7th Parliament · 2nd Session
The President (Senator the Hon. T. Givens) took the chair at 3 p.m., and read prayers.
The following papers were presented : -
Bounties Act 1907-1912.- Return of Particu lars relating to Bounties Paid during Financial Year 1916-17.
Defence Act 1903-1915. - Regulations amended, &c.- Statutory Rules 1917, Nos. 192, 220, 221.
Lands Acquisition Act 1906. - Land acquired at Blackboy Hill, near Midland Junction, Western Australia - For Defence purposes.
The War - Prisoners’ Camps in Germany : Correspondence respecting use of Police Dogs. ‘ (Paper presented to British Parliament.)
– I ask the Minister for Repatriation if it is a fact, as stated in the newspapers, that returned soldiers have refused to take up the farms prepared for them by the New South Wales Government?
– I am unable to answer the question, but I shall endeavour to ascertain from the New South Wales Minister for Lands what truth there is in the statement.
– Have any reports yet been received from the InterState Commission with regard to their investigation of the increased cost of food and living; and, if not, when may we expect to get some reports?
– I think I am cor rect in saying that, up to the present, no reports have been received, but I anticipate that they will be in the hands of the Government in a few days.
Leave to Original Anzacs - Return or Officers - Instructional Staff
– I beg to ask the Minister for Defence the following questions : -
– I have seen in the press the statement referred to by the honorable senator. It was not authorized by me or any other member of the Government. I have asked Mr. Mackinnon to inform me whether he is correctly reported in the statement said to have been made.
asked the Minister for Defence, upon notice -
How many officers who have been on active service have returned to Australia for either of the following reasons: - Invalidity through wounds, invalidity through ill-health; and through other reasons than the above?
– The answer is -
The undermentioned number of officers have been returned to Australia from abroad for the reasons as specified: -
asked the Minister for Defence, upon notice -
– Inquiries are being made, and replies will be furnished as soon as possible.
CASE OF Mr. R. KEVAN.
asked the Minister representing the Postmaster-General, upon notice -
Will he lay on the table of the Library the file dealing with the case of Mr.R. Kevan, telegraphist (unattached), Perth, Western Australia?
– On behalf of my colleague, I beg to supply the following answer : -
Without knowing what particular papers are referred to, the Minister is unable to say. If the honorable senator will kindly indicate the subject-matter of the papers, the matter will receive consideration.
– I move -
That this Bill be now read a second time.
Although the figures in the Bill are such as will compel attention, I venture to say that the Bill itself is not one which will make a very heavy demand on the time of honorable senators. It authorizes the raising of a sum not exceeding £80,000,000 for the purpose of the prosecution of the war. ‘ The total amount authorized to be raised by previous legislation is £88,000,000, of which approximately £82,000,000 has been raised. A further sum of £6,000,000 may, therefore, be raised under the existing Acts. It may interest honorable senators to know how the public accounts stand in relation to the war loan expenditures. Up to the 30th June next the expenditure will be -out of loan, £189,045,757; and out of revenue, £25,834,916; making a total of £214,880,673. That amount has to be reduced by a sum of £2,139,164 paid into sinking funds, making a total expenditure, actual or estimated, up to the end of June next, of £212,741,509. Included in the above estimate of expenditure out of loan for the current financial year is the sum of £26,000,000 due to the British Government for the maintenance of our troops at the Front and the supply to them of munitions. The estimated expenditure by the British Government in respect of the Australian Imperial Force up to 30th June, 1917, is £28,500,000 and up to 30th June, 1918, a further amount of £29,750,000. This makes a total of £58,250,000, of which £5,000,000 was paid by the Commonwealth in 1916- 17, and £26,000,000 is to be , paid during the current financial year.
– Do those figures include the expenditure upon the Australian Navy?
– I am not quite in a position to answer that question offhand, but I shall endeavour to obtain the information before the Senate rises to-day. These two payments will still leave an amount due to the Imperial Government of £27,250,000 unpaid on the 30th June, 1918. Included in the above war expenditure of £212,741,509 is an amount of £2,850,000 for advances to the States for the construction and erection of silos for wheat storage, and an amount of £2,000,000 to be advanced to the States for the repatriation of returned soldiers. On the, 30th June last there was on hand as balance of war loans previously raised £17,745,163. The instalments to be received after the 30th June, 1917, in respect of the fourth war loan, issued in February last, amounted to £6,187,668. These two amounts total £23,932,831, which will be the total loan moneys either in hand or in sight at 30th June, 1917.
I come now to the expenditure. The estimated expenditure out of war loan in 1917-18 is £84,051,230. Deducting loan moneys in hand or in sight, as already mentioned, namely, £23,932,831, the amount yet to be raised is £60,118,399. It is quite obvious that though that is the estimated amount required, it is desirable to have a slight margin for contingencies. It is, therefore, proposed to raise not the net amount which .the Estimates disclose as necessary, but a slightly larger sum, and this amount brings the total to £64,065,000. If this £64,065,000 be all borrowed during 1917-18 there will be an additional sum still outstanding of about £27,250,000 duetto the British Government, which, however, it is not intended to pay during this financial year’. The amount required for, war loan expenditure is £64,065,922,’ but it is advisable to have a margin. That is a margin to which I have just referred. I have already explained the reason why the amount proposed to be raised slightly exceeds the amount of the estimated expenditure.
If the Senate sanctions this Bill it is proposed to issue at once a loan of £20,000,000, having the same currency as our previous loans, but maturing on the 15th December, 1927. As this loan will be floated somewhat later than our other loans, it is proposed that it shall mature at a later period. It is not. desirable that all these loans should mature on the same date, but it is very desirable that they should have the same currency. The terms upon which it is intended that the loan shall be issued are in all particulars th’e same as those which governed the issue of previous loans, that is to say, the rate of interest will be 4J per cent, and that interest will be free of Commonwealth and State income tax.
– I have no desire to debate this Bill at length. But I do feel that the pace at which we are travelling in regard to the expenditure of borrowed money is a very rapid one. I would, therefore, again urge upon the Government the wisdom of seriously considering the necessity of making some adequate preparation to exact from those persons who are enjoying large incomes their fair share of the cost of this war. If we continue to spend borrowed money at the rate we are now spending it, without wishing to appear in the rôle of a prophet of disaster, I say that any ordinary man must perceive what will be the end of it. Personally, I am of a very hopeful disposition, and for a considerable time I have been hoping for the end of the war. But on , the facts confronting us to-day we must admit that we cannot foresee any early termination of the struggle.
As I remarked yesterday, I have no desire either to delay or inconvenience the Government. The problem of financing the war is one which belongs to the Government, and we ought to do all that we can to assist them, and to tender them advice in such a way that there may be some hope of its being accepted. I exceedingly regret that the Government are seeking authority to issue this huge loan without exacting from individuals who are in receipt of large incomes their fair share of taxation. I pointed out yesterday that if incomes in excess of £200 a year were seized by the Government, they would collect under this heading no less a sum than £178,000,000 annually. To go on borrowing money to sustain and equip our soldiers at the Front is, to my mind, an unfair treatment of them. I do hope that the Government will seriously consider the need for financing the war in such a way that these huge loans will not be our only means of meeting our expenditure. Of course I quite recognise that we cannot hope to finance the war out of revenue, and that those who come after us ought to carry their fair share of the burden. At the same time we have not faced the obligations laid upon us in the way that we should have done.
– I have a few remarks to make which I think are appropriate to the Bill now before us. Some time ago it was announced as the intention of the Government then in power to take preliminary steps for the organization of the industries of this country. I remember reading a speech by the Minister for Defence on the importance of this matter. It is proposed under this Bill to borrow an additional £80,000,000. Speaking on the War-time Profits Bill last night, I had occasion to mention that the total indebtedness of the Commonwealth for war purposes up to the end of the current financial year will be £212,000,000. That is to say, we shall have borrowed £212,000,000 for war purposes.
– Yes, according to the Budget statement of the Treasurer, Sir John Forrest.
– That includes £29,000,000 paid out of revenue. It is not the total indebtedness, but the total war expenditure.
– I stand corrected. It is the total war expenditure. It is now proposed to borrow an additional £80,000,000.
– That sum is not to be added to the other total.
– I am aware of that. This £80,000,000 will be a part of the total of £212,000,000. We have to take into serious consideration the enormous interest bill which our handful of 5,000,000 of people will be called upon to “ pay. As Senator Gardiner has pointed out, it is a very serious financial burden for the people of Australia to face.
It seems to me that there is only one way by which we can avert financial disaster, and that is by making the utmost of Australia’s splendid natural resources. If we are to do so, we should begin no. It was a part of the Win-the-war Government’s policy when they went to the country, as may be seen from speeches by the Prime Minister and other leaders *oi the party, that the natural resources of Australia should be taken advantage of to the fullest possible extent. The present Government have been in power for some months, but there does not seem to have been any great effort put forward bv them to take the preliminary steps necessary foi the organization of our natural resources. It is a very big task for any Government to undertake, but it is one in which the present or any other Government may confidently expect to receive the fullest possible assistance from every member of this Parliament, no matter to what political party he may belong. The Government should take the preliminary steps necessary for the organization of our resources as soon as possible, if the Australian taxpayers are nob to be up against a very solid difficulty.
– We had better get over the industrial rebellion with which we are faced now before we start that task.
– Senator Earle ia sitting behind a Government the members of which have not shown any great desire to get over the industrial rebellion. The Government were asked, and were expected by people outside, to take some steps to bring about a cessation of the disastrous industrial rebellion.
– And they have done their best to spread it.
– The Leader of the Government (Mr. Hughes) has made a number of speeches, every one of which, so far from being conciliatory, has been provocative to the last degree.
– It is of no use for Senator de Largie to deny my statement. I do not say that the offence has been confined to one side. Bitter speeches have been made on both sides, but the Prime Minister has been one .of the worst in making provocative, rather than conciliatory, speeches to bring to an end the industrial rebellion. I have been led off the track by the interjection made by Senator Earle, who I do not think would have made a similar interjection a year or so ago. But that is by the way.
– Yes, I would. The honorable senator need not worry about that. He need not worry at all about my actions.
– And Senator Earle need not worry about mine.
I repeat that we have to find an enormous sum of money to meet the interest on the loans we have borrowed. I believe, that Australia will cheerfully do what is necessary. We have the command of such magnificent natural resources in Australia that we shall be able to do what is necessary if those resources are properly handled.
– Hear, hear! If they are properly handled.
– I admit that it is a huge task for this or any other Government to see that our resources are availed of to the utmost extent, bub I say that it is about time that this Win-the-War Government showed some earnestness in the matter by taking the preliminary steps accessary for that organization. We must find the money necessary to meet our interest bill, and we shall never be able to do that without imposing unbearably crushing taxation upon the low-wage earning classes in the country if our great resources of iron, wool, timber, and so on are not properly organized. After the war we shall be faced with the additional expenditure necessary to reinstate in reasonably profitable positions the men who are fighting for us abroad-. The lowwage people of the country will never be able to bear the burden of taxation that will have to be imposed upon them unless our natural resources are made use of to the utmost extent. The present Government have splendid opportunities before them. They have a majority in both Houses of this Parliament, and in connexion with matters like this no party considerations will be allowed to intervene. They will have the full support of both sides in any legitimate attempt to organize the resources and industries of the country. I hope that in the very near future we shall find the Government making some earnest effort to do what many of its members promised would be done during the last election campaign.
SenatorFERRICKS (Queensland) [3.28]. - I wish to refer briefly to this Bill. I realize the seriousness of the financial situation in which Australia is involved. If one did not otherwise realize it fully the magnitude of the sum asked for under this Bill, £80,000,000, would be sufficient to impress it upon his mind. I am under no illusions in this regard. I noticed a statement in the Argus which is very appropriate to the matter in hand, as touching the seriousness of recent events in connexion with the present world-wide war. In a leader in the Argus of 13th September I find these pertinent references -
The effect if Russia fell out of the war has been described from the point of view of America by a writer in the New Republic. He says that it would be at best a hideously expensive stalemate for the present and the next summer; that instead of preparing to enlist and discipline 1,000,000 conscripts the United States should be planning a draft of all ablebodied men between twenty and forty, with training camps for at least 4,000,000 soldiers, and that three or four years of fighting with casualties of several millions, with corresponding enormous expenditure, would lie ahead. If that be the prospect of the United States, what must it be to Britain ?
When we bear in mind that this summer in Europe coincides with our winter just now near its close we realize the seriousness of the position that is facing Australia and the world in regard to financial matters. If any emphasis of this were needed it is supplied by the following brief extract: from the Sydney Morning Herald of Monday last on the question of our financial responsibilities -
The longer the war lasts the heavier the burden will be. By this time all hope of getting indemnities from Germany further than are necessary for the reasonable reparation of Belgium and elsewhere, is pretty well abandoned. That means that some way or other we shall have to face our war debt ourselves, and make the best of it.
Most thinking people have now come to realize that it is impossible to expect Germany to pay full indemnities, but if a mere member of this Senate had made the statement contained in the Sydney Morning Herald he would have been accused of disloyalty or pro-Germanism, such is the intolerance displayed in regard to any expression of opinion concerning this matter. This statement as to the seriousness of the situation causes us to wonder what would have been the effect on Australia financially, nationally, : and industrially had the policy of conscription been given full effect to, without due regard to all that it meant.
– If the Empire had been under a conscription law when war threatened, there would not have been any war at all.
– It is quite true, as the Vice-President of the Executive Council (Senator Millen) has pointed out, that it would have been ill-advised, and perhaps disastrous, if our respective war loans matured at the same date. When we remember that this Bill involves the probability, or the certainty, of raising the whole of the £80,000,000, and that it follows so closely upon another loan of £80,000,000, with a breathing space, as the Minister terms it, of only two years, I think it would have been advisable if this second loan issue had been made redeemable at a date muchlater than two years after the first authorization. This loan might reasonably, and I think without any prejudicial effect on the issue itself, have been extended over a period of fifteen years, or seven years after the redemption of the previous loan. In view of the financial strain that will be imposed upon the world, it will be disadvantageous to have huge sums of money like this maturing at what is practically the same time. It is not likely that normal conditions will prevail in 1925 or 1927, so it is probable that when this loan has to be redeemed or renewed, the rates of interest will be higher than normal, whereas if maturity had been fixed at a later date, we might reasonably expect the renewal to be effected at pre-war or normal rates of interest.
It has been truly said that this is a repetition of the policy of raising money for war purposes in Australia, and that, therefore, it is desirable, and some say necessary,that the conditions attached to the previous war loan should apply also to this issue. I do not agree with that. This is a new loan, to mature at a later date, so there isno reason why the Government should not have made a departure in regard to the terms. In my opinion, a mistake was made in regard to the first war loan raised in Australia by including in the terms a condition exempting subscribers from Federal or State income taxation on the interest received. On that occasion, Senator Millen pointed out that this exemption was all in favour of the large, as against the small subscribers. It is now admitted that the views expressed from this side of the Senate in the early stages of our war loan legislation have been amply borne out, and that exemption from Federal and State income taxation actually raises the rate of interest to 5 J per cent.
– When the first war loan was under consideration, I remarked that the rate of interest, owing to freedom from taxation, would amount to that art. least.
– But the honorable senator did not give his support to our proposal at that time.
– Nor would I now.
-When Mr. Poynton, a supporter of the Government in another place, submitted an amendment to do away with the exemption, and to increase the rate of interest, I think to b per cent., the Government and their supporters declined to accept it. I am not in favour of the higher rate of interest, because I do not think it is fair that those who hold the wealth of Australia
– I thought the honorable senator was not in favour of any interest at all.
– When people were howling for the conscription of human life, members on this side voiced a proposal that those who had the money should voluntarily offer it, because that was a lesser sacrifice than the offer of one’s life. The terms of this loan are wholly in favour of the big man. Let us see for a moment how these terms will operate in the case of interest derivable from huge investments in the war loan. It has been shown that the incidence of the income tax reaches its maximum, I think, at 6s. 3d. in the £1 on a taxable income of £7,000 ; but if the taxpayer paying on that amount subscribed heavily to the war loan, he would escape all Federal and State income taxation, amounting in his case to at least 6s. 3d. in the £1 in the Federal tax alone, so that his interest would not be 4£ per cent., but actually about 7 per cent. It is safe also to say that probably 99 per cent, of such subscribers have been amongst the loudest advocates for the conscription of human beings in Australia to go 12,000 miles to fight for this country. That exemption, therefore, cannot be defended. I put it to honorable senators opposite that there must be something wrong. Are not these people prepared to lend their money to the nation for war purposes at reasonable rates of interest ? The normal rate prior ‘to the W0,r was 3£ per cent.
– What is it now?
– 5 J per cent.
– It is possible that they can get more than per cent, through other channels; perhaps by lending to other British Dominions.
– But are they entitled, to more? It simply means that the’ wealth controllers and owners have Increased the price of money by. 50 per cent. Those in the humbler walks of life who seek to increase their rates of remuneration have been described as disloyalists and traitors, and some people have even gone to the extent of saying that they should be shot, but the money lenders have jumped up the price of their commodity by 50 per cent., yet we hear no complaints from the other side. Thm went on strike because they had the money. Even if we take the normal prewar rate of interest as having been 3 per cent., and it is now 5J per cent., that is an increase of 40 per cent.-, which is nearly as unreasonable.
– Where can you get money at 5 J per cent, now?
– The honorable senator expects men who are asking for 6d. or ls. a day more in their occupations to carry on their work at the same rates as they were receiving in pre-war days; otherwise to him they pre disloyalists.
– And that 6d. per day would not improve their position.
– Unfortunately, not; because in this country no action is taken to make the increase effective.
I understand from the papers that in New Zealand an attempt has been made to compel investments in the war loan. That country went in for conscription, with which I do not agree, having always taken up the attitude that even if wealth were conscripted it was no argument for the conscription of life to follow. I understand that in New Zealand a form of compulsion has been introduced to obtain subscribers to the war loan, by which’ people are assessed at about three times the income-tax assessment, and if they fail to put the amount at which they have been assessed into the war loan they are penalized by a doubling of the income tax. That, at any rate, is a commencement in the conscription of wealth. I am not blaming the present Australian Government any more than the previous Government for the exemption from income tax of interest on war loans. The principle was wrong at its inception, and should never have been tolerated.
I wish to enter my protest against the allowance of commission to members of stock exchanges for money which goes through their offices into the war loan. There is no warrant for the payment of that commission, which already has totalled £58,000, according to the Vice-
President of the Executive Council.
– On what amount”
– On £23,000,000. In a time of war, when other people, notably the Commonwealth Bank and every post-office in the Commonwealth, were doing the work for a ominal charge, where was the necessity to invoke the aid of the brokers? As a rule, mining people are not overburdened with generosity.
– I always thought mining people were rather a generous lot.
– I refer to members of the stock exchanges and others who control mining.
– They do not exercise much control over mining nowadays.
– They are controlling this aspect of the war loan flotation at any rate. The position is this : Were the people willing to put their money into the war loan on these very attractive terms ? If so, they could have paid it through any bank or postoffice, and there was no necessity to invoke the aid of the stock brokers. If the people were not prepared to put in their money, it is a sweeping indictment of those who had the money and still howled for the conscription of life.
– The honorable senator’s period would not have been nice without that last clause about the conscription of human life!
– It is a very pertinent time to raise the question, when we are giving such enticing rates of interest and almost going on our knees to people for money.
– Do you think you would get any more if you took it forcibly ?
– It would be got cheaper, at any rate; but the honorable senator was eager to take the men forcibly.
One phase of war loan subscriptions which the Government have not provided for in the Bill has, perhaps, not occurred to them, or has not been brought under their notice. I refer to small subscribers by way of inscribed stock. The war savings certificate system has introduced virtually a new savings bank system, and has been a very valuable augmentation to the loan. The certificates are attractive to purchasers, but as time goes on, and they mature, it is just possible that persons who do not believe in life assurance, but desire to make some small provision for those dependent on them, may wish to put their small savings, perhaps to the extent of £100 or £200, into inscribed stock.In their desire to make the security doubly secure, they may not care to have the money in war bonds transferable from one person to another. There are provisions by which they can take up £100 or £200 worth of inscribed stock, but that £100 or £200 may comprise the whole of the estate which a man would leave to those dependent on him, and before transfer of the inscribed stock can be made to his survivors, letters of administration must be taken out in his estate. That is not the case with regard to deposits in the Queensland Government Savings Bank. The Treasurer of Queensland has discretionary power, when it is proved that the applicant is the next of kin, to allow deposits up to £200 to pass over without letters of administration being necessary.
– But in that case there is a deposit standing in the name of some one, whereas the war saving certificates are like bank notes.
– That leads up to the very point I want to make. The war saving certificates and bonds are not in the name of any person, but the man who wants to makeprovision for his dependants may desire to have inscribed stock, and, seeing that the certificates are being so widely pushed and extensively taken up, exemption from the necessity to take out letters of administration in a deceased estate might very well be granted by the Government in all cases where the certificates or bonds have been converted into inscribed stock. I know that our Inscribed Stock Act provides in section 29 that letters of administration are necessary, and the regulation on the subject provides that all this formula has to be gone through.
A concrete case has come under my notice. A young fellow I knew died; his father was the next of kin, and to secure a transfer of £100 worth of inscribed stock letters of administration had to be taken out, at an expense of £15 153.
– In all probability these charges would have been made if the estate had consisted of £100 worth of any other kind of property.
– Quite so, but my contention is that the provision should not apply in a case of this sort where the aim is to spread the contributions to the war loan over as wide an area as possible It is virtually another savings bank. M* informant, whom I know very well, summed up the matter in a very short, but fully warranted comment. He said, “It is a damned shame,” and I think it is a shame to exact a sum of £15 15s. for the simple execution of a transfer of an estate of £100. I submit for the consideration of the Minister whether some provision should not be made in the Bill in this regard in relation to inscribed stock. t feel quite sure that it would simplify the administration of very many small estates. I see no reason why that exemption should not apply to inscribed stock up to the amount of £200.
The Bill will not be delayed by me. I simply protest against the principle which I think is wrong of alio win et freedom from State and Federal income taxation. I am of course totally opposed to the idea of patriotic gentlemen from the stock exchanges drawing a commission out of the national necessities of Australia at a time like the present.
Senator NEEDHAM (Western Australia) [3.531. - I was about to raise the question of continuing to pay 4£ per cent’, interest on our loans, and at the same time exempting them from Federal and State income tax. When the first Loan Bill was submitted shortly after the outbreak of war I agreed to such an exemption.
– A very reasonable attitude to take, seeing that it was our first venture.
– It was because it was our first venture that I took up that position. The argument adduced then was, “It is imperative that we should make our first loan a success by offering the best inducement to investors.” I agreed with that argument, but since then I have formed another opinion, and I gave expression to that opinion on the last War Loan Bill. I said then that the time had arrived when we might review the conditions in connexion with our loans. It is true that’- we desire to see every, loan a success. It is equally true that we must get money to carry on’ the great struggle. I realize that this generation cannot pay the cost of the victory, and that future generations must bear a portion of it; but I do think that it will be wise for this Parliament to consider the necessity of giving the ordinary rate of interest to those who invest in our war loans as an ordinary business investment, nothing more and nothing less. Besides giving a very great concession to those gentlemen who have money to invest in large amounts in our war loan, I might, point out that the State Governments are suffering as well as the Federal Government so far as the exchequer is concerned. The investors. in our war loans in the different States are freed from liability to pay State income tax, and to that extent State Treasuries are depleted. The same applies to the Commonwealth Treasury.
The cry throughout Australia and the Empire is that the war must be won. Despite many statements to the contrary, which have been made inside and outside of Parliament, I know of no man in this Parliament who is not desirous of seeing this war speedily and victoriously concluded in favour of the Allies. It does not matter what the press may say, or what statements are made in the heat of an election campaign, and probably regretted afterwards. We must realize, this fact, that every member of any British Parliament is eager for the victorious prosecution of this great struggle. Why, then, should any particular set of citizens have an advantage in this regard, which, undoubtedly, they are getting when they are freed from both Federal and State income taxation, and are receiving a return of 4£ per cent, on their investment? As Senator Ferricks very forcibly pointed out, it» means a return of something like 7 per cent, on the money invested in the loan.
– That is not putting the position fairly. That is the return on large amounts.
– On large amounts, of course. I am speaking, now, of large investors only. Senator Bakhap interjected, during the speech of Senator Ferricks, that perhaps these gentlemen could get a greater amount of interest in other British investments. That may be so; but is that the price which they insist upon putting on their patriotism ? Here are 300,000 Australians who volunteered their all. They placed no premium on their lives. They did not ask for anything; they sprang into action when the call came, and made no conditions. Not one of those 300,000 men made a condition on his enlistment. But the gentlemen who have money to invest, in order to help to pay for the clothing, the equipment, and the transportation to the theatre of activities of those men, say, “ We must have so much for the use of our money; we must have 4$ per cent.”
– The Government says that it will give 4^ per cent.
– I admit that the Government did make that statement, and I confess that I supported the idea. But the war has gone to a point which, perhaps, we did not anticipate then. It is now a determined struggle, the end of which no man living can see. Why should these gentlemen with money attach this stipulation to an investment as a condition of its success? I dare say that the Leader of the Senate will say that to make the proposed loan of £80,000,000 successful, we should continue the same conditions. But I think it is’ about time that we changed the conditions, and let these gentlemen who are so patriotic, and have anything from £20,000 to £100,000 to lend, invest their money at the ordinary rate of interest.
– It all depends upon whether what they have is liquid or not.
A man cannot invest everything he has in a war loan.
– Do you mind telling me what is the ordinary rate of interest?
– As Senator Ferricks pointed out, the pre-war rate of interest was 3 per cent.
– What is the ordinary rate to-day ?
– I am quite prepared to go a little over the pre-war rate. When the State Governments borrowed from the Commonwealth Treasury in prewar days, they paid 3J per cent. I suggest to the Minister that 4£ per cent., without exemption from Federal and. State income taxation, would be a fair rate of interest on an investment.
It has been pointed out by Senator Ferricks that a man who ceased work in order to get a higher rate of wages, or better conditions of employment, during this troublous time, has been described as disloyal and as a traitor to the Empire. The man had his labour to sell, and he asked for a higher price with better conditions. The gentlemen who have money to invest have practically their money to sell, and they are going to sell it at the highest price they can get. If they do not receive the price they want the money will not go to the assistance of the Government in the prosecution of the war.
– None of the strikers are out for higher wages just now, are they?
– I am not speaking of the present industrial trouble. The honorable senator is well aware that, during the past three years, there have been cessations of employment with the desire to get increased wages. In the press, and on the platform, these men have been dubbed disloyal because they dared to demand fid. or ls. per day more for their labour. They have been described as traitors to the Empire, and as unworthy of residence in Australia, because they dared to try and get a higher price for their labour in order to maintain their dependants in some degree of comfort, and to keep pace with the daily increasing cost of commodities. The gentlemen from whom we expect to borrow this amount of £89,000,000 are in the same category. We want that money. They say, “ We will lend our money on certain conditions.”
– They say nothing <»f the kind.
– Suppose that this Parliament were to determine tomorrow that, as regards this loan oi £80,000,000, it would only give 4J per cent, interest, and that the money invested would be liable to Federal and State income taxation, would these gentlemen be satisfied, or would they invest their money in the loan? Will the honorable senator answer that question?
– They are not making any ‘ conditions ; it is Parliament that is doing that.
– It is because of the concession which Parliament made, and is asked to make again, that I am complaining. The time has arrived, I think, when it should not make the concession.
– Why not blame Parliament ?
– I ask the honorable senator again: Would his wealthy friends invest their money in this loan of £80,000,000 at 4£ per cent.., with liability to pay Federal and State income taxation ?
– If they will not subscribe to the loan what does the honorable senator suggest?
– I would take the money from them.
– Yes ; I would conscript wealth. But if the Government were doing something decent in regard to the taxation of war profits there would be no necessity for any such action.
– What does the honorable senator mean by “ decent “ ?
– Order! The honorable senator must not refer to war profits taxation.
– In effect, Senator Earle says that if we do not grant the conditions which have accompanied previous war loans the proposed loan will not be a success. That may be so, but we would at least discover whether or not the patriotism of which many capitalists prate is sincere.
– That would not feed and equip our soldiers at the Front.
– I quite admit that. I realize the necessity which’ exists for securing this money, and I also recognise that the present generation cannot be ‘expected to pay the cost of the war. At the same time it would be a spurious patriotism which would permit a man with £100,000 to say that he would not lend his money to the Commonwealth to enable it to prosecute the war unless he received the same conditions as governed the issue of previous loans. To continue the present system is unfair alike to the State and Commonwealth exchequers. I shall support the Bill, but if I thought that there was the slightest hope of giving effect to my idea that the interest derived by investors in the proposed loan should not be exempt from’ State and Federal income tax, I would move inthat direction.
– The arguments which have been adduced against the Bill have not convinced me that the Government are doing wrong in proposing to exempt from State and Federal income tax the interest derived from investments in the proposed war loan. What is the good of paying per cent, interest to subscribers to the loan if we have to appoint a set of officers to collect that interest ? Surely it would be more economical to pay a minimum rate of interest and to be done with the business. If the interest accruing from investments in this loan is to be taxable, will those who have subscribed to previous war loans continue to invest their money in them? Do honorable senators desire to see this loan a success, or do they wish to see it a failure? We have only to fix a rate of interest sufficiently low, and in my opinion the amount of money that would be subscribed to our war loans would be infinitesimal. I do not know that the rate of interest proposed can be defended .by some schools of political economists, but the school which I follow - that of Henry George - supports the paying of interest.
– Will the honorable senator discuss the Bill?
– If the rate of interest were increased to 5£ per cent, by the time it had been collected the Commonwealth would not be much better off than it is to-day. The Government, I presume, have carefully considered this matter before deciding upon the conditions of the loan. As the end of the war does not. appear to be in sight, we shall be confronted in the near future with an annual interest bill of £10,000,000. But after all that is not much. We can very easily pay ‘ that amount provided that taxation be levied in such a way as to fall upon the shoulders of those who are best able to bear it.
– Particularly if the money is borrowed in the Commonwealth.
– Yes. It is one of the axioms of the Protectionist party that everything is all right so long as the money is retained in the country.
I am at a loss to understand why the Government is paying brokerage in connexion with our waT loans. It is not cleaT to me that this payment is essential. When we borrowed £23,000,000 we had to pay some £58,000 as brokers’ commission. Consequently, if we borrow £200,000,000, we shall have to pay something like £430,000 in commission. If the payment of this money can be avoided, it is our duty to avoid it.
– A large amount of it goes to the Commonwealth Bank.
– I do not know who the brokers, were who received the commission. But the Government should certainly minimize payments in that direction. I- wish the loan every possible success, and shall support the Bill.
– I wish to make a few observations upon this Bill. I have listened very carefully to the speeches which have been delivered upon it - all of them from ‘ the opposite side of the chamber - and, as a new senator in this new Parliament, I must say that I regard the future with a great deal of misgiving. It seems to me that the best that can happen in connexion with Australia’s part in the war is that we shall owe at least £200,000,000 before the struggle is over. That burden will impose upon us a permanent interest charge of £9,000,000 annually, and when there is added to that sum the amount which must be found for pensions to our soldiers, for repatriation purposes, and for considerable items in connexion with the development of our own defence, I cannot see how anything less than another £15,000,000 a year will have to be imposed as additional taxation.
I believe that the Government, in the not distant future, will grasp the nettle of additional taxation, and also the nettle of retrenchment. I would remind honorable senators opposite that our expenditure during the past six or seven years has been Increasing, that extravagance has been growing, and that during the major portion of that period they themselves had control of the machinery of government. The National Government have already done something during the brief period of their existence. As a new senator, I am perfectly satisfied with what they are attempting to do, and it must be recollected that they are responsible for very large operations outside of this Parliament.
– The strike, and things like that.
– The strike was not the fault of the National Government. It took place in spite of them.
– They planned it..
– I am sure that the Government will not fail to observe that if we exempt from taxation the incomes derived from investments in this war loan, we shall diminish to a corresponding extent the taxable incomes of the future. It was mentioned yesterday that incomes in - Australia of £1,000 and over totalled over £28,000,000. By borrowing £200,000,000, and paying £9,000,000 in interest, we have to remember that our future taxable incomes will be diminished to that extent.
Something has been said on the subject of interest. In my opinion the Common; wealth Government, when projecting their first war loan, adopted the right course in fixing the rate of interest at 4J per cent., free of income tax. At that time it appeared to be a very good thing for the Commonwealth, and I believe that the proposal was submitted, and its principle emanated, from the political party to which honorable senators opposite belong. At all events, at that time the rate, ~f interest fixed was comparatively low, and it must be remembered that since then the rate of interest has risen all over the world. Even the British Government, in floating a bie loan recently, gave investors the option of investing at 4” per cent., free of income tax, or 5 per cent., subject to income tax. French, rentes are to-day practically valued on a 6 per cent, basis. We know, also, that the securities of the State Governments in the London market are valued, for buying and selling, on a basis a little less than 6 per cent. In all the circumstances, I do not think that the proposal of the Government to raise further loans up to £80,000,000 at the same rate of interest and under the same terms and conditions as before, can be criticised very much. I have a good deal of sympathy with the remarks made with regard to the advantage which a loan on these terms gives to the very rich man. He has to pay 6s. 3d. in the £1 now, but I unhesitatingly prognosticate that- in the very near future he will have to pay very much more. So that, should he put ‘his money -into war loans under these conditions, he will benefit in the ratio of the increase in the income tax.
With regard to the commissions paid to members of the Stock Exchange, the Leader of the Senate will correct me if I am wrong when I say that I am under the impression that the stockbrokers receive a commission from the Government of 2s. 6d. per cent., or 2s. 6d. on every £100 worth of a war loan they secure for the Government.
– No, 5s. per cent.
– Then my figures will require some modification. So far as I have worked out the figures, I believe that the stockbrokers have been paid commission on about one-fourth of the amount of the loans raised by the Commonwealth up to the present time.
– They have received £58,000.
– I remind honorable senators that stockbrokers, since the inception of these Commonwealth war loans, have received an average of about £200 per head for their trouble and work in connexion with the floating of these loans. Stockbrokers very often keep money for their clients. There is the carry-over; there are margins, and forms have to be filled up .and scrip secured, and for the trouble involved in connexion with the matter 5s. per cent, does not appear to «ie to be a very high rate of commission to pay to stockbrokers of the Commonwealth. If a stockbroker is employed by a man in the country who desires to invest in a war loan, he can do so through the post. I think honorable senators opposite who believe that every man is worthy of his hire have little reason to cavil at the amount which has been divided amongst the whole of the stockbrokers and agents of Australia in connexion with our war loans.
I must say that I am sorry that honorable senators opposite sometimes fling at those on this side some of the barbed arrows of class prejudice in connexion with matters which really ought not to be debated in that way. Personally, it seems to me that if the war has proved anything it is that a Democracy is not invincible. It has proved tha* an Autocracy may be able ‘to conduct a war better than a Democracy. At all. events, the future appears to be very black, and it may be that before many years are over our heads, we, in this Parliament, and throughout the Commonwealth, will have to stand four-square to effectively meet the position with which we may be faced.
– What about the money then ?
– I shall be prepared to do a fair thing in taxing up to the Kilt the man who has got most. I shall be prepared to make those who have money pay. At all events, this may be one of the contingencies we will have to face in the future. In connexion with the world’s affairs now, I have every sympathy with a Government overweighted with such heavy responsibilities. We do not want, I think, in this chamber, too much acrid criticism. Personally, I should prefer to see all honorable senators prepared to help in a fair way in connexion with such noncontentious matters as this - non -contentious because the precedent for this measure was set by a previous Government, and the present Government in this Bill are asking for neither more nor less than was asked by a previous Government.
I do hope that the Government will raise this money within our own borders, and will not Ngo to the London market again. I hope they will not impose, or attempt to impose, additional burdens upon the much-tried Mother Country. I should like the Government to consider also whether it would not be advisable to raise the rate of interest to 5 per cent, in the case of small investors who are called upon to pay income tax. I support the Bill, being personally satisfied to leave its details to the present Ministry, feeling assured that they realize as fully as do any other men in the country what difficulties the future holds for us.
– I do not know that there was very much in the debate calling for a reply from me, but I should not like honorable senators to think that if I refrained from saying anything it would be due to a want of courtesy on my part. It seemed to me that the remarks which have been made by honorable senators opposite indicated a tendency to criticise if they could .possibly do so, but to criticise in the spirit of men who know that they are only criticising that which they previously approved. They were, therefore, under some disability. We have to remember that whatever faults there may be in this Bill, it does not lie in tha mouths of honorable senators opposite to point-them out.
– Why not?
– Because honorable senators opposite were the authors of the very scheme of borrowing which rs being perpetuated in this Bill.
– Does the honorable senator not expect us to gain information by experience?
– I am afraid thatso far as Senator Gardiner is concerned I do not.
– Does the honorable senator not know that, some honorable senators on this side criticised similar measures when they were submitted by the Government they supported ?
– I quite remember that.
– I pointed out how the Government might secure revenue by taxation.
– If my memory serves me aright, I believe I have heard Senator Grant suggest that we could overcome .all our financial difficulties by the imposition of a land tax.
– I hope the honorable sena tor will riot enter upon a discussion of that question.
– Sir, I never want to hear it, discussed again. I would point out in all seriousness that this Bill differs in no single particular from not’ only one but two or three Bills which Senator Gardiner introduced in this chamber and helped to pass. It is, therefore, stretching the bounds of courtesy to ask us to believe that he speaks as he did to-day, in all sincerity. The principle of defraying a portion of the war expenditure out of loan has already been approved by the honorable senator. The principle of making interest upon these loans free of income tax has also been approved by him. There is not a single detail in this Bill which Senator Gardiner has not previously approved and supported by his vote In the- circumstances, I must he pardoned if I am unable, with becoming seriousness, to accept the criticism which he has ventured to address to the Senate to-day.
– I .think the honorable senator must have been dreaming when I was speaking to-day.
– I think that the whole tenor of the remarks made by honorable senators opposite has been to indicate that the Government are making a mistake in resorting to loans rather than to direct taxation to defray the cost of the war.
– I quite assent to that.
– I am glad to hear the honorable senator say so.
– There was no criticism with respect to the terms of the proposed loan.
– I was dealing with the criticism of the Opposition generally, and I leave it to honorable senators to say whether I am not right in suggesting that it was the criticism of men who desired to find fault, but whose opportunity to do so was limited by their association with entirely similar legislation.
I wish to say something in regard to the provisions by which the Government guarantee immunity from .State and Commonwealth taxation of the income derived from investment in the proposed loan. As honorable senators are aware,
I do not think that a sound principle. I said so when previous measures were presented upon which we have borrowed some £80,000,000. When those loans were floated at 4½ per cent., free of income tax, money was easier than it is to-day. Money has hardened since, and the Government, therefore, had to ask themselves whether, if those conditions were necessary to insure success then, there was a reasonable prospect of floating a loan successfully to-day under less favorable conditions. I am submitting this Bill for that reason, and not because I believe in the principle of exempting interest on these loans from taxation. When that £80,000,000 was floated under those conditions at a time when money was easier, and knowing that the country cannot afford the failure of a loan, there is certainly some justification for continuing the provisions previously adopted in order to secure the success which we regard as essential.
A suggestion was made by Senator Ferricks with respect to the abolition of letters of administration in respect of the holders of small amounts of war-saving certificates. There might be something in the suggestion, but I remind the honorable senator that it is out of the jurisdiction of the Commonwealth, and is a matter for’ State legislation.
– Could we not make the exemption apply in connexion with our Commonwealth Inscribed Stock Act, and so give an excellent lead to the State Parliaments ?
– Nothing we could do here would cancel the State law requiring letters of administration to be taken out. Therefore, if a man died holding one of these war-saving certificates, it would be property in respect to which his executors would be required, under the State law, to take out letters of administration. I express no opinion as to the value of the suggestion; but if Senator Ferricks desires to press it, he should bring it under the notice of members of the Queensland Parliament.
– Could we not deal with the matter in our own Act?
– The paper would be there representing value, and the executor of the person holding it would require to take out letters of administra tion. It is a State law, not a Commonwealth law, that requires them to do that, and. the honorable senator’s suggestion could only be given effect to by an amendment of the State law.
– If we dealt with the matter in our Inscribed Stock Act, it would override any State Act in conflict with it.
– No; because we have no jurisdiction in such a matter. I am sure the honorable senator will find that I am right on the point.
Something has been said with regard to commission to brokers. Does the honorable senator suppose that every loan has been floated without any expenditure? “
– I know the expenditure has been comparatively small.
– The honorable senator must bear in mind that every loan costs something to float. Even the amount recently floated by the Commonwealth Government in Great Britain at 5½ per cent. was issued at a discount of 2 per cent., and the expenditure in connexion with that transaction was not less than £1 12s. 6d. per cent. It may have been a shade higher. When we consider the services which brokers are in a position to render, not merely by formally applying for the loan, but frequently by prevailing upon clients to invest in a loan, the amount paid them in the way of brokerage has not been out of proportion to the value of the services rendered.
Question resolved in the affirmative.
Bill read a second time.
Clause 1 agreed to.
Clause 2 (Authority to borrow £80,000,000).
– I should like to understand clearly from the Vice-President of the Executive Council if it is intended to float the whole of the loan in Australia ?
.- The Vice-President of the Executive Council (Senator Millen) seemed to regard my remarks on the second reading as inconsistent with my attitude in regard to previous Loan Bills, but I merely took the opportunity of remarking on the enormous increase in the amount of borrowed money now required to finance the war, and pointed out that the Government should seriously consider the question of making adequate provision, by way of further taxation on the huge incomes which some people are enjoying at the present time, in order to meet
the interest bill. I shall now quote from page 57 of the Monthly Summary of Australian Statistics, showing the incomes earned by persons resident in Australia for the twelve months ending 30th June, 1915. These are the latest figures available”. The return is as follows : -
I have quoted those figures so that the Minister might realize the enormous amount of lie net incomes earned in Australia, and for the purpose of suggesting that it is reasonable to expect that such persons should bear a larger share of the War costs than they are paying at the present time.’ I fail to see any inconsistency in my attitude. The first issue of £20,000,000, on such terms as I suggested, would not disturb the commercial and business interests of this country.
We are now in the position that, after three years of war, the Treasurer (Sir John Forrest) is asking for a new loan of £80,000,000, with no certainty, either, that this will not be followed by an even greater amount. Surely, in view of these facts, it is time the Government became seized with the importance of making adequate provision for the payment of interest? This burden is increasing, and yet, when I venture to criticise the Bill, I am met with a flippant suggestion from the Leader of the Senate that my attitude is inconsistent. Not a member on the Ministerial benches - not even the
Leader of the Senate himself, as a party man - believes entirely in the whole Government programme. The VicePresident of the Executive Council must be aware that the , sacrifice of the individual is absolutely essential to the interest of the Government. No Government could be successfully carried on if every man were a law to himself.
– Hear, hear !
– I recognise clearly now, as I recognised when on the Ministerial benches, the difference between a party man advising the Government as to the course to be adopted, and a party man as a member of a Government; and surely it is not unreasonable for me to ask that in a loan proposal for £S0,000,000 there should be included some provision for the payment of interest? This loan proposal is not accompanied by that provision.
Clause agreed to.
Clause 3 agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Bill read a third time.
– I move -
That this Bill be now read a second time.
Its purpose is really to legalize a slight technical error. Money was raised under a previous War Loan Act to the amount of £24,500,000, and it was directed by that Act to be paid into the Consolidated Revenue Fund. Up to 30th June, 1915, £14,100,000 was so treated, and the balance, £10,400,000, was ordered by a later Act to be paid into the Loan Fund, but it has been discovered that, although the portion paid into the Loan Fund has since been spent, there was no authorization appropriating it out of that fund. The original appropriation proceeded on the assumption that the whole amount would be paid into the Consolidated Revenue.
– Then this is a validating Bill ?
– Yes, in the sense that it corrects a technical invalidity. The appropriation of these amounts was approved by Parliament, under the impression that the whole amount would have been paid into the Consolidated Revenue, whereas only a portion went into that fund, and the balance went into the Loan Fund. It is now asked by this Bill that the Senate should sanction the ap- propriation of the balance of the amount out of the loan account itself.
Question resolved in the affirmative.
Bill read a second time, and reported from Committee without amendment; report adopted.
Debate resumed from 12th September (vide page 1910), on motion by Senator Millen -
That this Bill be now read a second time.
– This is a measure in which every honorable senator should take a deep interest. The criticism levelled against it has been very peculiar, and the Bill itself has had a very chequered career. It started, I believe, in another place as a War Profits Bill, the taxation to be levied on profits made directly out of or consequent upon the war. Then the difficulty seemed to crop up in members’, minds to find a thing to tax. They recognised that somewhere and somehow persons had made money during the time of the war, and the nature of the Bill was changed, with the result that it comes before us, not as a tax on war profits, but as a tax on wartime profits - that is, on profits made during the period that the war has existed, and not on profits made out of or consequent upon the war. It has met a very peculiar kind of criticism, both from those who fostered it and those who opposed it. It suffered both from its friends and from its opponents. Like a football it was kicked by both sides. Both sides said it was not the Bill they wanted, or expected, and yet both were loath to refuse to pass it.
– It must have struck the happy medium.
– Consequently, I reason that the right thing has been done at last. One side says that £3,000,000 can be derived from this tax, and others estimate the amount at less than £500,000. A most peculiar arithmetical problem arises from the fact that the previous Trea-surer (Mr. Higgs) stated that the whole would amount to £3,000,000, whereas the present Treasurer (Sir John Forrest) states that three-quarters of the whole will amount to only £500,000. I cannot understand how that can be so. The exemptions do not make the difference, because, after all, when carefully examined they do not materially affect the product of the Bill. Thus the two Treasurers had practically the same basis upon which to judge.
– No. I looked up Mr. Higgs’ speech, and found that several inferences could be drawn from it, but I am very doubtful if one can draw the inference that he estimated a revenue of £3,000,000 from this tax. His statement was very guarded.
– The speeches made in this chamber on the Bill gave me that impression.
– Senator Gardiner said that Mr. Higgs anticipated £3,000,000, but it is very doubtful if it was so.
– Even if the estimate is only approximately correct; the result is that the whole equals about £3,000,000, whilst three-quarters of the whole equals less than £500,000.
I could not help noting the fervour of Senator Gardiner’s advocacy of a tax on excess profits, but I also noticed that he’ very carefully, cleverly, and wisely limited himself to mere generalities. It is possible for almost any of us to import a considerable amount of fervour into our denunciations, so long as we deal in generalities, but directly we attempt to prove a specific case our fervour evaporates.
During the whole time that this Bill has been under consideration there has been, evidenced the feeling that somewhere in the universe somebody, whether a company or an individual, has been making immense sums directly out of the necessities of the people in a very wicked fashion, and that therefore a Bill to tax that company or individual very severely was a necessity. Senator Gardiner quoted a large number of figures, but the first difficulty that seemed to impress itself upon him was where to begin the taxation, on whom to rest it, and what its general incidence was to be. Although it is admitted that profits have been made out of the war, Australia in that regard is not in the same category as Great Britain or Canada. In this, country only an infinitesimal amount has been derived by private individuals from the manufacture of munitions, or the distribution of Government money in large naval or military contracts. The position, of course, is quite different in Great Britain and Canada.
– I draw attention to the fact that there is not a quorum present. [Quorum formed’].
– As things are different in Australia, the old rule obtains, that when things are different they are not the same, and consequently we cannot apply to this country the measure that has been found applicable to Great Britain or Canada. That fact has escaped the attention of those who have been so loud in their denunciation of the maker,s of immense profits. Honorable senators may cite cases, quote newspaper cuttings, and bring forward lists, but they cannot produce lists showing that proportionately larger profits have been made in Australia during the war than previously.
– Do you mean that no undue profits have been made by business people since the war?
– That requires qualification. Profits may seem to have been made in a larger degree than previously; but take the case of a wholesale merchant. He has been very largely debarred from importing stock to replace what he has sold. It has not only cost him more to buy the new goods on the other side of the world, but it has cost him more in freight. The cost of placing down the new goods, therefore, has been greater. His profits are usually calculated on a percentage basis. If he had to pay twice as much for the articles, and got the same rate of interest on the amount expended, he would appear to some men to have been making immense profits. But the turnover has not been as large as usual. Honorable senators will not venture to say that the turnover in these businesses has been as large during war-time as ‘ it was previously. The amount of money which the merchants have handled may have been more, but the turnover has not been as large as usual.
– Some of them will tell you that it is.
– They have got more money for a smaller turnover.
-That I grant; but will the honorable senator say that these are outrageous profits? Take an article like galvanized iron, which has been quoted here. In the town in which I live a cottage is being built for a man who prescribed that the whole of the iron for roofing the cottage and the verandah should be of a certain brand. The contractor was able to secure a supply of the brand to roof the cottage, but he could not procure the. brand in the length required for the roof of the verandah, no matter what price he was willing to pay. I know that the price of galvanized iron was raised, but here is a case where a supply of the article could not be obtained. That limits business.
– Does a case like that justify a man in raising the price from £18 to £100 a ton ?
– I am not here to justify an increase of that kind, but to point out that the deductions made by honorable senators are scarcely fair, seeing that they have lost sight of other charges which increase the cost price. I contend’ that a business man has a right to charge his proportion of profit on what he could replace the article for. There1 must come a time when a merchant will have to sell his goods for less than the cost price. Surely prices cannot keep on soaring. Undoubtedly, many merchants are calculating on that basis and putting by an amount to meet the contingency. All these questions should be taken into consideration fairly and honestly. I can conceive that, under present conditions, to avert what would otherwise be a serious calamity merchants may be placed in that position. It is very popular to ‘raise the cry, but it is an argument which is more suited to a platform where, perhaps, the critics are not so keen as the members of the Senate, who examine an argument from every stand-point.
Let me now take the list which Senator Gardiner read. He did not tell us why, in the case of some of the goods he cited, the profits made in 1914 were remarkably small, and why in other cases in 1915 the profits amounted to only some hundreds of pounds and then soared up to thousands of pounds? It is very easy to take a list of that kind and say, “Here is a horrible example of a man who made a profit of only £800 in the first year but made a profit of £2,000 in the second year.” It might have been a new business which had been started since the outbreak of the war. It seemed to be a very large percentage of profit, but it might not mean much to the man who had invested large sums. No information was given by Senator Gardiner as to the amount of capital invested in each business. It shows how easy it is to be unjust when honorable senators only take some of the facts into consideration and do not reveal the whole of them.
– Why do not some honorable senators opposite give us the other side?
– That certainly is a lame kind of argument to advance.
– But everything you are stating is purely hypothetical.
– I might retort just as forcibly that my honorable friend’s case is hypothetical.
– These are facts.
– It is not a complete statement of the case until all the facts are revealed
– Will you .put the facts which you think are missing?
– I am doing so.
– I put the facts which I thought necessary.
– We should look at every matter from a judicial stand-point. lt is of no use to state only half the truth, because it is scarcely a fair argument to use. Those who have cited oases here did not state what amount of capital was invested in a concern. It might justly be a very large increase of percentage on the previous year’s turnover. It might, after all, be only a covering rate of interest on the capital. No evidence was given by Senator Gardiner as to whether a case he cited was a small venture or one involving a capital of hundreds of thousands of pounds. It is scarcely just to contend, from such facts, that here is a ground for taxing business people severely. I rose at this late stage in the debate to put what I believe is the other side of the case, and a side which, I think, should be stated before it is announced to the general public that there are millions of profits which ought to be taxed.
There are some points on which honorable senators opposite and I are agreed. I notice that no suggestion has been made by Senator Gardiner to discover exactly where war profits are to be found. Can he point to a single case, and say, “ Here are war profits which should be taxed “ ? Revenue returns come within the purview of the Income Tax Act. Senator Gardiner did not point to a single case in his list which would not be covered by the income tax. If he has any complaint to make, it should take the form of a statement that the parabolic curve is not swift enough, that the percentage should be much higher than it is. He has not justified the imposition of this war profits tax by a single quotation.
There is another matter which, I think, should have been brought forward. Take the case of a man whose original business has practically become defunct by being transformed into a business of an entirely * different kind. Many persons who, prior to the war, were engaged in catering for a certain class of customers who have gone to the Front, transformed their business from, say, clothing the citizen to clothing the soldier. That has meant laying aside -a considerable amount of old trade and capital and taking up something new. Take, again, a saddler’s business, which has been transformed to something entirely new, involving the importation and setting up of new machinery. In many cases the old machinery lies idle. These cases were cited by Senator Gardiner from his list. They are really transformed businesses; but nothing is said of the capital which lies idle. Yet it becomes a horrible example of one of those businesses which should be severely taxed, and taxed out of existence. We need to look a little below the surface, and thus get to know something of what is taking place.
I take it that since the war there has been a diffusion of prosperity greater than what took place previously, I do not think that there is such an aggregation to-day as there was in pre-war times. To be candid, we have all benefited by the expenditure which has taken place; but we have not all benefited equally, nor can we expect to do so. . Not long ago I travelled in a train from Adelaide to Melbourne with a director of the South Australian Savings Bank. He assured me, as a glad sign, that since the war the number of depositors in the Savings Bank had considerably increased. Two things; he said, accounted for the increase in the number of depositors and the increase in the amount deposited. One was the early closing of the liquor bars, and the other the diffusion of a larger amountof money amongst a certain class of persons owing to the allocation of military pay here. As a result of these allocations many wives have found that they have more money than they require, and the surplus is consequently deposited in the Savings Bank.
– Unfortunately, the opposite is true in many cases.
Senior SENIOR. - But the Savings Bank records show that the statement of the bank director is correct. Depositors in our Savings Banks have also invested both in our war loan and in war certificates.
– How does the honorable senator establish the fact that that money has been withdrawn from the Savings Banks !
– I can prove it by a very simple illustration. It is now proposed to float a. loan of £80,000,000. Let us assume that I am fortunate enough to have £100 at the Savings Bank. I naturally give notice that I wish to withdraw that money. The manager knows perfectly well that I am not likely to take it to the race-course or to the public house, and justifiably concludes that I wish to withdraw it in order that I may get 4½ per cent. ‘ interest upon it, instead of 3¾ per cent.
– The honorable senator has not established his case.
– My honorable friend has only to inquire amongst his friends who have deposits in our Savings Banks to discover whether they will withdraw them when they are afforded an opportunity to obtain a higher rate of interest.
– The conclusion may be very obvious to the honorable senator, but his remarks are obviously not relevant to this Bill.
– It seems to me that honorable senators opposite have been only carping critics - too weak in their criticism to injure the Bill, and too bankrupt in ideas to suggest any improvement in it. Consequently, their criticism stands condemned. Their position reminds me very much’ of the individual who was engaged to conserve water for irrigation purposes, and who in the midst of a fog exclaimed,”Oh, if I could only gather this fog. It is so many miles long, many miles wide,’ and so many hundreds of feet high. There is an enormous quantity of moisture contained in it, and as an inch of rainfall will cover so many square yards, obviously this fog, ifI could only conserve it, would irrigate a very large area.” That is exactly their position. But when they come down to practical politics they discover that the fog is not as dense as they thought it was.
The purpose of the Bill might, perhaps, have been better achieved by means of an Income Tax Act. At present, from the stand-point of our income-tax methods we are fishing with an angler’s line. By adopting improved methods we might use a net, and fishing in the same stream, we would undoubtedly catch more fish. It is high time that our income-tax methods were revised, seeing that at present not only is a Federal staff employed for the purpose of collecting the tax, but six State staffs are similarly employed. They are all dipping their lines in the same stream. I am also of opinion that there should be brought home to persons of wealth a sense of their duty to the Empire in view of the very great sacrifices which have been made by our volunteers at the Front. We cannot blind ourselves to the fact that in connexion with the titanic struggle which is now being waged, wealth has its obligations, just as much as has humanity. We all agree that there should be something like an equality of sacrifice, and, consequently, those who are possessed of wealth ought willingly to respond to the call to help us financially to win this war. An endea1vour should be made to secure thi= equality of sacrifice. The Bill will, 1 think, accomplish something in that, direction. ‘ It has been suggested that excess profits should be the first profits conscripted, and this measure aims at reaching those profits. The response from the wealthy individuals of the community ought to be as generous as was the response of our volunteers. I remember how Senator Needham exultantly spoke of the young men of Australia as having “leapt to arms.” A similar spirit should be exhibited by those who own the wealth of this country.
There is just one other phase of this matter upon which I desire to make a few observations. Senator Gardiner and some of his followers apparently wish to impose upon those persons living to-day the whole burden of our war expenditure.
– To kill the goose that lays the golden egg?
– Exactly. In endeavouring to extract from the people more than they can legitimately spare, my honorable friends would cripple the energies of the nation, and, consequently, there would be less to appropriate in the form of taxation in future years. I da not favour the adoption of that course, not because I want to spare the individual, but because I wish to conserve the wealth of the community. That wealth belongs to the whole nation just as much as the human energies belong to the entire nation. If we cripple that wealth, in any way, we shall inflict an injury upon the community. This, then, really is the field to which the criticism of hon orable senators opposite should have been directed. But they have not touched it. Their cry evidently is, “ All or nothing.’’ This is a somewhat short-sighted view to take, because it does not comprehend the energies of the nation as a whole.
Personally, I regard this Bill as a just one, and I favour its passing. It may be of a purely tentative character. As the Minister who introduced it remarked, we are now dealing with a matter in respect of which we have nothing to guide us. In entering an unknown region we naturally experience a sense of timidity.
– The Minister had the English, Canadian, and New Zealand examples to guide him.
– I admit that. But I have already pointed out that the conditions which obtain in England, and particularly those which obtain in Canada, are quite different from tho conditions which prevail in- Australia. The conditions .of New Zealand are more like those of Australia, and New Zealand has adopted a super-income tax in preference to this proposal.
T think there is something lacking in the Bill. The new conditions set up by the war are calculated to encourage individuals to embark in the establishment of new industries. The most ultraProtectionist could never have hoped, in his most sanguine moments, to secure such a measure of protection for industries as the war has given us. In a sense, that has been a fortunate thing for Australia. I hope that remark will not be misrepresented, because I do not believe for a moment that war is a fortunate thing. I merely desire to point out that war conditions have given an opportunity that is unique for the establishment of new industries in this country. I fear that this Bill does not cover, as it ought, the establishment of new industries.
– It actually discourages their establishment.
– That is the. point I desired to make. We are asked why we import a great number of things, and the reason is that they cannot be manufactured here except at the expenditure of a large amount of capital, the purchase of costly machinery, and the passing through, by the business of an initial stage in which the profits are comparatively small.
– Or in which losses are made.
– Quite so. If there is one provision which should be found in a War-time Profits Bill it is one intended to secure the protection of those who have seized the fortunate hour to establish in Australia industries essential to our welfare. Travelling from Adelaide to Melbourne, directly one gets outside the gaslit area, he discovers now that kerosene has taken the place of the acetylene gas for lighting purposes. The reason for this is that we have been importing calcium carbide, and have not been manufacturing it. This Bill should make provision for encouraging the establishment of an industry of this kind, because outside those areas in which gas or electricity are supplied acetylene gas took their place in the lighting of churches, public halls, and public buildings generally.
If Australia is to go. forward, we must endeavour to “manufacture here the things that we use. There was a time when, in Australia, we did not grow sufficient food for our own people, and had to import foodstuffs. To-day we can export foodstuffs to the other side of the world. We have met our requirements in one direction, and there is no reason why we should not meet them in many other directions. We should send to other lands, not merely the raw materials of manufactures, but the manufactures themselves. I, therefore, say that this Bill should contain a provision to protect new industries in their initial stages, instead of penalizing them as it does. It is my intention to submit in Committee one or two amendments to remedy this defect. To take another illustration, honorable senators are all aware of the extent to which the motor has entered into our means of transport and communication. They know the very large number of motor vehicles that are imported. Under existing conditions there is no reason why the manufacture of these cars should not be undertaken in Australia. Provided that when the new industry is started the taxpayer is not placed in a position, as he would be under this Bill, to say to those who invest their money in the business, “You made no profits in pre-war times. ‘ You have made immense profits from this business, and, as they are war-time profits, you must come under this taxation.” The machinery secured for the business will not * last very long, and when the war is over the owners of it will be subjected to outside competition, which may result in all the capital they have expended going by the board. The initial stages of the business must be protected, so that those engaged in it may be able to build up a fund which will enable them later to secure the capital they have invested.
With one or two exceptions, I believe that the clauses of this Bill will have a safe passage through’ Committee. I hope that the fears of some of our honorable friends opposite will not be realized. If they take the trouble to view both sides of the shield, I think they will recognise that the war-time profits which have been earned are not, perhaps, so large as they think they are. That profits have been made directly arising out of the conditions due to the war will be admitted, and I hope that under this Bill they may be made the subject of taxation.
– To the best of my recollection a War Profits Bill was an item in the election programme of the National party, although I must say it did not arouse much attention on the part of the electors, since I cannot remember having had a single question addressed to me on the matter. I must admit that every member of the National party impliedly subscribed to the necessity of a War Profits Bill. That much may be granted. But I will assert, on my own behalf, that I did not for a moment, in giving assent to a War Profits Bill as an item of the Government programme, renounce any of my claims that all legislation should be consonant with the principles of equity, and particularly all taxation legislation.
I am not altogether in sympathy with honorable senators on the other side who refer from time to time to the tremendous amounts that might be secured if we could only put the profiteers into the taxation press. We are told that a tremendous sum could easily be exacted from them. My own knowledge of the financial position of Australia, and of the profits gained in the prosecution of certain businesses, and the operations of certain companies, leads me to believe that nothing on a very substantial scale in the way of profits directly attributable” to war conditions can be discovered in Australia Undoubtedly there are some instances in which, profits directly traceable to war conditions can be discovered, but that this can be done in any comprehensive way I am not prepared to grant. It has been asserted that this Bill is modelled on the lines of the Imperial measure, but I suppose I am only repeating what speakers who have preceded me in the debate have already said when I say that it will be readily conceded that the conditions for earning profits arising out of the war have been immensely more favorable in the countries of the Old World than they have been in Australia.
I recently read in a reputable publication a very well-written article in which it was stated that the £4,000,000,000, which, I understand, is the sum approximating to the total war expenditure of the United Kingdom up to the present, might be taken from the profits earned in certain businesses and enterprises in the United Kingdom, and there would still be a tremendous margin unappropriated. It is’ stated that the profits in connexion with shipping, banking, and many industries in the Old Country have been on a colossal scale. We have had assertionsmade in the British House of Commons, by men holding high Ministerial rank, that such has been their personal experience. I do not know whetherthe assertion that the whole of the war expenditure of the United Kingdom could be met by the war profits, and still leave a large margin unappropriated, is based upon a fallacy or not. But my own impression is that when people speak of thousands of millions sterling, and ask that taxpayers shall furnish these amounts in fluid currency, they are attempting to achieve the impossible. However, the statement has been made, and it leads one to the conclusion that very substantial profits directly traceable to war conditions have been made by corporations and individuals in the Home countries.
I have no knowledge of profits having been made on anything like that scale in Australia. I believe that some copper-producing companies in Australia made fairly substantial profits. It has been asserted that a year or two ago many of them set aside substantial sums to meet the war profits taxation which their directorates believed to be imminent. I also read in a report of the Victorian Chamber of Commerce, which, I think, was published early in the year, a statement to the effect that one firm operating in Melbourne, whose profits in normal years before the war fluctuated between £10,000 and £12,000, had made £32,000 in 1916 in one department alone. There are, no doubt, a few isolated cases in which fairly substantial profits due to war conditions have been made in Australia, but I do not think that the war profits earned in the Commonwealth’ run into any very substantial sum in a national sense.
– It is quite possible to ascertain whether there have been war profits.
– I think so, and, having regard to the programme of the National Government, I do not recede from the position I took up, namely, that, in respect to profits directly traceable to war conditions, I regard them as a legitimate source of taxation to meet the expenditure caused by the war. But we have to be equitable.
Some honorable senators opposite have stated that a previous Government had promulgated a war profits taxation measure which would have brought in millions of pounds. It was also said that the measure, as brought in by the present Government, will only produce a few hundred thousand pounds, and that the cost of administration will be particularly heavy. All legislators in democratic countries have on their shoulders the responsibility of finding the money with which to carry on the services of the Government - a responsibility which it is a platitude to say is increased by war conditions, and particularly during a prolonged war. To me the amount that is to be secured by taxation of this character is only a secondary consideration. It certainly is secondary to the question whether we shall levy taxation equitably or otherwise, and whether the incidence shall be such as can stand the light of day. That is the main consideration with me, and in all seriousness - I am not in thehabit of making extravagant statements - I say that this measure, if not altered in Committee, will operate in connexion with some industries in such a way as to be tantamount to what I call Turkish taxation. We all know what that means. We have been led to believe that long ago a man who made a considerable amount of money in Turkey took good care to make the exterior of his house as mean as possible so that his possession of -wealth would not be suspected. Ultimately, however, it came to the ears of the Sultan that he was a rich man, with the result that he received a message from the Sultan’s representative requesting an interview. At that interview, weare told, the Pasha remarked - -“ I hear you are a very rich man, and you know the Government is poor, so you must give out of your abundance.” Perhaps the amount fixed was half a million or a million of money, and the unfortunate rich man said to the Pasha - “ Give me until to-morrow, your Serene Highness,” thinking perhaps that he could bribe the Pasha to let him down a little lightly. Nevertheless he would have to furnish the money whether, he liked it or not. Possibly the Pasha in such cases would make a levy equivalent practically to the whole of a man’s possessions, but he would have to grin and bear it under threat of torture or some other punishment of a very severe nature.
– With no right of appeal.
– Does the honorable senator suggest that the present Treasurer is a Pasha ?
– Well, I think he has some of the characteristics of a very desirable Pasha, but the point I wish to emphasize with regard to this measure is that, probably without design, it contains the possibility of injustice of an alarming -kind - so alarming that it is the duty of this Chamber, where the membership is smaller than in another place, and where members can address themselves in a quieter atmosphere to the consideration of its clauses, to go through the measure very circumspectly and see that its provisions are made* as equitable as human wit, as it exists in this Chamber, can devise.
I heard one honorable senator, who has himself criticised this measure, say that the pastoralists, traders, professional, shipping, and mining interests all desire to be exempted. I suppose that to a certain extent this is human nature. But it is also evidence that men in touch with some particular occupation or industry are able to point to the possibilities of taxation iniquities. Pastoralists, as well as those interested in the mining and trading concerns, have complained to me, as no doubt they have complained to other honorable senators. I happen to know, -or think I know, something about mining. Anyhow, I had to get my living in that industry before I came into this Chamber, and, in fact, I had to address myself to it for a portion of the time in order to adjust the balance of expenditure against myself caused by my launching on the troubled sea of politics. I am not going to plead for the mining interest, and ask that it be exempted) but I shall ask that the measure be made decently equitable in regard to its incidence towards the mining industry. Gold has been exempted from the provisions of the Bill because, if other commodities have appreciated in value during the war period, manifestly gold, which is the standard of value, has to that extent depreciated, and men following the goldmining industry have suffered in a way which we cannot redress. Undoubtedly they are suffering because, owing to the appreciation in general values, an ounce of gold will not buy as many commodities now as during the pre-war period. Common sense has thus recognised the obvious in the case of the gold miner, who will be allowed to prosecute his industry free from the operations of this proposed tax. I understand, also, that the coal mining industry is likewise relieved, presumably because coal is the only portable source of power which we possess in great quantities, and being essential to the prosecution of industry, is thus essential also to the successful prosecution of the war. Nevertheless, coal-mine owners’ profits come within the ambit of Federal and State income tax laws. To-day Senator Ferricks stated that the incidence of the income tax reaches its highest point at 6s. ?d. in the £1, which is nearly onethird, and. consequently, profits earned in anything like a substantial degree are subject to an exaction of 33 per cent., and so no very great harm is done by the operation of this impost. ,
T would point out, however, that there are other industries quite as essential as coal to the successful prosecution of this war. I may mention copper as one. T.s copper not vital to the prosecution of this war? Evidently the Germans think so, for we are told that German authorities are melting down bronze statues, and otherwise obtaining copper in small quantities, on the principle, evidently, that many small quantities contribute to a large aggregate. Copper is certainly one of the metals out of the production and sale of which profits directly traceable to war conditions may be discovered. I am not going to say it is wise to impose drastic taxation on the copper-mining industry, because that might cause those engaged in it to limit the .output; but I do know that many mining companies themselves recognise that they are earning profits during the war period on a scale very much above that which they were able to earn for some years before the war. Some of the rarer ores, such as wolfram and molybdenite, have also appreciated very much in price because of war conditions, but it is debatable whether we should tax profits made from the mining of those ores, because they are absolutely essential for the manufacture of munitions and in various other phases of war, work.
– They are taxable at present. f
– Wolfram and molybdenite are necessary for the prosecution of the war, and if the coal and gold mining industries are exempt, the Government will have to. carry the exemption list a little further and exempt something which has net appreciated because of prices due to war conditions.
– I think the honorable senator is wrong about coal. I understand the coal mining industry will be taxed under this Bil
– I have only had time to read the measure very hurriedly) and I am making my protest because of representations which have been made to me on this subject of exemptions. Whether coal is exempted from the operations of the measure in toto or only partially I will not contend at this juncture, other than to say that it evidently was exempted from the operation of some provisions when the measure was introduced into the House of Representatives.
It was understood that the Bill would be set aside for a sufficient period to enable all members of Parliament thoroughly to digest its provisions, and send it to individuals and corporations who would be affected by its provisions, so that they would be fully and carefully advised as to how it was likely to affect the industries involved. I understood that that was the intention of the Administration, and, although I admit that the measure was kept in suspense for a certain time, it has not been held over as long as I anticipated.
– Coal mining is not exempted.
– It was exempted from certain provisions in the measure as introduced in another place. Having arrived from Tasmania only this afternoon, I have not had time to read the Bill as it has been sent up to us. Senator Needham’s information does not affect my argument, which is that many industries capitalized before the war, and some capitalized since the war - and those capitalized since have been capitalized according to the conditions imposed by the Treasurer - are earning profits which will be taxable under the provisions of this measure, but which are not in any degree traceable to war conditions. Honorable senators will concede that that is a rank injustice.
– It is not the only one.
– Then, we shall have to do our best to eliminate some of these crudities from the measure. That is why we were sent here by the people. 1 am going to speak of an industry in which I have been engaged more or less actively all my life. I refer to tin mining. A tin mine that has been operated before the war by a company or individual, and in regard to which there is a pre-war standard of profits, can be dealt with equitably. If you grant that tin must be taxed, that it is not so vital to the prosecution of the war as to justify its total exemption from the operation of the measure; particularly if you say, “ We cannot tax copper and let tin escape,” then, in regard to a tin mine operated before the outbreak of war, and in connexion with which profits have been declared, there is a standard of comparison which will to a very large- extent prevent taxation from being inequitable. A tin mine would be affected by war conditions only by way of appreciation in the’ price of the metal. I shall prove from a memorandum compiled by the greatest tin-producing and marketing corporation in Australia - the Mount Bischoff Tin Mine and Smelting Company of Tasmania, that tin has not appreciated in price because of war conditions. The figures are taken for each six months for the three years prior to the outbreak of war. The average price per ton for the three years ended 30th June, 1914, was £196 8s. 9£d. The average price for 4he first two of those three years was actually £207 14s. 4½d. ; so that tin was at a substantial price m the years preceding the outbreak of the war. The average price for the three years from the 1st July, 1914, to 30th June, 1917, compiled on the .average of six-month periods, was £174 8s. 9d. There was, therefore, an advantage in favour of the prewar years of no less than £22 0s. 0£d. per ton ; yet tin mines that have been operated profitably during the war period will become subject to this war-time profits measure. Such a position cannot be logically defended.
The measure cannot be logically defended in view of its undoubted operation in regard to tin mines and to companies producing other articles that have not been favorably affected by wartime prices. I possess no special brief for tin mine-owners. The only reason I have introduced these illustrations is that I have a closer acquaintance with the industry of tin mining than with any other industry or calling, and am justified in giving honorable senators the benefit of my knowledge of how this measure will prejudicially affect an industry with which I have been so long connected. Understand that it is not going to affect me individually to the slightest extent. The tin mines of which I am the owner, or in which I am interested, are not very important ; their measure of production is not great, and there are pre-war-time standards of profits available in some instances for purposes of comparison, although sometimes, I am sorry to say, as a miner, that the profits do not exist j so let no honorable senator think I am arguing from the personal stand-point because the incidence of the measure is going to prejudicially affect my personal interests.
It is perhaps a little unfair to dwell too . largely upon the attitude of the Treasurer (Sir John Forrest) towards the measure introduced by a previous Administra tion, but I could quote very voluminously from his deliverances many pertinent remarks which would perhaps be far more pointed than anything I could address to the Senate. He has denounced the incidence of this or a similar measure; he has smitten it hip and thigh.
– The measure has been very much altered since then.
– And it must be still further altered in such a way that the profits of any industry which are not directly attributable to conditions and circumstances created by the war shall not be affected by it, or I shall disclaim, as a Government supporter, any responsibility for it.
– This is not a War Profits Bill, but a War-time Profits Bill.
– If it is a Wartime Profits Bill, that does not justify the introduction into its clauses of a principle that is not equitable. If it is a war-time profits measure, it simply means a tax on war-time incomes - incomes derived from the prosecution of certain industries and the conduct of certain businesses during the war, and it justifies the. epithets hurled against it in that it is sectional and inequitable, and practically an income tax of a most nefarious kind. 3t attacks the incomes of certain individuals, and completely exempts others. There is no justification for it at Bil.
There is a justification for a measure such as was outlined in the Ministerial programme when we placed ourselves before the electors. There is a justification for a measure which will levy on profits directly derivable from conditions created by the war to meet war expenditure, and such a measure I have been impliedly sent here to support; but I am not going to support a measure which embodies principles that are in themselves absolutely unjust I shall not go so far as to quote Sir John Forrest. Iti is, perhaps, not always fair to be digging into the publications of the past, even though that past be not far distant, for the purpose of adducing arguments which savour of criticism of a man’s present attitude. There has to be a certain cohesion and unity amongst the members of an Administration, and a Minister is often forced to advocate what he individually does not greatly commend. On that account I shall not quote the criticisms directed by the present Treasurer at a measure of substantially the same kind introduced in a previous session ; but it is open to every senator - in fact, it is his duty - to resent the purposed operation of any tax that is absolutely unjust in its incidence.
I tell Senator Millen that I shall do my level best to have such an amendment introduced as will give a measure of relief to an industry, the successful prosecution of which is essential to the vigorous conduct of the war, an industry with which I am acquainted, and which will be affected in the most paralyzing fashion by the provisions of the measure as they now stand - such an amendment as will give those who are conducting that industry a chance of being dealt with fairly and justly, and not expose them to taxation which will rob them of about three-fourths of their profits- profits not in the slightest degree attributable to conditions created by the war. I do not want to be selfish in this matter. People who have no connexion with mining, who have never spent a penny on a mine, who have never purchased a mining share, and, consequently, have never sold one and made a penny of profit, have approached me, and pointed out the injustice that will ensue from the application of this measure, particularly in connexion with its application to industries which were established before the war, but have become profitearning only during the war-time period, and not because of any conditions created by the war.
– What metals, other than gold, have not been directly increased in price as the result of the war?
– Tin, for instance. The average price of tin during the three years of the war has been lower than the average price in the three years before the war.
– Then it will not pay any tax.
– Nonsense ! If the Minister can point out to me in the Bill a provision which will prevent the levying of taxation on such companies, I will take back a great deal of what I have said.
– The pre-war-time profits are the criterion for the taxation in each year of profits.
– If a company has earned profits during the war period, but earned no profits during the three years preceding the war, what then?
Honorable senators have been circularized by gentlemen engaged ‘in the industry of tin mining who have an exact knowledge of how the tax will operate in connexion with their industry. The incidence of the operation of this measure will be such that a larger sum will be taken in profits from individuals who have only earned profits during the war period than can be attributable in any sense to any appreciation in the value of the articles they are producing. Here’ is a concrete illustration. It is the case of an enterprise which, only starting to earn profits during the war period, has earned £4,000 net profit.
In the case of a company having a cash capital of £3,000 and a mine with an estimated life of five years -
In the calculations I noticed an error of £300, which goes right through the circular, and which I have corrected-
That is to say, the Government propose to take £1,950 out of an enterprise which has earned a profit of £4,000, and the price of the commodity it has produced has not appreciated because of war conditions. That is a concrete illustration.
– I very much doubt your statement about the price of tin not having appreciated.
– I have a copy of this circular, which I pass along to the Minister. It was fixed up by the Mount Bischoff Company - a reputable company - showing that the average price of tin for the war period has been less than it was for the pre-war years.
– Tin was often up to a great price before the war.
– These gentlemen, in compiling their illustration, assumed that there was a difference of £30 per ton. I, who have a pretty accurate knowledge of the tin market, told them that that was not the case. “Oh, no,” they said, “ it was not the case, hut we are only introducing this as an illustration.” I said, “ Get the Mount Bischoff Company to work out the prices, and you will find that the average price for the whole of the three war years has been less than the average price for the three pre-war years,” and such is the case.
– It is a well-known fact that tin has been subject to greater fluctuations than has any other metal.
– Yes; and it has commanded a higher price during times of peace than it has done in war years. The tin mine-owner is very much concerned about the possible operation of this tax, and naturally he has made representations. He has made representations to a member of the National Parliament, who, he knows has had some practical acquaintance with the industry. That is why I am using this as a pointed illustration in regard to the possible inequities which may be perpetrated by this measure.
– Do you say that these figures were supplied by the Mount Bischoff Company?
– Yes; here is a marginal note in red ink on the copy in my possession.
In a very important Australian publication I find this statement -
A business was established some ten years ago, employing as manager a particularly capable and energetic young man. The business started in a small way, but, owing to the efforts of this man, made rapid progress, the earnings increasing from a few hundreds to £4,000 per annum, in both 1912 and 1913. The proprietor devoted very little of his time to the business, and, while the manager’s salary was regularly increased, until in 1913 he was drawing £600 a year, he considered that he was inadequately remunerated, and decided to accept the offer of a friend to finance him in a similar business to the extent of £2,000. Upon acquainting his employer, he was immediately offered a partnership, which he had to refuse, owing to having already definitely committed himself. Shortly after commencing business the present war commenced, and, in addition to the difficulties inseparable from a new venture, he was faced with unprecedented circumstances as regards obtaining supplies and con ducting business generally. By ceaseless and untiring attention to business, he was able to obtain profits of £2,000 during the year ended June, 1916, and £2,200 in the following year. It is this man who will be called upon to pay a tax of over £1,000, whilst his competitor, whose profits have fairly well been maintained, owing mainly to the organization effected by the former manager, escapes free. Does the Federal Treasurer consider this equitable taxation?
In other words, the active man is to be penalized, and the possessor of a longestablished business is to go free. A great deal of talk has been indulged in about the small production in Australia.
Sitting suspended from 6.30 to 8 p.m.
– When the sitting was suspended I was explaining that, although I spoke with specific knowledge of the mining industry, the inequitable provisions of this Bill, if it be carried in its present form, will seriously affect persons and companies engaged in other industries which have no relation whatever to mining.
I notice that the Treasurer, in criticising the Bill dealing with war-time profits taxation, which was introduced last session, laid special emphasis on the impairment of mining enterprise that would inevitably follow the placing of such a measure on our statute-book. I have in my mind two illustrations which will bear out his strictures. The right honorable gentleman particularly insisted on the fact that it is necessary to stimulate mining and other enterprises throughout Australia in every possible way. Now, there are in Tasmania two mines which have been operated for many years, and which will furnish an effective illustration of my contention regarding the impairment of mining enterprise which will ensue if the Bill now under consideration be approved in its present form. A mine called the Dreadnought Boulder has been operating at a great disadvantage on the West Coast of Tasmania for many years. Inpassing, I may remark that it is not my duty here to battle for the interests of large and old-established mining corporations. My aim is rather to do what I can for the men who own the smaller propositions, which have been struggling against an adverse fate for many years, and which have emerged from their difficulties during the war period, though not because of conditions that have been created by the war. Now, the Dreadnought Boulder, during the war period, Kas made profits running into some thousands of pounds. It has not declared any dividend, because it is necessary for the satisfactory exploitation of the big proposition belonging to this company, to retain its profits for the purpose of future development. A dividend has not been declared, but profits have been made. There is no pre-war standard of profits so far as this company is concerned, and under this Bill the profits which have been made during the war period will be subject to almost confiscatory taxation.
It is most necessary that we should stimulate mining enterprise throughout this great continent to the utmost degree. I venture to say that financial matters connected with the war may yet compel us to issue paper money with the backing of piled-up ores, which do not deteriorate, for the simple reason that they may not be exportable to the countries in which they have hitherto found a market because of the impairment of .our maritime communications with those countries. Now, the products of the agricultural industry, valuable though they may be, depreciate in value as the result of storage. But ores do not so depreciate. If we could not export these ores at once, it would be to the advantage of the Commonwealth to pile them up in order that we might make them available to the rest of the world in the peace period which must follow the war. In a national sense there is nothing to be gained by anything which will have the effect of restricting mining enterprise. Senator Pratten has shown very conclusively that the pre-war standard of profits will not be affected by this proposed legislation. In the north-east of Tasmania, close to the mining town in which I lived for years, there is a very large deposit of stanniferous rock, which, for a long period has been mined with conspicuous illfortune from the stand-point of the shareholders. This mine has never declared a dividend. Assistance was rendered to it by the Tasmanian Government, and in the period immediately preceding the outbreak of war it practically became a State mine. It afforded employment to hundreds of men, and caused thousands of pounds to be distributed monthly throughout the north-eastern district of Tasmania, in addition to which its output during the past thirty years has been a conspicuous factor in developing settlement on small agricultural holdings. This district is now a prosperous one, irrespective of the operations of the mine in question, but, undoubtedly, settlement has been materially promoted as the result of its existence. After the outbreak of war the company was unable to get the capital which was required for another imminent reconstruction process, which was only one of many that had preceded it. The Tasmanian Government, therefore, took over the mine, which was ‘worked by tributers. Of course, its output was nothing commensurate with the operations, that had not been profitable from a shareholder’s stand-point for many years preceding the war. The other day the Tasmanian Government decided to close its connexion with this property, and accordingly invited tenders for its purchase. An enterprising firm in Hobart, consisting of several brothers, who run an iron foundry there, purchased it for the sum of £2,000. Now this Bill will practically preclude them from making anything like a satisfactory attempt to re-establish the mine and get a good output from it, because, if they made substantial profits now, owing perhaps to a stroke of fortune consequent upon meeting better veins of ore, they would be deprived of those profits.
Before the suspension of the sitting, I think I mentioned something about the Turkish method of taxation. I also remember reading, when quite a lad, a not very flattering description’ of certain territories which had once been prosperous, but which had passed under Turkish rule. The book stated that these countries were now amongst the most miserable in the world, because the Turks had conquered them and had imposed their paralyzing influence upon them. “We may do the same thing by a measure of this description. We must all recognise the necessity which exists for stimulating the producing interests of Australia to the utmost. Senator O’Keefe very properly said that it was necessary to stimulate production right throughout this continent. It is only by increased production that the financial ravages of the war can be made good. But how are we going to prosper if we allow a measure of this kind to sequestrate the major portion of the profits which may be earned during the war period, notwithstanding that those profits are not at all attributable to war conditions ?
Under this Bill I find that certain powers are to be vested in the Commissioner. That officer, I have no doubt, will do his duty. I am not one of those who are in the habit of decrying our public servants. The latter render very effective and loyal service to the Commonwealth. But they are only men, and we should not impose upon them duties which are beyond their strength. Yet the Government are asking the Commissioner to assume the duty of equitably interpreting the provisions of this measure. Those provisions are very loose and indefinite. Something more definite is required to put the position of the “ adventurer “ beyond all doubt, if he contemplates embarking upon any particular enterprise at this period in our history. Consequently I protest against what I may term the too loose discretionary power which it is sought to vest in the Commissioner under this Bill.
Referring to a position described by Sir John Forrest, when denouncing the provisions of a measure similar to this, the statement is made -
As illustrating the position set forth above, imagine a company with an unexpended capital of £10,000 making a net pre-war profit, as prescribed by the Act, of £12,000 a year. This company, if making a similar profit during the war or account period under the Act, would entirely escape taxation, and if it made more than £12,000 profit, would pay tax on only the excess over the £12,000, plus the £200 allowed by the Act. How different would be the case of a company established since the outbreak of the war, with exactly the same capital and a life of ton years, and which, with a stroke of good fortune, is able to show a net profit of £12,000 a year during the account period.
We have to be pretty exact in this matter, because Ministers in charge of the measure in the Senate will endeavour to be loyal to their colleagues in the House of Representatives who have succeeded in carrying it to its present stage. Let honorable senators not infer that a stroke of good fortune necessarily means an increase in the price of the commodity produced by the corporation. A stroke of good fortune in connexion with a mining proposition may mean the striking of a rich vein or body of ore, and may have nothing whatever to do with the price obtained for the metal or ore produced. The statement I quote continues -
Instead of completely escaping taxation, this company would, on a 75 per cent, basis charge on excess profits, be mulcted in the sum of £6,975, without making allowance for State and Federal income taxes. That is, from the £12,000 profit this company .would be allowed to deduct 10 per cent, interest on the capital - £1,000, plus 10 per cent, return of capital consequent on gradual exhaustion of mine’s life, equals £1,000, plus the £200 and £500 allowance by the Act, and one-fourth of the profit, namely, £2,325, or a total of £5,025 for the company; .while the Government, through the war-time profits tax, would annex no less than £6,975 of the £12,000.
That is what such a company will be faced with if we do not substantially amend some of the provisions of this Bill and extract from them the principle of inequity which they at present contain. My quotation proceeds -
Now, if the last-named company had to pay on war profits alone, which is ostensibly the object of the Bill, it would simply pay on the difference between the pre-war price of, say, tin, and the present price, as shown below.
Let me say that these illustrations have been drawn up on the assumption that there was a difference between the prewar price of tin and the War-period price. As a matter of fact, the pre-war price of tin was greater than the war-period. price, striking averages every six months. The gentlemen who compiled these illustrations are representatives of, the Mount Bischoff Company, which is the biggest tin-smelting and producing corporation in Australia. From its records were taken the figures that I handed to the Minister for Defence; and if they are examined it will be found that they conclusively prove that the price of tin during the present war period is less than The average price for three years preceding the war. To continue my quotation -
The £12,000 profit would represent, roughly, the value of 78 tons of metallic tin, at £230 per ton, less working charges and expenses, say, £0,000. The pre-war price of tin, as illustrated further on, was £205 per ton, therefore, the increase in value on this 78 tons is £25 per ton, or £1,950, and a Avar profits tax of 75 per cent, on this would give £1,462 10s. ,to the Taxation Department, as against £6,975 under the provisions of the proposed Bill.
That is assuming that there was an increase in the price of tin of £25 per ton during the war period, as against the prewar period, and that was levied on, as it might be legitimately under a true war profits taxation measure, the Government would get only £1,462 10s., as against £6,975 which they would get under the provisions of this War-time Profits Bill.
I hope that honorable senators will address themselves to this measure, clause by clause and line by line. I know that, in common with myself, they cannot read everything that is sent to them in protest against various measures submitted from time to time to this Parliament; but in view of the possibilities of injustice under this measure, I venture to say that we shall be doing what is just to the people and to Parliament if we proceed with the greatest circumspection, to examine, line by line, the possibilities of this measure. The people responsible for compiling these illustrations say here something so pertinent that I may be regarded as justified in quoting from them again. They say -
The big producers escape to the extent of the pre-war standard of profits exemption, whereas mines coming to a profitable stage or started since the outbreak of the war are apparently to be mercilessly penalized and shorn of 75 per cent, of the net profits, which are obviously not war profits, as soon as produced, which must result in the closing down and nonworking of many mines, and react far more seriously upon the community (and the employees) than the foregoing of the revenue which the .proposed tax is capable of extracting from the industry: Surely the mine without a- pie-war standard of profits exemption- is equitably and. justly entitled to work under conditions obtaining before the war, and be exempted to the extent of the average of prewar price- of the metal ‘produced, particularly as the assessment of the tax could be so easily arrived at.
I find that dairying, horticultural, and agricultural industries- are exempted.
Senator- Ferricks. - I think that only co-operative dairying companies are exempt.
– 1 have not had time to look into the matter with meticulous care. I know that there are substantial exemptions made in respect of certain primary industries which produce foodstuffs. Man does not live by bread alone, but he has to have bread. Far be it from me to cavil at anything reasonable in the way of exemptions affecting any industry. But we are in the stern grip of a war period. In every sense of the term we are living in an era of blood and iron. Metals and ores are vital factors in the prosecution of this war. I make apology to business men, as I am npt a business man, and have never been engaged in big trade enterprises, for not being able to illustrate the injustices of the Bill as it may possibly affect their businesses. In the matter of illustra tions,. I must confine myself to the industry I know So well. Metals and ores are to be exempted to a certain extent. Gold is exempted. I believe that some of the metals which have been utilized in comparatively recent periods are regarded as so vital to the conduct of the war that they are to be exempted. I venture to say that, in all equity the Senate must consider the necessity of protecting industries] individuals, or corporations concerned in mining for ores essential not only to the prosecution of the war, but to the ordinary processes of civilized life. I have no objection whatever to the taxation of any mining corporation which has substantially benefited by the appreciation in the prices of ores and metals obviously due to the conditions, of the war. They must abide the issue of this measure. It is only fair that they should pay out of their war-produced profits some of the money necessary to meet war expenditure. But against that principle must be placed the necessity of so stimulating production and enterprise that we may pile up all those essentials of material wealth which will enable us to take advantage of the trade position directly the war is over. I do not think that, even for the sake of a couple of millions sterling in taxation, it is advisable for the Australian Parliament to bring about a condition of things which will cause companies to fail to mine, during the war period, their reserves of ore. They should be stimulated to get1 everything out, to have it in piles, in smelters, and anywhere in a. marketable condition ready for the period of competition which will set in. after the declaration of peace.
Although somewhat lightly , many of us gave our adhesion to this item in the Ministerial programme, if not by actual profession, bv our silence in regard to the matter, I venture to say that this measure, instead of doing no more than produce: money for the Treasury, may operate so prejudicially in another sense that we may be at the present’ time engaged in what Solomon calls “ an evil employment “ if we pass this measure. Let us pass it, but! let us be particularly careful that in its provisions we shall deal only with the principle of taxing profits directly derivable from war conditions. We must bear in mind the principle of justice, so that when the Bill has emerged from our deliberations in Committee) we shall be able to confront the producers and business men of the Commonwealth, and say, “We have endeavoured to act justly.” But if we go by rule-of-thumb and say that we must get’ the money in somehow, regardless of the principles of equity and the canons of sound taxation, then I do not know how we, who should be a Chamber of review, are going with our heads erect to meet the enterprising men and adventurers of this Commonwealth, who, with their forerunners, have helped to make it what it is. I know that the Administration would not designedly do anything prejudicial to any industry in the Commonwealth, and I hope that they will not endeavour to rush the measure through, but will permit us to investigate it with a deliberation consonant with our position as a Chamber of review, so that we may do something to equitably draw from the taxpayers those profits which we may legitimately ask them to hand over to us, while at the same time we show the most careful regard for the spirit of enterprise which, I hope, permeates most Australian industries.
– I think that honorable senators generally agree that’ the debate has been most informative and interesting. We have had several speeches, all of which commanded some measure of attention, but perhaps honorable senators will allow me to specially indicate one which excited very general interest, and that was the speech of my honorable colleague in the representation of New South Wales, Senator Pratten. But whilst the speeches have indicated a considerable diversity of opinion, I hope I am not misjudging the temper of the Senate when I say that most of the points raised were those which rather lend themselves to treatment in Committee than place on me any obligation to further discuss them just now.
There were, however, one or two lines of argument indicated in the course of the debate to which I should like to make some reference, and also one or two statements concerning which I desire to offer some correction. Taking them in their order, I refer to Senator Gardiner’s references to the small amount of revenue anticipated under this Bill as compared with the revenue expected under the Bill withwhich he was associated as a member of a previous Ministry. He mentioned that that Bill was expected to return. £3,000,000 to the Treasury, and contrasted that result, and of course to the glorification of his own measure, with the smaller amount estimated to be received by Sir John Forrest. Now, the quotation to which he referred as having fallen from the lips of his then colleague (Mr. Higgs) did not justify his statement that the previous measure was expected to yield £3,000,000. What Mr. Higgs said was-
The honorable member seems to think that if we allow these deductions, we shall not get any revenue. These deductions are only those which are allowed in the case of the income tax, from which we expect to derive £3,000,000 this year.
The only reference to £3,000,000 in the course of the debate on the previous Wartime Profits Tax Bill was the £3,000,000 then being received from the income tax., and it had no application whatever to the expected revenue from the former Wartime Profits Tax Bill.
– What was said with regard to this matter in the manifesto which our party issued?
– I have that manifesto here., and I propose to quote some portion of it before I conclude.
The Leader of the Opposition (Senator Gardiner) referred to this measure in somewhat contemptuous terms because, apparently, it did not go far enough; but I think the Government can congratulate itself that it has not found it necessary to indulge in a revel of taxation although I know that my honorable friends opposite are always anxious for any excuse to impose additional burdens upon the people,more particularly at a time like this. It is, however, one of the canons of good, sound government not to increase the load of taxation. I see no virtue in taxation, and, therefore, I take the honorable senator’s comment rather as a commendation that the Government found it possible to present to Parliament a financial statement which does not seek to impose excessive taxation at this juncture.
Judging from his remarks, the Leader of the Opposition was also surprised at what he appeared to regard as painful unanimity between the statement I was privileged to make to this Chamber and the statement made by my colleague Sir John Forrest, in another place. I cannot myself see that there is much reason for surprise at that fact. I should rather have thought surprise would have been occasioned had there been any discrepancy. Yet, when I came to think the matter over - and I do endeavour to think matters over when I am puzzled - I came to the conclusion that it was natural that surprise should be expressed by Senator Gardiner, who, himself, as an anticonscriptionist, for so long occupied a seat in a conscriptionist Ministry.
– Do you call a Government a conscriptionist Ministry which contained six members in favour of that policy and four against it?
– Well, I point out that as an anti-conscriptionist in a conscriptionist Ministry Senator Gardiner did occupy an anomalous position. Indeed, I am inclined to think that his position was more strikingly surprising than any unanimity which was disclosed in the Ministerial speeches on this measure.
– But how did you manage to use the same words?
– I am not aware that there is any patent rights in words. And the honorable senator must accept my assurance that I am not an egotist enough - perhaps in that I differentiate from the honorable senator - to suppose that I could introduce a complicated measure of this character unsupported by notes or official statements.
The Leader of the Opposition gave us what he was pleased to regard as a sound financial policy for the present time. Apparently he thinks that we can win the war by taxation, and that if we secured the whole of the wealth of this country and placed it in a huge pile in .this chamber we would have done something towards winning the war. But it would not help one whit to collect more by taxation than is necessary to pay our way as we go.
– Do you call it paying our way to borrow money?
– This is the policy to which the Leader of the Opposition himself subscribed, and it has taken him three years, as well as a change in his seat in the Senate, to discover what he now terms to be a weakness of Government policy. When the Leader of the Opposition occupied a seat on the Treasury benches he presented practically a similar measure to this, and on that occasion said nothing about the fact which he apparently discovered last night, that he was in favour of taking the excess of all incomes over £200 a year. He said not a word about it then. It was only last night that he suddenly discovered that in some way or other we would not be doing our duty to the boys at the Front unless we levied taxation on incomes in excess of the amount stated. I remind him, however, that this war has been raging for three years, and that this inequity - if it is one - has been in existence for three years, though it is only now that he is raising his voice in protest against it. I feel justified, therefore, in regarding his statement on this matter as lacking somewhat in sincerity.
Let me remind the Leader of the Opposition of the platform to which he stands pledged. He has told us that, instead of borrowing, we should dip more deeply into the pockets of the taxpayers to finance this war, and one of his colleagues - I think it was Senator O’Keefe - pointed out how great an iniquity it would be if, instead of taxing the people, we paid our war expenditure out of loans, so that when our men came back from the Front they would be required, as taxpayers, to contribute towards the redemption of these loans.
– Hear, hear!
– Does not the honorable senator think that he would be more sincere if he had made that statement at the last election, for, although he was not a candidate himself, he spoke in favour of candidates who stood on the platform represented by Mr. Tudor’s manifesto.
– How do you know I did not?
– Because I know the honorable senator.
– Well, I did say so. You have made a mistake, and that is not the first mistake you have made.
– If Senator O’Keefe says that, I am of course quite prepared to accept his statement, but I shall be able to show that Senator O’Keefe can say ‘ ‘ yes ‘ ‘ and “no” in the same breath.
Members of the party opposite denounce the financial policy of the Government on the ground that it rests too much on loan and too little on revenue. Honorable senators will, no doubt, be aware of the fact that honorable members opposite were at one time staunch advocates of the wealth tax. But how long was it before they abandoned this principle ?
– I was not.
– No; we always’ know where to find Senator Grant. He is- the one man in the party opposite who stands firmly on the rock upon which he has planted his political faith. “We know that so long as there is an acre of land to be taxed Senator Grant will look for no other source of revenue. I remind the Senate, however, that honorable members opposite had no hesitation, at one time, in declaring their advocacy of a tax upon wealth. They came out like roaring lions in favour of this principle, but they were the first to drop it, though, in the meantime, they had taunted honorable members on this side with being liable to depart from their financial proposals.
– What party are you referring to?
– The party known as the National party. The manifesto to which I refer was signed by Mr. Tudor and Mr. Watkins, and, being an official document, I assume that every member of the party which took the platform under Mr. Tudor’s banner subscribed to it. That document contained the following statement: -
We regret the delay in the passage of a Bill to levy a tax upon the excess profits of those persons, firms, or companies making more profits during than before the war. If returned to power, we propose to tax war-time profits on the basis of 50 per cent. of excess profits for the year ending 30th June, 1915, 60 per cent. for the year ending 30th June, 1916, and100 per cent. thereafter while the war lasts.
After having read that statement, I remind the Senate that Senator Gardiner denounced the present Bill because it was retrospective; but, in the manifesto referred to, he declared his belief in the desirability of going back yet another year.
– Hear, hear!
– But Senator Gardiner has told us that he does not like retrospective legislation. I ask him now why did he like it on the 5th of May last, because, in the manifesto, the party opposite declared in favour of making this legislation retrospective for another twelve months.
– I only made a suggestion to the Government.
– Why did not the honorable senator make that suggestion to his Caucus when the manifesto was under consideration ?
Senator Guy, in the course of his remarks, referred to thefact that this tax was not heavy enough, and the simile was used of the burglar who said, “ If you will leave some of the boodle with me you can take the rest.” Now, the Government proposal was totake 50 per cent. and 75 per cent., and the gentlemen who criticise it proposed to levy 50 per cent. in the first year, 60 per cent. in the second, and 100 per cent. in the subsequent years. I also remind the Senate of the argument which has been used that if 50 per cent. of the war profits tax is taken from a person there will be an inducement to him to try and make it up by loading the price of his goods, but that somehow or other, if the tax taken represented 100 per cent. of the excess profits, there would be no such temptation. I do not claim to be an expert in logic, but it seems to me that if the taking of 50 per cent. in the way of taxation would stimulate a man to load the prices of his goods, the taking of 100 per cent. would stimulate him twice as much.
SenatorFerricks. - No. If a man lost the whole of his profits there would be no inducement for him to do that.
– Does the honorable senator think that if only half profits were taken there would be an inducement to load the prices?
– Yes, in order to make up the other half.
– And if 100 per cent. were taken, does he think there wouldbe no such stimulus?
– No, because there would be no inducement for him to make more.
– If 100 per cent. were taken there would be nothing left, but if there were, I venture to say that honorable senators opposite would have inserted in their manifesto a provision to take 120 per cent.
– He would not want an inducement to load prices if the Government “ collared “ the whole of the excess profit.
– It is no good bandying words about this. The argument was utterly absurd. If taking 50 per cent. away from a man will fill his soul with a desire to add to the price of a thing he sells, that desire will be intensified if you take the whole 100 per cent. away. Men do not add to the price of the things they sell merely because they desire to do so ; they must see the possibility of selling them.
– What would be the good of that man’s excess profits to him if the Government took all of them?
– Then why did the honorable senator’s party put it in their manifesto? That is just the difference between their proposal and ours. The honorable senator’s party proposed to take the whole of theprofits, thereby absolutely removing any incentive on the part of a man to make any profit at all, and preventing him from carrying on or expanding his industry. If you tell the industrial and commercial community that no matter how much they strain themselves mentally or physically to expand their businesses they will not get an additional cent. out of it, you will rob them of that incentive which moves us all. Therefore, there is wisdom not in collecting 100 per cent. and removing that incentive, but incollecting a less amount, so thatthey know that out of every additional sovereign they make they will get some reward for their extra effort and enterprise.
As Senator O’Keefe seems disposed to take a hand in this debate, let me say a few words to him. There was at one time in my own State a gentleman who was known because of a Yes-No attitude attributed to him.
– And you were his lieutenant and chief supporter.
– I was up to that time, and a good supporter afterwards. But if he knew what was taking place here he would turn green with envy at Senator O’Keefe’s achievement last night. The honorable senator last night put himself into this magnificently strong position : He could by virtue of what he said then go to the mining districts of Tasmania and show them by a quotation from Hansard that he was not favorable to mining being included in’ this Bill, and then he could go to the agricultural centres and show them that he was in favour of it. He asked last night why the rare or base metals were not included. He could see no reason why they should be shut out. A little later he said he could not see, in view of the gambling character of mining, why it should be included at all. The honorable senator can therefore persuade theagriculturists of Tasmania that he was a strong advocate of levying a fair taxon the big mining companies.
– I am never afraid to tell the people what I say here.
– That is what I am saying, but the honorable senator is always careful to have something that will suit the particular people to whom he is talking. I am not finding fault, but am complimenting my honorable friend upon his agility in this regard.. Senator Pratten two or three times in his speech yesterday made a statement which seemed to indicate rather a failure on his part to quite comprehend the purpose of this tax. He spoke of the principles of taxation, and said that it should be laid on the shoulders of those best able to bear it. That is all right as a general proposition, but the honorable senator must bear in mind that this is an excess profits tax, and therefore not one which falls upon a wealthy man. merely because he is wealthy. It falls upon the man who has made more profit - - -
– Then why are there any exemptions?
– The honorable senator will have an opportunity in Committee to move to strike out those exemptions if he wishes.
– Does not the measure establish any connexion between the profits and the war?
– Directly, no.
– That is a revelation.
– It is not. The title of the Bill is not a War Profits Tax. Bill. A mere correct designation would be an Excess Profits Tax Bill.
– It is not the measure blazoned on the Ministerial programme when we appealed to the electors.
– Yes it was. It was a War-time Profits Tax Bill.
– The impression in the popular mind, and in the minds of legislators, was, and is, that the measure established a direct connexion between profits and the war.
– I am not so much concerned with the popular impression as withthe simple fact that the Bills which appeared in the Government programme was a Bill to levy ,a tax upon war-time profits.
– ‘Irrespective of whether they were derived from war conditions or not?
– I did not understand anything of that sort.
– The honorable senator will recollect that when the question of taxing war profits first came up, there was a general acceptation of that principle, but it was not very long before a closer consideration of the problem revealed the impossibility of identifying those profits which sprang directly out of the war, and public men - and I assume also the people outside - rapidly recognised that all that could be done was to levy, on the excess profits- made during the time of the war. Senator Pratten unconsciously gave a very strong reason, when -dealing with this very matter, for the support which I hope he is. going to give the measure. He referred to the. stimulated prosperity consequent upon the- expenditure due to the war. That is quite true. Owing to the large amount of public money expended through the Defence Department and other activities connected with the war, there has been a great stimulus to industry generally, and, therefore, although you cannot’ say that a particular shop has made a profit as the direct result of the war; it is a fair assumption that a large percentage of excess profits made in a variety of businesses is due to the stimulated prosperity which the war has brought about. To that extent, therefore, they are indirectly, although not directly, the product of the war itself.
Senator Pratten suggested the creation of more than one Board of Referees There is a good deal to be said in favour of this, especially by those who, like myself and the honorable senator, come from the city which is the largest commercial centre in Australia. There is naturally a. feeling of some irritation in New South Wales at finding that they have continually, to come to Melbourne, at the cost of both time and money, to deal with matters which their Melbourne competitors can get adjusted by walking across the -street. That is a very natural feeling, And I have no doubt that Senator Pratten has been influenced by it in making his suggestion. But the danger of creating more than one tribunal to hear these appeals is ‘the possibility of a want of unanimity and . harmony in their decisions. Whilst that is an insurmountable objection to the suggestion, in order to meet the convenience, not only of New South Wales people, but of those in other States, the Treasurer supposes that the Board, instead of requiring appellants from the other States to come here, will, like the High Court itself, travel to the various States as circumstances demand.
– ‘But it will never get round unless it duplicates itself.
– I do not know whether that is an intimation that the honorable senator and his other business friends aTe going in- for a conspiracy of appeals. If it is found that one board cannot deal with, the work, the only thing to do> will be to review this provision. I believe that to make. the. Board a travelling board will largely meet the difficulty which the honorable senator would attempt to smooth away by the creation of other boards.
– Could not the word “ Boards “ be inserted in the clause, leaving the Government free to appoint more than one if they were found necessary ?
– The danger of that would be that if the Government accepted that amendment it’ would be rightly- taken as an intimation that the Government were favorable to the suggestion. I prefer to say, quite frankly, that the Government are not able to adopt it, but that in order to meet the difficulty which Senator Pratten has pointed out the Board will travel’ from State to State.
– But if congestion arises ?
– I am sure the honorable senator would not support a Government which had not enough common sense to review the position in the light of existing circumstances.
– Parliament may not be sitting.
– Parliament will sit long before that Board gets to work. Senator Foll suggested that, pending an appeal, payment of the tax should stand over. That suggestion would no doubt be received with glee by prospective taxpayers. Every taxpayer would appeal,
And it would mean tying up the payments for a considerable while. It would multiply the number of appeals, and, consequently, the time given for the payment of the tax would possibly extend to years. The honorable senator will, therefore, see that his suggestion can hardly be included among the amendments to be adopted by the Government.
– It would keep Senator Pratten ‘s Boards employed.
– Not all Senator Pratten’s Boards could deal with the cases that would arise.
Senator Bakhap, to whom we always listen with a great deal of interest, brought forward the case of the tinmining industry. He said, quite correctly, that the mining industry was important, particularly when Australia was under some inducement to stimulate its industries. It is quite true that we are under the strongest possible pressure to stimulate all our industries as much as we can, but we have also to raise taxation, and every argument the honorable senator used on this point could be applied with equal force to any proposal to tax an industry. A tax, no matter how you view it, loads up the cost which an industry has to bear. If we were to say that no tax was to go upon any industry where it would be in the nature of a restriction, hampering the efforts of those engaged in it, we could not levy a tax of any kind. An income tax is open to the same objection.
– Tlie honorable senator must do me the justice of acknowledging .that I did not claim exemption for any profits directly attributable to or derivable from war conditions.
– That is so; but I am dealing with the honorable senator’s general proposition as to the duty of the Government in its efforts to stimulate industries. He- pointed out the difference between stimulating and depressing an industry. I agree with him as a general proposition. There is, therefore, an obligation upon any Government to make this tax as light as possible; but I could apply the arguments which he used with equal effect to an income tax. If I levy an income tax to the same amount upon the income made by a mine, it is an impost upon that mine just as heavy and destructive in its effect as if I call it an excess profits tax. You cannot put a tax. on an industry without .taking from it some portion of the capital which, if left in its hands, would enable it to expand to a greater extent than it otherwise could.
– This is a sectional income tax under the guise of a war profits tax.
– This Bill is simple in its principle, in that it does propose to take from those men who have made more in the war time than they made in the pre-war time, a special contribution towards the cost of government. The honorable senator pointed out that the price of tin was higher in certain of the prewar years than it has been during the currency, of the war. That statement is quite right. He will not mind me supplementing the figures he gave by pointing out that tin has gone up by from 25 to 30 per cent, or more over his figures, so that it is not quite a safeguard to take the limited period with which he dealt.
– I took three war years as against three, pre-war years.
– The honorable senator showed an average of £174; but to-day the price is from £242 to £246.
– In pre-war years itf was over £200.
– I understand that the honorable senator’s contention, founded on the figures, was that the Government, in levying an excess tax, ought to levy on the basis of the difference between the price which the article was fetching in war time and the price which it fetched in pre-war time.
– Quite so.
– That is very satisfactory to the tin mines whose product went down in price, but it is a complete denial of the principle of this Bill. The Bill does not ask’ whether a man got more or less for the thing he sold, but whether he made more or less profit. It is conceivable - and the honorable senator’s case proves it - that a man may be selling a product at a lower value and yet making a bigger profit.
– Yes; but that certainly is not attributable in the slightest degree to war conditions.
– The honorable senator is harking back to an incorrect conception of the Bill.
– It was a very general conception, anyhow.
– If the honorable senator spoke under the impression that this was an attempt to collect profits directly created by the war, he will see at once that he spoke in error.
– Then I am under no obligation to support this measure?
– No; I am not aware that the honorable senator is under any obligation-
– Certainly, if I took the electoral field in support of a measure that expressed a principle which I thoroughly understood, I am under an obligation to support such measure.
– The honorable senator, I understand, went out and supported the policy enunciated by the Prime Minister.
– To tax war profits.
– No. If the honorable senator looks at the manifesto he will find that it was to be a war-time profits tax.
– It was not explained in that sense.
– I think that most members of the party so understood the proposal, and if there should be any doubt on that point - I have none myself - all that I can do is to invite the honorable senator to read the manifesto of the Prime Minister, Mr. Hughes, when he will find, I think, that my statement is correct. However, that is neither here nor there.
I wish to remind honorable senators of the case which Senator Bakhap referred to, and I ask him to correct me if I am wrong. I understood him to say that a company, with a capital of £3,000, had made a gross profit of £6,000 and a net profit of £4,000.
– Yes; but the figures, I might say, contained an error in addition, for which the gentlemen who compiled them are responsible. I think it is only a typographical error, but it has gone right through the calculations. However, the figures are not substantially affected.
– The correction does not substantially affect my argument, and that is’ that, ff a company with a capital of £3,000 ‘can make a net income of £4,000 in a year, it is not going to excite very much sympathy when the Government asks it to contribute towards the cost of government.
– But a company which is making the same profit is going to escape simply because it made the profit during the years previous to the war, and gives a standard of comparison which this company cannot give, seeing that it only commenced operations after the war began.
– I invite the honorable senator, or any other member of the Senate, to put forward any tax in respect to which I cannot find a hard case.
– I. do not think it would be difficult to modify the terms of this -measure so as to make it more equitable.
– The honorable senator’s idea of equity, apparently, is to make certain alterations which will affect a particular industry in which he is interested.
– No; all industries in the same position.
– It would be opening a door for a large number of exemptions of industries and companies which ought to pay. Does the honorable senator mean to tell me that, on the whole, the metal industries have not done well?
– Senator Ferricks said that under the Federal and State income taxation they are paying 6s. 3d. in the £1 now.
– I said that the big investors in the war loan would avoid that tax of 6s. 3d. in the £1.
– I did riot understand Senator Ferricks to make any reference to these gentlemen paying a tax of 6s. 3d. on the value of their shares in metal companies. The position is a very simple one. There are to-day, largely es a result, for many reasons-
– Not of war conditions.
– My honorable friend and I need not argue any further. If he spoke on the assumption that this was a Bill to collect profits created by the war, I am not discussing a Bill of that nature. It is not such a measure.
– I know where I am then.
– I need not continue my remarks regarding Senator Bakhap.
– Have you an estimate of the revenue expected to be received from this tax?
– The estimate given was that £1,000,000 would be collected in two years.
I think it was Senator Maughan who asked me to give an idea of the cost of collection. It is put down at £30,000 a year,But the Treasury officials frankly state that there is a very uncertain element in the estimate. They have done their best to form an opinion, bat they do not regard the estimate as more than a general indication of what they expect. I suppose that I am entitled to an opinion as well as other laymen. I think that the estimate is on the extremely cautious and conservative side. I cannot help thinking that they preferred., in advising their chief, to be on the safe side rather than to err in a contrary direction.
– Had they not the income returns before them when they were making the estimate?
– Of course, the officials had the returns. I am not prepared to say by what methods they proceeded to work; but I assume that, as. experienced and responsible officers, they did their best toarrive at some estimate to place in the Treasurer’s hands. At any rate, they are not so sanguine as I am as to the possible yield from the tax.
There were a great many other matters brought up in the course of the debate. In Committee, if further information is desired on any particular clause, I shall endeavour to supply it.
Questionresolved in the affirmative.
Bill read a second time.
In Committee :
Clause 1 -
This Act may be cited us the War-time Profits Tax Assessment Act 1917.
.- I am going to make myself quite clear on the matter referred to by the Minister. If I have erred in thinking that the purpose of this measure was to tax profits that were undoubtedly derivable from war conditions, it seems to me that I have erred in very good company, for I know that so staunch a supporter of the National party as Sir “William Irvine has animadverted on this particular phase of the whole question.
– But did he understand it?
– So far as I car remember the debates in another place, he spoke on the equity and desirability of taxing purely war-time profits. I understood from his remarks that that was the general principle which should be observed in dealing with profits derivable during war-time from war conditions. I think that he made a pretty voluminous protest against this War-time Profits Bill on the very grounds, although he expressed himself differently, which I have referred to. I believe that the public mind will not be disabused of the idea which it undoubtedly entertains in regard to the taxation of war profits. The feeling in the country, if feeling there is irk the matter, is that war profits are a legitimate subject of taxation; but I hesitate to say that there is any feeling on the part of the majority ofelectors in favour of sectionalizing incomes earned during the war period, and not even remotely associated with war conditions, for special taxation. It was because of my sudden awakening to the sinister feature of this measure - a feature that was certainly not believed by the majority of the electors to exist - which caused me to call “ No “ when the President put the question for the second reading. Are honorable senators in favour of taxing profits directly derivable from the war - a proposal which they may legitimately” support, a principle which they may conscientiously advance - or are they in favour of sectionalizing certain incomes during the war period and putting them aside as a special subject of taxation ? Therefore, I move -
That the word “ time “ be left out.
– I need hardly point out that Senator Bakhap’s purpose is to destroy the basis of this Bill.
– According to the interpretation of it given by the Minister.
– The Government have introduced a Bill for the collection of excess profits earned in war time, and the honorable senator seeks to substitute a measure which will tax war profits only. That seems to me”, as his voice against the motion for the second reading did, to express a desire to destroy the measure. I ask the Committee to’ reject the amendment.
Clause agreed to.
Clauses2 and 3 agreed to.
Clause 4 -
In this Act, unless the contrary intention appears - “ Australia “ includes the Territory of Papua. “Business” includes any profession or trade and any transaction not in the course of a person’s business for the sale and purchase of any commodity. “ Co-.operative company “ means a company in which not less than two-thirds of the shares are heldby members who are bona fide primary producers or suppliers to the company of foodstuffs the produce of Australia for the purposes of manufacture or sale.
.- I move -
That the word “ includes,” in the definition of “ Australia “ be left out, with a view to insert in lieu thereof the words “ does not include “.
In speaking upon the motion for the second reading of this Bill I explained my reason for desiring to exclude the Territory of Papua from its operation. I pointed out that Papua occupies an entirely different position from that occupied by other parts of Australia in having Customs taxation levied on its products, and consequently its industries should be exempted from the. taxation proposed under this measure.
– Last night I was in agreement with Senator Foll upon the point which he has raised, but I have since learned that the rubber and copra industries, which are the chief industries of Papua, will be exempt from the operation of the Bill. Consequently there is no need for the amendment.
– I am quite unable to support the amendment of Senator Foll. The arguments which he advanced in its favour did not seem to carry him anywhere. It may be that, at present, there is an invidious distinction between Papua and the mainland, so far as our Customs duties are concerned. But that distinction will pass away, and Papua will remain an integral part of the Commonwealth. I hope that the amendment will be withdrawn.
– I would point out to honorable senators that the taxation proposed under this Bill undoubtedly arises from conditions of war, and I submit that if there be any person in Papua in the position described by the measure he is as much entitled’ to make his contribution towards defraying the cost of the war as is anybody in Australia. But, like Senator Fairbairn, I do not think we shall collect much revenue from Papua under this Bill, because the main industries of that Territory will be exempt from its opera tion.
.- I move-
That after the word “ commodity.” in the definition of “ Business,” the following words be inserted : - “a new business shall mean an industry to establish a manufacture in Australia of goods now generally imported.”
We all know that, owing to the difficulty which is experienced in obtaining certain commodities, new businesses are being started in Australia, and it would be manifestly unfair to deprive those businesses of the profits which they make during the war period. Further, it is frequently necessary to spend very large sums in the establishment of new businesses. Sometimes that expenditure is incurred in the erection of buildings or plant, which are quite unsuitable for any other purpose. For instance, I have in my mind the establishment of the calcium carbide industry. We also know that the motor industry can be fostered in Australia. At present, an attempt is being made to promote a trade in the building of motor bodies here. That will involve the importation of costly machinery, and, unless we are prepared to protect new industries of this description, they will not be started.
– Would the honorable senator exempt the Broken Hill steel works at Newcastle?
– Those works were established before the outbreak of war. It is in the best interests of Australia that new industries started during the war period should not be penalized. The Broken Hill works for the treatment of zinc concentrates were in existence before the war. Consequently, they have a prewar standard of profit, which to a large extent will exempt them from thetaxation proposed to be levied under this Bill, whereas the steel works at Newcastle, which have probably expended a far larger sum upon machinery and plant, will be subject to heavy taxation. I know that there was a time when the construction of the east-west railway was practically held up because we could not import steel rails, and the rails were consequently manufactured at the Broken Hill Company’s steel works at Newcastle. It is essential that we should foster new industries during the war period. Let us suppose that an attempt were made by a proprietary company to establish the ship-building industry here. There would be no pre-war standard by which its profits could be judged, and, as its profits would be very large during the war period, the Bill would be absolutely punitive in its operation.
– I support with much sincerity this first amendment to the Bill moved By Senator Senior. Honorable senators are aware that the war has given us a better opportunity of establishing new industries in this country than any measure of Protection could have given us. The incidence of this taxation on new industries, not industries established three or four years ago, but the industries we hope to establish in the near future, will take away all that Protection which the war has given us, and its incentive to the establishment of new enterprises. To establish a new industry in these parlous times, when we have no definite knowledge of what is going to happen in the future, and no definite promise of adequate protection in the future to Australian labour, those who invest in them look for a probable reward of, say, from 15 per cent, to 20 per cent. I say a “probable” reward deliberately, be-‘ cause, in risking capital in the establishment of a new industry, no reward is certain. We should, especially under existing conditions) encourage the establishment of new industries.
For the information of Senator de Largie> I shall indicate a few samples of what is being done, or attempted, in the Commonwealth to-day. Recently a company was floated in Sydney to establish the process and development of detinning, utilizing, in fact, the whole of our scrap tin-plate, so many thousands of tons of which went to Germany before the war. Another industry which has just been started is one established by a set of in fluential men in Newcastle. They are to try and develop the manufacture of tho better class of iron, such as railway axles, railway, springs, and such like. The primary manufacture of iron is, of course, the manufacture of bar and sheet iron from iron ore, and it is’ the secondary manufacture that this new company proposes to attempt’. Several attempts are now being made in the production of the finer kinds of glass which previously came, from Belgium and Germany. Attempts at new manufactures are being made in other directions, and even in respect of such small things as boot eyelets and buttons. From 75 per cent, to 90 per cent, of the stock to be found in chemists’ shops was, before the war, manufactured in Germany, and, to-day, I think that about one-half of the stock to be found in chemists’ shops is being manufactured in Australia.
– Or America.
– Perhaps the remaining half is now being imported from America. But many kinds of goods now stocked by chemists, and before the war imported from Germany, are now being manufactured in Australia.
– Is our Tariff protecting their manufacture?
– Our Tariff, and the opportunity afforded for their manufacture here by the elimination of German competition.
I should like the Government under this Bill to extend the utmost leniency to new industries. The measure will operate only until the 30th June following the war. In this country, men have been ranting from every platform throughout the length and breadth of the Commonwealth, “ Down with German trade. Root out German trade. Establish new industries in Australia,” and surely we are not going to stultify ourselves now by passing a measure which will handicap the establishment of new industries. I hope that, whatever the Committee does with this Bill, it will decide to treat young and tender Australian industries with the greatest leniency. A good many exemptions are already provided for, with some of which I do hoo agree, but I do ask that the Committee shall consider what the next two or three years are going to mean for the many young industries that are being established in our midst. I hope the amendment will be accepted. I understand that in is to bo followed, if accepted, by one or two consequential amendments, which will not prevent the Commissioner taxing these industries, but will prevent any measure of this kind .taking from those who have established them the money they so badly require for their development.
– In this Protectionist Parliament, we may look for a sympathetic hearing for a Protectionist argument, but I am afraid that the particular instances of new industries referred to by Senator Pratten will not help him very much. He referred to the new iron and steel industries being established in Newcastle. Honorable senators should ‘remember that the Commonwealth has been paying, and, I think, is still paying, a certain bounty upon the productions of this company.
– 1 think the honorable senator is mistaken.
– I know that the Commonwealth has been paying a considerable amount by way of bounty to promote the establishment of these industries.
– Principally to Lithgow.
– The bounty is nayable on bar, rod, sheet, angle, and T iron.
– I referred to railway axles and springs.
– The honorable senator will find that the iron to which he referred will indirectly come within the scope of the bounty I have mentioned, because pig iron and steel are, or were, bounty fed, and axles and springs cannot be made without steel. In addition to the bounty, we have iron industries in Australia to-day that have a complete monopoly. The newly established steel works at Newcastle have a complete monopoly of their industry.
– Is Hoskins dead?
– The little that Hoskins produces is not worth considering. I remind honorable senators further that when the establishment of these iron industries was inquired into by the Inter-State Commission a few years ago, the gentleman at the head of the Broken Hill Works, Mr. Delprat, proposed at the time to start his industry on a Free Trade basis. He did not ask for any assistance or any protective duty. He was prepared, even in the face of the keen competition of pre-war times, to go into the industry on a Free Trade basis.
– I did not refer to the Broken Hill Company, but to a. new company. The honorable senator is talking about an Aunt Sally.
– If Senator Pratten has put up an Aunt Sally, that is his own look out.
– It is Senator de Largie who has done that.
– The honorable senator had better listen to my argument, and later on he can reply effectively if I am in error. I can assure him that I know a little of the industry about which I am speaking, and, if I may be so “resumptuous, I may say that I know something about Newcastle and the Newcastle steel works to which Senator Pratten was referring.
– I was not referring to the Newcastle steel works.
– These protective industries are in possession of a complete monopoly, and if they are to be excluded from the operation of- this tax we shall have no justification for applying it to any other industry. I hope that the Committee will, not agree to their exemption under this Bill.
– Speaking yesterday on the second reading of the Bill, I said that we should tread warily when dealing with new industries, and that we should do whatever may be necessary to foster and develop them. I do not think that their exemption from the operation of this measure, as suggested by Senators Senior and Pratten, is the right way in which to protect them. Australia is committed to a Protectionist Tariff.
– To a high revenue Tariff.
– It mav’ be a revenue Tariff of a high nature, but it is the desire of the people of Australia to have a Protectionist Tariff. If the existing Tariff is not sufficiently protective to insure the development, of new industries, we should amend it.
– The honorable senator knows that the revision of the Tariff cannot be undertaken now.
– Nothing is impossible to the Government which Senator Senior is now supporting. They have a preponderating majority in both Houses of this Parliament, and can undertake anything if they desire to do so. The Vice-President of the Executive Council (Senator Millen) will see that this is not the place in the Bill to protect new industries:
– This is not the time to cripple them.
– I do not think they will be crippled by being included iu the operation of this measure. Parliament should give protection to new industries by an amendment of the present Tariff law.
– If it is to be effected after the war, then we shall lose several valuable years.
– Or failing an amendment of the Tariff law, it may be effected by a renewal of the Bounties Act. £ am with honorable senators in their desire to protect new industries, because 1 want to see Australia self-contained and independent. This war has taught us a lesson.
– It is giving us an opportunity, if we take it.
– Yes, the opportunity is here, and we ought to avail ourselves of it.
– We are throwing it away under this Bill.
– I am heart and soul with the idea of protecting new industries, but I do not think this is the Way to do it. I will support an amend.ment of the Tariff to afford higher projection.
– I have listened carefully to the speeches made on this amendment, and I am sorry to say that I cannot see my way to support it, because I think many new industries are as well able to pay this tax as some of the old industries. The- amendment is only a wholesale application of the principle of exemptions, and I think, with Senator Needham, that the proper place to afford protection would be under clause 8. If the amendment is carried we might as well withdraw the Bill.
– Shall we get all the revenue from the new industries?
– No ; I think a great part of ‘ the revenue will come from the old-established industries.
– Then where . is the danger of exempting new industries?
– They should pay their fair share of the taxation. If they are not sufficiently protected at present we can give them more protection later on, and I would favour this course because I want to see Australia, independent of Germany for the future. Many of the new industries are doing very well just now, but if it is shown that some are struggling, they can be given assistance under clause 8.
– I suggest that Senator Needham should allow this matter to stand over until we are dealing generally with exemptions. This is a Government financial measure, and so far as possible, I feel like standing by the Government. At the same time I realize that Senator Senior’s proposition to exempt new industries is reasonable, and perhaps before we reach clause 8 the honorable senator will have come to some agreement with the Government on this matter. Personally, my view is that all exemptions should be wiped out, but if there are to be exemptions, then new industries have as much right to consideration as old businesses. ‘
I also take this opportunity of replying briefly to a statement made by Senator Millen concerning my remarks regarding the estimate of revenue under the War-time Profits Bill introduced by Mr. Higgs. I find that the statement made by Senator Millen is absolutely correct, and in justice to myself I want to say that after my absence from the Senate .for several weeks’ I was preparing my reply to Senator Millen’s speech, and while reading the report of Mr. Higgs’ remarks on the former Bill I noticed an interjection by Mr. Riley, who said, “ How much do you expect to get ?” Mr. Higgs, in his reply, said -
The honorable member seems to think that if we allow these “deductions we shall get no revenue. These deductions are only those which ore allowed under the Income Tax Act, from which we derived £3,000,000.
I confess that I simply read the question, and concluded from Mr. Higgs’ reply that he expected £3,000,000 from the operation of the War-time Profits Tax Bill.
Referring again to the amendment moved by Senator Senior, I want to say that personally I have an open mind, with regard to industries. It has been demonstrated, however, that ample profits are accruing, but if exemptions are to be allowed for those industries with friends sufficiently strong to make their influence felt, the new businesses should also be considered.
– I desire to say a few words concerning the remarks made by Senator de Largie, for I am afraid some misapprehension exists as to what I said. I am aware that the iron industry in Australia was established by Mr. Sandford, followed by Mr. Hoskins, at Lithgow, and that it was built up by the bonus system. I know, also, that the iron works at Newcastle were established by the Broken Hill Proprietary Company, and that prior to their establishment it was said that Mr. Delprat, the manager, haddeclared that they did not want any protection. I want the Senate to know, however, that I understand, on the best authority, that statement has since been recanted. I did not refer to the works at all, but to a further combination of strong Newcastle business men interested in coachbuilding, ironworking, and shipwright work, forthe founding of another iron works at Newcastle, to undertake the manufacture of axles, springs, sheet iron, and undertake other branches of the industry. The chairman of that company is Mr. Goininan, who has nothing to do with the Broken Hill Proprietary Company.
– Where will the new company get the raw material?
– From the
Broken Hill Proprietary Company, and they will give to it added value by the process of manufacture.
– I hope Senator Senior will not listen to Senator Gardiner’s suggestion, for in this case it is a question of the Greeks bringing gifts, and such gifts should be suspect. Seeing that, according to Senator Millen, I have utterly misunderstood the purport of this measure, as other gentlemen and people outside have misunderstood it, I have no hesitation in supporting Senator Senior in his attempt to secure something like a satisfactory position for industries started since the war, or which are likely to start during the war period. Japan, our Ally, and necessarily a belligerent in this conflict, is making inroads on the trade hitherto car ried on in Australia by the commercial representatives of our enemies, and I could not conceive of the Japanese Government being so witless as to penalize new industries - established for the purpose of developing, not only internal trade, but external trade also - by the advocacy of any measure similar to this War-time Profits Tax Bill. No Japanese Government would be likely to harass the industrial enterprises of their own people by a measure like this. I sympathize with Senator Senior, and shall support his amendment to the utmost of my ability.
– I should like to join with Senator Gardiner in an appeal to Senator Senior to withdraw the amendment, because its terms are ambiguous, and, if carried, it would lead us into a considerable amount of trouble. The honorable senator asks us to define as a new business an industry to establish the manufacture in Australia of goods now generally imported. How would he define “generally imported”? When is the new business to be established ? Is it immediately before or immediately after the war? There is a very wide range there, which could also lead to complications. An idea of what is in the minds of those supporting the amendment is given by Senator Pratten, who said people would hesitate to gointo a new business unless they could see something like 20 per cent. ahead of them.
– I said a probable reward of from 15 per cent. to 20 per cent.
– If such a business is brought into existence clearly as a result of the war, and can show a profit of 20 per cent., I am not prepared to weep tears of sympathy over it; but I would thank any one who would put me into such a proposition.
– To be fair, yon should quote my further remark that all businesses were not successful, and that the real reward would be averaged down.
– This Bill does not average. It taxes only the business that is successful. I do not know that we should make a special exemption in favour of industries, brought into existence by the war, which show a prospect of 20 per cent. profit.
– This matter has evidently been before the Government, who are not anxious to make any further exemptions. The word “ business “ in the clause is not defined any more clearly than in my amendment, but it is self-evident that a new business is one that has recently been started or is about to be started. It could not be called anything but a new buisness if it is started at the present time or has been started since the war began. If Senator Millen wants a definition, I will accept as a new business one started during the month preceding the beginning of the war.
– That would be over three years old.
– Is it fair to expect a baby of three years to carry the burden that a man of twenty would carry? The effect of the Bill will be to take away every penny of protection that war conditions have given. Old-established propositions have a pre-war standard to be judged by. Therefore, the Bill comes down most severely on new businesses. The Government are practically saying to the Australian people, “We do not want any new businesses, and if any start and are prosperous, we shall throttle them at their birth.” My proposition does not free them from the payment of income tax. It only frees them in their initial stage from this super-tax. It is our duty to start as many new businesses to supply our own wants as we can. We offer practically an open market for a dear friend of ours to-day, and he is exploiting us for all he is -worth, I cannot blame him for doing so. By levying this tax on new businesses we are practically giving a bonus to a friend outside rather than helping our own people inside. Let the Government propose a definition of “ new business,” and I will consider it. I see nothing ambiguous in my amendment. I have consequential amendments to propose if it is carried which will clearly show by their position what a “ new business “ is. I object to Senator Gardiner’s invitation to postpone my amendment to the day of general slaughter. He must regard me as exceedingly simple if he thinks I will accept his suggestion to deal with it when we reach the exemptions, all of which, he says, he is going to wipe out if he can. “ In. vain is the net spread in the sight of any bird.” I am glad the honorable senator forewarned me, for I recognise that he has no real generosity in this regard. I shall put the question to a test vote. Now is the time, and this is the hour. If we have any faith in the establishment of new businesses and any faith in ourselves we will carry the amendment. If we have not, we will let these new businesses go elsewhere. After all the talk we have heard about Australia being self-contained, supplying its own needs, making itself self-supporting, and being prepared to defend itself, we should seize a unique opportunity when it offers. If we are not prepared to take that opportunity by the hand we deserve to be defeated.
– I am sorry that Senator Bakhap and Senator Senior misunderstood my offer. I simply asked Senator Senior to bring the amendment forward later, so that we could deal with it amongst the exemptions, instead of amongst the definitions. Then, as I did not want him to think that I would support him, I pointed out that my support would be conditional on the way that other exemptions were dealt with. If he persists in moving the amendment in the wrong place, I shall, without undue delay, reply to one or two of his arguments. He said he wanted to exempt only new businesses. Let us look at the figures given by Sir Alexander Peacock in the State House to see how some of his young bantlings are getting on. One business made a profit of £313 in 1914, £1,250 in 1915, and £3,697 in 1916. Possibly 1914 was its first year.
– You do not know whether that is a new business or not.
– It looks like one. Another °business made no profits in 1914, £726 in 1915, and £7,000 in 1916. I am of opinion that those are new businesses, and that their profits are largely the war profits that Senator Bakhap wanted to tax. The chances are they are businesses that have grown up, and are making profits out of the war.
– Are you sure they are deriving their profits from war conditions ?
– No ; but it looks as if they are new businesses arising out of war conditions. Senator Senior is prepared to exempt those businesses if they are new. even though their profits are purely war profits. I am not prepared to do so. I am not going to enter into a general argument about protecting new businesses in Australia, but it is time something was said when Senator de Largie stands up to his word about protection, and when we look at the awful spectacle of poor old Pre© Trade Britain, with seventy years of Free Trade behind her, financing the world for the last three years in the most disastrous war that has ever occurred.
.- Senator Senior would have been well advised to hold his amendment back until we reached clause 8. We might then insert a sub-clause exempting manufacturing businesses, which is the kind he has in view, established since the 4th August, 1914.
– Will you support it if I do that?
– And will you support me in recommitting this clause to get in a definition?
– Of course, if we put in that sub-clause we must have a definition. Nothing can be more important to the financial, industrial, and national life of this country than the establishment of industries at the present time. If we, as a Parliament, in order to obtain some special amount of revenue during the years of war and twelve months after, do something which will prevent the establishment of industries that will pay revenue for all time, and find permanent employment for Australia’s sons, we shall be doing a very short-sighted thing indeed. There are, I am sure, many industries which incurred a considerable amount of extra expenditure in order to become productive straight away, with the hope that, in consequence of the extra demand for their products at the higher prices obtaining, they would soon be recouped the additional outlay. I had a clause drafted to provide that the extra expenditure on plant and machinery should be deducted from the profits taxable by the State. I did not conceive at the time that it would be a wiser thing to exempt new industries from this taxation. I think that there is more justification for removing some of the exemptions in the Bill than for refusing to exempt industries which are just starting, and which may be of an advan tage to Australia that cannot be estimated at present. Hence I think that Senator Senior is on the right track, but, whether we can arrive at a proper definition, so as not to leave too great an opening, is a question which will have to be considered very carefully. If the honorable senator will postpone his amendment, so that we can get to some definite and concrete proposal which will exempt new manufacturing industries from the tax, I intend to vote with him.
– Would you make them dependent on the war profits, not on the war-time profits?
– If a new industry is established now and makes exceptional profits in consequence of the war, there is no reason why it should not be taxed. We should be careful not to do anything which would prevent the application of the extra energy which people have at present, and which is so vital to the future welfare of Australia to establish new industries.
– You would have to adopt some arbitrary standard in assessing the extra profits.
– Possibly that is the difficulty. It is most hard to come to a conclusion which may not be challenged. That was the experience in another place. But, even so, it should not deter us from doing something which we are convinced would be in the best interests of the State. I am afraid that in grasping at the revenue which will be derived from a tax on the earnings of new companies we shall be grasping at the shadow and losing the substance. The main thing which Australia has to look forward to is the starting of industries in order that it may be self-contained.
– And nothing will be so effective in preventing their establishment as this measure.
– It must necessarily have a retarding influence. Although I have no sympathy with a man who devotes the whole of his time to embracing an opportunity to make a fortune, yet we have to recognise that if a man launches out with his money, much of which, of course, has been hard earned, he must be encouraged by the prospect of getting a reasonable return. I think that the Committee would be well advised to ask that new industries should get! that meed of protection in order that they may be assisted and encouraged.
.- I believe that the object of the amendment is to protect industries established one month before the commencement of the war.
– There is no particular time mentioned.
– That makes all the difference.
– Senator Senior, who moved this amendment, said that he would fix the date at one month before the commencement of the war.
– Then I cannot support the amendment, because I know industries which were established eighteen months before the war commenced, and made no profit until last year, which would have to close if they were subjected to this tax.
– I want to test the principle on this amendment, but I am prepared to meet the wishes of my honorable friends on the other clause. If I fail to get a definition inserted in this clause, I shall fail to get the other parts put in.
– Why not try the other parts first?
– Because if I succeeded there, it would be necessary to recommit this clause, in order to get back to the same point. I have explained clearly to honorable senators that my desire is to protect new businesses which have been started simply because of the war conditions, and because they are supplying articles which otherwise would have had to be imported. I ask Senator Earle to reconsider his attitude. I point out to him that if he cannot support me on this clause, he cannot support me on clause 8 when it is reached.
.- I am sorry that I cannot make myself quite clear to Senator Senior. My idea, of course, is to secure the insertion of a clause relating to new businesses, and to provide a definition of “ new business “ afterwards. To proceed in the other way would undoubtedly be to put the cart before the horse. I am not clear in my mind that the proposed definition would cover what I am agreeable to insert in clause 8. I am prepared to insert in that clause a sub-clause providing that there shall also be exempt from the tax any manufacturing business started since the 4th July, 1914. I cannot accept the definition as proposed by Senator Senior, but if he will postpone his proposal until after clause 8 has been dealt with- -
– If we carry the amendment in clause 8, we shall have to return to the definition clause.
– I ask you, sir, whether, if the definitions are carried as theystand in this clause, it will not be competent for an honorable senator to submit any amendment he likes in subsequent clauses, which may, of course, entail consequential amendments in the definition clause?
– It is entirely in the hands of the Committee to say whether it will recommit the Bill or not.
– I am prepared to temporarily withdraw the amendment on the condition that the Minister will allow the Bill to be recommitted.
– No. We have spent an hour and a half on this amendment, and I think that we are now in a position to vote. It is only a little while to Christmas.
– I remind the Minister that this practically is the second day on which we have been debating a most important Bill. At the present juncture, we are discussing a most vital question in connexion with it.
Question - That the words proposed to be inserted be inserted - put. The Committee divided.
Majority … 10
Question so resolved in the negative.
.- I move-
That the word “ means “ in the definition of “ Co-operative Company “ be left out, with a view to insert in lieu thereof the word “ includes.”
My desire is to broaden the definition of a co-operative company, with the object of securing in clause 8 a further amendment under this heading of which I have given notice. If it will suit the convenience of the Minister in charge of the Bill, I am Mailing to postpone the amendment with which we are now dealing until after the consideration of the further amendment which I intend to move in clause 8.
– The honorable senator has made the purpose of his amendment quite clear, and I see no reason for postponing its consideration.
– If the amendment I desire to have made in clause 8 be agreed to, a consequential amendment will be necessary in the definition clause. There are many co-operative companies operating in Australia, particularly in the Newcastle, the Wollongong, and the Lithgow districts of New South Wales, the profits of which are returned to their shareholders. The amendment is designed to open the way for the acceptance by the Committee of the later amendment which I have indicated.
– The honorable senator has stated his amendment with great clarity. Its effect would be to include quite a large range of companies, many of which may be earning very big profits indeed.
– Only book profits.
– Those book profits may include hidden reserves. The honorable senator has informed us that, if his amendment be carried, he proposes to insert in clause 8 a provision which will exempt from the operation of this taxation co-operative companies whose profits are returned to their shareholders. We know that it is the practice of many companies not to return all their profits to their shareholders, but to build up huge reserves with them. If the amendment be carried, the door will be open to a large number of companies, which, although they may not return to their shareholders more than 10 per cent. in the form of profits, may still be making much larger profits. For the reasons which I have indicated, I ask honorable senators to adhere to the clause.
– I understand that the Minister has promised that if any clause in the Bill which is not covered by the definition clause be altered, he will be willing to recommit the definition clause. If that be so, we shall get along swimmingly.
– If honorable senators prefer that these amendments should be debated on the major clauses of the Bill, I have no objection to that course being adopted.
– I wish tobe quite clear on. this matter. In connexion with cooperative companies there are what are known as co-operative societies. These societies deal largely with their own membership. Some of them may derive 5 or 6 per cent. of their trade from casual customers, but primarily they deal with their own members. These societies distribute their profits every six months amongst their members. Their membership is of a fluctuating character; The members of one of these societies to-day may not be its members to-morrow. But they may have received from the profits accruing to the society their share of the dividends of perhaps two, three, or four years. One society of which I have a personal knowledge, with a capital of £10,000, has a turnover of between £50,000 and £60,000 per annum. Its membership to-day is scarcely recognisable with its membership of two years ago. It might scarcely be recognisable from the membership of twelve months ago. The profits of this society are at the end of every six months distributed amongst its members, who pay income tax if their income is beyond the’ stipulated exemption. If this society, or any society of a similar character, is to betaxed under this Bill upon its profits, the only source from which the taxation can be derived is the capital, which consists of bricks and mortar-, horses and carts, and stock, the means by which the business of the society is carried on. It will be impossible to get at the actual profits made, because they will have been distributed to the members. In the circumstances, if such societies are to be liable to this taxation, the effect will be to destroy them. I should like to learn from the Vice-President of theExecutive
Council whether that is the intention of the Bill.
– The company to which Senator Henderson has referred is in no different position from hundreds of other businesses, whether conducted by individuals, partners, or joint stock companies. The company he referred to has shares which are obtainable on the market.
– No; that is a mistake. The shares are not transferable) and are not saleable to any one ‘outside the society.
– I cannot understand how the shares of a company cannot be transferred to itself. I can understand -one shareholder selling out of a company, and the number of shareholders being gradually reduced until the last one left would hold the whole of the shares.
– The members cannot sell their shares, but *hey may withdraw their share capital.
– And other persons may take up that share capital.
– Other persons may take up their own shares.
– The company is co-operative apparently in the sense that a man makes a deposit of £1 for a share.
– No, ls. or 2s. 6d.
– Whatever the amount may be. The position would be rather serious for such a company if it were called upon to pay an excess profit tax in respect of profits which it had distributed to shareholders, who had ceased to be shareholders. But the company will have had a pre-war standard, and it will not be taxed on the profits it makes, but on its excess profit’s. If it is making only the same profits now that it made in pre-war time, it will not be taxable under this Bill. If it! is making profits in excess of the profits it made in pre-war times it will be taxable to the extent of the excess. That is the purpose of the Bill, and the company referred to, and all other companies in a similar position, have had. eighteen months’ warning of the intention to impose this taxation. Most wellmanaged concerns have made provision to meet it. Prom the little I know of the company to which Senator Henderson has referred, there” is no reason to suppose that, in the last two years, it has been making greater profits than it made before the war, and if that assumption be correct, it will not come under the operation of the Bill.
– There may be an always increasing business.
– If the capital is increasing, that will not make any difference, because allowance is made for increasing capital. The business done by co-operative companies run in such a way ag Senator Henderson has described does not. vary very much from one year to another.
– I understood the VicePresident of the Executive Council to agree to hold over the discussion of this matter until we came_to clause 8, when, if the amendment I intend to move upon that clause is agreed to, the definition clause can be altered to meet it. I agree with Senator Gardiner that it would be advisable to take all these, exemptions together, as in that way the Committee will be better able to follow the incidence el the amendments proposed.
Amendment, by leave, withdrawn.
.- I move -
That the words “ of foodstuffs the produce of Australia for the purposes of manufacture or sale “ be left out of the definition of “ Cooperative Company.”
The reason for this amendment is that these words are unnecessary in view of the words appearing in paragraph b of subclause 1 of clause 8.
– A suggestion was made a few minutes ago by Senator Gardiner that this clause should be postponed until the main clauses of the Bill are dealt with, when the definitions may be amended, if necessary, to meet any amendments made. I understood that the Vice-President of the Executive Council was favorable to the adoption of that course, but he is now going on with amendments of the definition clause.
– Senator Gardiner’s suggestion was that we should postpone the consideration of amendments to the definition clause intended to cover alterations proposed in the material clauses of the Bill.
I agreed to that, but the amendments I am now proposing are amendments of the definition clause, which it is only fair that the Committee should know at this juncture.
Amendment agreed to.
– I move-
That after the definition of “ Co-operative Company “ the following new definition be inserted : - “Partnership “ includes beneficiaries under a will settlement or other deed of trust who are carrying on business jointly.
I think the amendment is sufficiently explanatory in itself. It is intended to include as partners, and to treat as partners, those beneficiaries interested in an estate which is still carried on as one business.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 5 agreed to.
Clause 6 (Commissioner).
– Under this clause power is given to the Commissioner to create and introduce whatever departmental and clerical assistance he desires. I should like to have some expression of opinion from the Vice-President of the Executive Council as to what is intended to be done under this clause in the direction of enlarging the Taxation Department. The honorable senator might give us some information as to the extra number of employees likely to be required, as, according to the Treasurer (Sir John Forrest), the administration of this Bill is likely to cost us £50,000 a year, and goodness knows how much it will cost the taxpayers.
– It is impossible to give the honorable senator, with any detail, the information which he seeks.
– Could the honorable senator give us some idea as to how the estimated cost of administration is made up?
– I cannot. There will be some assessors necessary, and some additional clerical assistance.
– Any new buildings !
– I think we need not assume thatthere will be any new buildings. If we had to wait until they were erected the honorable senator will see that by that time the measure would be overdue.
Clause agreed to.
Bill received from the House of Representatives, and (on motion by Senator Millen) read a first time.
Bill received from the House of Representatives, and (on motion by Senator Millen) read a first time.
The following paper was presented : -
North Queensland Railway Strike : Correspondence between Prime Minister and Queensland Premier, &c.
Senate adjourned at 11.1 p.m.
Cite as: Australia, Senate, Debates, 13 September 1917, viewed 22 October 2017, <http://historichansard.net/senate/1917/19170913_senate_7_83/>.