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 : -
Horse-racing : Cabinet decisions regarding control throughout Australia.
The War. - British Prisoners of War - Report on Transport to Germany. (Paper presented to British Parliament.)
Age of Enlistmentand Parental
– I ask the Minister for Defence, without notice, whether the Governmenthave considered the question of the enlistment of minors without their parents’ consent, and, if so, what determination they have come to on the subject?
– The Government have considered this question, and, runder three heads, thefollowing are the alterations in theregulationsthat have been agreed to: -
– Arising out of the answer to Senator Fairbairn?s question, I ask whether it is the intention of the Government to send to the Front any young men of eighteen years of age who have already enlisted without their parents’ consent?
– It is not only the intention todoso,but it has been the practice since the commencement of the war.
– In reference to the amended regulation referred to by the Minister for Defence, will the honorable senator say when that regulation will be laid on the table of the Senate, so that honorable senators may have an opportunity to discuss it?
– I do not think it takes the form of a regulation, but merely of instructions; but if the honorable senator will give notice of his question I will see that an answer is supplied to him.
– At the Recruiting Conference it w.as -suggested that certainregulations that were considered tostand in theway ofharmony should be repealed. I askthe Leader ofthe Government in theSenate whether the Government have received notice of a number of such regulations -considered objectionable from. Mr. Tudor; and, if so, what steps, if any,have been takento give effect to the promises made bythe representatives of the Government at the Recruiting Conference?
– The communication referred to has been received from Mr. ‘Tudor, and is now being considered by the Government. Some progress in that consideration has been made.
Statement bySergeant Montefiore.
– I ask the Minister for Defence if he has any information to give me in reply to a question I asked some time ago concerninga statement made by Sergeant Montefiore in Brisbane?
– The honorable senator asked me the following questions : -
The answer is -
There is no such person as Sergeant Montefiore employed on recruiting duties or on any other duty in connexion with the Defence Department, and, therefore, no action can be taken in the matter.
– Arising out of the answer to Senator McDougall’s question, I ask the Minister for Defence if he is aware of the fact that the statement made by Sergeant Montefiore was made in a joking spirit, and that after he made it it was explained at the same meeting that the sergeant stated that the reason why Mr. Ryan would not come back was that they intended to steal his clothes, and so he would not be able to come back if he had no clothes?
– I have no other information on the subject but that which I have already given to the Senate.
– If the statement read out by the Minister for Defence from my questions, that Sergeant Montefiore said that the Ryan Government were going to get some of the direct action which they preached themselves, be correct, that does not mean that Mr. Ryan was only to be left without clothes, and it was not a joke.
Seizure of Papers
– I ask the Minister for Defence, without notice, if it is a fact that a petition being got up by Italian members of this community for presentation to this Parliament has been seized by the military authorities? If so, what is the reason for the seizure; and, further, has not any section of the community a right to petition this Parliament?
– The honorable senator’s question was answered yesterday. In reply to Senator Grant, I stated that a number of incriminating documents were seized at the Italian Club. Among them there were some blank petition forms. The representative of the club was informed that he could have those forms back upon entering into an undertaking that he would not continue to circulate the incriminating documents, but he refused to take them.
Reprints from “Hansard.”
– I ask whether the censor has instructions to interfere with exact reprints from Hansard of the speeches of honorable senators obtained from the Government Printer?
– The law officers of the Crown advise us that reprints from Hansard are not privileged documents; and as all printed publications dealing with the war must be submitted for censorship, these reprints from Hansard come within that category when they have reference to the war.
– Arising out of the answer to the question, I ask you, sir, as President of the Senate, whether you will protect honorable senators from this encroachment upon their rights and privileges by the Defence Department ?
– In reply to the honorable senator’s question directed to myself, I point out that Mr. Speaker and I have always protected the rights of members of this Parliament in respect to Hansard against any Government interference whatever. Beyond the publication of Hansard our authority in this matter ceases. All that we can do is to see that Hansard is not subjected to any restrictions or any censorship, and that it remains a true and correct record of the proceedings of Parliament. With regard to anything else, Mr. Speaker and I have no authority whatever.
– In view, sir, of your answer to my question, I ask the Minister for Defence whether he does not think it is absurd to prevent me sending a reprint of a speech to an individual, while at the same time permitting me to send to him a copy of Hansard containing exactly the same speech ?
– I do not propose to reply to that question. What might seem absurd to Senator Gardiner might appear to me to be very serious.
– May I suggest to the Minister for Defence that he did not realize the importance of the question put by Senator Gardiner ?
– Order ! The honorable senator must ask a question.
– I will put it this way : In view of the fact that a copy of my speech in Hansard may go to any of my constituents in Tasmania without being in the slightest degree subject to censorship, will the Minister see that a reprint of the same speech, if I choose to send it, shall reach my constituents also without interference on the part of the censor? The one is not censored while it is in the Hansard volume; yet the same speech contained upon a single sheet is subject to censorship. Will the Minister see that speeches, whether contained in Hansard orin the form of a reprint, are not interfered withby the censor in transit?
– We do not propose to give members of Parliament a privilege which we do not extend to other persons with respect to circulating leaflets connected with the war, namely, that they may be transmitted without undergoing censorship.
– But you do.
– Is the Minister aware that already a number of speeches and extracts from speeches made in this Chamber, which would not give any information of advantage to the enemy, and which come well within the realm of political matters, are being censored, and are prevented from republication in Labour newspapers ?
– If the honorable senator will acquaint me with the details, I shall instruct that inquiries be made.
– Has the Leader of the Senate seen press reports of the judgment of Mr. Justice Heydon upon an application by the Minister for Labour in New South Wales for the re-registration of certain unions, which application, it is presumed, formed part of the agreement arrived at at the Recruiting Conference? If the Leader of the Senate has read that report, can he state whether the Government have taken any action, or whether it is contemplated to proceed in the matter of restoring those trade unions to the status they enjoyedprior to their deregistration ?
– I have seen the press reportsof the judgment given by Mr. Justice Heydon. The cases referred to, and the unions concerned, come entirely within the jurisdiction of the State arbitration laws of New South Wales. The agreement to which the honorable senator refers is, however, hardly an agreement, since it requires two parties to come to an agreement upon anything. It was a promise by the State Premier concerned, which is necessarily a matter for his redemption.
– I ask the Leader of the Senate whether, during the strike of July, August, and September last, certain unions were not de-registered by an Executive act of the Federal Government? If so, in view of the promises of the members of the Government at the Recruiting Conference that steps would be taken to replace the unions upon their old basis, will the Government adopt the necessary action to re-register those unions ?
– Will the honorable senator please give notice?
– No ; I shall not be here to-morrow.
– But the honorable senator may give notice now.
– I desire to ask a question, without notice, of the Minister under whose administration comes the matter of dealing with metals and ores that are the subject of an Imperial war monopoly. Is the Minister aware that it has been published frequently that in Canada, which is a British Dominion, prices are available to producers of molybdenite and tungsten ores, which are nearly double the prices that may be secured by producers of those ores in Australia? Will the Minister make representations to secure to Australian miners a parity of prices with those ruling in Canada?
– The matter comes within the Prime Minister’s Department. I shall be glad to make representations to my colleague upon the lines indicated by the inquiry.
Bill received from the House of Representatives, and (on motion by Senator Millen) read a first time.
asked the Minister representing the. Treasurer, upon notice -
Will he give the names of the two newspapers which claimed £1 5s. per inch for advertising the sixth war loan?
– The answer is -
The Sydney Morning Herald and the Sydney Daily Telegraph. The charges were for space in special positions on the principal news pages, and concessions not allowed to other advertisers were given by the papers.
Invitation to Visit England
asked the Minister representing the Prime Minister, upon notice -
– The answer is - 1, 2, and 3. A cable has been received from the High Commissioner conveying an invitation to twelve editors or owners of newspapers in Australia to visit Great Britain and the Western Front. The matter is now receiving the attention of the Government, whose desire is that the mission should be a thoroughly representative one. I hope to be in a position at an early date to make a full statement regarding the matter.
asked the Minis ter representing the Minister for Works and Railways, upon notice -
– The answer is - 1, 2, and 3. I have ascertained from the Commonwealth Railways Commissioner that, so far as the trans-Australian railway is concerned, the men are not asked to produce their rejection badges before obtaining employment.
I am having inquiries made in respect of the Henderson Naval Base, Cockburn Sound, and will inform the honorable senator as soon as the information shall have been received.
The Director of Naval Works states that no such instructions have been issued.
Cleric al Division Classification.
asked the Minis ter representing the Prime Minister, upon notice-
– The answer is - 1, 2, and 3. Inquiry is being made.
asked the Minister representing the Prime Minister, upon notice -
– The answer is -
The desired information will be obtained, and supplied to the honorable senator as early as possible.
asked the Minister for Defence, upon notice -
– It is not proposed to make this information public.
asked the VicePresident of the Executive Council, upon notice -
– The answers are -
Women as Dispensers.
asked the Minister for Defence, upon notice -
In view of the fact that the two essentials in conducting the war are men and money, will the Minister consider the advisability of filling some of the positions of dispensers in the Base Hospitals, and any institutions where such services are required, with fully qualified women pharmacists ?
– The matter of em. ploying female pharmacists in Military Hospitals has already been considered, and arrangements are now being made to employ women in this direction.
asked the Minister for Defence, upon notice -
– It will be necessary to make some inquiries in the matter, and a reply will be given to the honorable senator in the course of a day or two.
Debate resumed from 22nd May (vide page 4919), on motion by Senator Millen -
That this Bill be now read a second .time.
.- There is nothing in this Bill which meets with my approval. From end to end the measure is an utterly objection able one.
– The honorable senator is not objecting to the use of the word “ tax “ in it, is he?
– Well, there is even in the Bill a provision relating to a land tax to which I object. This is alleged to be a machinery measure - a Bill to levy further taxes upon industry. Surely there can be nothing more objectionable at this stage in our history. The Bill is designed to tighten up the machinery of existing taxation with a view to squeezing more taxes out of the industrious section of the community. I can conceive of nothing more objectionable than that. There is no doubt, however, that the Commonwealth has full power to levy any taxation that it may please. That point was settled long ago, and the Ministry, having been given a lead by a. previous Government, are only too willing to follow in their footsteps. ]t will doubtless be recollected that a previous Administration brought, forward an Income Tax Bill which contained a proposal to levy an impost of 5 per cent, upon the rental value of the house in which a taxpayer resided. Such a provision operates as u direct hindrance to industry. In this Bill it is proposed to proceed still further in the same direction. Following the bad example set by their predecessors, the Government propose to take into consideration the value of the dwelling in which an employee resides, and to regard the rental value of it as part of his income. I think that every person in the community should be encouraged to invest his money in improving the country by building a home for himself. Yet we find that the Government are prepared to tax him in exact proportion to the expenditure he incurs in that direction. I hope that the Senate will refuse to agree to any such proposal when we come to consider it in Committee. It has ‘nothing whatever to recommend it, and it simply represents a further effort to secure revenue by “wrong means. Under the guise of an income tax, it is an attempt on the part of the Government to impose a small Federal land tax. I hold that we could deal with a proposal of that sort much more satisfactorily by means of a straight-out amendment of the land tax.
I repeat that the Government propose to take into consideration the value of the land upon which a man erects his house, and to tax him at the rate of 5 per cent, on the total value of that laud and of the improvements which he erects thereon. Such taxation does not meet with my approval, and when we reach Committee I shall endeavour to have this obnoxious proposal removed from the Bill.
– To what clause is the honorable senator referring?
– To the amendment proposed in paragraph e of section 14 of the principal Act. That particular paragraph provides that -
Provided that when the taxpayer is an employee and premises are occupied by him for purposes of residence in connexion with Iiia employment the taxpayer’s income shall include the annual rental value of the premises or part thereof used, by him for the purposes of residence.
– That is when a Commonwealth employee occupies a residence rent free as a part of his salary.
– Yes. Under the guise of an income tax, it is a proposal to tax the value of the land, together with the improvements thereon. This Parliament appears to be slavishly following the lead of the British Parliament in the matter .of taxation. According to the Estimates for the current year, the imperial Government propose to collect from income tax, including super-tax, the sum of £224,000,000, whilst from land tax- including Crown lands, land and house duty, and land value duties - they expect to collect only ‘the nominal sum of £3,600,000. After the speeches which were delivered by Mr. Lloyd George and others, I was certainly under the impression that the British Parliament would do something in the direction of compelling the land-owners of Great Britain to contribute substantially to the revenue of the country. But it has not done so. The Commonwealth Government - apparently following ‘ the lead of the Imperial Government - propose to explore every nook and corner with a view to securing as much revenue as possible by means of an income tax, quite regardless of the disturbance to industry which may thus be effected. I noticed in the press a few days ago that, speaking, at Hawthorn, Mr. McPherson, the Victorian Treasurer, said -
The Government would not ask the people to bear further taxation. This would be welcome, because the public realized that, no matter how taxation was imposed in the first place, it got clown to the working man at the finish,
That is precisely the statement that was made to me some months ago by a prominent and enthusiastic member of the Industrial Workers of the World. I was trying to show him the proper source of taxation, and he assured me that it did not really matter how taxation was imposed, because in the long run the working mau had to pay it. It will at once be admitted that there is some truth in his statement, but it is very far from being the whole truth. It is an effort made by a member of the Industrial Workers of the World, and, no doubt, also by Mr. McPherson, to cloud the real issue. It is quite true that the only men who can pay the taxes are the men who work. No men other than those who produce can pay anything.
– What do you produce, and what do you pay?
– But it is also true that, in addition to paying the taxes, the men who work are keeping Senator de Largie and a great number of other nonproducers in very comfortable positions - people who render no service whatever to the community, and who, indeed, are a distinct drawback to it, being merely parasites, and producing nothing. No one would imagine, by the wildest flight of fancy, that Senator de Largie in his position here is engaged in any useful productive work. Mr. McPherson overlooks the fact that the schoolmaster has been abroad, and that to-day we are quite able to analyze his statement, and show how fallacious, misleading, and mischievous it really is. It is, of course, true that the working man pays the taxes, National, State, and local, because nobody else can pay them ; but, in addition, he has to maintain every oneof those parasites who do no useful work, otherwise they would perish, and we should hear no more about them. Yet we are told by prominent public men, as if they were telling the whole truth, and nothing but the truth, that it does not matter how taxation is imposed, because ultimately it has to be paid by the working man. If that is so, and I do not deny it, I would point out, as forcibly as possible, that, in addition to paying all the taxation of the country, the man who does the production of the country has to pay and maintain all those who do no work at all. Who maintains our Forces at the Front to-day ? . Is it the man who does no work ? Not he. The woman who knits a pair of socks for a soldier at the Front does a great deal more for his support, maintenance, and comfort than is done by those who, like Senator de Largie, sit down here and do nothing.
– This is very interesting, but it is hardly relevant to the question of income taxation.
– Possibly I am a little wide of the mark,but I wish to make the point that it is, and always has been, a matter of the most vital importance how taxation is imposed. The British Government go to Customs and Excise, and to incomes, to raise many million pounds of revenue per year, because they know that by going to those sources they leave untapped and untouched the very people who can best afford to pay, and whom they represent. That is the reason why the Commonwealth Government to-day are following very carefully in their footsteps. When I see a public man making statements like those just referred to, I am not prepared to let them pass unchallenged and uncontradicted. How long would the six State Parliaments of Australia and the National Parliament live but for the man who produces potatoes, pumpkins, and other commodities in the Commonwealth ? They would not, and could not, live at all. They all live upon the man who does the actual work of the country. Consider the number of people in Australia who do not do any work, but live upon the workers ! There are armies of them. We have six State Parliaments, six State Governors, a National Parlia ment, and a National Governor. How many potatoes do they produce in the course of a year ? Some of them do some useful work, or think they do, by employing other people to do it; but, personally, they do mighty little. Then take the innumerable Boards that have been established, and the Commissions that have been appointed. It is becoming almost impossible to-day to find a man who is doing any useful productive work. He is either shifting papers about, or talking, or doing something in that direction, but producing nothing useful whatever. The men at the Front would not remain there five minutes but for the food and clothing made for them by the actual workers in the community. It is as well to keep steadily in mind that, while the working man pays all the taxes, he has, in addition, to keep all the members of the various bodies throughout the Commonwealth in good positions, without their engaging in any productive work at all.
Under this Bill, a number of people are exempted from taxation. It is proposed by the Government, under the clause I have just mentioned, to value the premises where an employee may live, and tax the annual rental value of those premises; but they do not say a word about the army of civil servants in some of the States who escape the payment of Federal income tax. That, apparently, is correct.
– Then how do they escape ?
– They do not pay.
– They are the one class of people who cannot escape.
– I say they do not pay unless they like. It is purely optional with them, and I understand a good number of them do not pay.
– I shall be glad to know how they can escape.
– They simply make no return, and the Commonwealth has no power to make them pay taxation.
– In Adelaide one day last week about 150 men were fined for failing to make returns whether they had taxable incomes or not.
– Were they civil servants ?
– They were members of the general community.
– But I was speaking of civil servants.
– There is no exemption of civil servants. The honorable senator is unfair to a very deserving class in the community.
– The honorable senator is quite mistaken. My statement is in accordance with fact, at least so far as the State I represent is concerned.
I should like to know, also, why the salaries of the State Governors are notbrought under the operation of the Federal income tax law. Who are they that they should be exempt, while members of this Parliament are called upon to pay ?
– They are the King’s representatives.
– That does not matter. I maintain that the King himself ought to pay taxation, so why should not the State Governors?
– I thought the honorable senator believed in the single tax principle ?
– I certainly do not believe in this Bill, and I am now pointing out- how inconsistent and how unfair it is to tax the income of an ordinary employee when at the same time the Government are not game enough to place taxation upon the thousands of pounds which the Governors of the various States draw from their respective Governments. Why should they escape? They are certainly well paid, and should pay somethin? towards the cost of the government of the country in which they live.
– Regarding the civil servants in New South Wales, to which the honorable senator has referred, do they deny the right of the Commonwealth to tax them upon their State emoluments?
– I understand that is so.
– How’ could the Commonwealth Government tax the salaries of the Governors when the State civil servants contest this right?
– There is no reason why the Government should not try, at all events.
Take also those gentlemen known as foreign consuls. What have they done, a”ny more than an ordinary working man, who is called upon to pay taxation even if he earns only £150 a year, that they should escape taxation?
– Because their incomes are derived from sources outside Australia.
– That does not matter. They are living here and enjoying the protection of this country in just the same manner as the Honorable senator, and I say that if it is good to tax anybody by way of income - :I do not think that it is, hut evidently the Government consider it an excellent principle - surely it should be a good thing to tax the salaries of the State Governors, foreign consuls, and trade commissioners? Why should members of the State and Federal Parliaments be called upon to pay income taxation if these officials are to be exempted ? As one representing many of the working people of my State, I want to know also why the Governor-General should not pay taxation, and thus assist in carrying on the affairs of this country ? I am not, of course, referring to th° present occupant of that position, but to the position itself, and I maintain that the salary of the Governor-General should be brought under the operation of this measure in just the same manner as other incomes are.
– Never again can the honorable senator claim to be a single tax-er after this speech.
– I am against the whole Bill from start to finish. There is no good in it. The income tax imposed by the Federal Government in 1916 produced £3,932,775, and in 1917 £5,621,948. But the Government are not satisfied with this amount, and it appears now that they are determined to drag a few more pounds out of the poorer sections of the community. That system of taxation does not meet with my approval in any way whatever, and, therefore, I am going to vote, against the Bill with a view to showing that there is a far more equitable method than that now suggested by the Government. I do not care about the proposal to tax cooperative companies. That .also is objectionable. There is nothing in the Bill that meets with my approval, and in Committee I shall take advantage of any opportunity that presents itself to endeavour to defeat all the new clauses proposed by the Government.
– This is a class of measure which we may expect to have very frequently before us in the near future. Any one who has studied the financial position of the Commonwealth at the present time must view it with something akin to alarm. The figures published yesterday by Mr. “Watt were little short of staggering. It is not my intention, in great detail, to go into the various figures connected with the finances- of the Commonwealth. That duty was very ably performed last evening by Senator Pratten. We are all very much indebted to the honorable senator for the very clear way in which lie put the figures before US. To take only a cursory glance at the financial position of the Commonwealth as disclosed yesterday by Mr. Watt, I may say that he represented that. £609,000,000 is the actual debt owing, by the handful of people who are scattered over this great continent. Of that amount, some £300,000,000 is owed by the States. Mr. Watt pointed out that to some extent, if not entirely, that sum has been expended upon reproductive works which are returning sufficient to meet the interest on the amount borrowed. That leaves us with what may be called a dead debt of £309,000,000, incurred chiefly as the result of the terrible war in which we are engaged. Reckoning the interest on this amount at 4-J per cent, in round figures, we have to face an annual bill of £14,000,000 to provide interest on these dead loans. There must be added to this the annual expenditure involved in the payment of pensions, which, sad to say, 5s increasing day by day. I have looked into the matter pretty thoroughly, and if the war were to cease to-morrow our obligations in respect of the payment of pensions would be something like £9,000,000 a year.
– To what pensions is the honorable senator referring?
– My figures include old-age, invalid, and .military pensions. I have given only an estimate-, but I think I am somewhere near the mark when I say that we” must face a payment of something like £9,000,000 a year to meet the obligations of the Commonwealth in respect of these pensions. It will be seen that in order to meet the interest on dead loans and our obligations in respect to pensions we shall require nearly £22,000,000 a year. That should give us cause for very deep thought. How are we to balance the ledger ?
Under our theory of taxation in the past, it has been understood that we should meet ordinary . Government expenditure and fixed expenditure, such as that upon pensions, out of the revenue for the year, otherwise we should gradually drift into insolvency. The only purposes for which we may legitimately borrow money are reproductive works and war expenditure. I hope that we shall continue to be guided by that theory of taxation, as otherwise our finances may drift into ai chaotic state. Already we are a very heavily-taxed community. The- Federal income tax on the highest incomes reaches no less than 6s. 3d. in the £1. The highest rate of State income tax paid is paid in Queensland, where it runs up to 3s. in the £1.
– Is not the rate of 6s. 3d. in the £1 levied only on incomes of over £7,000, and is not the rate reduced upon, lower incomes?
– That is so; 6s. 3d. in the £1 has to be paid on incomes of £7,000 and over.
– The honorable senator cannot ask for much sympathy for those who have to pay 6s. 3d. in the £1 because their incomes are over £7,000.
– I suppose that Senator Grant would say that, if he had the income, lie would be glad to pay that rate.
– The incidence of the flat rates in New South Wales and Queensland, is higher than that of the Federal income tax.
– I agree with the honorable senator. That has been brought out very pointedly by the fact that the returns from the New South Wales income tax are very much the same as are the returns from the Federal income tax. It is remarkable that this should be so when, under the New South Wales income tax, the highest rate is only ls. 2d. in the £1, whilst under the Federal income tax the highest rate is 6s. 3d. in the £1. In the circumstances, I am inclined to doubt whether the Federal Income Tax Department is deriving all the revenue it should. It would appear that some persons who ought to pay Federal income tax are escaping their obligation. Senator Pratten referred to the fact that the New South Wales income tax produces very much the same results as the federal income tax, although the rate is very much higher in the . case of the latter. I admit that I do not understand the reason for this, and the remarkable fact certainly needs looking into.
– The lower estates in New South Wales are taxed nearly twice as much for State purposes as for Federal purposes.
– - I have not gone thoroughly into that matter, but it is decidedly strange that the New South Wales tax, with a comparatively low maximum, should produce nearly the same amount as the Commonwealth tax, with a very much higher maximum.
I have stated our theory of taxation, and under it we know that those in receipt of incomes of over £156 per year, or £100 per year jil the case of unmarried men, have to bear a great deal of the load of taxation. I believe that the taxpayers of the Commonwealth desire chiefly two things. The first is that all should be taxed alike. The people do not desire that there should be discriminating taxation under which’ one man escapes whilst his neighbour has to pay. Another tiling is tha’t the taxpayers desire to see the most rigid economy practised in carrying on the Government. I hope that that will be the motto of the Government for many a day to come. I look upon the recess that is rapidly approaching as absolutely necessary to give the Government the opportunity to consider the best means of securing economy of administration.
– Another recess!
– I am prepared to justify it. The honorable senator, unfortunately, because he was ill, was away upon a long holiday, and I may say that I do not desire the recess for myself, but in order to give the Government time to look into the finances of the country. When they meet Parliament after the recess, I hope that they will be prepared with a number of sterling proposals to cut down the number of the Boards and Commissions to which Senator Grant has referred. It is simply staggering to find by a report of the Public Service Commissioner that the employees of the Commonwealth in this time of war were in creased in number by 2 per cent, last year.
– The work has increased also.
– We know that the work has also increased, but I am sure that Senator Pratten will agree with me that there is plenty of room for economy in many directions. The honorable senator, as a business man, would not ,run his business in the extravagant way in which the Government of the Commonwealth is carried on.
– I, personally, believe in greater efficiency rather than in greater economy.
– We need efficiency, but we must have economy as well. We cannot continue to bear the load with which we are now burdened.
Why should not the Commonwealth and State Taxation Departments be amalgamated”? There has been a most admirable conference of the heads of the Taxation Departments of the Commonwealth and States. The report of that conference is one of the most business-like reports that was ever drawn up. The gentlemen attending the conference did their work well. They presented a most able report, and it is now the duty of the Commonwealth and State Governments to give effect to that report. The people of this country demand that something shall be done to amalgamate the Taxation Departments. We need uniformity of taxation, and I am one of those who believe that the Commonwealth is the proper authority to carry it out. I have heard it argued, and I think Senator Pratten mentioned it, that the New South Wales Taxation Department is. run very much more cheaply than the Federal Department. It should not, however, be forgotten that, particularly in the case of landed estates, the Commonwealth Department has had a great deal of work to do in connexion with valuations. It is a comparatively new Department, and is not properly going yet.
– Not after three years.
– No; because there have been so many changes in our taxation that the Department has had almost every year to make a fresh start. If the Commonwealth and State Taxation Departments were amalgamated, the State officers taken into the Federal Department could explain to our Federal officers the way .in which they had conducted their business in the different States. I am sure that our Federal officers would not be above taking a hint that would lead to better administration, and in this way the economy that is so necessary would be brought about.
– Does the honorable senator think that all the members of the State Taxation Departments would require to be kept on.
– There is a contract with them, and I should not break a contract either with a civil servant, a bond-holder, or a land-holder.
– Then there would be no economy under the honorable senator’s scheme.
– Indeed, there would, because, in the Federal Departments, and I think also in the State Departments, there are a great many temporary hands employed. The places of the temporary hands in the Commonwealth Taxation Department would probably not be more than tilled by the employment of the permanent officials now in the service of the different State Governments. I should never be one to agree that a permanent officer should be discharged.
– The honorable senator would pass out the temporary men, but he would keep the permanent officers.
– I would. There is no contract with the temporary man. He knows that when there is no work for him to do his job ceases.
– Apart from any economy that might be effected by the merging of the Commonwealth and State Departments, there would be the infinitely greater economy so far as the taxpayers are concerned of having to prepare only one return instead of two.
– I intended to refer to that. I am glad the honorable senator has called my attention to it, be? cause there is, at the present time, an enormous unnecessary burden thrown on the taxpayers throughout the Commonwealth. They are hardly done preparing a return of income or land tax for a State Department when they are called upon to prepare another for the Commonwealth Department. The annoyance caused to taxpayers in this respect is getting beyond endurance. I have always been an advocate of State rights, and I feel that that there is nothing so much calculated to weaken the contention for State rights as the continual irritation caused by having to make up separate returns for Commonwealth and State. Many of my friends, who have been strong advocates of State rights, are beginning to say to me, “For goodness’ sake, let us have one Government. We are sick of all the returns we. have to make out.” If our State Premiers do not now see the disastrous effect this is calculated to have upon the State rights question, I think they very soon will. I am very glad to see a clause in the Bill now before us to enable the amalgamation of Commonwealth and State Taxation Departments to be brought about. I hope that it will lead to a saving of expense, and will put an end to the annoyance and expense to individual taxpayers caused by the present system.
Another thing I should like to see is the amalgamation of the Electoral Departments of the Commonwealth and the States. How long are we to continue the system of separate Commonwealth and State Electoral Departments?
– What has this to do with the Income Tax Assessment Bill ?
– The amalgamation of these Departments would result in the saving of money. That has to do with Commonwealth expenditure, and that is why I refer to the matter in discussing this Bill. If we could amalgamate those Departments we might be able thus to assist to some extent in the reduction of this vast expenditure. The matter has been before the various Governments, who have all come to an agreement. But that does not seem to have any effect. We never appear to do anything. In Parliament, we seem to do nothing tangible. We talk day after day, and night after night, especially upon such things as points of order; but we never do anything, actually. If I were Prime Minister I would cut down expenditure by £10,000,000 in a very short while. It was Mr. Cook who said that this matter was rotten ripe for consideration. There we could save very much money, and conduct our affairs in a really businesslike method. I am therefore glad to see the provisions of clause 3 within this Bill.
The increase in the numbers of officials in our Civil Service is significant. The figures given to us are 2 per cent. We are certainly doing more work, but I very much doubt whether we are not duplicating, a great many of our civil duties. As to the Bureau of Science, for example, there were organizations of that sort in all the States previously. They were very efficient, although I do not recall that they have done a great deal of tangible work. Like other educational bodies, however, they pointed out to the individual the right track to follow, and especially did they give assistance to the great producing industries. The imposition of the Commonwealth Bureau on top of the State organizations appears to me to have been unnecessary.
– It has not justified its creation.
– I cannot see that it has; perhaps it has not yet had time. There was one matter affecting the pastoral industry, with which it was to deal, namely, the blow -fly pest.
– Do you not think the tick pest should be a Commonwealth matter?
– I can only say that the subject which I have indicated has been examined probably for centuries in the Old World. State experts and State organizations have looked into it; yet the Commonwealth Bureau now rushes in. I trust the Government will “cut out” this body, and thus save a little money there.
At a later period we shall have to face a tremendous increase in taxation. In. Australia we labour under great disadvantages owing to our distance from the world’s markets, and because of the freights which we are thus called on to pay Canada and other parts of the Empire are collecting enormous sums by the taxation of legitimate war profits. In the Old Country the Excess Profits Tax, has amounted to £220,214,000 per annum, A great deal of that is drawn from freights. Freights have soared until now poor Australia has been deprived to an enormous extent of its normal tonnage. This is due, of course, almost entirely to the war. Australia expects to get in two years from its war-time profits tax, which is more far-reaching than the British law, a sum amounting to only about £1,000,000. Compare that total with the sum drawn in the Old Country during 1917-18- £220,000,000 sterling. That is a splendid total, drawn from a splendid source of revenue. I have not been able to ascertain what Canada has secured in the same direction, but I know that that Dominion is also reaping a vast harvest by the taxation of war profits It might well be mentioned in the Old Country that a great deal of the £220,000,000 comes out of the pockets of Australians through the excessive freights which they have to pay. When accounts are being rendered from all the different parts of the Empire in connexion with our war costs that is one matter which we should keep prominently before the Old Land.
– Hear, hear! The price of wheat comes in there, too.
– It certainly does. I believe we are the highest-taxed part of the Empire at present.
– You are surely joking;
– I am not. I understand from Senator Pratten that the super-tax in Great Britain is 3s. 6d, in the £1. That would really be a little higher than in Australia. Still, in my opinion, we are taxed the more heavily.
– There are some British investors interested in Australia who are paying 5s. in the £1 Imperial tax on top of their Australian taxes.
– That is so.
With respect to the provision in the Bill for employers to collect taxes for which their employees are liable in certain cases, it should not be forgotten that much of the friction which existed in the past has now departed. The recent Recruiting Conference at Government House allayed a great deal of that friction. Tax collectors are never very popular, and I am afraid that the imposition of this duty upon employers may develop fresh causes of friction. Employers do not want to undertake the obligation, but I suppose that if the Government say we must do so, there will be no help for it.
– It ought to be a last resource
– It should be indeed.
– We can vote that provision out, and we should do so.
– I have heard that many men avoid paying income tax by appearing with one name in one avenue of employment, and by working under another name when they have been taken on elsewhere. I understand that that is done to a great extent. The only way to meet that sort of thing would be either by the use of a stamp upon the payment of wages, or by insisting upon a discharge certificate, as in the case of seamen to-day.
– Why brand thE employee as a defaulter?
– It would be only where he is known to be a defaulter ; and, if he is such, surely there would be no objection to calling him one ? I know, however, that employers are very reluctant to be drawn into anything of this kind.
– What if the defaulter is an employer? Who would collect his tax?
– The Government machinery would look after that.
– Then why not Government machinery to look after an employee also?
– There may be something in the point that for one defaulting employer there are many defaulting employees. Another consideration is that there are many ways of dealing with a recalcitrant employer; but, as to the employee, there is only the source of his wages to draw upon.
I hope that in future we shall avoid anything further in the way of retrospective taxation.. One clause in the Bill under discussion validates that principle. We know that the intention is to save revenue. Nevertheless, there are many hard cases which would be affected under this clause, while, in other instances, the parties concerned have brought the situation upon themselves. They had an amount carried forward when the Act came into force. That sum, at first, was not taxable. The Act referred only to the period up to the 30th June, 1914, and .any slim made before that was not taxable. It was found then that a great deal of income which should have paid taxation was stated to “belong to those amounts which had been carried forwardThereupon the Department, to protect itself, got the Minister to amend the Act so -as to make the carried forward profits taxable in the ordinary way. That amendment ‘has not proved ‘sufficient.
Now, therefore, there is this further proposal, which has been introduced solely for the protection of revenue. In this respect I understand that no further retrospection is contemplated; yet the fact remains that there aTe some very hard cases owing to ihe difficulty of differentiating between those who should not have to pay, and those who ought not to be permitted to escape. But I hope that in future there will be no retrospective taxation, and that taxation will fall upon all alike. Above everything, I trust that there will be a thorough investigation into our machinery of government and a remorseless cutting down of all unnecessary expenditure. If that course be not followed, assuredly we shall get upon the rocks.
– Would not the honorable senator extend special consideration to the man with a large family.!
– I understand that that matter is dealt with in this Bill.
– Only to a limited extent. In Japan, a man with a family of six is exempt from all direct taxation.
– Irrespective of his income ?
– No; I am speaking of the ordinary workman.
– I agree with Senator Pratten that an allowance of 5 per cent, for wear and tear on machinery is not sufficient. To my mind a larger deduction should be permitted. I also think that when machinery is scrapped the cost of it, less the sum written off for depreciation, ought to be allowed as a deduction in a man’s balance-sheet. We do not desire to encourage men »to continue working with antiquated machinery, and if we do not allow them to make the cost of that machinery, when scrapped, a charge against their profits, we shall be legislating to compel them to keep their old machines at work. Now, we require to encourage the use of the newest machinery with a view to increasing production and to making that production as economical as possible. There are a great many details connected with the measure with which we can better deal in Committee, and for that reason I shall not continue my remarks.
.- The debate upon this Bill has been commendably short, but it has lost nothing of its value from a business point of view on that account. We have had one or two speeches which, I venture to say, have impressed honorable senators - speeches which have compelled their attention, and which have brought under review certain matters of high importance in regard to which I think a reply from me is necessary. Senator Pratten’s speech is one of those to which I wish particularly to direct attention. I also desire to associate with him the name of Senator Fairbairn, who has briefly referred to similar matters here to-day. Senator Pratten, in a very thoughtful address which he delivered last evening, put forward certain points, and his objections to this Bill may, I think, be classified under certain definite headings. His first criticism was that the Commissioner of Taxation adopts a high-handed attitude in determining the deductions allowed on account of depreciation of plant and machinery. Secondly, he claimed that the Bill ought to touch 381,000 people who were admitted to be in receipt of incomes exceeding £160 per annum, whereas the Commissioner of Taxation only assessed 235,000 persons.
– No. I suggested that there may be 100,000 persons in Australia who escape the payment of Federal income tax.
– The honorable, senator’s statement was that from an examination of the position he has concluded that there are a number of persons who ought to be paying income tax but who are not doing so.
– That is quite correct.
– He further alleged that the Commonwealth is l’osing heavily in revenue because, it does not collect the tax from many individuals who are taxable, and because it does not collect income tax upon companies’ profits at the source.
– It is not losing revenue on that account, but on account of inefficient administration.
– If the loss be due to inefficient administration, what point is there in the honorable senator’s criticism of the Federal method, which does not collect income tax at the source?
– Because the Federal method is very difficult to administer, whereas the State method is easy to administer.
– Then the honorable senator was attacking the method. I merely wish to get the real purport qf his criticism. I certainly understood him to contend that the Federal Government loses revenue because instead of following the State system of collecting at the source it collects from the individual. Another objection by him had reference to the retrospective character of certain of the provisions of this measure. He further objected to the liability of employers to pay the tax on behalf of defaulting employees. I think that I have now indicated the points to which the honorable senator took exception. He then proceeded to advocate that the collection of the income tax should be intrusted to the State Taxation Departments rather than to our own Department.
– On present lines, yes.
– I wish to run over these points, and I am sure that Senator Pratten will recognise that I do so because I candidly admit that his speech, both because of its matter and because of the evident attention which he had bestowed upon his subject, demands an answer from me.
I shall deal first with the honorable senator’s accusation that there is a tendency to high-handedness on the part of the Commissioner of Taxation in regard to the amount which he allows on account of depreciation of plant and machinery. The honorable senator knows perfectly well that the Act itself lays certain obligations upon that officer. One of those obligations is to determine the deductions which shall be allowed on account of depreciation. Now, the Act itself limits the items in respect of which depreciation may be allowed. Whatever may be said of the Act itself, it is only fair to the Commissioner that I should point out that there are limits placed on his authority.
– But the Act does not limit the percentage that is to be allowed.
– It must not be assumed because this officer does exercise a discretion that he is without some direction from the Act as to the way in which that discretion should be exercised. So much for the limitations that are placed upon the Commissioner by the Act itself. Now, as to the way in which that officer discharges his duty. I have not the slightest doubt that in fixing the rates in respect of depreciation the Commissioner, to the best of his ability, has had regard to the varieties of plant and machinery used for business purposes, and has sought the best advice available as to the average life of that plant and machinery. He does not pretend to be an expert on machinery, but he does claim to have consulted those persons whose advice was calculated to help him to arrive at a just decision. Having done that, the rates fixed apply to a normal day of eight hours, because scientific examination has shown that if machinery be continuously worked for a longer period the effect upon it is more serious than if it be worked for a shorter period. I was not aware of that fact until the other day, but it is one which has been scientifically demonstrated.-
– Is that all the Minister has to say about depreciation?
– No, but it is a very important factor, and I am merely indicating for those who are interested the considerations which have prevailed with the Commissioner in adopting the attitude that he has adopted. L am doing this because the complaint made by Senator Pratten is not a new one. I do not think, however, that he quite means all that he says against these officials. But he has so frequently revived this charge that I think I should set out the action which has been taken by the Commissioner before he has arrived at the decision in respect of which complaint is made.
– The effect of the Minister’s answer is that the Commissioner says that he is right, and everybody else is wrong.
– What he says is that a> number of gentlemen who are deeply interested in this matter are not able to see eye to eye with him.
– And who know what they are talking about.
– He says that he has consulted a number of experts-
– Will the Minister give me the name of one of those experts ?
– I am not in a position to do so off-hand, but the best answer to the honorable senator is to be found in the balance-sheets of some of those who complain.
There is another point in regard to which the Commissioner- finds himself out of touch with those who consider themselves aggrieved. i I refer to. the invariable practice on the part of companies to set aside a certain amount annually as a sinking fund, and to use that amount in the course of their business. In that way the amount credited to the. sinking fund earns just the same rate of profit as does the rest of the capital employed.
– The Minister is re- “ f erring to the percentage of depreciation 1
– Where a firm sets aside, say, 5 per cent, on account of depreciation, and puts that money into ils own business, which is earning, perhaps 20 per cent., -it will be seen that a considerable difference must be made as to the period when the capital cost of the machinery employed will be wiped out. It is quite a common practice for those who take up the attitude of Senator Pratten, to assume, in reference to the depreciation of machinery, that the cost of any machine ought to be divided by the number of years that represent its life. If a machine, for example, costs £100, and its life is set down at twenty years, the ordinary custom is to wipe off, on account of depreciation, £5 each year. But in practice it has been found that if a machine has a life of twenty years it is not necessary to provide a sinking fund of £5 annually, because if that fund is, as is invariably the case, employed in the business where it earns interest, a smaller amount than 5 per cent, is quite sufficient to make up the capital cost of the machine when its life ceases.
– The Minister has some more curves now?
– No. The Income Tax Commissioner is doing exactly what the smart business men of this country do.
– Certainty not. Senator MILLEN. - There is not one of them who puts the £5 depreciation in the case of my imaginary machine into a crevice in the wall, and hides it there.
– Even if a man makes use of the 5 per cent, depreciation on the £5 annually, it will only represent a ‘depreciation of 6 per cent.
– So that while the honorable senator and his friends claim that the total cost of a machine should be divided by the years of life which that machine possesses in order to arrive at the depreciation which should be allowed annually, it does not follow that that method is right. When 5 per cent, depreciation is allowed, in reality it represents more than ‘5 per cent.
– The Minister means that it represents 5 per cent., plus compound interest.
– Yes; my honorable friend has put the position in a sentence-
– Will the Minister . instruct the Commissioner of Taxation to allow a reasonable mathematical deduction on account of depreciation ?
– - The Commissioner is already allowing that.
– Is the Commissioner taking up the position that he is right, and that everybody else is wrong?
– Undoubtedly he is taking up the position that he is right. Indeed, I cannot conceive of any officer saying to his Minister, “ Please inform Parliament and the country that I am doing that which I know to be wrong.”
– Then there will be no redress ?
– Unless the honorable senator can bring forward some more substantial arguments than those which have been used, I can promise him none. But it is always open to him to show by specific cases where the Commissioner is wrong or where the Act is wrong. At present I say that the Commissioner has taken very great care indeed, in that he has pushed his inquiries as far as possible in an endeavour to obtain scientific knowledge to help him in this matter, and he has arrived at the conclusion that what he is doing is not unfair.
– The Minister says that he has been guided by expert advice.
– I do, and scientific advice, too.
– Will the Minister give us the names of the men who have guided the Commissioner?
– I do not know them. But I take the Commissioner’s assurance that he has had. such consultations. At present I can go no further than that. I am quite certain that neither the Government nor the Commissioner desire to do more than the Act empowers them to do. I have some little knowledge of an evaporating plant - that is a plant which gradually wears out - and I know as a business man that I always allowed more for depreciation than experience showed to be necessary. If I had a machine, I wrote down for depreciation 10 per cent, for the year. But the machine lasted more than ten years. I allowed that rate for depreciation, as all business men do, for the purposes of safety.
– Sometimes a boiler will wear out earlier than is expected.
– In that case either the purchaser has been taken down or he had not the knowledge which entitled him to buy.
– Or there was carelessness.
– These, of course, are contingencies which will arise anywhere.
– But the Commissioner can hardly ascertain whether a man’s loss is due to carelessness or otherwise.
– As a rule those who .control these plants look after them very effectively.
The next point is that we are losing some revenue by allowing a number of those who ought to be taxpayers to escape in some way or other. Senator Pratten estimated them at about 100,000, but I am not so much concerned as to the actual number, as I understand the honorable senator to say that he merely gave the figure as indicative without being definite. The point would still be worth inquiring into if the number supposed ‘to escape was much less. In fact, if anybody escapes we ‘ are bound to look, closely into the matter. But is there reason to suppose that any considerable number of persons are avoiding their just ‘obligation? The figures concerning the total num’ber of returns received for the ‘current year’s assessment have not yet been finalized, but from approximations made they exceed 600,000. Senator Pratten, speaking from figures which he had drawn from the wealth census returns, spoke of 381,000 persons who ought to be paying income tax. The estimate made by the Taxation Department is that this year’s current returns will exceed 600,000.
– But that is morethan double the number for last year.
– Bachelors earning £100 now come in.
– It is true that the Act has been widened, but we ought also to recollect that our Taxation Department is a comparatively new institution. It was inevitable that when it came into being there would be some little weakness, some gaps, some slips, but’ as each year goes on the Department is able to tighten up, and it is probable that some portion of the increase is due to that tightening-up process. No Department, and I have very close personal reasons for knowing this, can spring into existence, Minerva-like, fully equipped. It takes a little while before the Department adjusts itself to the’ task thrown upon it. Our Income Tax Department is now three or four years old, and it is only reasonable to suppose that where gaps have occurred, where a section of the taxpayers have evaded their obligations, track has been taken of them, and they are gradually being roped in. I assume, therefore, that some portion of this increase is due to that fact, and some to the enlargement of. the areaof taxation.
– Does the Minister seriously say that the Commissioner- willhave approximately 600,000 individual assessments of the people of Australia this year?
– I say that there are approximately 600,000 returns.
– It is a question of assessments, not of returns.
– But the 381,000 cases which the honorable senator quoted from the census cards are only returns.
– They were people who, on their own showing, were liable to pay income tax.
– They were people who said they had a certain income, but it does not follow they were liable to pay income tax, because they had a certain gross income. From all amounts returned as income- certain statutory deductions, are allowed, and although a man returns- himself on his census card as having a certain income- -
– Net income.
– Whether it is net or not certain statutory deductions are still allowed. There is the matter of insurance, for instance. Quite a number of those 381,000 people to whom the honorable senator directs attention would, not be income taxpayers if they filled in income tax returns.
– But there is a discrepancy of 150,000 between that number and the last known number of assessments.
– The fact that 381,000 people made that return under the wealth census is in no sense evidence that they would all have been taxpayers.
– “What other evidence do you. want?
– I cannot understand the tenacity with which the honorable senator hangs on to. his. point when I have offered a. reasonable explanation. Men. who return a, certain income for the purpose of. a wealth census, do not, by that means, declare, themselves as- payers of income tax, because, when they fill in r&turns, for income- tax purposes^ they are entitled to exemptions, allowed by- the Act, which will frequently- bring them, below the taxable- amount. Besides, iiisurance payments, they can deduct premiums for friendly societies^ and there is the deduction, allowed in respect of children. Frequently a man who showed himself to be in receipt of a net income of over £156 under the census return, would not have an income entitling him to be taxed under the Income Tax Act. “Whether the number who would thus escape is large or small, some allowance must be made for them. The 600,000 odd returns that have been received to date by the Commissioner will not all represent income taxpayers. When the accounts are finally adjusted some of those persons will be found to be exempt. -It is a reasonable assumption, and I admit that in this matter one can speak only on assumption, that, in view of the 600,000 returns received, the average number of taxpayers will be in excess of those of previous years, and will also dispose of any supposed discrepancy between the income taxpayers and those shown on the census cards to which the honorable senator referred.
– I was speaking on the only figures available; the honorable senator is speaking on assumptions.
– That is so, but I am endeavouring to dispose of the point which the honorable senator submitted, and which I said I regarded as entitled to inquiry and an answer.
With regard to the failure to trace taxpayers, I have already referred to the fact that the Department is a comparatively new organization. As it has to deal with people spread over a continent of no mean dimensions, it was inevitable that there would be some escapees in the early period of its operations. The Department, in its effort to trace defaulters, is persistently and methodically following out a course which is showing every day beneficial results. There is an invariable tendency in Australia to complain when a Department adds to its numerical strength. When honorable senators draw attention to possible loop-holes, they ought to remember the steps taken in other countries to stop them. In England there is a most extensive organization in this regard. The Income Tax Commissioner has his own officer .resident in almost every considerable centre. He is a sort of permanent resident income tax inspector, and is known officially as an inland revenue officer. He is supposed to have personal knowledge of, and supervision over, all the people living within the area of his jurisdiction, and by a variety of means, some open and some otherwise, he forms an estimate of, and keeps a check on, their incomes. If Australia adopted that course, Senator Pratten and Senator Fairbairn would, with a good deal of sincere indignation, draw attention to the gross expansion of the Department and its rapidly increasing and unjustifiable expenditure.
– Quite right!
– But the honorable senator must remember, when he calls upon a Department to take steps to correct some possible weaknesses, that he, as a critic, would be the first to object if it took what appeared to be the simplest method of doing so. At any rate, the Department, without any such rapid expan sion, is gradually bringing in those who have hitherto avoided the duty imposed upon them by the Act.
– I think you will do a lot by compelling everybody to make a return, .as the new Act proposes.
– Even then it will not be easy. We may tell everybody to do so, but one of the difficulties is that in Australia men change their occupations very much more frequently than in a settled country like England, and not only that, but I think I am not libelling some of them in saying that they also change their names. In the circumstances, it is easy to preach a counsel of perfection, but, as sensible men, we must take notice of practical difficulties in the way. of giving effect to it. The Department is making very strenuous, methodical, and successful efforts gradually to see that those called upon to make returns and payments shall do so.
The wisdom of collecting the tax at its source where companies are involved, or of collecting from the individuals, has also been the occasion of much controversy. Senator Pratten has strenuously urged that the system operating in New South Wales can be adopted with advantage by the Commonwealth. He says that system is more simple, and makes the tax easier of collection. That may be quite true, but is it more equitable? The present method of the Commonwealth is to tax the taxpayer on the dividend he receives as portion of his general income. The proposition of Senator Pratten, and those who think with him, is that we should levy on the dividends of the companies on a flat rate before they are distributed.
– Not quite. Our position is - first collect a flat rate, and then credit it in your graduated income.
– That is not going to simplify matters. The effect of the proposal is this: We have in operation a graduated income tax, which requires that a man with a larger income shall pay a higher rate, and the man with the smaller income a lesser rate. If the tax is collected, as in New South Wales, from the company on a flat rate, the effect will be to release the recipients of bigger incomes from some portion of their just liability, and to throw upon the recipients of smaller incomes a tax to which the law says they are not subject.
– My suggestion did not go as far as that.
– I am dealing with the general proposition which has been put to the Government with a great deal of frequency, if not force. The whole difference of the two systems is this : The Commonwealth Government say that if a man liable to pay only 4d. in the £1 receives a portion of his income from a company, that portion shall go into his general income, and he shall be assessed on it at 4d. in the £1, but that, if another individual is liable to pay 5s. or 6s. in the £1, he shall not escape portion of the tax at that rate simply because part of his income is derived in dividends from a company - that each shareholder shall pay at the rate which Parliament says shall apply to his income. If we have a flat rate for a company it will mean that a man will pay either higher than the minimum or lower than the maximum intended by Parliament. We have taken the flat rate at ls. 10£d. in the £1. What will that mean? It will mean that the smaller shareholder, who, Parliament has said, shall pay at the rate of 4d. in the £1 upon his income, will be called upon to pay ls. 10½d.; whereas the man who Parliament has said shall pay at the rate of 6s. 3d. in the £1 on his income, will be let off the difference between that amount and ls. 10$d. This proposal is manifestly unfair, because it will require a man whose income from shares held in a company may be only £150 to pay at the rate of ls. 10-Jd., while a man with a similar income derived from an individual business will pay at the lower rate. That would be manifestly unfair.
– I did not suggest that.
– No, but I am dealing with the general proposition as contained in the New South Wales system of levying a flat rate upon companies and which, it has been suggested, should be adopted by the Commonwealth Government. My answer to that is that it would be a distinct injustice to holders of company scrip in receipt of small incomes, and a distinct violation of one of the fundamental principles of our income tax system.
– You could easily link that Up with the present system.
– I shall be glad if the honorable senator will first allow me to finish my argument. I repeat that this proposal to levy, a flat rate on companies’ would not only be inequitable, so far as the taxpayers in receipt of smaller incomes are concerned, but also a violation of the principle of our Act. It 13 the accepted policy of Australia that the persons in receipt of larger incomes shall pay taxation at the higher rate, and this proposal to levy a flat rate upon companies’ dividends before distribution undoubtedly means that the smaller holders of company scrip will be called upon to pay more than the amount which Parliament said they should pay in order that the richer men may be let off the amount which Parliament has said shall be imposed upon them.
– Quite true, if you stop there.
– That is where I propose to stop, and I now have the assurance of Senator Pratten that I am quite right.
Let me give one or two sets of figures to show how inequitable it would be to levy a flat rate upon companies prior to the distribution of dividends. I have quite a number of instances, but I do not propose to weary the Senate by reading them all. I shall quote just one or two to illustrate my argument. In a manufacturing concern of 520,000 shares of £1 each the total number of shareholders is 1,323, and the average number of shares is 393 per shareholder. They run all the way from 476 shareholders holding 100 shares or over, to -69 shareholders holding less than 100. And now we come to what is the interesting and critical point in the statement - the dividend point. We find that the dividend in this company ranged all the way from 8s. to one shareholder to £2,200 to another. In the case of a pastoral company £18 was the minimum amount of dividend paid to any shareholder, and £810 the maximum. Turning, now, to financial companies, we find that the dividends ranged from 4s. Id. paid to one shareholder, to £406 to the highest. In a commercial trading company, 12s. was the minimum amount paid to one shareholder, and £1,220 the maximum. In an ordinary company, the dividends ranged from 4s. to one shareholder, to £24,017 to the largest shareholder; and in a shipping company, one shareholder received 10d., and another £3,797. It is obvious that Parliament never intended that the shareholders in receipt of the smaller amount should be taxed at the same rate as those in receipt of. the larger dividends. Can any one show justification for releasing recipients of the larger dividends from some of their liabilities, when, by releasing them, we impose upon the persons in receipt of smaller dividends taxation at a rate higher than that sanctioned by Parliament?
– Nobody proposed to do that.
– That is what the New South Wales system does, and that is what the New South Wales Government and their officials urge that we should do. This argument ‘was raised at the Taxation Conference, as my honorable friend knows. I am not saying that he advocated it, although I understood him to do so.
– I advocated, really, a combination of the two systems.
– Then I venture to say that by a combination of the two systems we shall be introducing some of the evils to which I have referred. The system, in my judgment, is inherently wrong; and I have not the slightest anticipation that this, or any other, Parliament will ever approve of it. The only alternative which, in- my opinion, is entitled to consideration is the adoption of the New South Wales system df levying -on the flat rate, and subsequently collecting any deficiency in the amount received from the larger incomes, and also making a rebate to those who were not entitled to pay the sum demanded of them under the flat rate.
– That is exactly what I advocated last night.
– Then, if that is called simplicity in taxation methods, I do not know what complexity is. At present, we propose to say to A, B, and C, and other taxpayers, that when they have received dividends, a call shall be made upon them; but under the system now advocated by Senator Pratten, the Commonwealth would collect on a flat rate from companies. We Would then turn to A, B, and C, and say, “ We will make you a rebate, because you have paid in excess of the amount that should have been demanded.” It is far better to make one demand on the individual when he has received his share of the profits.
I leave that now, with the remark that I shall be glad to deal further with any objections to the clause in Committee, and turn to what is .alleged to be the retrospective features of the Bill. They are not retrospective in the sense that I think Senator Pratten inferred. It is not proposed, when this Bill becomes law, to collect any ‘taxation from those who have not paid up to ‘the ‘present. That, indeed, would be retrospective legislation. What is proposed is to validate what has already been done by the Department. Acting on their own interpretation of certain provisions of the Act, the Department proceeded ‘to make assessments and collect the tax ; but a case was taken to the High Court, which determined that the action of the Department was wrong, and it is now proposed to validate what has already been -done.
– I understand that refunds are being made in some cases.
– I suppose .refunds have been made in the case which was taken to Court, but I am not quite certain.
– Then would ,you penalize taxpayers for not taking their cases to Court?
– I think that in nine cases out of ten a person who -goes to Court is already penalized.
– How will the man who went to Court and proved his case fare under the operations of this measure?
– I cannot .-say what happens in that particular case, but I will ascertain before the clause is dealt with in Committee.
– It was stated in another place that the taxpayer got the benefit of the verdict.
– I am not sure, but I will ascertain definitely at a later stage.
There is another phase of the question to which reference was made, namely, the provisions requiring employers to collect taxation from defaulting taxpayers. I can quite understand an employer’s objection to being placed in the position of collecting agent for the Government, and
I admit that there are sound reasons underlying that objection; but I ask honorable senators can they suggest any other way to deal with taxpayers who may seek to escape their just obligations?
– I suggested the use of revenue stamps.
– Under what circumstances would they be attached?
– To the payment of wages.
– That proposal would be open to the objection that stamps, - based on the unit of wages earned, would be attached.
– I can quite conceive that a man earning £5 a week for a limited number of weeks in the year would, under Senator Pratten’s proposal, be paying income tax although his total income for the year might not amount to more than £60 or £70, and Parliament has said that that man shall not be taxable. This is a matter not without its difficulties from whatever standpoint^ is viewed. I am sure Senator Pratten recognises that the obligation sought to be placed upon some employers will not make them liable to the amount of tax due to the Department. The employer’s liability will be merely, after notice has been served upon him by the Taxation Department showing that some one in his employ owes money to the Department, to see that portion of the money due to that employee is withheld and paid to the Crown.
– But the taxpayer may be in South America.
– A taxpayer cannot be in South America and in employ in Australia at the same time.
– Of course he could, if he signed on under ship’s articles.
– If, then, a man is in South America, he is not entitled to any more sympathy than a man who is working in Australia, if he is seeking to avoid his obligations. Suppose such a man is in South America and in the employ of an Australian firm carrying on business here, I see no great hardship in calling upon the employer to hold back some of the money due to the man.
– How could an employer hold money when he had paid the man his weekly wages?
– If pay day is on a Friday, and the employer, prior to Friday, received notice from the Crown that a certain employee owed income tax to the Department, he would be in a position to hold back portion of the pay due. Honorable senators may point to the difficulties of the proposal, but unless they can suggest some alternative which, would meet the case of a man who is trying to dodge his payments to the Crown, I submit they should support the Government’s proposal.
– Does the New South Wales Government suggest that the employer should collect taxation from the workmen ?
– This is done in Queensland.
– Senator Grant, I know, is one of those who scorns to do what others have done. He says, “We intend to carve out our own course. We control our own destiny. What other, people have done has nothing to do with us. We lead Creation.”
– Western Australia is following the same course.
– Queensland did the same years ago.
– I am glad to hear it.
There is one other matter to which I should like to refer, and that is the very frank and pronounced advocacy by Senator Pratten of an agreement with the State Governments under which they should act as collecting agents for the Commonwealth Government. We are all agreed as to the advisability of getting rid, as early as possible, of the duplicate machinery of taxation. I venture to say that, if that were brought about it would effect not only economies in departmental expenditure, but a vastly greater saving to individual taxpayers. Even a man whose operations, like my own, are very small, may consider it worth a few shillings to avoid the preparation of his own income tax returns. Small as my operations are, I hand the preparation of my return over to an accountant, to whom I pay a modest fee. I have no business operations, and I can quite believe that some of my business friends have members of their staffs engaged often for weeks in preparing their returns. If the saving of expense in this respect be multiplied by the number of taxpayers, it will be admitted that the amalgamation suggested would result in the saving to taxpayers in money alone of an amount running into hundreds of thousands of pounds. In addition to that it would re-
Bult in what I regard as a distinct asset to the country, namely, a saving of temper. If we can bring about the merger we should secure both. The question is in what way is the merger to be effected. I shall not enter upon that argument, because in my view the question is not open to argument. I am unable to see how the Commonwealth can, or ought, to hand over its functions in this regard to the States Senator Fairbairn, I think, completely disposed of that contention when he pointed out that whilst the States may vary in their methods, there must be for Commonwealth purposes a uniform method throughout Australia. It seems to me that for that reason alone it is essential, if there is to be an agent in the matter, that the Commonwealth Government should’ act as agent for the States Governments rather than that the States Governments should act as agents for us.
– Are the Government not going to consider the method by which they would be likely to get most revenue ?
– I cannot see why, if the collection is in the hands of the States or of the Commonwealth Government, that should affect the amount of revenue collected.
– I quoted some figures with respect to collection in New South Wales which, I think, are worth replying to. I quoted the comparative collection of State and Federal income taxation in that State, n.
– I thought that I had dealt with that matter to some extent.
– I gave details of the money collected.
– I am glad the honorable senator has reminded me of that. He is quite right when he says that his figures are entitled to some reply. But before I venture to give that reply I think the honorable senator should give the Senate some more information than he has yet given us. He made certain statements, in all sincerity, which he said were supported by the highest authority, to the effect that the Commonwealth is losing some millions of pounds which we might otherwise collect. I suggest that on reading the report of his speech the honorable senator will see that he did not support those statements by facts. He smiles, but I say that it is not sufficient for him to assert that the Commonwealth is losing millions of pounds because it does not adopt some different system. There is an obligation upon him to follow up that statement, and indicate more clearly and definitely than he has- done the particular way in which we are losing that money. He referred to companies and the enormous profits they make, and pointed out how little we are receiving from them. I direct his attention to the fact that the incomes of these companies are not so great as he apparently assumes.
– I think the Minister is under a misapprehension. The figures I quoted had reference to the collection of State income tax for 1915-16 and 1916-17 and were compared with figures of the collection of Commonwealth income tax in that State during the same period.
– From all sources ?
– Why should the results have been so nearly alike when the rates of the Commonwealth tax are so much higher than are the rates of the State tax?
– There are certain reasons for that. One thing which the honorable senator is apparently overlooking is that when he refers to Federal income tax collections he quotes only New South Wales contributions made in that State. He has overlooked the amount of New South Wales contributions made to the central Federal office.
– Those figures would not greatly affect the matter.
– They would materially affect, the matter in the case of a State like New South Wales.
– Could the honorable senator give those figures approximately ?
– Not at this stage, but I shall be glad to do so later. They would represent a material disturbance of the argument based upon the figures which Senator Pratten advanced. I invite the honorable senator to go more closely into the matter, and to recognise how great a service he may render Australia if he can show a sorely-pressed
Treasurer stretching out his hands for revenue that there are millions awaiting collection.
– Yes, £3,000,000.
– If the honorable senator can put the Commonwealth Treasurer in possession of £3,000,000 that are now apparently going begging, he will have more than justified his seat in the Senate.
– At present the money is in the pockets of the taxpayers.
– I should not like to take any action so invidious, but I do say that if the honorable senator can do what he has suggested, there will be ample justification for the Senate making a distinguished exception in his case, and adding considerably to the emoluments which he receives as a member of this Chamber. This is a general invitation to the honorable senator to indicate more clearly than he has done so far, the way in which these surplus millions are at present running through our fingers.
– I accept the invitation.
– If the honorable senator can put forward something more definite, I shall be prepared, on behalf of the Government, to take advantage of it, or’ to show him, if that be at all possible, where he has overlooked certain factors which require to be considered.
Question resolved in the affirmative.
Bill read a second time.
Clause 1 agreed to.
Clause 2 (Amendment of section 3).
– I propose to ask the Chairman to report progress, because, no doubt, honorable senators, as well as myself, would like an opportunity to look a little more closely into the details of this measure.
Debate resumed from 17th May (vide page 4828), on motion by Senator Millen -
That this Bill be now read a second time.
– As I am not a financial expert, I have not very rauch to say on this Bill. Like that which we have just been considering, it is a machinery measure which can be best discussed in Committee, where I may have something to say upon it. I believe that experts are agreed that sinking funds are necessary for all loans, but it is important that they should be properly administered. We shall have to wait to see whether this measure will be properly administered after the war is over. I understand that a sinking fund* of per cent will wipe out a loan at 4 per cent, in fortyone years. We have increased the interest on some of our war loans, and in that case it will take longer for the fund so created to redeem those loans.
Question resolved in the affirmative.
Bill read a. second time.
Clauses 1 to 5 agreed to.
Clause 6 (Investment of loan sinking fund).
– I am somewhat surprised at the attitude of the Opposition on this measure. I should have thought that a Bill involving a very important principle, as this measure does, would have received some attention from them. The only member of the Opposition who has spoken on the measure is Senator McDougall. In view of the public attention which financial questions have received recently, especially in Victoria, where a certain trade union has advocated the repudiation of war loans, I expected that some members of the Opposition would have risen to dissociate themselves from any proposal of that kind as affecting Australia. Whether they indorse that principle or not is not for me to say. It would have been just to their own principles, as a party, however, to have referred to that matter in connexion with a Bill of this kind. It was merely the fact that no honorable senator opposite had seen fit to refer to it that brought me to my feet. I can only add that I hope honorable senators opposite do not indorse the principle to which I have referred. ,
Clause agreed to.
Clause 7 agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
In Committer (Consideration resumed from 17th May, vide page 4829) :
Clauses 3 and 4 agreed to.
Clause 5 ( Amendment of section 52a).
– I desire to express approval of the very belated action of the Government in adopting a policy first enunciated in this chamber by Senator Mullan, in November, 1915, on the occasion of the discussion of No. 3 War Loan Bill, which actually related to No. 2 of the loans floated in Australia. Senator Mullan moved an amendment (vide page 7445 of Hansard) -
That the following words be added: - “Provided that the provisions of sections 52a, 52b, and 52c of the Commonwealth Inscribed Stock Act 1911-15 shall not apply to the loan raised under the authority of this Act.”
Section 52a of the Commonwealth Inscribed Stock Act relates to the exemption from stamp duty of the instruments of the war loan - the bonds themselves.. On that occasion, when .Senator Mullan moved his amendment, the proposal was received as quite Utopian. It will be recalled that the attitude of the mover and those who supported him was considered to savour of the ridiculous. But in the intervening time there has evidently been opportunity for the present Government to reconsider the action of the Labour Government who were then in .power. Senator Millen, in reference, then, to the .amendment regarding section 52b of the Inscribed Stock Act - dealing with exemption from State and Federal income tax - pointed out that it was wholly to the interest of the big investor and to the detriment of the small investor.
The reason that Senator Millen gave for not supporting the amendment of Sen’ator Mullan was that part of the £20,000,000 loan then on the market had already been covered, and that the position would arise, therefore, that portion of the war loan would be subject to the exemption, while the remainder would not; which would be an anomalous position. Now the same situation has arisen to-day. Clause 5, under discussion, deals with the exemption of war loan bonds, or inscribed stock, from stamp tax; and the same position will arise here, namely, that part of the war loan securities, or intruments, will be subject to stamp duty, while others will not. I am pleased that the position has evidently been forced upon the Government by their financial advisers owing to the seriousness of the situation - a seriousness to which I may better refer, perhaps, when the Committee is. dealing with the next clause. Meanwhile, I again express approval of the belated action of the Government in thus doing what Mr. Fisher and his financial advisers should have done in connexion with the first war loan, and altogether, in fact, in respect of the early stages of floating war loans in the Commonwealth.
– I do not know that much has been gained by making the instruments’ of the war loans subject to taxation, when it is remembered that the interest payable on such loans has been increased considerably beyond that given upon the loans free of taxation. It must be quite obvious that, so far .as the Government are concerned, and so far as investors are concerned, it is not a matter of much importance whether the bonds are free from taxation or whether holders have to pay, provided that the interest is adjusted accordingly. I quite realize that under these four extraordinary mathematical curves, which no one understands - not even two of our most expert mathematicians - a large investor will have to pay 6s. 3d. in the £,1 on account of the amount of his income; but that the small investor, on the other hand, who is outside the pale of taxation, will get a higher rate of interest for his investment than he could secure from almost any other source at the present time.
Again, it must be remembered that the tax-free investments are only returning 4 per cent., while there are thousands of investments in the Commonwealth which are providing a much higher rate of interest. In fact, they are so numerous that it has been only after an extreme process of advertising that the various war loans have been so strongly subscribed to. I do not know that the Government have done anything of advantage in the way of securing additional war loans by making the proceeds liable to taxation; but they have probably met an objection which, to my mind, is more fanciful than real, seeing that they are now paying on taxable war loans a higher rate of interest than upon loans free of taxation.
I can quite understand why the Government have decided to make the proceeds of the war loans in future subject to taxation. It does appear that to have a huge sum of money invested in war loans free of taxation is somewhat anomalous. But against that it must be recalled that capitalists could easily find better investments for their money, and that many persons invested in the war loans only after considerable pressure. -Further, these taxfree investments will only remain so for a limited number of years, at the end of which period the Government will require to devise some way of refloating them at, probably, a much higher rate of interest.
Clause agreed to.
Clause 6 (Amendment of section 52b).
– I may be permitted now to refer to the phase of exemptions from interest on war loans which I indicated in speaking to the previous clause. It is a remarkable thing that section 52b of the Act should be brought in at such a late stage in the procedure connected with war loan flotation in Australia; and it is even more remarkable that many of those who first howled against any proposal for doing away with the exemption from taxation df interest upon war loans are now agreeable to the suggestion. I am not referring to the Government in this respect. But even the Argus to-day admits that it is the proper course to pursue now. That journal, however, does not say that it was the proper course to pursue from the beginning. According, to the statement of the Acting Prime Minister (Mr. Watt) m another .place, the total amount which has been invested by ‘ our own people in six war loans is approximately £150,000,000. The interest payable upon that amount is at present free from taxation. In other words, capital to the extent of £150,000,000 has been removed from the arena of. taxation. Of course quite a lot of persons who have invested in these loans will now recognise - having sunk their own money in them - that whilst it is a very proper thing that the interest payable to themselves should be exempt from State and Federal income tax, is is not a proper thing that future investments in our war loans should be treated in the same way.
I recollect an occasion last session upon which Senator Needham quoted an address delivered by ‘Sir John Grice, chairman of directors of the Bank of Australasia, in which that gentleman drew attention to the fact that the policy of exempting interest derived from investments in war loans was a dangerous one, and one which might prove to be financially unsound in the ‘future. Now, the Bank of Australasia- has invested £12,445,000 in war loans raised in Australia. Of course the interest upon that amount is exempt from taxation, and not unnaturally those persons more imme.diately concerned have now -set about seeing that the “ other fellow “ does not get such advantageous terms. Sir John Grice pointed out in his statement that the interest payable upon investments in our .war loans represents more than 4i per cent. - that, as a matter of fact, upon the higher incomes it amounts to as much as 7 per cent. He showed that a man who is deriving an income of £5.00 a year from his investments in our -war loans, receives £4 14s. 6d. per £100, or nearly 4¾ per cent., by reason of his exemption from State and Federal taxation, while a man .with an income of £1,000 from the same source receives £4 1.9s. 2d. per .£.10.0, or nearly o per cent, upon his investment. Similarly a man with an income of £3,000 from our war loans secures a return of £5 10s. 5d..per £100, or 5£ per cent.; an individual with an income of £5,500 receives £6 9s. 9d. per £100, or nearly 6 J per cent., whilst a man with an income of £30,000 a year from the same source receives nearly 7 per cent, upon his investment. All these figures go to show that the exemptions which were tolerated by a Labour Government in the earlier stages of the war are wholly in the interests of the big investor. Senator Millen himself pointed this out on the floor of thischamber, although he declined to voteagainst those exemptions later on. He evidently realized that anything in the interests of the big investor was good enough for him, and voted accordingly.
Very soon after the first War Loan Bill was introduced here I objected to the proposed exemptions. A little later the then Prime Minister (Mr. Fisher) resigned, and a by-election took place to fill the vacancy thus occasioned. Throughout the whole of that campaign I took up the position that the Labour Government, of which he had been the head, acted wrongly in exempting from income tax the interest upon moneys invested in our war loans. I denounced the principle as a vicious one. That position has been fully impressed upon us by speeches delivered here both yesterday and to-day upon another matter. But a tardy recognition of the unfairness of this exemption is not very consoling to those who realize that the interest upon no less a sum than £150,000,000 has been freed from taxation. The interest upon that amount represents about £7,000,000 annually.
– How much would the honorable senator have taken from that?
– It is not taxable income.
– When the honorable senator desired to conscript every eligible man in Australia, those men did not ask for higher interest. When the workers struck for higher wages we were told that they ought to be shot. But when the financial advisers of the Fisher Government proposed an increase of 33J per cent, upon the rate of interest payable in respect of our war loan they were not condemned as traitors but were rather hailed as patriots. That is the position, and there is no escape from- it. Those who had the capital in Australia went on strike by demanding an increased rate of interest upon their money.
– They could have got a very much higher rate by investing it in channels of private enterprise.
– How would the war have progressed if no money had been forthcoming - if private investors had not put their money into our war loans ? What would Senator Bakhap - who was prepared to conscript every eligible man in -Australia, and to send him overseas to fight for 2d. per day - have done in such circumstances ?
– I would have taxed those who had the capital to the last shilling.
– The policy of the Government which the honorable senator supported prevented the taxation of the very class to which he refers.
– Because Australia was an untried loan field at the time.
– It was also an untried field from the military point of view. But yet the experiment was made in that direction. Surely it was only a fair thing that those who possessed the money should have lent it to the Commonwealth without interest during the currency of the war, or at the normal rata of interest which prevailed prior to the war.
– Then we have to suffer now for the misdeeds of former Labour Governments ?
– Yes .
– How strong was the Opposition then?
– It numbered, only five members.
– The honorable senator and ex-Senators Stewart and Mullan endeavoured to prevent any interest being paid upon our war loans.
– They stood out as buccaneers.
– Seeing that men were being called upon to give their lives to the cause for which the Allies are fighting, it was only a fair thing that those who possessed the money should lend it to the Commonwealth without interest during the currency of the war and for five years afterwards. When we could not secure that result we endeavoured to get’ the rate of interest fixed at 3J per cent. But those who .possessed the money demanded an increased rate of interest, and they bludgeoned the Commonwealth into paying it. We then attempted to bring the interest payable upon these loans within the operation of the Income Tax Acts, both State and Federal.
– In most cases those who voted for interest being paid upon our war loans said that they were nob establishing a precedent.
– I would remind Senator Bakhap that there was no vote taken, either upon the first War Loan Bill or upon the second, on this aspect.
– In Committee therewas.
– No. Senator Russell delivered his second-reading speech upon the first War Loan Bill about 3 or- 4 o’clock in the morning, and we then adjourned till a later hour of the day - a Friday, I think - when Senator Needham occupied the chair. I recollect that Mr. Fisher was in and out of this chamber all that afternoon, and that he exhibited every symptom of concern. He wanted the Bill to be put through before the Senate adjourned that day, because the prospectus of the war loan had already been sent out to the newspapers. The result was that Senator Stewart, in particular, did not even speak upon the Bill.
– But subscriptions to the extent of hundreds of thousands of pounds were already in.
– And the prospectus had been sent out to the newspapers before honorable senators saw it. It was when the second War Loan Bill was under consideration - a measure dealing with the borrowing of money in. the United Kingdom - that Senator Stewart submitted his proposal that no interest should be payable upon the moneys invested in that loan. It was on the third War Loan Bill - the second loan raised in Australia - that Senator Mullan moved to abolish the exemption in respect of interest derived from the loan so far as State and Federal income tax was concerned. On that occasion, Senator Millen stated that the exemption was in the interests of the big investors.
– The honorable senator knows that I combated the idea then.
– I have already pointed out that fact. But when the division bell rang the honorable senator voted against the amendment of Senator Mullan.
– Yet the honorable senator supported a Government which did all these things.
– Some of us have been very severely criticised for the number of occasions upon which we differed from the Labour Government which we were then supporting. As a matter of fact, it has been argued that Senator Keating and Senator Millen themselves were better supporters of that Government than we were. Only some seven or eight of us voted in favour of abolishing the exemption in respect of interest derived from investments in our war loans. We were on right lines, because it was the right policy for Australia, and it would have been the right policy if the money had been lent at pre-war rates of interest without a jump of 33$ per cent.
It would have been better for Australia if Senator Mullan’s amendment had been accepted in 1915, because the interest on £150,000,000 sterling would not then have been outside the pale of. taxation. If another £150,000,000 were exempted in the same way, it might be the means of bringing about a financial crisis in Australia, which none of us wish to see. The policy was unsound when first introduced, and should never have been entertained.
– I am glad to know that, even at this late hour, the Government repent of its past practice of exempting the interest on money invested in war loans from Federal and State taxation. It has been stated that the investment in the next war loan will be liable to taxation. While I rejoice in the repentance of the Government, let me say that I am repenting also. I admit that I opposed Senator Mullan;s amendment; but I am a sadder and wiser man to-day. When the first loan was under consideration, the then Prime Minister (Mr. Fisher) was flitting in and out of the precincts of this chamber, fearful lest we might do something that would prevent the successful flotation of that first effort.
– That is a very lame excuse.
– .Senator de Largie is the last man in the world to whom I would think of making any excuse. When the Australian “Labour party was united, I was one of those who thought that it might be wise to float our war loans on the conditions then prescribed, with interest at 4J per cent., and freedom from Federal and State income taxation. I have since repented of that action, because I have realized that other men have made greater sacrifices - than those who lend us their money. When the tocsin of war sounded, and Australia was asked to assist the Motherland in her trouble, and when our young Australian manhood responded to the call, they placed no condition whatever on their services. But when our wealthy men were asked to assist the nation in that moment of dire peril they placed a condition on their offer of assistance - that the interest should be at 4£ per cent, and free from Federal and State income taxation.
– Who imposed that condition?
– The men who had the money to lend.
– It was the deliberate decision of the ‘Treasury.
– When this portion of the Empire responded to the call, and asked ‘ its wealthy men to assist to equip, clothe, feed, and transport our soldiers, they imposed a condition which, I say, was wrong. They demanded their pound of flesh. They were modern Shylocks, and if they had not been -.granted those conditions our war loans would not have been a success. To prove that, I need go no further back than the sixth war loan, .where alternative terms were offered to the investor - 4£ per cent, free from Federal and State income taxation, or 5 per cent, with liability to such taxation. I learnt from the Leader of the “Senate (Senator Millen), in answer “to a question, that about £6,000,000 of the total of that last loan -was contributed on the 5 per cent, basis, with liability “to income taxation, Federal and State, and that the remaining £37,322,850 was offered on the ‘4J per cent, basis, free from taxation.
– That only proves how wise we were to vote as-we did in the first place.
– It only proves how loyal are those other people who demand their 7 per cent. I am glad, however, that even at the “.death knock ‘ the Treasurer has announced that investments in the next war loan will be liable to Federal and State income taxation.
– I do not think the announcement is that they will be subject to State taxation.
– We cannot legislate so far as the States are concerned.
– We have done so.
– At any rate, I read the Treasurer’s statement as meaning that the investments in the next loan will be liable to income taxation, both Federal and State. When we first tried to borrow money to assist the Empire in this time of war I favoured the exemption of the investor from such taxation, but I have lived long enough to know that I was wrong, and ever since then I have advocated on the public platform and here that all men who lend money to the Commonwealth for the prosecution of the war should lend it under ordinary conditions, at the ordinary rate of interest, and “bear the same obligations as any other citizen in helping to ‘win this Empire -struggle.
– Will the Leader of -the Senate state ‘how much more money the Government are authorized to borrow under the powers already granted, free from income taxation’? I understand that the last loan did not quite exhaust the amount that can he borrowed in .that way. It would :be a great-convenience to honorable senators if this Bill were printed for their use in the same way as the Income Tax Bill, with the words proposed to be struck out of the principal Act deleted, and the words proposed to be inserted printed in black type.
– No more money will be raised under the old prospectus. That is exhausted.
Clause agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Debate resumed from 17th .May (vide page 4829), on motion by Senator .Millen -
That this Bill be now read a second time.
– I propose to raise some objections to this measure. The very meagre information given to us by the Minister for Repatriation (Senator Millen) in introducing it gives one food for thought as to whether it is going to be a .good thing or not, and what really is its purpose. I understood the Minister to say that its object was to provide money out of war loans for operations on the market in purchasing our own stock to keep up the market price. The Bill provides that the securities shall be done away with when they are bought. It simply means that we are going to use one part of the loan money to buy up the stock practically to annihilate the loan in time. The Minister says that the intention is to protect the holder of the security. I do not know whether that object is going to be attained, but it seems to me that the effect will be to give the speculator an opportunity to exploit the holders of this stock at times. The Bill gives one no idea of when the Treasurer will step in to buy up the stock. We are not told whether he will step in when it is at £99 12s. 6d., £99, or £98, as quoted at different periods. I take it that it will be optional with him. Can Senator Millen tell me whether the Treasurer’s idea is to wait until the stock has fallen to a certain figure? I believe our stock dropped to £98 when the Government threatened to place a wealth tax on the’ community. As soon as that tax was mentioned our securities fell, but directly the Government decided not to go on with it, although they had promised when before the people to impose such a tax, the stock went up again to £99 12s. 6cl. If the Bill aimed at preventing trafficking in this stock I might be inclined to support it, but I think it is intended to protect the big men. Suppose the Government have £1,000,000 to the credit of the fund, and £750,000 of that amount is utilized. How will they obtain additional money for the purchase of - further securities which may come on the market? If the idea is to prevent stock getting on to the market at all the measure may be satisfactory; but if it is not, I see no reason for this provision enabling the Treasurer to step in and operate at any time. The brokers, I believe, are the only people who will gain any benefit by the Bill. I do not pretend to be a financial expert at all, but I read carefully the speech delivered by the Minister in moving the second reading, and he seems to think that, because a similar law is in operation in Great Britain, we should pass this legislation now. But, in my judgment, - what may be a good thing for the British investors and the British Government may not be a good thing for Australian investors and the Commonwealth Government, because the conditions in Australia are totally different from those in Great Britain. I believe the British Act is in- tended to enable the Treasurer to prevent any exploitation of the market by foreign buyers in respect of British stock, but I do not think we shall ever have that experience in Australia. I would like to have some further explanation as to the need for the Bill from some honorable senator who is a financial expert. At the present time I am doubtful whether I should vote for the measure or not.
– I would like to put forward a few aspects of this question which, I think, are worthy of consideration. The . Bill before the Senate provides for the constitution of a fund for the repurchase of Commonwealth securities, the basis to be a percentage of one-eighth maximum per month on the amount of war loan money raised in Australia. That percentage each month would mean about li per cent, in the twelve months, and there is this stipulation, that the fund will not be allowed to go beyond £1,000,000 or below £900,000, but that it will be kept at about that amount, by what we may regard as a syphon system, in which money instead of water will flow out at one end and be syphoned from another, so that the fund will always be kept at about that level. But here is the responsibility devolving upon Australia. Taking the Treasurer’s statement as fairly accurate, we may assume that £150,000,000 in round figures have been raised in war loans in Australia, and it will be possible for 1-J per cent, on that amount during twelve months to reach £2,250,000, which Australia is rendering itself liable for by the passage of this simple looking little measure.
The argument put forward by Senator Millen, and which has been mentioned in the press and advanced in another place, is that the Bill will enable the Treasurer to take in what is termed the “ slack “ of the market - that is to say, when the market in war-loan securities shows any weakening effect, the Treasurer, from this fund, would be empowered to purchase securities and so take in the “ slack.” It is further said that the State Treasurers have had this power for many years in relation to dealings in their securities, and have been using it for that purpose, with the result that their stock on the Colonial and British markets - the British market particularly - has always been kept at what might be termed an attractive level from the investor’s point of view. This is put forward as an argument why the Senate should pass this
Bill to enable the Federal Treasurer to deal similarly with Commonwealth stocks. I would point out, however, that the State Treasurers have no special Acts of Parliament authorizing them to do this, their operations being carried on from their sinking funds. I point out also that already a Commonwealth law which, if not technically, is practically in operation provides that the sum of £ per cent, per annum of the public debt of Australia shall be accumulated. On the basis of the Treasurer’s statement we may compute the public debt of this country at £227,000,000 on account of war, and there is, in addition, a liability of about £33,000,000 for note issue, and a further liability in respect of transferred properties, the Northern Territory debt, and the Oodnadatta railway, of about £34,000,000, so that the total public debt of the Commonwealth must be in the vicinity of £300,000,000, and per cent, on that amount would give us about £1,500,000 per year. There is no gainsaying the fact that unfortunately our public debt is going to grow in the near future to uncomfortably large dimensions, and there need be no feaT that per cent, would not be* sufficient for the establishment of a pool from which to recover the floating Commonwealth securities.
The existing law empowers the Treasurer of the Commonwealth to purchase securities guaranteed by the Government of the United Kingdom, the Government of the Commonwealth, or the Government of any State, and may at any time sell such securities. Why should the Commonwealth seek to purchase in Great Britain, or in any of the States, when they have securities of their own which the sooner they are redeemed the better it will be for the financial stability of the Commonwealth ? I submit that there is no better method of redeeming these securities than by means of the accumulated fund to which I have referred. The Bill authorizes the -Treasurer to purchase any of the securities referred to that may be on the market at up to par value, and I point out what I conceive to be a danger in intrusting the Treasurer with this power. Perhaps the danger has been exaggerated somewhat elsewhere by pointing to the fact that investments in war loans, under the instalment system, would, in some circumstances, mean interest payment noi at the rate of 4 per cent., but, calculated for the first term, would really work out at about 11 per cent., and if carried over the- first year actually would be 6 per cent, or over, and not A. per cent. Ithas ‘been actuarially proved, and set down irrefutably, that the interest on our war loan investments is not 4^ per cent., but, by virtue of this concession in regard to the interest for the first year under the instalment plan, it actually rises to £4 13s. 4d. over the period of the loan. In this connexion I point out what I conceive to be a danger. I am not saying that actual dishonesty may arise in the purchase of these securities to an almost unlimited extent by the Treasurer ; but, as I have already pointed out, 1£ per cent, on the Australian war debt will in the future mean a huge reserve, and it might happen that when the Government of the day think the time opportune to take in the “slack” of the market prices might be forced down to 98 by the manipulation of the market.
– Under Government direction.
– We may leave that out altogether, and say that the market may be forced down to 98 by reason of operations on the Stock Exchange. Every one who has lived on a mining field knows that “engineering” is resorted to on some occasions in order to affect the value of certain shares. Probably a very large holder who desires to unload will go into the open call at the exchange, and by’ buying at enhanced or rising values some scrip in a certain mine, will persuade the general investing public to rush in and get some of it, when all the time probably it is his own scrip that is being unloaded at enhanced prices. This operation has been performed time after time on our stock exchanges, and the same might be done in regard to the repurchase of Commonwealth securities. The Treasurer may be purchasing without knowing who the seller is. His financial advisers may not know who are the sellers, and I therefore submit that there is great danger of manipulation in this connexion.
There is another phase of the question which is rather important. Some reference was made, I think, by Senator Bakhap, to the financial advisers who framed the war loan conditions for the
Fisher Government. I believe that they were big guns in the financial world. It is reasonable to assume that the financial advisers of the Treasurer in the repurchase of these Commonwealth securities will be officers of the Treasury Department, and it is no injustice to them to say that it is quite conceivable that they may not. know what is going on in the financial world as well as keen business men outside. It seems to me that the person responsible for the repurchase of these securities, out of what appears to be an almost unlimited fund based on oneeighth per cent, per month of the amount of war loan money raised in Australia, should not be the Treasurer of the Commonwealth. He has many Cabinet, political, and parliamentary duties to perform, and in my opinion it would be far’ safer and better to give this power, if it is to be given to any one, to the Governor of the Commonwealth Bank, who would have his finger on the pulse of the financial market.
The Minister for Repatriation (Senator Millen) suggested that one effect of creating the fund for the repurchase of Commonwealth securities on the market would be to bring about stability in the market price of the securities should small investors in bonds of £50 or £100,- through necessitous circumstances, be forced to sell. I want to express the opinion that the comparatively small investor is not going to affect the market prices of these stocks. We have some evidence of that in the particulars which have been given of the investments in the last loan. We find that £37,000,000 of that loan was subscribed at 4$ per cent, free of Federal and State taxation, and about £6,500,000 was subscribed at 5 per cent, with liability to taxation. It is not unreasonable to assume that it was the big investors who desired freedom from Federal and State taxation, who contributed the £37,000,000, and the’ small men to whom an additional A per cent, interest was a matter of more concern than the freedom of interest on their investments from Federal and State taxation who contributed the £6,500,000. I submit, therefore, that there is much justification for my contention that the small men who might, by reason of necessitous circumstances, have to sell a £50 or a £100 bond would not be a factor in affecting the stability of the market.
– But should not a man who wishes to dispose of a £50 bond be able to obtain face value for it?
– I shall deal with that point, but I wish honorable senators first of all to realize what has been done in connexion with the issue of war-saving certificates. There has been a great deal of advertising of that scheme going on. It has been in operation now for some time, and the total sum raised by means of war-saving certificates is, I believe, about £6,000,000. That is very gratifying, as showing the tendency to save small amounts. The persons who have invested in war-saving certificates, in view of the amount secured in this way, must be numerically fifty or a thousand times as many as the subscribers to our loans in larger amounts. When it comes to a question of buying and selling, it will be the big men and not the small men who will be able to affect the market for these stocks. If the big investors, for their own benefit, or the benefit of a group of moneyed men, seek to bring about a financial crisis in Australia, the responsibility will be theirs, and they must take the consequences. It will not be the small bond-holders, who have put their mites into our war loans, who will precipitate a financial crisis in Australia. I agree with Senator Crawford that the man who holds a £50 or a £100 bond is entitled, if he desires to sell it, to as much as he can get for it. But I remind the honorable senator that if, because of necessitous circumstances, a man sells a horse, or a house, or a piece of land, he does not always receive full value for it. The honorable senator must also bear in mind that the man who takes up a bond of £100 in a war loan receives 4J per cent, interest on it. Under future conditions, the holder of such a bond will receive 5 per cent. If he put the money into the Government Savings Bank he would only receive 3 per cent., and if he has had the bond for a couple of years he will have received an additional return of £2 or £3, and would lose nothing by selling his £100 bond at £98. The sales of their securities by such men will not, in my opinion, be sufficient’ to affect the market.
We are not to assume that the man who puts his money into a war loan does so merely for what he can make out of it. When on one occasion Senator Millen was referring to the fact that a man puts money into a joint stock company rather than into a war loan because he can get a better return for it, I asked him what was the difference between such a man and a man who invested in a war loan, if the latter desired merely to make a profit. If investors in the war loan must have full face value in any circumstances for their security, it cannot be said that they are actuated by the patriotic motives about which we have heard so much. It is clear, in my opinion, that it will be the big men who bear responsibility in this direction who will have the power to affect the market, and if they do so, and bring about a slump, it will be at their own cost.
Another important consideration in dealing with this Bill is that, when the Treasurer buys up floating war loan securities, he may do so, if honorable senators please, -out of war loan moneys. That is not getting rid of the securities. It is merely transferring the responsibility from one pocket to another. Surely to repurchase war loan securities with war loan money is a Micawber method of finance. It will not get rid of our responsibility in any way. There is nothing financially sound about such a proposal. The machinery exists now to enable the Treasurer to carry out hia intentions in this regard, and this Bill is, therefore, quite unnecessary. If war loan securities are repurchased, aud paid for out of the sinking fund, there will be a practical, effective, and’ permanent redemption. I realize that the money put into the sinking fund, will come out of the Consolidated Revenue, and war loan securities repurchased from that source may be cancelled, and something will have, been achieved. If the Treasurer buys war loan securities with war loan money, he may tear up the securities he has purchased a dozen times, but he will be no further ahead. We should make some advance if the repurchases were made from the Consolidated Revenue, as they were under the pre-existing Stock” Redemption Fund.
It is due to the Senate that the Minister for Repatriation should give us some reason why this is not done. I have pointed out that if the ^ per cent. I have referred to is not enough, it could be raised to a higher percentage.
Sitting suspended from 6.30 to 8 p.m.
Progress Report - Invalided Soldiers : “ Shooting/
Debate resumed from 16th May (vide page 4754), on motion by Senator Thomas -
That the progress report from the Select Committee on “ Intoxicating Liquor - Effect on Australian Soldiers, and Best Method of dealing with Sale,” presented to. the Senate on 1st May,’ be adopted!
– I think the Senate will readily understand that, in common with every other section of the community, the Government are fully seized with the wide-spreading importance of the question raised in the report, the adoption of which we are now asked to accept. The Government arealso aware of the very considerable strength of public feeling which has manifested itself regarding this matter. We are obviously not ignorant of many of the evils that exist as the result of the drink habit in our midst. At the same time, there are certain features in connexion with the subject which have already received the attention of the Government. The liquor question, as such, does not come directly within the ambit of Federal jurisdiction. It is primarily a State matter. The Commonwealth is concerned only in so far as it affects the prosecution of the war. I would not like to go so far as to say upon that point more than this: That the Commonwealth Government, strictly speaking, while entitled to use every power necessary for the prosecution of the war, can hardly be expected to use those powers for the mere securing of a moral reform, however urgently needed such reform may be. The Government must employ its powers for military purposes only. And, in view of this consideration, the Government, after having given very careful and frequent thought to the matter, have decided to adopt a policy which is in conformity with the first recommendation of the Committee’s report. That is the recommendation wherein the Committee, as a result of its investigations, sets out the advisability of prohibiting the serving of intoxicating liquors to invalided soldiers. Within the next few days the Minister for .Defence (Senator Pearce) will make a public announcement as to the methods by which effect will be given to that proposition. It is sufficient for me to say, therefore, that the Government will take steps to prohibit the serving of intoxicants to those soldiers who are invalids.
With respect ito the other recommendation - i-that is the matter of .an ti-“ .shouting “ regulations being put into (practice - I invite the attention of -Senator Thomas, and of the Senate generally, to the fact that when we approach this phase, other considerations not directly associated with soldiers come into view. It is part of the whole question of liquor control, and at this juncture I am not prepared to -say that the Government can accept the recommendation. I remind the Senate that this is only a progress report; it is to be assumed that in due course the Select Committee will present a report covering its completed investigations. The Government feel, therefore, that they are entitled to have the remaining recommendations - if any are to come before them - before they are asked to decide upon a mere sectional presentation of the case. In addition, there are other matters which, so far, have not been touched upon in the report - matters very intimately associated with the question now raised. The Government have the whole of these under consideration, and, upon receipt of the final report of the Committee, will give very prompt attention to what is then presented.
In the circumstances I ask Senator Thomas, as the honorable senator in charge of the motion, to rest content for the present with the announcement I have just made, which, from his standpoint, may be regarded, I think, as a distinct advance in the direction he has sought to carry us. I ask that he will accede to my suggestion, that upon a suitable occasion he will either withdraw the motion or -allow it to stand, without forcing it to an issue at this juncture. I point out that, otherwise, Senator Thomas would place in rather a false position those who, like myself, may take the view that he would be forcing an issue upon what is really a double-barrelled motion. I feel certain, therefore, that the honorable senator will regard my suggestion as one entitled to consideration.
.- I wish to say a few words in support of the motion. The position which the Government have adopted presents a phase that is worthy of consideration. Had I known ten minutes ago that this specific matter was likely to arise, I would have consulted my colleagues upon the Committee, and have ascertained their opinions. Personally, and without - consultation with any one of them, I feel disposed to accept the promise of the Minister. It is satisfactory to know that the Government will adopt the first recommendation, for it is one which is very urgent and necessary. The Minister does not Bay that he is opposed to the .second recommendation, but that the Government will give it consideration. Under the circumstances, I do not know whether we should continue the debate or .accept the offer. I, personally, am willing to accept the offer and to drop the discussion ; tout if I felt that my colleagues desired to go on, I would be prepared to join with them in doing so. Altogether, therefore, I am in some difficulty to know what to do.
– I suggest that you move for the adjournment of the debate till next Thursday, with the right to continue.
– The honorable senator, in those circumstances, has not the right to move the adjournment, because he has already spoken to the motion. He would be perfectly in order, however, in asking leave to continue his speech on the resumption of the debate, and then Senator Thomas could move to set down a date for the resumption.
– I ask leave, then, sir, to continue my remarks upon the resumption of the debate.
Leave granted; debate adjourned.
Payment to States for Citizens who have Enlisted.
Debate resumed from 10th April (vide page 3714), on motion by Senator Needham -
That in the opinion of the Senate -
The refusal by the Commonwealth Government to pay to the Treasurers of the States of Queensland, New South Wales, Victoria, South Australia, Western Australia, and Tasmania the sum of 25s. per capita for citizens of the above-mentioned States whohave enlisted in the Australian Imperial Force, and are on active service abroad, is a breach of clause 4 of the Surplus Revenue Act of 1910.
All such moneys have been, and are still being, illegally withheld.
The Commonwealth Government should pay to the Treasurers of the aforesaid States the sum of 25s. for every citizen who has enlisted in the Australian Imperial Force, and who has been, and is, and who may be on active service abroad.
That the foregoing resolution be transmitted to the House of Representatives with a request for its concurrence therein.
– The objective of my motion - as I have previously indicated - is the action of the Federal Government in relation to the capitation grant of 25s. per head regarding soldiers from the various States. I have already quoted a certain section from the Surplus Revenue Act 1910, which I contend is illegal. It has been argued by some honorable senators that the section in question is quite legal, and that it was perfectly in order for the Government to deprive the States of the capitation grant in respect of citizens who are serving at the Front. I point out, however, that no amendment of that Surplus Revenue Act has been before the Senate. The Government of the Commonwealth have taken to themselves a certain power which, to my mind, is undoubtedly illegal. The law as it stands under the Surplus Revenue Act states distinctly that 25s. per head shall be paid for every citizen of the Commonwealth; and, because certain citizens have elected to take their part in the world warfare, and are absent from their respective States, those States are being deprived of portion of their revenue.
– But those men are not here.
– I know; but the very fact of their not being in their States does not deprive them of their rights of citizenship. We have had, during this war period, amending legislation to enable those citizens to exercise their franchise. We have an electoral law. Every honorable senator is acquainted with all its provisions. It sets forth that every citizen over the age of twenty-one who has been for six months resident in a State has the right to vote on election day. When it became necessary to hold an election or a referendum in Australia, those citizens, concerning whom Senator Reid has just interjected, had to be qualified in order that they mightmaintain their franchise. The electoral law was amended to enable the soldiers to record their votes when on active service abroad. It was quite right that the Parliament should have passed that Statute, and, that being so, those rights of citizenship continue in every respect, by the amendment of the electoral law. In effect, Parliament said that those men were stillcitizens of Australia. If they are still citizens of Australia, why should not the States from which they hail receive the benefit of the Surplus Revenue Act so far as the capitation grant is concerned? In reply, the Minister may say that the Government are bearing the cost of the maintenance and equipment of these men. But whilst that is so, it must be remembered that the States from which they come are contributors towards that cost. We are one people, and consequently the Commonwealth ought not to deprive the States of the capitationgrant in respect to their soldiers abroad.
I have noticed that the Premiers’ Conference has dealt with this matter, but I do not know what agreement has been entered into between that body and the Commonwealth Government. Nor do I care what arrangement has been arrived at, because, after all, this Parliament is supreme. Whatever may have been agreed to, it cannot be denied that the action of the Commonwealth Government is an illegal one. I do not intend to labour this question. I contend that our soldiers abroad are still citizens of the Commonwealth and of the States which they have left. In these circumstances the capitation grant of 25s. per head should be paid to the States on their account.
In concluding, may I be permitted to make an appeal on behalf- of the State which I represent? I do not know of any State in the Commonwealth which has been harder hit by. the war than has “Western Australia. So far as its eligibles are concerned, I believe that in proportion to population it has contributed a larger quota to the Australian Imperial Force than has any other State. In saying that, I have no desire to reflect on any other State of the Union. But anybody familiar with industrial matters will readily recognise what that contribution by Western Australia really means. However, I shall not say any more on the matter. In the terms of my motion I consider that the Surplus Revenue Act has been infringed, and that the retention by the Commonwealth of the capitation grant is an illegal act.
– This motion is one which, under ordinary circumstances, would undoubtedly appeal to the sympathies of honorable senators, who, quite regardless of their allegiance to the Commonwealth, still entertain, very properly, a regard for the position of their own individual States. If the Commonwealth possessed’ an inexhaustible supply of wealth, or if it were endowed with the philosopher’s stone, by the timely use of which it could replenish its own resources, everybody would give a ready acceptance to the motion that has been submitted by Senator Needham. But we have to look upon things as they are, and not as we would wish them to be. I propose, therefore, to show, first of all, that there is no justification for the honorable senator’s contention that the capitation grant is being illegally withheld, and then I shall invite consideration of the financial position with which the Commonwealth, as well as the States, is now confronted. May I say at once that it was hardly necessary for Senator Needham to refer to the efforts and sacrifices made by Western Australia during this war? We all recognise them. I do not seek to institute any comparison with other States when I say that it is recognised throughout the Commonwealth that Western Australia has loyally and man fully borne her part in this great conflict.
I come now to the legal aspect of the case. I deny altogether that what the Commonwealth is doing is illegal. It is quite true that under an agreement with the States the Commonwealth undertook to pay to them annually 25s. per head, based upon the population figures determined in a certain way. Let us see how the number of the population is to be determined. I invite attention to this aspect of. the matter, because Senator Needham has specifically taken his stand upon what he regards as the legal claim of the States. Section 4 of the Surplus Revenue Act of 1910 provides for the payment by the Commonwealth to the States by monthly instalments of an annual sum amounting to 25s. per head of the number of the people of the States. There is no dispute that under that section the Commonwealth is bound to pay 25s. per head for the number of the people in any State. The whole question involved, therefore, is, “What is that number?” Now, the Act is not silent upon how that number is to be computed. Indeed, it gives specific directions as to how it is to be ascertained. Section 7 provides -
Where in this Act reference is made, in relation to any payment or debit, to the number of the people of a State, the reference .shall be deemed, to be to the number of the people of the State as ascertained according to the laws of the Commonwealth by the Commonwealth Statistician as at the 31st day of December in the financial year in respect of which the payment or debit is to bc made.
The number, therefore, is to be determined by the Commonwealth Statistician. We are, consequently, face to face with this position : that the number certified to by that officer is the number in respect to which the Commonwealth is under a legal obligation to pay 25s. per head.
– Are not those men citizens of the State?
– We are to pay 25s. per head in respect to the number of persons in any State, as determined by the Commonwealth Statistician. Now, a census was taken in 1911, and, in order to ascertain the population in the years intervening before the next census, the Commonwealth Statistician has regard to the excess of births over deaths, or vice versa, and of arrivals over departures, or vice versa. He thus ascertains the number of persons who are in Australia at the time fixed, and cannot take into account the probable duration of, or reason for, the absence of any person from Australia. On the assumption that the Statistician has based his estimate of the population in each year on the principle mentioned above, the Solicitor-General has advised that the States, have no claim to payment in respect of men who are absent with the Australian Imperial Force abroad. Nobody, looking at sections 4 and ‘7 of the Act, can dispute that the Commonwealth is relieved of. the legal responsibility to pay the amount that isclaimed by Senator Needham.
But I want to pass from that aspect of . the matter. I have already stated that, under other circumstances, the Commonwealth would he found as ready to pay this capitation grant as Senator Needham is to claim it. But, although under the agreement with the States 25s. per head is to be paid by the Commonwealth for the number of persons resident in any State, we know that the basis of that grant was laid many years before, upon the creation of the Federation. Its basis is really to » be found in that provision in our Constitution which affirms that out of the Customs revenue a certain percentage should -be handed back to the States. “When, in the evolution of time, the Commonwealth Parliament, in its wisdom, not only thought it desirable - but was, indeed, forced by circumstances - to legislate on that point, it arrived at an agreement under, which it was to- pay to the States 25s. per head on a. population basis, in lieu: of the percentage of the Customs revenue which was set out in the Constitution itself. The basis of the agreement, therefore, was the taking over of the- Customs revenue. , It, is important to remember that, for the reason that 25s. per head is, to some extent, a set-off against depriving the States of the Customs revenue which was previously returned to them. It is important also to- remember that if the States are losing the 25s. per head which they would have received if their absent soldiers had remained in Australia, the Commonwealth, is. also losing the Customs revenue in respect of which, in essence, it agreed to pay that 25s. If we are paying 25s. per head, to the States, in lieu of their share of the Customs revenue contributed by the people of Australia, their moral claim for payment on account of their absent soldiers. disappears, seeing that those soldiers are- no longer contributors to our Customs revenue. The States, it is true, thus lose 25s. per head for every absent man. But what is the Commonwealth losing? It is. impossible to say exactly how much, it is losing; but it needs to be remembered that theadult male is- a more liberal contributor to the Customs revenue than is any other unit of the population. It is easy to see, therefore, that the Commonwealth has lost between £4 and £5> per- head’ on- account of Customs revenue in respect of these absent soldiers. In- other words, the Commonwealth is losing- two or three times as much as are the States-. That means that, whilst the States may have lost - in the sense that- they did not receive it - £400,000 since the outbreak of the war, the- Commonwealth has lost £1,500,000 during that period. In addition, it has had to main-tain these soldiers^ What the .cost of their maintenance is: I do not know; but it is a- modest estimate to say that the maintenance of. our- armies abroad- is not less than £150 per man annually, and possibly it is. much nearer £200-. When we remember these things, is it unfair to ask the States to recognise’ the Commonwealth’s position?
Certain statements have been made by some honorable senators to-day, which have brought us face to- face with the very serious financial position, which confronts us. We are within measurable distance of the time when heavy additional taxation mustbe imposed. The outlook is hard, for the States, but it is still harder for those charged with the responsibility of Federal finance. However much honorable senators’ sympathies may lead them to support the motion, they must first remember the condition of the Commonwealth finances, and ask themselves whether they can, there being no legal liability in the matter, lightly accept as an act of grace the additional burden which will be imposed on the Commonwealth Treasury if effect is given to the motion. , When the matter was discussed at the Premiers’ Conference in Sydney recently, after Mr. Watt had defined the attitude of the Commonwealth, Mr. Holman, the Premier of the State which, so far as numbers are concerned, would be most substantially affected, said he would not proceed with the claim. I suggest that Senator Needham should take up the same attitude. I am certain that he has brought the matter forward in the interests of his State, as he was quite entitled to do.
– Not of my own State only, but of all the States.
– Very well, if the honorable senator likes to put it that way.
I first deny that there is any legal liability, and then I ask the honorable senator to consider the Federal financial position, responsibilities, and outlook. In view of all these circumstances, and quite apart from the legal aspect, the Commonwealth has the right to ask the States not to press the claim even as a matter of grace, but rather to remember the very heavy financial responsibility imposed on the Commonwealth by its share in the conduct of the war. It cannot be disputed that our war-like operations impose on the Commonwealth Government a responsibility very much greater than any additional responsibility the States are called upon to carry. It is therefore a fair, reasonable, and logical proposition that the States, stall apart from the legal aspect of the case, should not unduly press claims on the attention of the Federal Treasurer, who has, and will have, enough to do to make ends meet in those matters which come within our jurisdiction. We should like to begenerous, but we must keep our own financial affairs straight. When that isdone, I am afraid there will be nothing left to meet claims of the kind now submitted. For those reasons I am obliged to oppose the motion.
Senator Lt.-Colonel O’LOGHLIN (South Australia) [8.33].- The Leader of the Senate has made out a clear and convincing case for the rejection of the motion. At one time I took a different view. When the matter was first mooted, it seemed to me unfair to deprive the States of so much revenue per capita simply because their sons were fighting for the Commonwealth at the Front. But the argument that has impressed me is that the fund from which this per capita grant has to be paid is the Customs revenue, and that the Commonwealth is not receiving in respect of the men who are awayfighting at the Front contributions towards ‘that fund from which the money hasto be paid. Logically, therefore,the
Commonwealth cannot be expected to pay it. I believe that view of the question so impressed itself on the recent Premiers’ Conference in Sydney that Mr. Holman, who was leading the States in the matter, did not press the claim. It does not matter to the taxpayer a dump whether the 25s. per capita is paid by the Commonwealth or not. It is only relieving the States by so much per head, and transferring the liability to the Commonwealth, the taxpayers being the same in each case. I shall support the Leader of the Senate in this matter, and trust that Senator Needham will withdraw the motion.
– The financial question has developed so enormously that I have long ceased to take the same interest in it as I did when it was much smaller. That may seem a contradiction in terms, but the question has grown to such tremendous proportions that it is quite beyond my imagination to grasp. The financial problem of Australia, like that of every other belligerent country, has grown at such a rate that it has become almost too big for the human brain to grasp. Our public debts have grown enormously, and there is every prospect that they will grow still bigger as the war goes on. No one can forecast the future financialconditions of the various countries. Australia is in just as bad a condition financially as any other country. The war really means more to Australia financially than to any other country, because we have rightly undertaken the burden of paying our men who go to the Front a much bigger allowance than any other country is paying, and our burden is consequently much greater in proportion.
Western Australia, as Senator Needham has properly pointed out, has not been backward in its efforts in the war. If comparisons must be made, that State stands second to none in the Commonwealth in its efforts to do its duty in the conflict. It has not only sent the largest percentage of its manhood to the Front voluntarily, but it is the only State that on two occasions has declared by referendum that every citizen capable of bearing arms should go to the Front. With the departure of our men, and the closing up of many of our industries, the finances and the businessof our State have got into a worse condition than perhaps those of any other State. Our secondary industries are somewhat backward; goldmining, which has been our big industry for many years, has fallen away considerably, and our other big industry, that of timber, has been practically stagnant since the war began. It is therefore evident that Western Australia, which is greater in area than any of the States, and has to face a higher expenditure on cost of government, must be in the worst financial position of all. If any State had the right to advance this question, it was Western Australia, where the financial needs are more pressing than in any other part of the Commonwealth. But even if the Commonwealth Government agreed to pay the sum proposed in the motion, it would not make a very great difference, so far as Western Australia is concerned. Some financial help should be given to that State, but not in this way. Seeing that Western Australia comprises one-third of the whole area of this big continent, and has to bear the cost of government of that large expanse of territory, financial help should be granted to it in the same way as has already been done in the case of Tasmania, the smallest in area of all the States.
– Would not that be in the shape of charity?
– There is no charity in it. I am sure that when Senator Needham voted for the grant to Tasmania–
– Order! That question does not arise out of the motion.
– I thought that on a motion of this kind, dealing with the finances of the various States, I was entitled to show that there was a better way of doing what the honorable senator sought.
– The question before the Senate relates to the capitation grant under the Surplus Revenue Act of 1910.
– Am I not entitled to show that there is another and better way of helping the State of Western Australia?
– The Act referred to is a specific Act applying to all the States. If I allowed a discussion such as the honorable senator seems inclined to initiate, it might easily degenerate into a squabble between the different States as to which has the best right to a special grant. No question of a special grant is raised by the motion.
– Do you rule, sir, that I cannot discuss an alternative financial proposal?
– I rule that the honorable senator will not be in order on this motion in making more than a passing reference, which he has already made, to the question of a special grant to any State.
– That is all I wanted to do. Senator Needham would have been well advised had he consulted, if not his colleagues in the representation of Western Australia, at all events his party, in order to ascertain what prospects he had of carrying a motion of this kind, because this matter has not been suddenly sprung on us. It is something like four years old. It has been going on long enough for Senator Needham to have brought it forward at the time when he occupied a position in this chamber which gave him a greater prospect of inducing the Government of the day to agree to his proposal than he has now.
– The deprivation of the capitation grant is not four years old, and you know it.
– It has been going on for years.
– Not for more than a year.
– It has been going on for a considerable time - ever since the war began. I do not see how Senator Needham can lay claim to speak for all the States in this matter, seeing that when it was discussed at the recent Premiers’ Conference Mr. Holman, the Premier of the biggest State, which has the largest monetary interest in the Commonwealth, said he would not press the claim.
– I think the State Premiers have a greater right than you or I.
– So far as the State finances are concerned. In any case, these are reasons which might very well induce Senator Needham to withdraw his motion. I certainly cannot support it, and I am not going to vote under any political pretence. I do not wish to be placed in a false position. I am going to take what I consider is a straightforward and honest course by opposing the motion by speech and vote, believing that no good can come from presenting it in this way. If Senator Need- ham had consulted his colleagues, I think he would have been shown good reasons for taking another course to help the States than the one he has adopted.
– I would not have spoken again but for the closing remark made by Senator de Largie. I do not know that I am under any obligation to consult him or any of my colleagues in Western Australia on any matter I might bring before the Senate; nor do I think that Senator de Largie or any of my colleagues are under any similar obligation with respect to me.
– Anyhow, who would consult Senator de Largie?
– I have often consulted the honorable senator on other matters, but I want again to refresh his memory. He tells me that if I had advanced this proposal before now I would have had a better chance of carrying it. May I assume that Senator de Largie refers to the time when he and I were in the same party, and supporting the same Government? Probably that was in the honorable senator’s mind. But let me tell him that this matter is not four years old, as he would have the Senate believe. It is true that the war is very nearly four years old, and that for a greater part of this term we had a united Labour party, with an Australian Labour Government in power ; but it is not correct to assume that the deprivation of this grant to the States is four years old. It is under one year old, and consequently Senator de Largie’s argument falls to the ground.
– If it is only one year old, why are the States claiming payment for three years?
– I am replying to Senator de Largie’s contention that I had better opportunities than to-night of carrying this motion, and I say, in the first place, that the occasion was not there, irrespective of what Government was in power.
– When did the occasion arise, then?
– About a year ago.
– Have the States been paid this amount until about a year ago?
– Yes, I think until about a year ago.
– No; three years ago.
– Does the Minister say that the grant in respect of the soldiers has been withheld for that term?
– Undoubtedly. The States are now claiming payment for the years 1915, 1916, and 1917.
– The split in the Labour party took place in 1916.
– What has that to do with it?
– I do not want to place any one in a false position. If the deprivation of this grant took place in the financial years 1915, 1916, 1917, and 1918, then I come back to the statement that there was only a period of six months of the financial year 1915-16 when I could have had any chance of having this matter dealt with by the united Labour party. As regards consulting my colleagues, let me say that in submitting the motion off my own “ bat,” as it were, I had no intention of hurting their feelings in any way. I am simply asking the Senate to obey the law as it stands now. If the Senate does not want to carry out the provisions of the Surplus Revenue Act, I cannot help it. I leave the motion now, and ask the Senate to support it.
Question resolved in the negative.
Debate resumed from 10th January (vide page 2893), on motion by Senator Needham -
That this Bill be now read a second time.
– My lines to-night seem to have fallen in unpleasant places, as for the second time I am under the unfortunate necessity of placing myself in opposition to Senator Needham.
– That is not unusual.
– It is not; but although it is something like a habit, it is not a pleasant one so far as I am concerned. Senator Needham is asking the Senate to pass a Bill to amend the section in the arbitration law which deals with the Public Service, so as to deprive Parliament of the opportunity to review any decision of the Arbitration Court. Honorable senators will remember that when he introduced the Bill Senator Needham made one or two statements, and with all due respect to him, I desire to point out that they were incorrect. He appealed to the Senate to pass the Bill on the ground that some injustice would be done to those public servants who had submitted their case to the Court, and obtained an award, because, so he said, it would- not be possible for the Court to make its award retrospective; but Senator Henderson, by interjection, sought to set the honorable gentleman right, though we all know .that is rather a difficult undertaking. Senator Needham refused to take the advice tendered to him by bis colleague, and persisted in affirming -that, unless this amendment were adopted’, there were no means by which an injustice to the Public Service could be avoided. I do not ask the Senate to accept my authority in this matter, so I would point out that the Crown Law officers of the Commonwealth state distinctly that it is within the competency of the Arbitration Court Judge to make any award retrospective either in whole or in part. The Court can, if it likes, fix the date from which an award shall operate, and there is also provision to the effect that an award may remain in a state of suspended animation until Parliament has had an opportunity of. expressing approval or disapproval of it.
– Can the Minister name any organizations that will be affected by it?
– I do not know of any except those that are covered by the Act. I again point out that the effect of the honorable member’s Bill, if adopted, will be to remove from Parliament any opportunity of reviewing an award. Although Parliament has placed in the hands of the Arbitration Court the duty of making an award, the reserve power to review must ‘always rest with Parliament, seeing that Parliament is called upon to appropriate the sums necessary to pay the Public Service.
– This Bill -does not take away the power of Parliament.
– It may not take away the power of Parliament directly, but the proposed alterations would have that effect. As the Act stands, Parliament may object to and veto an award, but if Senator Needham’s Bill be carried, Parliament will not have the right of veto before an award becomes operative. It could only withdraw it, and honorable senators know it is much more difficult to withdraw an increase of salary made to a class of public servants, if they have been in receipt of it for a few months, than for Parliament to step in before it is paid, and veto it. Senator Needham must know that the Bill will hamper Parliament considerably. It is a much simpler proposition for Parliament to interpose before an award becomes operative.
– If the Minister can give me any guarantee that an award will become operative, rr.y objection to the Act will cease.
– Nothing that I may say can be regarded as a guarantee, because Parliament has a sovereign right to step in, and declare whether an award shall become operative or not. If we had fifty Acts of Parliament, the Legislature could still prevent an award from becoming operative. Parliament, which rnakes a law, can always repeal it. I submit that the public servants of the Commonwealth have no reason to complain of any act of injustice on the part of this Parliament in connexion with these awards. All that I am pleading for is that the Parliament should have in law, as well as in fact, a.n effective opportunity of exercising, if necessary, the reserve power of veto in connexion with awards affecting the Public Service, for the carrying on of which the Senate,- as a part of the Parliament, is called upon to make the necessary financial arrangements. If Senator Needham could point to any case of injustice suffered by public servants in this connexion, he might make out a case for what he proposes.
– I mentioned six cases of the kind.
– The honorable senator mentioned two or three cases where there had been some delay in the operation of an award. That delay, however, is easily avoidable. A Judge of the Arbitration Court might, if he saw fit, make his award apply from the date upon which he gave it. Although the award would not become operative until Parliament had had thirty days within which to consider it, if within that time it took no action, and by silence gave its assent, the award, at the close of that time, would become operative from the date upon which it was made. The worst then that could happen to the public servants would be that they might have to wait thirty days, or sixty days, for the benefits to which they might be entitled under the award.
– They might have to wait six months, if Parliament were not in session.
– Theoretically, the honorable senator is right. It is conceivable that they might have to wait sismonths, but in practice they would1 not have to wait nearly so long. I admit that it is desirable- that a public’ servant should know hg fate as quickly as pOS.sible; but, in the- absence of anything more than inconvenience to which’ Senator Needham can point under the existing law, I venture to say honorable senators should not be lightly induced to surrender the reserve power in this- mutter which Parliament has hitherto possessed. In the circumstances,. I ask the Senate to dissent from Senator Needham’^ proposition.
Debate- (on motion by Senator Grant) adjourned..
Senate adjourned at 9.4 p.m.
Cite as: Australia, Senate, Debates, 23 May 1918, viewed 22 October 2017, <http://historichansard.net/senate/1918/19180523_senate_7_85/>.