22nd Parliament · 2nd Session
Mr. SPEAKER (Hon. John McLeay) took the chair at 3.30 p.m., and read prayers.
– I ask the Prime Minister: What is the probable date of the return to this country of the Minister for External Affairs? As soon as practicable after that event, will the Prime Minister arrange for a debate on international affairs, covering, of course, the observations that he himself recently made on Middle East problems?
– I understand that my colleague will be back in Canberra on Monday of next week, but probably I will be in touch with him before then, over the week-end. I will convey this suggestion to him.
– My question is directed to the Minister for the Interior. Has there been any consultation between the Commonwealth and Victorian Governments regarding the future of the Melbourne Customs House? Has the Victorian Premier made a suggestion that the Commonwealth should exchange the present Customs House site for a site at 23 Williamstreet, Melbourne, on which the State Electricity Commission has commenced building?
– I am not aware of any approach having been made to us by the Premier of Victoria on the matter raised by the honorable member. I understand that the proposal that the Commonwealth Government exchange the Customs House site for the State Electricity Commission site was canvassed during recent sittings of the Public Works Committee. The honorable member can rest assured that any proposal of that kind will be given the most sympathetic consideration.
– I address a question to the Postmaster-General. In view of the fact that the law of the Commonwealth in respect of broadcasting and telecasting lays down the principle that sporting events, such as the Melbourne Cup, cricket matches and football matches, cannot be broadcast or televised without permission from the committee or executive of the sporting body concerned, will he investigate the circumstances under which the Australian Broadcasting Commission, which is a government instrumentality supposedly independent of, and reputedly competitive with, commercial broadcasting and television interests, joined with Melbourne’s two commercial television stations in refusing to telecast to-day’s Melbourne Cup race direct from the course, because the committee of the Victoria Racing Club required the payment of a reasonable sum for telecasting rights and, when offered the programme free of charge-
– Order! What is the honorable member’s question?
– That is the first part of the question. The next part is: Will the Minister consider taking appropriate action to prevent the Australian Broadcasting Commission from continuing its association with greedy commercial television station interests in their campaign to prevent nonprofitmaking sporting bodies from receiving a fair return for their expense and trouble in arranging sports which national and commercial television stations are anxious to telecast?
– I do not know whether I can deal with every phase of the rather lengthy question asked by the honorable member. Perhaps I should remind him that this matter was the subject of considerable debate when the Broadcasting and Television Bill was before the House early last year. I had several successful conferences with representatives of the sporting bodies and the television licensees in an effort to arrive at an acceptable decision. The Government made it plain that it did not desire to intrude into the private business of these various organizations but would much prefer that the determination of terms and conditions on which sporting events would be televised be a matter of private treaty between the interests concerned. That proposal was accepted and the practice has continued until the present time. Recently, some discussion arose over the televising of the Melbourne Cup. Certain preliminary steps were taken, and my information on Saturday last was to the effect that a reasonably satisfactory arrangement had been made. I understand the running of the cup will be broadcast and telecast to-night.
– Can the Prime Minister indicate the reason why Tasmania was not included in the extended itinerary of Her Majesty the Queen Mother? Will he make every effort to arrange for Her Majesty to make at least a brief visit to that delightful State?
– As the honorable member may well imagine, this is a matter on which I have had the benefit of some strong views expressed by my colleague, the Minister for Immigration. The visit of Her Majesty the Queen Mother is, of necessity, relatively brief and, as I indicated previously, it was not desired to make the visit an incessant series of engagements or to involve an avoidable amount of extensive travel. At the time when the visit was announced it was anticipated that it would not be possible, if those general rules were to be observed, to include more than three capital cities. As a result of recent negotiations, however, it has been possible to extend slightly the overall period which will be sufficient to enable a very brief visit to two other capital cities but not to three, which would have involved a still further extension of time.
On that matter we are not the masters; we must fit in with the arrangements of Her Majesty. The result is that one capital city will have to be omitted, and under those circumstances it is quite understandable that a sense of grievance is felt. I am sorry that that must be so. I have found Tasmania quite the most attractive State to visit, but at the same time it must be realized that it is not possible to extend the period further, and that we are grateful for the extension that has been already granted which enables two more capital cities to be included in the itinerary.
– I ask the Minister for Labour and Industry: Is it a fact that the number of men engaged in the production of coal in New South Wales has decreased by over 3,500 since early in 1955? Is it also a fact that the tonnage of underground coal produced in 1955 reached the record figure of 13,810,000 tons, and in 1956 the further record figure of 14,019,236 tons? Does the Minister agree that more coal is now being produced in New South Wales with considerably fewer men than were employed in the past, and that as a result of over-production hundreds of coal-miners are unemployed? What action is the Government taking to assist in providing alternative employment for those 3,500 coalminers, together with the 53 men at the Tongarra mine, on the south coast of New South Wales, who are under notice of dismissal because of lack of orders for coal from that mine?
– The honorable member’s question has touched on a number of points of detail, not all of which I can answer precisely at this moment. I shall try to get specific answers to them, but I think the honorable member will be aware that this Government, in conjunction with the New South Wales Government, and in co-operation with the miners’ federation, mine management, and the Joint Coal Board, has established a committee to deal with the kind of problem to which he has referred. My colleague, the Minister for National Development, has been actively engaging in the discussions of that committee. I shall see whether I can supply further material or detail on the points that have been put to me.
– I address a question to the Minister for the Navy. Is it a fact that, as a result of discussions with the federal congress of the Returned Servicemen’s League in Hobart recently, the Minister stated that there will be no naval establishment constructed on the western seaboard of this continent? If that is not a fact, will the Minister inform r.ie just what is the position?
- Mr. Speaker, I confess that I was somewhat surprised to learn that in the Western Australian press I was credited with having said that there would be no naval establishment in Western Australia. The press towards the end of last week published a statement to the effect that the federal congress of the R.S.L. in Tasmania had passed a resolution recommending to the Federal Government that a naval establishment should be provided in Western Australia, and consequently certain press representatives got in touch with me for a comment. I was very careful to say that I had no particular comment to make, but I did point out that this was a subject which had been given considerable attention over a number of years, and that in the House it had been raised from time to time, particularly by Western Australian members. I can remember that one of the first things put up by my friend from Canning, whom I have known for a long time, was just such a proposal. Therefore, it was not a new proposal. Having said that, I simply stated that at present there is not on the stocks any proposal for the establishment of a naval base in Western Australia. This is purely a statement of fact.
– I wish to address a question to the Prime Minister, in his capacity as Leader of the Government. Does the right honorable gentleman still subscribe to the view that was expressed by him in 1953 that an airport is an essential amenity for a city like Newcastle? If he does, will he say whether the Government has repudiated the promises made by at least three Ministers for Civil Aviation that an airport would be developed at Newcastle as a Commonwealth responsibility? Further, will the Prime Minister say whether he subscribes to the view that large cities such as Newcastle must accept the responsibility of developing airports from their own resources? If he does, will the right honorable gentleman say whether the Government has two policies in relation to the construction of airports - one embracing areas including Liberal and Australian Country party electorates, and the other embracing areas including Labour electorates? If the Government has only one policy on airport construction, will the Prime Minister explain why Commonwealth funds have been expended on airports at Tamworth, Coffs Harbour, Casino, Mackay and numerous other places, and why the amount of £100,000 has been provided in this year’s Estimates for an airport at Grafton, in view of the fact that the Government has told the people of Newcastle that if they want an airport they will have to provide it from their own resources? Finally, will the right honorable gentleman inform the House what special reasons exist for the spending of Commonwealth funds at Grafton when nothing is being provided for Newcastle?
– I will bring the remarks of the honorable member under the notice of the Minister for Civil Aviation.
– My question is directed to the Minister for Primary Industry. Is it a fact that wheat farmers in New South Wales have been asked by the Australian Wheat Board to retain their crop for seed and to sell to other wheat farmers any wheat surplus to their requirements? Is it a fact that this surplus of seed will be sold at a price arranged between the seller and the buyer? Is there any possibility of an increase in the price of seed wheat? Will the Government consider securing a quantity of seed wheat and making it available to approved buyers at reasonable prices to ensure a satisfactory wheat crop next season?
– I do not think that 1 can give precise answers to the four questions asked by the honorable member for Calare. Subsequent to a question asked by the honorable member for Lawson, I took up with the Australian Wheat Board the problem of the supply of seed wheat for this season. I am glad to be able to say that, due to the recent rains, the problem cannot now be regarded as a serious one. The Australian Wheat Board is arranging for a transfer of seed wheat between growers and for certain seed wheats to be delivered from the best silos available. That action is being taken by the Australian Wheat Board with the full knowledge that it is essential that high quality seed wheat be released to farmers for next season. As the honorable member for Lawson has been very interested in this problem, I state now that I drew the attention of the Australian Wheat Board to the fact that it must look at the problem of ensuring supplies of good uniform quality seed to individual growers. I assure the House that this problem is being carefully considered.
– I ask the Prime Minister whether his Government has yet conferred with the New South Wales Government regarding the sale by the Joint Coal Board of Newcom and Newstan collieries. As the Joint Coal Board is a Commonwealth-State authority, if an official approach has not been made to the New South Wales Government, I should like to know whether that indicates the unilateral abandonment by the Commonwealth Government of the agreement upon which the Joint Coal Board was based. Is the Prime Minister in a position to make a statement on the future of the Joint Coal Board?
– It is now a few weeks - I think three weeks - since I was in personal touch with the Premier on this matter, and I am not familiar with more recent developments. I will ascertain the position from my colleague, the Minister for National Development, and have a complete up-to-date statement prepared.
– Will the right honorable gentleman make the statement in the House?
– If that is possible.
– My question is directed to the Minister for Primary Industry. In the event of wheat from Western Australia from the current crop being required for New South Wales, will Western Australian wheat-growers continue to receive the 3d. a bushel advantage in price which they normally receive on export wheat? Would the importation of Canadian wheat to make up any deficiencies in New South Wales be more or less costly than supplying Western Australian wheat? Has any decision been reached on this matter?
– The whole problem of wheat is now before the Government for consideration. I can state that the question of the payment of the 3d. premium by the Australian Wheat Board to Western Australian growers is being considered by the Crown Law authorities, as it is not yet certain whether the Australian Wheat Board can in certain circumstances pay that amount. It is a legal problem concerning the wheat board and not an administrative problem. The price of Western Australian wheat in New South Wales would be about 17s. 2d. a bushel. The price of Canadian wheat - that is, Manitoba No. 3 wheat - would be between 17s. 7d. and 17s. 8d. a bushel.
– I ask the Minister for Labour and National Service whether it has been decided to appoint a member of the New South Wales Industrial Commission as a presidential member of the Commonwealth Conciliation and Arbitration Commission. Has this learned gentleman constituted, and is it proposed that he should continue to constitute, the Coal Industry Tribunal? Is it intended that he should also hold office, as each of the other presidential members still does, as a judge of the old Commonwealth Court of Conciliation and Arbitration, and if so, what will be his duties as such judge?
– It is proposed to make an appointment to the commission. I shall give a considered answer to the points raised by the honorable gentleman in his question.
– My question, which is addressed to the Minister for the Interior, refers to his recent statement regarding the establishment of a hydro-meteorological service. I understand that the aim of the service is, amongst other things, to prevent the flooding of rivers, and I also understand that the Minister believes that the service will be in operation on the eastern watershed within a few years. What are the prospects of establishing such a service to assist in controlling the waters of the western watershed, including the Macquarie River, which is subject to disastrous floods, such as those which occurred at Wellington, Dubbo, Narromine and other towns a few years ago?
– The aim of the service - and I hope there will not be any misunderstanding about it - is not to prevent flooding but to collect data on which flood mitigation, conservation and power generation works, and so on, can properly be designed. Understandably, in a big country like this, we cannot devote unlimited resources to such a task. It will be some years before the service really gathers sufficient data for it to be thoroughly useful but those rivers in respect of which works are already being planned, or are in course of construction, will be dealt with first.
– The Minister in charge of civil defence may remember that, some time ago, I asked in this House for information about the steps that had been taken to arrange civil defence corps in the various States. Since then, I understand that the State Premiers have attended a civil defence school at Macedon and have been seriously alarmed by the information that they gained there and the films that they saw, and that they have been impressed by the need to train the people of Australia in civil defence and to indicate to them what would be required in the event of a nuclear or atomic attack. I again ask the Minister whether steps have been taken to arrange civil defence corps in the various States. IF the corps have not been established, is it intended to establish them at an early date, so that the Australian people may know what is required of them in the event of attack?
– At this moment, the courses being arranged are centered entirely at Mount Macedon. They are indoctrination courses. -We are bringing to the school, from all over the country, the nominees of State governments, municipal councils, and so on. They will go back to their States and will be prepared to organize courses as the matters of policy are decided.
– My question is addressed to the Minister representing the Minister for Civil Aviation. In view of the heavy expenditure that is involved in installing, in areas of traffic density, additional radio aids for civil aviation, such as the new visual aural radio range and distancemeasuring equipment at Rosebud, in the Melbourne area, will the honorable gentleman explain the closing, except in cases of emergency, such as aircraft in distress, ot the non-directional beacon at Cunderdin, in Western Australia? As this beacon provides a vital electronic directional aid for aircraft approaching Perth from the eastern States, does not its closing lower the very high safety factor in Australian aviation by imposing additional navigational precautions on air crews?
– I shall have to refer that question, I think, to my colleague in another place, but perhaps I should say that I am certain that navigational aids would not be removed if the removal would prejudice the safety of aircraft. Speaking from memory, the non-directional beacon at Cunderdin is about 80 air miles from Perth. I should think that aircraft flying at reasonable heights for commercial flights would pick up the signals from the high powered visual aural radio range and distancemeasuring equipment at Perth airport without having to rely on the Cunderdin beacon. I assume that a change has been made in the equipment at Cunderdin - probably for purposes of economy - so that the beacon is no longer manned, but the circumstances and the details of the matter are not known to me. I will refer the question to my colleague and see that the honorable member receives an adequate reply.
– I address a question to the Minister representing the Minister for Civil Aviation. Will the Minister closely examine the present provisions for the maintenance and servicing of civil aircraft in order to ensure that all such aircraft remain airworthy? Will he also ensure that private airlines do not effect economies in aircraft maintenance that might prejudice the security of the travelling public?
– Although I must refer this question, too, to the Minister concerned, I can give the honorable member an unqualified assurance that nothing will be done which would prejudice the safety of aircraft. I point out, while I am on my feet, that navigational aids, beacons and the like, are not in any way the responsibility of airline companies. They are wholly controlled by the Department of Civil Aviation and are the responsibility of the examining officers and engineers of that department. The requirements for maintenance and servicing of aircraft are also matters for the Department of Civil Aviation.
– I address a question to the Minister representing the Minister for Civil Aviation, following on the question asked by the honorable member for Shortland about the policy of the Government with regard to certain country aerodromes. I ask the Minister: Did the predecessors in office of the Minister for Civil Aviation promise to take over the aerodrome at Tamworth after the people there had, (a) at their own expense resumed the site that the department indicated was satisfactory, (b) found the whole of the money necessary for establishing the aerodrome and bringing it up to a satisfactory standard, and (c) proved, by the frequency of air services, that the Government was justified in taking over and, if necessary, extending the aerodrome?
– The Prime Minister, in reply to the honorable member for Shortland, has already said that he will refer this question to the Minister concerned. The facts as stated by the honorable member for New England are, as I remember them, quite correct.
– Is the Prime Minister aware that during a television session entitled “ Meet the Press “ on Station TCN, Channel 9, Sydney, on Sunday evening, 27th October last, the honorable member for Mackellar stated that he believed one or two officers in the Department of External Affairs were Russian agents, and that he had reported his suspicions to the Commonwealth Government? Will the Prime Minister say whether in fact the honorable member did submit such a report to the Government and, if so, what action was taken in the matter?
– By a strange coincidence, I did see the television programme in question.
– Did you see the toothpaste smile?
– No, I can look at only one side at a time. I saw the programme referred to. The question put by the honorable member for East Sydney contains, I think, a distortion of what was said by the honorable member for Mackellar. He was being questioned about communism. He pointed out - very properly, I thought - that Communists did not always engage in spying, that Communist policy passed through various phases, and that at present the top-line directions favoured the dissemination of propaganda on a wide scale. He was then asked by one of the questioners whether he thought there were still spies in Australia. He said he had no doubt there were some. He was asked whether he believed there were any in the Department of External Affairs. He said, as I heard him, “ Well, I don’t know. There may be one or two. I don’t know.” All this was a statement by him of a possibility. I was quite amused, next morning, to find that it had been built up into a specific allegation made by him only stopping short of giving names.
– Can the Minister for Immigration indicate whether there has been any substantial increase in the number of new Australians now becoming naturalized? Is it expected that, in view of the citizenship campaign which was introduced by the Minister recently, the rate of naturalization will still further increase before the end of the current financial year?
– I am pleased to say that there has been an improvement in the rate of naturalization. I have not the precise figures in my mind, but in the year ended last June, the number was between 50,000 and 60,000, which was an increase . of about 25 per cent, on the figure for the preceding year. The improvement has continued up to date.
– I ask the PostmasterGeneral, as the Minister representing the Minister for Repatriation, whether he is aware that at the Repatriation General Hospital at Heidelberg in Victoria, fresh milk and eggs and good quality meat were supplied through the catering department up to October this year, but since the appointment of a new caterer in that month, skim milk, pulp eggs - of which twelve months’ supply has been purchased - and “ cracker “ beef and mutton are being used? If the Minister is not aware of these matters, will he bring them to the notice of the Minister for Repatriation so that immediate action can be taken to safeguard the health of many patients, including tuberculosis patients, which is being endangered by this change of food?
– Naturally, I am not aware of the details of the matter raised by the honorable member for Yarra regarding the administration of the Heidelberg Repatriation Hospital. However, as he has asked, I shall refer it to my colleague, the Minister for Repatriation, whose administration in matters of this kind is favorably known. I am certain he will go thoroughly into the matter and provide the honorable member with a reply.
– Will the Minister for the Interior endeavour to arrange a special session at the Civil Defence School at Mount Macedon for members of the Cabinet so that they may become aware of the necessity for carrying out the suggestion made a few minutes ago by the honorable member for Adelaide?
– I shall look into the prospect of doing what the honorable member suggests and advise him of the result.
– I draw the attention of the Postmaster-General to the fact that some two or three weeks ago he promised Western Australian members that he would give them a reply in regard to the erection of a new building in Perth for the Australian Broadcasting Commission. I have seen some reference in the press to the present position, but as far as I am aware no final reply has been given to those honorable members. I hope that when the reply does come to hand it will not indicate, as has been stated in the press, that the building cannot be gone on with until next year’s Estimates have been approved. Can something be done before then?
– This subject has been referred to in this chamber on several occasions in recent weeks. Recently, the Lord Mayor of Perth wrote to me personally asking for information on the matter. He also sent copies of his letter to a number of honorable members of this House and to a number of honorable senators, who passed their copies on to me. Last week, I sent a reply to the Lord Mayor of Perth in terms which I have already stated in this House in connexion with the matter. At the same time, I sent copies of that letter to those honorable members and honorable senators who had sent on to me copies of the letter sent to them by the Lord Mayor of Perth. Because the honorable member for Perth and the honorable member for Stirling had also asked questions on this subject, I have arranged for a copy of my letter to the Lord Mayor of Perth to be forwarded to them, so that all honorable members who have inquired will have all the information relating to the subject.
– Can the Minister for Immigration tell the House whether he has received any protests from members of the Opposition about the release and deportation by the New South Wales Government of a person convicted of murder?
– No, I have had no protests. As I said in the House some time ago, these are matters for determination by the Crown Law authorities in the various States. We come into such a matter only when a person is to be deported, and we do not waste any time in deporting that person when he is released.
– My question is addressed to the Prime Minister. Has the right honorable gentleman been apprised of the findings of a tribunal appointed by the United Kingdom Prime Minister, whose majority recommendation was that official tapping of telephones and interception of mails should continue in order to detect major crimes and to safeguard national security? Has he noted that the United Kingdom Prime Minister has accepted this recommendation? Does our Prime Minister agree with the tribunal’s view? In any case, will he reveal to the House how many letters have been intercepted and how many telephone conversations have been tapped with the approval of Commonwealth authorities in the last few years?
– In common with the honorable member, I read a small report about this in the cabled news in the press. I am awaiting with great interest the full report, which I am sure will be a very closely reasoned document.
– In addressing a question to the Minister for Air, I refer to the regrettable destruction by fire last week-end near Keith, in my electorate, of part of the historic plane of Sir Ross and Sir Keith Smith. Can the Minister state the cause of this fire? Has an estimate been made of the loss? What steps can be taken to repair the damage, or provide replacements?
– I am sorry to tell the honorable member that this very regrettable accident to the famous aircraft flown to Australia after the first world war by Sir Ross and Sir Keith Smith has resulted in very extensive damage to the aircraft. The honorable member asks rae how the fire began. That is not known. A court of inquiry has been set up by the Royal Australian Air Force to try to determine the cause. The aircraft was being conveyed by the R.A.A.F. in a convoy of four vehicles. There was a truck ahead, followed by two semi-trailers with a large truck bringing up the rear. The main planes, the propellors and one engine cowling were in the leading semi-trailer. Personnel in the two vehicles following it noticed that smoke was coming from the semi-trailer and had it stopped. Immediately the vehicle stopped, the main planes burst into flames. Very extensive damage was also done to one engine cowling and the propellors
I cannot say at present to what extent it will be possible to rebuild the parts of the aircraft which have been destroyed. That will depend to some degree on whether the maker’s plans are still in existence. I assure the honorable member, and all other honorable members interested in this aircraft - and there are many of them - that every effort will be made to reconstruct the damaged parts as far as possible. Fortunately, the fuselage, the engine, the wheels and one engine cowling are undamaged. We hope to be able to reconstruct the aircraft very much in its previous form.
– 1 ask the Minister for Immigration whether it is a fact that the Good Neighbour Council has expressed concern at the desperate plight of approximately 5,000 Hungarian refugees who are without employment and who are wander ing around the cities and countryside in search of work. Has the council approached the Government in connexion with this matter? If so, what action is proposed in respect of this problem? Will it again be dismissed as having no basis and will it be declared by the Government to be nothing more than Communist propaganda? If the latter is the case, will the Minister state when, in the opinion of the Government, the Good Neighbour Council came under Communist control?
– I am grateful to the honorable member for East Sydney for having raised this question, because it has been the subject of great distortion. Mrs. Watts, the New South Wales secretary of the Good Neighbour Council, I thought, corrected the erroneous impression that might have been conveyed by this statement. What the Good Neighbour Council said was that the coming to New South Wales of about 5,000 Hungarians had increased the work of the Good Neighbour Council. I cite last week’s figures from the Department of Labour and National Service when I say that 73 Hungarians are registered as unemployed in the whole of Australia. In all, 10,000 Hungarians have come to this country and, at the end of last week, there were 744 in the immigrant centres. During the week, another 21 came in and 217 moved out to employment. Of those remaining in the centres, 290 were workers but 175 of them have been in this country for less than four weeks.
– I should like to preface a question which I address to the Minister representing the Minister for Repatriation by saying that in the United States of America surveys were made of the incidence of cancer amongst ex-servicemen. The report made, as a result, has indicated that the incidence of cancer among exservicemen in the age group below 45 years is double the normal figure. Therefore, I ask the Minister if he will endeavour to obtain copies of that report. If a sufficient number of copies can be obtained, could the exservicemen’s committee of Government supporters be given one for its perusal? Further, could a similar survey be conducted in Australia?
– I shall be glad to pass on to the Minister for Repatriation the suggestion made by the honorable member for Lilley. I am sure that my colleague will be very interested in the report if he has not already seen it, although he probably has. I am sure that he will agree to pass on copies of the report to all those members and bodies interested in it.
– I remind the PostmasterGeneral that, in a speech which he made on 24th October, he said that if any difficulty was experienced in arranging a conference between television licensees and producers he would undertake to see that the difficulty was overcome. In view of the fact that it would be better to prevent a difficulty than to allow it to arise and then try to remove it, will the Minister arrange a conference between television licensees and television programme producers and employees with a view to reaching agreement for the use of minimum percentages of Australian programmes in, at least, drama and music?
– As I have indicated on a number of occasions recently, the encouragement of Australian talent in television programmes is constantly receiving my attention and the attention of the Australian Broadcasting Control Board. Only recently, I have had discussions with some of the licensees and have given consideration to the possibility of a conference between all the interested parties, including film producers. I will not say at the moment that I am prepared to have a conference. However, I shall not hesitate to call one if it proves to be necessary, as it may in the future after further discussions which I propose to have.
The following bills were returned from the Senate: -
Without amendment -
Appropriation (Works and Services) Bill 1957-58.
Without requests -
Appropriation Bill 1957-58.
Sir ARTHUR FADDEN (McPherson-
Treasurer) [4.17]. - I move -
That the bill be now read a second time.
In the course of my Budget speech, I announced several income tax proposals, including increases in allowances for dependants, widening the scope of deductions for gifts and relaxation of the depreciation provisions of the Assessment Act. This bill is presented to the House to give effect to those proposals.
In 1953, this Government increased the income tax deductions for the maintenance of a spouse from £104 to £130. A similar increase was applied where a daughter-housekeeper or a parent was maintained by a taxpayer. These deductions are being raised by £13, that is, from £130 to £143. Where the allowance for a housekeeper having the care of children under the age of sixteen years applies, the deduction will also be increased from £130 to £143.
Increases of £13 are also being made in the allowances for the first child under sixteen years, a student child under 21 years and an invalid relative maintained by the taxpayer. In the case of these dependants, the deductions are being raised from £78 to £91. Where a child under 16 years other than the first is maintained by the taxpayer, the increased allowance will be £65 instead of £52 as at present. The income tax dependants’ allowances are also being widenedby extending the present deduction for dependent parents to those taxpayers who maintain parents-in-law. Where a parent-in-law is wholly maintained by the taxpayer, the deduction allowable will be £143.
In conjunction with similar action being taken for gift duty and estate duty purposes, a provision is included in the bill to ensure that adopted children and other children towards whom a taxpayer has all the legal obligations of parenthood will be accorded the same treatment, so far as income tax is concerned, as the taxpayer’s own children. Most of the income tax concessional allowances already extend to such cases, but the allowance for insurance premiums and like payments is at present limited to payments made in respect of the taxpayer’s own children. The proposed provision will also make this allowance available in the cases concerned, up to the maximum deduction of £300 allowable for payments of this nature.
The adjustments I have mentioned will commence to apply in the current income year 1957-58.
It is proposed that the allowance for gifts of £1 and upwards to specified funds and institutions in Australia shall be extended to gifts to the following: -
The National Trust in each of the States of New South Wales, Victoria and South Australia.
Public libraries, museums and art galleries.
The Sydney Opera House Appeal Fund.
The Sidney Myer Music Bowl Trust.
The Industrial Design Council of Australia.
Deduction will be allowed for gifts made to these funds and institutions on and after 1st July, 1957.
Provision is made in the bill to exempt from tax and contribution income derived on and from 1st July, 1956, by residents of the Island of Nauru from sources within that island. An exemption of this nature has applied for many years to income derived by residents of the Territories of Papua, New Guinea and Norfolk Island from sources in those Territories.
Of far reaching importance are those provisions of the bill relating to the income tax allowances for depreciation on assets used in the production of assessable income. Honorable members will recall that these allowances were reviewed by the Commonwealth Committee on Rates of Depreciation, under the chairmanship of my colleague, the honorable member for Petrie (Mr. Hulme). Last year, certain of the recommendations made by the committee were adopted and it is now proposed that effect be given to several more of those recommendations.
One of the major recommendations of the committee related to the rates of depreciation to be applied in calculating the annual deductions allowable. These deduc tions may be calculated either under what is known as the diminishing value method, or, at the option of the taxpayer, under the prime cost method. Under the diminishing value method, the depreciation for each year is calculated on the written down value of the asset at the beginning of that year, that is, the original cost less depreciation already allowed. Thus, a lower deduction is allowable in each successive year and the cost of the asset is not entirely written off until it is disposed of or scrapped. Under the prime cost method, on the other hand, the depreciation for each year is calculated on the original cost of the asset, the effect being that the cost is written off by equal instalments over its estimated effective life.
At present, the same percentage rate of depreciation is applied under both the diminishing value and prime cost methods. The result is that, whilst the cost of an asset is wholly written off over the period of its effective life under the prime cost method, only about two-thirds is written off over the same period under the diminishing value method.
In order that the two methods may be brought into reasonable equality, the committee recommended that the rates of annual depreciation to be applied under the diminishing value method be increased by 50 per cent. and the bill contains a provision to give effect to this recommendation.
The increased rates will apply to assets on hand at 1st July, 1957, as well as to future purchases.
Concurrently with this increase in the rates of depreciation to be applied under the diminishing value method, taxpayers at present using the prime cost method will be afforded an opportunity to change to the diminishing value method, in regard either to the whole of their depreciable assets or to future purchases only. Taxpayers at present using the diminishing value method may change to the prime cost method for future purchases only, or may have the prime cost method applied to the whole of the plant at present being used as well as plant that may be acquired in the future.
A further aspect of the depreciation allowances which was examined by the committee was the system of balancing adjustments where a depreciable asset is disposed of, lost or destroyed. In such cases, where the consideration receivable exceeds the written down value of the asset, the excess, to an extent not greater than the depreciation allowed on the asset, is included as a balancing charge in the assessable income of the year in which the disposal, loss or destruction occurs. By this means, the total deduction allowed in respect of the asset over the period of its use are equated to the actual cost of the asset after taking into account any amount received on disposal, loss or destruction.
Because of the effect of the graduated rates of tax on individual incomes, this method of adjustment in one year of amounts previously allowed as deductions over a number of years tends to diminish the value of those deductions in many instances. For individuals and companies alike, the adjustment reduces the funds available for replacement of the asset at a time when they are most needed for that purpose.
In order to afford taxpayers some relief in such circumstances, the committee recommended that an alternative basis of adjustment of the balancing charge be provided. Broadly, the proposal was that the taxpayer should be given an option, in lieu of being assessed on the balancing charge, to set off an equivalent amount against the cost of the replacement asset or against the value of any other assets subject to depreciation. This principle was adopted last year in relation to insurance and other recoveries on the loss or destruction of depreciable assets and it is proposed in this bill to extend those provisions to amounts received in relation to disposals of assets by sale or otherwise.
A complementary provision is also included in the bill to meet cases in which the loss or disposal of depreciable assets results in the cessation of an individual taxpayer’s business. In such cases the assets of the business would no longer be available to set off the balancing charge. It is proposed that taxpayers in such a position should be afforded an opportunity to seek a rate of tax on the balancing charge and other income somewhat lower than the rate at which tax would otherwise be payable. This adjustment is being effected by the calculation of a notional income along the already established lines applying where lease premiums are received, or abnormal income is derived by an author or inventor.
The amendments proposed in relation to depreciation will apply in respect of the current income year 1957-58 and subsequent years. Honorable members will appreciate that a measure of this nature unavoidably contains very technical provisions. Mainly for this reason, I have arranged for the preparation of a memorandum explaining in detail each of the clauses of the bill. This memorandum will be circulated for the information of honorable members.
Debate (or. motion by Mr. Crean) adjourned.
la Committee of Ways and Means: Consideration resumed from 23rd October (vide page 1638), on motion by Sir Arthur Fadden - 1. - (1) That, in this Resolution - . . . (vide page 1635).
– This resolution is submitted to the committee for the purpose of declaring the rates at which income tax and social services contribution will be payable for the current financial year. So far as individual taxpayers are concerned, the rates applying for the last financial year are not being altered. It is pertinent to observe, however, that reductions are being made in the weight of taxation on those responsible for the maintenance of families. This tax relief is being effected by means of increased allowances for dependants provided by the amending assessment bill.
The resolution proposes an increase in the exemption limits of the age allowance which will cause that allowance to be consistent with the total of the increased age pension and the maximum permissible income of age pensioners. For this income year, 1957-58, a single man or woman qualified by age may receive a net income of £410 and be free from tax. A married couple, both qualified by age, may receive a combined net income of £819 without tax or contribution becoming payable.
As in the past, provision is also being made to grant some relief for those of pensionable age whose net incomes are in the range that might be described as marginal.
Where the net income of a single aged person is between £410 and £460 the tax payable shall not be greater than nine-twentieths of the excess of the net income over £410. In the case of a person contributing to the maintenance of his or her spouse, the tax payable shall not be greater than ninetwentieths of the excess over £819 of their combined net incomes, subject to an upper limit of a net income of £1,106. The revenue cost of extending these exemption limits is estimated at £450,000 for a full year and £250,000 in 1957-58.
As announced in my Budget speech, the rates at which income tax and social services contribution will be payable by companies for the current financial year 1957-58 are being reduced by 6d. in the £1. The proposed rates at which tax will be payable by resident public companies will be 6s. 6d. in the £1 on the first £5,000 of taxable income and 7s. 6d. in the £1 on the balance. The proposed rates at which tax will be payable by private companies will be 4s. 6d. in the £1 on the first £5,000 of taxable income and 6s. 6d. in the £1 on the balance. Similarly, the various rates at which tax will be payable by non-profit companies, non-resident public companies, co-operative companies and life assurance companies are also to be reduced by 6d. in the £1.
For friendly society dispensaries a flat rate of tax of 5s. 6d. in the £1 is proposed. As I explained in my Budget speech, this reduced rate is to be applied, as it is recognized that friendly society dispensaries frequently conduct their businesses through a number of branches which do not separately derive an income in excess of £5,000.
Non-profit companies including friendly society dispensaries are not liable to tax unless the taxable income exceeds £104. Provision is also being made, as in the past, to ensure that the tax does not fall with undue weight on companies deriving incomes moderately in excess of £104. Accordingly, the tax on incomes between £104 and £231 is being limited to one-half of the excess of the taxable income over £104.
The rate of 10s. in the £1 at which tax is payable on insufficient distributions of income of private companies is not being varied. This rate has remained constant since its introduction for the financial year 1952-53. In all, the cost of the proposed reductions in company rates is estimated at £14,500,000 in a full year and £13,000,000 in 1957-58.
I commend this resolution to the committee.
– I move -
That the bill be now read a second time.
This bill is introduced to give effect to those estate duty proposals which were announced in the course of my Budget speech. One provision - clause 4- -has been included in the bill mainly to ensure that estate passing to the adopted child, step-child or ex-nuptial child of a deceased person will not be subjected to heavier duty than estate passing to the child of the marriage of the deceased. This provision is consistent in principle with an income tax amendment which I have already explained.
By clause 5 of the bill it is proposed to extend the exemption from estate duty to bequests, devises and gifts to public libraries and hospitals which are not carried on for the profit of individuals. It is also proposed to extend the exemption to bequests, devises and gifts to the National Trust which has been established in each of the States of New South Wales, Victoria and South Australia, and to the Australian Council for Educational Research.
Another provision - clause 6 - of the bill is designed to give effect to the Government’s proposal for quick succession relief. It has come to be recognized in several countries and in most of the Australian States that some relief is justified in those cases where duty is paid in an estate and within the space of a year or a few years the death of a beneficiary causes duty again to be payable.
It is understandable that in a matter such as this the Government has examined the systems of quick succession relief granted overseas and by the Australian States. I believe that the Government, having done so, has evolved a system possessing the best features of other systems whilst avoiding most, if not all, of the complexities of those systems. In broad outline, the relief which is proposed will be provided where the dutiable value of an estate becomes subject to duty, wholly or in part, on two occasions within a period of five years.
It has been necessary, of course, to set out in precise terms the method of arriving at the value of an estate which has borne duty twice and the rate at which duty has been paid on each occasion. The lower of these two rates when applied to the value subject to duty twice will represent the basis for relief from duty. Having calculated an amount on that basis, the relief proposed is to be 50 per cent, of the amount if the two deaths occur within one year. That percentage is to be reduced as the years in the interval between the two deaths increase. If the second death occurs in the second year after the first, the percentage of relief will be 40 per cent, and so on until the percentage relief is 10 per cent, if the second death occurs in the fifth year after the first death.
Notes explaining in greater detail the technical features of the amendments proposed in this bill will be circulated for the information of honorable members. AL of the amendments effected will apply to the estates of persons dying on or after the date on which the bill receives the Royal assent. I commend the bill to honorable members.
Debate (on motion by Mr. Crean) adjourned.
– I move -
That the bill be now read a second time.
This bill has been introduced for the prime purpose of extending to gifts to an adopted child, step-child, or ex-nuptial child, of a donor the provisions of the gift duty law at present applying to gifts to children of the marriage of the donor. This proposal is in consonance with the income tax and estate duty proposals already outlined.
I would explain, however, that, in practical effect, the main feature of the bill will apply where premiums are paid by a person on a policy of assurance effected by him on his life for the benefit of his wife or any of his children. Payments of these premiums, not exceeding £100 annually, are exempt from gift duty. By this bill, it is proposed that the exemption will apply where the policy of life assurance is taken out for the benefit of an adopted child, step-child, or ex-nuptial child, of the person on whose life the policy is effected.
The other provisions in this bill are drafting amendments designed to facilitate reference to the Gift Duty Assessment Act. I commend the measure to honorable members.
Debate (on motion by Mr. Crean) adjourned.
Debate resumed from 3rd September (Vide page 253), oh motion by Sir Arthur Fadden -
That the bill be now read a second time.
.- Over the last few years, we have heard from interested quarters a great deal about the pay-roll tax. There has been a very determined effort to force the Government to abandon the tax altogether, and it is just as well that the facts in relation to this tax should be put on record once more, first, in order that the public generally will know the purpose for which it is raised, and how it came into existence, and secondly, in order that the people will know the amount of revenue involved, and the effect upon the Consolidated Revenue if the payroll tax were abolished.
I do not often agree with a body called the Institute of Public Affairs, in Victoria, but I agree with it in this matter. In its October-December issue of last year, the institute put the facts about the pay-roll tax very fairly, and very squarely, before the readers of its journal. I should like to read from it the following passage: -
The origin of the payroll tax dates back to 1941-42 when it was instituted by the Menzies administration as a means of financing child endowment. The tax was initially levied at the rate of 2i% on all payrolls over £20 a week ot £1,040 a year. Despite substantial increases in wages, the exemption limit remained unchanged until 1st October, 1953, when it was raised to £4,160. This had the effect of removing liability for payroll tax from 50,000 employers, out of a total number of 90,000 previously paying the lax.
That was certainly a considerable relief. The article continues -
The exemption limit was further raised to £6,240 in September, 1954, relieving an additional 10,500 employers of the tax. The rate o£ tax has continued at 2i% of the monthly payroll.
This bill will relieve approximately 16,000 more employers of liability to pay the tax, and will allow a greater margin of exemption to all employers who remain liable to pay it. lt is proposed to raise the statutory exemption from its present level of £6,240 per annum to £10,400 per annum. As the Treasurer (Sir Arthur Fadden) said, in his second-reading speech -
So, since the introduction of the pay-roll tax for the purpose of financing child endowment, the principal act has been amended very liberally, and only those persons or companies in receipt of the biggest incomes are now liable to pay the tax. Another comment made in the journal of the Institute of Public Affairs, in Victoria, also, is worthy of comment. It is -
One of the peculiar features of the tax is that it is payable by practically all government authorities as well as by private employers. The only government instrumentalities which are not liable for payment are Commonwealth departments and authorities such as the Commonwealth Railways and the Australian Broadcasting Commission whose funds are drawn from Consolidated Revenue.
When the amending measure of 1954 was being considered in committee, I moved an amendment to add to clause 4 of that bill a paragraph in the following terms to exempt municipalities from paying this tax: - (bb) by a municipal or other local governing body, or an authority established for the purpose of carrying out all or any of the functions ordinarily carried out by such a body, otherwise than in the conduct of an enterprise, which, in the opinion of the Commissioner, is a trading enterprise:
What we sought to do in 1954, Mr. Acting Deputy Speaker, was to relieve municipalities of the burden of paying the pay-roll tax in respect of their non-revenue-earning activities. We did not suggest at that time that bodies such as the State Electricity Commission, or the Gas and Fuel Corporation, in Victoria, or trading bodies operating under municipal auspices or ownership, or under semi-governmental ownership, should be exempted from the tax. The Government has seen fit to relieve these bodies and all municipalities to the extent that the exemption applies generally, and some municipalities with a pay-roll of several hundred pounds a week will be exempt from the tax. But there are many big municipalities, and the tendency throughout Australia is now to amalgamate local authority areas, so that we have fewer, and larger, municipalities. They will continue to pay the pay-roll tax unless the Government, now or at some future time, decides to amend the legislation to give them relief.
I wish to cite a further brief paragraph from the journal of the Institute of Public Affairs, in Victoria, as follows -
The payroll tax is a prolific source of government revenue. In 1955-56 it produced £45.5 million; the Budget estimate for 1956-57 is £48.25 million. Collections from the tax have rapidly increased since the year of its introduction, when it realised only £9 million, . . .
If that were the end of the passage, one would say that this body was trying to mislead the public and misrepresent the facts. But, to its credit, it concluded the last sentence of the paragraph with these words - but in no year have they been sufficient to finance the full cost of child endowment, which in 1955-56 amounted to over £60 million.
With the concurrence of honorable members, I incorporate in “ Hansard “ the following figures showing child endowment payments and pay-roll tax collections in recent years: -
Those figures illustrate the point very well. It will be noted that in 1953-54, when payroll tax collections amounted to £40,383,789, child endowment payments totalled £50,760,799. Although pay-roll tax remissions have been made, the cost of child endowment has continued to increase.
The estimated amount of pay-roll tax collections for this financial year is £50,500,000 and the estimated total for child endowment payments is £59,600,000.
This form of taxation was intended to finance child endowment. I can well recall when in 1941, to the astonishment of the then Parliament, the present Minister for Labour and National Service (Mr. Harold Holt), in the same role, introduced a bill to provide for child endowment. The story behind it, as far as 1 have been able to check it, was that at that time the Commonwealth Court of Conciliation and Arbitration, under the chairmanship of Chief Judge Beeby, proposed to grant an increase in the basic wage. According to rumour, the increase would be about 6s. a week. It was represented to the Government that the payment of child endowment would be fairer to the family man and cheaper to industry if the endowment to be established was based on the principle of a payment of 5s. for each child other than the first child in each family and the whole burden was to be borne by industry. As the figures show, the burden has never been borne by industry in its entirety. Those people who want to get rid of the pay-roll tax completely are acting in a way which will not benefit society. All they have in mind is relief from a £40,000,000 tax burden on themselves and others who are similarly placed.
A case can be made out about the inflationary effects of the pay-roll tax. We are told that the pay-roll tax differs from the sales tax in that the sales tax is imposed on the sale of an article at the retail level whereas the pay-roll tax is imposed at the manufacturer’s level. The Tariff Board, in its report to the Parliament in 1956, went so far as to state -
It may be true to say that every pound of income received by the Government in pay-roll tax means an increase in price of consumer goods of at least two pounds.
When the Tariff Board makes a claim of that kind, the Government is under an obligation to have the position examined and, on the facts as it finds them, to decide to continue the pay-roll tax even if it is inflationary or to discontinue it in favour of some other tax.
I do not believe that the employers who to-day are paying £40,000,000 in pay-roll tax can legitimately claim an exemption from that burden. If they want to get rid of the pay-roll tax because of its allegedly inflationary tendencies, they ought to be prepared to accept a transfer of the burden. If they do not want to pay £40,000,000 in pay-roll tax, they ought to be prepared to pay that sum by way of increased company tax and increased income tax. We are told that this country is one of the most heavily taxed countries in the world. But big incomes in Australia, when these are compared with big incomes in the United States of America and Great Britain, are lightly taxed.
– And when compared with those of New Zealand.
– And when compared with those of New Zealand, too. I thank the Treasurer for his observation. In Australia, the rate of tax on taxable incomes of £1 6,000 or more is approximately 13s. 4d. in the £1. In the United States, the rate of tax on taxable incomes of 400,000 dollars, or maybe, even as low as 200,000 dollars, is 92 cents on every 100 cents, which is equivalent to about 18s. 6d. in the £A1. In Great Britain, the rate of tax on the bigger incomes is 18s. 6d. in the £1. I put it to those wealthy interests that are continually campaigning for the abolition of the pay-roll tax that, if their contention that it is inflationary is true, and if, as the Tariff Board said, every £1 of tax imposed means an increase of at least £2 in the price of consumer goods, they must bear the burden in some other way.
Child endowment is not now the benefit that it once was. If child endowment were increased to meet the fall in the purchasing power of money, all the mothers of Australia would be receiving at least £1 instead of 10s. for each child after the first, and, if we continued to pay endowment for the first child, we would have to raise the payment for that child from 5s. to 10s. That would increase the overall burden of child endowment from its present level of £50,000,000 to approximately £100,000,000. And if the principle that the employers ought to bear that burden rather than suffer a rise in the basic wage were still valid, their tax burden would be very heavy indeed.
Child endowment should not become a dead-letter in our social security legislation. The Government should examine ways and means of increasing the payment, even if it did not increase the pay-roll tax to meet the full burden. I should prefer those in our society who are doing so well to-day to say to the Government, “ If you will meet us in one regard, we will agree readily to any reasonable readjustment that you might decide upon”.
The Institute of Public Affairs, in the article I have already quoted, faced up to the argument “ that the pay-roll tax adds substantially more to the cost structure and to the prices consumers have to pay than would be implied by the actual amount of tax itself “. I have read the article several times, and I find that the institute had no difficulty in proving to its satisfaction that what the Tariff Board had reported was in accordance with fact. While employers can make a case on the ground of the real or alleged inflationary effects of the pay-roll tax, they will get support for a lot of the arguments that they bring forward.
It is a pity that we live in a very greedy age. We talk about this great country and what has to be done to make it greater still. We pay tribute to men who sacrificed their lives in two world wars; but in respect of paying taxes to maintain our society, I suppose the age in which we live is greedier or less co-operative than any previous age. That statement applies particularly to those persons who are making very big fortunes, as company reports indicate, not merely from month to month or from week to week, but from day to day. The returns which most companies are able to present to their shareholders show rises in profits reaching fantastic proportion - very much bigger than was the rule five or six years ago.
The difficulties of government are great at all times, and during periods of inflation they are greater still. When those who arc doing very well out of the present order of society try to pressurize a government - even one of their own choosing - to give them something which they are not justly entitled to receive, and all the time ignore the claims of the more needy sections of the community, we have reached the stage in our development where there ought to bc some re-thinking of just what we are trying to do with this country, and of how far we are likely to succeed when greed becomes the dominant motive in all that is being done, and the comfort of the men, women and children of Australia is to be of little consequence in the thinking of a lot of very wealthy persons.
There can be no better investment for a nation, from the biological point of view, than the encouragement of family life. There is nothing greater that a government can do than to help mothers to raise their children in these difficult times; nothing better for the nation than the encouragement of people to have families, and I am sure that although the birth-rate is in a very healthy state, comparatively, and is nearly as high as it was in the 1920’s, it is still retarded because of the great problems that face young people who are marrying and setting up houses in which to maintain the children that will be born to them later. In committee we shall move an appropriate amendment such as I have outlined, but we do not propose to vote against the second reading of the bill.
– First, may I commend the honorable member for Melbourne (Mr. Calwell) for his heroic effort in making a debate in reply to the secondreading speech of the Treasurer (Sir Arthur Fadden) on this bill. I think it is not unfair to say that he does not disagree with the pay-roll tax, but that he argues that it is up to those who want an alternative form of tax to show not only the new form of tax that should be imposed, but also that the new tax would be more favorable in its incidence on the community. That is what he said, in effect, and I can but commend him for that attitude of mind. I think, also, it is true to say that besides the main point the honorable gentleman did suggest that semi-government and local government authorities might be relieved of the payment of the tax. Thirdly, he raised the question of the inflationary impact of the tax. It seems right and proper, on an occasion like this, particularly after the rebuke the honorable gentleman gave me when the gold tax legislation was before the House, that I should give a detailed reply to the questions asked and the problems mentioned by him. May I, in doing so, go back, first of all, a little into the history of this tax?
Pay-roll tax was imposed as a special tax in order to provide funds to supplement the wages of those who had family responsibilities, and whilst it is true to say that the word “ need “ was used, and therefore that it was a tax imposed on individuals and on companies in order that the needs of the family sector of the community could be met, I venture to say that a more precise use of words would have been that it was a supplement to wages to cover the responsibilities of the family man and woman and to give them an opportunity to maintain their families on a better standard of living. It put it that that was the basis on which the tax was introduced. That basis still exists, and therefore I cannot see any logical or real necessity for the repeal of the payroll tax, based on the original conception of helping the family. I know it has been argued that because the method of assessing the basic wage has changed from one based on the needs of the family group to the maximum that industry can afford to pay, we should change the method of taxing foi the purpose of the payment of child endowment. I cannot completely agree with that argument. I admit it has some force, but when it is considered in conjunction with other matters, I venture to offer the suggestion that we cannot, at the present moment, contemplate repeal of the pay-roll tax.
The second question asked by the honorable gentleman was whether the Government should repeal the tax insofar as it relates to local government authorities. The honorable gentleman must know that this has already been considered by the Commonwealth Committee on Taxation, and that that committee, in its report of 22nd July, 1953, to the Treasurer, said -
Although the committee is of the opinion that a strong case exists for exempting certain local governing bodies from pay-roll tax, it is unable to define the extent of any such exemption, because it feels that other considerations could not be excluded.
The report then goes on to mention what those other considerations are. The committee that dealt with this matter could not make a precise finding, and suggested that it was a problem for the Government itself. There is a second important administrative detail that has to be considered. The payroll tax is paid by State government instrumentalities, by local government bodies and by both Federal and State semi-government instrumentalities. Pay-roll tax is paid by those authorities, but when tax reimbursements are made by the Commonwealth to the States allowance is made for the amounts of pay-roll tax paid. In effect, therefore, those authorities are reimbursed for their payment of pay-roll tax. If the provisions of the legislation in so far as they relate to the authorities I have mentioned were repealed this year it would mean that there would be an overpayment to the State governments in tax reimbursements and the State governments would have a surplus of funds, at least for this year. The excess could not be recovered without great administrative difficulty. The Commonwealth Government, therefore, has decided in its wisdom not to ask the Parliament to repeal the provisions of the act as they relate to State governments and State government instrumentalities.
The honorable member for Melbourne also mentioned the fact that many companies argue that pay-roll tax is inflationary and, therefore, being a cost tax, should be repealed and replaced by some other form of tax. I can agree with the argument of the honorable gentleman that those who want the tax repealed should tell us just how it can be done. I hesitate to think that any government would like to impose increased sales tax to yield the equivalent of the £51,000,000 that would be lost in the first year as a result of the repeal of the pay-roll tax legislation. I venture to suggest that even the honorable gentleman himself would have a great deal of doubt, if he happened to be in government, about imposing a degree of sales tax that would bring in an amount to replace the amount lost by the repeal of the legislation.
– I did not suggest a sales tax.
– I know you did not. I am saying that if the advocates of the repeal of pay-roll tax suggest that it should be replaced by sales tax, you and 1 would have great difficulty in agreeing with them, and so would the public.
Now I turn to the impact of this tax in terms of its incidence o:i the community, and what it is likely to involve in terms of inflation. I know that it is suggested by some people that the tax means an increaseof something like 4 per cent, it! the sale price of goods charged to the consumers. Others, particularly the Institute of Public Affairs, argue, on the basis of the statement of the Tariff Board, that each fi of tax may cause an increase of £2 in the final price of a commodity. I venture to say that both statements are an exaggeration. I do so for these reasons: First, it is impossible to ascertain the incidence of this tax. In the case of some governmental authorities, professional men and financial institutions, only the tax itself is passed on, not the cumulative effect of the tax as happens with some industrial concerns. Again, in the case of some industrial concerns - and now I hope that I am adequately crystallizing what has been said so frequently by my colleague, the Treasurer - one cannot tell, from one industry to another, and frequently as between factories within the same industry, just how a reduction in pay-roll tax would be passed on so as to affect profits, investment or even prices. I could argue this matter in detail. As a generalization I think it can be stated clearly and unequivocally that one cannot trace the incidence of pay-roll tax. That being so, if it were removed one could not find out accurately the ultimate effect as regards the reduction of profits, investment or prices.
As to the inflationary effect of the tax, many able men have applied their minds to this problem. Several of the most talented have stated that there is good reason to think that the tax may be said to cause an average increase of 1.68 per cent, in the cost of goods. One finds equally able, perhaps from a taxation point of view, more technically qualified men than are on the Tariff Board - men who have given a lifetime to the study of this problem - assessing the increase in the cost of goods as, not 4 per cent, or £2 for every £1 of tax levied, but something substantially less, on an average, than 2 per cent.
I finish that part of my argument which relates to inflation by saying, first, that one cannot trace the incidence of, and therefore one cannot actually find out the effect of the remission or abolition of pay-roll tax. Secondly, as to the inflationary impact of the tax, I think - and I am supported by responsible authority in this view - that its effects have been vastly exaggerated, and that the saving in costs that would result from the abolition of the tax have similarly been exaggerated. 1 have been asked on several occasions whether the extent to which the tax increases costs of Australian primary products on to the exporter can be measured. It has been estimated in some quarters that in a total export trade of £995,000,000 in 1956-57, the pay-roll tax content would amount to something of the order of £2,000,000. It is an extremely difficult problem to deal with - one in which there cannot be, by the very nature of things, any real precision. However, one can say that the impact of the tax on the economy, in terms of inflation, and in terms of boosting export prices, has been exaggerated.
I have dealt with the main arguments of the honorable member for Melbourne, who spoke on behalf of the Opposition. What does the Government think about this problem? It thinks, of course, that consistent with the need to provide funds from taxation for the national development programme, and to provide funds for State works programmes, and also our needs in connexion with the conversion of Commonwealth loans, there should be reduction of taxation as, and when, this is possible. The consequences of that philosophy is seen in the Budget. Company tax has been reduced by 6d. in the £1, at a cost of about £14,500,000 in a full year. Relief has been given by way of depreciation allowances, both to give partial effect to recommendations in the Hulme committee’s report, and to cover certain other sections of that report. I have not the exact figures before me but the relief given has been very substantial and reflects the approach of the Government to this matter of taxation.
I repeat, the Government looks at taxes in this way: It first makes up its mind what amount of tax concessions can be given, and then endeavours to reduce taxes in such a way as to bring maximum benefit to the companies, and to the community generally. On this occasion the Government decided that it would reduce company tax by 6d. in the £1, and suffer a loss in revenue of £14,500,000 in a full year. Secondly, it gave the depreciation allowances which I have mentioned. These are to cost £26,400,000 in one full year. There is proof that the Government wants to help companies by way of tax reductions and concessions as and when it can and in such a way as in its view will bring the greatest benefit to the companies.
Now I should like to turn to certain political arguments on this question. I have the feeling - and it is supported by many of my colleagues - that if the Federal Government did get out of the pay-roll tax field, several of the State governments would promptly enter it. Therefore, those who now clamour for a reduction of the pay-roll tax would find that, first, there had been a reduction by the Commonwealth but, on the other hand, an imposition to an equal or greater extent by some of the State Governments at least. In the result, the companies seeking relief would probably derive little benefit. They might even be worse off. For example, the Commonwealth vacated the land tax field. Within a year the New South Wales Government imposed a land tax that some people believe to be much heavier and more harmful in its incidence than the Commonwealth tax which was abolished. This is one of the possibilities that must be considered. Personally, I would like to see taxes reduced just as quickly as the Government can reduce them, but 1 venture to say that when we are looking at this general problem of taxes we must ask ourselves where the maximum contribution can be made.
During the preparation of the Budget a decision was made as to what tax concessions could be granted. We wanted to reduce taxes. That was the principle which determined the Government’s actions. The Government decided that it would relieve many pay-roll taxpayers from the payment of the tax. The Treasurer said during his speech that something like 1 6,000 employers would be relieved from the liability to pay the tax, and that all companies paying it would have a greater margin of exemption than previously. The exemption, which has been raised from £6,240 per annum to £10,400 per annum, applies to all companies - not only the 16,000 who are to be exempted entirely.
I should like to finish on a note similar to that introduced by the honorable member for Melbourne who, as I have said, argued his case quite convincingly and fairly. If it is argued that the tax should be abolished and that we should find £51,000,000 in the first year, and something like £37,000,000 in subsequent years with which to replace it, it is up to those who so argue to answer two questions. Firstly, what kind of a tax would they impose - sales tax or personal tax? Secondly, on what class of people and on what class of companies would they impose it? They would have to prove that the tax they suggested would have a less onerous effect on the community and that its incidence would be less severe than the present pay-roll tax. I venture to say that it would be extremely difficult to prove these propositions. I have yet to be convinced that the alternatives are both practicable and realistic.
I therefore think that the approach taken by the Commonwealth Government in this year’s Budget was correct. The Government looked at company taxation, which affects all companies, and decided that companies should be permitted to do what they wished with the additional money amounting to £14,500,000 left at their disposal. By increasing depreciation allowances, it gave an incentive to increased investment in capital equipment. I think that was the proper way to approach the problem and I therefore unhesitatingly join with my colleague the Treasurer in commending the bill to the House.
– The Minister for Primary Industry (Mr. McMahon) has done his best to justify this rather peculiar tax, the pay-roll tax. As in the case of a number of other taxes that have been introduced from time to time, the original purpose of this tax has been entirely lost sight of. The Deputy Leader of the Opposition (Mr. Calwell) reminded us that the pay-roll tax was imposed originally to provide a means of financing child endowment but, as he pointed out, although the annual revenue from this tax has risen, as also has the expenditure on child endowment, in no one year has there been any kind of equation between payroll tax collections and disbursements for child endowment.
I was rather astonished when the Minister said that it was extremely difficult to find out whom this tax really hit. I suggest it would be quite simple to ascertain where the first impact of the tax occurs. There is some interesting information on that matter in the statistics published in the annual reports of the Commissioner of Taxation. The first point to be noted is that firms which pay out less than £200 a week in wages - which means roughly, on average wages, firms employing a dozen or fewer employees - will in future be exempted from the pay-roll tax. As the Treasurer <Sir Arthur Fadden) said, that means that there will be 16,000 fewer undertakings paying pay-roll tax next year. He said that there will be a considerable reduction in the number of taxpayers for this purpose. That is perfectly true, but that argument ignores the fact that the pay-roll tax field will not be significantly curtailed, because the major portion of the revenue comes from firms or organizations, sometimes government undertakings, with pay-rolls much in excess of £200 a week. They will derive very little benefit from this concession.
The last available figures are those contained in the thirty-fifth report of the Commissioner of Taxation. They disclose that for the year 1954-55, 37,306 firms were liable to pay pay-roll tax. The salaries and wages paid by those 37,306 firms aggregated £1,857,000,000, which is a very significant part of the total wages bill of the community. The position is shown in greater detail in the statistical summary at the end of the report. The Commissioner shows that the 37,306 firms paying the tax employed an aggregate of 2,229,000 people, or more than 80 per cent, of the total number of people employed in this country, excluding those engaged in rural activities. The figures demonstrate, of course, what we know from other indications - ‘that in this community there has been a great aggregation of business units. Despite glib talk about small businesses and the spirit of free enterprise, the significant economic unit in the field of what is called private enterprise to-day is not the small undertaking, but the large undertaking, employing in some cases hundreds or thousands of people.
The break-down of the categories of companies paying pay-roll tax shows that the manufacturing companies comprise the largest and most important group. The total amount of wages paid in 1954-55 by those in the manufacturing group who were subject to pay-roll tax was £764,000,000. In view of these figures, I join issue with the Minister when he says that it is difficult to work out the incidence of this tax. It is quite simple to calculate that manufacturing firms with an aggregate wages bill of £764,000,000, paying pay-roll tax at the rate of 6d. in the £1 - one-fortieth of the wages bill - have been paying in the region of £19,000,000 a year in pay-roll tax. Nobody can gainsay that that £19,000,000 has been passed on to the public in the form of additional charges for goods and services.
There is another category, “Public authorities not elsewhere included “. Some public authorities are listed under “ Transport and Communications “ and other headings. Those excluded from those categories paid, in 1954-55, wages agggregating £212,000,000. Dividing that sum by 40, we find that they paid £5,5000,000 in payroll tax during that year. The Minister for Primary Industry draws comfort from the fact that insofar as these undertakings are State undertakings, they are catered for by tax reimbursements grants. What sort of a crazy financial position has this country reached when the Commonwealth makes grants to the State governments and State undertakings and then rakes back that money to the extent of £5,500,000 a year by means of another tax, adopting the attitude .that everything comes out in the wash? That, to my mind, is a stupid and irresponsible approach by any government.
The Minister’s thesis is that it is not possible to gauge accurately the incidence of this tax at the present time. I suggest that, in the future, it would not be a very difficult task for the Government - when this amendment comes into force there will be approximately only 20,000 separate undertakings subject to pay-roll tax - to go through the whole of the 20,000 assessments, not necessarily in detail, to find out what kinds of goods and services they cover, and to say, so far as manufacturing is concerned, what part falls on import’s and what part falls on exports. Similarly with regard to local government undertakings, in about 50 separate categories the pay-roll tax could be estimated without very much difficulty. That is not necessarily the final incidence of this matter but at least it is the beginning; and the Government would then be in a position to face up to the situation postulated by the honorable member for Melbourne when he said, in effect, “ We are not so irresponsible as to suggest that if we forgo £51,000,000 in one direction we do not have to make it up in another “. He went on to point out that a certain amount would be recouped in increased income tax collections because the pay-roll tax that had been formerly allowed as a deduction in computing profit would no longer be deducted. The profit then would be so much higher. The honorable member for Melbourne estimated that about one-third would be recouped in that way. Whether that is an accurate assessment, I do not know; but at least it would reduce the initial impact from £51,000,000 to a very much lower figure.
However, even that ought not to baulk any responsible government. If a tax is bad - and it seems difficult to demonstrate how this, in any sense, is a good tax - a government ought to remove it and institute some other method of collecting the lost revenue. I suggest there is need to recast the entire tax structure in Australia, not only the pay-roll tax but also land tax which at least has some social use in the hands of the States as it can be used to bring about a better distribution of the natural resources of this country. But nobody could argue a social ground in respect of pay-roll tax. If that is the case, it is time this Government which retreated from the land tax field also retreated from this economic backwater, the pay-roll tax, and quite a number of other existing taxes. We on this side of the House have asserted more than once that, assuming there must be some aggregate total collection, the tax structure to-day provides for too much indirect taxation which bears most harshly upon people according to their consumption of certain articles, but for too little emphasis on direct taxation according to the capacity of people to pay after making allowance for family commitments and the like. In some bills introduced earlier to-day, the Treasurer indicated that the Government is now adjusting the amounts allowable for dependants. It may have to go further and raise the statutory exemption upon which no tax is payable, increase the amounts allowed for wife, children, &c, and then perhaps impose a higher tax on the residue. Those deductions would at least do justice to those people who need them most. That is not the position with our tax structure to-day where there is still too high a proportion of indirect taxation bearing on the people who can least afford it and not enough impact upon income-earners who are in a position to pay.
The honorable member for Melbourne said that in America the maximum tax is 18s. 6d. in the £1 Australian, whereas in Australia it is in the region of 13s. 6d. or 14s. in the £1. That still leaves quite a leeway on high incomes in Australia. I believe, too, there is a case for a better graduated company tax. I cannot see any logic in taxing a company that makes a profit of £ 1,000,000 a year, and extracts a greater amount from the social framework of the community, at the same flat rate as a small company making a profit of £6,000 a year. That system ignores the real social question in our day and generation, that shareholders in large undertakings which pay the largest proportion of pay-roll tax are an inert mass who play no part whatever in the management of the undertaking, the sole concern of which is that the profit and correspondingly the dividend should be as high as possible. To my mind that is not a very good foundation on which to base society.
The Government ought to go a little deeper into this subject of pay-roll tax than was reflected in the very shallow sophistry of the Minister for Primary Industry (Mr. McMahon) who said a few moments ago, “ If you can show us a way of raising £51,000,000, we are prepared to consider it, but meanwhile we do not really think this tax is as bad as you make out “. At the same time, he was unable to suggest how it is a good tax in any respect. That seems to be an inverted kind of logic on which to establish any tax-raising apparatus in this country. The tax, while falling on very few taxpayers, is falling on the major part of economic activity in Australia. It is adding to the prices of goods and services produced by private enterprise and is having a very adverse impact upon State authorities, semi-governmental authorities, and those noble bodies, the local councils which have nowhere to turn for additional revenue. It is quite easy to say, as no doubt will be said, that the average municipality pays perhaps only £3,000 or £4,000 a year in pay-roll tax, but that is the sort of marginal sum which local councils to-day need in order to expand the various social services they are called upon to provide because the National Government seems to be unaware of these problems. To my mind the greatest difficulty in State and Federal financial relationships - and this problem goes right to the root of it - is that the States and local government authorities, because the States are starved for a few million pounds more and the local government authorities for a few thousand pounds more, are unable to discharge the additional responsibilities which any modern community must continue to take to itself if society is not to stagnate. This is apparent in the field of education, so important to the future of this community, lt is not a matter of hundreds of millions of pounds at all. It is a matter of a few millions only that is required by each State. Similarly, local governing bodies which have to provide libraries, and additional services such as meals-on-wheels, rest centres, and public health centres, do not want large sums of money. Each one does not want millions of pounds, but each one wants a few thousand pounds extra. The continuance of this sort of stupid and unwarranted tax by this Government stops the local governing bodies from having that marginal mobility, as it were, without which this country will stagnate in the future.
– The legislation before the House concerns the amendment of the Pay-roll Tax Assessment Act which, since its inception, has always been associated with providing the necessary funds for child endowment. I feel that everybody, whatever his views about the pay-roll tax may be, appreciates the fact that this is the third occasion on which this Government h’as reduced the incidence of the tax on both employers and the public as a whole. Originally, pay-roll tax applied to pay-rolls of £20 a week and more. In 1953, the exemption was raised to £80 a week, and in 1954 it was raised to £120 a week. Clause 5 of the bill increases the exemption to £200 a week, equivalent to £10,400 per annum.
Since the introduction of pay-roll tax in this country, the rate has never varied; it has always been 6d. in the £1. While I personally hold no brief for the principle of pay-roll taxation, I should like to point out two ways in which it could be gradually eliminated. The first is the reduction of the actual rate of tax, and the other is the raising of the minimum taxable pay-roll. However, I believe that this legislation is a further indication of the Government’s wish to reduce taxation and also to vacate eventually certain fields of taxation. I remind honorable members that since I have been a member of this House the Government has removed two well-known taxes from the
Commonwealth statute-book - entertainment tax and land tax. 1 shall have something further to say about land tax as I proceed.
Contrary to the impression that honorable members opposite might have gained from certain references, the Government has no intention to abandon its responsibility for child endowment. The fact that legislation which has contributed moneys for the payment of child endowment in the past is substantially altered, or even abolished, does not indicate that the Government had the least intention of abrogating its duty in relation to child endowment. Here, I wish to state a qualification of my remarks.
If the Government were to abolish payroll tax and the field were to be immediately occupied by State treasuries, as happened in relation to land tax and entertainment tax, the whole of the proposition that I propose to advance would fall to the ground, and in such circumstances I would suggest that we let sleeping dogs lie. We should remember what was said by the honorable member for Melbourne (Mr. Calwell) some weeks ago in his speech on the Budget. When referring to the pay-roll tax, the honorable gentleman said -
I for my part would hand the pay-roll tax field over to the States and deduct the amount raised by the tax from the reimbursements that we now give them.
That statement conveyed to me that the honorable member for Melbourne was at least turning over in his mind the idea that the pay-roll tax itself should cease to be tied to child endowment payments, which was the purpose for which the tax was introduced. In these matters, I think it is well for us to have regard to the conception of the purpose of the tax when the legislation was originally presented to the Parliament. Several other honorable members have directed attention to the remarks that were made by the Minister for Labour and National Service (Mr. Harold Holt) when he introduced the Child Endowment Bill 1941. The Pay-roll Tax Assessment Bill 1941 was introduced by the late Mr. Larry Anthony, of whom we have all tender memories. He said, when speaking to the motion in Committee of Ways and Means, as reported in “Hansard”, volume 166, at page 344 -
Some part of the cost of the scheme may be met from general revenue but, in the main, we must find new revenue for the purpose, and, in the opinion of the Government, no means of doing so is more appropriate than the proposed pay-roll tax. Wages are now fixed at flat rates irrespective of the size of families. Family endowment is a special supplement to wages, and under this scheme it will be graduated according to the size of the family. As it is therefore, a logical adjunct of the wages system, the money required to pay it is a logical addition to payroll costs of employers. It is necessary for the Commonwealth to collect the money, pool it and distribute it to families, because, obviously, if employers had to pay more wages to men with families than to others, the family man would not get a job at all.
At the time the tax was introduced, it was expected that the proceeds would provide about two-thirds of the cost of the child endowment scheme, and the remaining one-third would be provided out of general revenue. That proportion was maintained for quite a long time. If we look at the measure before the House, we see that the pay-roll tax is expected to yield £50,500,000 and child endowment payments will aggragate more than £60,000,000, and we realize that there has been a gradual tendency for pay-roll tax to provide more, and for general revenue to provide less of the money needed for child endowment. There is a strong case for the argument that the employer should provide the addition to the family income and that the Commonwealth itself, because of the employment that it provides, should bear a proportion. It is quite logical to say that a proportion should be provided out of general revenue.
Now, Sir, the . practical working of the scheme, as I have mentioned, has shown a very wide movement from the original conception of employer liability. What industry generally pays as tax is built into the selling prices of goods and services. In other words, the tax is passed on, quite automatically, into the present economy of the country. I think the real weakness of the basic conception of the tax is that it was tied to the level of wages, the underlying principle being that child endowment should be provided by those who paid wages. It is interesting to recall the words of the late John Curtin. As recorded in the same volume of “ Hansard “ that I have mentioned, at page 391, he said -
The provision, therefore, of children to grow up and replace the worn out units in the labour army, is an economic necessity, and should be included in full current “ cost of produc tion”. . . In other words, the maintenance of the worker’s wife and children is a matter with which the employer should be concerned. . .
If one looks at this question in a logical manner, he must realize that that contains a great deal of truth. After all, if we are to continue as an industrial country, we require numbers for our work force and there is an obligation on industry itself to foster the supply which it needs. During the debate that I mentioned earlier, Mr. Spooner said - 1 feel sure that were honorable members asked to vote on this measure quite detached from any scheme of child endowment, it would be given an entirely different reception.
He was implying that, if it had not been for the humanitarian purpose of pay-roll tax, coupled with the conditions then existing - a time of war with the vast demands necessarily made on revenue - the principle of pay-roll tax would have been rejected. Pay-roll tax is out of perspective. If it had not been associated with child endowment, I very much doubt whether it would have received much support.
The Minister for Primary Industry (Mr. McMahon) said that he felt that those at present paying pay-roll tax should make some more definite statement which would reassure the Treasury that ii would not lose substantially if the tax were removed and which would suggest a source from which the necessary funds could be obtained to fulfil the purpose for which pay-roll tax was designed. It is as well to consider what amounts are received from pay-roll tax and where they come from. As pay-roll tax is a direct deduction from personal and company income tax, it is quite obvious that, with company tax at the present flat rate of 7s. 6d. in the £1, the abolition of pay-roll tax will not be a complete loss. I took the trouble to approach the Taxation Department to find out whether it could give me figures which would be appropriate to the remarks I am now making. While I have much respect for their accuracy, I should say definitely that these figures are conservative.
If pay-roll tax were abolished, the recovery in personal and company income tax, from which pay-roll tax is deductible, is estimated at £12,500,000. I say advisedly that that figure is conservative. The amount recovered by State governments and State governmental authorities is estimated at £12,400,000 and the amount recovered by certain Commonwealth semigovernment authorities and municipalities is estimated at £900,000. Those figures total £25,800,000 out of an estimated receipt of £50,500,000 in a full year. If the tax were abolished, the figures I have given - and I say they are conservative - show that the loss of revenue would be not more than £23,000,000. If pay-roll tax were abolished, it would be perfectly competent for the Commonwealth to say to the States, “ You will be relieved of that amount of expenditure; as a quid pro quo, the special grants or the tax reimbursements will be reduced by the same amount”. The same argument could be used with that portion attributable to municipalities. That is not such a great amount, but it is an amount of some importance. The municipal authorities will pay an estimated £1,600,000 over and above the figures I have given and I believe that a satisfactory basis for the relief of this portion of the tax could also be arrived at. The total overall recoupment, either by income tax or by reduction in direct or indirect allowances to the States and, through them, to the municipalities, could be about £27,400,000 leaving, on the present yield of pay-roll tax, approximately £23,000,000 to be found from other sources. I repeat that the figures on which I am working are, I believe, extremely conservative.
I do not propose to go into the many objections to pay-roll tax as a tax. I propose to attack it more on the basis of its effect on the economy and the original idea that it was tied to child endowment and to the employers’ responsibility to provide that portion of the family income. Obviously, pay-roll tax inflates costs. The Deputy Leader of the Opposition mentioned the Tariff Board’s report of 1956, which suggested that this tax added 100 per cent., as well as the actual amount of tax, to costs. In other words, for every £1 of pay-roll tax, £2 is added to the price of an article. Pay-roll tax disregards the principle of ability to pay. It is charged whether the person paying it is making a profit or not. It is a fairly elementary business principle that, if a tax must be paid without a profit being made, a person does not remain in business for very long.
Pay-roil tax is discriminatory. It falls on the person who employs a number of workers and not necessarily on the employer with few employees. To a lesser extent, it places an extra cost on export commodities. That is a point which has been turning over in the minds of those who study the overseas credits of Australia.
All those points can be clearly illustrated; but I do not want to weary the House. I want to attack the underlying argument used in justification of the tax. The original conception of pay-roll tax was that it was supposed to provide for the family requirements in excess of the basic wage family unit, through the provision of child endowment. Over the years, this conception has been weakened and virtually voided, first, by the Arbitration Court’s determination of the basic wage on ability to pay and not on the needs of a family unit, and, secondly, by the introduction of endowment for the first child. The burden was originally shared by all employers of any substance, but the gradual raising of the minimum limit for those paying pay-roll tax has meant a reduction in the number of persons paying it. If it were still shared by all employers, the justification for the tax would be much stronger, but the progressive increases in the minimum limit has meant that the obligation to support the wage structure has become more and more the responsibility of large employers rather than of the general run of employers. It is, therefore, not unreasonable to suggest that such proportion of the child endowment payments as are attributable to employers as a whole - say, five-sixths on the present figures - would be more equitably met from company income tax, thus removing from the employers the responsibility and expense of going through the mechanical processes of collecting pay-roll tax and paying it to the Treasury. That in itself is obviously an added cost to industry.
Furthermore, if it were true that the benefits of child endowment went only to those in industry or commerce where the employers were paying the tax, it might be logical to argue that those employers were supporting the general wage structure. However, as no means test is applied to child endowment, in actual practice those employers who contribute to pay-roll tax are called on to support a benefit which goes far wider than the original conception, which was to support the wage structure. Child endowment is paid to people of independent means, people who are selfemployed or, generally, to those who have no real claim on industry or employers for support. To-day, as I mentioned earlier, it is more or less generally accepted that payroll tax is passed on to the consumer, I believe with some justification, since it is a definite charge on industry. All the indications lead one to believe that this passing on of pay-roll tax will increase progressively. I suggest, in the interests of the public, that it would be far more difficult to justify the passing on of company income tax than it is to justify the passing on of pay-roll tax.
It is obvious that if pay-roll tax were abolished, additional revenue would have to be found elsewhere. It is of little use to say that a tax should be abolished unless we have an alternative taxing method to replace the revenue that is involved. We must remember, however, that the amount involved will be substantially reduced as the rate of pay-roll tax is reduced. Although I have no authority to support my belief - and I want it to be clearly understood that I have never discussed the matter with employers - I think that industry as a whole would prefer to make up for the loss of revenue involved in the abolition of payroll tax by an increase of company income tax, provided that industry - and I emphasize this - knew for certain that the tax would not be taken up by the States, as was done by the State authorities in connexion with entertainment tax and land tax. The whole of my argument rests on the assumption that if the Government abolished pay-roll tax it could so publicize its objective and its intention, as a frontal attack on costs in the community, that there would be hesitancy on the part of State authorities to intervene.
During the course of discussions I have had on this matter it has been argued that if the present write-up of the sale price of goods attributable to pay-roll tax could be avoided by the abolition of the tax, there could be a consequent loss of revenue from company tax or personal income tax. I find myself at variance with this argument. Even if it were sound, I believe that, on balance, the benefits to be derived from a reduced cost structure would easily recompense for any loss of revenue. There also would be the compensation of reduced expenses, such as those associated with the vast government undertakings which the Government has on its plate at the moment. Furthermore, I believe that it could be pointed out clearly to employer associations that the removal of pay-roll tax would involve them in an obligation to give evidence of their bona fides by reducing prices, and with that thought in mind, at the time that pay-roll tax was abolished, an indication could be given that the matter would be reviewed at stated periods.
To sum up, 1 believe that if pay-roll tax were abolished, the consumer could not be the loser, but, on the contrary, could derive considerable benefits in the way of reduced prices. The position of the employees in industry would be improved, especially in a time of recession, because, after all, payroll tax is a tax on employment. The large concerns, which play such an important part in our industrial and commercial activity, and which have such a large influence on our internal cost structure, also would benefit, at least to the extent of avoiding the nuisance of collecting pay-roll tax. After all, the large industrial undertakings that provide the greater part of the pay-roll tax that is collected are the basis of our cost structure. I think that we need to keep that point clearly in mind.
The Treasury would have to accept the responsibility to replace a percentage of the revenue that would be lost through the abolition of pay-roll tax, in the interests of suppressing the forces of inflation that exist to-day in Australia and throughout the world. Perhaps the Treasury officials could use their imagination to devise alternative methods to discharge the financial obligation that would be involved. I repeat, in conclusion, that all my remarks are dependent entirely on pay-roll tax being abolished altogether, and that my arguments would be completely valueless and ineffective if payroll tax were to be reimposed by some other authority.
Sitting suspended from 5.59 to 8 p.m.
– All taxes are unpopular in the mind of the average person, but it is safe to say that the pay-roll tax is one of the most unpopular taxes ever introduced by this Parliament. Since its introduction in the early days of the war, all sections of the community have joined in criticizing various aspects of it. We can truthfully say that this tax is a legacy from war-time, and that it has a very doubtful place in the economy in peace-time. I submit that it is an irregular tax, because it was originally levied to meet a part of the cost of child endowment, but to-day the proceeds from it are placed in the general taxation pool, as is the case with other taxes. It was originally intended to raise £9,000,000 a year, and it did so during the first year of its operation, but the receipts have now increased to £49,000,000, despite the fact that the endowment rate has not increased. In other words, the receipts from the tax have increased by about 500 per cent, while the endowment rate has remained the same. That is a matter, of course, for discussion in another debate, but it is a very interesting point.
I think I will obtain general agreement when I say that the pay-roll tax is a liability on consumers because it is passed on. In effect, it is a hidden tax, and I believe 1 will again obtain general agreement when I say that hidden taxes, whatever their nature, are bad in principle. The pay-roll tax is levied in the first instance on the employer, but it is passed on in very great measure to the consumer, and the amount finally passed on is far greater than the original tax. The employer, following normal business procedure, includes the tax in his total cost of production, and then adds his profit margin. By the time the manufacturer, the wholesaler and the retailer have all followed this procedure, the consumer possibly has to pay £2 for every £1 of the tax originally levied on the employer. This is bad in theory, but it is also definitely bad in practice, because it has an inflationary effect on the whole of our cost structure. The 1956 Tariff Board Report has been mentioned earlier in this debate, but it will bear mentioning again. In that report the Tariff Board estimated that while the tax collected at the source is about £48,000,000 or £49,000,000, by the time the goods reach the consumer the amount has increased to £98,000,000. It is, therefore, definitely inflationary in its operation.
If the Government abolished this wartime levy - and that is what it can be truthfully called - it would not lose anything like £49,000,000, because the amount of the tax is an indirect deduction from income tax. It is estimated that the loss of income tax revenue on the present basis is about £14,000,000. State governments and semigovernment instrumentalities would pay £14,000,000 in pay-roll tax. A tax that raises £49,000,000 but entails a loss of revenue amounting to £28,000,000 - because, after all, the States must be reimbursed by the Commonwealth, directly or indirectly, for what they pay out as a result of this impost - is, I submit, a most foolish tax and does not achieve what it was originally intended to do.
All the factors I have mentioned combine to make a formidable case for dropping the pay-roll tax. It is irregular, it is illogical and it is an economically indefensible burden. Having made those few preliminary remarks, I wish to concentrate my remarks on the amendment foreshadowed by the Deputy Leader of the Opposition (Mr. Calwell), to the effect that local government bodies should be exempt from pay-roll tax. I hope that the Government will consider my remarks on a non-party basis, because they will be submitted entirely in that spirit.
I realize that in the past governments of all complexions have levied pay-roll tax on municipalities. Nevertheless, we live in a changing world, and conditions have changed in local government just as they have in other fields. The imposition of the pay-roll tax on municipal authorities to-day is far more detrimental to good local government than it was, say, ten or fifteen years ago. Over the last twenty years, and particularly the last ten or twelve years, there has been a complete re-arrangement of the duties of local government. Before the war local governing bodies were mainly concerned with roads, footpaths and drainage, with a few incidental matters thrown in for good measure. Since the war, all sections of the community in all parts of the Commonwealth have demanded that local government authorities should initiate other services for the benefit of the whole community. Local governing bodies have been called upon and expected to pay for these extra services. It is true that for some of them they receive grants from State governments, but these grants in no way compensate for the crushing financial burden inflicted on municipalities as a result of their accepting these additional responsibilities.
Local authorities to-day are called upon to provide certain social as well as material services. 1 shall mention a few of these services that have been added to the list of local government responsibilities during the last 20 or 30 years. Local authorities throughout Australia are now expected to provide baby health centres, child care centres, rest centres for women, community libraries, youth centres and cultural centres of all kinds. The latest trend in local government - and it is one with which 1 heartily agree - is towards the establishment of elderly citizen clubs, meals-on-wheels schemes and the like. These are most laudable local government activities, but they require money, and everyone knows that the avenues available to local authorities for raising money are strictly limited. Generally speaking, there is only one money source. Some municipalities are fortunate in having an additional source, through proceeds from electric light undertakings or similar enterprises, but, in the main, municipal councils have only one source of revenue, which is a tax on property. Local authorities to-day are expected to provide services of a national character organized on a local basis. It is far more satisfactory for all concerned if the local people control these activities, but they are activities that are ultimately for the national good.
We find, also, that local government bodies to-day are expected to play an increasing part in building up land productivity, destroying noxious weeds, arresting soil erosion and initiating flood prevention measures. With the wildest stretch of the imagination no one could say that those activities should be paid for out of municipal rates, because they are national jobs that are done for the purpose of improving the nation as a whole. In present conditions we find that municipal authorities, which have only one very restricted source of revenue, are expected to carry on all sorts of activities that were never envisaged as local government responsibilities twenty or thirty years ago.
The various municipal bodies to-day are expected to provide the bigger and better roads that the people are demanding, although the Government has not done the right thing by providing them with sufficient money for roads, and is, in fact, hanging on to about £17,000,000 that it should make available for this purpose. I men tion that matter only in passing, and to make the point that as the Government has not honoured its obligations to local councils to provide sufficient money for roads, surely it could show the councils some sympathy by including in the bill before the House a clause exempting municipal bodies from the payment of pay-roll tax. It would be some recognition of the national service being carried out by local municipalities to say to them, “ Although you might not pay extra much in pay-roll tax, we are prepared to make that amount available to you to carry out services that we know are far outside the orbit of your original charter “.
I put this to the community and to the Parliament: To-day, municipalities are providing essential community services, and they should receive a share of the community funds to enable them to do so. 1 am not suggesting that, under this bill, they should receive a direct grant out of Commonwealth revenue derived from the ordinary sources of taxation, but here is an opportunity for the Commonwealth to recognize the wonderful services the municipalities have been giving to the community over the last ten or twenty years. Why should a person who owns a property be called upon to provide the money for all these services? Why single out the propertyowner? The jobs which these municipalities are doing are being carried out for the benefit of all persons irrespective of whether they own property or not. The original purpose of levying rates on property was to help meet the cost of constructing a road or a drain or some other public amenity that would be of benefit to the whole community and which also would enhance the value of property adjacent to it. But would anybody suggest that only property owners should have to pay for baby health centres or aged citizens’ homes or similar services provided by municipalities? These should be financed by a community tax. This bill should have done something in the direction I am advocating. Agitation has been going on for many years. Local government bodies everywhere, irrespective of their political affiliation, have made requests to the Commonwealth for a remission of payroll tax so that the money collected from them in that way can be used to finance works of a national character which they are doing.
This bill does nothing to ease the problems of local government. Before 1954, municipalities with a pay-roll of £80 a week were exempt from pay-roll tax. In that year the exemption was increased to £120 a week, and now it is £200 a week. But what is £200 a week in the pay-roll of the average municipality? I can speak only about the municipality in which I reside. It is just an ordinary municipality, rendering ordinary services, nothing luxurious. It has a population of about 45,000. The wages bill of that municipality is between £3,000 and £4,000 a week, lt varies according to the amount of work being done. The exemption of £200 is of little value in respect of such a large pay-roll. That municipality is paying about £3,500 a year in pay-roll tax. It could do quite a lot for the benefit of the community with that sum. Yet, it is expected to carry out all sorts of work for the benefit of the whole community, and the property-owners are penalized to provide the finance. This bill does not attack the root of the problem; it is merely playing with it.
Before the suspension of the sitting this evening the Minister for Primary Industry (Mr. McMahon) stressed the fact that the Commonwealth Committee on Taxation had investigated this question. I should have thought that the Government would have acted courageously and would have done something of its own accord to grant relief to municipalities from this tax. The issue is quite plain. It is whether these public spirited local government bodies should be penalized in carrying on an honorary service of administration for the benefit of the community or whether the Government will alter its policy of non-recognition of their problems and give them some encouragement.
– The Commonwealth should treat local government bodies as well as it treats itself.
– 1. agree entirely with the honorable member; but I am not asking for so great a favour. I am asking that the Commonwealth should exempt municipalities from the pay-roll tax. I have not been able to obtain specific figures on pay-roll tax because they are bound up with both governmental and semi-governmental activities, but the total revenue collected from pay-roll tax is a comparatively insignificant amount in a total taxation revenue of £1,200,000,000. Nevertheless, it is a most important sum to local government bodies. I say again that much of the work of these bodies is done in the interests of the community but much more cannot be done because so much of their revenue is taken in pay-roll tax.
In J 954, the Government took a step in the right direction by exempting nonprofitmaking private hospitals from pay-roll tax. This brought them into line with public hospitals, which enjoyed the same concession. The amending bill that made that provision was wholeheartedly supported by members on both sides of the House, and I enthusiastically commended it. I should have thought that the Government would have followed that step by providing in this bill for the exemption of municipalities from pay-roll tax. There is no difference, for the purposes of pay-roll tax, between the service given to the community by hospitals and municipalities. Each provides a public service in different spheres of activity. The hospitals provide treatment for sick people; the municipalities build health centres, play centres, elderly citizens’ clubs, sports grounds and other amenities to keep the community healthy in mind and body. But we find that there is a marked discrimination between the hospitals on one hand and the municipalities on the other. I am not asking that the hospitals should pay any tax - far from it - but 1 say that a principle exercised in their favour for the last six or seven years should now be applied to local government bodies.
Municipalities are formed for the purpose of providing communal services in a defined area. To provide the necessary finance to carry out those services a rate must be struck. There is np thought of making a profit and no profit is made by the municipality. The rates are levied to finance works and services for the good of the community. Local government bodies obtain then- revenues from only one section of the population but they are then compelled to pay portion of that revenue tome Commonwealth for the purpose of carrying out another community service - that is, child endowment. The ironical but well-known fact is that wherever one goes one finds that municipalities, irrespective of their political complexion, are carrying out many public obligations that ought to be- financed from the community tax chest. I should have thought that the Commonwealth would make a gesture of the right kind in this bill. It could have said that it at least recognized the services given to the community by local government bodies and, as an encouragement, exempted them from the pay-roll tax. An amount of £3,000, £4,000 or £5,000 might be only chicken-feed to the Commonwealth, but it is an important sum to a local government body, and if it were made available to municipalities they would spend it most judiciously. The Treasurer (Sir Arthur Fadden) has missed a big opportunity in not exempting local government bodies from this tax. I expect that the next speaker from the Government side will say that the Commonwealth has no responsibility^ under the Constitution, for local government affairs, but surely it should make some contribution for community services rendered. It should recognize that it has a moral and ethical obligation to allow municipalities to retain this money because the work they are doing should be done by the Commonwealth under its constitutional obligations.
I am not an alarmist, but I know from personal practical experience that municipalities throughout the Commonwealth are being reduced to a state of financial impotence. They are carrying an evergrowing burden caused by increases in wages and other costs. Wherever one goes one finds the same sorry state of affairs of increasing local government deficits. This situation in which local governing bodies find themselves is not of their own making. They are the victims of circumstances beyond their control. They have increased rates to the limit, and valuations have soared to the skies, but even with these increases in revenue from such unpopular sources - they are unpopular because they amount to taxation on one section of community, the property-owners - the local governing bodies have been unable to meet the increasing costs of providing normal local authority services, let alone finance new services that may be required from time to time.
I suggest that the Government should give very serious consideration to helping local governing bodies in the way I have suggested and as we shall seek to do by way of an amendment which the Deputy Leader of the Opposition proposes to move in committee. The Opposition deems the amendment advisable because we are firmly of the opinion that, unless this Government is prepared to help local governing bodies, the time is not far off when local government will fall into disrepute. Local government must do so if it fails to give full service to the people. It will be a national disaster, both economically and politically, if local government does fall into disrepute because it is a form of government closest to the needs of the people, a democratic form of government, and even at this late stage, 1 submit the Government should take steps to give local government a wellmerited impetus.
Let me sum up the case for our foreshadowed amendment by saying that the pay-roll tax imposed by the present Government contains an essentially bad feature in that government at a lower level, which is taxing property for the means to carry out its work, is itself taxed by government at the supreme level. When we consider the meagre financial tools in the hands of local authorities and the increasing magnitude of the task imposed upon them day by day, it is incongruous, it is unjust, in fact, one might even say it is outrageous that out of these small municipal incomes a large amount of pay-roll tax is extracted by the Commonwealth. After all, to accept our proposed amendment would cost only a few million pounds out of a Budget of £1,200,000,000. In effect, the Government would not be throwing anything away, because the money saved by the thousands of local governing bodies throughout Australia would be used by them for the provision of community services. Why, the present miserable concession of £80 a week would not pay for ten square yards of asphalt at present-day costs, yet the Government tells us that the concession will help the local governing bodies to carry on!
I hope that the Treasurer will do the right thing by local governing bodies, that he will reconsider the matter and that he will not seek to shelve it by asserting tha: it is not a constitutional responsibility of the Commonwealth. Morally, it is a responsibility of the Commonwealth in that the Commonwealth Government should do its utmost to ensure that the system of local government, which, after all, is a system of government which means so much to the people, does not reach a state of collapse.
I emphasize that I am not speaking in any carping way to-night; I am speaking for all sections of local government irrespective of political colour. Local government generally is in a bad way and this Government could show its sympathy in a practical way by extending to local governing bodies the policy it has adopted in connexion with public hospitals and non-profit-making private hospitals. An organization which is genuinely working for the common public good should receive some definite encouragement by way of a concession in the form of exemption from the payment of pay-roll tax.
I repeat that I hope that even at this late stage the Treasurer will realize that a good case has been submitted by the Opposition and that he will give the matter further serious consideration.
.- The pleasing feature about this bill is the fact that the number of pay-roll taxpayers will be reduced from 39,000 to 23,000. The effect of its operation in my State, South Australia, will be that only about 2,000 people, firms or companies will be paying this tax. Naturally, those 2,000 will be, in the main, the bigger industries and the bigger commercial houses, yet once again we see members of the Labour party flocking to support them. The small industries, the small businessmen and the primary producers will now be virtually exempted from the payment of pay-roll tax.
Although the Labour party is apparently opposing the imposition of pay-roll tax, it has offered no alternative means of obtaining the revenue of £50,000,000 that would be lost to the Government by the abolition of pay-roll tax. I point out that the Labour party not only supports child endowment, for which this tax was imposed, but has suggested increases in payments from time to time. Despite this, we have not heard one word from honorable members opposite as to how the £50,000,000 now derived by way of pay-roll tax could be levied if this tax were abolished. Do honorable members opposite suggest, for example, that it should be raised by way of increased sales tax? If they do, then I point out that this would mean an increase of 25 per cent, in the rate of sales tax imposed. Or do honorable members opposite suggest that the £50,000,000 should be obtained by increasing the rate of income tax? To adopt that suggestion would mean an increase of more than 10 per cent, in the present rates of income tax. What the Labour party is saying, in effect, to the people of Australia is that it supports either an increase of 10 per cent, in income tax or an increase of 25 per cent, in sales tax so that 22,000 persons and companies that otherwise would pay pay-roll tax may be exempted from it.
No doubt, from the big combines, the big industries and the big commercial houses which the Labour party is now so keen to support, honorable members opposite will receive a ready audience for the remarks they have uttered to-night. But even that audience will not be so happy when it discovers that if we adopt the Labour party’s suggestion it will be necessary to impose additional income tax on those self-same employers in order to regain the £50,000,000 that will be lost by the abolition of the pay-roll tax. At the present time, pay-roll tax is an allowable deduction before income tax or company tax is assessed. If, as the result of the abolition of pay-roll tax, the manufacturing and commercial companies now paying pay-roll tax increased their income by the amount of pay-roll tax of which they were relieved, that additional income would immediately become assessable for income tax or company tax purposes.
It is true that there are objections to the pay-roll tax. I do not think there is a single tax in existence to which objection cannot be found. The objection normally put forward to pay-roll tax is that it is not a tax based upon the principle of the ability of the industry to pay. That is true. But because of the exemptions that the Treasurer (Sir Arthur Fadden) has been making, year by year, during the last few years, more and more of the burden of this tax has been placed on the industries that have the ability to pay it. In other words, stage by stage, since the Treasurer has been guiding the finances of this country, he has been removing the burden of pay-roll tax from those industries and commercial houses which have the least ability to pay it. Does anyone in this House suggest that the 22,000 taxpayers who will be subject to pay-roll tax after the passing of this bill have not the ability to pay it? Does anyone suggest that these same people would rather pay the sum of £50,000,000 in income tax or company tax which they could not pass on?
– I do not think that they would. I do not think that thinking industrial and commercial people will thank Labour very much for putting up a case for the total abolition of pay-roll tax. They know perfectly well that if pay-roll tax were abolished a tax would have to be laid on the shoulders of other people in order to raise an equivalent amount. Has anybody suggested, for example, that instead of £50,000,000 being collected in pay-roll tax, it should be collected in the form of sales tax? I suggest that the regressive burden is far greater in sales tax than in pay-roll tax. Sales tax is a direct cost which is added to the price of commodities. If this £50,000,000 were collected in the form of sales tax it would increase prices far more than it does in the form of pay-roll tax.
The Labour party assumes that all payroll tax is passed on. That is not correct. Some industries are able to pass it on. Other industries are not able to pass it on. The speech of the Minister for Primary Industry (Mr. McMahon) proved that the statements of members of the Opposition were nonsense. He proved very conclusively that a large part of pay-roll tax is not and cannot be passed on. So the whole of Labour’s argument falls to the ground when Opposition members argue that the burden of payroll tax is entirely borne in the form of increased prices by the general public. As a matter of fact, it is a tax that is borne substantially by the larger industries and commercial houses in Australia. From that point of view, we do give an advantage to a very important section of the community, namely the smaller industries - the industries that are just starting out, the small farmer, the small grocer, and the small professional man. They do not have to pay pay-roll tax until they have perhaps fifteen or twenty employees. So if this bill can be said to differentiate between taxpayers, it differentiates to the advantage of the small man against the big man. I should think that, if it is necessary to differentiate m taxation, that is the least harmful way of differentiating.
Another matter to consider in levying taxation is the cost of collecting a tax. The pay-roll tax is one of the cheapest of all taxes to collect. As I have mentioned, it will be collected from 22,000 taxpayers. All those taxpayers are big industries and big commercial houses. They have accountants and auditors to keep their books in firstclass order. Therefore, it is not a terrific cost to an industry to have to file its payroll tax returns and pay the tax to the Treasury. The official figures show that the cost to the Treasury of collecting the payroll tax is .45 per cent, of the tax collected, while the cost of collecting income tax is 88 per cent. In other words, it costs the Government almost twice as much to collect income tax as it costs to collect pay-roll tax.
I join with other honorable members who pointed out the weakness of pay-roll tax because it does not accurately measure ability to pay. I am afraid that it will be a Utopian world when all taxes can be levied strictly according to ability to pay. Nowadays, advanced thought on methods of taxation is swinging far more towards taxes on consumption rather than taxes on income, based upon ability to pay. The old idea that taxation should be levied strictly according to ability to pay ignores the fact that some people are heavy spenders while other people save more in proportion to their income. There is just as much justification for saying that for the good of the country, people must be taxed according to what they spend as there is for saying that they should be taxed according to their ability to pay. I am not going to suggest which of these theories is right.
I think that the honorable member for Yarra (Mr. Cairns), not very long ago, advocated levying taxation according to what people spent rather than according to their ability to pay. I think that there are a lot of arguments to be stated in favour of both theories. In Australia, we do impose taxation on luxury goods which is in the nature of a tax on spending. Similarly, we levy income tax according to the ability of people to pay. So we have a combination of those two taxation theories. It is a question of getting a balance between the two. lt is all very well for the Opposition to condemn sales tax up hill and down dale because it is not levied according to the ability of people to pay. Similarly, they could say that pay-roll tax was not levied according to the ability of people to pay. All taxes have their merits and all taxes have their weaknesses. It has been said that taxation is a method of so plucking the goose as to get the maximum amount of feathers with the minimum amount of squealing. After all, the main object of taxation is to get revenue to pay for the essential services of the Commonwealth. It is necessary to ask, “ Where can we get that revenue? “
Taxation must be levied in such a way that the cost of collection does not take up too great a proportion of the revenue received. Then ability to pay has to be considered. Then one must consider taxes on luxuries and things of that nature. I believe that the Treasurer is to be commended for the very skilful manner in which, over a period of years, he has held the balance between these varying and rival theories. We have a system of taxation in Australia under which a very large amount of revenue has to be collected to pay for the essential services of a rapidly developing country. I believe that the Treasurer has spread the burden in a very skilful manner. I commend him for the manner in which he has handled pay-roll tax. Tn effect, he said: “ We admit the weaknesses of this tax. We are not in a position at the moment to lose £50,000,000 in revenue. Neither are we prepared to raise an additional £50,000,000 from income tax and sales tax, but what we will do is to help the small man, the small industry, the small farmer, and the small grazier. We will remove them from the list of pay-roll taxpayers.”
The number of pay-roll taxpayers has gradually been decreased until to-day only 22,000 in Australia, including 2,000 in South Australia, pay this tax. Although I am in favour of the ultimate elimination of pay-roll tax if a better method of raising the revenue can be found, I wholeheartedly support this bill. The Treasurer has very fairly spread the burden of this tax over the whole community.
.- The honorable member for Sturt (Mr. Wilson), in his examination of this bill, supported the principle of taxing consumption or expenditure. This principle has been underlying the submissions of the honorable member for Sturt for some considerable time. The proposal put forward by the honorable member is, I presume, a proposal for an expenditure tax, which was first outlined in recent times by the economist Nicholas Kaldor. In putting forward that proposal the honorable member for Sturt said that I had supported it on a previous occasion. I wish to make it clear that I have never supported such a proposal. I think honorable members will recognize the significance of this proposal for a consumption or expenditure tax if some little thought is given to it.
The honorable member for Sturt advocates a consumption or expenditure tax rather than a tax based upon ability to pay. A contrast of these two propositions brings out all that is implicit in the situation. Certainly, 1 think it is wise for honorable members on the Government side to support a consumption tax rather than a tax based on ability to pay. A consumption tax is not based on ability to pay, and Government supporters can best represent their constituents by advocating such a tax, because the people who support the Government are the well-to-do in the community.
The honorable member for Sturt, in advocating this tax, said that it provided protection for savers. Who are the savers in the community? Statistics show that the main determinant of saving is the size of a person’s income. The greater the income, the larger the proportion of that income the recipient will be able to save. If a tax which protects savers, which gives them an allowance for saving, is imposed, then the larger a person’s income, the more he will benefit. People who are on the basic wage, or the average wage, do not save as much as those on high incomes, because they do not earn sufficient income from which to save. So if we impose a tax upon consumption we impose it in inverse proportion to ability to pay. That is why the proposal of the honorable member for Sturt is in such sharp contrast to the generally accepted principle of income taxation.
I am sure the Treasurer (Sir Arthur Fadden) will agree with me that the policy proposed by the honorable member for Sturt is much more conservative than the Government’s present taxation policy. It must be remembered that a very large proportion of Commonwealth revenue is raised by indirect taxation, by taxes on consumption. Only about one-quarter of our revenue comes from personal income tax, and about one-half from other direct taxes, which do reflect some ability to pay. The rest is raised by taxes which are imposed upon consumption. I have in mind sales tax, customs tax, and pay-roll tax.
– Who imposed pay-roll tax?
– I am not concerned with who imposed it. Rather than worry about that, let us think of the effect of the tax. The honorable member for Batman (Mr Bird) said that all taxes were unpopular. I think some taxes should be more unpopular than others, and pay-roll tax is one of them. It is a disguised tax.
I want to deal with some of the views expressed by honorable members who have spoken in this debate. First of all, there was the Deputy Leader of the Opposition (Mr. Calwell), then the honorable member for Melbourne Ports (Mr. Crean) and the honorable member for Batman. Those honorable members said that pay-roll tax was bad because a great deal of it, if not all of it, was passed on. Now, the Minister for Primary Industry (Mr. McMahon), in saying that pay-roll tax should be retained, has been joined by the honorable member for Sturt. But the honorable member for Corangamite (Mr. Mackinnon) has allied himself with the Labour party on this matter and made a speech which was almost identical in principle, and in a great deal of detail, with the case put by the Opposition. I think the honorable member for Corangamite provided a far better and more logical examination of the bill than did the Minister for Primary Industry, who seemed to make up his speech as he went along, or the honorable member for Sturt, who, as honorable members know, gives very serious consideration to these matters.
I think we should look at the origin of this tax. Pay-roll tax was introduced as a means of paying for child endowment, and I think experience has shown that it is bad practice to tie a tax to a particular purpose unless in fact that purpose is achieved. As the honorable member for Batman pointed out, that has not been done in the case of pay-roll tax. The proceeds from pay-roll tax have been poured into the receptacle for revenue from all sources, and from that receptacle payments have been withdrawn for child endowment. There is no close connexion between pay-roll tax and child endowment. I think that the point made by the honorable member for Corangamite was a very strong one. He quoted Mr. Spooner, a former member of this House, who said that the tax would have received an entirely different reception had it not been coupled with child endowment. I think it was the coupling of pay-roll tax with child endowment that led to its being accepted more readily than would otherwise have been the case. But the Minister for Primary Industry supports its retention, although he supports the elimination of another 16,000 from those who pay it. We can assume, I suppose, that the view put forward by the Minister for Primary Industry reflects the view of the Government. Why is it that the Government has this view? The Minister told us that it was because this tax provides a supplement to wages. He accepted the argument that was put forward at the time and denied that the tax is passed on or can be passed on substantially. He said that rather than have a system under which industry is expected to pay people according to the number of children they have, it is better to collect moneys from industry itself and redistribute them to the workers in accordance with their family responsibilities. That latter system would be very well if it worked out in that way in practice, but honorable members have suggested and. I think, clearly demonstrated that it does not work out that way. All that the Minister for Primary Industry could say in answer to the submissions made by the honorable member for Corangamite and the three Labour speakers was, not that the tax was not passed on, but that we did not know whether it was passed on.
I suggest that there is a reason for the Government to support this tax, which is a very plausible and subtle kind of tax. The Government is supporting a tax which, on the face of it, is paid by the large proprietors. It appears to be paid by the larger employers in industry. The honorable member for Sturt said that they could afford to pay the tax, but, if the statements made by the three Opposition speakers and the honorable member for Corangamite are true, a substantial part of the tax, if not all of it, is passed on to the community. It is not the large employers who pay it.
I suggest, then, that if this tax were looked at rather shrewdly by the large employers and by the Government - which is not very widely separated from them in its interests - it would seem to them to be an ideal sort of tax, because although the large employers seem to be paying it, they can, in practice, pass it on. If they do pass it on, they pass it on to all members of the community. We on this side have said that rather than have this tax, which, if we are correct, can be passed on to all members of the community, we ought to have a tax which is paid only by that section of the community which can afford to pay it.
– What sort of tax would you have?
– Direct income tax. That suggestion has been put forward by each of the speakers in this debate from this side of the House. I will come back to that in a moment. Before going on, I want to look at the incidence of this tax. The crucial question seems to me to be: Who pays it? We suggest that the proposals of the Government are consistent with a further transfer of national income from the wage and salary earners of the community and the small proprietors - the classes of people whom in this respect 1 would call dependent - to the larger proprietors, comprising that section of the community that I would call determinant, insofar as they determine prices and other factors which determine the distribution of income in the community.
Purely in passing, I should like to refer to the associated tax measures that were announced in the Budget, in order to show that this pay-roll tax concession is consistent with the other changes in taxation that have been made. First, I refer to the company tax reductions. There is a reduction of £14,500,000 a year in the direct taxation of companies. These companies consist, to a very large extent, of the larger proprietors - the determining section of the economy, as I see them. They will, in a full year, gain another £26,400,000 as a result of the change in the depreciation allowances. Those two provisions take up roughly about 75 per cent, of the value of all the tax concessions that have been made in the Budget. In addition, there are reductions in estate duty of £168,000 and in gift duty of £157,000. Those items total £41,125,000, and they seem to me to be pretty clearly tax concessions to the better off sections of the community. If all the rest of the tax concessions that the Government has chosen to make in the Budget go to the benefit of the dependent sections of the community - the wage and salary earners and others who have very little influence in determining prices or the incidence of taxation - they amount to only £15,625,000.
I suggest that in these measures the Government has done very well for those people who are fairly well known to be its supporters at election times. I think that these figures put the most favorable interpretation on what the Government has done in relation to these people. If v/e consider this pay-roll tax concession in the context of the other taxation concessions that the Government has made, we find that it is quite consistent with them. The raising of the exemption limit will eliminate another 1 6,000 from those who pay pay-roll tax. If we are correct in our proposition about the power of the larger proprietor to pass on this tax, the Government is concentrating pay-roll taxation upon those who have the ability to pass it on, and taking it away from those who, perhaps, would have to pay a substantial portion of the tax themselves. What the Government is doing in this measure is quite consistent with what it has done in all other measures.
Let us look a little closer at this question of incidence. I think that in discussions of economic theory relatively little attention has been given to it in recent times. It could be discussed very well in relation to thi-< measure. The general view, as I mentioned a few minutes ago, is that payroll tax is accepted by a great many people because it is a tax on employers. We are questioning this view, because we think the tax has become concentrated, as it were, on the larger employers, who have considerable ability to pass it on. Whether a tax is a good or a bad tax, I suggest, depends on quite a number of factors. I do not think that at least two of those factors would be disputed by anybody, even by members of the Australian Country party. Whether a tax is a good or a bad tax depends in the first place, I suggest, on whether it is equitable, and, secondly, on whether it is likely to inhibit activity and so reduce national output to an extent which is greater than the good achieved by the tax. What is required in place of the pay-roll tax is, not a tax on consumption or expenditure, but a progressive tax - that is a tax which increases at a greater rate than the income upon which it is imposed. The honorable member for Melbourne Ports (Mr. Crean) and the honorable member for Melbourne have stated quite clearly that this is the test that the Opposition applies in relation to this kind of tax.
Once we have these rules, how can we form a conclusion about whether they are to be applied? That is where the problem of the incidence of a tax comes in. I suggest that a tax that is imposed inside the industrial or commercial system - inside the factory, the warehouse, the shop or the farm - is far more likely to be passed on than is one that is imposed outside.
– How can the farmer pass it on?
– He can pass it on through stabilized price systems. In that respect, he has used a considerable amount of influence on governments to get what he wants.
– The stabilized price systems are dependent upon export prices.
– In many fields farmers are not now dependent upon export prices to anything like the extent that they were dependent on them in the nineteenth century. However, as members of the Australian Country party are still living in the nineteenth century, I can easily understand why they think it is still true that farmers are entirely dependent upon export prices.
Whether or not a tax is passed on depends, first, on whether it is imposed within the production system. If a tax is imposed within the system, with its uniform methods of accounting and costing, it becomes the practice to include the tax in the cost of production, and to pass it on by increasing prices. The pay-roll tax is imposed in that way, and for this reason alone it is more likely to be passed on than are certain other taxes. Secondly, I suggest that a tax is more likely to be passed on if it is imposed upon a big producer, seller, or distributor, of goods. The bigger he is, the larger is the proportion of the supply that he controls, and the stronger is his position in the market, and, therefore, the more likely he will be to pass on the tax. Apart from the general situation, in which there is a very definite, but gradual, increase in the size of large concerns, and in their share in the production of very many commodities, with a consequent increase in their ability to pass on the pay-roll tax, or any other tax, provisions deliberately included in amendments to the principal act have tended to reduce the field of those who pay the pay-roll tax, and therefore to limit liability for the payment of this tax to the larger producers.
If we examine this tax in the light of the factors that determine its incidence, there are, I suggest, two general propositions that can guide us. First, a progressive income tax is much more likely to be equitable, and its incidence is much more likely to stay where it is imposed, than is the case with almost any other kind of tax. It is likely to be more equitable because it tends to be imposed in proportion to ability to pay. Its incidence is much more likely to stay where it is imposed because it is not imposed within the production system, and so will not so easily be included in costs. I have not yet heard of any instances in which manufacturers, distributors, or retailers, have adapted their accounting or costing systems so as to include income tax in the costs of business operation in order to pass that tax on in increased prices. However, the way things are going, it may not be very long before we hear of such a development. Since it has not occurred so far, I suggest that a direct progressive income tax is less likely to be passed on than is the pay-roll tax. The answer to the arguments of the honorable member for Sturt with respect to the equitability of the pay-roll tax is, I think, implicit in this proposition.
The second proposition that should guide us in this matter, as well as in many others, is that it is becoming increasingly difficult to bring about progressive changes in the distribution of income in a system in which there is a fairly clear distinction in the community between those who control productive activities, and have the power to determine prices and other things, and those who do not. I suggest therefore that there is a strong probability that the pay-roll tax is a bad tax. Honorable members on both sides of the House have agreed on this in the present debate. The only substantial answer to those who ask why this tax should not be removed was given by the Minister for Primary Industry, who, we can assume, is the Government’s spokesman, although his speech was not very well prepared, and by the honorable member for Sturt. They asked what would be put in the place of this tax. The Opposition, and the honorable member for Corangamite, I think at least by implication, if not outright, suggest that the pay-roll tax should be replaced by a progressive income or company tax, or by increased income or company tax rates. I have given the reasons for this proposal in my examination of the problem of the incidence of taxation.
I think that the honorable member for Corangamite is correct in principle in his argument that the removal of the pay-roll tax would increase the proceeds of company and individual income taxation. I think that the honorable member said that figures obtained by him from the Taxation Branch suggested that company and individual income tax proceeds would increase by £12,500,000 if the pay-roll tax were abolished, and that the removal of the allowances would increase the proceeds of these taxes by another £15,000,000, making a total increase of £27,500,000. Of course, it is difficult to say what the exact figures would be. The honorable member suggested that those stated by him were conservative. I think that it may well be true that the first figure is conservative, and low, but my own view is that the second one may not be conservative. At any rate, a direct result of the removal of the pay-roll tax would be a considerable increase of income tax returns - probably by at least £20,000,000 - even without any increase in the tax rates. This must be taken into account, and it is a strong argument in favour of the abolition of the payroll tax. But this increase of revenue would not make up the whole of the £51,000,000 that is at present being obtained from the pay-roll tax.
I suggest that, for very good reasons, the pay-roll tax should be removed. If it is removed, we must turn to a progressive income tax to recoup the loss of revenue, but the rates of tax on taxable incomes below about £1,500 a year should not be increased. This is a consistent and necessary proposal. We must adopt it to ensure equitability and to observe the need to tax in proportion to ability to pay. In this respect, it is true, as the honorable member for Batman suggested, that every tax is unpopular. However, I think that a lot of taxes are unpopular because people do not like the way in which the proceeds are spent. If they are satisfied that the money is well spent, they will be much more likely to regard a tax favorably than if the proceeds are wasted. In view of some of the things that this Government has perpetrated - I think that is the only word for it - in the expenditure of the proceeds of taxation in recent years, it is no wonder that the people have come to regard taxation as very unpleasant, and something to be avoided.
– Would they be happier if Labour spent the proceeds of the taxes that they pay?
– Perhaps we shall see. 1 think that, during the term of the Curtin Government, under which Australia fought a war very effectively, and during the term of the Chifley Government, under which reconstruction and rehabilitation were excellently handled, there was a more favorable attitude towards taxation. It is no wonder that taxation savours of unpopularity when a government wastes money on the scale involved in the St. Mary’s project.
In conclusion, I want to return to the remarks made by the honorable member for Melbourne Ports, who suggested that this bill - as, I think, does every other bill consequent upon the Budget - makes it clear that a thorough review of the entire tax structure is needed. In making such a review, we should turn more to the use of direct taxes than to the use of indirect taxes. This has been the tendency during the last sixteen years since the Curtin Government took office. When that Government took office, about 80 per cent, of Commonwealth revenue was obtained from taxes on consumption - indirect taxes that were levied contrary to the principle of ability to pay - and about 20 per cent, from direct taxes. The ratio has now been reversed, and is something like 30 per cent, to 70 per cent. That ratio was established by the Curtin and Chifley Labour governments and it has been more or less maintained ever since. I suggest that we must go further in the direction of direct taxation in reviewing our tax structure.
Secondly, we on this side of the House in particular must be suspicious of taxes that seem to be imposed upon employers who have the ability to pass them on. That is a subtle way of imposing taxes. To increase our tax collections and to replace taxes that may be abolished, we must move towards more progressive scales of taxation on incomes of £1,500 and over.
In any review of our tax structure, we must pay attention to tax avoidance or evasion, which has become a significant method of increasing income. There is hardly an industry in which holidays, entertainment and travel are not paid for by the companies concerned with the result that the incomes of the directors and senior employees are vastly increased. It has been said that the expenses of about 75 per cent, of the people who attend the leading hotels on any night are charged to expense accounts. Not too many workers have expense accounts! It has been said also that 40 per cent, to 50 per cent, of the people who are at present at the more expensive theatres at any time are there on expense accounts. The same remark applies to many people who visit Surfers Paradise. Avoidance is the legal way of getting out of the payment of taxes; evasion is the illegal way of doing it. But increased attention must be given to both methods in a review of our taxation system.
The final suggestion I wish to offer is relevant to this measure, because we have been talking about a means of replacing the pay-roll tax. I suggest that attention should be paid to capital appreciation.
– Order! The honorable member’s time has expired.
– in reply - I have listened with great interest to the speeches of honorable members opposite, particularly that of the honorable member for Yarra (Mr. Cairns). Having listened to those speeches, one would think that the pay-roll tax had been introduced and retained only by the
Menzies Government. I remind the Opposition that this tax was introduced in 1941 to finance child endowment. The amount of the exemption then was £1,040 a year. The scheme remained the same in every respect until this Government again assumed office in 1949.
The honorable member for Yarra said that the imposition of this tax was a subtle means of assisting the friends of the Government. If that is so, I point out that it was retained by the Curtin and Chifley governments for the same purpose.
– This Government changed the amount of the exemption.
– This Government, in the very first Budget that it presented after it was returned to office in 1949, raised the amount of the exemption that it inherited from the Chifley Government from £1,040 to £4,160 a year. The exemption was later increased to £6,240, and we now propose to raise it to £10,400. 1 remind the Opposition that, if the pay-roll tax was a bad tax and had all the imperfections that honorable members opposite would lead us to believe, those imperfections were retained, with greater effect, during the period Labour occupied the treasury bench. The only relief that has been afforded has been granted by this Government.
To abolish the tax and to substitute for it direct taxation, as has been advocated by honorable members opposite, would assist the very people whom’ they almost hate politically and economically. No one would receive greater benefit from the abolition of the tax than would those people who are best able to bear it.
– They pass it on.
– Do they pass it on? The effect of the pay-roll tax on costs and prices has been greatly exaggerated, as my colleague the Minister for Primary Industry (Mr. McMahon) pointed out very effectively this afternoon.
– It has led to a 4i per cent, increase in costs.
– According to your calculation as an expert economist! If the tax were abolished or reduced, the concession would benefit only a comparatively small number of relatively large employers, a great many of whom have no need of relief in that direction. For many of them, it would mean a straight-out increase of profits without the community receiving the benefit of a reduction of prices. If it were abolished, State governments would immediately have an opportunity to raise their level of spending. Any idea that the Commonwealth could later reduce its grants to the States to offset their gains would be largely illusory, as experience in Commonwealth and State financial relations has taught us.
Have honorable members opposite overlooked the fact that, if the Commonwealth vacated the field of pay-roll taxation tomorrow, the States, with all their constitutional authority and power, would be in the field the following day? Let us not forget that the first wages tax in Australia was imposed by the Lang Labour Government. That government imposed a tax of 3 per cent. on all wages, without any exemption whatever, irrespective of whether the wages were paid by local authorities or any other State instrumentality. The States would enter the field of pay-roll taxation just as they entered the fields of land tax and entertainment tax when the Commonwealth vacated them.
The Labour party is asking us to do what it refused to do in season and out of season during its term of office. I repeat that Labour did not raise the amount of the exemption, and that, other than introduce minor machinery amendments to remove certain anomalies, it did not amend the act in any respect. I repeat, too, that the incidence of the tax remained the same throughout Labour’s term of office, but that this Government has progressively raised the amount of the exemption.
Pressure was brought to bear upon the Chifley Government, repeatedly, to give effect to the substance of the new clause that has been proposed by the honorable member for Melbourne (Mr. Calwell), namely, to exempt local authorities from the payment of the tax in the direction indicated. At no stage did Mr. Chifley favorably consider the suggestions that were made, and the reason for his not doing so is very obvious. I adopt the same reason for not accepting the amendment that is proposed. The pay-roll tax was imposed on the widest possible field of persons able to bear it and, because it was introduced to provide the greater portion of the funds that were necessary to pay for child endowment, the Chifley Government retained that basis. The view has been taken that the tax is a logical adjunct to the pay-rolls of State government departments and local government bodies. The tax, in effect, is a substitute for higher wages that otherwise would be favoured for employees with family responsibilities. This Government, in its review of taxation for Budget purposes, has continuously considered the various representations, including local authority representations, that have been made for relief along the lines proposed in the amendment. We cannot see that, under any circumstances, having regard to the structure and the nature and the necessity of the tax, we should relieve the incidence of the tax in the direction desired in the amendment. The Government, of course, is not unmindful of the difficulties under which local government authorities operate. But they are not our responsibility. It is clear that it would not be a practical proposition to free such bodies from the tax without granting similar immunity to State government departments and other authorities. To do this would be to upset the whole basis of the tax. It was, therefore, not found possible to accede to the representations made on behalf of the local government bodies. For the same reasons as I have stated now, Mr. Chifley, Labour Prime Minister and Treasurer, did not accede to the many representations made to him. The Government, consequently, is not able to accept the amendment.
Question resolved in the affirmative.
Bill read a second time.
Clauses 1 to 6 - by leave - taken together, and agreed to.
Proposed new clause 4a.
.-I move -
That the following new clause be inserted in the bill:- “ 4a. Section fifteen of the Principal Act is amended by inserting after paragraph (ba) the following paragraph: - (bb) by a municipal or other local governing body, or an authority established for the purpose of carrying out all or any of the functions ordinarily carried out by such a body, otherwise than in the conduct of an enterprise which, in the opinion of the Commissioner, is a trading enterprise; 1 moved a similar amendment in 1954, and 1 had the members of the Australian Country party and the Liberal party prognosticating that ultimately this tax would be abolished. They said how much they favoured the amendment, but they said also that they would leave it to the Government to give effect to its policy of reducing taxation progressively. I think that on that occasion. Mr. Chairman, you were among those who forecast the abolition of the tax. Three years have passed and nothing has been done about the matter.
– Oh, yes!
– Oh, no! I moved that previous amendment in almost the same terminology as the present amendment. It was designed to exempt all municipalities from the payment of pay-roll tax except in respect of such of their activities as were profit-making.
– What happened to the amendment?
– The amendment was defeated because of the purblind opposition of members of the Australian Country party and the Liberal party.
– Why did the Labour government not amend the legislation when it had the chance to do so?
– Why? Because for four and a half years of the period in which the Curtin Government was in office there was a war, and we had to have every penny we could get for the conduct of that war. In the post-war period we had to have as much money as possible for the rehabilitation of the people who served in the war. We moved our amendment in 1954 in respect of municipalities only. I do not want to repeat what I said on that occasion, but I assure honorable members that my words were very wise and cogent and much to the point. However, in spite of the wisdom inherent in all I said on that occasion, every member opposite voted against our amendment. The honorable member for Macarthur (Mr. Jeff Bate), mistaking the amendment which I had moved for a government amendment, said -
I repeat that the whole of the additional moneys that will be made available to local government authorities will be used on the provision of better roads, bridges and community facilities of all kinds.
That was, of course, presuming that the amendment was carried. Then, still misunderstanding the purpose of the amendment, still thinking that the Treasurer and not the Deputy Leader of the Opposition had moved it - in other words, getting his Arthurs mixed - he said -
The situation under which municipalities and shires, which are semi-governmental bodies, actually have to raise taxes on property in order to pay the pay-roll tax is ridiculous. It amounts to double-barrelled taxation. There are two lots of tax-gatherers, one in the shire and municipal offices and the other in the offices of the Taxation Branch in Canberra and the State capitals. That is a foolish situation. In fact, such a doublebarrelled arrangement, which involves heavy additional administrative costs, is utterly stupid.
He was completely right then, even if he was a bit mixed up. He should have voted with the Opposition on that occasion, and he should vote with us on this occasion, because three years have passed, the Government has had abounding revenues, and surely it should relieve the municipalities of this country of the burden which it imposes on them in the form of the payment of pay-roll tax. Municipalities are bound to State governments. They have no separate authority. They have no guaranteed sources of revenue under written State constitutions. They have their powers given to them and taken away from them. They are just puppets or marionettes. But they still have to do a very important job, and we want to relieve the municipalities of this burden of tax. Of course, we got only verbal support from the honorable member for Macarthur on that previous occasion in 1954. On that occasion, too, the honorable member for Petrie (Mr. Hulme) said -
But when it came to the vote the honorable member for Petrie voted against the amendment moved by the Opposition. You, Mr. Chairman, if I may quote your remarks in a capacity other than that of Chairman of Committees, during the committee stages of the debate on that bill in 1954 had this to say - lt is far belter to reduce pay-roll tax progressively and to abolish it eventually, which undoubtedly the Government will do in future years, than to deprive local authorities of other moneys which they will receive if other proposed legislation is agreed to.
The honorable member for Mallee (Mr. Turnbull) interjects and says, in effect, “ Live, horse. Eat grass. Some day you will be abolished.” But the honorable gentleman himself has done nothing to relieve municipalities in his own electorate, or anywhere else, of this burden. The honorable member, of course, being an auctioneer, would not eat grass. He would live otherwise. The honorable member for Mallee went on to say on that occasion in 1954-
The Government is making the right approach to the subject of pay-roll tax. I agree with the statement of the honorable member for Petrie that pay-roll tax is not a correct form of taxation, because it is not related to profit.
But he will still vote to-night against this amendment.
– Read the rest of my speech on that occasion.
– I have no intention of pandering to the honorable gentleman’s diseased egotism by quoting all he said.
Mr. Chairman, I wrongly attributed the last remarks that I quoted from the 1954 debate to the honorable member for Mallee. They were made by you from the floor. However, the honorable member for Mallee did say -
I think honorable members will agree that 1 am right on the mark when I say that, when this Government assumed office, it stated that taxation would be progressively reduced as the economy was stabilized.
– Has that not happened?
– I do not think that it has.
– I like what the honorable member is reading. I hope that he will continue.
– I will. The honorable member will not make me desist. Indeed, only the forms of the committee could do that. He said also -
Like other honorable members on both sides of the House, I favour the abolition of this form of taxation.
When does the honorable member for Mallee propose doing something about it? To-night, he will undoubtedly vote against this amendment, just as he voted against the last. The honorable member said further -
I am hopeful that, in the near future-
He did not define “ near future “ - since conditions are improving so tremendously under the Government-
Of course, that was mere wishful thinking - and as people have been made able to achieve not only increased productivity, but also many other things . . . this tax will be abolished.
I invite the honorable member and every other member of the Australian Country party, and members of the Liberal party, to vote to-night in favour of this amendment.
– When did the honorable member say that?
– In 1954.
– About 40,000 employers have since been relieved of the tax.
– I said that at another stage, and I do not think that I did the Treasurer’s reputation any harm on that occasion either!
– You could not.
– I could if I tried. What I am trying to do now is persuade the timorous members of the Australian Country party and the Liberal party, who have, in the past, attacked the pay-roll tax, to line up with us on this amendment.
Order! The honorable member’s time has expired.
.- When the honorable member for Melbourne (Mr. Calwell) appeared recently on a television programme and was asked what was his greatest headache at the moment, he said that it was the Menzies Government. Apparently, the headache persists.
– I was right. It is Australia’s greatest headache, too.
– I am glad that the honorable member to-night confirms the fact that he did express those sentiments, and still believes in them. Obviously, tonight he is opposing not so much the tax as the Government. He is imbued with the idea that he must get back to the treasury bench. He is concerned, not with applying logical thought to some taxation problem, or legislation, but with returning the present Opposition to the treasury bench. He has chosen to quote some of the things that I said on this subject some years ago, in 1954, and he has quoted certain passages only. Many honorable members opposite - among them some who are here now - have complained in the past that their remarks have been taken out of their context. To-night, 1 have been the victim. The honorable member for Melbourne has chosen to cite selected passages which suited his case, and he is an expert at that. If he can put an honorable member in the wrong by quoting a half-truth which suits his case, he is happy to do so. He then bears a smile similar to the smile that he bears tonight. And I may add that, despite his portrayal in newspaper cartoons as a lugubrious person, he can indeed smile when he wishes to do so.
– I can smile at the cartoons, too.
– That is very true. A lady recently said to me when she came to Canberra, “ After seeing the cartoons portraying Mr. Calwell, I was quite surprised to see what a fine, upstanding man he is. He is quite different when you see him in person.” I think that we should at least pay him that compliment, and say that the newspapers are quite wrong in depicting him as they do. Be that as it may, the honorable member said that, in 1954, I had made certain statements. I told him that I liked hearing my speech read out, and pressed him to read further. He quoted me as saying, in 1954, that I hoped this tax would be progressively reduced - or that the statutory exemption would be raised - which is very much the same thing.
– You said that you hoped the tax would eventually be abolished.
– My stand on that matter has not changed, and I can prove to the honorable member that, since 1954, the incidence of pay-roll tax has been progressively reduced. I have advocated this both at party meetings and in this chamber.
– Since 1954. I am sorry that the honorable member for Stirling (Mr. Webb) cannot understand something that is so transparently clear. The Treasurer (Sir Arthur Fadden) has, of course, been wide awake in this matter. He has known of the advocacy on this side of the Parliament and, indeed, has himself personally endeavoured to reduce the application of the pay-roll tax. On many occasions I have heard him say that, consistent with the need to maintain the stability of the economy, it should be progressively reduced.
It is strange how, one day, honorable members opposite regard Australia as having great prosperity and, the next, regard it as suffering from a depression. They choose whichever state of affairs suits their case at the moment. How often have they said: “ The people are the best judges. You are always against the Labour opinion “? Yet when the people have been given an opportunity to state their views they have always given us their support. The bill before the committee has but one purpose - to raise the statutory exemption from pay-roil tax from £6,240 per annum to £10,400 per annum. That is the object of the bill.
– We are discussing the amendment.
– I am leading up to that. The amendment seeks the insertion of a new clause - not the mere alteration of an existing clause. The Treasurer has made the object of the bill quite clear, and it has my full support. One would think that the Deputy Leader of the Opposition, having moved such an amendment, would tell us how the £50,000,000 that is required for child endowment would be raised. One of his colleagues did that to some extent, but after all one does not take back benchers too seriously because the present Deputy Leader of the Opposition, if his party were returned to office, would pay no regard at all to what had been said by a back bencher. The honorable member for Melbourne has not told us how the money needed for child endowment would be raised.
– I have.
– In any event, that is not under discussion. The question is whether local authorities should be exempt from pay-roll tax.
– I should like to ask how the money lost by the extension of this exemption would be made up. One would think that an honorable member who moved an amendment that would deprive the Government of a large sum of money for the financing of child endowment, a purpose that has the support of all - including the Deputy Leader of the Opposition - would say how the money was to be raised. I rose on the spur of the moment because I felt that I must reply to the unwarranted attack made on me by the Deputy Leader of the Opposition. I still stand where I stood in 1954, except that I am happy to see the things which I have advocated are to be given effect through this bill, which has my full support.
.- It has been said that “ Hansard “ is one of the curses of the Parliament, because when an honorable member makes a speech it is recorded and can be quoted against him some years later. We have seen an example of that in this debate. The Deputy Leader of the Opposition (Mr. Calwell) quoted speeches made by the honorable members for Macarthur (Mr. Bate) and Mallee (Mr. Turnbull) some time ago in which they supported, unwittingly of course, the proposition now advanced by the Australian Labour party in the amendment moved by the Deputy Leader of the Opposition Although in their hearts they agree with the proposal made in the amendment, they are not prepared to stand by the opinions they expressed in those speeches. To-night we had the honorable member for Mallee apologizing for what he had said then.
– The honorable member should withdraw that statement. I did not say that. I admitted what I said and stood by it.
– I believe that the honorable member apologized for his speech of 1954. I really believe that. He finds it rather embarrassing now when the Deputy Leader of the Opposition reminds him of what he said then. He resents the exposure to which he has been subjected in this chamber this evening.
I believe that the proposal contained in the amendment moved by the Deputy Leader of the Opposition is one which, if accepted, would be of great value to municipalities throughout the length and breadth of Australia. I have heard many speeches in this chamber on the subject of the exemption of local authorities from the pay roll tax. The Deputy Leader of the Opposition is attempting, by the amendment he has moved, to do a great service for local government in Australia. It is admitted that local authorities receive their charters from the various State governments, but frequently the State authorities, starved for finance under the uniform taxation system - with which I have no quarrel, except for the formula - find that they cannot give to the local authorities the relief which is so necessary. We on this side of the chamber feel that one method that could be adopted to assist local government authorities would be to relieve them of their present liability to pay-roll taxation.
It is true that this evening we are considering a proposal - a very worthy proposal I will admit - by the Treasurer (Sir Arthur Fadden) to raise the exemption limit for pay-roll taxation, but as a counter to that the Opposition has submitted that local authorities should be entirely exempted from pay-roll tax. The real position with which we are faced is that the proposition of the Treasurer is to give private corporations, private companies and private traders exemption from pay-roll taxation to a considerable extent, but the Opposition wants public corporations, municipalities, to be given complete exemption. I come from the city of Brisbane, which has a system of local government that is the envy of all other local authorities in Australia. The local government authority in Brisbane is efficient and sound in operation.
Mi. Whitlam. - A metropolitan parliament.
– It is a metropolitan parliament, as the honorable member for Werriwa suggests. The revenue of the Brisbane City Council amounts to £25,000,000 a year. Of that amount, speaking from memory, about £5,000,000 is used to pay interest and debt redemption charges, about £10,000,000 is spent on materials, and about £10,000,000 is spent on the payment of wages. Under the progressive relief system advocated by the Treasurer, it would be a very long time before a municipality paying £10,000,000 a year in wages were exempted from the payroll tax. As every penny received by the local authority in Brisbane is spent in an attempt to provide much-needed amenities for the citizens, the Commonwealth Government should be prepared to assist it, and also every other local authority in Australia, by exempting local authorities from pay-roll taxation. If that were done, municipalities would be able to provide greater services, not of the luxury class, but basic services such as water supplies, sewerage and drainage facilities, and health services and other things on which the life of a city depends.
Surely that is not asking too much of a government that can give liberal taxation concessions to trading organizations. When we were debating the motion for the second reading of this bill the honorable member for Yarra (Mr. Cairns) referred to this matter at length and gave the House some rather informative figures. As the Government is prepared to grant taxation concessions to trading corporations, surely we are not asking too much in requesting this concession for local authorities, the benefit of which would be felt by every citizen in every city, shire and municipality. We all know that local government is the basis of the life of any community. Good local government promotes a sense of responsibility in any community.
At present, local authorities are being slowly throttled, financially speaking. Their revenues are decreasing and they cannot obtain from the State authorities the financial assistance that they need. I am not prepared to try to justify the actions of the State governments in this matter, but by supporting the proposition advanced by the Deputy Leader of the Opposition we could take a bold step forward towards assisting local authorities, which are crying out for financial assistance. This Parliament is the tax gatherer of the Commonwealth. The Commonwealth Treasury is bursting at the moment with moneys received from many sources. The Commonwealth Government could quite easily exempt local authorities from this very heavy tax. In the interests of all local authorities in Australia, I hope that the amendment moved by the Deputy Leader of the Opposition will be accepted.
If the members of the Australian Country party, some of whom have expressed themselves in times past as being in favour of the proposal now advanced by the Opposition, accept the amendment before the committee, they will earn the gratitude of the members of country municipalities and shires, who are crying out for the revenue needed to provide decent roads and good amenities for the citizens of the areas they represent.
.- I support the amendment moved by the Deputy Leader of the Opposition (Mr. Calwell). 1 was interested to hear the Treasurer (Sir Arthur Fadden) say that the Government would not accept the amendment because pay-roil tax was imposed to cover as wide a field as possible and had to be used for the purpose for which it was originally enacted. I point out that the tax was imposed in 1949-41 at a time of national crisis when the government was straining every nerve to raise money for the sinews of war. and an additional source of finance was necessary to provide for the implementation of the child endowment scheme.
– The honorable member is now making a second-reading speech on the bill. He must confine his remarks to the amendment which proposes to exempt local government bodies from the tax.
– That is so. The reason municipalities should pay their share of the tax in 1941 does not apply to-day, because we are living in far different times. In 1941 every one and everybody, small or large, had to put their shoulders to the wheel and provide the necessary finance for government services. The Government is now obtaining far more revenue than it did in 1940-41. It was not possible to exempt municipalities during the war, or in the immediate post-war period up to 1949-50 because the government had incurred liabilities consequent upon the war. To-day the Government budgets for a revenue of £1,200,000,000, and to expect poverty-stricken municipalities to contribute to that budget in this way is not a fair thing. It is all very well for the Treasurer to say, “ The Chifley Government and the Curtin Government did not remit this money to the municipalities “. If the Parliament accepts that approach as being logical - that because something was done ten, twenty or 30 years ago it must be done now, or like the laws of the Medes and Persians must not be altered - there is no hope for Australia. Because a Labour government did something seven, eight or ten years ago, surely it does not follow that if a Labour government were in office to-day it would pursue the same policy. Of course it would not. The Labour party adjusts its policy to meet changing conditions and to progress with the times. I have not the slightest doubt that if a Labour government were in office to-day this proposed amendment would be made law.
As a member of the Parliament in 1957 I am not going to be bound for ever by something which a Labour government did ten years ago. After all, different men are in the Parliament to-day. Their ideas which may have been out of place in 1947 are modern and are accepted in this year of grace. I refuse to accept the argument that is always trotted out, “What did you do when you were in office? “ We believe in marching with the times. To-day municipal bodies throughout the Commonwealth are demanding to be exempt from the imposition of the pay-roll tax. This agitation has grown with the passing of the years, and surely something beneficial to the municipalities can be suggested. We are doing that. The honorable member for Mallee (Mr. Turnbull) believes the pay-roll tax is being progressively reduced. All I can say is that his definition of progress does not coincide with mine, because a microscope is needed to see the benefit resulting from this minute exemption of pay-rolls up to £80 a week. That is a mere flea bite in these days of inflation, and will not help municipalities one iota. The Government is trying to side-step the issue. It knows perfectly well that the Opposition on this occasion is speaking for the people and municipalities in the north, south, east and west of this great country; but because the amendment emanates from the Labour party it is anathema to the Government, tainted at the source, and must not be touched with a 40-foot pole. The Government has adopted that policy.
During the eight years I have been a member of the Parliament the Government has on only two occasions accepted amendments moved by the Opposition and those amendments simply altered the terminology of a particular clause. I ask the Government to cast aside these shackles of prejudice and bias against anything emanating from the Labour party. We are not putting this amendment forward for party political gain but because we know the difficulties being encountered by municipal bodies and we want to assist them in financing services demanded by ratepayers. I venture to suggest that not £2,000,000 would be involved in this matter. What is £2,000,000 in a budget of £1,200,000,000? It is practically infinitesimal, but the concession would be of tremendous benefit to these bodies which are doing such wonderful work in spite of lack of assistance from the Commonwealth. 1 appeal to the Government to give the amendment the consideration it merits. I have no doubt that many government supporters really approve of the amendment, but because of their policy that nothing must be accepted from the Opposition, they will in a few minutes vote against their own convictions although inwardly they agree it is the right and just thing to do for the municipalities throughout this country.
.- The refusal of the Government to accept the amendment is a clear indication of its lack of sympathy for and understanding of the problems facing local government bodies. I should have thought this amendment would receive the approval of the majority of members of this committee. It is not uncommon for honorable members on returning to their electorates to meet the shire presidents and councillors and mayors and aldermen of various municipalities and to express their great faith in local government. Honorable members agree that local government authorities are entitled to a new deal. Let us appreciate this fact at the outset: Local government, in co-operation with the Commonwealth and the States, shares the responsibility of controlling this nation. In accepting the statement that local government has its responsibility to meet the problems facing Australia, I think it is only reasonable and just that the amendment submitted on behalf of the Opposition by the Deputy Leader should be accepted by the committee without serious opposition. It is astonishing to hear some members on the Government side, especially the honorable member for Mallee (Mr. Turnbull), who has since left the chamber, say-
– I am here.
– It was astonishing to me to hear them expound this view when in opposition and yet, in the committee this evening, from the other side to put forward a contrary view. It is amazing how easily some honorable members change their coats. Time and geographical position produce an amazing effect. Those honorable members speak to shire presidents and shire councillors, then come into this place and deny the things that they have upheld in their electorates.
I can only put to this committee this evening the case that was well documented by the Opposition speakers on the needs of local councils. Why should this course be adopted? I submit, Mr. Chairman, that there are a number of reasons. First, there is the question of inflation. Local government is beset with the problem of rising costs, and just as rising costs interfere with the budgetary plans of this Government, so, too, local government has had to cut its cloth into conformity with the inflationary trends in trying to give the services required by the people. This inflation has not been made by local government. The inflation in this country has been made mainly by this Government, which refuses to face up to its responsibility to deal with the problems of higher profits and an uncontrolled economy.
It is not my intention to develop that theme. I shall keep to the amendment submitted to the committee. The amendment is necessary also in respect of the expanding needs of the people throughout Australia. The question of the additional services being provided by local government is a clear indication of the need for additional funds to be made available to it. Time was when it was sufficient that local governments should provide roads, bridges, drains, gutters and the normal health services in their respective areas. To-day, the position has changed quite considerably, for, in addition to all those historic services which were provided by local authorities, it is true to say that to-day local government is called upon to provide a multitude of new services - libraries, swimming pools, educational facilities of various kinds, immunization against polio and diphtheria and all those other services which have been thrust on to local government and which must be paid for.
It seems reasonable, therefore, that the Commonwealth Government should try to meet the situation. One way in which local government can be aided by the National Parliament is by relief from the incidence of the pay-roll tax.
The question of the expanding needs of the people seems to me not to require further remarks in this chamber. It must be accepted by every honorable member. Not only have new tasks and new responsibilities been thrust upon local authorities, but these additional duties have to be fulfilled on behalf of the people. Surely no one would suggest that local government should retreat from the position it has taken up in trying to provide the amenities and services required by the people. But in addition to that, the Commonwealth Government has a responsibility. It has embarked upon a vigorous immigration policy. I am not here to-night to offer criticism of the immigration policy. When I speak of that policy I do so merely to point out that it imposes stresses and strains upon the economy of the nation. Just as it has imposed those stresses and strains, it likewise has affected local government most severely, for local government is called upon to provide amenities and necessary services for the newcomers. As local government is charged with the responsibility of providing water, sewerage, drainage and many other services for the expanding population, again I suggest to the committee that there rests on the Commonwealth Parliament a responsibility to provide local government with the additional money that it requires for the purpose of carrying out these services.
The Commonwealth Government has not indicated that it is prepared to devote even the whole of the proceeds of the petrol tax to local councils for roads and sundry services, and is not prepared to vote a sum of money from the common pool of taxation to help local government. I submit that this is one positive way in which the Parliament of the Commonwealth of Australia, in committee here this evening, can strike a blow to assist local government to overcome some of its problems. Local government would not derive a great sum of money from acceptance of the amendment, but the amount would certainly help.
The wording of the amendment makes it clear that no assistance is to be provided to local government authorities for their various trading funds. Many of them have non-profit trading funds; nevertheless, they would derive no benefit from the amendment. Personally, I would prefer a blanket proposal in respect of all local government funds, so that the local authorities may be assisted in the broadest possible way, but the amendment merely provides that with the exception of the trading funds, the pay-roll tax shall not be levied on local government funds. I would say that as the Commonwealth Government has taken a stand in relation to its own works, it should announce that it does not intend to levy pay-roll tax on bodies that are helping to build this nation. It has no moral right to impose pay-roll tax on our local authorities which are performing a service to the people.
The amendment will test honorable members in this chamber. They have an opportunity to vote for the amendment and with local government on this question, or to vote against the amendment and against local government in this country. The test awaits honorable members this evening. I submit that those who are really on the side of local government will record their votes in favour of the amendment that has been proposed by the Deputy Leader of the Opposition.
– I rise to make a personal explanation. When the honorable member for Macquarie (Mr. Luchetti) was speaking, he said that the honorable member for Mallee had made certain remarks and then left the chamber. I point out that I have been in this chamber continuously since 8 o’clock. It seems to me that there is a kind of organized effort-
– Order! The honorable member is going beyond a personal explanation.
– The amendment that has been moved by the Deputy Leader of the Opposition (Mr. Calwell) is doubtless very desirable from many points of view, but I do not believe for one minute that the Opposition is serious-
– Will you vote for it?
– My reason for making that statement is that if honorable members opposite were serious, I think their Deputy Leader would have moved something worth while, and not just taken a sentence or a paragraph out of its context in order to try to catch one or two votes. As we have passed the Budget, it is not much use our proceeding to tear it to pieces.
I have risen at this stage to say that I think all honorable members in this chamber would like to see the pay-roll tax abolished. I merely ask the Government to consider that view before framing the next Budget. It is no good waiting until next year’s Budget is introduced. At that stage, it is too late to have the matter reconsidered.
This amendment deals only with one section of local government. The honorable member for Macquarie (Mr. Luchetti) said that it does not cover even the trading instrumentalities of local government. If you are going to remove pay-roll tax from one section of local government, why not remove it from the lot? And if you are going to remove the tax from local government, there is a very much stronger case for removing it from State governments and instrumentalities. I do not want to discuss that proposal at any length. Any one who has had anything to do with the States knows that pay-roll tax affects the States much more than it affects local governing authorities. We compare the results of the Commonwealth Railways with those of State Railways, but the Commonwealth Railways do not pay pay-roll tax.
I ask the Government to consider this matter before the next budget is brought down. The pay-roll tax adds very considerably to the cost of transport and the cost of living. We tax other governments but we refuse to pay their taxes. As an example, I mention that the hire-purchase tax imposed in Victoria is not paid by Commonwealth instrumentalities. This whole system of taxation is topsy-turvy. One amendment of this nature is no good, and we should not be expected to give it serious consideration. I know that the Government has given much thought to the problem of pay-roll tax, but could not alter it at this stage. I do not intend to vote for the amendment for that reason. Every one has a very good and just reason for not voting for it. The amendment has been moved for one specific purpose - in the hope that some of the local governing authorities may think that the Opposition is serious. However, I ask the Government, before the next budget is introduced, to consider the position in which we refuse to pay State taxes but impose a tax of this nature on State governments and local governing authorities. This tax merely increases the cost of living, and therefore increases inflation.
.- The honorable member for Chisholm (Sir Wilfrid Kent Hughes) has touched upon the very real anomaly that pay-roll tax presents in the financial relationship between the Commonwealth and States. The whole intendment of the Constitution is that the Commonwealth should not tax the States or their creations and that the States and their creations should not tax the Commonwealth. Section 114 of the Constitution quite categorically says that the Commonwealth shall not impose any tax on property of any kind belonging to a State. Nevertheless, the device of taxing the States and their instrumentalities, not in regard to their property but in regard to their employees, was discovered in the 1940’s and the 1950’s. As the honorable member for Chisholm has so rightly put, the State instrumentalities are now the largest contributors to the Commonwealth exactions of pay-roll tax. The New South Wales Department of Railways is the biggest contributor of that tax in Australia. From recollection, it pays about £1,300,000 a year.
– Pay-roll tax represents 25 per cent, of the deficit of the New South Wales Railways.
– Exactly. Among other very high contributors to pay-roll tax are the State Electricity Commission of. Victoria and the water boards of the various Stales. I completely support the exemption from pay-roll tax of all such public authorities.
– We are dealing only with municipal or local governing authorities.
– I agree.
– Well, be relevant.
– Because nobody - the honorable member for Chisholm, or anybody else - has moved that we exempt all State governments and all State instrumentalities from the payment of pay-roll tax does not mean that we should therefore refuse relief to any of those instrumentalities.
I was disappointed in the speech of the honorable member for Chisholm only to the extent that he attributed to us on this side a want of good faith in not going as far as he suggested. I am sure that if he were to move an amendment as wide as he suggested, we would support it to a man. If he really wishes to know why we have excluded trading authorities from the amendment, let me point out to him that it is in order that no accusation can be made that we are seeking an advantage for, say, Stale omnibus services over private omnibus services or for electricity services which are predominantly publicly owned over gas services which are predominantly privately owned. We have sought by this amendment completely to discard any anomalous discrimination and we have concentrated on seeking to exempt the municipal and local government services which are indubitably of a governmental kind. We want to remove the anomaly under which the Commonwealth is able to tax municipal authorities in respect of building inspectors, health inspectors, engineers and road gangs employed by them.
– And civil defence workers.
– Yes. They are obviously governmental activities in the same sense as any activities which the State governments have ever carried on in a century and a half or we have ever carried on in half a century. Can anybody justify the Commonwealth still taxing such purely governmental activities carried on by local government authorities? Such taxation cannot be justified.
– Your government contemplated it and did it for many years.
– We did.
– You asked whether any government could do it. You should consider Labour’s record.
– We would be well content if the right honorable gentleman would carry on everything which the Labour government did but which he now repeals when it suits him.
– I know you would, but we are not foolish enough for that.
– The right honorable gentleman wants it both ways. It is true, of course, that we continued pay-roll tax. It was introduced, as I recollect, in 1941 to finance the Commonwealth’s payments of child endowment. It had previously been imposed in one form or another by the New South Wales Government after that Government introduced child endowment about 1926. It is true that when we came into office late in 1941 we continued payroll tax on local government bodies which we now seek to exempt from it. Surely that excuse can no longer justify the Treasurer (Sir Arthur Fadden) and his followers, because he has been in office for nearly eight years. If he rejects this very reasonable amendment, which many of his followers have supported in the past, then surely the weakest of his arguments is that Labour used to tax local government bodies. We have admitted our error, if the right honorable gentleman wants us to say so. What is wrong with the Government exempting them now? How much longer will it wait before it does the right and decent thing?
Pay-roll tax is surely not a very great advantage to the Commonwealth, but it is a considerable burden to hundreds of local government bodies. I think the Prime Minister (Mr. Menzies) has stated that there are 1.000 such bodies, municipalities, shires and counties, in Australia. A very real contribution would be made to their activities if we were to exempt their purely governmental functions from the payment of pay-roll tax to the Commonwealth Government, which ought to be their partner in the government of Australia. I do not know what amount is involved. I do not recollect the Treasurer having said how much would be involved if this amendment were carried. One difficulty in finding out anything about pay-roll tax is that the secrecy provisions of the income tax legislation are repeated in the pay-roll tax legislation. Although everybody knows that every large company and every large State instrumentality and municipal instrumentality pays pay-roll tax, the Treasurer constantly says in answer to questions which we put on the notice-paper - and he has said it in answer to questions which I have tried to make as innocuous as possible - that the law prevents him revealing the figures. Surely he can give the sumtotal that is paid by local government, or State government, instrumentalities to the Commonwealth by way of pay-roll tax. We believe that it has continued to mount with the inflation during his term of office, in the same way as has the amount of payroll tax paid by private enterprise, private employers and companies.
– The high wage content is a factor, too.
– Exactly. These are payments made by governments whose costs are much more, in the way of wages and salaries, than are those of companies; that is, the burden which pay-roll tax represents to local government proportionately is much greater than is the burden which it represents to companies and industry in general.
– Local government bodies cannot pass it on, either.
– Precisely. Whereas we are always hearing complaints - many of them justified - of the burden that payroll tax represents to industry, which, of course, can pass it on to its customers, how much more should we consider the burden which pay-roll tax represents to local government, whose main costs are in the nature of wages and salaries; that is, in the nature of pay-rolls. We are mulcting the ratepayers to benefit the Commonwealth. If we are really to play the role of partners in government in Australia we should exempt municipal bodies from pay-roll tax in the same way as we insist on our exemption from municipal rates.
– Order! The honorable member’s time has expired.
– It becomes more and more obvious, as we listen to the members of the Opposition, that they have not understood the arguments that were put forward officially on behalf of the Opposition by the honorable member for Melbourne (Mr. Calwell), and that, rather like Stephen Leacock’s horse, they are galloping off in all directions at the one moment. What did the honorable gentleman say? I think it wise that the gentleman from Werriwa (Mr. Whitlam), who has just resumed his seat, should appreciate and know the arguments that have been put forward by the honorable member for Melbourne.
First, the honorable member for Melbourne argued clearly that it was the responsibility of those who urged the abolition or reduction of pay-roll tax to say how the money that would.be lost by the Treasury could in fact be found by alternative means. In other words, officially the Opposition argued, “ If you want pay-roll tax reduced by £15,000,000 for the benefit of State and local governing authorities, then tell us how you are to get the additional finance “. The honorable member for Werriwa has not bothered to listen to what the honorable member for Melbourne said, but has merely argued - “ Reduce the tax and to hell with the consequences “, not bothering to say how the additional money was to be found, not knowing whether in fact that could be done, not bothering about the consequences at all, and ignoring the argument that was put forward officially by the Opposition itself.
Secondly, he has not argued to the text of the amendment which relates, not to the wholesale reduction of State and semigovernment taxation or pay-roll tax, but exclusively to tax paid by local governing authorities or local governing bodies. We who sit on this side of the chamber recognize the fact that the honorable member for Werriwa, the honorable member for Macquarie (Mr. Luchetti), and other honorable members opposite, have not understood what was officially put forward by the Opposition. Let me come to the honorable member for Melbourne. He said that some years ago - in 1954, to be precise - he had put forward a somewhat similar amendment. But that was not the first occasion on which something of a similar nature had been thought of. Shortly after the Treasurer (Sir Arthur Fadden) became Treasurer he set up the Commonwealth Committee on Taxation, which went into the problem of pay-roll tax insofar as it affected local governing authorities. As I said here this afternoon, that committee came to the following conclusion: -
Although the committee is of the opinion that a strong case exists for exempting certain local governing bodies from pay-roll tax, it is unable to define the extent of any such exemption because it feels that other considerations cannot be excluded.
If the honorable member for Melbourne had gone a little further into the substance of the committee’s report he would have found that the committee also stated -
It seems to the committee that there must exist a case to exempt certain Government and semiGovernment activities from pay-roll tax. There is probably a stronger case to exempt State pay-rolls, especially to the extent that they are a direct charge on revenue . . .
Think, therefore, of the anomaly that would be created if the suggestion of the honorable member for Melbourne were accepted! A greater anomaly would in fact be created, as was recognised by the Commonwealth Committee on Taxation. In other words, the honorable member for Melbourne has read the recommendation without bothering about the substance, and therefore without bothering about the logic. In fact, he would create greater anomalies than those which he now seeks to cure. In terms of logic, the honorable gentleman’s argument is difficult to follow.
There are two facts with which I want to deal quickly. If we accept the logic of the argument of the committee, then there would be taxation remissions amounting to approximately £15,000,000, made up as follows:- £900,000 for Commonwealth semi-government authorities; £12,400,000 for State government authorities; and £1.600,000 for local governing bodies. What would happen if the logic of the argument of the committee were accepted, so that we had to find an extra £15,000,000 of taxation? Where would the money come from? I put it that the Opposition, of necessity, would be compelled to argue that Australian companies alone would be bearing the burden of the residue of taxation, amounting to £35,600,000, and the probability is that they would be asked to bear the additional burden of approximately £15,000,000. I want it to be on record that this would be the probable effect of the arguments of the honorable member for Melbourne and, more particularly, of those of the honorable member for Werriwa. Australian companies would get it in the neck. Australian companies would be compelled to pay the tax that would be remitted to State governments and local governing authorities.
There are two other arguments that I should like to use against the amendment. The first is, as my colleague, the Treasurer, very well pointed out, that this section of the taxes that are imposed has the least inflationary impact on the cost structure of this country, because it has no cumulative effect as it moves through; so that we should be removing the tax that has the least impact on the community itself. Then there is the question of the extent to which we should in fact remove the tax from what the honorable member for Yarra (Mr. Cairns) has called the poverty-stricken local governing authorities. The amount of tax paid by them would be £1,600,000 over the whole area of local government taxation, and therefore to say that the remission of that amount would be a great help to the poverty-stricken local governing authorities is sheer and absolute nonsense.
Of course, we on this side of the chamber would like to see further tax reductions. Of course, we favour the cause of local governing authorities, but we think that that cause would be far better met by the State governments recognizing the great task that those authorities face and making some worthwhile contribution to their future, such as giving them extended franchise and extended local governing activities, and helping them to carry out their responsibilities. There is a second argument, again as my colleague, the Treasurer, has pointed out, that when considering tax reimbursements, the amount of tax paid by the State governments, the semi-government authorities and the local governing authorities is considered. If we were to remit or cancel the tax as applied to municipal bodies, all that would happen would be that for one year, and one year only, local government authorities would get an extra £1,600,000, but, thereafter, when the adjustments took place, they would, in effect, get nothing extra. So what nonsense the argument of honorable members opposite turns out to be in terms of long-range trends and benefits likely to ensue. If the State governments were sincere, and particularly the socialist Government of New South Wales, they would be making concessions now.
The other argument that I want to put very strongly is that if we are to remit £15,000,000 of tax paid by State governments and local and semi-government authorities, then Australian industrial and commercial concerns will have to pay. I want to warn again of that possibility, and I want our Australian companies to know what the consequences would be if the Australian Labour party had the opportunity to interfere with this tax.
I come now to one other criticism that has been made, because of what has been said about my colleagues of the Australian Country party. When they have argued in favour of changes in the payroll tax they have been accused of not being prepared to stand up to what they have said were their principles. I say most emphatically that taxation is a matter of choice and of priorities. To my knowledge, the Australian Country party has always been a tax reduction party, but it is a practical party. It put its programme of tax reduction in an order of priorities.
– Order! The Minister’s time has expired.
.- I was rather pleased to hear the Minister for Primary Industry (Mr. McMahon) quoting Stephen Leacock. The Minister reminds us of Stephen Leacock’s description of a landlady as an angular object capable of anything. As I listened to his argument, it seemed to me that he is capable of anything in the field of logic. Let us take the Minister’s point that if we abolish the tax as it applies to municipalities, thus giving them an extra £1,600,000 this year, next year they will receive no practical benefit, because the tax will not be levied on them and they cannot, therefore, get out of it. That argument reminds me of my small son who, before he commenced to attend school, howled when the holidays came around because he was not getting any.
– Not getting any what?
– He was not getting any holidays. I am glad to see that the Treasurer has finally awakened. I listened to his interjections with mingled feelings of gratification and sorrow. I was gratified that his sense of history is such that he continually speaks of what the Labour party did in the past, but I am sorrowful that he does not turn his mind to the great constructive achievements of the Labour party and take up its cause with equal vigour One of my colleagues suggests that the Treasurer should confine himself to banking matters.
Let us examine the general position with regard to pay-roll tax. Is the rate-paying citizen a completely different animal, in an entirely different field, from the person who pays income tax? Is there any unity in the whole spirit of government in Australia? Is there no unity between State, Commonwealth and municipal governments? Is it not our objective to produce an ordered, organized and well-governed community foi everybody? Surely that is the fundamental concept of government. How the Treasurer and his colleagues can justify the taxing of municipalities that are carrying out thu business of government just as importantly as this Government is, while exempting Commonwealth instrumentalities from paying even rates to those municipalities, surpasses my comprehension.
– There is a pretty good precedent for it all.
– But the point is, Sir, that after your long and distinguished service in this chamber you have nearly reached the stage where you are creating precedents - or you ought to be. If we adopted the Treasurer’s attitude, there is no real reason why we should not go back to the Stone Age and perhaps have no taxes at all.
– That might have its advantages, too.
– We would be quite at home with the Australian Country party if we did get back to the Stone Age. I suggest that we should be endeavouring to bring a spirit of unity to the problem of taxation generally and to the whole principles of government. This is not a purely abstract argument for the abolition of pay-roll tax on municipalities. I represent a couple of municipalities in this chamber. Each one of them pays about £4,000 a year in payroll tax and has about 15,000 or 16,000 ratepayers. Every rate assessment that goes out in Coburg and Brunswick includes an amount of about 5s. to meet the pay-roll lax paid by the instrumentality concerned. This illustrates how the pay-roll tax affects every member of the community. Each one of those amounts of 5s. paid in tax decreases the opportunity of the municipal authority to carry out the services that are being demanded by the people. If a person goes to the local library, maintained by the municipality, the service he gets is restricted to the extent of the amount of money taken from the local authority in pay-roll tax but if he goes to the post office to collect his letters from the instrumentality maintained by the Commonwealth Government, he finds that that organization is not restricted in the same way.
These aspects of taxation policy are completely indefensible. We have chosen our battleground in this instance in the field of municipal taxation. After all, there are in Australia about 900 municipalities. I do not know how many of them have a large enough wages bill to require them to pay pay-roll tax, but I have no doubt that about 500 or 600 of them would be involved. All the 30 municipalities around Melbourne would pay from £3,000 to £6,000 or £7,000 a year. I do not include the Melbourne City Council, which would pay something more than £100,000 a year, and when we are discussing municipal finance £100,000 is not chicken feed. It is nonsense for the Minister for Primary Industry to suggest that the amounts paid by local authorities are insignificant. Amounts of £3,000 or £4,000 in municipal revenues are very important. The indefensible feature of the system is that the pay-roll tax puts the municipalities and other government instrumentalities in a position in which they cannot meet their expenses, and so they must have recourse to loan funds and Commonwealth subsidies. The Commonwealth Government must then levy extra taxes to meet the commitments of State instrumentalities, including railways and local authorities. It has to levy special taxes to meet a situation brought about by its own taxation policy. If this is not accelerating the inflationary spiral that is so fondly talked about by honorable members opposite, I miss my guess.
The argument of the Minister for Primary Industry that the pay-roll tax is not inflationary cuts no ice, particularly when it is applied to municipalities such as those which I represent, which, for the best part of the 100 years of their existence have been almost completely starved of the good things of life. The services that the people of these communities should have had have been denied them. If £3,000 or £4,000 were spent on increasing the services, such as libraries or baby health centres, in those municipalities, or in improving the streets, it would constitute a valuable contribution to a better way of living for the people in those districts. The same remarks apply to other districts in all parts of Australia.
We contend that the attitude of the Government is indefensible. If the Treasurer bases his policies on the past, he must take the good with the bad when turning back the pages of history, and he must accept a more constructive attitude to other questions. If our endeavour is to achieve unity of purpose in government generally, State, municipal or Commonwealth, then the taxing of municipal governments by this Government is indefensible, especially in view of the fact that the Commonwealth Government refuses, in practically every instance, to meet commitments by way of rates on property held by it in the various municipalities. In the case of some municipalities, these rates amount to £2,000 or £3,000 a year.
The argument that the £1,600,000 involved in the remission of this tax is of no particular account cannot be sustained. If it is of no particular account for the municipalities, it is of even less account for this Government with its £1,300,000,000 Budget, and, therefore, this Government would suffer no serious deprivation if the tax were handed back.
The suggestion that honorable members on this side of the House are not putting the matter forward sincerely is nonsense. Members of the Labour party, unlike their political opponents, step into the municipal field conscious of their responsibilities to the people as Labour men, and they know what they are talking about. Honorable members should pay very close attention to the remarks of the honorable member for Batman (Mr. Bird) about municipal government. We on this side of the House accept municipal government as another field of government activity. We regard it as entitled to some consideration from this Government. A Labour man does not change his outlook when the enters the municipal field. He admits he is a Labour supporter and he does not change his politics every second Monday night. These are points which honorable members on the Government side ought to be considering. According to the schedule in the report of the Commissioner of Taxation for 1954, 882 local government bodies were paying pay-roll tax. I am surprised that the Treasurer, with his great experience and the knowledge he has gained in practically running the country - as he has done for half the lifetime of us younger members at least - should fail to realize that it is about time he ceased looking into the past and looked into the future. When he does so and takes the constructive step of removing the pay-roll tax, I shall be very happy to pay him tribute.
– Mr. Chairman-
Motion (by Mr. Harold Holt) put -
That the question be now put.
The committee divided. (The Chairman - Mr. C. F. Adermann.)
Majority . . . . 26
Question so resolved in the affirmative.
Question put -
That the clause proposed to be inserted (Mr. Calwell’s amendment) be so inserted.
The committee divided. (The Chairman - Mr. C. F. Adermann.)
Majority . . . . 24
Question so resolvedin the negative.
Title agreed to.
Bill reported without amendment; report adopted.
Bill - by leave - read a third time.
Motion (by Mr. Harold Holt) proposed - That the House do now adjourn.
.- Mr. Sneaker, this afternoon, at question time-
Motion (by Mr. Harold Holt) put -
That the question be now put.
The House divided. (Mr. Speaker - Hon. John McLeay.)
Majority . . . . 25
Question resolved in the affirmative.
Original question resolved in the affirmative.
House adjourned at 11.2 p.m.
The following answers to questions were circulated: -
United Kingdom Bank Rate.
n asked the Treasurer, upon notice -
– The answers to the honorable member’s questions are as follows: -
The formulae governing the level and distribution of income tax reimbursement grants were introduced in their original form in the States Grants (Tax Reimbursement) Act 1946. The formula governing the level of the grants was amended in 1947 and again in 19 IS. 2. (a) The States Grants (Tax Reimbursement) Act 1946-1948 provides that the aggregate grant in each year should be equivalent to the amount of £45,000,000 adjusted in proportion to the variation in population between 1st July, 1947, and 1st July of the year in which the grant is made and further adjusted by the percentage increase (if any) in average wages per person employed between 1945-46 and the year preceding the year of payment of the grant. The formula also provides that the aggregate grant in each year should not be less than the amount of £45,000,000.
In the following year, 1950-51, two separate grants were provided to the States in addition to the tax reimbursement grants - an “ Additional Tax Reimbursement Grant “ of £5,000,000 and a “ Special Financial Assistance Grant “ of £15,000,000. This latter additional assistance was made having regard to the effect on State budgets of the £1 per week increase in the basic wage. The “ Additional Tax Reimbursement Grant “ was distributed in the same proportions as the tax reimbursement formula grant while the distribution of the “ Special Financial Assistance Grant “ was based on the States’ financial needs.
In 1951-52 and each subsequent year the tax reimbursement grant has been found to be insufficient to meet the States’ needs and in each year a “ Special Financial Assistance Grant “ has been paid to the States to supplement their tax reimbursement grants. In 1951-52 the additional assistance was distributed in accordance with the States’ financial requirements. In 1952-53 and 1953- 54 these grants were distributed in the same way as the tax reimbursement grants with an adjustment to increase slightly the amounts going to Victoria and Tasmania. In the following year, 1954- 55, the supplementary grant was distributed among the States in exactly the same proportions as was the tax reimbursement grant in that year. The same basis for distribution of the supplementary grant was used again in 1955-56, with the addition of £2,000,000 for New South Wales in recognition of certain special difficulties in that State arising from extensive flood damage during 1954-55. The supplementary grant paid to the States in 1956-57 was distributed among the States in accordance with the tax reimbursement formula, but an additional £1,000,000 was added to Victoria’s share to assist it to meet certain special difficulties confronting that State in 1956-57. The supplementary grant payable to the States in 1957-58 will be distributed in the same proportions as the formula grant.
d asked the Minister for Labour and National Service, upon notice -
– The answers to the honorable member’s questions are as. follows: - 1 - (a) The numbers of persons registered withthe Commonwealth Employment Service and receiving unemployment benefit at 31st August, 1957, ia each State were -
The figures of persons registered for employment’ relate to persons who claimed when registering with the Commonwealth Employment Service that they were not employed and who were recorded as unplaced at the date shown. The figures include persons who had been referred to employers, but whose placement had not then been confirmed andthese who may have obtained employment without notifying the Commonwealth Employment Service and whose applications for employment had not lapsed by that date.
Statistics are not kept which would enable the numbers of persons unemployed at 30th August, 1957, who have since been placed, to be given.
The numbers of persons registered with the Commonwealth Employment Service and receiving unemployment benefit at 28th September, 1957, in each State were -
Homes for the Aged.
r asked the Minister for
Social Services, upon notice -
– The answers to the honorable member’s questions are as follows: -
ser asked the Minister for the Interior, upon notice: -
– The answers to the honorable member’s questions are as follows: -
ser asked the Minister for the Interior, upon notice -
– The answers to the honorable member’s questions are as follows: -
Cite as: Australia, House of Representatives, Debates, 5 November 1957, viewed 22 October 2017, <http://historichansard.net/hofreps/1957/19571105_reps_22_hor17/>.