in the form in the Second Schedule to this Act authorising any member of the police force of the Commonwealth or of a State or of a Territory of the Commonwealth or any other person named therein to levy the amount of tax due by the deceased, with costs, by distress and sale of any property of the deceased. (3f) Upon the issue of any such order the member or person so authorized shall have power to levy that amount accordingly in the prescribed manner." (3G) Notwithstanding anything contained in the last three preceding sub-sections, if at any time probate of the estate of the deceased is granted to, or letters of administration of the estate are taken out by, a person, that person may, within forty-two days after the date on which probate was granted or letters of administration were taken out, lodge an objection against the assessment, stating fully and in detail the grounds on which he relies, and the provisions of this Act relating to objections and appeals shall thereupon apply in relation to the objection as if that person were the taxpayer. *Sitting suspended from 6.15 to 8 p.m.* {: #subdebate-22-0-s22 .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 .- It was almost impossible to follow so comprehensive an amendment as that put before us by the Attorney-General without seeing it on paper. I think it ought to have been circulated. However, I believe I understand the substance of it. This is a fundamental departure from a well established practice of law. The Crown has no more right than any other creditor at law to assume the position of assessor, taxing master, collector, sheriff, and bailiff in connexion with a deceased person's estate. The proper procedure is that which has to be followed in law by every creditor of a deceased person's estate, and that is, where representation has not been raised in the ordinary course of law, for the Curator of Intestate Estates to be moved to take out letters of administration of the estate. The taxing master has then some principal with whom to deal. It is far too wide a power for the Commissioner of Taxation to assume to levy taxation upon an estate, to follow that up with certain statutory notices or advertisements, and then, instead of raising representation to the estate, to proceed to distrain on the assets, dispose of them, and satisfy the tax, and possibly by enforced sale destroy the equity. He should be in the same position as every other creditor in law. The Crown should see that representation is raised to an estate by an authority constituted for the purpose. When a deceased person has died intestate, or his estate has not been administered, or is not sufficient to meet liabilities, the ordinary practice is that representation should be made by the Curator of Intestate Estates, who shall raise the proper representation within the State. The Crown then takes up the ordinary position of a creditor at law. When interested persons are absent from Australia, they may never see the prescribed notices; hut if the course I suggest is adopted when there is no representation to an estate, the Crown, as represented by the Commonwealth, will move the authority in the State, and a trustee will be appointed who will guard the estate. The taxing master would not be likely to make the most effective realization possible of the assets by forced sale. His only concern would be to satisfy the tax. I hope the AttorneyGeneral will reconsider his amendment, and frame it in such a way as will safeguard the possible interest of relatives or beneficiaries of deceased persons, while, at the same time, safeguarding the rights of the Crown in respect of the tax. **Mr. LATHAM** (Kooyong- AttorneyGeneral [8.10]. - This provision will apply only in very special cases. In all the States there are officials known as curators of intestate estates or persons who discharge the functions of such curators. They are generally paid by fees, and the fees depend on the value of the estates' administered. It is to their interest to see that there is representation to every estate. Some such provision of law operates in every State. As the remuneration of these officials depends on the number of estates they handle, it is only very occasionally that this provision with which we are now concerned would operate. But if this provision is not inserted, there will he no method by which the Crown can take any action where no representation is made to an estate. It is to the interest of a Curator of Intestate Estates to take out letters of administration. The Commonwealth is not a creditor until an assessment has been duly made and served. As the law now stands, however, there would not be any one to assess in the cases we have been considering. Therefore the Commonwealth would be quite helpless unless some special provision were made. The Commonwealth is not able to legislate on such matters as the taking out of probate or letters of administration. I think the dangers which the honorable member foresees are very remote, and are most unlikely to occur. In the amendment, provision is made for the giving of due publicity ; so that interested parties shall have an opportunity to come forward and appeal in the ordinary way. This provision will apply only in exceptional circumstances, and I think its inclusion is justified. {: #subdebate-22-0-s23 .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 .- The Attorney-General's explanation does not alter the method of levying taxation. I would suggest to him that he insert in his amendment a provision to the effect that the Curator of Intestate Estates should receive notification in these cases. That would be an additional safeguard for any outstanding interests. It is possible on a realization of this description for any equity in an estate to be sacrificed. {: .speaker-KZO} ##### Mr Latham: -- The curator would sea the advertisement. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- I think we might make it an obligation that the curator be notified. To levy on a property for sale is to take extreme steps, and where there is any possibility of saving outstanding interests, I think the giving of notice to the curator would be an additional safeguard which the Crown ought to provide. {: #subdebate-22-0-s24 .speaker-JSC} ##### Mr BRENNAN:
Batman .- The honorable member for Wannon **(Mr. Rodgers)** has pointed out one difficulty which may arise out of this amendment. I suggest further to the Attorney-General that it is not always a simple matter, or one that can be promptly dealt with, to set up representation to the estate of a deceased person. The difficulty applies equally to those cases in which there is no will, and those in which there is representation of an intestate estate. It is possible that there may be prolonged litigation over the granting of probate of a will or letters of administration of an estate. Nobody knows better than the Attorney-General how long and involved such litigation may be. A variety of interests may be involved, and these interests can be determined, perhaps, only after the conclusion of the litigation. Under this amendment six months is allowed before action is taken, but at the expiration of that time, the tax collector can make an order which is final and conclusive, and whatever interests may arise as a matter of law after that time, are debarred from raising any action under this act for the protection of their rights. {: .speaker-KZO} ##### Mr Latham: -- An objection can be put in by a person interested in such a case, and it would be put in if there were any doubt. {: .speaker-JSC} ##### Mr BRENNAN: -- The interest may be a very doubtful one, and may itself be the subject of contention. When a litigant is involved in such a case, his mind is not directed towards making claims in respect of taxation. He is thinking of something nearer home than the taxation on the property involved. I would suggest that the Attorney-General consider the inclusion of something in this amendment which would extend the time in cases where a notice has been put in. Six months is not a long time when there is an involved estate to administer. It is quite a common thing not to have gathered up the threads of the estate and obtained probate by that time even where there is no litigation. A provision could be inserted in this amendment enabling the claimant to register his notice, and enlarging the time from that notice considerably beyond the period of six months. I think there is a good deal in the contention also of the honorable member for Wannon **(Mr. Rodgers),** and I suggest that it should be further considered. {: #subdebate-22-0-s25 .speaker-KZO} ##### Mr LATHAM:
AttorneyGeneral · Kooyong · NAT -- There is, a good deal of weight in the remarks of the honorable member for Batman **(Mr. Brennan),** and I think it is proper that an amendment should be framed to meet the point he raised. A provision could be inserted providing that if probate or letters of administration is subsequently granted the executor or administrator may, within 42 days after the grant, lodge an objection, and that objection shall be treated as if lodged in due time. I should like an opportunity to put such an amendment into suitable words if it meets the case. {: .speaker-JSC} ##### Mr Brennan: -- In my view, it would. {: .speaker-KZO} ##### Mr LATHAM: -- The commissioner is at present dealing with a case where there are assets in the estate, taxes owing, and no one willing to take out letters of administration. The commissioner is utterly powerless and unable to collect from those assets, which are literally staring him in the face, the moneys owing to the Commonwealth. Some means must be adopted to cope with such a position. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- Is there any necessity to provide for notice to the Curator of Intestate Estates? {: .speaker-KZO} ##### Mr LATHAM: -- I can assure the honorable member that officers holding the position of public trustees or curator of intestate estates are very much on the *qui vive* in these matters. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- Very often distant relatives, or obscure persons, never see the notice. {: .speaker-KZO} ##### Mr LATHAM: -- If there are any assets in the estate the public curator or person holding an administrative position at once comes forward. I would like to have the clause postponed. Clause postponed. Clause 23 - > Section sixty-five of the principal act is amended - > >by adding at the end of sub-section (1) the following proviso: - . " Provided however that a company shall not be required under this section to pay any tax in respect of a dividend which is or may become payable to a shareholder who is an absentee." > > *Section proposed to be amended -* {: type="1" start="65"} 0. -- (1. ) *The Commissioner may, by notice in writing (a copy of which shall be forwarded to the taxpayer to the last place of address known to the Commissioner), require -* {: type="a" start="a"} 0. *any person......... to pay to him, forthwith, or within such further time as the Commissioner, Assistant Commissioner or Deputy Commissioner allows, the money or so much thereof as is, sufficient to pay the tax due by the taxpayer or the fines and costs (if any) imposed by a court on him in- respect of an offence against this Act.* {: #subdebate-22-0-s26 .speaker-F4Q} ##### Mr SCULLIN:
Yarra -- I move - >That sub-clause (e) be omitted. This matter was discussed on the second reading of the bill, and I do not propose again to traverse the same ground. This is the only portion of the bill, in addition to clause 11, which provides that absentee shareholders shall be fully exempted from paying income tax on profits earned in Australia. At present the company concerned is called upon to pay such tax, and it collects, if it can, from the absentee shareholders. It has been argued that companies not registered in Australia are unable to collect, and that, even when they are registered in Australia, they experience difficulty in collecting the tax from absentee shareholders. To date the onus has been placed upon the company to pay the tax, and it must collect as best it can. If itis unable to collect, that is a matter between itself and its shareholders. The important fact is that the income is earned in Australia, and it should he taxable here, and provide revenue for our Treasury. The only tax that we impose upon companies is a flat rate of ls. in the £1. That may be sufficient when applied to some shareholders, but it is totally inadequate when applied to a good many. The Treasurer has advanced a number of reasons in support of this provision, but his principal reason is that we must encourage capital to come to Australia. That is not a sound reason for the exemption of these profits from taxation. The advantage applies only to those who live in other countries, have capital invested in Australia, and draw profits from Australian companies to spend them abroad. No provision is made for the exemption of absentee land-owners. They are, in fact, treated with greater severity than are Australian land-owners, and there is a good reason for that. If the argument is sound that absentee shareholders drawing profits from Australian companies should be encouraged to continue to invest here by being granted exemptions from income tax, surely it should apply with equal force to absentee landowners. 5 They send capital to Australia to develop, to a slight extent, the lands which they are monopolizing in this country. I do not see how, logically, there can be any differentiation between the two categories. In Great Britain the company tax is 4s. 6d. in the £1. If an Australian resident has capital invested in a British company he has to pay 4s. 6d. in the £1. If he is resident in Great Britain he has an opportunity to interview the authorities and obtain a rebate on the company taxation, but if he is resident in Australia he forfeits that advantage. In the circumstances, we are surely entitled -to collect income tax from absentee shareholders, whether living in Great Britain or elsewhere. {: .speaker-KI7} ##### Sir Neville Howse: -- Our people may obtain a rebate on taxes paid in England. {: .speaker-F4Q} ##### Mr SCULLIN: -- The honorable member has in mind the operation of section 18 of our act, which provides for a reciprocal arrangement between the Australian and British Governments, and for the rebate of certain portions of a tax. That is merely to avoid double taxation, where a taxpayer is liable to pay tax both in Australia and in the United Kingdom. In such cases the British Government will forgo the Australian tax if it is no more than half of the British rate, but it will forgo only up to half of that rate, even though that is insufficient to meet the provision that there shall be no double taxation. It will thus be seen that there is double taxation, although it is largely eliminated by that arrangement. If this amendment is carried that arrangement goes by the board. That is an individual tax. The company tax is imposed on the companies in Great Britain, and a shareholder resident in Australia must pay. If he is not paying other taxes in Great Britain he obtains no rebate. Our main protest is that there are large sums of money invested in Australia by capitalists abroad, mostly resident in Great Britain, who have always been taxed by this Government. "We have certainly taxed absentee land-owners since the inception of the Commonwealth Land Tax Act in 1910. "Why should this arrangement be introduced? The legal argument has been advanced that such people are outside our jurisdiction, that the company has to pay the tax, and not the individual. The principal argument stressed by the Treasurer is that it is the policy of the Government to attract to. Australia capital from abroad. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- "Would not such people obtain partial relief under section 18 of the act? {: .speaker-F4Q} ##### Mr SCULLIN: -- Some relief; but they would pay tax on that portion of the profits earned in Australia. That section deals with taxpayers who have incomes both from Great Britain and Australia, and it provides for a reciprocal arrangement. {: .speaker-KVS} ##### Mr Theodore: -- Under the old regime such taxpayers were subject to two taxes, even though they drew their income only from Australia. {: .speaker-F4Q} ##### Mr SCULLIN: -- Section 18 was inserted in the act to prevent double taxation. Under the old arrangement these people were taxed and we got our share of the taxation; but under this arrangement we shall get nothing except the ls. in the £1 company tax. If companies were taxed here as they are in Great Britain, we should have no complaint, but they are not. If the amendment is carried, the revenue of the country will' suffer considerably. I should like to know to just what extent it will be affected. When amendments of this nature are placed before us the Treasurer should give us some indication of the extent to which they will separately affect the revenue. In introducing the bill he gave a general indication of the effect that all the amendments would have upon the revenue, but the taxation officers must have some idea of the effect of each one, and the Treasurer should make that information available to us. Surely it will not be suggested that we should treat absentee shareholders with greater leniency than we treat shareholders who are resident in Australia. I hope the committee will accept the amendment. {: #subdebate-22-0-s27 .speaker-F4B} ##### Mr BRUCE:
Prime Minister and Minister for External Affairs · Flinders · NAT -- Two clauses in the bill deal with the taxation of absentees, but this one concerns particularly the' position of companies which are required by the commissioner to pay income tax in respect of absentee shareholders, and I propose to confine my remarks entirely to that subject. Three classes of companies are operating in Australia. First there are the companies which are registered in Britain, and which have their directorate and head office there, and declare their dividends there; secondly there are the companies which are registered in Britain but have their directorate in Australia and declare their dividend here. Thirdly, there are the purely Australian companies, which are registered have their directorate here, and declare their dividends here. The bulk of the capital of companies of the first class is subscribed by absentees resident in Britain. "We are unable to levy a tax upon those shareholders, and cannot impose one on the company itself, for it is beyond our jurisdiction. Companies of the second class are more desirable from the Australian point of view than those of the first class. The major part of their capital is also subscribed in Britain, but they have come to the conclusion that as their main operations are in Australia it is desirable that their directorate and control should be here. The position of these companies, from the taxation standpoint, is that their absentee shareholders are liable for Australian taxation; but Ave have no power to compel them to pay taxes. All that we can do is to compel the companies to pay it, although they may have no power to recover it from the persons concerned. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- Except by altering their articles of association. {: .speaker-F4B} ##### Mr BRUCE: -- That would not help in the least. If companies of these two classes are competitors, it is hardly fair to oblige the Australian-controlled companies to pay taxation in respect of their absentee shareholders while the Britishcontrolled companies cannot be compelled to pay it. The Government considers that it would be grossly unfair to tax one class of company and not the other, for those with Australian organization are doing something more than the others for Australia. Assuming that companies of both classes are relieved from taxation, I do not think any one would contend for a moment that it would be equitable to tax the purely Australian company which has to compete Avith the others. The Australian company is unquestionably the most desirable of all from our point of view, and Ave should encourage rather than discourage it. To make it pay income tax in respect of its absentee shareholders, when we know that it has no power to recover from them, would be most unjust. The Government is of the opinion that, as it is not possible to tax absentee shareholders in the first type of company, and not equitable to tax them in the second type of company, it would be a hardship on the Australian companies to compel them to pay taxation for which their absentee shareholders are liable. It is for those reasons that this clause has been included in the bill. The wider question of the desirableness of granting a statutory exemption to absentees does not arise under the clause, and Ave can deal Avith it when it is before us. {: #subdebate-22-0-s28 .speaker-JXA} ##### Mr CHARLTON:
Hunter .- The amendment of the honorable member for Yarra **(Mr. Scullin)** deserves earnest consideration. I can see no reason why Ave should exempt absentee shareholders in Australian companies from taxation because Ave cannot tax absentee shareholders in companies registered in Great Britain but operating here. There is no justification for exempting any absentees. The people who should receive first consideration when exemptions are being proposed are those who live in Australia, and the last who deserve it are those who derive large incomes from investments here, and live abroad. From the point of view of equity, the absentee should certainly be taxed at least as heavily as the shareholder resident in Australia. - {: .speaker-F4B} ##### Mr Bruce: -- If a tax is levied upon absentee shareholders, the Australian shareholders will be obliged to pay it. {: .speaker-JXA} ##### Mr CHARLTON: -- They would only be obliged to pay a certain portion of it, for provision is made in clause 18, to adjust the incidence of the tax. There is a kind of reciprocal arrangement. On the ground of equity, I think it can hardly be argued that because absentee shareholders in English companies, that are controlled and declare their dividends in England, cannot be taxed by us, we should relieve absentee shareholders in Australian companies from fair taxation. Such share-' holders derive their income from Australia, and should be prepared to pay taxation upon it. If this amendment is agreed to, the revenue of the country will be considerably increased. Persons who make large incomes from any project in which they have money invested in Australia should be prepared to pay taxation upon them, whether they live here or elsewhere. The Treasurer urged that the amendment should be rejected on quite different grounds from those advanced by the Prime Minister. He said that if the amendment were approved it would be an inducement to outside people to put their capital in Australian investments. It would be just as ridiculous were I to say that if we permit these people to go free from taxation, while we tax Australian citizens, we induce our people to reside outside Australia, because they would not then be liable to taxation here. Assuming that the rate of tax was 2s. or 2s. 6d. in the £1, it might be better for those people to spend their time in the enjoyment of comfort and pleasure in the south of France, by means of the income ' they derive from Australia, secure in the knowledge that they will not be taxed. I can as well say that the amendment is an inducement to people to leave Australia as the Treasurer **(Dr. Earle Page)** to say that it is an inducement to people to invest here. {: .speaker-C7E} ##### Dr Earle Page: -- Absentees are not taxed by Australia on the interest they collect from moneys they lend to her, no matter where they live. {: .speaker-JXA} ##### Mr CHARLTON: -- That is different from deriving a direct income from an investment in this country. Surely if it is fair to tax the Australian citizen who derives an income from company investments in Australia, absentees who participate in the profits that are made by those same companies should be called upon to pay an' equal amount. There can be no warrant for exempting the individual who happens to live abroad. The tax can be collected from the company before its dividends are disbursed. In respect of an Australian citizen we provide that if the rate which he would be charged according to his income is less than that which is paid by the company, a rebate shall be made by the Commissioner of Taxation. Therefore, no injustice is done to him. A similar provision could be made applicable to absentees. Any person who gains a material advantage from investment in this country should not object to contribute towards its revenues. These individuals invest their money in Australia because they believe it will confer upon them a greater advantage than would investment in other countries. It is not equity to compel our own people to provide the whole of the taxation, and allow those who reside abroad to reap the benefit of our expenditure without contributing towards it. The taxation law has been in force in the Commonwealth for a number of years, yet it has never previously occurred to anybody that absentees should be exempt, from, it. If we continue this practice of relieving from taxation not only absentees, but also our own people, the loss of revenue will be considerable. Our financial position is such that we cannot afford these exemptions. I hope that we shall be able to foster our industries in such a way that our imports will be materially curtailed. If that should happen, and the customs revenue should drop, how are we going to finance our operations? We sometimes forget that the income-tax law was passed to enable us to meet the obligations that were placed upon us by the recent war. The Commonwealth is now collecting from this source £7,000,000 per annum less than it did at one period, notwithstanding the fact that its interest bill is £2,500,000 greater than it was at the termination of the war. Nobody knows what the future holds in store. I have no desire to be pessimistic; but I assert that no honorable member can view the present trend of events with a feeling- of confidence in the immediate future. The falling away in our returns from wool and wheat must have a b,ad effect; yet it is seriously proposed to reduce still further the taxation that is imposed on income. I do not object to the giving of relief to the man who is genuinely entitled to it. We on this side support many of the provisions of the bill because we believe that the primary producer must be given some concession. But such a procedure is not justified in the case of a man who is absent from and yet makes a considerable income in Australia. {: #subdebate-22-0-s29 .speaker-KZO} ##### Mr LATHAM:
AttorneyGeneral · Kooyong · NAT .- The Leader of the Opposition **(Mr. Charlton)** has addressed himself to the clause in a manner that suggests that it favours absentees against Australians. That is not the position. It must be recognized that there are limits to the legislative power of an Australian parliament. The difficulty with which the amending provision is designed to deal has arisen from certain decisions of the English courts which, shortly, are to the effect that where a contract which has been entered into between a shareholder and a company which is not an Australian contract, an Australian parliament cannot legislate is such a way as to affect or alter it. In 1897 the case of *Spiller* and *Turner* was heard in the English courts. An English company which was carrying on business in Queensland had certain preference stock-holders who were entitled to interest at the rate of 6 per cent. Some of those stock-holders resided in England, others apparently in Queensland. The decision of the English courts referred to the English stockholders. The Queensland Parliament passed an act imposing a tax in the nature of an income tax on all dividends or interest paid out of assets in the colony, as it then was, to the members of companies carrying on business therein. That act declared that the tax collected in respect of any dividend or interest payable to a shareholder should be a debt due to him from the Crown. The company, in compliance with the act, deducted the tax from the dividend or interest payable to the English stockholders. They sued the company for the full amount, and obtained a judgment in their favour. {: .speaker-KFS} ##### Mr Gullett: -- Did that put an end to the practice? {: .speaker-KZO} ##### Mr LATHAM: -- If the honorable member will allow me, I shall deal first with the law. The result was that, although the company had to pay the tax, it could not recover it from the absentee shareholders. A similar decision was given last year by **Mr. Justice** Tomlin - reported in the Law Reports for 1927 - in which it was expressly held that a Commonwealth income tax which was paid by a company under these provisions could not be recovered from the English shareholders. Therefore those shareholders receive their dividends in full, whatever may be the provision of the Australian law. That is a position which we are unable to affect by any alteration of our law, because it does not operate in Great Britain. The alteration that we now propose to make does not, therefore, improve the position of the absentee shareholder as against the Australian shareholder or anybody else. On the contrary, it leaves those shareholders where they stand to-day. What, then, will be its effect? It is designed to relieve a company that has absentee shareholders from the necessity to pay tax at the rate that is applicable to the absentee shareholder and to place on an equal footing in this respect those who have absentee shareholders and those who have not. The Prime Minister **(Mr. Bruce)** has dealt with that aspect of the matter, and I have no wish to repeat what he has said. I rose merely to make it clear that the aim of this legislation is to deal with a situation that does not arise from and and cannot be affected by Australian law, and that the advantage proposed to be conferred is not in favour of absentees as against Australian citizens. I shall add only one further remark. If, without unfairness to our own citizens - and I have endeavoured to show that that is the position - we can make this country attractive to the investor abroad, it is desirable to do so. We want more capital in Australia. I do not regard as in any sense an enemy of Australia the man who lives in another country and chooses Australia rather than Peru, Bolivia or the United States of America as a field for his investment. I suggest that it is not only a more generous, but also a more prudent, suggestionthan that placed before the committee, by the Leader of the Opposition. {: #subdebate-22-0-s30 .speaker-KVS} ##### Mr THEODORE:
Dalley .- The Attorney-General **(Mr. Latham)** was no doubt strictly accurate in his statement of the law in this case ; but his reference to its application and bis defence of the proposal of the Government was certainly not convincing. He concluded by suggesting that the motive of the Government is more generous than the suggestion of the Leader of the Opposition, inasmuch as the Government desires to encourage the investment of overseas capital in Australian companies. The Government is offering absentee shareholders and intending investors in Australian companies, living abroad, the inducement of tax-free dividends. The policy of the Government is that dividends paid to Australian residents are to be heavily taxed; but those paid to absentees are to be tax free. {: .speaker-KZO} ##### Mr Latham: -- That position cannot be effected by anything that this committee does. {: .speaker-KVS} ##### Mr THEODORE: -- The AttorneyGeneral cannot uphold that statement. The Prime Minister and the AttorneyGeneral have said that in the case of a company established and registered abroad, whose shareholders are absentees, and whose profits arise in Australia, and are distributed as dividends abroad, the Commonwealth has no jurisdiction to collect any tax whatever. The Prime Minister said that .the tax could not be collected from either the company or the shareholder. I do not know whether the AttorneyGeneral is relying upon some technical point in respect of the company; but does he suggest that, in the case of such a company operating in Australia, whose income is derived in Australia and paid in dividends abroad, the Commonwealth would have no authority to tax that income in Australia? Take certain foreign insurance companies that are trading in Australia. The State Governments are to-day taxing them even though their rate of profit is not known, nor can it be calculated. They are taxed at a fixed rate, say at 7-J per cent., on premium income. Does the AttorneyGeneral contend that that would hot apply in the case of a company registered abroad, whose directors and principal shareholders reside abroad? {: .speaker-KZO} ##### Mr Latham: -- I did not deal with that subject at all. {: .speaker-KVS} ##### Mr THEODORE: -- The Prime Minister referred to it. He said that there was no possibility of collecting taxation either from the shareholder or from the company, and I contend that he was wrong. The Commonwealth can in sUCh a case collect a reasonable tax from the profits of the company. I wish to point out what may happen under this singular provision to exempt absentee shareholders from taxation. If the bill is given effect, what is to prevent Anglo-Australian or American-Australian companies that today have a share register, and perhaps a directorate, in Australia, and perhaps declare their dividends in Australia, from opening a share register in London, New York or Hong Kong, appointing a directorate there, taking their funds out of Australia, and declaring their dividends elsewhere? Every absentee shareholder of such companies would then be removed from the ambit of Australian taxation. What foolish companies they would be if they did not take advantage of this proposed law. Take the case of former Australian citizens now residing in England or America, and .deriving large dividends from Australia. At present they are taxable in Australia. Their agents furnish returns and pay the tax, and the Commonwealth has full authority to collect it ; but what is to prevent them from converting their business into a company registered abroad to manage their affairs, whose purpose would be to receive their dividends, and thus place themselves beyond the ambit of Australian taxation? The bill is full of such loopholes. The statements made by the Attorney-General and Prime Minister, in support of the proposal were most lame, and certainly insufficient justification for this sweeping change. What is to prevent any purely Australian company, if this provision is passed, from forming a company in Hongkong or elsewhere, registering it there, and providing that that company become a holding company, deriving all its profits from the Australian company, paying its dividends in respect of the new company, and thus escaping taxation under the Commonwealth law? That is quite feasible, and I suggest that it has already been attempted under our taxation and succession duty laws which have had to be tightened up to prevent the evasion of legitimate taxation. A large number of companies are deriving enormous profits in Australia, and paying dividends to absentee shareholders. The Government has made no attempt to indicate the amount of revenue involved; possibly it is difficult to compute or cannot be computed. In 1926 the amount of taxable profits in Australia under Commonwealth law was £59,000,000, according to the Income Tax Commissioner's report. A large proportion of that is payable to absentees. Most of the principal banks in Australia are Anglo-Australian institutions, and most of the large insurance companies have absentee shareholder Nearly all the large land, mortgage, and mercantile companies, the large pastoral companies, and large mining and trading corporations have oversea share registers, and the amount of the dividends that go out of Australia in the aggregate must be large indeed; and,- so far as I can see, this provision will exempt them from taxation. Surely there can be no justification for such an exemption. {: .speaker-KLL} ##### Mr Makin: -- The 'Australian shareholder has to pay the tax. {: .speaker-KVS} ##### Mr THEODORE: -- How puerile is the suggestion that Australians should pay the tax, and oversea investors escape it, merely as a special inducement to oversea capitalists to invest their money in Australia. It is discriminatory treatment that may force many Australian investors to reside overseas. Why should a man receiving £10,000 or £15,000 a year as income from a company in Australia continue to reside here when by residing overseas he can escape taxation? {: .speaker-K4Y} ##### Dr Nott: -- The picture show corporations are a glaring example. {: .speaker-KVS} ##### Mr THEODORE: -- Yes. So far the argument has been confined to oversea shareholders residing in Great Britain, but of course the provision will apply to shareholders wherever they may reside overseas. It applies to AmericanAustralian companies as well as to AngloAustralian companies. {: .speaker-KFS} ##### Mr Gullett: -- It applies to the Goodyear company and to the Ford company. {: .speaker-KVS} ##### Mr THEODORE: -- That is so. Take the case of a well-known Australian mining company. Recently fresh capital to the extent of £650,000 was raised in London. In addition, English shareholders have been buying shares and transferring them to the London register, so to the extent of over £1,000,000. This company will, therefore, be largely represented by oversea shareholders whose incomes will be exempt from taxation under this provision. Has the Government contemplated that aspect, and does it really intend to extend the exemptions so far? This concession is entirely unwarranted. There is not a tittle of justification for it, and the explanation given by the Treasurer in his second-reading speech was a confession of sheer helplessness. Because the Government foresaw some difficulty in collecting taxation from absentee shareholders, it decided to take them entirely out of the field of income taxation ! The Attorney-General quoted a well-known Queensland case of 1897 as a justification for this law. Did he overlook the fact that that case must have been well known to the taxation authorities and those advising the Commonwealth when the first income taxation law was propounded? Absentee shareholders have been subject to taxation for the last ten years, and for more than twenty years in the States. The Attorney-General also made a passing reference to a more recent case of 1926, but how that presented a further difficulty than the earlier case of 1897 he did not explain. I admit that there may be some hardship on companies that have to pay taxation in Australia and are unable to recoup themselves from shareholders residing in England or elsewhere, but I submit that there is a remedy. The members of the company control their own affairs and they can alter their articles and memorandum of association. If one class of shareholder gets an advantage over another, I think that the general body of shareholders can supply the remedy. If the shareholders in England will not consent to any change in the articles of association, the company may continue to suffer, but that is no justification for the Commonwealth authorities exempting absentee shareholders from taxation on Australian dividends. The position of debenture holders is slightly different from that of those who derive dividends from their investments. A person who lends money to a company on debentures at a fixed rate of interest enters into a contract for a definite period of years, and 'any diminution of the return provided for in the original contract may be held in law to be unjustifiable. But if the taxation of dividends, regardless of their destination, becomes a permanent feature of our income tax legislation, companies raising loans here or elsewhere will have to provide in their contract wit*h the lenders for payment of th.3 income tax due to the Australian Government in respect of the interest on such investments. No British law would prevent that. A company raising capital in England for investment in Australia would stipulate in the prospectus that the interest payable on the loan would be subject to a deduction to meet the requirements of the Commonwealth Taxation Commissioner. That is legitimate and feasible, and every company can guard itself in that way. In regard to dividends, especially dividends earned and distributed in Australia, if the company has difficulty in collecting from the overseas shareholders, it must overcome the problem as, best it can. There is no reason why the Australian citizen should be mulct in an extra charge because overseas shareholders manage to escape their just contributions towards the cost of Government in the country from which they are deriving portion of their income: If British legislation enables an absentee shareholder in an Anglo-Australian company to avoid paying taxation in this country, he will naturally take advantage of it, but in 90 per cent, of cases the company could make provision in its articles of association against such evasions. This concession, however, is extended not only to British shareholders, but also to foreigners who hold shares in Australia! companies. I hope it will be defeated. It appears to me a particularly significant proposal. It has not accidentally found its way into this bill, and I am convinced that it was not suggested by the Income Tax Commissioner or his advisers. It is part of the considered policy of the Government and one of the additional concessions to be ,made.*to capitalism. It must be considered in conjuc- tion with what has previously occurred during the session. One cannot ignore the significant sequence of events in the development of nationalist policy - first, the whittling away of the powers of the Commonwealth Bank, in order to prevent it from competing with private banking institutions; secondly, the determination to sell the Commonwealth ships and so remove a competitor of the private companies; thirdly, the reduction of direct taxation payable by the wealthy and, concurrently, the increase of indirect taxation which falls upon the shoulders of the workers; and, lastly, this proposal to render tax-free the dividends of oversea capitalists who have invested in Australian companies. {: #subdebate-22-0-s31 .speaker-L1T} ##### Mr YATES:
Adelaide .- The Prime Minister and the AttorneyGeneral said that the provision now before the committee would place Australian companies on an equal footing with their competitors. I have in mind an Adelaide company which is peculiarly well circumstanced and has no competitors. When, as secretary of the Labour party in Adelaide, I applied to the Registrar of Companies for the share list of the Adelaide Electric Light Company, I was informed that I could .not get it as the company was registered in England. That company has a monopoly of electric lighting in Adelaide and suburbs. The municipal tramways generate much more electricity than they require, and could supply the people with cheap electric current, but the act under which the Adelaide Electric Light Company operates gives it exclusive rights in respect of the sale of this commodity. The Legislative Council, of which the Honorable George Brookman, one of the biggest shareholders, was a member, took good care of that. If the Government's proposal is agreed to, the English shareholders will pay no income taxation in respect of the profits derived from this South Australian company, and at the same time the Liberal Government in South Australia is reducing the general exemption under the State Income Assessment Act from £150 to £100. This is evidently part of a design to protect the; capitalist by placing heavier burdens upon those people who are least able to bear them. I hope the committee will realize- the significance of the Government's proposal. {: #subdebate-22-0-s32 .speaker-KFS} ##### Mr GULLETT:
Henty .- I am not yet convinced by the arguments advanced in support of the proposed amendment. Millions of pounds of British and American capital is invested in this country, and from the dividends derived from foreign- owned, but locally operated, companies, the Commonwealth derives considerable revenue in the form of income taxation. "Whoever pays the money, the Treasurer gets it. If this revenue is abandoned, it will have to be recovered from purely Australian sources. There is a saying that " an old tax is a good tax ;" if it is a hardship, it is an accepted one. Certainly this particular form of taxation has not stopped; the flow of money into Australia, and I am not disposed to see it removed. The Treasurer is deriving revenue from- the silver, lead, pastoral and great insurance companies, amongst many others, and the British investors have apparently been perfectly satisfied for many years to pay this taxation. At any rate, I have heard no clamour from them for its removal. The Attorney-General has explained to the committee the English law upon the subject. I would not presume to contest the honorable gentleman's legal knowledge, but I do know that if one of the Broken Hill companies for instance, declares a quarterly dividend of 2s., tax free, the shareholders it) Australia and Great Britain alike get it. It may be that the company pays the income tax on behalf of the British shareholder; but whatever the internal arrangement is, both classes of shareholders receive the same return for their investment. Can the Attorney-General **(Mr. Latham)** give the committee an assurance that the law will operate in the same way in regard to American, Chinese, or other foreign shareholders in companies operating in Australia? If he cannot, on that ground alone I shall be reluctant to approve of this proposal. American investments in this country have increased in recent years, and are continually expanding, and I shall strongly resist any effort to place the American investor upon a better footing than the Australian investor. {: .speaker-F4B} ##### Mr Bruce: -- We are not to-day getting any. income tax in respect of dividends paid to shareholders abroad in British or foreign companies operating in Australia. {: .speaker-KFS} ##### Mr GULLETT: -- The right honorable gentleman is referring to companies registered in and operated from Great Britain, but many great companies- with British and foreign shareholders are operated from within Australia, and their directorates are here. For instance, the Goodyear Company has recently been formed in Sydney, with a great deal of American capital and an Australian directorate. The Government proposal is that the American capital invested in that company shall escape income taxation, but that the Australian shareholders shall pay. I do not believe the Australian people will tolerate discrimination of that character. The Treasurer has stated in justification of the proposal that it will encourage the inflow of overseas capital to Australia to assist in the development of the country. That argument is sound so far as it goes, but although a decision not to tax dividends payable to overseas investors in Australian companies may prove an inducement to foreign capitalists to come here, it will also be an incentive to Australian investors to leave the country and draw their dividends abroad. I think the argument which the Treasurer has put forward is a very weak one indeed. Personally, I would like to see the Government give further consideration to this amendment before it is passed by the committee. {: #subdebate-22-0-s33 .speaker-F4B} ##### Mr BRUCE:
Prime Minister and Minister for External Affairs · Flinders · NAT -- I have listened to the objections which have been urged to this course which it is proposed to pursue, and I think there is some slight misapprehension in regard to what is intended under this particular section. The intention is to prevent a company being made liable for taxation on dividends that have been declared, and are payable to shareholders of the company who are not resident in Australia. The honorable member for Dalley **(Mr. Theodore)** said we could tax the companies in this country. 'Of course we can tax the companies?0 We can alter the law in any respect we consider desirable, and we can tax any company in any way which we determine to he just, equitable and proper. We have had trouble in the past in connexion with the collection of company taxation, because of devices have been adopted under which, when the affairs of a company were examined, it was found that there is no profit. We have tried to defeat those who have endeavoured in this way to avoid their legitimate obligations, but because it is income taxation we have been able to do nothing. It is true that we can amend the law in connexion with the taxation of companies, but this section is not dealing with company taxation at all. A company which is making a profit has declared a dividend. When it is not possible to get the income tax out of the individual shareholder, power is retained to take it out of the profits of the company. It is suggested that there is something unfair to the Australian taxpayers if that power , is given up. Let us consider whether that contention will bear investigation. Take the case of a British or American company, or a company registered in any other- part of the world, whose shareholders are resident outside of Australia, and which is carrying on operations in Australia. The company declares dividends, and they are paid to shareholders. We, in Australia, cannot get taxation out of the company or out of the individual shareholders in respect of the dividend declared by it, and payable to the individual shareholder. We can take our toll out of the profits of the company, but not from the dividend that is payable to the shareholder. In the case of a foreign registered company with shareholders resident in foreign countries we cannot get income tax at the present time. The most simple case is that of a British company registered in Britain, of which the capital is subscribed in Britain, which is carrying on a profitable business in Australia. We in Australia levy our company taxation on the profits earned in Australia. We are scrupulously just. We levy on nothing but the profits made in Australia. The company declares a dividend, say, one of 10 per cent., on the share capital, and it pays that dividend to its shareholders resident in Britain. There are hundreds of companies operating in Australia to-day on that basis, and we are not getting any taxation from the individual shareholders, nor can we get it from the company on the dividend that is declared. If we levy on the company to meet the obligation of the shareholders, the company has now power to recover the amount paid on behalf of its shareholders resident in Britain or elsewhere abroad. The result is that the Australian shareholder has his dividends reduced to' meet the obligations of the British shareholder whom we are not able to reach. If this provision is not adopted, the Australian shareholders will have to meet part of the obligations of the shareholders resident in Britain. {: .speaker-F4Q} ##### Mr Scullin: -- Provision can be made to meet that. {: .speaker-F4B} ##### Mr BRUCE: -- I suggest that it is impossible to make provision to meet such cases. Take, for example, the case in which a tax-free dividend is declared by a company. In that case the company, out of its resources, pays to the shareholders a dividend which is really rather smaller than it would otherwise be in a position to pay, because it has had to use part of its profit to meet the taxation obligations of the individual shareholders. {: .speaker-KVS} ##### Mr Theodore: -- In that case the absentee shareholder would receive a smaller dividend. {: .speaker-F4B} ##### Mr BRUCE: -- It is impossible to secure absolute equity as between the different classes of shareholders by adopting that course. I suppose 90 per cent, of the joint stock companies operating today do not pay their dividends tax-free. The accepted practice in regard to the distribution of dividends is not to pay them tax-free, but to leave the obligation to pay taxes upon the individual shareholder, who pays the taxation levied in the country in which he is resident. The simple remedy put forward that companies should alter their articles is not practicable. Honorable members who have any experience of companies know how difficult it is to alter the articles of association, particularly when, as in this case, the overseas shareholder would thus be made pay income tax. In the majority of joint stock companies operating in Australia the capital, in the first instance, came from Great Britain, and it is only recently that accumulations of capital in Australia have permitted any considerable amount of the stock to be held in this country. In most cases where companies are registered in Britain the major portion of the capital is held by British shareholders, so" that there is little hope of the articles being altered so as to allow of British shareholders being made to pay income tax. I do not propose to argue the general question of the desirability of attracting capital to this country, but I stress the fact that a wrong inference has been drawn by several speakers to the effect that what it is proposed to do now will free a large number of company shareholders resident in Great Britain and Australia from obligations which they are bearing now. We are not getting income taxation from those individual citizens in Great Britain or the United States at the present time. {: .speaker-F4Q} ##### Mr Scullin: -- We are getting it from the companies. {: .speaker-F4B} ##### Mr BRUCE: -- Not in all cases. We are only getting the taxation which we can levy on companies in general; and that taxation we can vary as we desire, provided that it is within the bounds laid down by the Constitution. It is not proposed under this section to make a present to the citizens of the United States by saying to them, "We used to tax you, but we shall not do so any more." I suggest that this proposal represents a step in the right direction, and one which is going to help us in regard to investments in Australia. It will tend to produce equality of conditions among the companies operating in Australia. {: #subdebate-22-0-s34 .speaker-F4Q} ##### Mr SCULLIN:
Yarra -The Prime Minister has put forward some very ingenious arguments, which no doubt seemed to him convincing, but actually were not. He said that we could not tax absentee shareholders of companies. We could, however tax the companies. The company is the whole body of shareholders. {: .speaker-F4B} ##### Mr Bruce: -- But we could only tax the company on the same basis as other companies. {: .speaker-F4Q} ##### Mr SCULLIN: -- Section 65 of the existing act empowers the commissioner to levy on a company in respect of any taxation payable by any shareholder of the company. He cannot be taxed; but the company holding his dividends can be compelled to pay taxation. The same remarks apply to interest on dividends. The Minister advanced the argument that if a tax is imposed on a company which cannot pass it on to the individual, the whole of the shareholders of the company must hear the burden, and the shareholders resident in Australia would have to bear their part of it, according to the proportion of shares that they held. That is true, but it is the business of the Australian shareholders, and not of the Commonwealth Government. Later in his speech the Prime Minister gave his case away by stating that the majority of the shareholders in those companies are British residents. If that is so, not many Australians will have to pay the absentee tax. If they do find it a burden, let them transfer their money to genuine Australian companies. Those absentee shareholders are a number of individuals, grouped together under the title of a company. If we tax their company we tax them. We can, not only tax their company at the company rate of taxation, but also compel them to pay to the commissioner the proportion of tax that their absentee shares should bear. That has been done for years, and now the Government proposes to withdraw that provision. {: .speaker-F4B} ##### Mr Bruce: -- We are not applying it to any companies excepting those controlled in Australia. {: .speaker-F4Q} ##### Mr SCULLIN: -- The provision is be- ' ing applied at least to such companies. Why should it not continue? I suggest that, instead of making the suggested concessions to these companies, we should extend the scope of the existing provisions. Surely we have some control of the people in our country. We have the right to say to those who are shareholders in Australian companies, but resident abroad, and who have their agents here, "Before we grant you any charter to operate in this country we make it clear that we require income tax on the profits that you make." Because a group of people club together as a company are they to be regarded as sacrosanct, and exempted from the tax justly due by all shareholders in companies, while individual citizens of this community conducting individual businesses, and who may have borrowed money from abroad, are not to enjoy the like exemption? As was pointed out by the Leader of the Opposition **(Mr. Charlton),** companies will be created in Australia, whose shareholders will live abroad, merely to escape taxation. {: .speaker-K99} ##### Sir Elliot Johnson: -- Can the honorable member suggest a remedy? {: .speaker-F4Q} ##### Mr SCULLIN: -- I suggest that we should adhere to the law as it stands, and act as we have acted in the past. {: .speaker-K99} ##### Sir Elliot Johnson: -- The tax is not at present collected from foreign countries. {: .speaker-F4Q} ##### Mr SCULLIN: -- It is not beyond the genius of our State and Federal Parliaments to co-operate and provide the necessary legislation. {: .speaker-KVS} ##### Mr Theodore: -- The Commonwealth has as much power as the States in this matter of taxation, and the States are collecting tax from absentee shareholders. {: .speaker-F4Q} ##### Mr SCULLIN: -- It is not a question of limiting the power of taxation, but of the conditions under which certain bodies shall operate and exploit the resources of this country as agents for foreign countries. Surely we have sufficient power to enable us to say to them, "If you insist on being a foreign company, and on having your shareholders resident abroad, we shall at least control your Australian operations in Australia." Then we could tax them. {: .speaker-K99} ##### Sir Elliot Johnson: -- That is all very well in theory. {: .speaker-F4Q} ##### Mr SCULLIN: -- And it could be put into practice. I suggest that the remedy, in the meantime, is not to exempt people from taxation which we are in a position to collect, and I trust that the amendment will be carried. {: #subdebate-22-0-s35 .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 .- The question in issue is an interesting, though an involved one. Personally, I take this as an announcement to the world that British and foreign capital invested in Australian companies will be exempt from income taxation. The equity of the principle of taxing British capital has been admitted, and finds legislative form in the very act that we are discussing. Section 18 provides a mode of arrangement between the UnitedKingdom and Australia with regardto the duality of taxation, and clearly sets out an acknowledgment of the right of Australia to levy taxation. I cannot see any difference in principle between an obligation that applies to individuals as individuals, and an obligation that disappears if they enter into a company. A principle must apply to every subject, whether he is operating in his individual rights or through company rights. I appreciate the difficulty of collecting the tax, but I do not admit that that difficulty is insuperable. I do not know why Australia should be made the happy hunting ground for, say, the American business people. Were this purely a concession to the British investor it would have some merits, for, after all, when we borrow from Great Britain our principle is to pay our bonds back in Great Britain free from taxation. We acknowledge her right so far as her bonds are concerned, that theyshall be paid in Great Britain free from taxation. If we go further and ask the British people to come here as investors and lend to us as individuals - for it amounts to that - that is an extension of the principle, and one to which I take less exception. {: .speaker-KVS} ##### Mr Theodore: -- We do not offer them tax-free conditions. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- That is true. I object to the American business people first levying gigantic tolls upon the Australian people and then getting off scotfree from taxation. The present Government has assailed, and rightly so, the establishment of " shadow " companies in Australia - they are called "pups" overseas. Those companies have sent to them consignments at values far in excess of their real wholesale value, and distribute them throughout Australia by means of " shadow " companies, in order that they may avoid even the declaration of a profit in Australia. That narrows down our legitimate taxation, and makes it more severe upon our own people. I am at a loss to understand what is behind the mind of the Government so far as countries other than Britain are concerned. I believe that the best person to police the collection of these taxes is the company that is resident here, and I am convinced that the policing can be done through the company, if we impose the obligation upon it. I am confident that it would find a way out. It is probable that, soon, our taxation will have to be higher. That may not come about immediately, but one can see by reason of our accumulated debt, and our lighter production, that the field of direct taxation will have to be entered later, and perhaps with great severity. I ask the Government to reconsider this matter. Let the provision remain as it is. If it rests where it is it does not place on us the moral obligation not to call upon these companies when necessary. It is a power to levy taxation upon profits earned in Australia that should not be surrendered. It is a reserve upon which we never know when we shall have to call, in order to raise the funds necessary for the requirements of Australia. I believe that there are many legitimate companies, and particularly British companies, which follow the spirit of section 18 of the principal act, and give Australia a fair deal. It is just the kind of action that one expects, and has always received, from the British. British investors recognize that they have entered a legitimate field of investment in Australia. They should be on at least an equal footing with the foreigner. {: #subdebate-22-0-s36 .speaker-KVS} ##### Mr THEODORE:
Dalley .- This seems to me to be too important a question to be allowed to go through without full discussion. I regard it as one of the most important matters that we have considered this session. Unless I am exaggregating the importance of it, the committee are not giving it due conconsideration. The Prime Minister twice referred to the case in which a company is registered overseas, and ' distributors its dividends there. The right honorable gentleman stated that in that case we cannot tax either the shareholder or the company. I suppose that, technically, he is right. We cannot tax a company that is registered and controlled in England and not in Australia, but we certainly could tax the Australian earnings of such a company, and we could tax them on a basis that would be the equivalent of the tax that the shareholders would pay if resident in Australia. There is every justification for taxing them on that basis, otherwise shareholders resident abroad have an advantage over those resident in Australia. ' The right honorable gentle- man stated that we do not tax the shareholders, but that the company or somebody representing the company has to pay the tax. But if a purely British corncompany, registered in England, with directors in England, and distributing dividends in England, has agents in Australia, those agents could be required to make returns to our taxation office, and the company could be taxed upon its local profits. There are quite a large number of insurance companies trading in Australia, whose register is overseas, and whose directors and whose principal shareholders are resident overseas. These persons have heretofore been contributing a tax on a fair and equitable basis to both the Commonwealth and the States, and no reasons have been advanced why they should not continue to do so. Under this scheme, they will be exempt from taxation. It has been said that they do not pay a tax now; but the fact is that they do pay, at least indirectly. Some of the companies which have absentee shareholders pay their dividends, tax free, and retain certain money out of the profits to meet taxation charges; while others pay the tax directly out of their funds, so that in one way or another the shareholders are taxed. Absentee individuals who derive income from investments in Australia have to pay income tax through their attorneys or the person whose duty it is to submit returns to the taxation commissioner. {: .speaker-F4B} ##### Mr Bruce: -- That is provided they have assets in the country. It would not apply to absentees who hold shares in British companies operating here, but have no assets here. {: .speaker-KVS} ##### Mr THEODORE: -- Absentees who have money invested in Australia, though not in shares, are required to pay taxation here just as though they were residents. It has been said that that practice will need to be .altered in consequence of the decision of a British court ; but I have not been able to discover why. All that has been put before us is that it is not fair to tax absentee shareholders because of the inability of the companies concerned to deduct the tax from the dividends which the absentees receive, as that would cause discrimination in the distribution of the dividend. I am not very much concerned on that point. If one class of absentee can be taxed to the full limit to which a resident in Australia is taxable, I submit that it should be possible to amend our law to provide that other classes of absentees may be similarly dealt with. Australians who invest in England are taxable there though they are absentees from this country; and Australian residents who derive income from investments in the United States, of America, Canada, or any foreign country where income tax is imposed, are, to the best of my knowledge, obliged to pay income tax there ; so I can see no reason why we should exempt persons abroad from taxation on income which they derive from Australia. It is of no use for us to attempt to avoid realities in discussing this subject. Although the Prime Minister has said that we cannot tax these absentees, they are, in fact, already taxed by us. {: .speaker-F4B} ##### Mr Bruce: -- A non-resident of Britain does not pay income tax on investments in Britain. There is taxation only at the source of income. {: .speaker-KVS} ##### Mr THEODORE: -- The Prime Minister has made that statement two or three times. I should like to know whether he is definitely assured of its accuracy. I doubt very much whether a Canadian who has estate in England, not shares in a company, can escape taxation upon the income which he derives from it. {: .speaker-F4B} ##### Mr Bruce: -- A non-resident does not pay tax. Taxation is imposed in Britain in accordance with the protection afforded by the flag. A person who has investments scattered over the whole world must bring them into account in Britain if he resides there and enjoys the protection of the flag; but persons who do not reside in Britain are not called upon tq present an income tax return there. The only taxation that can be levied upon them is that which is levied at the source of the income. {: .speaker-KVS} ##### Mr THEODORE: -- If the Prime Minister is assured on that point, I shall not dispute it. But I know that company taxation is levied there at rates which rise in some cases to 4s. or 5s. in the £1. I doubt Very much whether any person who derives income from the United States of America is able, irrespective of where he lives, to escape American taxation on it. It has not been suggested that hardship has been suffered by either companies or shareholders in respect of the imposition of taxation on absentee shareholders. We have not been informed of the amount of dividends which goes to absentees, nor of the effect that this provision is likely to have upon our .revenue. The taxation authorities must have some information on this point, for companies have been obliged to make returns and to pay taxation in respect of their absentee shareholders for a number of years. The information which the department has on these points should be made available to us. {: #subdebate-22-0-s37 .speaker-KFS} ##### Mr GULLETT:
Henty .- I should like to quote briefly from a recent volume entitled *The Science of Public Finance,* by G. Findlay Sharras, one of the greatest authorities on the subject, as to the British practice of taxing the income of absentees. The following paragraph appears on page 263: - >The taxation of income usually affects nonresidents as well as residents, but not in all cases. It is customary, as has been shown, to tax residents on their income arising inside and outside the country, and non-residents on income arising inside the country. 'In the case of companies residence is determined according as the direction of control is centred in Great Britain or abroad. Non-residents may in the case of Great Britain and Northern Ireland recover income tax from interest and colonial securities, and also certain British war loans. Although non-resident they have to pay income *tax on* income arising- in tlie United Kingdom such as income from industries, railways, and banks. British "subjects ordinarily resident outside Great Britain and Northern Ireland are entitled to reliefs in tha form of abatement and allowances to which those in Great Britain and Northern Ireland are eligible. Other non-residents are liable at the full standard rate without allowances and reliefs. That is quite specific. Under the New Zealand law also absentees are compelled to pay the full rate of income tax without any deduction. If I had the time I believe I could show that that is the practice in practically every country. {: #subdebate-22-0-s38 .speaker-JXA} ##### Mr CHARLTON:
Hunter .- I agree with the honorable member for Dalley **(Mr. Theodore)** that this is too important a- matter to be allowed to go to a division before it has- been thoroughly considered by .the committee. It is the duty of the committee to endeavour to improve every measure that is placed before it. This is not a party question. I am disappointed that no justification has been offered by a responsible Minister for such a fundamental change in our taxation law. {: .speaker-K99} ##### Sir Elliot Johnson: -- The Prime Minister has explained the position. {: .speaker-JXA} ##### Mr CHARLTON: -- The Prime Minister has not explained what will be the effect on our taxation returns. Is the committee justified in agreeing to reduce taxation before it is given those particulars? The mere fact that the Government has decided upon a certain course is not a proof that that course is in the best interests of the country. It will be too late for honorable members to complain if subsequently a loss of £250,000 is disclosed. I can see no reason why the officers of the department should not advise the Government on this matter. Probably they have clone so. If they have, why are Ministers withholding the information from the committee? No argument has been advanced in favour of the proposal. This provision has been in operation for very many years, but we have no . knowledge of any complaint having been made against it. It is strange that we should now be asked to amend the law in the direction suggested. The Treasurer **(Dr. Earle Page)** has adopted the attitude that it will be of some assistance to British investors. I am inclined to the view that we are travelling too far in that direction. In recent years the disposition seems to be to give concessions to Great Britain without receiving a *quid pro quo.* It is about .time that we put a stop to that practice. We are all desirous of helping the Mother Country, and are prepared to extend preferences to her ; but we must realize that that policy cannot be carried on at the expense of our own development. We are paying to Great Britain for the debt which we incurred to finance our war operations a higher interest rate than she is paying to the United States of America for the money which she borrowed on our account. We should be actuated by the desire to have regard first to the development of our own country. If there is then room for any preference, it can be given to the Mother Country. It is not an answer to pay that, because certain companies in other countries are free from taxation, we should apply that principle to the British investor here. . We can impose taxation upon investors here no matter in what country they may reside. If we had not possessed that power, our law would have been challenged long ago. I appeal to honorable members not to be influenced by the fact that the Government has brought forward this proposal. Unless there is a real justification for it, it ought not to be passed. It is only by applying our intelligence to measures and endeavouring to amend them that we can hope to pass legislation that will give satisfactory results. We should not adopt a biased- attitude. It is not fair to claim that a Government measure should not be amended. Every honorable member should endeavour to give effect to his own opinions. Quite a number of honorable members opposite have expressed themselves in opposition to this proposal, thus indicating plainly, that they realize that it is not justified. The Government would be well advised to instruct its officers to ascertain the amount of revenue that is now obtained from absentee shareholders. {: .speaker-F4B} ##### Mr Bruce: -- There are no statistics, but the commissioner estimates that the loss of revenue under this clause and under paragraphs *b* and c of clause 11 will be in the region of £200,000. {: .speaker-JXA} ##### Mr CHARLTON: -- The debate has been proceeding for a co'uple of hours. The Prime Minister, the AttorneyGeneral and the Treasurer have spoken, yet until this minute that information has not been vouchsafed to the committee. It should have been given at the outset. Can we afford to forego the £200.000 that is now paid by persons who live outside of, but derive an income within, Australia? How long can we continue to remove taxation from the shoulders of the wealthy and place it on the shoulders of the great masses of the people? I have said previously, and I now reiterate, that our war commitments have not diminished; whilst on the other hand our interest bill has increased. We are not in a position to lose £200,000 in one direction and £200,000 in another. If we experience a bad season, we may find ourselves next year on the wrong side of the ledger, and be faced with the necessity of imposing additional taxation. Any such taxation would, be levied on the mass of the people. Absentee shareholders deriving great benefit from the transactions of companies in this country are to pay no income taxation at all to the Commonwealth. According to the Prime Minister, they are to be relieved of taxation to the extent of about £200,000. {: .speaker-F4B} ##### Mr Bruce: -- In conjunction with clause 11, paragraphb; and *c.* {: .speaker-JXA} ##### Mr CHARLTON: -- This bill and the Land Tax Assessment Bill will reduce the Commonwealth revenue by £1,200,000, and £200,000 of that is to be given to absentee shyreholders. I welcome legitimate income tax reductions that benefit our own people, but I strongly object to exempting absentee shareholders from income taxation. I believe that honorable members behind the Government, even if they vote against the amendment, are in their hearts opposed to this provision. I ask the Government to postpone the clause for further consideration, and, failing that, to accept the amendment. If it will not do that, I hope that honorable members will vote for the amendment, and thus leave the existing provision as it stands. {: #subdebate-22-0-s39 .speaker-KYI} ##### Mr PROWSE:
Forrest .-I have listened carefully to the debate, and I think that the Prime Minister and the Attorney-General made the position clear. If they were correct, in future I shall not , welcome to Australia British companies registered here. The Minister for Trade and Customs is asking for high protective duties, to increase tbe revenue of this country and to encourage British companies to invest their capital here. The tariff imposes an indirect tax on the primary producer of 3s. or 4s. in the £1, yet British companies established here will pay only ls. in the £1. That does not seem to me to be fair, and the provision requires closer consideration before we decide to give a general exemption from income taxation to absentee shareholders. Certainly an Australian companywith Australian shareholders should not pay more in taxation than a British company operating here, and while that discrimination exists, I am not in favour of en couraging British companies to invest capital here under the protection of the tariff at the expense of the primary producer. It is only right and proper that those companies should contribute to the Commonwealth revenue in reasonable proportion. There is, of course, this aspect, that the levying of taxation may be a deterrent to other companies coming here; and we certainly desire to develop this country, but I do not know that that would be possible if we had many British companies here that were not making reasonable contributions to our revenue. {: #subdebate-22-0-s40 .speaker-KLL} ##### Mr MAKIN:
Hindmarsh .- It is only reasonable to assume that the estimate of £200,000 given by the Prime Minister, by interjection, as the extent to which the revenues of this country will suffer because of the operation of this bill, is rather conservative. {: .speaker-KVS} ##### Mr Theodore: -- He is a conservative gentleman. {: .speaker-KLL} ##### Mr MAKIN: -- Exactly. The fact that he represents vested interests would naturally make him very cautious in giving any estimate. The **CHAIRMAN (Mr. Bayley).The** honorable member is entitled to state facts, but not to draw inferences from them. {: .speaker-KLL} ##### Mr MAKIN: -- I have made no inference at all. I have stated a fact. The reduction in our revenues which will be consequent on this legislation will he made up from other sources, an.d the main source tapped will be the family man. The Government has said that this exemption from taxation will encourage the investment of overseas capital in Australian industries. But the law which the Government is seeking to place on the statute-book will render that policy ineffective. It will encourage Australian investors to make their domicile abroad. Our policy should be to attract and to make people feel when they are here that Australian citizeznship offers real advantages. This legislation, on the contrary, is designed to penalize those who invest their money and reside here. It cannot be defended upon any principle of equity. Ultimately the burden which is being taken from the shoulders of the rich investor abroad will fall upon the shoulders of the Australian working man. We have been told on many occasions, and in an unguarded moment the Prime Minister confirmed the truth, that taxation invariably filters down to the lowest level - the workman who cannot pass it on. The absentee investors should pay taxation on a higher scale than the resident, to encourage them to reinforce their investment by their presence in the country and their active participation in its affairs. The Prime Minister has said that British investors are taxed on the principle of what they term " the flag." For many years I have heard Tory politicians emphasizing Australia's obligation to the Mother Country for the protection she affords us. I have been somewhat diffident about disputing that statement, although I have always recognized that it paid the British capitalists who have invested in Australia to have their capital adequately protected. Australia by this remission of taxation will open up another and more complete avenue for the British Government to tax for revenueproducing purposes, and in this way a considerable sum is directly taken from the wealth of Australia, for any assistance that she receives in that way. I hope that we shall hear less in future of this class obligation to the Old Country. For any protection that comes to us from the flag we have paid directly and indirectly in substantial measure. {: .speaker-KVS} ##### Mr Theodore: -- Ordinary absentees derive from Australia £2,000,000 in dividends; they can escape taxation on that amount by forming themselves into companies. {: .speaker-KLL} ##### Mr MAKIN: -- Exactly; this is a direct invitation to people to evade taxation in that way. I hope the committee will enter an emphatic protest against the Government's proposal. The inadequacy of the Commonwealth power in regard to the taxation of companies emphasizes the need for an amendment of the Constitution in order to give greater authority to the Federal Parliament. The preponderance of power in regard to companies remains with the State legislatures. {: .speaker-KZT} ##### Mr RODGERS:
WANNON, VICTORIA · LP; NAT from 1917 -- Under this power of taxation there are no limits. {: .speaker-KLL} ##### Mr MAKIN: -- In the circumstances, the excuse that might have been offered - that there is a conflict between the various company laws of the States - does not apply. There is, therefore, all the more reason why we should reject the Government's proposal to exempt from taxation the wealthier sections who, although absent, extract wealth from this country. {: #subdebate-22-0-s41 .speaker-L07} ##### Mr LAZZARINI:
Werriwa -- It is remarkable that since this Government assumed office, not a session has passed without a bill being introduced to exempt from taxation the wealthy sections of the community. The Treasurer said that the result of the proposed exemption would be t5 encourage Australian development. In my opinion, the people who would benefit from this exemption are of little or no value to Australia. The exemption will benefit big companies registered in London, which are doing nothing to develop Australia. The big wholesale and retail houses in this country are not truly Australian. The goods in their establishments are, for the most part branded " Made in Germany " or " Made in Japan." It is true that some of them are companies registered in Australia, but their capital comes from Britain. They would be exempted under the proposal of the Government. The only time when the Prime Minister, the Treasurer, and the Attorney-General remain in the chamber to discuss the details of bills in committee is when measures which will benefit their wealthy friends are being discussed. The Labour party believes that absentees should be taxed more heavily than are persons resident in Australia. Instead of assisting in the development of this country absentees are doing much to injure Australian industries, and to benefit foreign industries. Yet they are the people whom the Government's proposals -would benefit. Britain taxes her absentees, and we should do the same. The AttorneyGeneral referred to a case which was decided in 1897. {: .speaker-KZO} ##### Mr Latham: -- The same decision was repeated this year in connexion with Commonwealth income taxation.* {: .speaker-L07} ##### Mr LAZZARINI: -- It has taken a long time for the governments of Australia .to realize the necessity for legislation of this character. In the past, landholders, and then the shipping interests have been exempted from taxation; now it is the turn of the big wholesale and retail merchants. Itis not sufficient to say that Australia cannot tax absentees; Britain has done so, and so can we. If it cannot be done in one way, it can be done in another. The Treasurer, in introducing this bill, did not say who would benefit by it, because he knew that if that information were supplied the Government would condemn itself. According to an interjection by the Prime Minister, an amount of about £200,000 is involved. In my opinion, much more is at stake. But even £200,000 is more than we can afford to lose, in view of our financial position, I am opposed to these exemptions from taxation, and shall, therefore support the amendment moved by the honorable member for Yarra **(Mr. Scullin).** {: #subdebate-22-0-s42 .speaker-F4B} ##### Mr BRUCE:
Prime Minister and Minister for External Affairs · Flinders · NAT .' - Although I have probably exhausted my right to speak on this clause, by the leave of the Committee . I shall offer a suggestion. This debate is a very important one, and deals with a fundamental principle. The question cannot really be decided, however,' except in conjunction with clause 11, to a consideration of which we must return at a later stage. May I suggest that possibly it would be more convenient if we now postponed the further consideration of this clause and proceeded with the other clauses of the bill? We could return then to clauses 7, 9, and 10, which were postponed, and when we had finished with clause 11 we could consider clause 22, and deal with it on the wider aspect exposed by clause 11. Clause postponed. Clauses 24 to 28, agreed to. Clause 29 (Application of Act). {: #subdebate-22-0-s43 .speaker-KVS} ##### Mr THEODORE:
Dalley .- This clause makes provision for the operation of the bill to be retrospective in certain respects. An honorable member on the ministerial side directed attention to this clause last night, and it was stated that an explanation would be given in regard to it. {: #subdebate-22-0-s44 .speaker-KZO} ##### Mr LATHAM:
AttorneyGeneral · Kooyong · NAT . -The honorable member for Boothby **(Mr. Duncan-Hughes)** drew attention to this matter, especially in regard to the retrospective effect of the bill if the amendment which stood in the name of the Treasurer had been moved. It is not now proposed to move that amendment so as to reverse the decision in what is known as the Weatherley case. The degree of retrospection now provided for in the clause is very slight, and is, I think, justifiable. The first part provides that the amendment effected by section 3 of the act, which confers on the assistant commissioner and second commissioner the powers of the commissioner, shall be deemed to have commenced on the 1st June, 1924, but in no case is the right of appeal to be effected. A taxpayer has taken the point that on one occasion a decision was wrongly given because the case was heard by the assistant commissioner and not by the commissioner. The rights of that taxpayer are being preserved to him; but the act is being altered so as to confirm the powers of the assistant commissioner and the deputy commissioner in all other cases as from the year 1924. The second alteration goes back only to 1926. That is effected by the averaging principle, and I suggest that we should postpone subclause 2 of this clause until clause 7 has been dealt with. Clause postponed. Postponed clause 7. (Average years for income tax.) {: #subdebate-22-0-s45 .speaker-KYI} ##### Mr PROWSE:
Forrest .- In view of the discussion which took place on clause 14, I recognize that it is somewhat futile for me to proceed with the amendment which I proposed to move. Sufficient information was gained during that debate to satisfy me that this committee, and even, the Government itself, is not satisfied with the present system of averaging incomes, and that the taxpayers of Australia are very far from satisfied. Daring the debate the suggestion was made that a small committee should be appointed from those who are competent to examine the position, in order that some system might be evolved which would ensure a greaterdegree of equity in assessing incomes. Honorable members should think individually on this matter and try to evolve a fairer scheme of taxation than that at present in force. I wish to make reference to the table that has been presented to the House, and to an item on page 2 of the Treasurer's statement. That is totally misleading as to the operation of the system. In one case a ten-years system is introduced, and in the other the calculation is made on a five-years basis. I have worked out the result with the aid of the ready reckoner, and I find that under my system for 1921, both steady and irregular incomes given work out the same in ten years. Clause agreed to. Progress reported. {: .page-start } page 2231 {:#debate-23} ### HOUR OF MEETING Motion (by **Mr. Bruce)** agreed to - >That the House, at its rising, adjourn until 11 o'clock a.m. to-morrow. {: .page-start } page 2231 {:#debate-24} ### ADJOURNMENT ServicesofAustralianCrusier. **Mr. BRUCE** (Flinders- Prime Minister - Minister for External Affairs, [11.0].- I move- >That the House do now adjourn. > >I wish to read to the House a cablegram which I have received to-day from the British Government. It is as follows: - > > **His** Majesty's Government in Great Britain desire to convey to His Majesty's Government in the Commonwealth of Australia an expression of their grateful thanks for the help afforded by H.M.S. *Adelaide* in the search for the perpetrators of the outrage at Sinarango, and the restoration of order, in the disaffected area. > >House adjourned at 11.1 p.m.

Cite as: Australia, House of Representatives, Debates, 29 November 1927, viewed 22 October 2017, <http://historichansard.net/hofreps/1927/19271129_reps_10_117/>.

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