Senate
6 August 1930

12th Parliament · 1st Session



The President (Senator the. Hon. W. Kingsmill) took the chair at11a.m., and read prayers.

page 5315

CENTRAL RESERVE BANK BILL

Select Committee.

Senator Sir WILLIAM GLASGOW, as chairman, brought up a progress report of the Select Committee on the Central Reserve Bank Bill.

Ordered to be printed.

page 5315

QUESTION

EXPORT OF MERINO BREEDING SHEEP

Senator GUTHRIE:
VICTORIA

– Is the Minister representing the Minister for Trade and Customs aware that the Graziers’ Federal Council, at a recent meeting in Brisbane, unanimously resolved that the export of merino breeding sheep from Australia be prohibited?

Senator DALY:
Vice-President of the Executive Council · SOUTH AUSTRALIA · ALP

– Yes.

page 5315

QUESTION

LOAN COUNCIL

Conference with Sir Otto Niemeyer.

Senator DUNCAN-HUGHES:
SOUTH AUSTRALIA · UAP

– Has the Leader of the Senate any information to give to honorable senators regarding the conference yesterday between the Loan Council and Sir Otto Niemeyer; if not, can he inform the Senate whether the statements regarding the conference published in to-day’s Canberra Times have any foundation?

Senator DALY:
ALP

– Obviously no information can he given regarding the deliberations of the) Loan Council until they arecompleted. I have not seen the report to which the honorable senator has referred ; the press is indulging in a good deal of speculation, but the Senate may rest assured that the Government has the financial position well in hand.

page 5315

QUESTION

GALVANIZED IRON

Has the attention of the Government been drawn to an announcement published in the Melbourne Argus newspaper of 2nd August to the effect that the prices of both Australian and imported galvanized iron have been increased by £1 per ton?

Did not Mr. Forde, M.P., when acting as Minister for Customs, announce that the increase of £1 per ton on the duty would be followed by a reduction of£5 per ton in the price ofAustralian-made galvanized iron?

In view of the statement- made by the Right Honorable the Prime Minister that, if instances were given of cases where the local manufacturer had increased his prices as a result of the increased tariff duties, the Government would take drastic action - what action does the Government propose to take in this instance?

Senator DALY:
ALP

– The answers to the honorable senator’s questions are -

  1. Yes.
  2. No.
  3. In this case the bounty has been reduced by £1 per ton, and if the old prices had been maintained the return to the manufacturer would have been reduced by that amount.

page 5316

QUESTION

MILITIA AND CADET FORCES

Senator H E ELLIOTT:
VICTORIA · NAT

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

Will the Minister lay on the table a return similar to that furnished in reply to Senator H. E. Elliott recently, showing the progress of recruiting and enrolment in the Commonwealth Militia and Cadet Forces as at the 31st July, 1930, as compared with strengths at 30th June, 1930?

Senator BARNES:
Assistant Minister assisting the Minister for Works and Railways · VICTORIA · ALP

– Yes ; but us the figures must be obtained from the several States, it may not be possible to supply the information before the House goes into recess.

page 5316

QUESTION

AUSTRALIA HOUSE

usefor Private Business Purposes.

Senator RAE:
through Senator Dunn

asked the Minister representing the Prime Minister -

  1. Has his attention been called to a. paragraph appearingin the daily press of Sydney on. the 1st August to the effect that the High Commissioner (Sir Granville Ryrie) introduced, in the Australia House Theatre, a special screening of Queensland films, the most outstanding being the Amalgamated Forests (Australasia) Limited’s film, depicting huge timber areas in northern Queensland, which Senator Foll (Queensland) described?
  2. Does the Government approve of the action of the Australian High Commissioner, in using the resources and equipment of Australia House in promoting the business interests of private companies?
Senator DALY:
ALP

– The answers to the honorable senator’s questions are - 1 and 2. I haveseen a press report to the effect mentioned by the honorable senator, and am having inquiries made regarding the matter.

page 5316

APPROPRIATION (WORKS AND BUILDINGS) BILL, 1930-31

Bill read a third time.

page 5316

INCOME TAX ASSESSMENT BILL

Second Reading

Debate resumed from5th August (vide page 5251), on motion by Senator Daly -

That the bill be now reada second time.

Senator Sir GEORGE PEARCE (Western Australia) [11.12]. - I am not sure whether senators speaking on this bill or those listening to it are the more deserving of sympathy. The income tax assessment legislation is extremely complicated, and it is most difficult for a layman to know the effect of amending bills. I shall endeavour to conform, as far as practicable, to the practice of dealing only with general principles at the second-reading stage, but the general principles of income taxation are laid down in the principal act, and when speaking on an amending bill one can deal only with those that arc affected by it. The measure is essentially one for consideration in committee, but I desire to direct attention to certain of its provisions now. There have been attempts from time to time to make income tax legislation apply retrospectively, and that doubtful principle is introduced in this bill in an aggravated form. What is the reason for theseattempts? Usually they arise in this way : Certain taxation is attempted to be collected, but the taxpayer, acting on legal advice, disputes the legality of his assessment. If the court gives judgment in favour of the appellant, and it is allowed to stand, other taxpayers take advantage of the defect in the law. Accordingly legislation is introduced to block the gap. Where clearly it was the intention of Parliament that certain incomes should be taxable, but taxation cannot be levied upon them owing to some defect in the law as revealed by decisions of the court, no reasonable person would object to an amendment to remedy that. It is reasonable also that in measuresdealing with income taxation some retrospective provisions should be found. But the amendments in clause 25 make retrospective to 1922 certain alterations of the income tax law. While I do not intend at this juncture to discuss the bill in detail, I propose to discuss one thing that the Government is endeavouring to do, no doubt on the recommendation of the Commissioner of Taxation. In paragraph c, of clause 2, relating to the definition of income, there is a new definition which will make the provisions of the act, as affected by clause 25, retrospective to 1922. I assume that if this amendment of section 4 is adopted, the commissioner will proceed to re-assess for income tax purposes incomes earned ms far back as the year mentioned. Paragraph c defines income as - any profit arising from the sale by any person of any property acquired by him for the purpose of profit-making by sale, or from the carrying on or carrying out of any profitmaking undertaking or scheme.

  1. invito honorable senators to note that the proposed new definition covers practically all forms of trade and commerce, because all trade and commerce is carried on for the purpose of profit-making. This new definition will make it possible for the Commissioner to tax even isolated transactions, such as the profit made on one sale of shares. In four assessments recently received, where each taxpayer had a similar single transaction resulting in a profit on a sale of shares which had been held for eight months, lie taxed one taxpayer on the profit made, but not tin three others. When the assessment was challenged,, the Commissioner claimed the tax, and the matter is still held up. The proposed new definition is objectionable because under it the Commissioner may tax profit on transactions entered into during the year ended 30th June, 1930, which would not be taxable under the principal act. It is objectionable also, because it is thought, to offend against section 55 of the Constitution, in that it attempts to tax profits which are accretions of capital. If such profits are to be taxed, it is only equitable that any loss arising from a single transaction not entered into for the purpose of profitmaking should be allowed as a set off against income from other sources.

The new definition is the thin end of the wedge to tax all profits on re-sale, however casual or isolated. For example, under the law, as proposed to be amended by this bill, profits on re-sale will be levied in respect of the buying and sell ing of a house or a block of land, also on the sale of shares bought in the first place as an investment and sold at a profit under stress of circumstances. It would appear from the explanatory note issued by the Commissioner of Taxation, that this is his intention, because he specifically mentions as justification for the alteration a recent decision in the House of Lords - Jones v. Leeming, T.L.R., page 396 - against the taxing authority. As I shall have a further opportunity to deal with these retrospective provisions in committee, I do not propose to carry the argument further at this stage.

The provisions in clause 10 relating to the taxation of private companies is of special importance. Apparently the act is to be applied to any private company that has been formed since 1915. To assess for taxation profits earned by private companies, which in their constitution do not comply with the law as it will be when this amending bill is passed, may be perfectly justifiable for this year; but under this proposed amendment it will be competent for the Commissioner of Taxation to tax all such companies retrospectively to 1915, or the year in which they were formed. We may assume that, acting under the law as it stood, these companies were formed and taxpayers honestly furnished their returns, and that, the Commissioner made his assessments for taxation purposes. I suggest that, when the bill is in committee, the Leader of the Senate (Senator Daly) should give a full explanation of the reasons for the retrospective nature of all these provisions a.nd, if necessary, justify the proposed alteration of the law. I contend also that, a reasonable time limit should be fixed in respect of the retrospective taxation of the private companies to which I have referred.

Another important provision in the bill, which is also in the parent act, is that relating to the discretion of the Commissioner. Under the existing law. the Commissioner may form a certain opinion and make his decision with regard to returns furnished by a taxpayer, notwithstanding, that the taxpayer may have been acting under legal advice and have furnished full information concerning items which he believed to he properly taxable. The Commissioner, acting within his discretion, may determine that certain other forms of income are taxable. The Commissioner, it should be remembered, is but one party to a dispute as to what form of income is properly taxable. The other party is the individual taxpayer concerned. Under our existing legislation, if there is a difference of opinion between the person subject to the law and the person administering the law, the former quite properly has the right of appeal to a legally constituted tribunal, whose function it is to interpret the law; My criticism of this bill is that a number of its provisions - I refer particularly to those affected by clause 2, paragraph (i) ; clause 5, paragraph (q), and clause 10, - this fundamental right of appeal is not recognized.. The exercise of discretion by the Commissioner should be subject to appeal to the court.’ I may be told that the protesting taxpayer will have the right of appeal to the Board of Review, but I invite the Minister, in his reply, to inform the Senate what provision in the bill gives the taxpayer an opportunity to appeal even to the Board of Review on a question of fact. I am aware that there will be the right of appeal to the court on a question of law, but there should also be the right of appeal against the facts upon which the Commissioner may have made his decision.

Senator Sir GEORGE PEARCE.What I am trying to impress upon the Minister is the fact that the taxpayer is not concerned so much with the right of appeal on questions of law, as upon the right to appeal on questions of fact upon which the Commissioner may have arrived at a decision as to what properly is taxable income. The Commissioner should be required to show that the exercise of his discretion is warranted by the facts of a particular case. Who is to determine that? As I read the law, the Commissioner has autocratic power in that respect. It is doubtful whether there is any appeal to the Board of Review on questions of fact, and there is certainly no appeal to the court on questions of fact regarding matters upon which the Commissioner may exercise his discretion and form his opinion. We should go fully into this matter to see whether there is justification for giving such wide powers to the Commissioner without appeal.

I ask the Leader of the Government in the Senate (Senator Daly) to clear up a point which has been exercising the minds of taxpayers. It has to do with the taxation of extra-Australian income. A New Zealand company which pays dividends to a resident of Australia is liable to pay New Zealand income tax on the profits from which the dividend is paid. Will the Federal Commissioner admit that the income of the shareholder, that is, the dividend, has borne tax in New Zealand ? Otherwise, although the profits of the New Zealand company may have borne a high rate of tax in New Zealand, the shareholder will again have to pay Federal income tax on the distributions from profits which come to him in the form of dividends. I understand that this . matter has been cleared up in the House of Representatives, but as there still remains some misunderstanding among taxpayers, I should be pleased if the Minister would state quite definitely that the point has been settled.

The Senate should also give attention to the proposed amendments of the law relating to the taxation of private companies. It has been alleged, and I think with some justification, that some persons have taken advantage of our income tax assessment law to evade taxation by the formation of what is called private companies. One can sympathise with the efforts of the Government and of the Commissioner to alter the law so that, while bona fide companies may continue paying the rate of taxation fixed for such companies, persons who form bogus companies for the purpose of evading taxation may be compelled to pay at the rate applicable to individual taxpayers.

If the bill goes through in its present form, a serious anomaly will be created regarding the proposed exemptions from double taxation. This matter is dealt with under section 18 of the principal act. Section 37 of the act fixes a limit of three years within which readjustment of assessment can be made, but that period is not sufficient. Take the case of an income liable to taxation in Great Britain and in Australia. Three years is altogether too short a period for the adjustment of claims relating to double taxation exemption. The returns have to be sent in in the two countries, the assessments have to be made out, and sent to the taxpayers. When we recall the length of time necessary for getting out the assessment on purely Australian income, it becomes evident that a period greater than three years is necessary to deal with incomes such as we are now considering. The taxpayer, after having obtained his assessment from Great Britain and Australia, must then set about endeavouring to obtain the readjustment which the law has provided for in order to avoid double taxation. And all this has to be done, and the claim settled, within three years.

Another anomaly likely to be created by this legislation has also to do with the taxation of extra-Australian income. In the case I am about to quote the values are hypothetical, but the facts are clear enough. Owing to the fall in overseas freights during the last year or so, especially on cargo ships, the Broken Hill Proprietary Company, which owns an immense deposit of ore in a place called Iron Knob, in South Australia, has been able to export ore to countries overseas. I am sure that the Minister will admit that that is all to the good.

Senator Sir GEORGE PEARCE.Let us assume that the Broken Hill Proprietary Company realizes £1 a ton on the ore exported. Suppose the expenses outside Australia are 5s. a ton, and those incurred inside Australia are also5s. a ton. Under the existing law, of that profit of 10s. a ton, half is liable to taxation, and half is exempt. The amending bill will make the whole 10s. taxable unless income tax is payable outside Australia on the extra-Australian proportion of the profits. If we compare this with what happens to the extraAustralian income earned by an investment of an Australian resident in a company which owns tin-mines in Siam, we shall see that an injustice will be done to the Broken Hill Proprietary Company. Under the present law the whole of the profits of the Siam Company are exempt, as the income is not earned in Australia, and the tin is subject to a royalty charge in Siam. Under the amended law, if income tax or royalty is payable abroad on such profits, the income is not taxable here; but if income tax or royalty is not payable abroad, then, the income will be taxable in Australia. However, if a royalty is payable to the Siamese Government on the tin mined, the profit made by the mining company will still be exempt from Australian taxation. That is provided for in this bill. The Broken Hill Proprietary Company uses Australian capital, employs Australians in Australia, and pays a royalty to the South Australian Government on the ore produced; but this will not save it from having to pay incometax on that part of its income earned by the export of iron ore, although the payment of a royalty to the Siamese Government will protect the dividends of the Siamese company from Australian taxation. Surely, if the Siamese company is to be exempt because it pays royalties, the Australian company should also be exempt.

I return now to the provisions in the bill directed against bogus companies and partnerships formed for the purpose of evading taxation. There is one form of partnership upon which the commissioner apparently looks with anything but a friendly eye - that is, the family partnership. When a man is in receipt of a very large income, one can understand, perhaps, that he may be tempted to draw up a partnership deed with members of his family for the purpose of reducing the amount of income tax payable. It might be that such a partnership was not a bona fide one. There is, however, a class of family partnership in this country which is very common, and which is, I contend, bona fide, and should receive sympathetic consideration. Honorable senators know that one of the problems with which men on the land are faced is io find careers for their sons. As the sons reach maturity tha Tendency is for them to drift to the cities. Usually they are not paid wages by their fathers. A father takes the view That the property will descend to his sons, and that consideration often encourages the sons to remain on the farm. Somerimcs, however, that encouragement does not prove sufficient. The sons are not prepared to wait on in the hope of inheriting the property; they want something more substantial. In. many such cases the farmer, who is getting up in years, enters into a bona fide partnership with his sons. He himself takes an everdecreasing share in the active management of the farm, though he still remains as the directing head.

Senator Sir GEORGE PEARCE.Shakespeare makes Hamlet say, “When the wind is southerly, I know a hawk from a handsaw “. The interjection of the honorable senator is equally enigmatical. I. do not suggest that the Government or the commissioner regard with hostility the partnerships to which I am referring; but in amending the law, that form of partnership should not be discouraged. We ought to do all we can to prevent the drift of rural settlers to the cities.

I shall defer any further comments 1 have to make until the measure is in committee.

Senator LAWSON:
Victoria

– I agree with the opinion expressed by the Leader of the Government in the Senate (Senator Daly) and also by the Leader of the Opposition (Senator Sir George Pearce) that this is a measure which could be more effectively discussed during the committee stage. In these circumstances, I do not propose to take up very much time at this juncture in debating its provisions, but shall content myself by making one or two general observations. I ask the Minister whether fit is not practicable to devise some means of simplifying our income tax legislation, and to make it capable of being understood by the man in the street. The entry of the Federal authority into the arena of direct taxation has created a new class of individual in our community - the taxation expert. He is a useful person, possessing in many instances high qualifications and attainments, but before the entry of the Federal Government into this sphere of taxation it was unnecessary for taxpayers to seek the. assistance of such persons in the preparation of returns. The States income tax legislation, with which I am familiar, is so simply stated that it can readily be understood by every taxpayer. There is no insuperable difficulty in the preparation of State returns or in determining the incidence of the taxation laws upon taxpayers generally. In the Federal sphere, however, we seem to be propounding mathematical problems of such importance that even lawyers find difficulty in advising their clients, while the man in the street throws up his hands in dismay. When the amount of taxation to be paid is large, he usually finds it worth while to take counsel with a taxation expert. In these circumstances I trust that, at the earliest possible date, the Government will take this matter into consideration, and see whether taxpayers cannot be relieved at least to some rxtent in this regard.

At first glance it seems a perfectly sound principle to tax extra-Australian incomes, but, as the Minister knows, it is not as simple at it appears. A good deal can be said in favour of the non-taxability of extra-Australian incomes. Certain anomalies and difficulties will arise against which we must adequately guard in the amending law. I support the Leader of the Opposition in his appeal to the Minister with respect to the question of appeals to the court. We do not wish taxpayers to be irritated, or to feel that they have been unjustly treated. There is no need for me to say anything further in support of the case that has been so clearly put by the Leader of the Opposition. I trust that the Minister will endeavour to meet the objections raised from a non-party viewpoint, and, if possible, when replying to the debate, to announce that the Government will accept an amendment on the lines suggested. If that is done, it will facilitate the passage of the hill and shorten the discussion which must necessarily ensue unless the reasonable amendment suggested by the Leader of the Opposition is agreed to. In section 23 of the principal act, which appears on page 27 of the memorandum circulated, the deductions allowable upon income tax are clearly set out. Included in these deductions, I find the following -

In calculating the taxable income of a taxpayer the total assessable income derived by the taxpayer from all sources in Australia shall be taken as a basis and from it there shall be deducted

ii ) gifts of One pound and upwards made out of the assessable income derived during the year in which the gifts are made to public charitable institutions in Australia, to public universities in Australia or colleges affiliated therewith, or to a public fund established and maintained for providing money for the construction or maintenance by Oron behalf of the Commonwealth, a State or a Territory of the Commonwealth, or a public memorial relating to the war which commenced on the fourth day of August, One thousand nine hundred and fourteen, if the gifts are verified to the satisfaction of the commissioner.

The object of that provision is to encourage private benevolence in the way of gifts to universities, hospitals, and such institutions. There is, however, the notable omission of art galleries and museums from that list. These, I suggest, should be included. These institutions are established and maintained for educational purposes and the cultivation of aesthetic tastes. As they are not conducted for profit they should be included in the list of institutions donations to which are allowable as deductions from income. Recently in a Victorian country town subscriptions were being obtained for erecting an art gallery sooner than was intended, in order to relieve the acute unemployment in the building trade. A number of persons were willing to contribute, but objected on the ground that if they gave, say, £100, they would be taxed on the amount subscribed. I suggest that the Minister should include art galleries and museums in the exemptions already provided, or insert a new clause to cover them. I have looked through the measure to see whether the Government hasredeemed the promise made by the Prime Minister with regard to the taxation of mutual life assurance companies prior to the last general election. The Prime Minister in his policy speech said -

The tax on mutual life assurance societies was an imposition mainly on the dependants of bread-winners. It was iniquitous to tax the provident funds contributed to by hundreds of thousands of comparatively poor people. A Labour Government would repeal the tax on mutual life assurance associations.

Representations have been made to the Prime Minister in this matter, who has stated that the change in the financial circumstances renders it impossible for the promise to be redeemed. The Government has not only failed to honour its promise, but has increased the tax on these companies by 33 per cent. The ease against the imposition of such taxation is exceedingly strong, and while it is probably futile in the present circumstances to protest against the action proposed, I desire to place on. record the objections raised. In view of the Government’s declared policy,I am sure that as soon as the present depression has lifted it will endeavour to give the relief to which these societies arc justly entitled. The burden of taxation should not fall on the thrifty members of the community, who by self-sacrifice contribute premiums to provide for their old age, or for the alleviation of the distress of widows and orphans on the death of the bread-winner. A mutual life society is not a trading company, nor does it carry on business for profit or gain; it is an institution by means of which the prudent may provide for the uncertainties of life. The fundamental principle of mutual life societies is that the strong must help the weak. They are philanthropic institutions in the truest sense of the word, and the service rendered by those institutions in the alleviation of distress relieves the Commonwealth of a heavy burden. There are no persons who derive any benefit from the operations of these societies except the policy-holders and their dependants. Any charge, therefore, in the form of a tax on any part of the revenue of mutual life societies falls directly on the individuals who contribute. It forms a deduction from the amounts which will eventually he payable to widows and orphans, the vast majority of whom would be destitute withoutthis form of protection. All governments have recognized that institutions promoting thrift should be encouraged. Other institutions of a type similar to mutual life societies, such as savings banks, friendly societies, and provident funds, are exempt from Commonwealth taxation, and we claim that that exemption should be extended to mutual life assurance societies. Governmental recognition that mutual life societies should be exempt from taxation already exists, not only in the case of the Dominion of Canada, but throughout the Union of South Africa.

A memorandum I hold sets out categorically under four heads, the objections of these companies to this taxation. Its statement of the case is definitely in accord with the policy of the Government, which I presume has been prevented from giving effect to its proposals only by the stringency of the times. As this tax affects approximately 2,500,000 policy-holders, honorable senators will realize how extensive is its incidence. The encouragement and development of the primal qualities of thrift and foresight should be stimulated and not retarded by legislation. I make this protest, and commend the matter to the early consideration of the Government.

Senator McLACHLAN:
South Australia

– I join with Senator Lawson in deprecating the complications that surround the income tax legislation of the Commonwealth. On the one hand there is the business man, who wishes to have something that is clear, simple and easily understood ; and on the other hand, there is the highly trained hypercritical, and very capable mind of the taxation Commissioner, who looks at the matter through the spectacles of suspicion, and whose aim is to prevent the loss of revenue through loop holes in the legislation. Thus we have surrounding the whole of our taxation law what the Prime Minister has described as “ entangling legalisms “.

Senator Daly:

– It is a battle of wits.

Senator McLACHLAN:

– As the Minister says, it is a battle of wits. But there was no battle of wits under the laws of the States. The Minister may suggest that this complexity has been caused by the complexity of business. I point out to him, however, that there is less friction under Schedule D of the British Finance Act, which has had a long run and is well understood, than under the system which is in vogue in Australia. I may be charged with being partly responsible for its continuance, but I assure the Senate that that system never gave me satisfaction and has never met with my approval.

Taxation affects every person in the community, and income tax forms are the bane of existence in some quarters. Speaking of my own State in particular, I say withoutfear of contradiction that simplicity itself prevailed in relation to income tax legislation, every man being, so to speak, his own lawyer in dealing with income tax returns. But there has gradually crept upon us what a distinguished gentleman in another place has described as “ problems of higher mathematics “ that have to be faced in the calculation of income tax, even when one knows what one’s income is. The object of this legislation is to determine what income is. Sometimes it is shown to be greater than what one has actually received, that result having been obtained by a calculation in the curve of the third degree. On one occasion, when I had an opportunity of addressing some distinguished gentlemen who were supposed to be versed in the intricacies of problems relating to income tax - a study of which, to my mind, is akin to a study of Sanskrit - I invited them to calculate for me the amount of tax that had to be paid on a hypothetical income. They had not in their breast pockets the ready-reckoner and calculator that they consult on such occasions, and without such an aid were unable to tell me the amount of tax that had to be paid. I allude to that only for the purpose of stressing the point that has been so well made by Senator Lawson. It is a pity that, with his exceptional ability, the Commissioner does not apply Mb mind to the evolving of a simpler system than that which is now in vogue in this country. The present system has bred a new form of taxation, a fresh levy on the business community, in the shape of the taxation expert. Surely a country with a population of 6,000,000 persons does not need taxation experts! Our complexities are not so great as are those of other parts of the world. I venture to think that, as the years go by, these entangling legalisms will entrench themselves, and that the red tape methods of the Taxation Department will lead to further complexities in administration.

Having said so much in a general way regarding the provisions of this bill, I should like to direct the attention of honorable senators to a .departure that has been made from a principle that has operated throughout the history of income taxation- in Australia. I believe that I am right in saying that, with the exception of Tasmania, in no State in the Commonwealth, and not in the Coamonwealth itself, has it been proposed hitherto to tax income that is earned outside Australia. The principle adopted in Great Britain is exactly the opposite. Being the great creditor nation that she is, Great Britain derives the larger part of her income from abroad. We are endeavouring to make our presence felt in the world, and are gradually obtaining in other countries the interest that arises from investment. Are not those people who act in that way the very best benefactors that this country could have at the present time? They are bringing to Australia money that is earned abroad. Yet we have this proposal, limited though it be, to levy tribute on those who, in the interests of Australia, are earning income in other parts of the world. I venture to assert that, economically, such an attitude is unsound, and it is particularly unsound at a juncture such as the present. I’ hope that when the bill is in committee the Leader of the Senate will explain exactly the extent of the relief that is to be given under the clause that provides that where taxation is already levied upon that income it will not be levied a second time in Australia. 3 foresee great difficulty in administering such a provision. I do not for a moment suggest that the Minister should withdraw it, because it does offer a certain measure of relief. In some cases a taxpayer’s income is made up partly of dividends from companies, upon which in certain directions tribute is levied before, distribution. Is that income to be exempt from taxation in the hands of individual shareholders? That is only one of many questions that suggest themselves to me. I am sure that every honorable senator shares the desire of the Minister and of the department to prevent the perpetration of fraud, and of what in legal as well as common parlance is described as the evasion of taxation. I believe that honorable senators generally would not for a moment subscribe to anything in the nature of evasion by taxpayers. ‘ The department is attempting by this measure to stop a number of leaks, but it has left untouched the big leak that occurs in connexion with bearer bonds. It would be simplicity itself to tax at its source the interest that is paid on bearer bonds. It is common knowledge that the most comprehensive method employed in Australia to-day to avoid levies that should be enforced by the Taxation Department is the use - I cannot call it misuse, because it is facilitated by the department - of bearer bonds. The attempt is being made to stop up all sorts of little leaks. Contributions to a graziers’ association, forsooth, are not to be allowed as a deduction in the future, because the department was defeated in the Gordon case, in which the judgment of the court laid it down that those contributions were an allowable deduction under the law. The Commissioner, with that subtlety of mind and that capacity which he possesses, looking at the taxation legislation through the spectacles of a tax collector, came to the conclusion that those contributions never were a proper deduction. He fought the matter inthe courts, where he was defeated. So he comes to this higher court of appeal, the Parliament of Australia, to have his view established. This is only a small matter, but it illustrates my point that attention is being paid to what is comparatively insignificant, while big leakages are not being checked. I realize that in the time that it has had at its disposal the Government cannot be expected to revolutionize the income tax law ; but I commend to it the serious consideration of the question that I have raised.

Turning to the averaging provisions, to which the Minister has referred, I subscribe to the view of the department that we should not allow what has been provided as a basis of relief to become a means of defeating the will of this Parliament as expressed in our income tax legislation. In that direction I think that we can unitedly support the proposals of the Government.

The bill is essentially one for review in committee, but, as certain principles are involved, I propose to say a word or two about them at this stage. Provisions relating to co-operative companies are contained in the bill. I suggest that those provisions are not wide enough to meet the requirements of all the cooperative companies throughout Australia. It has been represented to me by various co-operative packing societies in the river Murray and other fruit-growing districts that they do not meet the cases of co-operative societies which have been incorporated for the purpose of packing the fruit grown by their members. In committee it may be possible to extend the scope of these provisions to include such societies.

Another point that has given rise to a good deal of discussion is that in future appeals will be limited to hearing by judges of the High Court. It is not a simple matter for the judges of the High Court to visit the more distant States.

Senator Barnes:

– That provision has been altered in another place.

Senator McLACHLAN:

– I am glad that that is so, because visits by the High Court to the more distant capitals cannot be frequent.While there might be something to be said for such a provision from the point of view of the department, I feel that it would have led to a great deal of friction.

Senator Pearce referred to the case of private companies. I suggest that the Government has gone a little too far in proposed new section 21a which makes retrospective its provisions relating to such companies. The proposed new section will operate from the date of the coming into operation of the Income Tax Assessment Act of 1915! As I understand the law, and, indeed, as it has been laid down by the Privy Council and the House of Lords in connexion with certain income tax cases, there is nothing inherently wrong, either morally or legally, in a man avoiding taxation so long as he acts within the law. The wrong consists in evading taxation. In a case which occurred in England - The Commissioner of Inland Revenue v. Fisher’s Trustees - Lord Sumner, a famous jurist, said -

The highest authorities have always recognized that the subject is entitled so to arrange his affairs as not to attract taxes imposed by the Crown, so far as he can do so within the law, and that he may legitimately claim the advantage of any express terms, or of any omissions, that he can find in his favour. In doing so he neither comes under liability nor incurs blame.

In those words Lord Sumner has expressed the view which I have always held. It may be that all that the departmental officers claim to have taken place, has, in fact, taken place; in such a matter I accept their word. But if we have stood by and allowed this thing to go on from 1915 until now, we should not be anting in accordance with the best British traditions if we were now to date back to 1915 legislation affecting private companies. We are justified in taking action to prevent a recurrence of such happenings in the future, but if we make this legislation retrospective we shall place the taxpayer who has done the things complained of, not in the position in which he would have been had he acted otherwise, but in a much worse position. That, however, is a matter which can be more conveniently debated in committee. At this stage I merely suggest that the Government reconsider the retrospectivity of proposed new section 21a.

While I at all times respect the opinions of men holding high and difficult offices under the Crown, I cannot bring myself to vote for a provision which makes a departmental head the final arbiter of the rights of a citizen in his dealings with the Crown. I know how difficult it is at times to prevent wrongdoers from escaping; but that difficulty does not justify our making the Commissioner of Taxation his own court of appeal. Throughout the bill we have such phrases as “ in the discretion of the Commissioner “ and “in his opinion “. I suggest that the Commissioner will always view taxation matters from a departmental standpoint. By reason of his training, he cannot properly appreciate the taxpayer’s point of view; he cannot deal judicially with the various matters brought before him for determination. The Commissioner of Taxation is not different from other men in that respect. I personally am at times inclined to judge happenings from the point of view of my personal interest, rather than from a strictly judicial standpoint. Despite their confidence in the administration, the taxpayers of this country would be relieved to know that from any decision of the Commissioner there is to be a right of appeal. There are not many appeals. I believe that the Commissioner always acts conscientiously and takes cases to court only when he feels that it is right for him to do so. “ All looks yellow to the jaundiced eye “, and I suggest that no Commissioner of Taxation can do other than view taxation matters through departmental spectacles. While I am prepared to grant the Commissioner wide powers to deal with wrongdoers, personswho in evading the law commit crimes. I feel that a right of appeal should remain. If the Commissioner were a person removed from the administration of his own department, it would be another matter; but he is so actively engaged in affairs of the Taxation Department that he must necessarily be affected by the departmental atmosphere. From him instructions of administration issue; to him are referred all matters of importance requiring decision. It is he who issues departmental rulings from time to time. He is so surrounded by the atmosphere of the department that it is impossible for him to be absolutely free from departmental bias. In saying that, I make no reflection on the Commissioner personally; no human situated as he is could be entirely free from departmental bias. When their activities do not affect me personally, I have a great admiration for the officers of the Taxation Department; but it is contrary to human nature and to experience for them to view taxation from the point of view of the taxpayer.

Senator O’Halloran:

– Perhaps all our admiration for the Commissioner is impersonal.

Senator McLACHLAN:

– I do not agree with the honorable senator. I have a great admiration for the Commissioner personally; although I should probably not be allowed to express my impersonal view in this chamber. In committee I shall endeavour to amend the bill along the lines that I have indicated, particularly its provisions in relation to private companies and appeals against decisions of the Commissioner. In the meantime, I ask the Minister to consider the points raised with a view to meeting them, if possible. I am in sympathy with much that is proposed in this measure; in committee I hope that we shall be able so to modify the bill as to make it acceptable to all parties.

Senator DALY:
South AustraliaVicePresident of the Executive Council · ALP

– I remind honorable senators, that about 200,000 of our people are not very much concerned at the present time with the discretion of income tax commissioners. Those persons who to-day have incomes on which taxation is payable are, indeed, fortunate, when one considers the very large number who by force of circumstances have practically no income at all. So what may appear to be a great hardship in normal times becomes a reasonable proposition in a period of crisis such as that through which we are now passing. I shall accept the suggestion of the Leader of the Opposition (Senator Pearce), and discuss fully with members of the Senate the Government’s reasons for the retrospectivity of some of. the provisions of the bill. I disagree, however, with the proposition that because the Parliament has allowed certain persons, within the law, admittedly, not to pay what the Senate may consider would have been a most equitable tax, we should not now insist upon the performance by them of the obligation to meet that tax. I think that honorable senators will admit that there is a strong feeling on both sides in politics that, in order to meet our present difficulties, a wealth tax should be levied. This view is not limited to any particular section, and it is animated by the thought that, after all, large numbers of persons in this country have become wealthy during the period of false prosperity through which Australia has recently passed. If the Senate is satisfied that a small section of the taxpayers has been let off at the expense of a very large section, those persons should not be allowed to continue to escape fair taxation.

Senator Guthrie:

– Why not try to catch the Yankee film people, and others of that class 1

Senator DALY:

– The honorable senator knows that this Government is out to tax the American film interests, and if any member of this chamber can submit a practical suggestion that will assist in the desired direction, the Government will gladly accept it. We do not intend to allow anybody to evade shouldering his obligations.

Turning to the court of appeal, I remind honorable senators that when the High Court was constituted, it was contemplated that it should be essentially a court of law ; it was never intended by the framers of the Constitution that the judges of the High Court should act as a court of review, with a discretion that is obviously ministerial. The fact that we have a board of review at the present time was glossed over by the Leader of the Opposition, and lost sight of by other honorable senators. This board consists of three men whose reputation, and whose ability to perform the task entrusted to them, are beyond question. It consists of Mr. T. S. Hume, a taxation expert of many years standing, Mr. Canning, a barrister at law and one time a special magistrate, and Mr. Lightband, a public accountant. In each State there is a taxpayers’ association, and in each capital city a chamber of commerce. I invite honorable senators, who suggest that we should impose on the High Court the duty of inquiring into matters which are now being in quired into by the Board of Review, to mention one objection to the present practice, that has ever been raised by a taxpayers’ association, or by a chamber of commerce in any part of Australia. No objection has reached the ears of the department to this procedure, .which was introduced by the predecessors of the present Government, and has worked apparently satisfactorily since the system was instituted. Is not the more appropriate tribunal to deal with appeals the body that we now have consisting of a taxation expert, a public accountant and a barrister at law ? I submit that the taxpayer is sufficiently protected, and until a stronger case than has been made out is established, the Senate should hesitate before suggesting that the powers exercised by it be vested in the High Court.

Senator H E ELLIOTT:
VICTORIA · NAT

– Why has the expression “determination of the Commissioner “ been changed to “ in the opinion of the Commissioner “ ?

Senator DALY:

– If the Commissioner is to do anything, he must make a determination, and that involves legal questions, documents, and other matters. 1 think that the term used is stronger than the expression previously employed. Against the Commissioner’s determination there is an appeal to the board of review. The Commissioner’s decisions have not on every occasion been upheld by the board; many of them have been upset.

Senator Sir Geobge Pearce:

– Could an appeal be made from the opinion of the Commissioner to the board of review on a question of fact ?

Senator DALY:

– If the honorable senator feels that the present provisions of the measure do not sufficiently safeguard that aspect of the matter, I am prepared to consider any suggestion, but I am anxious to allow the present system to continue, particularly as no complaint regarding it has been received from the chambers of manufactures or the taxpayers’ associations. It would be rather an arbitrary use of the discretion of Parliament to alter a practice that has been in operation for many years, when no complaint has been raised by those from whom we might expect complaints.

Senator Lawson referred to a notable omission from the list of deductions from taxable income. He spoke of gifts to public art galleries and museums. There is a lot to be said against the exemption of such gifts. The honorable senator remarked that a man who was asked to make a donation to such a public institution would say, “If I do that, I shall have to pay income tax on it.” If this is regarded merely as a matter of robbing Peter to pay Paul, and doing it in the name of charity, I am against such a principle. But the danger of such a provision is that a grant may be made to one of these bodies, and the money may be used for a work of pure convenience as opposed to a work of necessity. Never in the history of Australia has it been so necessary as it is to-day for us to husband our resources at home and abroad. The giving of £10,000 to a particular institution, so that it may erect a building for the convenience of the students of that institution does not increase the absorptive capacity of the nation by 1 per cent; but if the £10,000 is allowed to remain as part of the -national resources for the development of our lands, it may increase our absorptive capacity eventually to such an extent that hundreds more people may find profitable occupation. Therefore, I ask the Senate to hesitate before permitting an addition to the deductions that may be made from taxable income even for charitable objects. We cannot afford at the present time to extend the exemptions. Every exemption means an addition to the burdens of the rest of the taxpayers. We are faced with a difficult financial position, and we have budgeted for certain revenue and expenditure. A definite sum of money is required to enable us to carry on the governmental operations of this country, and we have told the people how much we expect to raise by direct taxation. If one class of taxpayer is relieved from taxation an extra burden is automatically imposed on the remainder of the community. Therefore, it is our duty to make the distribution of the burden as equitable as possible among the whole of the people.

This bill must be considered from that angle, even in regard to ex-Australian income.

Senator McLachlan:

– If this class of income is taxed it will no longer be brought into Australia. It will pay persons better to send it to New Zealand.

Senator DALY:

– If there are persons in this country who are so devoid of patriotism that they would send elsewhere their ex-Australian income, which they have earned as the result of living in this country, then Australia could get on just as well without them. A person living in Australia, and having resources in Great Britain, is entitled to pay his fair share of taxation. Sitting suspended from lto.lfi to 2.15 p.m.

Senator DALY:

– Honorable senators should realize that persons who live in Australia and derive ex-Australian income enjoy the benefit of free education and other advantages provided by the States. In times like these, when State Governments have to consider whether they will discontinue or reduce those benefits or apply to the Commonwealth for a disability grant, we should not complicate the position by exempting any citizens of the Commonwealth who come within this category. The matter was given the fullest consideration by the taxation authorities, and an attempt has been made by the Government to spread the burden equitably over all classes of the community. The Government is prepared to listen, in committee, to suggestions as to inequities that may arise under this scheme, but, unless it can be shown how the leeway can be made up, the Senate can follow only one course.

Senator McLachlan:

– What is the amount of money involved by this provision ?

Senator DALY:

– It is difficult to obtain an accurate estimate, but I understand that if these provisions were eliminated from the bill, the Government would have to make up a leeway of something like £200,000. Honorable senators will therefore realize the difficulties that would confront the Government if it gave effect to the recommendation of honorable senators opposite.

I sincerely hope that the Senate will approach the subject in the spirit that I have suggested. I am confident that if that is done the Government will be able to justify every provision in the measure, and that the bill will be passed.

Although it may impose some hardships on people who are not at present taxed, it will lighten the burden that would otherwise have to be placed on the shoulders of those who are already very heavily taxed.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clause 1 agreed to.

Clause 2 -

Suction four of the principal act is amended -

by omitting the definition of “Absen tee “ and inserting in its stead the following definition: -

by inserting in the definition of “Income”, after paragraph (b), the following paragraph: - “; and (ba) any profit arising from the sale by any person of any property acquired by him for the purpose of profit-making by sale or from the carrying on or carrying out of any profitmaking undertaking or scheme “:

Senator Sir GEORGE PEARCE (Western Australia) [2.20]. - Sub-clause 1 of clause 25 reads -

The amendments effectedby paragraphs c and g of section two and by paragraph c of section eleven of this act shall apply to assessments for the financial year beginning on the first day of July, One thousand nine hundred and twenty-two, and all subsequent years.

The sales referred to in sub-clause c are, apparently, not taxable under the principal act, and this is an amendment to make a single sale of the character referred to taxable. If I read thissubclause aright in its relation to paragraph a of clause 25, assessments can be made for arrears of taxation retrospectively to 1922. Is my assumption correct? I do not want tobe told merely what is the intention of the Government. We are passing a law. If it is not intended to re-open those assessments retrospectively to 1922, why is it necessary to make the clause retrospective to that year? If it is only intended to make such transactions assessable to the present year and onwards, why is sub-clause 1 of clause 25 so worded ?

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– The cases referred to by the right honorable the Leader of the Opposi tion (Senator Pearce) are covered by what is known as the Blockey Case, which is reported in 31 C.L.R. page 503. The headnote of that case reads -

Three persons entered into an agreement to buy from time to time wheat scrip to the value of about £5,000, to sell the scrip as opportunity offered at a profit, and to divide any profits between them in certain proportions. The buying of the scrip extended over a period of about two months, and the selling over a subsequent period of about one month, and the result was that a profit was realized.

Held, that the share of the profits of each of the persons was the proceeds of a business carried on by him within the definition of income from personal exertion “, in section 3 of the Income Tax Assessment Act 1915-1921. and was therefore part of his assessable income.

That was the judgment of the High Court, consisting of Knox, C.J. ; Isaacs,

J.; Higgins, J.; Starke,J. ; so that. it was a very good Bench. As to the second point raised by the Leader of the Opposition, it is not the intention of the department to re-open any assessments, but it is necessary that this provision should be made retrospective so that this legislation will apply to cases in which objectionhas been lodged.

Senator McLACHLAN:
South Australia

– I fear that we will become involved in some difficulties under the operation of the clause referred to by the right honorable the Leader of the Opposition. I take no exception to the definition, but I do to the position referred to by the right honorable senator. I think that it is almost declaratory of the law as it stands at present, as applied to a series of transactions involving profit. If a man is trading for profit there is no doubt that his is taxable income. If a property is purchased for the purpose of making income, any resultant profit is. properly, taxable income, but, if a person who buys a property to live in ultimately changes his mind and sells at a profit, the income so derived is not taxable income, but is accretion of capital. We have a series of decisions on that point by the State courts as well as the High Court. I think that the department has stated the position pretty clearly in the explanatory brochure that has been circulated. This is an endeavour to collect taxation on an isolated transaction, and it does not seem fair that we should make the provision retrospective to 1922:

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– If that is the point raised by Senator Pearce I fail to see any reason for this objection. Whether the case is an isolated one or not, the question that this Senate has to consider is whether such cases were intended to be covered when the taxation laws were originally passed. If honorable senators will refer to the explanatory brochure that has been circulated they will see, at page 5, the following passages: -

The scheme of the Commonwealth law is to lax income.

Various classes of income are specifically described, e.g., the proceeds of any business; but income not so described is required to be ascertained by the application of general principles.

The general principle which is applied in the case of a profit made on the realization of property is that “if the property was. acquired for the purpose of profit-making by sale, the profit is income, and that in any ither case the profit is capital.

That principle has been in operation ever since the Income Tax Department was established, and it is a practice that has met with the approval of every government that has presided over the department. The notes continue -

It has long been the practice of the department to apply that principle to isolated transactions, many thousands of which arise annually. That practice has, in several instances, been ratified by decisions of the courts. The High Court itself, sitting as a Full Court, has not yet decided that profit on an isolated transaction of purchase and sale, entered into for the purpose of making a profit, is income, but the dicta of a majority of the judges who decided Bloekey’s case (31 C.L.R. 503), indicated that the question, if it ever arose, would be decided in favour of the department.

Senator McLACHLAN:
SOUTH AUSTRALIA · NAT

– The prtegnant portion is in the next paragraph.

Senator DALY:

– It continues -

However in view of the decision of the Mouse of Lords, in Jones v. Leeming, there is a possibility that the department’s praotice may not continue to be supported by the High Court, and that an amendment of the law is necessary in order to prevent a very serious lose of revenue.

That is the point. It has been the practice of the department for many years to tax this particular class of transaction, there is judicial authority for it, and Parliament has allowed it to continue. Suddenly, however, in a court in another country doubt has been raised as to whether it is, wfthin the meaning of the

English p’ractice, profit or income. I do not think that we need be concerned with what the opinion of judges may be as. to what is income. Our present concern is whether this particular class of transaction was intended by this Parliament to be taxed. Hitherto it has been taxed, and the bill provides no departure from the existing practice in that respect. Indeed if it had not been for the possibility of the High Court feeling that., whatever its own opinion might be, it would be bound by the decision in the Leeming case, there would have been no necessity for this amendment. I do not think that honorable senators will ask that this class of taxpayer which has been taxed in the past with the approval of the highest judicial authority in the land, should be exempt. If they do, they must be prepared to allow the taxation that these people are released from paying to be placed on the shoulders of others. Is there anything unfair in asking a man who has made a profit in an isolated transaction to pay tax upon it? Is there any logical justification foi releasing him from income taxation?

Senator Sir George Pearce:

– I am not contesting that point.

Senator DALY:

– I take it that the honorable senator is not contesting the prospective application of the provision, but is questioning its retrospective effect.

Senator Sir George Pearce:

– Hear, hear !

Senator DALY:

– Hundreds of people have already paid taxation under this provision. Others, however, have lodged objections, and their cases may or may not. be covered by the decision in the Leeming case. If honorable senators think that the provision should operate prospectively why should they object to it acting retrospectively? I can assure honorable senators that its retrospectivity will no.t apply to any taxpayer who has not already been assessed.

Senator Sir George Pearce:

– That i; the point. Will it re-open assessments?

Senator DALY:

– No.

Senator Sir George Pearce:

– Well, that is the only point I am raising.

Senator DALY:

– I can assure honorable senators that in practice this provision will apply only to assessments thai have already been made and in respect of which objections have been lodged. Its purpose is simply to continue the practice that has been in operation, the decision in the Leeming case notwithstanding.

Senator Sir William Glasgow:

– Does it apply to assessments made upon which tax has not been paid?

Senator DALY:

– Yes.

Senator McLACHLAN:
South Australia

– I agree with what Senator Daly has said with regard to the first portion of paragraph c, but doubt arises in my mind as to the meaning of the words “ carrying on or carrying out of any profit-making undertaking or scheme.” Until it reaches that point the paragraph is only declaring the wellsettled law of Australia. These last few words, however, seem to extend the law further than it has hitherto been applied. A man buys a block of land on which to build a house. He buys it at the market value, and holds it for a time. After a period he finds that it is not convenient for him to build a home on it, and he sells it. While he has held the block it has increased in value. Clearly the difference between the purchase price and the sale price is accretion of capital. I ask whether the words “ profit-making undertaking or scheme “ will cover . a transaction such as this, which has hitherto been held to be outside the pale of the present taxation law?

Senator Rae:

– Should not the land speculator be taxed?

Senator McLACHLAN:

– The land speculator is already taxed ; so also is the man who is not a speculator, but buys land for the purpose of making a profit. It has been shown in a variety of ways that a man who has bought land, and made a profit on it, simply because he has held it for some time, is not liable to income taxation on the transaction. Under the principles of British law and decisions of the High Court it is regarded as an accretion of capital, and not as income. If the words “ profit-making undertaking or scheme” are qualified by the earlier words of the paragraph, no objection can be taken to them, but, in the everyday parlance of the people, the man who sells land for more than he has paid for it has made a profit.

Senator Rae:

– How can any distinction be drawn ?

Senator McLACHLAN:

– The distinction has been drawn in a multitude of decisions. There has never been any attempt under British law or our own principles of taxation to tax an accretion of capital brought about in the way I have indicated. If assessments are not to be re-opened, provision can be made in section 25 to protect the taxpayer against any injustice, and I see no other point to which I can take particular exception.

Senator RAE:
New South Wales

.- The New South Wales Income Assessment Act provides that any property re-sold at a profit shall be set out in the taxpayer’s income tax return.

Senator E B Johnston:

– Only if it is re-sold within three years.

Senator RAE:

– I understand thatthe taxpayer has to set out in his return any transaction in the way of selling property upon which a profit has been derived. I bought land with the intention of building a home on it, and afterwards sold it, at a profit, because I did not have the wherewithal to build the house.

Senator McLachlan:

– Was the honorable senator taxed on the profit he made ?

Senator RAE:

– Yes. I cannot see why I should not be so taxed on an isolated transaction. It is a profit of the same class as that which is made by the man who makes it his business to buy and sell land. If I get £100 for land which I bought for £75, I make a profit of £25.

Senator Payne:

– But what would happen if the honorable senator made a loss of £25?

Senator RAE:

– I would have to suffer the loss, I do not see why a man should be taxed because he earns a wage of £5 a week, while the man who makes a profit on the sale of property escapes taxation.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

.- The words “profit-making” to which Senator McLachlan has drawn attention, qualify the words “ undertaking or scheme.” They are used in an adjectival sense. Income is not taxed unless the taxpayer has been engaged in a profit-making undertaking or scheme.

Senator Sir GEORGE PEARCE (Western Australia)[2.44]. - I am quite satisfied with the explanation given by Senator Daly. I now wish to draw attention to the paragraphi. Section 4 of the principal act is amended -

  1. by inserting, after the definition of “ Person,” the following definition : - “‘Resident’ or ‘Resident of Australia’ means -
  2. a person, other than a company, who resides in Australia, and includes a person -
  3. whose domicile is in Australia unless the Commissioner is satisfied that his permanent place of abode is outside Australia; or

This is the first mention of the words “ unless the Commissioner is satisfied.” I should like Senator Daly to say whether the Commissioner’s decision on the facts of domicile is capable of being appealed against to the Board of Review, and, if so, in what section of the act is provision for that appeal to be found. I am unable to find in the bill any provision for an appeal to the Board of Review on the facts. The question of domicile is important, and it may be of great moment to a taxpayer. Surely the decision of the Commissioner on the facts connected with the domicile of a taxpayer should be subject to appeal to the Board of Review, because, upon his decision, rests the liability of the taxpayer to pay taxation as a citizen of the Commonwealth or as an absentee. I should like the Leader of the Senate (Senator Daly) to say definitely whether an appeal will lie to the Board ofReview, and, if so, whether it will be on the questions of fact. Will the Minister also explain why there is no provision for appeal to the court ?

SenatorDALY (South Australia - Vice-President of the Executive Council) [2.47]. - The question of domicile can only arise when an assessment has been made. Income tax returns are classified and the assessment of the Commissioner is dependent upon a number of facts, amongst which is that relating to domicile. If the Commissioner is satisfied that the domicile of the person furnishing a return is outside Australia, the assessment can be appealed against to the Board of Review. The question of domicile would be one of the questions upon which the board would have to be satisfied before arriving at a decision. Section 44 provides, in sub-section 1 -

A board of review shall have power to review such decisions of the Commissioner, Assistant-Commissioner or Deputy Commissioner as are referred to it by the Commis sioner under this act, and, for the purpose of reviewing such decisions, shall have all the powers and functions of the Commissioner in making assessments, determinations, and decisions under this act, and such assessments, determinations, and decisions of the board, and the decisions of the board upon review shall, for all purposes (except for the purposes of sub-section 4 of section 50 and sub-section 6 of section 51 of this act) be deemed to be assessments, determinations, or decisions of the Commissioner.

If an assessment is challenged by a taxpayer, it will go before the Board of Review, which, as I have shown, will have all the powers of the Commissioner. The phrase “ shall have all the powers and functions of the Commissioner in making assessments” is sufficiently wide to cover all cases. I am informed that this is the practice which the department intends to continue in the administration of this act.

Senator Sir George Pearce:

– I am satisfied with the Minister’s explanation, but I have an amendment to move later on the question of appeal to the court.

Clause agreed to.

Clauses 3 and 4 agreed to.

Clause 5 -

Section fourteen of the principal act is amended -

by inserting at the end of sub-section (1.) the following paragraphs: - “(q) income derived from sources outside Australia -

) by a resident of Australia to the extent to which that income is proved to the satisfaction of the Commissioner -

to he derived from the sale of any produce which is chargeable in the hands of the person deriving that income with royalty or export duty by the Government of any country outside Australia; and

Section proposed to he amended - 14. (1.) The following incomes, revenues and funds shall he exempt from income tax.

the income of any society or association not carried on for the purposes of profit or gain to the individual members thereof, established for the purpose of promoting the development of the agricultural, pastoral, horticultural, viticultural, stockraising, manufacturing or indus

Senator Sir GEORGE PEARCE (Western Australia) [2.51].- I should like the Leader of the Senate to explain why section 14, which is amended by this clause, is to be made retrospective to 1st July, 1923. This clause also raises the question of taxation of ex-Australian incomes, in connexion with which I have an amendment which I will move later. Clause 25 provides that the amendments made by this clause will be retrospective to the date mentioned.

Senator DALY:
. Vice-President of the Executive Council · South Australia · ALP

– The right honorable gentleman has forgotten, apparently, that the Government of which he was a member decided upon certain exemptions which were adopted by the department, but which did not receive legislative sanction.

Senator Sir George Pearce:

– The Minister is referring, I assume, to consular representatives?

Senator DALY:

– Yes. When this bill was in course of preparation, the exemptions authorized by the previous Administration were brought under notice, and the provision to which the honorable gentleman has directed attention was inserted to ratify the action of the preceding Government.

Senator DUNCAN-HUGHES:
SOUTH AUSTRALIA · UAP

– Will this involve any refund?

Senator DALY:

– No ; the tax was not collected.

Senator Sir George Pearce:

– I presume that the retrospective provision in the clause relates only to incomes referred to in proposed new paragraphh?

Senator DALY:

– That is so.

Senator GUTHRIE:
Victoria

– I move -

That after paragraph (a) the following new paragraph be inserted: - “ (aa) by inserting in paragraph (j) of sub-section 1 after the word ‘ development ‘. the words ‘ of aviation and ‘ “.

The paragraph will then read -

  1. the income of any society or associa tion not carried on for the purposesof profit or gain to the individual members thereof, established for the purpose of promoting the development of . aviation and of the agricultural, pastoral, horticultural, viticultural, stock-raising, manufacturing or industrial resources of Australia shall be exempt. The constitution of the Australian Aero Club provides that it shall not be carried on for the purpose of profit. All the branches of this club i the various States are doing magnificent work in training air pilots. Since these clubs are not carried on for a profit, they should be exempt from taxation on the amount of the grant which they receive from the Government for the encouragement of civil aviation. This vast island continent is particularly adapted for aviation, and already Australian pilots have proved themselves to lie amongst the foremost in the world. Recently, Mr. Mackay equipped an aerial expedition at his own expense and, flying to Central Australia, mapped a vast area of unexplored country. He also discovered an immense lake, the existence of which was unknown. In Canada, civil aviation plays an important part in fighting forest fires, and in mapping unexplored territory. Recently civil aviators there mapped an area of 200,000 square miles of new forest country. In Australia valuable services are being rendered daily to the community by commercial aviation companies and civil aviators. Persons suffering from sickness in the interior are conveyed to hospitals, and when occasion arises doctors and nurses are transported from place to place to minister to persons who are in need of skilled attention. These aero clubs are doing a wonderful work in the development of Australia. Already they have trained over 300 “ A “ class pilots who are ready to take their part in the defence of this country in the event of war. These pilots, I venture to say, would constitute our first line of defence. It is impossible to speak too highly of the extraordinary efficiency of pilots trained by aero clubs in Australia. We are all proud of the achievements of Sir Ross and Sir Keith Smith, Parer. Mackintosh, Hinkler, Kingsford Smith, and many others. We also pay a high tribute to the courage and resourcefulness of Miss Amy Johnson, the English aviatrix, whoflew solo to Australia a few months ago. She was trained by the London Aero Club. In view of the splendidwork which these aero clubs of Australia are doing in training pilots, it is only fair that their incomes should be exempt from taxation. The men who have been trained in Australia and who are performing wonderful work in the interests of our country, are always available should their services be required by the Defence Department. During the Great War Americans were sent to England to be trained as pilots in aero clubs in order to enable them to engage in aviation work at the front. These aero clubs are conducted on a totally different basis from those wonderful companies such as the Australian Airways Limited, Queensland and Northern Territory Aerial Service, and the Larkin Aircraft Supply Company, which have secured world’s records in the carrying of passengers and mail matter. I am not suggesting that these companies should be exempt from taxation, because they are trading for profit; but I wish to place on record their wonderful achievements. I understand that up to March of this year the aircraft of the three companies that I have mentioned have flown 2,519,578 miles in 32,448 flying hours without serious mishap, and have carried 373,777 lb. in freight, and 1,676,933 letters without the loss of a single letter. I think it can safely be said that our pilots are the most efficient in the world. I remind honorable senators that the Atlantic was first crossed by air in 1919 by Arthur Whitten Brown and John Alcock, both Britishers, ten years before Lindbergh performed the same feat. Kingsford Smith is an Australiantrained pilot who, in addition to being the first to fly the Pacific, has also flown over the Atlantic Ocean and the Tasman Sea, and was the first pilot to circle the world by air. I believe that the Government, in the assistance which it has given to the five principal clubs, recognizes the good work being done by aero clubs. Under existing conditions assistance is given by the Commonwealth Government through the Department of Defence on the following basis: -

    1. A certain number of machines and spares are issued on loan or replacement. Those form the nucleus of the fleets of aeroplanes with which the club carry on training.
    2. Hangar accommodation is made available and club houses built - the latter being rented to the club at a figure to cover the interest on capital outlay.
    3. A bonus of £20 is paid to the club for each pilot trained to receive an”A” licence.

That is an extraordinary cheap way in which to train pilots who must be fully equipped and capable of flying solo for 20 hours before they can obtain an “A” licence. Training of this kind equips them for assisting in the defence of our country. No less than 300 pilots have been trained, at a cost of only £20 each to the Government, whereas, to provide a similar training in the Air Force, would probably cost hundreds of pounds. The conditions under which assistance is granted continue -

  1. In addition, a bonus forflying time on a sliding scale, is payable. The rates under the present agreement are 10s. for the first 1,000 hours, 7s.6d. for the second 1,000 hours, and5s.d. thereafter: a maximum of £1,200 in all. This bonus is in lieu of a previous arrangement by which spares up to a certain amount were supplied by the department.

The clubs are all vigorous bodies. They are controlled by committees of aviation enthusiasts, whose chief aim is to foster aviation in the Commonwealth. Under their articles all clubs are prohibited from distributing any profit among members. In other words they are associations which are not operating for profit. Their work is carried out efficiently and enthusiastically. The rates charged for flying rank favorably with those charged in any part of the world, notwithstanding the high cost of spares, petrol, oil, &c., The pioneer clubs of the movement in Australia have their head-quarters in Sydney and Melbourne. These clubs started flying operations in August, 1926, and, up to the 31st May of this year, had registered up to 20,500 hours of flying, and had trained 300 pupils for an “ A “ licence. In addition to the training of pupils, the clubs carry out extremely valuable work by giving ex-war pilots the opportunity to retain their efficiency at a very low cost, thus preserving a valuable asset to Australia in time of need. But for the existence of the air clubs many of the ex-war pilots, through a lack of training, would become, to use a colloquialism “rusty” ; but, on payment of a reasonable fee, they can hire a machine and thus retain their efficiency. Aero clubs arc not confined to Australia, but are operating in England, Canada, India, Singapore, South Africa and New Zealand. In all parts of the Empire their worth is recognized and they are afforded a substantial measure of support. For the year ended 30th September, the Government subsidy and bonus to the Victorian section of the Australian Aero Club was £300, the total earnings including Government assistance, £2,317 19s. Id., and the profit £436 3s. 3d. In 1928 the figures were £308 5s., £3,183 5s. 4d. and £491 ls. 3d. respectively. In 1929 the Government assistance and bonus was £1,753 3s. 8d., the total earnings, including Government assistance, £6,556 13s. 10d., and the loss, £85 3s. lid. It -will be noted that although the turnover has increased by nearly 300 per cent, no profit has been made. This is due to the club’s policy to keep the cost of flying down so that it may be within the reach of everyone. The club is doing exceedingly valuable work, as will be shown by a comparison between the cost of training a pilot under the Aero Club’s scheme with that of the Royal Australian Air Force. In the former case, the Government pays a small proportion and the pupil pays the rest. When trained, an aero club pilot is not as expert or efficient as are Royal Australian Air Force pilots; but, in time of need, the training he has received would be of great value, and he would only require a little additional training to become fully competent. The position at present is somewhat ludicrous. The clubs are not taxed on the income received from members, but on the revenue from other sources which is derived in the form of Government subsidies and bonuses which are subject to taxation.

The CHAIRMAN (Senator Plain).The honorable senator’s time has expired.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

.- I trust that the committee will reject this amendment. I agree with what Senator Guthrie has said concerning the exceptional value of aero clubs in the national life of Australia. But surely the honorable senator does not suggest that the present provisions of the act impose any hardship upon aero clubs because, as he has stated, the clubs’ rules preclude them from making any profit. I can assure the honorable senator that it is the policy of the department to tax only the profits.

Senator Guthrie:

– The profits they make are utilized in improving their landing grounds.

Senator DALY:

– That is the point. Aclub or a private individual may register as an aero club, formed for the purpose of assisting aviation, and could arrange for the landing of say such a distinguished aviatrix as Miss Amy Johnson and charge an admission of 3s. or 4s. a head and say that the profits were to be used for the benefit of aviation.

Senator Sampson:

– Would not the amusement tax be imposed in that case?

Senator DALY:

– I am now dealing with income taxation. No hardships will be imposed by leaving the law as it stands. If honorable senators will refer to section 14 of the act they will find that the exemptions provided are already very comprehensive, and, in fact, too much so, considering the heavy taxation which has to be paid by other sections of the community. If aero clubs were exempted claims would immediately be made by the representatives of other athletic clubs.

Senator Guthrie:

– They are totally different.

Senator DALY:

– In the interests of the defence of this country it is necessary to improve the physique of our manhood, which can effectively he done by encouraging football, cricket and such other sports.

Senator Guthrie:

– The benefit derived in that way would not be as great as in this case.

Senator DALY:

– I submit that the man who becomes an efficient motor driver may eventually play a very important part in the defence of his country.

Senator Rae:

– Even a good pick and shovel man is an asset.

Senator DALY:

– Exactly.

Senator McLachlan:

– The Government subsidizes the clubs and then taxes them.

Senator DALY:

– In this uneconomic age we do many uneconomic things; but, I remind the honorable senator that there is a danger in establishing a precedent. If we exempt aero clubs because they are in receipt of a subsidy from the Government, we could on the same basis decline to impose taxation upon the profits of, say, the manufacturer of galvanized iron, who receives a bonus. We subsidize the East-West air service, which is working in competition with the transcontinental railway.

Senator Guthrie:

– They are both working for profit.

Senator DALY:

– The principle is the same. We tax companies to whom we give a bonus, and, in the same way, tax aero clubs which we subsidize. In that respect, an aero club is in a similar position to a company which receives a bounty. I suggest that no real hardship is imposed upon these clubs, and that if they were exempt an agitation would immediately be- raised for the exemption of other clubs. This is not a time to exempt the payment of a legitimate tax.

Senator Herbert Hays:

– What payment has been made to the Taxation Department by these clubs f

Senator DALY:

– It must have been a long time ago for the officers of the department know nothing about any payment having been made.

Senator Guthrie:

– The clubs have asked for the exemption.

Senator DALY:

– That is easy to understand. They feel that there is a possibility of some one other than Miss Amy Johnson flying to Australia, and giving them an opportunity to make profits. So long as these clubs confine their activities to the training of pilots - for which they are granted a subsidy by the Government - there is no likelihood of their making profits. But should circumstances arise to make profits possible, why should they be exempt from taxation?

Senator Sir William Glasgow:

– Their profits would not be distributed among members.

Senator DALY:

– Tattersalls Club in South Australia makes some profits out of horse-racing. Those profits, which instead of being distributed among members, are utilized to increase the comforts provided for members in the club rooms, are taxed.

Senator McLachlan:

– Why not treat this as a special case?

Senator DALY:

– If we make an exemption in the case of aero clubs, we do not know what other applications we shall receive. Honorable senators have seen that difficulty in connexion with bounties. Once the principle of grant ing bounties has been established, it is difficult to draw the line. These aero clubs may be doing good work; but so long as they make no profits, of what value is a gesture which means nothing? Should a case of hardship arise it can be dealt with when it occurs. No good reason has been advanced for any exemption.

Senator COOPER:
Queensland

– Aero clubs are different from other clubs. Some time ago I suggested that various automobile clubs might be exempted, but, on reflection, I feel that their case is entirely different from that of aero clubs. During the war the greatest difficulty was found in providing an adequate number of trained pilots to keep pace with front line wastage. The most difficult time in training was when the pilot had to fly alone. Indeed, a considerable number of the casualties in the Air Force occurred when pilots were undertaking their first solo flights. I submit ‘that the training of pilots by these aero clubs would save a great deal of time in training them in the event of war. They would already have gained confidence and air-sense. Senator Guthrie said that any profits made by aero clubs would not be used for personal “ gain, but would be expended in improving aerodromes, landing grounds, &c. The Minister said that in the event of the clubs making huge profits, those profits should be taxed. I should like to see them make profits, because the consequent improvements to aerodromes and landing grounds would be in the interests of aviation generally. It should be a sufficient safeguard to provide that any profits made shall be expended in furthering aviation. I hope that the Minister will accept the . proposal of Senator Guthrie.

Senator CHAPMAN:
South Australia

– Reference has been made to the possibility of these aero clubs making large profits for individual members That point is already covered, for the act reads that the income of any specified society or association which is not carried on for the purpose of profit or gain to its individual members is exempt from income tax. Some months ago when visiting England and the Continent, I travelled from London to Paris and

Berlin by aeroplane. The British aeroplane, in which I travelled, carried eighteen passengers, and appeared to me to be a fine machine: But on arrival at Berlin I was compelled to admit that aviation had made greater strides in Germany than in England. Ninety regular services extend from Berlin to Sweden, Russia, Austria, Turkey, Spain, and even to Africa. Every few minutes one of the aeroplanes engaged in those services either arrived at or departed from the Uerlin aerodrome. Britain was financially crippled through financing the war, with the result that in aviation matters she has fallen behind other countries. But while Britain made little progress- because of financial difficulties, German aero services were built up with American capital. Remembering what I saw while abroad, particularly in Germany, I am prepared to do all that I can to foster aviation in Australia, particularly as this country is so suited to flying.” I think that this small concession should be granted to aero clubs.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– If the proposal of Senator Guthrie meant the granting of a concession to aero clubs, the committee could consider it on that basis. But it is not.

Senator E B Johnston:

– Then why object to it?

Senator DALY:

– If we grant this concession to aero clubs we shall probably have applications from other clubs for similar concessions. After all, the aero clubs are not the only institutions in Australia which might prove of value in the event of an invasion. For instance, in South Australia there is a motor cycle club which, I submit, would be of inestimable value to the country in such an event.

Senator Cooper:

– Motor cyclists can be trained much more quickly than .is possible in the case of air pilots.

Senator DALY:

– That is not the point. We are considering the advisability of exempting aero clubs from taxation. These clubs are already granted a subsidy by the Commonwealth. From the point of view of Commonwealth revenue, it might be well if they were allowed to make profits for then a subsidy would nnt he necessary. If this exemption is granted, before long some South Australian senator will urge that the motor cycle club of that State should be similarly treated. Men who engage in flying, or, indeed, in motor cycling, do so for the love of it. The question of profit does not enter into their thoughts. I do not know whether in modern warfare homing pigeons are used to any extent ; but if they were, I can see the possibility of applications being made for the exemption of such clubs from taxation. In South Australia there are many pigeon clubs, which conduct regular pigeon races. They are doing as valuable work from a defence point of view, as are the aero clubs. If we exempt aero clubs, claims from these other clubs for exemptions could not consistently be rejected. The basis of exemption should not be that suggested by Senator Cooper, namely, the time taken to train pilots. That may form the basis for some consideration by the Defence Department for an increased subsidy to the club; but we have to consider whether at this time all clubs should be exempt from the payment of income tax. If meaningless amendments such as this are carried, we shall be inundated with requests for exemption from clubs of all description. If we exempt aero clubs, it will be very difficult to differentiate between the applications made on behalf of different organizations. This is a time when it is necessary to close down on exemptions. There is no question of any hardship being imposed upon aero clubs by the operation of the bill, or that the Govern- ment’s taxation proposals will hamper the activities of aero clubs and prevent the expeditious training of pilots. In the circumstances, I ask the Senate to reject the amendment.

Senator MCLACHLAN (South Australia) 3. 32]. - I appeal to the Minister to reconsider his decision. Aero clubs are on a different plane from other clubs. They are performing a national work. The men that they train take their lives in their hands every time they go aloft. The finest types of our young manhood are attracted to aviation, and as these aviation clubs will become our first line of defence under the policy of the Government, nothing should be done to discourage their development. I subscribe to all that the Minister has said with regard to the undesirability of opening a gap in the measure through which all types of organizations may gain exemption from taxation. But our aero clubs are serving a very lofty purpose. There can be no comparison between them and motor cycle clubs. This new science is of tremendous importance to the country, and even if the Minister were logical I should allow my sympathy to go in favour of the amendment. But I do not think that the honorable senator is logical. I should not support at this juncture any suggestion to exempt motor cycle clubs, racing clubs, sporting clubs, and so forth. Everybody in the community should bear his quota of taxation so far as is practicable.

Senator Daly:

– Does not the honorable senator realize that this amendment would invite clubs of all descriptions to make application for exemption from taxation ?

Senator McLACHLAN:

– The decision would lie with the Senate and another place. With the Minister, I do not think that the amendment would result in any appreciable monetary concession to the aero clubs; but its incorporation in the bill would be a gesture to those who are giving their time, and even sacrificing their lives, to develop an important science that will give the country invaluable assistance should Australia become involved in another war. Much as I desire to avoid making any exemption gaps in the bill, I shall be obliged to vote for the amendment moved by Senator Guthrie.

SenatorRAE (New South Wales) [3,36]. - I am sorry that so much misplaced sentiment is being intruded into the discussion. I am prepared to endorse all that has been said as to the merits of aviators and as to the use of aero clubs. By reason of their daring, aero clubs might almost be christened “hero clubs.” However, if it is necessary to grant further assistance to such bodies, that can be done by additional subsidies. The chief object of this bill is to close all loopholes through which income taxation may be evaded. It is a wonderful testimony to the dishonesty of the commercial community that so many ingenious methods have been practised to evade the payment of taxation, and that it is necessary to tighten up the law as we are now doing. If we exempted aero clubs from taxation, we might well carry the principle further. Who could be more worthy of exemption than those brave people who risk their lives on the deep; the heroes who remain by their wireless sets, sending out S.O.S. signals, remaining on the ship until the last moment, and frequently going down with it? One could point to many ways in which heroism, which happily is inherent in human nature, manifests itself, but surely such things are irrelevant to the present debate. I put it as a matter of common sense that if aero clubs require special consideration, it should be given to them in the form of subsidies.

Senator SAMPSON:
Tasmania

– I have listened to this discussion with very great interest because, for four years, I have been a flying member of the Tasmanian section ofthe Aero Club. I take it that the income of these clubs would be liable to taxation if absolute profits were made. Would the subscriptions of members be subject to taxation ?

Senator Daly:

– The High Court has decided that the subscriptions are not liable to taxation.

Senator SAMPSON:

– My own club was formed about four years ago, and we have not yet got our hangar or club-house. We have our machines on order, and have had the money to pay for them for over three years. The subscriptions range from £6 6s., for flying members, downwards for ordinary and country members. If they are not liable to taxation, I am quite satisfied with this provision in the bill. Undoubtedly, aero clubs are performing a signal service to the country by inculcating in our people an air-sense, which 90 per cent. of the people of Australia lack, because of the dearth of facilities hitherto available. It is imperative that we should develop an air-sense, as, if we have to defend our country, we shall have to rely on our aviators to supply our “ eyes.” I am not very keen on “gestures,” because they do not mean very much. The reference sounds very nice; but I like a little more meat on the bone. The other members of my club will be satisfied if subscriptions are not liable to be taxed.

Senator GUTHRIE:
Victoria

– I am almost sorry that I brought forward my amendment, since it has drawn from the the Leader of the Government in the Senate (Senator Daly) a most regrettable comparison. The honorable senator compared members of aero clubs with those of betting clubs.

Senator Daly:

– I did not.

Senator GUTHRIE:

– Well, ‘ with members of bicycle and similar clubs. The honorable senator might just as well have compared them with members of spinning top clubs. Our embryo aviators take tremendous risks when learning to fly, and they have to supply most of the money to enable them to gain proficiency in the art. Unfortunately, quite a number make the supreme sacrifice.

Senator Dunn:

– A great number engage in aviation for sport.

Senator GUTHRIE:
VICTORIA · NAT; UAP from 1931

– T h at kind of sport has more value to the nation than any other type. Australia has a coastline of about 12,000 miles, and we must rely on our aviators to act as our spotters if this country is ever attacked. I admit that the Commonwealth Government gives a subsidy to aero clubs for every “ A “-class pilot who graduates, but the club and the trainee are involved in an expenditure much more than the amount of the subsidy. They are not receiving much encouragement. An additional duty of over £100 has been imposed on Moth machines, the type most needed by aero clubs for training purposes. They are not ordinary clubs in any sense of the word. They are teaching the best of our young people that air-sense which is so essential to Australia. I do not know any other country in which civil aviatiot. hiis received such poor assistance.

Senator Sir George Pearce:

– I do not think that that criticism is justified. Australia has. given very considerable assistance to civil aviation.

Senator GUTHRIE:

– I do not think that it has been granted nearly as much assistance as it should have received. Our aerodromes are a disgrace, and it is ridiculous that the clubs should be taxed.

Senator Daly:

– I said that they are not taxed.

Senator GUTHRIE:

– Why should we not give them this concession for which they are asking?

Senator Millen:

– Is it a concession ?

Senator GUTHRIE:

– They think it is. At any rate it is an encouragement to them. The Essendon aerodrome in Victoria is a disgrace. It is a bog when there is any rain. There is a reservoir in the middle of the area into which two capable aviators crashed during a storm. I have visited the aerodrome when it has been in a deplorable condition. When I asked why the club did not put cinders down to improve the runway, I was told that the club had not sufficient money to do it. There is not a decent aerodrome in Australia.

Senator Cox:

– Speak for Victoria.

Senator GUTHRIE:

– The other day Mascot aerodrome was under water.

Senator Cox:

– We have one of the best, aerodromes in the world in New South Wales.

The CHAIRMAN (Senator Plain).Order! The committee is dealing with the exemptions.

Senator GUTHRIE:

– I press for the exemption of these aero clubs, which are performing such wonderful service for the nation in preparing men for the defence of their country or for exploration work. It would be a great reflection on the Senate if the modest request they have submitted were not granted.

Senator COX:
New South Wales

– It is rather interesting to hear Senator Guthrie declare that there is not a decent aerodrome in Australia. His knowledge of his country must be small.

Senator Guthrie:

– It is what the aero clubs say.

Senator COX:

– I do not care what they say. The Richmond aerodrome is one of the safest in the world. I do not know where these aero clubs get their money, but within twenty miles of Sydney they are spending something like £60,000 or £80,000 in building an aerodrome on the Liverpool road. It will be one of the best in the world. It is a pity that Senator Guthrie in the responsible position he occupies should have made such a wild statement.

Senator GUTHRIE:
Victoria

– I notice that trade unions are exempt from taxation. I should think that aero clubs are equally entitled to be exempted. My statement about the aerodromes of Australia being inefficient was based on the comments of flying men who have visited Australia, including Sir Alan Cobham, and those of the president of the Australian Aero Club, and the president of the club in Victoria. Surely those gentlemen know more about aerodromes than Senator Cox does. I do not pretend to be an authority on the subject, but the aerodromes I have seen are very bad, and few and far between. I am assured by the presidents of these clubs, who are noted airmen, that we have not one really good, efficient, welldrained aerodrome in Australia.

Senator Cox:

– The Richmond aerodrome is the driest aerodrome in the world. The aeroclubs are already doing fairly well on the subsidy they are receiving.

Question - That the paragraph proposed to be inserted be so inserted (Senator Guthrie’s amendment) - put. The committee divided.

AYES: 0

NOES: 0

AYES

NOES

Question so resolved in the affirmative.

Amendment agreed to.

Senator Sir GEORGE PEARCE (Western Australia) [3.56]. - I move -

That the words “ outside Australia “, paragraph c, sub-paragraphq (i) 2, be left out with a view to insert in lieu thereof the words “ including the Government of the Commonwealth or of a State of the Commonwealth “.

The object of this amendment is to provide that where a company or firm is ex porting goods from Australia upon which royalty is paid, it should be placed in the same position as a company which derives ex- Australian income from mining tin in Malaya or Siam, on which royalty is paid. I have particularly in mind the export of iron ore from South Australia on which royalty is paid. It may be urged that my amendment would embrace the export of timber, because royalty is paid on timber in a number of . the States, but at present the export of timber from Australia is negligible. We cannot produce enough timber to supply our own requirements. It is true that a little jarrah is exported.

Senator Sir GEORGE PEARCE.From Iron Knob, and the South Australian Government charges royalty on it. It seems to me that it is only fair that the people who are exporting this ore and making a slight profit on the sale of it overseas should be placed in the same position as those Australians who are making a profit on the mining of tin in Malaya or Siam on which royalty is paid.

Senator Sir GEORGE PEARCE.To some extent, yes. But I hope that the Government will not consider the proposal from the point of view of the immediate revenue to be obtained It is important that we should do everything possible to encourage the export trade. The companies which I have in mind are to-day labouring under serious disadvantages. Owing to the present industrial depression, they have been obliged to close down some of their furnaces. Since the question which I have raised involves government policy, I suggest that rather than reject my proposal, the Leader of the Senate should agree to postpone consideration of the clause in order to confer with the Prime Minister.

Senator DALY (South Australia - VicePresident of the Executive Council) [4.3 1 . - Representations have been made tothe Government with reference to the matters mentioned by the right honorable gentleman, but owing to the almost continuous sittings of the Loan Council I have not had an. opportunity to confer with the Prime Minister. If we postpone discussion of the clause, I may have an opportunity to see him during the dinner hour.

Clause postponed.

Clause 6 -

Section 16 of the principal act is amended-

by omitting paragraph (d) and inserting in its stead the following paragraph: (d.) money derived by way of royalty or bonuses . . . premium, fine or foregift . . or for goodwill or a licence. . . .

Provided further that this paragraph shall not apply to -

any lease from the Commonwealth or a State being a perpetual lease without revaluation, or a lease with a right of purchase.

Section proposed to be amended -

The assessable income of any person shall include -

money derived by way of royalty or bonuses, and premiums fines or foregifts or consideration inthe nature of premiums fines or foregifts demanded and given in connexion wilh leasehold estates;

Senator Sir GEORGE PEARCE (Western Australia) [4.5]. - I direct attention to the proviso to paragraph b which reads -

Provided that where the company distributes to a member or shareholder who is a resident, anr income upon which it is exempt or would, if it were a resident, be exempt from income tax under paragraph (q) of sub-section 1 of section 14 of this act, or any income derived from sources outside Australia, prior to the first day of July, 1029, as dividends, bonuses, or profits among its members or shareholders, the income so distributed shall not be assessable income of the member or shareholder.

I mentioned this proviso during the discussion at the second-reading stage. 1 should now like to have from the Minister an explanation of the meaning of tinwords “ or would if it were a resident “. May we take it they mean that in the case of a company operating in New Zealand which, for the purposes of this act is a foreign country, dividends to shareholders will be exempt?

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– Yes. I am instructed by the Commissioner of Taxation that the words were inserted to provide for the class of case mentioned by the right honorable gentleman. If such dividends are taxed in the country where the profit is made, the profits earned by shareholders in Australia will not be subject to taxation.

Senator E B JOHNSTON:
Western Australia

– I move -

That sub-paragra ph (iii), paragraphf (d), be left out with a view to insert in lieu thereof the following: -

Any lease of any tenure whatsoever from the Commonwealth or a State of land to be used for pastoral, grazing, or cultivation purposes, which lease has been held by the taxpayer for a period of more than three years prior to its sale.

Apparently, the Government’s intention is to exempt from taxation any lease, being a perpetual lease without revaluation, or a lease with a right of purchase. We may assume, therefore, that the Government wishes to give some relief to persons who hold perpetual leases from the Crown. As far as I know the number of perpetual leases without revaluation is infinitesimal. If it is the intention of the Government to exempt pastoral leases, the proviso in the bill does not- achieve that purpose, because in Western Australia, and, I understand, most of the other States also, there are practically no perpetual leases without re-valuation. In most instances the State has a right to re-value at certain stated periods. In Western Australia there are no rightofpurchase leases. There are, however, conditionalpurchase leases, under which the lessee pays instalments for a period of about 20 years, at the end of which period he obtains the freehold. It would be interesting to learn from the Minister where are the leases that are covered by the Government’s proposal. Leases from the Crown of land used for agricultural, pastoral, or grazing purposes, should not be taxed if they have been held for a period of three years or more. In most of the States there are large areas of unoccupied waste Crown lands. People should be encouraged to take up these areas and improve them. Exemption from taxation might be one form of encouragement. Our aim should be to increase our export trade in primary products. To do this we should encourage the occupation of all land suitable for agricultural, pastoral or grazing purposes. I agree that safeguards should be included in our taxation legislation against speculators, so my amendment provides that the lease must be held by the owner for threeyears. This condition will be a guarantee of the bona fides of the lessee, who, in the first year of his lease, will bc obliged to incur certain expenditure for stocking the land. A large area in Western Australia, extending practically from a little north of Geraldton to near Wyndham and the gold-fields as well, is held under pastoral leases, which expire in 1948. These leases contain a Condition which gives the Crown the right to re-value at stated periods.

Senator Rae:

– That country is held on very low rentals.

Senator E B JOHNSTON:

– The rental is from 10s. to 25s. per 1,000 acres. About three or four years ago the charge was considerably increased by the Pastoral Assessment Board.

Unfortunately, the prospects of the pastoral industry in Western Australia are not favorable. A few days ago it was reported in one of the Sydney newspapers that 60,000 sheep in one district would have to be destroyed owing to the shortage of feed and the high cost of transport to agistment areas. The posi tion of the industry is such that the holders of Crown leases will not be able to bear any fresh taxation burdens. I hope that the Minister will accept my amendment, which will give some relief to those engaged in the agricultural and pastoral industries.

SenatorDALY (South Australia - VicePresident of the Executive Council) [4.15]. - I invite the committee to study this amendment in relation to the clause in which the proviso appears, and to determine whether, if adopted, it would not produce an absolute absurdity. The proviso is inserted to exempt leases which so closely resemble freehold property, that it is difficult to make a distinction. This is an income tax assessment bill under which a clear line of demarcation between capital and income has to be drawn. This particular class of pastoral lease is granted in every State, with the exception of Western Australia. It is the only class of lease resembling freehold; but the honorable senator suggests that another form of lease should also be included. If this amendment were accepted, the position would be chaotic, seeing that throughout the bill a clear distinction is made between freehold and leasehold land. It is provided that certain moneys represent an accretion of capital, and that other moneys represent income. Under the proviso, a legitimate exemption is made. In effect, the amendment provides that this particular class of leasehold shall, for the purposes of this measure be deemed to be freehold land. The proviso has been inserted as a result of a number of cases heard before the High Court, and because of the existence of a class of lease which so closely resembles freehold land, that under the law such cases can be treated as freehold. It is unreasonable to ask the National Parliament to declare that every form of leasehold shall be deemed to be freehold.

Senator E B Johnston:

– A similar amendment was moved in another place.

Senator DALY:

– I admit that, and that amendment was no doubt submitted with the best of intentions. Throughout the bill we are attempting to draw a distinction between capital and income, and for the purposes of this measure to bring within the definition of freehold a form of leasehold, which in reality so closely resembles freehold that it is difficult to make a distinction. A number of other leases are granted, such as the lease of an hotel, but which by no stretch of imagination can be regarded as freehold

It will simply mean that if the amendment is carried other clauses in the hill will. have to be reconsidered and the whole measure re-cast. By adopting the amendment we would be declaring that all forms of leasehold should, for the purposes of income taxation, be deemed to be freehold. I shudder to think what would happen if the High Court endeavoured to interpret the intention of Parliament, if such an amendment were adopted. To accede to the honorable senator’s request would be to make it even more difficult to get out of that Serbonian bog to which Senator McLachlan referred. I

Urge the honorable senator not to press his amendment, and I trust that the committee will treat this particular clause seriously. This is an innovation in legal and parliamentary practice, and a proposal which should not be lightly considered by the legislature. This clause has been inserted in view of certain judicial decisions by the High Court on various sections of our income taxation law, and if the principle is departed from it will mean upsetting a well-established practice.

Senator MCLACHLAN:
South Australia

– The acceptance of this amendment would have an important bearing upon other clauses which have already been passed, and would not, I submit, achieve the object which Senator E. B. Johnston desires. It would, I believe, increase the difficulties and anomalies which we wish to avoid, and make it even more difficult to simplify our income taxationlegislation, as suggested by Senator Lawson.

Amendment negatived.

Senator Sir GEORGE PEARCE (Western Australia) [4.23]. - I understand that paragraph i is an attempt to qualify the existing section of the act in regard to the value of Wool and of sheep, on the assumption that sheep have increased in value, as apart from the wool, and to arrive at that accretion of value of sheep. Am I right in assuming that this paragraph is not to be retrospective, and that a taxpayer having paid his tax under the existing act will not be re-assessed because of this system of differentiation between thevalue of sheep and the value of wool.

Senator DALY:

– This amendment will apply to all assessments made after the passing of this measure; but not to prior assessments.

Clause agreed to.

Clause 7 agreed to.

Clause 8 (Taxation of companies).

Senator Sir GEORGE PEARCE (Western Australia) [4.25]. - This clause amends section 20 -

  1. By omitting sub-section (1.),and inserting in its stead the following sub-section:- (1.) In calculating the taxable income of a co-operative company there shall be deducted’, in addition to any other deduction allowed under this act. so much of the assessable income of the company as -
  2. in the case of a company having as its primary object that specified in paragraph (b) of subsection (1.) (a) of this section - is applied by the company for or towards the repayment of any money loaned to the company by a government of the Commonwealth or of a State to enable the company to acquire assets which are required for the purpose of carrying on the businessof the company or to pay that government for assets so required which the company has taken over from that government. lis sub-paragraph c of paragraph a to be retrospective to the 1st July, 1925?
Senator Daly:

– No.

Senator Sir GEORGE PEARCE:

– Should not the word “ required “ after the words “ assets so “ be “ acquired “ ?

Senator McLachlan:

-The word “required “, first occurring, appears to be correct ; but in the second instance should, I think, be “ acquired “.

Senator Daly:

-I am advised that “ required “ is considered satisfactory in each instance.

Clause agreed to.

Clause 9 agreed to.

Clause 10-

After section 21 of the principal act the following section is inserted: - “21a. - (1.) Notwithstanding anything contained in this act, where the Commissioner is of the opinion that any company formed after the commencement of the Income Tax Assessment Act 1915, being a company wherein not less than ninety per centum of the paid-up capital is represented by shares held by or on behalf of not more than ten individuals, or a companyhaving such a company as its principal shareholder, has been formed for the purpose, inter alia, of relieving any person or persons specified by the Commissioner (other than a company) from any liability to which he or they would have been subject under this act if the company had not been formed, and that purpose is, in the opinion of the Commissioner, effective in the year in which the income was derived, that company shall-

where there is in the opinion of the Commissioner only one such person - be deemed to be an individually owned private company; or

where there are in the opinion of the Commissioner two or more such persons - be deemed to be a severally owned private company.”

Senator E B JOHNSTON:
Western Australia

– An injustice will be done under this clause unless its application is confined to companies formed for the purpose of evading taxation. I move -

That the words “ inter alia “, sub-section 1, of proposed new section 21a be left out.

Many bona fide companies may be brought under this provision merely at the whimof the Commissioner, although they were formed for legitimate purposes under the law of the land. Numbers of companies have been formed with the object of limiting the personal liability of their members. Among them are pastoral and trading companies in all the States. The intention of the amendment is to limit the operation of the section to companies formed for the purpose of evading taxation. The sub-section is harsh also in that it is to be retrospective to 1915. An unsuccessful effort was made in another place to delete the words “ inter alia”. I hope that the amendment will be agreed to, otherwise the Commissioner could harass bona fide companies, which would have no right of appeal. Should it be defeated, I propose to move a new clause to limit the operation of this section to the future, so that companies which have been carrying on legitimately for fifteen years shall not be brought under its provisions.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– If the amendment is agreed to, the clause will be ruinous. The Com missioner would then have to prove- that the company had been formed solely for the purpose of evading taxation. I think that the honorable senator has misinterpreted the section. In its present form it provides that the Commissioner may deal with companies which have been formed for various purposes, included among them being the evasion of taxation, but if the words “inter alia” are omitted he would be restricted to com panies formed for the express purpose of evading taxation. Instead of imposing a hardship on taxpayers, the clause in its present form provides them with some measure of relief, for it allows the Commissioner some discretion in cases of hardship. The clause is consistent with the principles ordinarily followed in legislation of this kind. I urge the committee to reject the amendment.

Amendment negatived.

Senator Sir GEORGE PEARCE (WesternAustralia) [4.37]. - Sub-section 2 of’ the proposed new section 21a provides that -

For the purposes of this section the expression “ shares held by or on behalf of “ or any expression of similar import, includes any share held by or in the name of - -

Then follow the various classes of shareholders affected. The words of which sub-section 2 gives the definition appear in sub-section 1, which provides that the Commissioner may exercise a discretion as to whether a company has been formed, among other reasons, for the purpose of evading taxation. In arriving at a decision the Commissioner takes note of the way which the shares are held, namely, as set out in paragraphs a, b, and c of sub-section 2. The word “ includes “ in sub-section 2 is too embracive. I suggest. that it be left out and the words “shall mean” inserted in its place. The word “ includes “ is so vague that no one knows what is included. Why not make the sub-section definite? Even if the words “ shall mean “ are substituted for “ includes “ the sub-section will still be wide in its application, for it deals with shares’held by or on behalf of various persons, or an expression of similar import. It might as well provide for shares held in any way. The language should be definite, so that the persons concerned might know what powers are vested in the Commissioner. After a company has been operating for a number of years, it should not be possible for the Commissioner to come along and say that it was formed for the purpose ofevading taxation. The term “ or any expression of similar import “ implies that Parliament leaves to the discretion of the Commissioner matters which should be definitely set out in legislation.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– The word “includes” is capable of a very simple explanation. Sub-section 2 is an inclusive definition. If the word “ means “ were substituted, the words “shares ‘held by or on behalf of or any expression of similar import “, whatever their meaning according to a standard English dictionary, would have a special meaning; they would be limited to the particular classes of persons referred to in paragraphs a. b, and c. The insertion of the word “includes” rather than “ means “ transforms an exhaustive definition into an inclusive definition, but does not enlarge the common usage meaning of the words “ ‘ by or on behalf of ‘ or any expression of similar import “. For the purpose of this act those words still retain the full signification to which they are entitled according to any accepted English dictionary. But in order to remove any possibility of doubt, and to enable the man in the street to know what is intended by the words “ ‘ by or on behalf of’ or any expression of similar import” the classes of persons are set out in paragraphs a, b, andc. Surely the Leader of the Opposition (Senator Sir George Pearce) does not suggest that if we are to tax shares held ‘ by or on behalf of a person’, we should limit those words to an extent which will not give them their full meaning. We should not limit them. It would probably be preferable to insert an inclusive definition.

Senator McLachlan:

– I suggest that the use of those words enlarges the scope of the words that follow.

Senator DALY:

– If that was the suggestion I could understand it. An inclusive definition could bring into the ordinary definitions words which would not normally be read into it. But the suggestion of the Leader of the Opposition is that the word “includes” gives a wider power of interpretation to the Commissioner of the words “by or on behalf of.” My suggestion is that the word “ includes “ does nothing of the sort, but paragraphs a, b, and c may possibly rope into the definition words which might otherwise not be there. The point raised by the right honorable the Leader of the Opposition was that we should have an exclusive and not an inclusive definition of those words.I suggest that that would not be proper. The inclusive definition does not give the Commissioner the right to place an interpretation on the words “ by or on behalf of” other than that which would be ordinarily understood by the use of those words, except insofar as is specifically stated in the bill. Therefore, I suggest that the clause should be allowed to remain in its present form.

Senator McLACHLAN:
South Australia

– I may be approaching the matter from a somewhat different angle from that of the Leader of the Government in the Senate” (Senator Daly). Proposed new sub-section 3 plays upon the words “ shares held by or on behalf of”, which appear in proposed now sub-section 1. It reads -

For the purposes of this section the expression “shares held by or on behalf of”, or any expression of similar import, includes any share held by or in the name of -

  1. any nominee.

One would think that there was no necessity to include that paragraph. Paragraph b follows -

Any person who is a relative by blood, marriage or adoption, of a shareholder, if that relative has acquired the share by gift from that shareholder or by means of money received from that shareholder: and

any cestui que trust to whom a trustee being the legal owner of shares in a private company, is required by the terms of the “trust to pay the income, if any, derived by him from the ownership of the shares.

I do not know what significance the blood relationship has, except that it gives a more comprehensive power to the Commissioner when dealing with family companies. One gets a little fogged in the multitude of these provisos and stipulations, and I should like my mind clarified as to what is the effect of the word “ includes.” Later in the afternoon we shall hate a first-class discussion upon proposed new section 21, but in the meantime I should like my mind cleared as to the words to which Senator Daly referred, from a slightly different angle.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– The definition “ any person who is a relative by blood, marriage, or adoption, of a shareholder, if that relative has acquired the shares by gift from t hat shareholder or by means of money received from that shareholder “ clearly sets out that for the purposes of this measure such a person shall be deemed to have acquired “ shares held by or on behalf of” the shareholder.

Senator E B Johnston:

– Cannot a parent give his child an interest in his business ?

Senator DALY:

– Of course, he can.

Senator McLachlan:

– I cannot see the necessity for the use of the word “ includes “ in either of the three collocations a. b, or c.

Senator DALY:

– There is this point about it : I might nominate “ A “ to hold shares on behalf of my wife. Although “ A “ would then be my nominee, the shares could not be held by me on his behalf. They would be held on behalf of my wife.

Senator McLachlan:

– The words “ any nominee “ do not get us any further.

Senator DALY:

– I am prepared to admit that it might not be necessary to i nclude the words “ any nominee,” but they certainly do no harm. The proposed new sub-section, probably, extends the language somewhat; but it does not alter the general scheme of the measure.

Senator McLachlan:

– It rather points it.

Senator DALY:

– That is so.

Senator MCLACHLAN:
South Australia

– I propose to move an amendment to proposed new sub-clause 3 to give relief to companies legitimately formed prior to the enactment of this legislation.

Senator Sir George Pearce:

– An amendment of which I have given notice covers, I think, the point with which the honorable senator proposes to deal.

SenatorMcLACHLAN.- Then I shall give way to the right honorable senator.

Senator Sir GEORGE PEARCE (Western Australia) [4.55]. - I move -

That the following proviso be added to proposed new section 21a: - “ Provided that the aggregate amount of tax that will be payable by any person being a shareholder of such company shall not be greater than the tax which would be payable by that person, if the company had not been formed.

Where services are rendered by any shareholder to the company in the ordinary course of the company’s business, the remuneration of such person shall be an allowable deduction.”

There are two points dealt with in my amendment, and I think that the first is associated with the amendment that Senator McLachlan has in mind. The rate for companies fixed by the Commissioner might be higher than the rate that would have been payable by the person concerned if the company had not been formed. My amendment is framed to correct that anomaly. I am asking that the amendment should be inserted at the end of the proposed new section, because it also concerns proposed sub-paragraphs 4, 5 and 6. As to the final paragraph of the amendment, I cite the example of a family partnership into which a man has taken his sons. Supposing that one of those sons has been acting as manager of the business or farm, as the case may be, surely he is entitled to take into consideration the salary paid to that son ?

Senator Daly:

– He is already entitled to do so, if the company is a bona fide one. The new provision is merely to deal with crooks.

Sir GEORGE PEARCE:
WESTERN AUSTRALIA

– Even if it is not a bona fide company, and a man has formed a family company and is paying his son a salary as manager of the company, surely he is entitled to deduct the amount of the salary so paid, as he would be entitled to do if he were taxed as an individual taxpayer. The two principles raised in my amendment are, first that when a company is declared not to be a company the rate of the tax should not be greater than would be imposed on the individual taxpayer, and secondly that the remuneration paid for services rendered by any shareholder to the company shall be an allowable deduction.

Senator DALY (South Australia - Vice-President of the Executive Council)

Leader of the Opposition stood by itself it would be a perfectly reasonable one, but I am sure that honorable senators will appreciate that it is most unreasonable when read in conjunction with the other provisions of clause 10. They apply not to a bona fide company, but to those companies which are formed for the purpose of evading the taxation law. If a man for the deliberate purpose of evading income tax forms a company, why should this Parliament extend any consideration to him? If the offence is proved against him, why should he not be compelled to pay the full penalty for his misdeed? Where a man’s son is bona fide employed in the business of a bona fide company, the salary paid is treated as a deduction in the ordinary way, but if it is not a bona fide company the effect of the amendment would be to fetter the discretion of the Taxation Commissioner. In the administration of the department a case has been discovered in which a family company made a profit of £20,000 during one year, and that profit was distributed by subterranean methods among the various shareholders. In one case known to the department, a director of a- company drawing £200 a year was only 2£ years old.

Senator McLachlan:

– Parliament wishes to help the Government to get at those people, but there are others who should be given every consideration.

Senator DALY:

– The provisions of clause 10 do not apply until it is established that a company has been formed for the purpose of relieving some persons from the liability to pay his just taxation. The amendment would fetter the discretion of the Taxation Commissioner by declaring that the principal shareholder of such a company cannot be forced to pay any higher tax than he would have paid had he been in a partnership. He could still say, “I was prepared to pay that infant £200.”

Senator Sir George Pearce:

– But the man who was actually managing a business would be entitled to draw his salary.

Senator DALY:

– And possibly the £200 was actually paid to the infant shareholder, but the whole point is that an honest and straightforward company has nothing to fear from the provisions of the bill as it stands. The discretion of the Commissioner is absolutely limited to companies that are formed for the purpose of relieving persons from paying their just taxation. Senator McLachlan says that the Senate is anxious to help the Government. If we are all agreed on the principle that transactions, which are not bona fide, should be controlled, why should we waste our time in considering what form of relief we can give to the man who is found to have broken the law ? Let such a man take the full consequences of what he has done. If he has formed a company for the purpose of enabling him to evade taxation, and given his daughter 200 shares in it, that daughter should be treated as his nominee. Against the decision of the Commissioner, there is an appeal to the Board of Review, but if the decision of the Commissioner, that the transaction is not bona fide, is held to be sound, why should we pass an amendment which fetters the Commissioner’s discretion, and reduces the liability of the shareholder, who has nominee shareholders in a company he has formed?

Senator Sir George Pearce:

– The amendment provides that his tax shall not exceed what otherwise he would be liable to pay.

Senator DALY:

– If the amendment were carried, the taxpayer could say, “If I had not formed a company I should still have paid that infant £200 to assist me in the management of the concern.5’ Elsewhere in the bill we charge the Commissioner with the responsibility of inquiring into these transactions and judging whether they are bogus or not, bin under the amendment, if a transaction is found to be bogus, the person who is found to have been doing something wrong would have the opportunity to say, “1 am not in any worse position by forming a company”. That is a method of legislating which is absolutely abhorrent to my ideas of what should be done. I have always understood that the wrongdoer should be made to pay the full penalty. Senator Pearce will admit that his amendment holds out to the people, who desire to form bogus companies, the promise that if they do so and are found out they will be in no worse position from the taxation standpoint than if they had not set out to form companies for thepurpose of evading taxation. Under those circumstances, bogus companies will be formed, and, if they are found out, will bless the majority in this chamber which prevented the Commissioner from taking steps which might have prevented other companies from being so formed. Before honorable senators pass the amendment, I invite them to consider the proviso in relation to the other provisions of the clause, and ask themselves whether they are acting fairly in declaring that though they are willing to prevent the formation of bogus companies for the purpose of evading taxation, they are also prepared to see that the persons who form these companies shall be in no way penalized.

Senator McLACHLAN:
South Australia

– Honorable senators have no desire to do what Senator Daly suggests they are willing to do. There are in the Commonwealth about 700 ordinary companies, and 15,000 proprietary companies, or what may be called private companies, or family companies - combinations of people who have brought their capital together : and there has been a considerable amount of alarm regarding this provision of the bill. The alarm may be quite uncalled for, but it seems to me that there is not sufficient differentiation in the clause. It has always been quite legitimate for any person to form a company, if he can by that means pay less tax than he would have to pay in carrying on as a private individual.

SenatorRae. -We want to prevent that in the future.

Senator McLACHLAN:

– I am quite with the honorable senator in that regard. But many people who have formed these companies quite legitimately and for proper reasons are to be brought into the same bull-ring as the gentleman whom Senator Daly has denounced. No one desires that those who commit real improprieties in relation to the payment of income tax should escape, but a matter has been submitted to me which touches companies thatare legitimately formed within the four corners of the law. I have not had the opportunity for a frank discussion with those people who are looking after the interests of legitimate privatelyowned concerns,but, when I in vited them to give me a lead as to how their position might be fairly protected, they suggested the insertion of the following proviso: -

Provided that any company to which this section applies shall be entitled to a rebate in its assessment of a sum equal to the amount by which its tax on one-third of its taxable income exceeds the tax which would be payable on that portion of the company’s income as is imposed on the taxable income of the company to which this section does not apply.

I am, with the Leader of the Opposition (Senator Sir George Pearce), prepared to leave the discretion in the hands of the Commissioner of Taxation. Huge proprietary concerns have been formed through the grouping of family interests for the purpose of, among other things, developing the particular business enterprises in which they were interested. Under the law as it stood this was a perfectly legitimate thing to do, and hitherto it has not been questioned by either the department or the Commissioner of Taxation.

SenatorRae. - There has been public comment.

Senator McLACHLAN:

– But, as I have already pointed out, it was a perfectly legitimate course to take. I agree that where the right in law has been abused and fraud perpetrated, the widest possible discretion should be given to the Commissioner to punish wrong-doers. I contend, however, that some measure of protection should be given to those who l egitimately and honestly formed private companies. I am afraid there is a very definite impression abroad that those people who legitimately and honestly formed themselves into private companies are to be brought into the stockade with those other persons about whose actions we have heard so much. I do not for one moment suggest that the Government or the Commissioner intends to do them any injustice as regards happenings of the past. Proposed new section -21a provides, in sub-section l, that if the Commissioner is of the opinion that any company established after the commencement of the Income Tax Assessment Act 1915, in which 90 per cent. of the paidup capital is represented by shares held by or on behalf of not more than ten individuals has been formed for the purpose, among other things, of relieving any person or persons from taxation, the company shall be deemed to be an individuallyowned private company or a severally-owned private company, as the case may be. There is not a shadow of doubt that certain persons have formed themselves intoprivate companies in order to secure relief from taxation; but as I have pointed out, under the law as it stood, it was a perfectly legitimate course to take. It came within the dictum of Lord Sumner in the case to which I alluded earlier in the debate this afternoon. Such action was within the law.

Senator Rae:

– We want it to be not within the law.

Senator McLACHLAN:

– I am with the honorable senator as regards the future, and if the Commissioner of Taxation can give us some assurance of relief in respect of those persons to whom I have directed attention, I shall have no objection. I suggest, therefore, that the Minister postpone consideration of the clause in order to confer with the Commissioner of Taxation so that we may avoid embarking on a protracted discussion on this principle. If we could vest discretion in the Minister I should be content. The Commissioner must know that, in many circumstances, the formation of private companies was a perfectly legitimate business development, and that this course was taken without intent to exploit the revenues of the Crown illegally.

SenatorRAE (New South Wales) [5.22]. - I cannot understand the solicitude of honorable senators opposite for those persons who have been evading taxation. I take it that the words “inter alia “ in proposed new section 21a were inserted for the purpose of including companies which were formed for the purpose, among other things, of evading taxation. I should be sorry to think that honorable senators opposite have a soft spot in their hearts for “ crooks “ ; but it will be very difficult to convince the public that they have not if they persist in enlarging the loopholes by which such persons may continue to escape the legitimate taxation demands of the Commonwealth. The intention of the amendment submitted by the right honorable the Leader of the Opposition is to nullify the penal provisions inserted by the Government. We take the view that those who have evaded taxation in the past should be compelled to pay in the future. This is the object of the bill. The purpose of the amendment is to prevent persons being nominees of bogus private companies from being compelled to pay the higher rate of taxation which would have been levied had the company not been formed. The object of this legislation is to prevent such tricks as that from being successful. The amendment of the Leader of the Opposition and the amendment suggested by Senator McLachlan would make the path of the wrongdoer as easy as ever. Senator McLachlan has argued that the formation of these private companies was a perfectly legitimate proceeding under the law. We all know that in the majority of instances the principal object the persons concerned had in view was to avoid payment of the higher rates of taxation which would have been levied upon them as individual taxpayers.

Senator H E ELLIOTT:
VICTORIA · NAT

– The object of the amendment is to put the individuals in the same position that they would have occupied if the company had not been formed.

Senator RAE:

– Then it will be just as safe for individuals in future to continue to be members of such private companies, because the amendment, if carried, will remove the penalties which this clause imposes upon them. If 90 per cent. of the shares in a private company are held by ten persons or a number fewer than ten, clearly it is not a company in the ordinary acceptation of the term.

SenatorHerbert Hays. - The law allows the formation of private companies.

Senator RAE:

– I know it does. But this measure will prevent the formation of such companies for tho purpose, among other things, of evading the higher rates of taxation which would be levied upon persons as individual income-tax payers.

Senator Sir George Pearce:

– Under my amendment they will not, as individuals, pay income at a rate higher than would be levied in the. case of a company.

Senator RAE:

– If I were in receipt of a taxable income of £500 a year, and if three or four members of my family were in the same position, the rate of tax on the individual incomes would be higher than the rate on the individuals as members of a private company. The Commissioner has to decide, among other things, whether such action is taken with the intention of evading taxation. I contend that the effect of the amendment moved by the Leader of the Opposition (Senator Pearce) and that foreshadowed by Senator McLachlan, is to relieve the. taxation of those who have not paid their fair share in the past. As an individual, I cannot escape taxation. I constantly meet persons who are grumbling because they have to pay small amounts in income taxation; but I always inform them that they should be thankful because they have an income on which taxation can be imposed.

Senator H E ELLIOTT:
VICTORIA · NAT

– How can any one be exempt under the amendment moved by the Leader of the Opposition?

Senator RAE:

– It would relieve such persons as I have mentioned of the obligation to pay what would otherwise be a higher tax. It has been submitted only to safeguard those individuals, and to prevent them from being mulcted in the full amount, which they would otherwise pay. The effect of the amendment is to restrict the powers of the Commissioner to levy taxation upon such individuals. Senator McLachlan said that persons associated with numerous legitimate companies are in a state of alarm because they cannot understand the proposals of the Government; but surely we are not here to legislate for the purpose of allaying people’s fears. My contention is that this provision is merely to cover companies formed for the purpose, perhaps, among other things, of evading taxation. The representatives of such companies appear to have many friends opposite, who wish to assist them in indulging in this practice. As many persons, receiving slightly more than the basic wage have to pay income taxation, I cannot sympathize with those whom the Leader of the Opposition is endeavouring to protect. While it is permissible for persons engaged in business to pay salaries to their own children employed in that business, yet, in the case cited by the Minister, the placing of a minor on the pay sheet clearly shows that certain bogus companies are operating to-day, and are trying to cheat the public. If loopholes are allowed to remain, heavier taxation will have to be paid by honest persons who have no desire to indulge in such practices.

Senator Sir GEORGE PEARCE (Western Australia) [5.35]. - I resent the suggestion of the Minister (Senator Daly) and Senator Rae, that, in submitting this amendment, I am endeavouring to protect those who, by forming bogus companies, are evading the payment of income tax.

Senator Daly:

– I did not mean that that was the right honorable senator’s intention.

Senator Rae:

– I said the amendment would have that effect.

Senator Sir GEORGE PEARCE.That is the only interpretation which can be placed upon their remarks. I am not endeavouring to deal with bogus companies which may be formed in the future, hut with genuine companies formed in the past, and which, if this clause is passed, will not be able to comply with this provision. The companies I have in mind are not bogus companies: but genuine companies operating within the law. The Minister referred to a company which had on its board of directors a child of 2i years of age. I am surprised to learn that under the company law in any of the States a child of that age can be a shareholder.

Senator O’Halloran:

– Under the company law in South Australia, a minor can participate in the profits of a company.

Senator Sir GEORGE PEARCE.How can a minor be a director of a company if he is not permitted to be a shareholder? Since our Income Tax Assessment Act has been in operation, a number of persons have, for various reasons, formed private companies. Such companies have been formed in some instances so that the shareholders will pay smaller amounts in income taxation than they would as individuals, which is perfectly legitimate.

Senator Daly:

– Did I understand the right honorable senator to say that a minor cannot be a shareholder in a company ?

Senator Sir GEORGE PEARCE.I think that that is the law in most of -‘ the States.

Senator Daly:

– I do not think it is in all the States.

Senator Sir GEORGE PEARCE:

– The interests of a minor can he held only by a trustee. These companies have been formed for several purposes, one of which is to avoid paying income taxation at the rate applicable to individuals. Are we to be so hypocritical as to say that if we can lawfully reduce our income taxation we will not do so. Is any one such a smug humbug that he would not, in his own interest, do what he knew to be lawful? That is what some companies have done. They have found that perfectly legal private companies can be formed, and that in that way the taxation of the shareholders can be reduced. We are now proposing to amend the law to provide that companies formed in that way will not reap the advantage in the future. If this provision becomes law, some of these companies will go into liquidation, because their shareholders will not be able to derive the benefit of lower taxation. My amendment provides that they should not be penalized on the past year’s income, because they formed a perfectly lawful company, and, by doing so were enabled to pay a reduced amount of income taxation. I can see that there is some force in the contention of the Minister that if my amendment is carried it will apply, not only to companies formed in the past, but those to be formed in the future. There would be no deterrent to persons wishing to form companies to evade income taxation. I have no desire to protect those who wish to evade the law ; or to put them in a more advantageous position than any one else. I can see, however, that if my amendment is carried it will have that effect. I suggest to the Minister, however, that private companies legitimately formed since the act has been in operation, and which are in business to-day, should not he penalized for something which has been legally done in the past. There are two classes of private companies - those legitimately formed, and those formed with the object of evading income taxation. I have no wish to protect those who wish to evade the law; hut if something can be done to protect those who in the past have legitimately formed private companies, I shall withdraw my amendment.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– I can assure the Leader of the Opposition (Senator Pearce) that I had no intention whatever of suggesting that he was holding a brief for those conducting bogus companies.- The impression I desired to convey was that the amendment, if carried, would have the effect of assisting those who wished to break the law. I know that the right honorable gentleman would not utilize his position in this chamber for that purpose. I am assured by the Commissioner of Taxation that the clause will not apply to any companies that have been assessed for any past year; but that it is essential to have this provision to permit of its application to bogus companies not yet assessed for some past years. Honorable senators are aware that a well-known company is at present taking advantage of the law in this respect. Even if we agreed to the suggestion of the Leader of the Opposition not to allow the law to operate retrospectively, but prospectively, it would benefit taxpayers whose assessments have been deliberately held up by the department because it has not been satisfied as to the bona fides of those concerned. The policy the Government will pursue will be to interpret the provision in accordance with the definite pronouncement of the Commissioner, that I have just given.

Senator Sir George Pearce:

– In view of the Minister’s statement, I ask leave to withdraw my amendment.

Amendment - by leave - withdrawn.

Senator E B JOHNSTON:
Western Australia

– I have circulated an amendment to the effect that this provision shall not apply to assessments made prior to the financial year beginning on the first day of July, 1930. I hold no brief for law-breakers or bogus companies, but the telegrams I have received from a number of important small companies in Western Australia indicate that they view these provisions with alarm. In view, however, of the very definite assurance given by the Minister that this provision will not apply to companies which have been assessed and have paid their tax, I do not propose to proceed with the amendment.

Senator McLACHLAN:
South Australia

– Some honorable senators appear to have misunderstood the position. A man may divide his property among his children, allowing them to retain any income derivable from it, but if, later, he sees fit to form a company, he comes within the scope of this legislation, although he may have been perfectly innocent of any wrong intention. I wish to make my position clear. It was with no desire to assist any one to evade the law that I supported the amendment of the Leader of the Opposition, but I feel that an injustice is still being done to legitimate companies. I accept the Minister’s assurance as to the retrospectivity of this provision, and I ask him to extend the same consideration to cases which might arise in the future. Some of these concerns will continue to operate, and if this legislation is applied to them - and the Commissioner will have no discretion but to apply it to them - they will be penalized. I suggest that we should vest in the Commissioner some discretionary power to meet such cases. That discretion should be unfettered, for I believe that he would use it only to deal with wrong-doers. I imagine, however, that the Commissioner will find himself in difficulties with some of these private companies. While not desirous of delaying the committee, or of proposing further amendments to this clause at this stage, I suggest that the Minister should see if something can be done to vest in the Commissioner an unfettered discretionary power to deal with evil-doers.

SenatorRAE (New South Wales) [5.50]. - In my remarks just now, I had no intention of attributing to honorable senators opposite any desire to shelter wrong-doers. I merely wished to convey the opinion that their action would have that effect, and that, therefore, obloquy would rest on them.

Clause agreed to.

Clause 11 -

Section 23 of the principal act is amended -

  1. by omitting from paragraph (g) of sub-section (1.) the words “a tax payer who is in receipt of salary, wages, allowances, stipends or annuity, or whose taxable “ and inserting in their stead the words “ the taxpayer, if he is a resident and is in receipt of salary, wages, allowances, stipends or annuity, as if his net”;
Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– I move -

That the word “as”, paragraph (e), be left out with a view to insert in lieu thereof the word “ or “.

This amendment is to correct a typographical error. The object of the main part of the amendment is to limit to resident taxpayers the concession granted by paragraph g of the principal act in relation to the deduction of contributions to pension funds. There are two classes of persons who are entitled to that concession: (1) all persons receiving salary and wages, stipends and annuities irrespective of the amount of their income; and (2) all other persons, provided their net income does not exceed £800. The original amendment in the bill, as introduced, was so worded that it threw the first class in the second group, and deprived salary and wage-earners of the concession if their net income exceeded £800. That was not intended. Accordingly, an amendment was moved in another place to rectify that mistake, but through a typographical error it remains. The alteration of the word “ as “ to “ or “ will rectify the error and recreate the two classes mentioned.

Amendment agreed to.

Senator Sir GEORGE PEARCE (Western Australia) [5.53]. - I should be glad if the Vice-President of the Executive Council (Senator Daly) would tell us why paragraph p, dealing with had debts, is made retrospective to 1928. I imagine that all bad debts have been provided for in the assessments already made. It will be harassing to taxpayers if further assessments are now to be made.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– When an amending bill was before Parliament in 1928, it was intended to do what is now proposed; but after that legislation had been passed by Parliament it was discovered that the legislative authority to that end was not complete.

The department followed the practice of allowing deduction according to what it believed to be the spirit of the legislation, ft was felt that the introduction of this bill offered a favorable opportunity to give legislative sanction to the action of the department in its interpretation of the will of Parliament. The intention is to do now what was intended in 1928, and also to validate the action taken by the department since then.

Senator LAWSON:
Victoria

.- This clause seeks to amend section 23 of the principal act, which deals with deductions. During the second-reading debate I asked the Minister whether he would consent to a further addition to subparagraph ii of paragraph h of this section, which allows as deduction from assessable income gifts of £1 and upwards made to public charitable institutions, universities or colleges affiliated therewith, or to a war memorial. In that category are art galleries and museums. I have modified the proposal which I previously submitted to the Minister, in order to meet some of the objections which he urged. I now move -

That the following new paragraph be inserted : - (fa) by inserting at the end of paragraph (h) the following sub-paragraph: -

gifts of one pound and upwards made out of the assessable income derived during the year in which the gifts are made to the building fund of any Public Art Gallery and/or Museum, if the gifts are verified to the satisfaction of the Commissioner ‘ “.

Probably the insertion of these words in sub-paragraph ii, before the words “ to public universities “, would achieve the same purpose; I am not concerned with the manner of making the amendment, so long as it is made. The amendment does not affect gifts for the maintenance of art galleries and museums already erected in all the principal capital cities of the Commonwealth. It will apply only in the case of country towns which embark on building projects of that nature. It is undoubtedly a wise policy to decentralize art, and to give country residents an opportunity of enjoying the benefits of art galleries and museums. Any country residents who may be prepared to make the necessary sacrifice to enable such buildings to be erected might be encouraged to do so if their gifts were allowable as a deduction from assessable income. We should provide for such cases. In its legal significance the word “ charitable “ might even include such an institution as an art gallery; but it is better to provide specifically for the cases I have mentioned. The amendment is not likely to have much effect on the revenue, for such instances will occur only once in any particular locality. When I was Premier of Victoria, I offered a grant for the erection of buildings for the University of Melbourne, provided that a certain proportion of the cost was raised privately. At one time, no encouragement was given to public-spirited citizens to make gifts for charitable or educational purposes. The liability to pay income tax on such amounts acted as a deterrent to private benevolence. If institutionsof this nature were not aided by private beneficence, the total burden would fall upon the Government. These subscriptions save the Government a great deal of expense in maintaining our universities and charitable institutions, and the same may be said with regard to art galleries. Generous citizens who make grants to public institutions of this description deserve to be encouraged. I see no logical reason why their gifts should be excluded from the list of taxation exemptions. The loss of income to the Government would be a mere bagatelle. I know the difficulties that confront the Treasurer, and realize that it is desirable that all loopholes in the act should be closed ; but this is only a trifle that I ask for. I entreat the Minister not to harden his heart, but to accept my amendment. It would be an encouragement to people to make gifts for the erection of art galleries in country districts. The exemption would not apply to gifts made to similar institutions in the metropolitan area for maintenance, and, as I have specified “ building funds “, the exemption involved would not be too large. I have done that in order to encourage the Minister and the Senate to accept my amendment.

Senator DALY (South Australia - Vice-President of the Executive Council) the amendment, which, on the face of it, would appear to be a perfectly reasonable one. But I ask the committee to consider the position in which the Government finds itself, and to realize the difficulties in the way of increasing existing exemptions. I point out that to assist the study of diseases in cattle is a most laudable object. Some beneficent pastoralist might come along and make a gift of £5,000 to the Council for Scientific and Industrial Research for that purpose; but the gift would not be exempt from taxation. A grant for the purchase of radium to assist in counteracting cancer would be another public spirited action, and there are dozens of other very fine objects that merit our recognition. However, if the Government began to exempt all gifts, from taxation it would never know where it stood. Having agreed that everybody should be taxed, the principle of exempting people simply because they make a donation to some organization is absolutely wrong. -

Senator McLachlan:

– Or even to exempt interest on loans raised by the Government !

Senator DALY:

– It seems most illogical to exempt the interest on such loans from income tax. If this amendment were allowed to go through, the Government would be inundated with applications for exemption from persons who had made contributions of a similar nature. I remind honorable senators that if, by this exemption, the Government sustained a loss of income to the extent of £500, that loss would have to be made up by the rest, of the taxpayers. I suggest that the difficulty is even more real than that presented by me when we were dealing with aero clubs. In view of the very urgent necessity for an equitable distribution of the burden of taxation, I ask honorable senators not to press for an extension of our exemptions, oven for such a laudable object as that mentioned by Senator Lawson. I suggest that it is better to restrict our exemptions until conditions improve. At present the nation cannot afford to relieve anybody of the payment of taxation. I submit that if gestures are to be the order of the day it would be a very bad gesture indeed to suggest that under these new proposals the nation is in such a position that ii can exempt from taxation certain items that were formerly taxable. That would be most unwise, and would make the position of the Government absolutely untenable. The time of Parliament would be taken up in deciding whether it could logically vote against certain requests for exemption advanced by, say. Senator Johnston, seeing that the majority of the Senate had already voted to exempt donations to art galleries. In the circumstances, I trust that the Senate will reject the amendment.

Amendment negatived.

Senator PAYNE:
Tasmania

.- I am very loth indeed to make any suggestion that might be the means of reducing the ‘anticipated revenue that the Government expects to collect this year. But, notwithstanding the financial straits in which the Government finds itself, we should endeavour to allow reasonable deductions to certain persons who are charged with the maintenance of relatives. It has come under my notice thar there are certain taxpayers, people of small means, who have placed upon them the burden of having to maintain a parent or relative who is in indigent circumstances. The Government should make some special provision by which a reasonable deduction could be allowed such people.

Senator Daly:

– It would be very difficult.

Senator PAYNE:

– It is difficult to evolve most legislation. I know that the position would have to be completely safeguarded.

Sitting suspended from 6.15 lo 8 p.m.

Senator PAYNE:

– My purpose is to have an amendment inserted in the bill to provide that a taxpayer who maintains or assists to maintain a parent who is in indigent circumstances shall be allowed to deduct from his assessable income an amount not exceeding £52 per annum, provided the parent is not in receipt of an invalid or old-age pension. There are men in Australia to-day who contribute their quota of income taxation, and who, in addition to having to maintain wives and families, assist in maintaining parents who have no opportunity to take advantage of the invalid or old-age pension. A parent, not being totally incapacitated, may not be eligible for an invalid pension, yet may have no possibility of carrying on without the assistance of a son. No deduction is allowed in respect of expenditure incurred on the maintenance of a household. The expenditure to which I am referring is entirely outside that form of domestic expenditure; it has nothing whatever to do with the maintenance of the taxpayer’s home. I think we ought to encourage the spirit, alive, I am glad to say, among a certain number of our people, which leads them to suffer privations in order that their parents may be maintained in decent comfort, and to my mind, where bona fide expenditure is incurred in that direction, provided it is less than the amount of invalid or old-age pension payable, it should be allowed as a deduction from assessable income for income taxation purposes.

Senator Daly:

– Will the honorable senator tell us what other class of people we must tax in order to make up the deficiency in the revenue?

Senator PAYNE:

– That is not a reasonable question to ask. Surely the perfection of an income tax assessment measure does not rest entirely on extracting all that one can get as a tax-gatherer ! I do not think the Minister would suggest that we should not observe equity in the framing of such a measure.

Senator Daly:

– I do not suggest that.

Senator PAYNE:

– I hope the Minister will look upon my proposal with favour. Of course, I cannot estimate the decrease in revenue involved.

Senator H E ELLIOTT:
VICTORIA · NAT

– It would lead to a saving in the payment of old-age pensions.

Senator PAYNE:

– It would do so, because I know some sons who have made regular contributions to the maintenance of their parents, on the condition that those parents did not apply for the oldage pension. Such a spirit of filial devotion and encouragement should he encouraged. It is with a view to encouraging it that I move -

That the following new paragraph be inserted: - “ (ga)by inserting after paragraph i the following paragraph: -(ia) so much of the assessable income as is paid by a taxpayer to a parent for maintenance who is not in receipt of an invalid or old-age pension, such deduction not to exceed £52 per annum.’ “.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– I must oppose this amendment. The bill has been framed with due regard to the budget. The adoption of the honorable senator’s amendment would involve a re-investigation of the whole financial position, and a re-adjustment of the. incidence of the taxation proposed. Apart from that aspect, the honorable senator seeks to confer a benefit upon a section only.

Senator Payne:

– It is not a proposal to confer a benefit; it is an attempt to remove an injustice.

Senator DALY:

– If an injustice is to be removed, it should be removed in respect toall classes. There are many single men who support their parents; there are others who have to take the place of a father, and become the breadwinners. There is no suggestion by the honorable senator that the amounts spent by them on the maintenance of brothers or sisters should be allowed as deductions. When the previous Administration was in power, there was a suggestion that there should be a bachelor tax, with certain exceptions. But I remember reading that it was found that the field was so wide that it would pay the Government not to have such a tax. It would have involved an inquiry staff of extraordinary dimensions. No one is being unfairly taxed to-day, and, while I have every sympathy with some of the sentiments to which Senator Payne has given expression, I suggest that his amendment, if agreed to, would create a state of chaos. It is all very well to say that we should encourage filial affection ; but does the honorable senator suggest that a son is to Be encouraged to support his parents in order that he may avoid the payment of £2 10s. or £3 in income tax?

Senator Payne:

– Many men need no such encouragement.

Senator DALY:

– Then why should the honorable senator argue on those lines in support of his amendment?

Senator Payne:

– I did not. I complained that they are penalized when they do so.

Senator DALY:

– They are not being penalized. Does the honorable senator suggest that the father who is rearing a family is allowed a deduction commensurate with what he spends upon his children? On that basis the married man should receive a bigger deduction.

Senator Payne:

– No domestic expenditure can be taken into consideration.

Senator DALY:

– I know; but the honorable senator suggests that one class of taxpayers, with dependants, should be exempted. Can he do so without covering the whole field?

Senator Payne:

– Deductions are allowed for children.

Senator DALY:

– Yes; but the deduction allowed is not commensurate with the sacrifice made. The whole thing is so involved that, if the committee decides to accept the honorable senator’s amendment, it will mean the absolute reconsideration of the incidence of taxation. If the honorable senator feels keenly about the matter, there is nothing to prevent him introducing a bill which will bring about a full inquiry into the whole of the incidence of taxation, so that, when one deduction is made, other avenues of taxation will be opened up to make up the deficiency in the revenue.

SenatorH.E. ELLIOTT (Victoria) [8.13]. - I am sorry that the Leader of the Government in the Senate (Senator Daly) cannot accept the amendment. The amount appropriated for old-age pensions is growing to alarming dimensions. People who make an effort to shoulder what I regard as their ordinary obligations should be given some little encouragement to do so. More and more we are departing from the doctrine that it is the duty of children to provide for their parents in their old-age, if the parents have not been able to make sufficient provision for themselves. It is becoming a practice for people who can afford to support their parents to look solely to the State for their maintenance. They say, “Why should we do anything of the sort when we are taxed to support the parents of others, as well as our own ?”

Senator Daly:

– Does the honorable senator think that they will support their parents if we allow them to deduct the cost of doing so from their assessable income?

Senator H E ELLIOTT:
VICTORIA · NAT

– We should do all we can to encourage them to do so. I do not know why we should make any exception even to the extent of £50 if there is nothing in the idea that children should be encouraged to honour their natural obligations. If we could in any way lessen the tendency on the part of certain people to turn to the State for assistance, the State would be very much better off. I strongly support the amendment.

Senator PAYNE:
Tasmania

– I regret that the Minister takes the view that the amendment will complicate the work of the department, and involve a reconsideration of the Government’s financial proposals. Already there is provision in the act to allow as deductions contributions to charitable’ institutions. I see no reason why the same principle should not be extended to contributions by sons to the support of their parents to the extent of, at most, £52 a year. Surely it is a stretch of the imagination to suggest that the question is an involved one. The income tax forms for the preparation of returns provide for certain deductions. No valid reason has been advanced why a taxpayer should not be allowed to include an amount paid towards the maintenance of his parents up to the sum stated. If necessary, he could attach a statutory declaration to satisfy the Commissioner that such payments had been made. When we are considering amendments to the act we should, whenever possible, remove any inequalities, so as to place the burden of taxation more evenly upon the taxpayers of the Commonwealth.

Amendment negatived.

Clause, as amended, agreed to.

Clause 12-

Section twenty-five of the principal act is amended -

  1. by inserting, after paragraph (e), the following paragraph: - ” (ea) any periodical subscription by a person in respect of hie membership of an association (whether corporate or unincorporate) unless -

    1. that subscription is ex pressly allowable as a deduction under any of the provisions of this Act;
    2. the carrying on of a business, or the exercise of a vocation or calling, from which assessable income is derived by him is conditional upon such membership; or
    3. the association carries out, on behalf of its members, during the year in which the assessable income of person was derived, any activity of such a nature that, if carried out by that person on his own behalf, its expense would be an allowance deduction to that person under this act :

Provided that in a case to which this sub-paragraph applies the person shall be entitled to a deduction of only so much of his subscription as bears to the whole of the subscription the same proportion as the losses or outgoings so incurred by the association in carrying out that activity boar to the total losses and outgoings (not being in the nature of losses and outgoings of capital) of the association for that year;”;

Section proposedto be amended -

  1. A deduction shall not, in any case, be made in respect, of any of the following matters: -

    1. money not wholly and exclusively laid out. or expended for the production of assessable income:
Senator McLACHLAN:
South Australia

.- I move-

That paragraph (a) be left out.

In an appeal case, Gordon v. The Federal Commissioner of Taxation, which came before the High Court of Australia recently, the court held that subscriptions paid to the Graziers Association was a reasonable business outgoing, and should be allowed as a deduction. The provisions contained in paragraph a, which I desire the committee to reject, were inserted to meet the position created by the High Court decision. In some explanatory notes furnished by the Commissioner of Taxation, it is pointed out that expenditure is often incurred for the representation of such associations before the Arbitration Court for the purpose of contesting demands of employees for increased wages, and not for the production of assessable income. I put it to honorable senators that expenditure so incurred is equivalent to expenditure for the production of assessable income. Trading associations are almost essential to the conduct of modern business, which is tending towards collectivism. The activities of such bodies are entirely due to the fact that they contribute something to the carrying on of a business. The provisions in paragraph a are intended to meet a position created by the decision of the High Court in the Gordon case - a decision with which, I suggest, no person with common sense can be in disagreement. The manner in which the proposed new provisions are presented is convincing evidence of the intricacies of income tax legislation generally. I direct attention particularly to the proviso. It states that a person shall be entitled to deduct only

So much of his subscription as bears to the whole of the subscription the same proportion as the losses or outgoings so incurred by the association in carrying out that activity bear to the total losses and outgoings (not being in the nature of losses and outgoings of capital) of the association for that year.

This appears to be another of those income tax assessment curves of the third degree about which we have heard so much in recent years. I submit that subscriptions to any organization necessary to the carrying on of a business are an allowable deduction. The decision of the court is unchallengeable. I therefore ask honorable senators to agree to my amendment and strike out the whole of the paragraph unless the Minister can satisfy the committee that it is desirable to retain the provisions contained in subparagraph iii.

Senator E. B. JOHNSTON (Western Australia [8.28]. - I support the amendment. The new provisions have been inserted by the department for the purpose of upsetting the decision of the High Court in an appeal by the Commissioner against a decision of the Supreme Court of New South Wales. In that case a pastoralist named Gordon appealed against the decision of the Commissioner of Taxation who disallowed as a deduc tion the amount paid in membership subscription to the Graziers Association of New South Wales. Three judges of the High Court, including Mr. Justice Isaacs, upheld the decision of the Supreme Court of New South Wales. The Graziers Association has spent a considerable amount of time and money in contesting in a constitutional manner the decisions of the Commissioner of Taxation. The association contended that the expenditure in subscriptions was incurred for the protection of assessable income. As such I. submit that it should certainly be allowed. It is extraordinary that since that decision in favour of the members of an association who had banded themselves together for protection, the Government has brought down an amendment designed to defeat a judgment of the High Court. It is also particularly surprising that this action should be taken by a Government which is forcing public servants to join organizations in order to obtain the benefits of awards of the Public Service Arbitrator. Surely if it is right for public servants to join an association in order to protect their interests, it should , also be beneficial for the pastoralists and farmers to join an organization to safeguard their interests. The men on the land .would be in a much worse position than they are to-day if it were not for the work which has been continually carried out by an association of which they are members, particularly in advocating their claims before the Arbitration. Court. The High Court has decided that the subscriptions paid by members of this association are legitimate deductions. Prom- the Government’s viewpoint the total revenue involved is infinitesimal, and from the point of view of the men on the land who are members of this association, and who are urged to join it; this privilege is essential. Although workers who do not join a trade union organization are ignored by this Government and its supporters, it has submitted this amendment to discourage another section of the community from joining a legitimate organization established to safeguard the interests of its members. If they do their contributions cannot be deducted from their taxable income. I trust that the amendment moved by Senator McLachlan will be agreed to, as this paragraph has been inserted to defeat, not only a decision of the Supreme Court of New South Wales, but of the High Court of Australia.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– I trust that the committee will not be misled by the suggestion of Senator Johnston that this paragraph is inserted with the intention of over-riding a decision of the High Court in the case which he quoted. It is not. The High Court was asked to interpret the law as it then stood. The function of the Parliament is to frame the law, and that of the court to interpret it. The practice has been to hold that a subscription to the Graziers Association is not per se an expenditure incurred in producing the assessable income of the subscriber. Senator McLachlan was a member of the Government that administered this provision. Will the honorable senator suggest that deductions should be made of amounts which are not spent in the production of income? The Government of which Senator McLachlan was a member went further in this connexion, and administered a section providing that a deduction should be disallowed on the grounds that the taxpayer had not shown that any part of the subscription was used by the association in common with other subscriptions and other incomes of the association to defray the cost of any activity of the association carried out on behalf of the subscribing members, which, if carried out by a member, would be an activity, the expenses of which would be an allowable deduction to that person under the act. The Full High Court in dealing with this provision ruled that the legislation provided that such deduction could be made by the taxpayer, and that decision will be faithfully observed by this Government so long as the legislation remains in its present form. The Government, in framing its budget, distributed taxation as equitably as possible on the assumption that Parliament would adhereto the practice which has been in operation for many years. If honorable senators opposite attempt to upset this provision, it will create chaos. Senator McLachlan asked why a lawyer should not be allowed to deduct his subscription to the Law Society, or a medical practitioner his contributions to the British Medical Association. I am a member of the Law Society of South Australia, but it cannot be held that it is necessary for me to be a member of that society to enable me to earn ari income. That society exists for the protection of its members, as do other similar societies. It is a condition precedent to practising as a barrister or solicitor, but membership is not compulsory. If unnecessary exemptions are permitted the burden of taxation of others must necessarily he increased. The committee has not to decide whether the Government is introducing legislation to override a decision of the High Court; but whether the present practice is inconsistent with the law as expressed by the legislature. As it is inconsistent with the letter of the law, the committee is now asked to determine whether it shall be allowed to remain in its present form, and deductions, such as those mentioned, allowed.

In framing the amendment it was necessary to preserve existing rights of deductions expressly permitted by the law, namely, deductions of contributions to any society registered under any friendly societies’ act of the Commonwealth or a State (section 23 (1) g). These rights are preserved hy the terms of subparagraph i of new paragraph ea proposed to be inserted by amendment a under clause 12.

Paragraph 2 will cover stock and sharebrokers who are obliged to pay annual subscriptions to the stock exchange as a condition precedent to being permitted to exercise their callings. Practitioners’ fees paid to the Supreme Court are allowable deductions, as are licence fees paid by certain persons following other occupations. It was never intended by the legislature that payments to such associations as the Growers Association, the Law Society, or the British Medical Association should be deducted from assessable incomes. If that were permissible, doctors, chemists and many other professional men would claim a similar right. Subparagraph iii, referred to by Senator McLachlan, provides in statutory form for the continuance of the present depart- mental practice of allowing a deduction to the taxpayer of so much of his subscription to the relevant association as bears to the whole of that subscription the same proportion as the expenditure incurred by the association in carrying out the activity specified in the provision, bears to the total expenses of the association for the year. The activity specified in the provision is an activity of the association which, if performed individually by the member, would represent an activity, the expenditure upon which would be a deduction in the assessment of that member, namely, advertising, advising as to best buying and future market prospects, collection of debts, investigating customers’ financial positions, engaging labour, and engaging transport. Honorable senators will see that what we consider to be the legal right of taxpayers to make a deduction has been preserved. If it is correct to say that it was always clear that the subscriptions of graziers to their associations were proper deductions, why did the previous Government continue this legislation?

Senator E B Johnston:

– Such subscriptions were allowed as deductions for many years until challenged by the Commissioner.

Senator DALY:

– The honorable senator is wrong. The departmental practice for many years prior to the High Court’s decision was not to allow them as deductions. It is for Parliament to decide whether, in view of the state of the finances, it will allow graziers, lawyers, chemists, doctors, and others to claim subscriptions paid to their associations as deductions’ against their incomes. Any man who can afford to join an association at the present time is indeed fortunate.

Senator Sir William Glasgow:

– He must do so, or go out of business.

Senator DALY:

– No. For example, there is no compulsion on a lawyer to join the Law Society. Indeed, many lawyers are not members of that society; yet they remain in business. Probably there are many graziers who are not members of the Graziers Association. My contention is that these subscriptions should not be allowed as deductions unless made for the purpose of earning income. There is no more reason why they should be deductible than there is for the deduc- tion of the fees paid by a politician to a golf club to keep him physically fit. I have told the Senate how serious the financial position is, and how necessary it is therefore that deductible items shall not be increased. If honorable senators are not prepared to assist the Government in this matter, they must accept the responsibility. I urge them not to allow these payments as deductions.

Senator McLACHLAN:
South Australia

– In the Gordon case the court found that these subscriptions were reasonable business outgoings. Surely the expenses incurred by a grazier in joining an association which works in his interests -is a reasonable business expenditure.

Senator Daly:

– Would the honorable senator allow a subscription to an automobile association as a deduction?

Senator McLACHLAN:

– Such subscriptions are not allowable deductions. Senator Daly suggests that some adjustments must be made. How can adjustments be made seeing that the organizations to which these payments are made are not required to lodge returns? Will the department have to ascertain what proportion a member’s subscription bears to the total amount of work done on his behalf? In the New South Wales legislation deductions of this kind are limited to £50. That is in keeping with the trend of modern business. Contributions to organizations, such as the Pastoralists Association, are reasonable business outgoings. Men do not make these payments for amusement; they expect some practical results from their contributions.

Senator Rae:

– Could we not lop off much of the income tax for the same reason ?

Senator McLACHLAN:

– This is a legitimate lopping off. In my opinion, the deduction should be allowed.

Senator CHAPMAN:
South Australia

– Honorable senators on this side have met the Government generously with regard to the tightening up of taxation. Their action should result in increased revenue to the department. I hope, however, that the Government will not insist on refusing to allow these payments as deductions. Section 23. -1 of the principal act provides - (1.) In calculating the taxable income ofa taxpayer the total assessable income derived by the taxpayer from all sources in Australia shall be taken as a basis, and from it there shall be deducted -

  1. all losses and outgoings (including commission, discount, travelling expenses, interest and expenses, and not being in the nature of losses and outgoings of capital) actually incurred in gaining or producing the assessable income.

There is no ambiguity about that provision. I desire to quote from a letter I have received from the Taxpayers Association of South Australia -

Last year a number of graziers who had their subscriptions to the Graziers Association disallowed went to the trouble and expense of carrying an appeal to the High Court of Australia. The decision in this case was in favour of the taxpayer, for the court held that such subscriptions were in fact an actual expense incurred in carrying on the business, and were paid for that reason and that alone.

If we wish to escape from the decision of the High Court we can safely say that there is no other course open to us than to alter the act. The letter goes on to say-

Taxpayers naturally hoped that after this ruling from the highest legal authority in the land that their old grievance would disappear, but by the section referred to in the amending bill it is proposed to deprive taxpayers of the benefit of this decision, and to expressly exclude such contributions and subscriptions. We do not feel that the position requires labouring from us as we think that it must appeal to any disinterested person that a merchant or grazier or any other person engaged in commercial or industrial activities does not pay these subscriptions with any other idea but that it is an aid in procuring the assessable income. This is illustrated by the fact that when men go out of business they usually resign their membership in such organizations.

Seeing that the members of those trading associations do not continue their subscriptions after they have retired from business, it is evident that they join them in order to obtain assistance in the conduct of their business.

Senator Sir WILLIAM GLASGOW (Queensland) [9.0].- I find it difficult to follow the reasoning of the Leader of the Government in the Senate (Senator Daly), when he states that a contribution to the Graziers Association is not an expenditure for the purpose of improving one’s income. What would be the position of graziers if they had not such an organization ? They receive little enough consideration as it is. Without the assistance of their association they would be left without a feather to fly with.

Senator Rae:

– And what would the workers do without the Australian Workers. Union ?

Senator Sir WILLIAM GLASGOW:

– Without the assistance of their association, the graziers would have no income on which the Commission could levy taxation. The association not only assists graziers with regard to industrial matters ; it also provides them with advice which enables them to improve their stock pastures and business generally. . On occasions the Government has brought experts from overseas ‘ to report on pastoral matters, and the investigations carried out by these experts have generally been conducted through the pastoral organizations. I remember Professor Thieler and an officer of the London County Council coming to this country, and portion of their work was done through the graziers’ associations. From time to time members of the association meet and discuss problems associated with their industry.

Senator Rae:

– Manifestly to improve their conditions.

Senator Sir WILLIAM GLASGOW.Exactly. Their contribution to the association is- made for the purpose of increasing their revenue, and, therefore, it is a proper deduction. The High Court found that it was a reasonable deduction, and I hope that the committee will support the amendment moved by Senator McLachlan.

Senator DUNN:
New South Wales

– Owing to the limited time that the Government has at its disposal prior to the termination of the session, and the very considerable amount of business that has to be dealt with during that period, it was not my intention to participate in this debate. However, the remarks of honorable senators opposite on this amendment impel me to do so. The financial affairs of Australia are in a state of chaos, and we are faced with a staggering adverse trade balance, neither of which can be attributed to any maladministration on the part of the present Government, which has occupied the treasury bench only for the last ten months. The Government finds it necessary to effect economies in all directions and to raise revenue wherever it is possible to do so, in order to honour the legacy of obligations bequeathed to it by its predecessors in office. At such a time one would naturally expect all to work for the furtherance of the common weal. Yet, when the Government brings down a measure for the purpose of tightening up income taxation, honorable senators opposite go out of their way to indulge in special pleading on behalf of their political supporters. Never was parochialism more illtimed. Here we have Senator McLachlan pleading the case of the unfortunate lawyers, Senator Sir William Glasgow drawing a pathetic picture of the distressed pastoralists, Senator Johnston painting a harrowing picture of the crippled business interests of Western Australia, and Senator Chapman, in a melancholy dirge, lamenting the hardships imposed upon the graziers of South Australia! What of the men who are on the basic wage - those who really do bear the heat and burden of the day? Have honorable senators opposite, no thought for them? I am reminded of a cartoon that I once saw in that exceptionally clever political journal, Punch. The artist depicted a woman, with her arms in the washtub. About her he built up the structure of society. In all directions the poor unfortunate worker was shown to be bearing the burden of the community. Tha,t very truthful piece of symbolism holds good to-day. The workers hear the burden, first, last, and always. I cannot recall having 3een any graziers or lawyers waiting upon benevolent societies to draw their bags of rations, nor have I seen them thrust out of any queue when endeavouring to replace their rags with discarded clothing that was being issued for those in distress. On the other hand I can remember, that, from 1922 until the latter part of 1929. our pastoralists enjoyed bountiful seasons and were literally rolling in wealth. The BrucePage Administration found itself with overflowing Treasury coffers. It rapidly dissipated that wealth, and when this Government assumed office, it was in the position of old Mother Hubbard. It went to the cupboard, and found it bare. Now when it endeavours, by tightening up the incidence of taxation, to counteract the policy of drift into which its predecessors had lapsed, its efforts are subjected to the vociferous protests of honorable senators opposite. We have had debated to-day the advisability of exempting the profits of aero clubs, and the expenditure of graziers. It might as well be claimed that if Senator Rae and I were prominent officials of a workers’ Christmas club, and we presented the organization with a Christmas ham that cost us 25s., we should be justified in claiming that expenditure as a reasonable deduction from our earnings, for income tax purposes. Unfortunately the Government in the Senate is overwhelmed by sheer weight of numbers. Honorable senators opposite, counting the President, number 29. We on the Government side number but 7, and must bow in the main to the arrogance of a brutal majority. Had the ex-Prime Minister, the Right Honorable S. M. Bruce-

The CHAIRMAN:

– Order ! I remind the honorable senator that we are debating an amendment to the Income Tax Assessment Bill.

Senator DUNN:

– I shall connect my remarks with the amendment. Had there been a double, instead of a single, dissolution last year, this party would have been returned with a majority in both Houses. Why should not trade unionists receive some concessions? It is no use trying to disguise the truth. If honorable senators opposite feel in the mood to emasculate this amending bill, or to throw it out altogether, that will be done. It is nauseating to me to have to listen to the doleful wail of honorable senators opposite, because their lament is absolutely unwarranted. If I hear many more tales of the character indulged in by honorable senators opposite, I shall have to borrow a handkerchief to hide my tears.

Senator DALY:
Vice-President of the Executive. Council · South Australia · ALP

– I rise to correct a statement made by Senator Johnston who quoted as his authority for it a statement made in another place. I have made inquiriesfrom the taxation office alnd find that the particular deduction to which he refers has never been allowed by the federal taxation authorities. The Leader of the Opposition in another place was confused with regard to the combined form used for taxation returns, which shows income for both State and Federal purposes. This item has heen an allowable deduction by the New South Wales Government, but never by the federal authorities. Although insistent demands were made for such a deduction by the Graziers Association, the previous Federal Government refused to allow it. The prevailing practice has been in operation ever since the Federal Government entered the taxation arena. I can assure the honorable senator that the statement was made in error by the Leader of the Opposition in another place. This deduction has never been allowed. The previous Government resolutely refused to override the decision of the Commissioner, and the practice was followed for years until the High Court discovered that it was not in accordance with the letter of the law. This amendment has been introduced to continue the practice. It is not to introduce some new burden of taxation.

Senator E B JOHNSTON:
Western Australia

– I merely quoted what I read inHansard as having been stated by the Leader of the Opposition in another place, andI quite accept Senator Daly’s statement. The Government admits that it is a proper deduction in part. While the court said that under the existing law the whole of the subscription should be a deduction, the Government still admits that part of it it a proper deduction.

Senator Daly:

– That has always been the practice.

Senator E B JOHNSTON:

– But the suggestion now is that, instead of the whole of the subscription being allowed as a deduction in accordance with the present law, some involved system of calculation is to be worked out and a man is to be allowed to deduct part of his subscription. The Government should not quibble over trifles of this nature. I do not think it should expect the pastoralists to consult their associations in order to ascertain what proportion of the subscription should be allowed. Although it is only a small matter an important principle is at stake. The subscription is clearly paid by the pastoralist or the farmer for the protection of his income and I hope that the committee will agree to the amendment moved by Senator McLachlan, particularly as the Government admits the justice of the principle by saying that it will allow a deduction in respect of a proportion of the subscription.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– The provision merely gives legal effect to, and places beyond all doubt, the practice that has been in operation in the past. The previous Government recognized that in certain circumstances a proportion of the subscription might be an allowable deduction. That was the departmental practice, and it is the practice which we intend to continue. I do not think Senator Johnston appreciates the significance of the proposal when he says that it is only a small matter. There is nothing to prevent the graziers from fixing their fee at one hundred guineas per annum.

Senator E B Johnston:

– Except that they would lose members.

Senator DALY:

– They might not, and the hundred guineas fee could be deducted from their taxable income. It is therefore a serious matter.

Senator McLachlan:

– Why not adopt the example of New South Wales, and impose a limit?

Senator DALY:

– If the New South Wales legislature allows this deduction why should there be a double deduction?

Senator McLachlan:

– How can the honorable senator distinguish between this and any other deduction for State and Federal purposes?

Senator DALY:

– It is not in every case that a concession is allowed to be deducted from both Federal and State income tax returns. There are deductions which are unmistakable deductions in both cases; but in this particular case it is. a concession we are asked to grant. The fact that some involved calculations may be required does not enter into the question. There is a principle at stake - whether this particular deduction is to be allowed or whether the Government is to be forced into the position of having to impose further taxation on industries that can least afford to pay it in order that an exemption may be granted to graziers, doctors and others, who can afford to pay taxation.

Question - That the paragraph proposed to be left out, be left out (Senator McLachlan’s amendment) - put. The committee divided. (Chairman - Senator Plain.)

AYES: 11

NOES: 10

Majority . . 1

AYES

NOES

Question so resolved in the affirmative.

Amendment agreed to.

Clause, as amended, agreed to.

Clause 13 agreed to.

Clause 14 -

Section twenty -six; of the principal act is amended -

by omitting sub-section (1.) and inserting in its stead the following sub-section : - “ (1.) Where a loss is made in any year by any person in carrying on a business in Australia, or by any person who is a resident in carrying on a business the proceeds of which (if any) derived from sources outside Australia would not be wholly exempt from income tax under the provisions of sub-paragraph (i) of paragraph (q) of subsection (1.) of section fourteen of this act the person shall be entitled to a deduction of that loss from the net assessable income (if any) derived by him in that year.” ;

Section proposed to be amended -

– (1.) Where a person makes a loss in any year in carrying on a business, the proceeds of which(if any) would be assessable, he shall be entitled to a deduction of thai loss from the net assessable income(if any) derived by him in that year:

Provided that where -that person has in that year derived income which for any reason is not liable to be assessed the amount deductible under this sub-section shall be -

if the person is not an absentee - the amount by which the loss exceeds the income which is not so liable. after deducting from that income, in any case in which there is a business loss which is attributable to sources outside Australia, the amount of that loss; and

if the person is an absentee - the amount by which the loss exceeds the income derived from sources in Australia which is not so liable.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– I move-

That proposed new sub-section (1.), paragraph (a), be left out with a view to insert in lieu thereof the following: - “ (1.) Where a loss is made in any year by any person -

in carrying on a business in Australia ;

if he is a resident, in carrying on a business the proceeds of which (if any) derived from sources outside Australia would not be wholly exempt from income tax under the provisions of sub-paragraph (i) of paragraph (q) of sub-section (1.) of section fourteen of this act; or

upon the sale of any property the profits (if any) from the sale of which would have been assessable as income of that person, that person shall be entitled to a deduction of that loss from the net assessable income (if any) derived by him in that year.”

The proposed new sub-section differs from that in the bill as printed in paragraph c only. The balance of the subsection is the same as appears in the bill except that the bill does not show the terms paragraphed into a and b. It is considered desirable to have the matter set out in paragraphs on account of the length of the text, and also, because three different subjects are mentioned. The purport of paragraphs a and b is explained in the printed explanatory notes, which have been issued. Paragraph c is inserted, because profit from isolated sales of property which had been acquired for re-sale at a profit is now to be treated as taxable income. Conversely a loss resulting from a similar operation should be treated as a loss to be deducted from assessable income, if any, of the taxpayer in the same year, or in the absence of such income, then as a loss to be carried forward into succeeding years to be deducted from the profits of those years as far as may be necessary to extinguish the loss within the four years next succeeding the year in which it is sustained. It has been the depart mental practice to allow a deduction of those losses in all past assessments, but it is considered desirable to have statutory authority for the practice, having regard to the fact that isolated transactions yielding taxable profit may not, in some cases, be classifiable strictly as businesses. Section 26 of the principal act in its present form allows deduction in respect of losses in businesses only.

Amendment agreed to.

Clause, as amended, agreed to.

Clause 15 -

After section twenty-eight of the principal act the following sections are inserted: - “ 28a. (3.) For the purposes of this section foreign company ‘ means a company in corporated outside Australia.”

Senator Sir GEORGE PEARCE (Western Australia) [9.33]. - I am glad to see this provision in the bill because it is an indication, although somewhat late, of repentance on the part of this Government and its supporters, and a tardy recognition of the contention of the previous Administration that the American film industry, which is extracting such a huge sum of money from the Australian public, should contribute to the revenue of the country. We all recall the fierce election battle over this issue during the last campaign, and the allegations made by Labour candidates that the Bruce-Page Administration intended to tax the people’s amusements. I do not know if you, Mr. Chairman, would rule the amendment out of order, but I should like to submit one, which I consider is amply justified. Sub-section 1 of proposed new section 28a reads -

Notwithstanding anything contained in this act, where any person residing outside Australia or any foreign company derives income under any contract or agreement with any person in relation to the carrying on in Australia by that person of a business of distributing, exhibiting or exploiting motion picture films. . . .

Then the section goes on to state that the foreign company shall be assessable and charged with income tax on its profits. I should like to alter the sub-section to read -

Notwithstanding anything contained in this act, or any promise made by the Labour party at the recent elections, or of any undertaking given by it to thu picture interests that no taxation would be levied upon the industry-

The CHAIRMAN (Senator Plain).The honorable senator is out of order.

Senator BARNES:
Assistant Minister · Victoria · ALP

– The accusation that the Labour party Avon the last election on its attitude to the American film industry is absolutely unwarranted. If I had my way I would tax that industry to the limit.

Senator Sir William Glasgow:

– This Government is taking action fairly late in the day.

Senator BARNES:

– These film companies which take so much money out of Australia, and which, apparently, are out to get all they can from this earth, should bc compelled to pay their fair share of taxation.

Senator DUNN:
New South Wales

– The right honorable the Leader of the Opposition (Senator Pearce) has adopted the role of Don Quixote, and. like that immortal personality, he has just had a tilt at an imaginary windmill. We have . all heard the story of how the Labour party won the last election. It has been told so often that, in the words of that popular phonograph record in which the “ Two Black Crows “ are heard, we are now inclined to say, “Why bring that up?” The Labour party won the last election on its declared policy.

Senator Sir George Pearce:

– “ Save our amusements”!

Senator DUNN:

– Immediately this Government took office it laid down a definite policy, which it is endeavouring to carry out. li has no desire to wear a crown of tinsel glory because of its attitude to the “ Mary Pickfords,” and, with all due respect to myself, the “Patty Arbuckles “ in the film world. We take the view that the American film interests, in common with any other corporation that operates in this country, should pay its fair share to the revenue by means of income taxation. Another company, known as. “ Union Pictures,” gives preference, wherever possible, to British films.

Senator Reid:

– It always did that.

Senator DUNN:

– The honorable senator is wrong. The Leader of the Opposition (Senator Pearce), who is, at the moment, in a facetious mood, has suggested that this Government has been over-friendly with the American film industry. That I emphatically deny. We went to the country on a definite platform, and were returned to give effect to our declared policy.

Senator H E ELLIOTT:
VICTORIA · NAT

.- I move-

That after the word “Australia” subsection (3.) of proposed new section 28a the words “ or Great Britain “ be inserted.

There should be some distinction made between companies incorporated and controlled outside the British Empire and companies incorporated and controlled within the Empire. As a matter of fact, the provisions iu sub-clause 3 will prejudicially affect the newly-established film industry in Great Britain.

Senator Sir George Pearce:

– If the honorable senator’s amendment is adopted, consequential alterations will have to be made to other provisions in the proposed new section.

Senator Daly:

– The amendment is an insult to Great Britain. Senator Elliott has not read the proposed new section.

Senator H E ELLIOTT:
VICTORIA · NAT

– It should be the desire of the Government to tax the American film corporations, which are drawing millions of pounds from Australia, and to encourage the picture industry in Great Britain.

Senator Daly:

– In South Australia a Victorian company is referred to as a “ foreign company “ ?

Senator H E ELLIOTT:
VICTORIA · NAT

– Yes, for the purposes of the act in which the term is used.

Senator Daly:

– It is used in the same sense in this measure.

Senator H E ELLIOTT:
VICTORIA · NAT

– Why should the Ministry aim at killing the picture industry in Great Britain?

Senator Daly:

– This provision is deliberately inserted to catch persons wilfully attempting to evade taxation. No company in Great Britain is doing that.

Senator McLachlan:

– The danger is that the persons whom the Government wish to catch might incorporate a company in Great Britain.

Senator Daly:

– I am surprised at Senator H. E. Elliott submitting such an amendment.

Senator H E ELLIOTT:
VICTORIA · NAT

– There is no reference in the clause to the evasion of taxation.

Senator Daly:

– It is to catch those who establish subsidiary companies for the purpose of evading taxation. They do not do that in Great Britain.

Senator H E ELLIOTT:
VICTORIA · NAT

– If the Minister will give his assurance that it will not apply to companies incorporated in Great Britain I shall not press the amendment.Will the Minister say that the provision will not apply to any company which is carrying on its business in a straightforward way.

Senator Daly:

-. - It will apply to any company attempting to evade taxation.

Senator McLACHLAN:
South Australia

– The object of this provision may be defeated through the machinations of certain people of whom lawyers have some knowledge. A company which might not consist of a single British shareholder could be incorporated in Great Britain. While I respect the sentiments of the honorable senator, the course he suggests is dangerous.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– The Leader of the Opposition eluded the Government for not preventing those persons forming subsidiary companies from robbing the country of just taxation. If a company incorporated in Great Britain, India, Canada, or in any portion of the dominions, and trading in Australia, forms subsidiary companies in order to evade taxation, Senator Elliott will surely agree that such companies should not be permitted to evade taxation. The sole object of this provision is to reach those who are endeavouring to avoid taxation. The language used is sufficiently comprehensive to cover what is required. It does not constitute a reflection on Great Britain, but is simply to define a class of company that must pay taxation in this form. It does not matter whether such companies are operating in the dominions or in America. They have no right to form subsidiary companies for the purpose of evading taxation.

Senator H E ELLIOTT:
VICTORIA · NAT

– In view of the Minister’s statement I ask leave to withdraw my amendment.

Amendment - by leave - withdrawn.

Senator DUNN (New South Wales) 9.52].- Senator H. E. Elliott, in moving his amendment, said that, “ it is the aim of this Ministry to kill the picture industry of Great Britain.” For the information of the honorable senator I should like to say that this Government has gone to a great deal of trouble to encourage the British film industry. As a result of the interest displayed by the Leader of the Government in the Senate (Senator Daly) in British productions, a film depicting scenes in the polar regions taken by a member of the Mawson expedition to the Antarctic is shortly to he displayed in Sydney.

Clause agreed to.

Clause 16 (Partners).

Senator Sir GEORGE PEARCE (Western Australia) [9.53]. - I have given notice of an amendment to this clause which relates to partnerships; but I assume that the policy of the Government with respect to what are known as family companies will also apply to partnerships. If the Minister will give me an assurance that the statement he made in regard to such companies also applies to partnerships I shall not move the. amendment.

Senator Daly:

– I have consulted the Commissioner of Taxation on this matter, and am able to give an undertaking similar to that which I gave when the subject of family companies was under consideration.

Senator E B JOHNSTON:
Western Australia

– Under this clause we are giving the Commissioner of Taxation power to exercise his opinion in declaring that partnerships consisting of one or two individuals are illegal.

Senator Daly:

– This is merely an application of a previous clause.

Senator E B JOHNSTON:

– It is more far-reaching. It applies to partnerships drawn up in circumstances different from those of companies.

Senator Daly:

– There is already a section in the act which practically covers the position.

Senator E B JOHNSTON:

– That refers only to partnerships between husbands and wives; but this is in relation to partnerships of relatives or adopted relatives, and which, in the opinion of the Commissioner, can be declared illegal or bogus partnerships. In order to catch one person evading the tax the department is prepared to make it exceedingly difficult for 99 honest men to satisfy the taxation authorities.

Senator McLachlan:

– If the Commissioner attempted to administer this provision unjustly the legislation would immediately be amended.

Senator E B JOHNSTON:

– I daresay that would happen ; but I am voicing the opinion of taxpayers 2,000 miles away from the Seat of Government, and who have not an opportunity of personally expressing their views to the taxation authorities at Canberra. In a country district in Western Australia in which I lived for years many of the activities on farms and pastoral properties are carried on by legitimate family partnerships. In a great many instances deeds of partnership have not even been drawn up. In some cases I may have been personally responsible because I know the people, and understood their intention when the partnership was formed. In many instances these persons merely registered the partnerships in the local court, each member of the firm signing the registration form, and under the title approved by the local court, carried on business indefinitely, Bay, as John Smith and Sons. In some cases properties are in the father’s name. Forms are filled in establishing a partnership in the farm which belongs to the father, who in many instances retires to the city or to a neighbouring country town. Although such partnerships have been in existence for many years the Commissioner may, if in his opinion they are evading taxation, to use an expression of the Minister, declare them to be illegal or bogus partnerships.

Senator Rae:

– Would not the Commissioner have reasonable grounds before coming to such a decision ?

Senator E B JOHNSTON:

– I think the Commissioner’s main consideration would be the position of the Consolidated Revenue, and probably the revenue has suffered because the law has always been carried out in this way. If some of these farmers had been aware of the proposed amendment of the law they would have divided their properties among their sons as they really intended to do. Under this provision the Commissioner can declare illegal what is a perfectly natural and legal partnership between members of families. The average young man of” 21 or 22 has not any capital, and in a great many cases men have placed their sons on the land under a form of partnership. There are many pastoral, grazing, and farming properties which are worked by the sons while the fathers reside in adjacent country towns. Is it to be a crime for a parent to establish his son on the land without handing the property over to him altogether? A father may pay to fit his son for a profession, and no objection is raised; he may spend thousands of pounds in purchasing a partnership for his son in the city and there is no complaint ; but should a man in the country establish his son on his property under some family arrangement, he is liable to be penalized. Every clause that we have tightened up has been directed against the man on the land. Properties leased from the Crown are to be liable to taxation whenever they are transferred, but no provision of that nature is to apply to freehold property in and near our cities. Only in the outlying portions of Australia, where people cannot obtain freehold, is this excessive taxation to apply. I object strongly to the measure, because it aims at piling up burdens on the man on the land, while, at the same time, it will not affect people living in or near the cities who own freehold. Clause 2 will not affect persons who have established their children in professions, but it will injure primary producers in the country who work under a system of family partnerships. We are asked to. say that the Commissioner may declare to be illegal that which is not only perfectly natural, but is also lawful. The Commissioner may apply a provision of this nature to any partnership between relatives or affecting relatives. I shall oppose the clause because I believe that it strikes a blow at people in the country who desire to work their land under an honest arrangement with relatives or members of their families. In the case of Moreau v. the Commissioner of Taxation, the court held that the opinion of the Commissioner could not be questioned. This provision will embarrass 99 honest family partnerships to every case of evasion that it will meet. Some of the persons affected by this legislation live at long distances from the cities. If they are called upon to explain their partnerships they will be forced to incur heavy expenditure in visiting the city. I hope that the clause will be rejected.

SenatorRAE (New South Wales [10.3]. - We have listened to a doleful story of an alleged attack on persons living in the country. Senator Johnston would have us believe that this clause is aimed directly at the few simple individuals who work their farms under a system of family partnerships. I remind him that it will affect only those partnerships which have been formed for the purpose of evading taxation. The honorable senator suggests that, in many cases, these partnerships are formed to carry on the family inheritance when the father has retired to the city or elsewhere and leaves his sons to carry on the farm. Such family arrangements are scarcely partnerships at all. No particular merit or blame attaches to a man who inherits his father’s possessions. Senator Johnston is absolutely incorrect in saying that this clause is aimed at the man on the land. We have just dealt with a clause which aims at meeting the cases of private companies which attempt to evade taxation. Does Senator Johnston suggest that such companies are mainly composed of men on the land? It is a false deduction on his part to charge the Government with a desire to injure farmers and others by this legislation. If, by forming partnerships, country dwellers can evade taxation, persons living in the cities are as likely to form partnerships for the same purpose. For instance, I could enter into partnerships with my sons to carry on some nominal business if thereby we could secure exemptions otherwise unobtainable. Senator Johnston must be suffering from “ imaginitis.” If we decline to agree to this clause, we should go back and repeal the previous clauses dealing with companies, because the two provisions are complementary. Those who have escaped taxation hitherto are lucky that they have not been found out sooner. They should not whine about what might happen to them in the future. If, as Senator Johnston said, those who might suffer from this legislation live away from the cities, and have no representation in this Parliament, I ask him what he is doing here?

Senator E B Johnston:

– I am endeavouring to represent their views to the Senate.

SenatorRAE. - Ninety per cent. of the people of Australia can read and write. There is, therefore, no need for them to visit Canberra to voice their grievances. All they have to do is to write to their representatives and their grievances will be attended to just as quickly as if they lived on the doorstep of this building. I hope that the clause will be agreed to.

Clause agreed to.

Clauses 17 to 19 agreed to.

Senator Sir GEORGE PEARCE (Western Australia) [10.10]. - I move -

That the following new clause be inserted : - “ 19a. After section fifty-one a of the principal act the following section is inserted: - 51b. Notwithstanding anything contained in this act a taxpayer who is dissatisfied with any opinion, decision or determination of the Commissioner under this act (whether in the exercise of a discretion conferred upon the Commissioner or otherwise) and who is dissatisfied with the assessment made pursuant to or involving such opinion, decision or determination shall, after the assessment has been made, have the same right of objection and appeal in respect of such opinion, decision or determination and assessment as is provided in sections fifty, fifty-one and fifty-one a of this act.’”

Section 50 sets out the procedure by which a taxpayer who is dissatisfied with his assessment may appeal against it. He may-

  1. in writing, request the Commissioner to refer the decision to a board of review for review; or
  2. in writing, request the Commissioner to treat his objection as an appeal and to forward it either to the High Court or to the Supreme Court of a State.

I know that this amendment will be strongly objected to by the Commissioner; but I suggest that it is essential that the protection it provides should be afforded to taxpayers. It is true that there can be an appeal to the Board of Review, but that body is largely comprised of departmental officers, who are likely to view taxation matters from a departmental stand-point. In every other case in which his property is concerned, the taxpayer has a right of appeal to a court. He should have the same right of appeal in cases in which, by an opinion or decision of the Commissioner, his property is affected. I shall listen with interest to the objections that the Minister may raise to this amendment. In my opinion, it gives the taxpayers a right which they should possess.

Senator DALY:
Vice- * President of the Executive Council · South Australia · ALP

– I am surprised at the right honorable gentleman pressing his amendment. When he first referred to it, he was under the impression that there was no statutory board of review. Now his objection is that that board is largely composed of departmental officers. I submit that the right honorable gentleman’s statements are an indictment of the previous Government. It was in 1922 that that Government, of which the right honorable gentleman was a member, suggested that it was impracticable for the High Court to decide these matters. Consequently, that Government appointed three men as a board of review. At the time the right honorable gentleman suggested that they were men who would hold the scales evenly between the taxpayer and the department. I have already given the personnel of that board, and have challenged the right honorable senator to show one letter of protest raised by any chamber of commerce, or taxpayers’ association, against anything that it has done. To dismiss this board summarily and to say to the High Court that in future not only has a taxpayer the right of appeal to it, but that that court shall hear and determine all questions arising out of any opinion given by the Commissioner, would be to impose upon this Government a task that the previous Government was not prepared to undertake - the necessity to find the money to pay the salaries of the judges whose services would be required,onorable senators know that in order to maintain the high standard that has been built up by the High Court it would be necessary to employ the best brains in the legal .fraternity. At a time when Australia is suffering from severe financial distress, and when the High Court itself is prepared to work undermanned in order to help the nation, the Government is asked to sack this Board of Review, for that is what it amounts to.

Senator H E ELLIOTT:
VICTORIA · NAT

– Why alter the wording of the principal act from “ de termination” to “opinion”? It is quite a different matter.

Senator DALY:

– I shall deal with that shortly. I ask why the Government should be asked to revert to the old practice.

Senator E B Johnston:

– The amendment provides for an appeal ito a single, judge of the Supreme Court.

Senator DALY:

– And eventually there will be an appeal to the High Court against the decision of the Supreme Court judge. Why should Parliament chop and change about in these matters? What reasons have been advanced for breaking away from a system that was introduced by our predecessors in office? This Government did not introduce the Board of Review, yet Senator Pearce states that these men have forgotten the very high and onerous judicial office that they are supposed to perform. The right honorable senator said that they are merely departmental officers. One is a barristeratlaw, who was a special magistrate in Western Australia; another is a very highly-qualified accountant, brought from Tasmania, while the third is a taxation expert. I believe that the reputation of each is unimpeachable. What evidence has been adduced before this Senate which would lead any reasonable man to vote against the proposals of this Government, and to justify this Senate breaking away from the prevailing system? I submit, only that of caprice. Of course, if the Opposition choose to deal with the subject capriciously, as apparently Senator Johnston proposes to do, no argument that I can advance will change their attitude. Honorable senators know that if this system had not met with the approval of the chambers of commerce and the taxpayers generally, there would have been objections against it. Senator Johnston referred to the telegrams that he has received from different associations, but he is not able to quote any objection to the action of this Board of Review.

Senator E B Johnston:

– I have had requests that the right of appeal should bc provided against the opinions of the Commissioner of Taxation.

Senator DALY:

– Apparently the people concerned did not know of their present right of appeal, which was provided by the Bruce-Page Government. T ask Senator Johnston whether he has had any complaint against this Board of Review, that was established by the Government’s predecessors in office?

SenatorE. B. Johnston. - Certainly not.

Senator DALY:

– Then why the necessity to alter the existing arrangement? The right of appeal to the High Court is still preserved on any question of law arising from proceedings before the Board of Review.

Senator Sir George Pearce:

– But not on questions of fact.

Senator DALY:

– The taxpayer has the right to go to the High Court if the facts involve any question of law. I ask the right honorable the Leader of the Opposition (Senator Pearce), why did the previous Government introduce this legislation and establish the Board of Review; also what has happened since then to shake his confidence in that board? Honorable senators are entitled to have an answer to those questions, and to know whether the right honorable senator is merely prompted by caprice. In the absence of satisfactory answers’ to those questions, I submit that honorable senators have a clear duty to perform, and that is to support the action of the Government with regard to this proposal. I can assure Senator H. E. Elliott, if he has any misgivings as to the use of the word “ opinion,” that I am prepared to. recommit the clause and alter the word to “ determination.” His vote on this amendment will not prejudice his desire in that respect. I shall lend the honorable senator a copy of the explanatory brochure that was circulated to each honorable senator, which contains a full explanation of these alterations.

Senator McLACHLAN:
South Australia

– I have never regarded the Board of Review, which, I understand, was inaugurated in 1925, as other than a sieve to sift, as it were, the various appeals that were lodged against the decisions of the department prior to a certain number of them reaching the High Court. Senator Daly stated that a great deal of the time of the High Court has been taken up in dealing with such matters handed over to it for decision. If the determinations of the Board of Review were satisfactory, these appeals would never see the light of day. Having regard to the drastic nature of the amendments that we have made to the principal act with the assistance, in some cases, of the Opposition, I feel that the commercial community will be uneasy. The Minister has invited us to given some illustration of protests made by chambers of commerce, or similar bodies vitally interested in this taxation measure. Apparently the honorable senator is not very familiar with the communications that have been addressed to the Prime Minister (Mr. Scullin). I have a copy of a letter addressed to that gentleman by the Sydney Chamber of Commerce. It is dated the 1st August last, and reads -

I am directed to inform you that the following recommendations of the Taxation Sectional Committee of this Chamber have been unanimously endorsed by the council: -

That provision should be made clearly setting out that all opinions and determinations of the Commissioner or other rulings or instructions affecting taxpayers should be subject to appeal in the manner provided in the New South Wales State act in section 52 (1.), which reads - “ Notwithstanding anything contained in this act a taxpayer who is dissatisfied with any opinion, decision, or determination of the Commissioner under this act (whether in the exercise of a discretion conferred upon the Commissioner or otherwise) and who is dissatisfied with the assessment made pursuant to or involving such opinion, decision, or determination, shall, after the assessment has been made, have the same right of objection in respect of such opinion, decision, or determination and assessment as is provided in section forty-eight, and also the same right of appeal against any decision of the Commissioner upon any such objection, except that such appeal shall be made to a court of review only.”

Senator Daly:

– It does not make any complaint against the Board of Review. If anything, the arguments of Senator Pearce suggest that the Bruce-Page Government did not appoint the right men to this Board of Review.

Senator McLACHLAN:

– I do not think that we should drag into the discussion the men who are holding that office. As an individual representing the people of South Australia, I shall not submit to any dictation by any institution connected with the finances of Australia, though I am prepared to support those bodies to the utmost limits in order to prevent evasion of the law. After all, this is merely the old fight of the individual against the Crown. Surely, if the department is acting in good faith, and I believe that it is, there is nothing to fear from this right of appeal. Surely if the Minister is right there will not be many appeals from the decisions of the Board ofReview, but having regard to the far-reaching powers conferred by this legislation on the Commissioner of Taxation, I think there should be some judicial redress for individual taxpayers. The Taxpayers Association of Victoria concludes a circular with the following; -

Throughout thebill added powers are given to the Commissioner to act on opinions formedby him. It ought to be competent for taxpayers if dissatisfied, to appeal either to the court or to the Board of Review. At present, appeal is limited to a Board of Review, the members of which are all Government appointees “on short term of office.

The Minister asks for evidence. Mr. A. Spencer Watts, chairman of the taxation section of the Sydney Chamber of Commerce, has also forwarded a letter, the terms of which are similar to those forwarded to the Prime Minister. There is no desire to have appeals to the courts on all sorts of minor matters. I think the Leader of the Opposition would be satisfied if they were granted from the determinations of the Board of Review to give the taxpayers an opportunity to enjoy a right which taxpayers have under every other form of taxation legislation with which I am familiar. The Board of Review - I speak subject to correction - came into being as the outcome of our Land Tax Assessment Act. Land tax appeals were taking up a great deal of time of the court, and an endeavour was made to reduce the number of small appeals in which no important questions, or no matters of vital interest were raised, by handing them to a board of departmental officers, as it was at first constituted. Later on the system was amended, and I understand a stipendiary magistrate was chosen as chairman of the board.

Senator Daly:

– The board consists of a taxation expert, a barrister and a public accountant.

Senator McLACHLAN:

– After functioning for a while, a board of review is liable to accept the departmental view point, whereas I stand for the judicial determination as against the departmental viewpoint. If an individual who has lost an appeal is satisfied with the decision of the Board of Review, or takes no further steps in the matter, it is obvious that the board has done justice, or that in contesting the matter before the board his eyes have been opened to the weakness of his case. We allow an appeal from the decision of the Board of Review in regard to assessments, but not in regard to far-reaching questions in which the reputation of people, their honesty and their integrity are to an extent involved - when, in effect, they have been found guilty of a crime. In regard to these matters the decision in regard to which rests with the Commissioner - surely the taxpayer should have the same right of appeal as he has when it is simply a matter of pounds, shillings and pence. Clause 19 makes very wide provision for the opening up and alteration of assessments. It is a provision which is not found in the taxation law of Great Britain. An alteration may be made “ where the Commissioner is of opinion that there has been an avoidance of tax . . . due to fraud or evasion.” It seems to me to be a very far-reaching power to give to any person, no matter what trust we have in him, and no matter what capacity he may possess. In all British legislation a discretion of this sort has always been controlled by the judiciary.

Senator Daly:

– Appeals lie to the court under that provision.

Senator McLACHLAN:

– Only in respect to the assessment. Without redress of any sort a man may be branded as one who has avoided tax by fraud or evasion. There is no appeal for him unless the amendment moved by Senator Pearce is made.

The CHAIRMAN:

– The honorable senator’s time has expired.

Senator Sir GEORGE PEARCE (Western Australia) [10.36]. - Senator McLachlan has shown that the taxpayers are not satisfied with merely having the right of appeal to the Board of Review. Sub-section 6 of section 51 provides -

The Commissioner or a taxpayer may appeal to the High Court from any decision of the board which in the opinion of the High Court involves a question of law.

The taxpayer cannot appeal to the High Court on the question of facts onwhich the Commissioner has based his decision.

Senator Daly:

– The question of whether a man has been guilty of fraud is a question of law.

Senator Sir GEORGE PEARCE.Again we have in section 51a, sub-section 8, the words -

On the hearing of the appeal, the court may if it thinks fit state a case in writing for the opinion of the High Court upon any question which in the opinion of the court is a question of law.

The only thing that can be appealed against is as to the law under which the assessment is made, but the taxpayer wants to appeal, not against the law, nor the interpretation of the law, but upon the facts upon which the Commissioner comes to a conclusion.

Senator Rae:

– All those facts would have to come out in trying the question of law.

Senator Sir GEORGE PEARCE:

– That is not the point. The taxpayer can appeal only on the interpretation of the law, and what the Sydney Chamber of Commerce and the Taxpayers Association have asked for is an opportunity to appeal, if necessary, from the decision of the Board of Review on the question of facts upon which the Commissioner of Taxation has come to his conclusions.

Senator DALY:
South AustraliaVicePresident of the Executive Council · ALP

. - I am surprised that the Leader of the Opposition (Senator Sir George Pearce) keeps harping on this question of law. The section to which the right honorable senator has drawn attention gives the High Court the right to grant an appeal to any taxpayer ona question of law. The right honorable senator says that the court cannot decide on the facts, but in proper cases the High Court can give leave to appeal on the facts. It did so in Gordon’s case.

Senator McLachlan:

– That was. a case of an appeal against the assessment.

Senator DALY:

– Exactly. I agree with the right honorable senator that the High Court is not going into every question of fact in respect to every assessment made by the Commissioner of Taxation. But it is for the court to decide whether on the facts the case is of sufficient magni tude to be heard by it. For instance, it may be shown that the Commissioner in the course of his investigation has done something contrary to the law. Surely it is not desired that every disgruntled taxpayer should have the right to waste the time of the High. Court on appeals when there is no question of law arising in connexion with an assessment.

Senator Sir Geobge Pearce:

– Right through the act, the words occur “if in the opinion of the Commissioner.”

Senator DALY:

– If, in the exercise of that discretion which is reposed in him, the Commissioner does something which it can be shown to the High Court is a wrongful exercise of his power, it becomes a question of law. The admission or rejection of any particular evidence which may be necessary to enable the Commissioner to arrive at a particular decision is a question of law or may he so in the opinion of the High Court. The facts would be considered first and the judgment given upon the facts, plus the inferences. The Gordon case involved questions of fact. The High Court should be in a position to refuse to hear frivolous appeals. It was never intended that it should be open to any disgruntled taxpayer who might not be satisfied with the assessment or the mathematical accuracy of the formula adopted by the Commissioner. That should be a matter for the Board of Review. The statement submitted by the Sydney Chamber of Commerce does not in any way reflect on the Board of Review. What has happened since the board was established to cause honorable senators who, at that time, favoured the scheme to object to it now? Are they simply objecting to it because it has been brought forward by this Government ?

Senator McLACHLAN:
South Australia

– I do not think that the Minister has addressed himself to the question that is troubling the minds of honorable senators on this side. If there is any reason why he should not have done so I do not wish to press the matter. I remind him that a greater authority than the Leader of the Opposition has said that the opinion of the Commissioner is not a question of law. In Moreau’s case, with which, I assume, the Minister is familiar, the present Chief

Justice held that, although there was no fraud or evasion, the court could not substitute its views for the views of the Commissioner. That is the point that is troubling me. If the Minister feels that there is some middle course which may be taken to alleviate the position, I shall be satisfied. I suggest that consideration of the clause be postponed to enable him to confer with departmental officers and see what the draftsman can do to put the matter right. I do not wish a taxpayer to stand for ever condemned simply because, in the opinion of the Commissioner, he may have been guilty of evasion. The amendment submitted by the right honorable the Leader of the Opposition should not be lightly rejected. Unless the Minister can suggest a via media, I intend to vote for the amendment.

Senator RAE:
New South Wales

– It seems to me that whenever there is an opportunity to quibble over trifles honorable senators opposite will take full advantage of it, for the purpose, apparently, of harassing the Government.

Senator E B Johnston:

– We have been generous to the Government in the discussion on this bill.

Senator RAE:

– If the proposals submitted by honorable senators opposite are to be regarded as evidence of generosity, I should not like to have evidence of their meanness. The Leader of the Government in the Senate (Senator Daly) issued a challenge, which, up to the present, has not been accepted. He declared that no responsible body concerned with taxation matters had made any complaint of inefficiency or unfairness on the part of the Board of Review.

Senator Sir George Pearce:

– What about the statement of the Sydney Chamber of Commerce?

Senator RAE:

– That body did not declare that the attitude of the Board of Review had been unsatisfactory.

Senator Sir George Pearce:

– It asked for the right of appeal to the court.

Senator RAE:

– It said nothing about the findings of the Board of Review. I do not infer that its findings have always given universal satisfaction, because a litigant appealing to the High Court would be more or less disgruntled at the decision of the board. The mere fac that some taxpayers are dissatisfied with the decisions of the board cannot be regarded as evidence that its judgments are unfair. The board was established by the previous Government, and, until tonight, I have heard no complaints from those honorable senators who were either members or supporters of that Government as to its inefficiency or unsuitability for the duties which it is called upon to discharge. It would appear, therefore, that this amendment has been brought forward for the purpose mainly of harassing the Government. It is one of the most unreasonable that has been submitted during this debate. The right honorable the Leader of the Opposition (Senator Pearce) mentioned the position of the taxpayer who might be accused of wilful evasion of the law. In such an event, there would be the right of appeal to the court on questions of law, and thecourt would determine whether or not the Commissioner was justified in arriving at his decision on the facts as presented to him. In some instances, a taxpayer might consider it expedient to suffer grievances rather than to go to the expense of seeking the remedy. I was in that, position myself some years ago, when, as an employee, I was required to punch the bundy. On two or three occasions, owing to a fault in the mechanism, I was marked as being late. Rather than go over to the Town Hall in my own time, a proceeding that would have involved a delay of two hours, I preferred to suffer a deduction in pay amounting to a quarter of an hour. Whether or not the High Court will deal with all cases submitted to it must depend upon the manner in which the Board of Review arrives at its finding. If the board went out of its way to inflict an injustice on any taxpayer, or make an accusation of criminal evasion of the act. questions of law would be involved, and these would be determined by the court.

Senator McLachlan:

– The High Court has said it could not interfere with the decision of the Commissioner. That i.= my difficulty.

Senator RAE:

– I understood the honorable senator to say that on a point of law there is an opportunity to appeal to the High Court or to the Supreme

Court of a State. If that is so, what points would he determined on a question of law? If I am entangledby the dispute between members of the legal fraternity, surely it is the duty of those who have some knowledge of the subject to remove the entanglements. I should think that a man charged with evading a taxation law would be guilty of an indictable offence, for which he could be heavily fined, or imprisoned. If honorable senators possessed of legal knowledge wish to keep it to themselves they cannot be surprised if we object to their very complicated presentation of a case.

Question - That the proposed new clause (Senator Sir George Pearce’s amendment) be agreed to - put. The committee divided. (Chairman - Senator Plain) .

AYES: 15

NOES: 6

Majority 9

AYES

NOES

Question so resolved in the affirmative.

Proposed new clause agreed to.

Clause 20 -

Section fifty-four of the principal act is amended by omitting sub-section 4 and inserting in its stead the following new subsections: -

Senator Sir WILLIAM GLASGOW (Queensland) [11.7]. - I move -

That all the words after “omitting” be left out with a view to insert in lieu thereof the following: - “. . . sub-sections (1.), (2.) and (4.) and inserting in their stead the following subsections: - (1.) Income tax may be paid in two equal instalments. (1a.) . The first instalment shall be due and payable sixty days after the service by post of a notice of assessment. (1b. ) The second instalment shall be due and payable six months after the date for payment of the first instalment. (2.) Where an assessment is amended in accordance with this act and additional income tax is thereby payable by the taxpayer, the additional income tax may be paid in two equal instalments. (2a.) The first instalment shall be due and payable sixty days after the service by post of the amended assessmenton the taxpayer. (2b.) The second instalment shall be due and payable six months after the date for payment of thefirst instalment. (4.) Subject to this suction, every person who is about to leave Australia shall apply to the Commissioner at his office or at the office of a Deputy Commissioner for a certificate that -

income tax is not payable by that person; or

all income tax which has been assessed to that person has been paid or that arrangements satisfactory to the Commissioner have been made for the payment of that tax and of any further income tax which may become due and payable by that person, and the Commissioner, Assistant Commissioner or Deputy Commissioner, upon being satisfied as to the facts, may issue a certificate accordingly.”

The object of this amendment is to permit taxpayers to make their payments to the Taxation Department in two instalments, the first of which is to be paid within 60 days after receipt of the assessment and the second within six months of the payment of the first instalment. Under the present system many taxpayers find it embarrassing, and at times exceedingly difficult, to pay their income taxation within the time provided in the existing act. If this amendment were adopted it would allow commercial men particularly to have the use of their money in theirbusinesses for a little longer, and would also relieve them of the responsibility of meeting their assessments in what I consider an unnecessarily short period. Practically every person in the community is at present receiving a reduced income, and an amendment such as I have moved would be of considerable benefit to practically every taxpayer in the Commonwealth. The department will probably contend that extra expenditure will be incurred in the collection of income taxation. The department would as at present, send out the assessments. At the end of 60 days the first instalment would be paid, and the second payment would be made within six months thereafter. It will also be contended that the Treasury would he without revenue from this source for a longer period; but that would he compensated for by the fact that the money which, in the ordinary course, would be paid into Consolidated Revenue would be used in trade and commerce generally, and would, therefore, be of indirect advantage tothe Commonwealth. The amendment, if adopted, will afford considerable relief to the taxpayers without causing any great inconvenience to the department, and I trust that it will be agreed to.

The CHAIRMAN (Senator Plain).The person to whom the honorable senator refers is, I understand, acting in the capacity of secretary to the right honorable the Leader of the Opposition (Senator Pearce), and is not, as the honorable senator suggests, on the floor of the chamber. Secretaries to Ministers occupy a similar position on the other side of the chamber.

The CHAIRMAN:

– He is not within the chamber proper. If the honorable senator dissents from my ruling he must do so in the manner provided in the Standing Orders.

Senator Daly:

– When Mr. Forde, the Acting Minister for Trade and Customs sat in the enclosure for ministerial secretaries one night, he was told that he had no right to be there.

Senator Sir WILLIAM GLASGOW.He passed through the ropes. I was present and saw him. I trust that the Senate will agree to the amendment.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– This is one of the most extraordinary amendments that has been sub mitted. If it is insisted on, I shall advise the Senate to reject the bill altogether.

Senator Reid:

– It is not so serious as that.

Senator DALY:

– It is serious. Do honorable senators realize that it will involve the Government in an additional £50,000 in issuing assessments and receipts? The Deputy Commissioner of Taxation has informed me that if this proposal is carried, it will increase the expenditure of the department by at least £50,000. There is another, and more serious, objection to it. The Government has budgeted to meet certain commitments. Those commitments are based on the collection of income tax within a certain time. As taxpayers are treated by the Commissioner with the utmost leniency, at no time is there need to legislate in the manner suggested. But to attempt to do so now is to act unreasonably. The Government is facing a financial crisis.

SenatorE. B. Johnston. - So are the taxpayers.

Senator DALY:

Senator J ohnston seems to have only one purpose in this Senate, and that is to harass the Government as much as possible. Should we not consider the nation before the taxpayers?

Senator Payne:

– Do not the taxpayers make the nation?

Senator DALY:

– Of course they do; and their interests must be considered. I know that a majority of honorable senators can defeat the Government on this amendment ; but, if the amendment is carried, the bill might as well be thrown out. No government could carry on in such circumstances. How could it budget under this time-payment system? I ask honorable senators to give to this Government that consideration which they would give to another government in normal times. The Government cannot accept the amendment, and it is too late to postpone the consideration of the clause. If the amendment is insisted on, then the Government will have to tell the people that it cannot find the. money. I have just received a further note from the Commissioner of Taxation, in which he states that if the amendment is carried only one half of the revenue from income taxation will be collected this year. The Government can put up with an amendment providing for appeals to the High Court, but it cannot submit to treatment of this kind. I say that in no threatening spirit. The Senate knows ihat the Government cannot afford to pay1d. extra for the collection of taxes. The Commissioner of Taxation tells methat £50,000 is a conservative estimate.

Senator McLachlan:

– Does that amount include interest losses?

Senator DALY:

– No. Administration costs will be increased by £50,000 if this amendment is agreed to. I say, sincerely, that, if the amendment is carried, the bill might just as well be rejected altogether.

Senator Sir WILLIAM GLASGOW (Queensland) [11.26].- I point out that the total estimated expenditure of the department for the current financial year, including land tax, is £443,000. Does the Minister seriously say that it will cost one-eighth of the total expenditure of the department to give the taxpayers a chance to pay their taxes in two instalments?

Senator Daly:

– Acting under instructions from the Bruce-Page Government, the Commissioner of Taxation prepared an estimate of the cost of doing what the amendment proposes. His estimate was £73,000.

Senator Sir WILLIAM GLASGOW.It is absurd to say that the amendment will involve such heavy expenditure. If I had thought that the cost would be so great, I should not have moved the amendment. I should like to know how the amount is made up. The Government will not get out of its difficulties by makingconditions hard for the taxpayers.

Senator Daly:

– And the taxpayers will not get out of their difficulties by making it harder for the Government.

Senator Rae:

– This will not be an extra burden on the Government.

Senator Sir WILLIAM GLASGOW.The taxpayers have already had additional burdens placed on them. At a time when incomes are smaller, taxation has been increased. Would the Minister consider granting two instalments with an interval of three months?

Senator DALY:
(Vice-President of the Executive Council · South Australia · ALP

– I have no objection to postponing the clause for a quarter of an hour to enable the honorable senator to confer with the Commissioner of Taxes. If the Commissioner convinces him, as he has convinced me, of the seriousness of the amendment, the honorable senator will see that it does not matter whether che interval is three months or six months.

Senator Sir HAL COLEBATCH (Western Australia) [11.31]. - I cannot help thinking that it would be a mistake to carry this amendment. There is no doubt that many taxpayers will find it extremely difficult to meet their obligations. There is also no doubt that there are many other taxpayers who can, and ought to pay up at once. I should like some assurance from the Minister that the Commissioner will give a generous interpretation to section 55 of the principal act. In the existing circumstances, I really think that that is as much as we can fairly expect.

Senator Daly:

– I am able to give that assurance.

Senator SAMPSON:
Tasmania

– If I understand the proposal of Senator Glasgow aright it would mean, if carried, that I should have two months in which to pay half of my assessment, and a further six months in which to pay the other half, so that it would be eight months before I paid the total amount. I submit that that is not a reasonable request. It would throw the financial arrangements of the Government into chaos. One’s income tax assessment always comes at a most inopportune time, and that can also be said of electric light bills and rate notices. With all due respect to the mover of the amendment, I submit that it is not a reasonable thing to ask the Government for eight months credit in which to pay one’s income tax assessment.

Senator RAE:
New South Wales

– Since there has been an amalgamation of the work of the Federal and State Income Tax Departments, the authorities contrive that a suitable period shall elapse between the collection of each tax. I know, too, that in many cases quite a lengthy period elapses between the lodging of the return and the arrival of the assessment. Last year I sent in my return by the 30th June, but did not receive the assessment until nearly Christmas, after which I had 60 to 90 days in which to pay. By the time I had paid both my Federal and State taxes it was very nearly time to lodge my next return. I agree with Senator Sampson that there never is an opportune time to pay a tax. However, the long delay did me no good. I am aware that the taxation office always exercises leniency when a business man has not the ready cash with which to pay his assessment.

Senator Sir WILLIAM GLASGOW (Queensland) [11.36]. - In view of the undertaking of the Minister that the Commissioner will give a liberal interpretation to section 55 of the principal act,I ask leave to withdraw my amendment.

Amen dmen t - by leave - wi thdr awn.

Clause agreed to.

Clauses 21 to 24 agreed to.

Clause 25- (5.) The following amendments effected by this act shall apply to assessments for the financial year beginning on the first day of July, One thousand nine hundred and thirty and all subsequent years: -

The amendments effected by paragraphs (a), (b),(d), (e), (f), (h) and (i) of section two, by section three, by section four, by paragraphs (6), (d) and (e) of section five, by paragraphs (a), (b), (c) and (f) of section six, by paragraph (a) of section eleven, by paragraphs (a) and (c) of section twelve, by paragraph (a) of section fourteen and by paragraphs (b) and (c) of section fourteen (in so far as they relate to losses incurred in carrying on a business the proceeds of which, if any, derived from sources outside Australia would not be wholly exempt from income tax under the provisions of sub-paragraph (i) of paragraph (q) of sub-section (1.) of section fourteen of the principal act as amended by this act), by section fifteen andby section seventeen.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

.- I move-

That after the words “ paragraph (a) “, second occurring, sub-clause 5, the words “(in so far as it relates to losses made in carrying on a business)” be inserted.

This amendment deals with the date of commencement of amendment 2. It will apply to all losses arising in future. There is. no necessity to give this amendment any retrospective application because it has been the departmental practice to allow a deduction of such losses in past assessments.

Amendment agreed to.

Clause, as amended, agreed to.

Postponed clause 5 -

Section fourteen of the principalact if amended - (e)by inserting at the end of sub-section (1.) the following paragraphs: -

income derived fromsources outside Australia -

by a resident of Australia to the extent to which that income is proved to the satisfaction of the Commissioner -

to be derived from the sale of any produce which is chargeable in the hands of the person deriving that income with royalty or export duty by the Government of any country outside Australia.

Upon which Senator Sir George Pearce. had moved by way of amendment -

That the words “ outside Australia “ paragraph 2, sub-paragraph (q) (i) (2) be left out with a view to insert in lieu thereof the words “ including the Government of the Commonwealth or of a State of the Commonwealth.”

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– If Senator Pearce will withdraw his amendment I shall move -

That the following new paragraphbe inserted in paragraph e: - “ (s) the proceeds arising from the sale for use outside Australia of iron ore, quarried or mined by the vendor in Australia.”

Senator Sir George Pearce:

– I ask leave to withdraw my amendment.

Amendment - by leave - withdrawn.

Senator DALY:

– I move my amendment. I had the opportunity during the dinner adjournment of conferring with the Commissioner of Taxation and the Prime Minister on the matters raised by the right honorable the Leader of the Opposition (Senator Pearce) and Senator McLachlan. As will be gathered from my amendment, the Government is prepared to include iron ore with gold, and the other minerals.

Amendment agreed to.

Clause, as amended, agreed to.

Title agreed to.

Question proposed -

That the bill be reported with amendments.

Ordered -

That clause 8 be reconsidered.

Clause 8 -

Section twenty of the principal act is a mended -

by omitting the proviso to sub-section 1a and inserting in its stead the following provisoes : - “ Provided further that if, in any financial year, the amount represented by the disposal among, or acquisition from, the members of a company of commodities and animals acquired or disposed of by that company in the ordinary course of the industry, trade or business, or the amount represented by the receipts from the storage of the commodities of the members of a company or the amount loaned to members, is less than ninety per centum of the amount represented by the total value of such commodities and animals disposed of or acquired, respectively, by the company, or (as the case may be) of the amount represented by the total receipts of the company from the storage of commodities or by the total loans made by the company, that company shall not, in respect of that year, be deemed to be a co-operative company.”.

Amendments (by Senator Daly) agreed to -

That after “ the “, second occurring, in the second proviso to paragraph c the words “ value upon the “ be inserted.

That after “ storage “, wherever occurring in the second proviso to paragraphc the words “or packing” be inserted.

Clause, as amended, agreed to.

Bill reported with amendments.

Standing and sessional orders suspended, and report adopted.

Bill read a third time.

page 5377

COMMONWEALTH EMPLOYEES’ COMPENSATION BILL

Second Reading

Debate resumed from 5th August (vide page 5254) on motion by Senator Daly-

That the bill be now read a second time.

Senator McLACHLAN:
South Australia

.- This bill is practically a replica of two measures I had the honour of introducing during the regime of the late Government. It is thus the third occasion on which the measure has been considered by this chamber, and I do not propose to dwell at any length upon its provisions. There is one feature to which I should direct attention, particularly at this juncture in the affairs of the nation. I had a feeling when we were dealing with the measure earlier that we were providing generous allowances in respect of injuries to workmen in the employment of the Commonwealth, by adopting the mean of the compensations provided for under the various State workers’ compensation acts. It was thought that, for the Commonwealth to do otherwise, would be to set an extravagant example to the States. No one desires to have any reduction in the scale of compensation; but in this bill the Federal Government has seen fit to establish, not merely a generous, but a lavish scale of compensation at a time when the public purse can ill afford it, and when the taxpayer, who is, usually, the last person thought about, is wilting under the financial stress of the times. The scale of compensation proposed excels that provided in the New South Wales law, which was previously regarded as the last word in lavishness. It is, however, the only criticism that I have to offer to this measure. It seems to me we are, by the schedule now proposed, setting an example to the States which they cannot afford to follow, and it is very doubtful whether we should embark upon it at a time when the finances are strained. I grant that the amounts are not large. Increases of £50 here and £100 there in the multitude of accidents which I suppose occur in the Public Service do not seem very much; but they run into a considerable sum of money before the end of each financial year. Provision has been made in this bill for fixing the compensation in respect of certain injuries, and it is to. those I particularly point, because of their lavishness. However, the Government must take the responsibility. If times were good we could go to the full limit in safeguarding the interests of the maimed and injured ; but, when everybody is more or less suffering from financial strain, and the Government itself is imposing grievous burdens on the people, I think it would have been advisable to call a halt, or stop at what I, when introducing this bill a couple of years ago, regarded as a generous allowance in respect of these injuries. The bill itself has been a trifle unlucky in the past. It has, on two occasions, been carried by this chamber, and gone down to another place where, because of circumstances that have arisen, no opportunity has been given for its consideration. Perhaps on this occasion it will meet with a happier fate.

Senator RAE:
New South Wales

– I am pleased that the honorable senator does not intend to offer any factious opposition to this bill; but he claims that, because of the financial stringency now existing, it is not a proper time to give the compensation provided for in it. I claim that it is just the time when we should secure some measure of justice for those who are deprived of their bread-winners. If the Public Service is to be fairly and decently treated in regard to those who meet with accidents, no time can be too soon to mete out that justice. It is only those whose means are very limited who can realize the tragedy that results when bread-winners meet with severe accidents, or even death. Consequently, the least the Commonwealth can do in times of stress is to see that we should give, not merely fair, but also generous consideration to those who become injured in the pursuance of their duties as public servants. I trust that during the course of the bill through committee we shall not haggle over the amounts of compensation proposed to be paid. In fact, in some cases I think it would be good sense to somewhat increase the amounts set out in the schedules. They may be in excess of what have hitherto been provided; but I do not think that any one would care to suffer mutilation for the sake of securing them.

Sitting suspended from 12. midnight to 1 a.m. (Thursday).

Thursday, 7 August 1930

Senator RAE:

– I do not consider that the provisions in the bill err on the side of liberality, because the purchasing power of money is not what it was some years ago.

Question resolved in the affirmative.

Bill read a second time.

In committee :

Clauses 1 to 8 agreed to.

Clause 9 (Compensation for personal injuries to employees).

Senator H E ELLIOTT:
VICTORIA · NAT

– I understood the Leader of the Senate (Senator Daly) to say, during his second-reading speech, that he would endeavour to obtain information as to the amount likely to be involved, over and above the liability of the Commonwealth under the present arrangement for the payment of compensation to Commonwealth employees. In view of the stringency of the financial position,I should imagine that the Government investigated this aspect of its proposal carefully, and that the Minister can indicate approximately what amount is involved.

Senator DALY:
(Vice-President of the Executive Council · South Australia · ALP

– In reply to Senator Duncan, during the second-reading debate, I said it would be difficult, if not impossible, to obtain an actuarial calculation of the probable increase in the liability, because at present the Publio Service Arbitrator includes in certain awards compensation benefits for injuries received. It is,I think, generally admitted that the Commonwealth should extend to its employees the same measure of relief as is given to employees outside the Public Service and whatever may be the consequences we shall stand up to our obligations.

Senator Sir William Glasgow:

– Where is the need for this measure if employees are securing compensation from the Public Service Arbitrator?

Senator DALY:

– This legislation is necessary because certain sections in the Public Service, including casual employees, are not covered by awards of the Public Service Arbitrator. The previous Government considered it desirable to appoint a commissioner to deal with this matter and this Government approved of its proposal. We believe that the provisions relating to compensation payable to Commonwealth employees should be brought into harmony with similar measures in operation in the different States.

Senator Sir William Glasgow:

– Has provision been made in the Estimates for the additional liability?

Senator DALY:

– That has been provided under the heading of contingencies.

Senator Sir William Glasgow:

– Then there must have been an estimate prepared.

Senator McLachlan:

– The Treasury records might be able to show something.

Senator DALY:

– Possibly they would, but no estimate has been prepared of the probable increase in liability, although provision will have been made under the heading of contingencies.

Senator Sir GEORGE PEARCE (Western Australia) [1.10 a.m.]. - Paragraph a of sub-clause 1 reads -

The employee shall not be entitled to recover compensation from the Commonwealth or any person or to receive from the Commonwealth any payment in respect of the accident, or in respect of. the illness or incapacity arising from the accident, both independently of and also under this act; but subject to this paragraph this act shall not affect any civil liability of the Commonwealth under any other law.

The meaning of the words “ both independently of and also under this act,” is not quite clear to me, especially when read in connexion with paragraph d which states -

If it appears that the claimant has a claim against the Commonwealth or any person for compensation or for any payment in respect of the injury under any other law in force in the Commonwealth or any other place, compensation under this act shall only be allowed upon the claimant undertaking not to claim compensation for the injury under any such law.

There is provision for sick pay in the Public Service Act, and regulations. Can the Minister say if a public servant who claims under this measure will also be able to claim benefits under the Public Service Act and regulations?

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– No. Paragraph a simply enacts a provision which appears in other compensation acts, reserving to the employee his common law rights. Paragraph d requires the employee to make an election; that is to say, if he elects to take advantage of his common law rights, he will be unable to claim compensation under this act. Clause 15 deals with determinations made by the

Public Service Arbitrator. I understand that Senator Bae wishes to have it deleted. If it is struck out of the bill an employee will be obliged to make an election. He will not be able to claim compensation under both acts.

Senator H E ELLIOTT:
VICTORIA · NAT

– If the Public Service Arbitrator awards less than is provided in the schedule to this bill, naturally the employee will elect to take compensation under this measure.

Senator McLachlan:

– If this bill is passed the arbitrator will not be disposed to deal with this difficult branch of the law in future awards.

Clause agreed to.

Clause 10 (Compensation to employees affected by or dying from certain industrial diseases).

Senator Sir GEORGE PEARCE (Western Australia) [1.15 a.m.]. - Paragraph 5 of this clause reads -

If the employee at the time of, or immediately before, the incapacity was employed in any process mentioned in the second column of the second schedule to this act, and produces a certificate from a duly qualified medical practitioner that the disease contracted is the disease or one of the diseases in the first column set opposite the description of the process, that disease shall, in the absence of proof to the contrary, be deemed to have been caused by the employment in which the employee was engaged.

I do not wish to say anything disrespectful concerning the medical profession; but I recall an experience during the war which clearly demonstrated the ease with which medical certificates can be obtained from a family practitioner. I suggest that some safeguard is needed in this clause to protect the interests of the public. The duly-qualified medical practitioner mentioned in the clause would probably be the family doctor, who has to say that an employee is suffering from a disease. If he were employed in a particular process at the time of incapacity, it would be assumed that the disease was caused by employment in that work. A reference to the schedule will show that the man may have had the disease before entering the employment of the Commonwealth. A person may, on entering the Postal Department and engaging in one of the processes mentioned, be suffering from a disease. He might then get the family doctor to certify that he is suffering from a particular complaint, and may be entitled to compensation to an amount up to £700.

SenatorRae. - Hashe not to undergo a medical examination before joining the Public Service?

Senator Sir GEORGE PEARCE.That is not so in the case of casual employees.

Senator Daly:

– It is only a prima facie case.

Senator Sir GEORGE PEARCE.It is the responsibility of the department to prove to the contrary. There is a danger of collusion between the medical practitioner and the employee. The clause should provide that the medical practitioner should be a health or quarantine officer, or such other medical officer as is prescribed. I do not wish to interfere with the payment of compensation to those suffering from occupational diseases, as I know that they are as much entitled to compensation as employees who have met with an accident. We have, however, to protect the public interest. In view of my experience during the war period, when medical certificates were “ framed up “ by family practitioners as a favour to the persons concerned, the Government should prescribe the medical practitioner who is to grant the certificate.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– If the compensation under this measure was payable in the circumstances which prevail in the States, I should be willing to amend the clause in the direction suggested by the Leader of the Opposition (Senator Pearce). Honorable senators, however, should remember that a commissioner is to be appointed. When a similar measure was under discussion in this chamber on a previous occasion, it was pointed out that the intention was to allow the commissioner to settle such matters. In the first place a man must be employed in one of the processes mentioned in the schedule. If he is employed either immediately before or at the time of incapacity he must obtain a certificate from a duly qualified medical practitioner that the disease contracted is the disease or one of the diseases set out in the first column of the schedule. The doctor has only to certify that the employee is suffering from a particular disease, and to give a certificate accordingly. It then has to be proved that the employee has been working in one of the processes mentioned in the schedule. On proof of these two facts the law presumes, unless proof to the contrary is given, that he is entitled to compensation. It is quite consistent with the general system of compensation. I admit that an employee may have contracted, say, lead poisoning before entering the service; hut that may happen to an employee in any other service. If an employee working under a State act is engaged in any of the processes mentioned in the schedule and, produces a medical certificate that he is suffering from a disease, he is presumed to have contracted it while working for his previous employer. No attempt is made under this clause to saddle the Commonwealth with any liability other than that of an ordinary employer. The medical practitioner does not have to certify that the employee contracted the disease while in the employ of the Commonwealth; but that he is, or is not, suffering from the disease. The employee has to submit himself for examination, and the Commissioner is in a fortunate position, because there is no limitation on his discretion as to proof. An employee may not be suffering from plumbism but from neurasthenia. Any possible dangers are amply safeguarded by the fact that a departmental officer has to decide whether proof to the contrary has been furnished. If the medical practitioner should certify that the employee is not suffering from plumbism that would probably be the end of the case; hut if, on the other hand, he should certify that he is suffering from that complaint, the department has to take only the same risk as an ordinary employer. An employer engages an employee with all his defects ; but in the case of occupational diseases, the Commonwealth is not liable unless it employs the man in one of the processes mentioned in the second schedule.

Senator Sir WILLIAM GLASGOW (Queensland) [1.25 a.m.]. - I, too, had some experience in connexion with claims made on governmental departments by employees alleged to be suffering from certain disases. In one case, the man received a certificate from a medical practitioner and, although all the evidence was against him, he persisted in pressing his claim against the department. If general medical practitioners are permitted to give medical certificates serious trouble will result in the department through the multiplicity of claims which will be lodged. The Minister would be well advised to tighten up this provision by providing that a certificate shall be obtained from a referee, as is mentioned in clause 18.

Senator McLACHLAN:
South Australia

.- The Leader of the Opposition suggests that the qualified medical practitioner should not, for the purposes of this act, be the family doctor. That point has, I think, been answered by the Minister. If the medical practitioner gives an incorrect certificate, the Commissioner has every facility under the provision relating to a referee to deal with the matter. The second point raised by the Leader of the Opposition was to the effect that once a certificate is given proof is established against the Crown which is very difficult to disprove. When a similar measure was under consideration some time ago, Senator Qreene said that meat inspectors, for instance, were liable to contract anthrax, and on their entering the Commonwealth service the Government might be saddled with the responsibility which should be borne by the previous employer. It seems that the difficulty lies in the degree of proof. At first it appeared to me that the point raised by the Leader of the Opposition was covered by the provision relating to the appointment of the medical referee; but even if a medical referee is appointed, a certificate must be obtained showing that the employee is suffering from a particular disease. Then the law comes to his aid in sub-clause 5, which provides that the disease shall be deemed, to have been caused by the employment in which he was engaged. That places on the Crown a burden which it cannot discharge. The sub-clause saddles the Crown with the liability and allows the man’s previous employer to escape. I admit that that difficulty would arise only in the case of men who had been for a short time in the employ of the Government. The position might be met by some modification of the language of this clause. The Minister is familiar with this class of legislation, and may be able to suggesi a suitable amendment.

Senator RAE:
New South Wales

– We appear to be agreed that there are sufficient means of determining whether an employee has contracted a disease. The difficulty is to determine whether he contracted it while employed by the Government, or when working for another employer. The extreme case cited by the Leader of the Opposition (Senator Pearce) - that of an employee who might have started work the day before he made his claim - could not apply to most diseases. For instance, a man could not contract lead poisoning in one day. Even though it was proved that he was suffering from lead poisoning, it would be known that he had contracted it before he entered the employment of the Government.

Senator H E ELLIOTT:
VICTORIA · NAT

– There might be difficulty in proving it.

SenatorRAE. - If the day on which he took ill followed closely on the day of his commencing work for the Government, it would be obvious that he contracted the disease before he became an employee of the Government. The provision is not so dangerous as some honorable senators would have us believe. Even if an easy-going family doctor who desired to please a patient gave a certificate, the Commissioner could submit the case to the medical referee. There would be no difficulty about determining whether or not he was suffering froma particular disease; the difficulty would be to decide when he contracted it. That is a matter which it is almost impossible to determine definitely, unless the man has been so recently engaged that he could not possibly have contracted tlx1 disease at his present placeof employment.

Senator H E ELLIOTT:
VICTORIA · NAT

– Why handicap the Commissioner?

Senator RAE:

– Would the honorable senator have him disqualify a man without proof? If it is obvious that an employee is suffering from a disease, and there is difficulty in determining when he contracted it, surely he should be given the benefit of the doubt, rather than be compelledto prove what may heimpossible of proof.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– I have been able to secure a copy of Willis, a leading authority on workmens’ compensation legislation. In the appendix is a copy of the English Workmen’s Compensation Act of 1925. That act contains a section which, in principle, is on all fours with this clause. It reads -

Supplementary Provisions as to Industrial Diseases.

If the workman at or immediately before the date of such disablement or suspension as aforesaid was employed in any process mentioned in the second column of the third schedule to this act and the disease contracted is the disease in the first column of that schedule set opposite the description of the process, the disease, except where the certifying surgeon certifies thatin his opinion the disease was not due to the nature of the employment shall be deemed to have been due to the nature of that employment unless the employer proves to the contrary.

Senator Sir George Pearce:

– He is the certifying surgeon.

Senator DALY:

– He is the man appointed under the act. There is no distinction in principle between the English legislation and this bill.

Senator Sir George Pearce:

– With the exception that the certifying surgeon under the British legislation is appointed under an Act of Parliament, whereas under this bill that is not the case.

Senator McLachlan:

– The safeguard is that the Commissioner always has the right to call in the referee.

Senator DALY:

– All that the certifying medical practitioner can do is to certify that, in his opinion, the disease was not due to thenature of the employment. That is proof of the contention that in the absence of proof to the contrary the disease shall be deemed to have been due to the nature of the employment in which the employee was engaged. The only difference between the two provisions is the point raised by the Leader of the Opposition that in one case the certificate is that of a duly qualified medical practioner, and in the other case of a certifying medical practioner. In the one case, the medical practitioner is expected to establish a negative proof, whereas in the other case an affirmative proposition must be established. But in either ease the result is the same from the point of view of the employer. The legislation in force in South Australia provides for a certifying medical practioner. Once he issues a certificate that a man is suffering from one of the diseases mentioned in the schedule, and it is established that he was engaged in the process set opposite to that disease in the schedule, the man is deemed to have contracted the disease while in the service of the last man by whom he was employed in that process.

Senator McLachlan:

– It is only prima facie evidence. It does not go so far as the English legislation goes.

Senator DALY:

– That is so. This particular certificate is only proof in the absence of proof to the contrary. It does not say that, until the Commissioner is satisfied, he shall be deemed to be suffering from a particular disease. The legislature has definitely allowed a discretion to the Commissioner as to what should amount to proof in the absence of proof to the contrary. In principle there is no difference between this clause, and the provisions of Workmens’ Compensations Acts in operation generally in England and Australia. “There is no need for further tightening of the clause if the intention of the Senate is merely to limit the liability of the Government to that of private employers.

Clause agreed to.

Clause 11 agreed to.

Clause 12-

Where an employee sustains, by accident arising out of and in the course of his employment, any of the injuries specified in the first column of the Third Schedule to this act, the compensation payable under this actshall, when the injury results in total or partial incapacity, be the amount specified in the second column of that schedule opposite the injury so sustained, less any amount received by the employee under the First Schedule to this act during any period of his total incapacity arising from his injury.

Senator RAE:
New South Wales

.- I move -

That after the word “ incapacity “ the words “ and where the employee so elects “ be inserted.

If honorable senators will peruse the schedules to this bill, they will see the reasonableness of the amendment.

Senator McLachlan:

– Is there not a later clause to which the honorable senator’s amendment would be more appropriate, for instance clause 15?

Senator RAE:

– The idea is to give the employee the benefit, if he so elects, of having his case of incapacity dealt with in connexion with the amount specified in the second column of the third schedule.

Senator McLACHLAN:
South Australia

– Might I suggest that election takes no part in this clause, which fixes the compensation to be granted for certain injuries arising out of the person’s employment. The honorable senator cannot possibly introduce his amendment here.

Senator Daly:

– Unless of course the intention is that there should be unlimited liability on the Commonwealth to make a weekly payment during partial incapacity, unless the employee elects to take a lump sum. The Commonwealth might be liable to pay an amount of £3 10s. a week for twenty years.

Senator RAE:
New South Wales

– I was given the impression that the employee should have the opportunity to say whether he would accept a lump sum or weekly payments, but I do not pit my opinion against the legal knowledge of Senator McLachlan. With the permission of the Senate I will withdraw my amendment and, if necessary, ask that the bill be recommitted.

Amendment - by leave - withdrawn.

Clause agreed to.

Clauses 13 and 14 agreed to.

Clause 15 -

Where in any determination made by the Public Service Arbitrator appointed under the Arbitration (Public Service) Act 1020-1929, provision is made for the grant of compensation or other benefits to employees in respect of personal injury by accident arising out of and in the course of their employment, any employee to whom the determination applies shall not be entitled to compensation or benefits both under the determination and under this act but may elect to take compensation or benefits either under the determination or under this act.

Senator RAE:
New South Wales

– I move -

That clause 15 be left out.

The deletion of this clause from the bill would allow applicants to choose either to have the arbitrator settle their claims, or to avail themselves of the schedule in this measure. I think that this is a reasonable enough provision. I assume that the prior determinations will cease to exist when this bill becomes law.

Senator McLachlan:

– I invite the honorable senator to read the opening words of the proposed clause. The applicant can have it only one way or the other.

Senator RAE:

– I was under the impression that the determinations ended upon the passing of this measure.

Senator McLachlan:

– No ; otherwise this clause would not be required.

Senator RAE:

– I certainly gathered from the criticism that I have heard and read that the proposed clause would deprive applicants of any option. However, in view of the honorable senator’s assurance, I shall not press my amendment.

Amendment - by leave - withdr a wn .

Senator H E ELLIOTT:
VICTORIA · NAT

– I am not quite sure as to the object of the clause. If this is intended to be a comprehensive measure dealing with compensation to Commonwealth employees, why should we preserve the right of the arbitrator at all? Why cannot we have a separate clause abolishing the arbitrator’s power to deal with compensation?

Senator McLachlan:

– Because a number of these determinations will continue.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– The point made by Senator McLachlan appears to me to be perfectly sound. There are certain determinations already in existence, and they should be allowed to run their course. The employee cannot have it both under the determination and under the act. I think that in the case of any future determinations, the arbitrator would ask himself “Is this matter in dispute?” as he is to deal only with matters in dispute between a department and employees. He would probably conclude” We must have uniformity in the service. That has been effected by the new measure. I shall make no determination”.

Senator H E ELLIOTT:
VICTORIA · NAT

– If that will be the effect of the law, I have no objection to the clause.

Clause agreed to.

Clause 16 (Time for taking proceedings).

Senator Sir GEORGE PEARCE (Western Australia) [2.0 a.m.]. - Eight through this bill provision is made for compensation for injuries and this clause governs the time for the notification of injuries. Under the last clause compensation was provided for occupational diseases. A disease can hardly be called an injury.

Senator Daly:

– Clause 10 provides that an occupational disease shall be treated as if it were an injury.

Senator Sir GEORGE PEARCE If that is so a period of six months is allowed in which a claim for compensation for injury may be made, but surely in the case of an occupational disease the period should be much less.

Senator Daly:

– There are two conditions precedent to the granting of a claim. Notice of injury must be given as soon as practicable, and the other is the claim itself.

Senator Sir GEORGE PEARCE:

– I had overlooked that.

Clause agreed to.

Clauses 17 and 18 agreed to.

Clause 19 (Medical examinations).

Senator Sir GEORGE PEARCE (Western Australia) [2.3 a.m.]. - When notice has been given of an injury which, I understand, includes an occupational disease, an employee who is receiving weekly payments under this act is required to submit himself for medical examination. Does that mean that a man whose claim for compensation has been admitted may, subsequently, be brought before a medical referee for reexamination?

Senator Daly:

– Yes.

Senator Sir GEORGE PEARCE.That would be a check in regard to the difficulty I pointed out in clause 16.

Senator Daly:

– I should say so.

Clause agreed to.

Clauses 20 to 23 agreed to.

First and second schedules agreed to.

Third schedule.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– The schedule, as printed in the bill, needs slight amendment in order to make it quite clear that loss of both eyes, loss of both hands, loss of both feet, loss of a hand and a foot, total and incurable loss of mental powers involving inability to work, and total and incurable paralysis of limbs or mental powers shall be regarded as total incapacitation and be treated as such.

Senator Rae:

– I think that the amount of the compensation payable should also be placed in the column opposite those injuries.

Senator DALY:

– Although the amount is already set out in the second schedule, I have no objection to following the honorable senator’s suggestion.

Senator McLachlan:

– I think all that is necessary is to rectify a printer’s error by the removal of a comma inadvertently inserted after “paralysis of limbs or mental powers”.

Schedule verbally amended, and, as amended, agreed to.

Title agreed to.

Bill reported with an amendment.

Standing and sessional orders suspended; report adopted.

Bill read a third time.

page 5384

HOPS MARKETING BILL

Second Reading

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– I move -

That the bill be now read a second time.

I feel sure that this bill will commend itself to honorable senators. It is an attempt to overcome a serious difficulty which has arisen in Tasmania in connexion with the marketing of hops. To convey to honorable senators some idea of the magnitude of the problem, I propose to quote briefly from statistical data which will be of some assistance in the consideration of this measure. The average quantity of hops used annually by brewers, bakers, and others in Australia during the last ten years was 10,548 bales, each bale weighing 240 lb. The estimates of the Tasmanian and Victorian crops for the 1929-30 season just closed were 8,750 bales and 1,580 bales respectively, or a total of 10,330 bales. The area under cultivation is approximately 1,200 acres in Tasmania and 300 acres in Victoria.

The quantity of hops exported during 1928-29 was 2,083 bales. Of this quantity, 73 per cent, was shipped to the United Kingdom, and 26 per cent, to the Irish Free State. During the last two years, the Tasmanian Hopgrowers Limited has sold 3,000 bales of hops to Messrs. Guinness of Dublin, but its offer this year of 2,000 bales at the low price of 6d. per lb. was refused by Guinness without any reason being assigned. From inquiries made by the High Commissioner’s Office, London, it appears that the refusal was due to an abundant surplus of hops in the home market caused by an over-production in England and on the Continent with consequent, low prices, Belgian hops being quoted at ll/d. per !b., and Polish at 1-id. per lb. f.o.b. Antwerp. English low and medium grade hops were quoted at from 2 l-7d. to 2-id. per lb. Imports of hops to Australia during 1928-29, amounted to 427 bales, and the average quantity imported annually during the last three years has been 640 bales. Of the total imported during 1928-29, approximately 85 per cent, came from New Zealand, 8 per cent, from the United States of America, and 6 per cent, from Czecho-Slovakia.

Since March, 1922, an arrangement has existed between the hop-growers of Tasmania and the Australian brewers, whereby the latter have restricted their importations of hops to 15 per cent, of the annual consumption of each individual brewer. That arrangement is still in force. Following a meeting held in May last, certain Tasmanian hopgrowers wrote to the Government asking that an embargo be placed on the importation into Australia of foreign hops and substitutes for hops, and also that the Commonwealth Parliament should enact legislation to regulate the interstate trade in hops. Following these representations, the Federal Government requested the Hon. J. Gunn, Director of Development, to proceed to Tasmania and inquire into the position of the hop industry there. Mr. Gunn has presented his report which has been tabled in both Houses of Parliament.

There are in Tasmania about 150 growers producing 8,750 bales of hops per annum, and in Victoria about 25 growers producing 1,600 bales. It is estimated that there will be in the Commonwealth a carry-over of 4,000 bales to next season. For some years prior, to the last crop 1929-30, the marketing of the major portion of the hops produced in Tasmania was carried out by a pool called “ The Tasmanian Hop-growers Limited.” but owing principally to the lack of support by the growers, the pool found itself” unable to continue beyond the season mentioned. Victorian .growers have not entered into any pooling arrangements, each grower disposing of his hops by private contract.

Mr. Gunn’s report states that in anticipation of the termination of the pool, and of a difficult situation after 1930, H. Jones & Company, and other buyers of Tasmanian hops, made contracts towards the end of 1929 to supply brewers with approximately 7,000 bales of hops per annum during the years 1931, 1932, and 1933. Having made these contracts, the buyers then negotiated with a certain number of selected growers whose hops, it is alleged, are acceptable to the brewers, and made contracts with them for the purchase of their hops during the three-year period mentioned. The exact quantity which these growers have contracted to supply is 6,910 bales per annum - 27 growers have made contracts. Both, the brewers’ and the growers’ contracts are for three years, with the right of renewal for a further period of two years. The price to be paid by the brewers for brewers’ quality hops is 2s. per lb., and the price to be paid to growers is, in most cases, ls. 9d. per lb. These contracts cover practically the whole of the brewers’ requirements in Tasmanian hops for the period in question. One other firm in Tasmania has also made contracts with growers, and with small mainland brewers, but these contracts would not cover more than approximately 500 bales of hops. The effect of these contracts is practically to exclude the majority of growers without contracts from participation in the Australian market for hops. In making their contracts in Tasmania, the brewers have not purchased their total Australian requirements, a margin apparently having been left to allow of purchase of hops produced in Victoria.

The present position is that in Tasmania 27 growers have contracted to supply practically the whole of the Tasmanian hops required by brewers for the years 1931, 1932, and 1933, whilst in Victoria the hop-growers have made contracts for the disposal of their hops, and, according to Mr. Gunn’s report, they are quite satisfied with existing arrangements. In Tasmania there are approximately 120 growers who have not been able to make contracts. These growers have requested the Federal Government to place an embargo on the importation of hops into Australia, and to introduce legislation to regulate interstate trade and commerce in hops.

Mr. Gunn states that a number of small growers will not be able to produce a crop next year because of the low return received consequent upon the failure of the pool to dispose of a large portion of the 1930 crop, and their inability to obtain further credit. Notwithstanding the present tariff, hops can be imported at prices below what is profitable for the Australian grower. The large consumers having contracted to obtain their Tasmanian supplies from 27 growers through Messrs. H. Jones & Company, and other buyers, it will be impossible for the great bulk of the remaining 120 growers either to obtain finance for the production of a crop or to market it when produced. This arbitrary method of reducing production is not equitable.

It may be urged that any proposal involving a reduction in production should be left entirely to the State concerned. On this point I remind honorable senators that, as regards the rationing of the market for hops, a State law will be ineffective outside the State itself. Consequently, representations were made to the Commonwealth Government to introduce legislation on lines similar to the Dried Fruits Act. Naturally the Commonwealth Government would not take action without first consulting the States. I have had an interview with the Premier of Tasmania, who, fortunately, happened to be in Canberra attending a meeting of the Loan Council. This proposal was submitted to him, and I have his assurance that it offers the only solution for the present difficulty in that State.

Senator J B Hayes:

– Has the Premier of Tasmania advised the Minister to that effect?

Senator DALY:

– Yes. When I asked him if he were in favour of the bill he said that it appeared to him that the method proposed by the Government was the only way in which the difiiculty could be overcome. The Minister for Markets and Transport (Mr. Parker Moloney), who has been in communication with the Tasmanian Government, received a message to the effect that information could be obtained from Mr. McPhee, who was to attend a meeting of the Loan Council in Canberra. I met Mr. McPhee, who informed me that he was meeting a deputation of Tasmanian senators in connexion with the bill, and that he had perused the measure, which seemed to provide the only way out of the difficulty.

Senator Sir George Pearce:

– What is the opinion of the Victorian hopgrowers ?

Senator DALY:

– As they sell to the brewers in Victoria they are not affected by this legislation. This measure will affect only those growers who intend to sell their product outside the State in which it is grown. I understand that the Carlton Brewery, in Victoria, absorbs practically the whole of the Victorian production of hops, and, therefore, the licence referred to in the bill would not be applicable to Victoria. Mr. Gunn suggests two alternatives for thefuture control of the industry -

  1. Enactment of legislation by the Tasmanian Parliament to control the marketing of hops. Such legislation could provide for the State to acquire the hops, and, if that action were taken, the State could control the interstate sale and oversea sale of such hops without the assistance of federal legislation.
  2. Introduction of legislation by the Commonwealth Parliament to control interstate trade on the same lines as the Commonwealth Dried Fruits Act.

In regard to the first of those two alternatives, the opinion in Tasmania is that, if the industry is to be controlled at all, authority should be exercised by the Federal Government, as any attempt at control by the State would he ineffective. The Commonwealth Government, realizing the precarious position in which the hop-growers in Tasmania are placed, is yielding to their request by introducing this legislation for their protection. This measure, if enacted, will control interstate and overseas trade in hops, and is to give effect to the Government’s intention ::: that regard.

The bill provides for the creation of an Australian hop board consisting of three representatives elected by hop-growers in Tasmania, one representative elected by hop-growers in the other States of the Commonwealth, and a Government representative appointed by the GovernorGeneral. The reason it is proposed to allot three growers’ representatives to Tasmania is on account of the large production of hops in that State, 8,750 bales having been produced last season, in comparison with 1,600 bales in Victoria, and a negligible production in South Australia and Western Australia. The Australian Hop Board will control the export and interstate trade in hops. This control will be exercised by the issue of licences to growers subject to such conditions and restrictions as are prescribed by regulation.

Senator McLachlan:

– Does that mean that current contracts will be interfered with?

Senator DALY:

– It is possible that that will be the case. The Commonwealth Government is concerned with the position of the hop industry generally and not with the interests of individuals.

The board will allot a share of the business with brewers and others requiring hops outside Tasmania to each grower, according to his production, provided, of course, that the grade and quality of the hops are up to the standard laid down by the board. This will mean that the Australian market for hops will be open to all growers. In other respects the measure is a replica of similar measures introduced in connexion with the canned and dried fruits industries. The Senate has to decide whether the Commonwealth Government should interfere’ with the hop industry, and, if so, whether the method proposed is the most effective to ensure some form of stabilization.

Senator Herbert Hays:

– This measure goes further than that. It affects the industry throughout Australia.

Senator DALY:

– The real purpose of the bill is to stabilize the industry in Tasmania. It cannot be detrimental to hop growers in Victoria. This is another direction in which the Government is endeavouring to assist Tasmania. It realizes that if assistance is not rendered to this industry the State may have to be compensated by a further financial grant.

Senator Sampson:

– In view of the low prices ruling for hops overseas, is there any likelihood of importations increasing beyond 15 per cent.?

Senator DALY:

– There is nothing to prevent that. I understand that at present brewers have not any difficulty in obtaining supplies. They cannot be compelled, under this measure, to purchase Australian hops.

Senator Sampson:

– Overseas prices are extraordinarily low.

Senator DALY:

– And the quality of Tasmanian hops is extraordinarily high. As it suits the Australian brewers to purchase Australian hops, I do not think overseas purchases are likely to be made.

Senator Cooper:

– Were the growers given an opportunity to carry on under the old pool?

Senator DALY:

– Messrs. Henry Jones and Company made arrangements to purchase the product of a certain number of hop-growers, leaving others, operating on small areas, in an unfortunate position. A big monopoly was actually crushing out a number of small growers.

Senator Cooper:

– Could not a ballot have been taken ?

Senator DALY:

– It would have been useless to take a ballot when there were no purchasers of the product handled by the pool. It is now a matter of whether 120 hop-growers shall be allowed to continue in the production of hops or be compelled to discourage production. I understand that the allotments on which the hops are grown are so small that they cannot profitably be utilized for any other purpose. In these circumstances, the Government considers it wise to intervene in their interest. As these proposals have received the approval of the Tasmanian Government, I trust the Senate will pass the bill.

Senator Sir GEORGE PEARCE (Western Australia) [2.43 a.m.]. - The Minister (Senator Daly) has said that this measure is similar to other bills passed in connexion with the control and export of canned and dried fruits. But to enable the dried fruits export control and similar other measures to become operative, State, as well as Federal, legislation was necessary. The Minister has not informed the Senate if the Governments of Tasmania or of Victoria are willing to pass supplementary legislation. After reading Mr. Gunn’s report I would be surprised to learn that those Governments will pass such legislation. If not, this measure, if enacted, will be ineffective. Export control boards have handled canned and dried fruit, and butter. In connexion with those products there was an excess of production over local consumption. As the hulk of the surplus production was exported there is an essential difference between those products and that under consideration. At present, I understand, there is no market overseas for Australian hops. Previously, the only overseas buyers were the manufacturers of Guinness’s stout, but since the Commonwealth Governmentlias imposed additional customs duties upon imported bottle ale and stout, Guinness’s have retaliated by saying that they will not take our hops.

Senator Daly:

– That is absolute nonsense.

Senator Sir GEORGE PEARCE:

-It is not. The essential difference between i his product and others over which the Commonwealth Government is exercising control is that in this case there will be no excess production for export. Only about one-third of the dried fruit produced in Australia is consumed in this country; the remainder is disposed of overseas. The position is much the same in the case of canned fruits, butter, and pearl shell. Indeed, practically the whole of our pearl shell is exported. In this case, although the conditions are exactly the reverse, the same machinery is expected to deal with them. Other export control boards were appointed specifically to deal with our export trade. I have read carefully the case prepared by the growers who are asking for the regulation of the hop industry, as well as Mr. Gunn’s report on the hop industry. They are depressing documents. There is nothing in either of them to lead us to believe that the industry will benefit from the passing of this bill. At this late hour I shall not quote from those reports extensively; but the case put forward by that section of the hop growers which is asking for this legislation, shows a declining industry, and over production brought about by excessive prices. At one time during the war the price of hops rose to 8s. a lb. That high price led to excessive production. The industry is suffering to-day from that over production. How can we hope to compete in the markets of the world with a product which on the evidence of Mr. Gunn, is sold overseas at 2d. a lb. as against a production cost of ls. 4d. in Australia? The story of hop-growing is a story of a declining industry. The Hop Industries Defence Committee seeks a remedy for the existing unsatisfactory state of affairs. It maintains that what is needed is a proper system of control. It says that the Commonwealth has protected the hop-growing industry by high tariffs, and that the Commonwealth is now bound to protect both the producer and the consumer. It goes on to say -

It surely cannot allow a combine or a combination of persons to seize all the profits of a primary industry that has been so long established . . . We do not ask for a federal pool, because that would involve the hops grown and disposed of iu Victoria.

What is this proposal but a federal pool? If it is not a federal pool it is federal regulation. The case of the Hop Industries Defence Committee continues -

W’e believe that the individual can be sufficiently protected by the Marketing Act provision if rightly applied to the hop industry.

I can only say that I cannot. distinguish between this regulation and a pool. They are asking that Victoria shall be roped in. Coming now to. Mr. Gunn’s report we find that the average annual Australian production over a period of ten years is 9,726 bales. Brewers and bakers use 10,548 bales. Our imports total 1,780 bales, and our exports 987 bales per annum. That gives an excess of imports over exports of 793 bales. Here is another doleful note from one point of view, although from another point of view it i3 cheering news -

Present indications arc that the consumption of beer is decreasing, and that the future demand for hops will not be so heavy as it has been in the past. The brewers report a considerable drop in consumption due principally to the existing depression.

Sales of 1930 hops are very slow, and large quantities of this year’s crop arc still unsold and in store.

With the increase in substitutes for yeast the demand for hops by bakers and others is also gradually decreasing.

Those are cruel facts which must be recognized. How can we expect by regulation to prop up such an industry? We cannot export hops, and the local consumption of hops is decreasing.

Senator Daly:

– It is only a temporary decrease.

Senator Sir GEORGE PEARCE.I hope that the decrease is permanent. How oan we maintain production when already there is overproduction, and at the same time maintain the price of an article which is already far above world parity? Yet we are asked to do those two impossible things in this bill. The people have such blind faith in an act of Parliament that they believe that almost anything can be done by legislation. They believe that by legislation we can make the economic sun stand still. It cannot he done. The kindest thing that we can do to these people is to tell them that it cannot be done. The unkindest thing would he to humbug them into believing that by passing this bill we can do the impossible. I have read the report and recommendations of Mr. Gunn and also the report of the Commonwealth Board of Trade, comprising Sir Alfred Ashbolt, Mr. E. Baynes, and Mr. W. J. Mill, and the remedies they suggested in 1925. They recommended a restriction of importations, a restriction of production, and the fixation of prices. Mr. Gunn docs not repeat their recommendation. Nor docs he recommend what the Government proposes in this bill.His conclusions are -

  1. During recent years the supply of bops has exceeded the requirements of the Australian market.
  2. At presentthere is no profitable export market, nor is there any likelihood of one developing.
  3. Itis anticipated that when the 1931 season’s crop is harvested, there will be a carry-over from previous years of at least 4,000 bales. 4 In order to stabilize the industry, production must be reduced to Australian requirements, with a safe margin to meet contingencies, such as a short or damaged crop.
  4. A number of small growers will not be able to produce a crop next year because of the low return received consequent upon the pool not being able to dispose of a large portion of the 1930 crop, and their inability to obtain further credit.
  5. Notwithstanding the present tariff, hops can be imported at prices below what is profitable for the Australian grower.

Mr. Gunn gives a number of alternatives for the control of industry -

  1. The Tasmanian Parliament could enact legislation similar to the New South Wales Marketing of Primary Products Act, and the Queensland Fruit Marketing Organization Act. Such legislation would provide for the grading of hops so as to eliminate the inefficient grower who produces low grade hops.
  2. The Commonwealth Parliament, under its constitutional powers, could control interstate trade, by enacting legislation similar to the Commonwealth Dried Fruits Act, making it compulsory for interstate traders in hops to be licensed, and could license in such a manner as to assure each efficient grower hisfair proportion of the Australian’ market.

In view of the fact that the control of the industry in Tasmania is essentially a matter for the Tasmanian Government, a consultation between the governments concerned should be held before any steps are taken by the Commonwealth to enact legislation.

To make cither Commonwealth or State legislative control effective, it will bc necessary tq restrict importations of hops. This, however, is a matter for consideration and advice by the Customs Department.

Mr. Gunn refrains from making any recommendation such as the proposal contained in this bill. I see no hope of any useful purpose being served by this legislation, and therefore I shall vote against the second reading.

Senator DUNN:
New South Wales

– If the majority of the Senate which is in opposition decides to’ destroy this child almost at birth so that the Government majority of seventeen in another place will not see it, we cannot expect to be entrusted with another child for fear that it, too, will bc strangled. The Senate should therefore be on its best behaviour and allow this bill to pass, otherwise those in another place will think that the Senate is not a very capable nurse to which to entrust the inauguration of further hills. I hope that the bill will pass through this chamber and go to another place, showing to those there that the practice of initiating legislation in this chamber is a wise one. The Leader of the Opposition said that the consumption of beer was decreasing. Perhaps the only thing concerning which the right honorable gentleman and I are in agreement is that we are both total abstainers.

Senator Sir Hal Colebatch:

– The honorable senators are none thebetter for that.

Senator DUNN:

– We are certainly none the worse for it. Nevertheless I have never voted for prohibition. The Leader of the Opposition said that the sale of beer was decreasing.

Senator Herbert Hays:

– He was quoting from Mr. Gunn’s report.

Senator DUNN:

– Various nations have their national drinks. In some countries the national drink is wine, in another champagne, in another beer, and so on, I am reminded of a verse which goes somewhat as follows: -

The Frenchman likes his sparkling wine;

The German his lager beer;

The Englishman his half and half;

And thinks it brings good cheer;

The Scotchman likeshis whisky neat;

The Irishman likes it hot;

But Australians have no national drink -

They drink the blinkin’ lot.

In the opening remarks of his report Mr. Gunn states -

On the 22nd May, 1930, certain hop-growers in the New Norfolk district, Tasmania, wrote to the Minister for Markets (Honorable F. J. Moloney) and submitted the following requests put forward by a meeting of hopgrowers held at New Norfolk on the 16th May, 1930:-

That the Federal Government be requested to immediately place a total embargo on the importation of foreign hops and substitutes for hops into Australia,

And it is indicated that Australia imports hops from such countries as the United States of America, Belgium, and Jugo-Slavia. I see no reason why we should encourage the importation of foreign varieties when we have a sufficient quantity of locally-grown hops to supply our demands. The report continues -

  1. That the Federal Government be requested to set up at once a compulsory hop pool for the production and marketing of hops in Australia.
  2. That the Federal Government be requested to set up immediately a royal commission to investigate the recent hop pools in Tasmania and the hop industry generally.

Subsequently the second request was altered to one asking the Commonwealth Parliament to enact legislation to regulate interstate trade and commerce in hops.

The people of Tasmania have urged the Government to grant some protection to the local hop industry. Ever since this Government has been in power honorable senators opposite have pleaded the cause of the primary producers, and the small man on the land, alleging that Labour was out to down such people. I have done a lot of political campaigning in this country, and have always found that the average farmer is not a supporter of the Labour party. Yet here is an endeavour on the part of a Labour Government to assist these people. Mr. McPhee, the Premier of Tasmania, who was in Canberra within the last 48 hours, gave an assurance to the Vice-President of the Executive Council that he agreed in the main with the principles embodied in this bill.

During the various debates that have taken place in the Senate we have frequently heard it stated that the Labour party has never been prepared to do the right thing by the returned soldiers ; that it is always anxious to act prejudicially to their interests. There are a number of returned soldiers among the Opposition in the Senate, and I represent them on the Government side. I have here a telegram from New Norfolk, Tasmania, signed by the secretary of the Derwent Valley branch of the Returned Soldiers Association, which reads -

Hop industry Derwent Valley most serious position. Returned soldiers employers employees affected. Strongly urge immediate federal assistance.

I also am a member of the Returned Sailors and Soldiers Imperial League of Australia, and in all sincerity I put it to the returned soldier representatives opposite: Are they prepared to turn down this request from their colleagues on the land?

Senator H E ELLIOTT:
VICTORIA · NAT

– What about the returned soldiers in the hop industry in Victoria?

Senator DUNN:

– I understand that the big breweries in the capital cities of Victoria provide a sufficient market for all the hops grown in that State. Senator H. E. Elliott is an ex-General of the Australian Imperial Force. Is he prepared to support the Government in its endeavour to assist these returned men? If he is not, I am prepared to meet him on the hustings and state the case for the Government against his defence of his attitude in the matter.

Senator H E ELLIOTT:
VICTORIA · NAT

– How does the honorable senator account. for the objection of the Victorian growers to this bill?

Senator DUNN:

– Not many of them object to it. Mr. Gunn’s report intimates that they are sufficiently protected by the Victorian market. But these unfortunate men in the Derwent Valley are growing for export trade. Personally, I think that the name Tasmania should be changed to Jonesmania, as the Jones family seems to have a strange-hold on the island. Jones and Company certainly have no love for the returned soldier hopgrowers of Tasmania; on the contrary they are trying to force them out of existence. I do not suppose that many of these Tasmanian Joneses represented Australia at the late war, although they cultivate jingoistic attitudes when asking the Government to protect their interests. I am not concerned about conserving the interests of Jones and Company, who have made millions of pounds out of sweated nigger labour in the Malaya tin fields. I dp not take advantage of my parliamentary privileges to make that statement. I am prepared to repeat it on the hustings. If this bill is rejected, 126 hop-growers and 700 small land-owners will be detrimentally affected. Mr. Gunn continues -

Production in Tasmania. - Tasmanian hops are grown principally in the Derwent Valley, which forms part of the New Norfolk district, situated in the southern part of the island.

Tasmanian growers produce two distinctive types, viz.: - the English varieties (known as straight hops), and a Californian variety (known as Golden Cluster). The straight hop is in greater demand by brewers because it lends itself to the production of a milder beer than can be obtained from the Golden Cluster.

I- see from this report that the brewers are importing hops from Bavaria ! What have honorable senators opposite to say about that? Are they going to countenance that action, and refuse to assist the returned soldier growers in the Derwent Valley? I speak feelingly on that point. At page 4 of his report Mr. Gunn says -

There has always been a quantity of hops imported into Australia. The imports have been obtained mainly from New Zealand, Bavaria, Czecho-Slovakia, and the United States of America.

I remind honorable senators that when our ships are trading to America, and they have Australian fruit aboard for consumption by their passengers, they are compelled to jettison that fruit immediately they enter American waters. Yet here we are importing hops from the United States of America. Reverting to Mr. Gunn’s report, I find that -

In Tasmania at present there are approximately 150 growers, many of whom carry on the production of hops in a very small way.

Mr. Gunn goes on to say

The Australian High Commissioner’s office in London has advised that over-production of hops is prevalent now both on the Continent and iu Great Britain, and quoted the following prices: Belgium, 14s. per cwt. or lid per lb.; Polish, 16s. per cwt. or lid. per lb. (f.o.b.).

Because there is over-production of hops in Belgium and Poland are we to buy our hops from those countries and place the hop-growers in the Derwent Valley on rations? I hope not. Mr. Gunn goes on to say -

The freight charges from England or the Continent to Australia would not be more than 2d. per lb., so that imported hops could apparently be landed in Australia, duty paid, at prices ranging from below ls. up to not more than ls. 4d. per lb. At the present time Australian brewers are paying 2s. per lb.

Because the growers can import hops at a price not exceeding ls. 4d., apparently the positions of the returned soldiers who, with their families, are engaged in growing hops, are to be jeopardized. The financial columns of our newspapers show us that the wealthy shareholders of Australian brewing companies draw handsome dividends. According to Mr. Gunn, our breweries are supposed to require imported hops to blend with their milder beers, but, also, according to Mr. Gunn, a variety of Australian hops, known as Golden Cluster, is quite suitable for blending for milder beers.

Senator E B Johnston:

– Why have honorable senators not been supplied with copies of Mr. Gunn’s report?

Senator DUNN:

– Copies were made available to Senator Sampson, the Opposition Whip, for distribution to honorable senators of the Opposition. Mr. Gunn goes on to say -

Practically the whole of the quantity exported in 1928-29 went to the United Kingdom and to the Irish Free State. Messrs. Guinness brewers, of Dublin, have taken large quantities of the Australian surplus during the past few years, but they have recently advised that they are not interested in Australian hops this year.

A few moments ago the Leader of the Opposition (Senator Pearce) said that the Government had, no doubt, by its tariff proposals, curtailed the importation of Guinness’ beers and stouts, implying that Messrs. Guinness, who are the largest brewers of their kind in the world, are retaliating by refusing to buy any more Australian hops. The bogy, however, is upset when we remember that in 1928-29 the Bruce-Page Government was in power. In regard to Victoria, Mr. Gunn reports -

Victorian marketing arrangements - Victorian hop-growers have not entered into any pooling arrangements, each man disposing of his hops by private contract with the brewers or agents. So far as can be ascertained, the Victorian brewers are satisfied with their existing methods of marketing and have no desire to form a pool.

Mr. Gunn also states that the whole of the Victorian production can be utilized by the Victorian brewers. In conclusion, 1 appeal to my friends of the Opposition to allow this bill to get into the committee stage on three grounds - firstly, to respond to the confidence displayed in this chamber, inasmuch as we have been asked to deal with the measure first; secondly, to give the returned soldiers in the Derwent. Valley an opportunity to earn a living: and thirdly, because of the assurance given a few hours ago to the Prime Minister (Mr. Scullin) and Senator Daly by Mr. McPhee, the Premier of Tasmania. I feel sure that the Government has put up a case for the protection of the returned soldier hop-growers of the Derwent Valley.

Senator J B HAYES:
Tasmania

.- The trouble with the hop industry for some years past has been that there are too many hops grown. If there were no surplus there would be no trouble. The hop-growers have been able to avoid trouble until the present by exporting; but, as has already been explained, the fact that the hops grown in European countries can now be bought at as low a price as- 2d. or 3d. a lb., excludes any possibility of Australia exporting hops. That leaves only the Australian market available. The industry is not a big one as industries go in Australia ; but it means a tremendous lot to those engaged in it in Tasmania.

At all times of the year it employs a great deal of labour, and especially does it do so at picking time. Anything we can do for it in a sensible way should he done; but no solution will be found unless provision is made for growing a smaller quantity of hops. Any scheme to help the hop industry must provide for a compulsory cessation of any extension of planting. I hold no brief for big or little growers. All should have a chance to make a living. No other industry in Australia lends itself so much to co-operation and voluntary control as does the hop industry. The total area under hops is not more than 1,200 acres, and it should be an easy matter to arrive at a scheme whereby every one can be satisfied. At present no one is satisfied. Senator Dunn has read one telegram; I could have read 50. I have received from 20 to 30 from each side - one lot frantically telling me to support the bill, and the other lot assuring me that it would mean ruination to the industry if the bill were passed. I have, as I say, no brief for either side. All I want is that something shall he done to help the industry. I am convinced that, this bill will not do it. All that it will do is to provide for the granting of a licence to export hops from one State to another. If that is done fairly, the hops will be exported pro rata according to the number of bales produced. But that in itself pre-supposes that some hops will not be exported. If there were no surplus there would be no need for the bill. If this bill is passed there will be such an increase in the surplus that in a year or two the cool stores in Tasmania will not hold it, and the scheme will break down with its own weight. This has been our experience with other pools. Those in control of the canned fruit pool adopted some weird scheme by which they tried to make people buy what they did not want. If they asked for peaches they had to take apricots or plums. As a result the people turned to America, which was prepared to supply them with what they required. The compulsory pool was supposed to be aimed at monopolies in Australia, but invariably its only effect was to lose the trade to Australia and allow monopolies in America to secure the market. They ai-c bound to fail because they interfere with the ordinary course of business. It has been said that the proposed pool will not interfere with the hop-growers in Victoria. Of course it will not.

Senator H E ELLIOTT:
VICTORIA · NAT

– This bill will interfere with Victorian growers.

Senator J B HAYES:

– I do not think it will, as I understand the growers in Victoria can dispose of the whole of their product to Victorian breweries; but it may interfere with the growers of that State if they attempt to export hops to New South Wales. The proposal certainly will interfere with Tasmanian growers, and actually it will be an open invitation to growers in Victoria to increase their acreage. Growers will chafe under the restrictions and will turn their attention to Victoria, where they will be free of restrictions. This will ruin the Tasmanian industry. In Victoria there is a great deal of land that is suitable for the growing of hops, and strangely enough Victorian growers usually obtain higher prices ‘than are paid to Tasmanian producers, although I do not think the Victorian product is superior in quality. Some objection appears to be taken to the action of certain Tasmanian growers in making contracts for the disposal of .their hops for the ensuing three years. Does not every producer wish to make contracts for the sale of his crop? It seems to me to be a sensible way of conducting business operations. Only this week I received information that fourteen additional growers in Tasmania had made contracts to supply hops to consumers in Victoria. There is really nothing wrong about making a contract, but there is something fundamentally wrong about the action of a government which seeks to break contracts. A contract, honestly made, should be regarded as sacred. I hope that I 3hall never be a member of a parliament that passes legislation to annul contracts honestly made for the protection of producers and buyers. I believe that the industry can be stabilized if a certain proportion of the growers can be induced to cease production for a time. My information is that they are prepared to take this action voluntarily if they receive adequate compensation. After all the quantity of hops involved is not very great. According to Mr. Gunn’s report, the carry-over is only about 4,000 bales. I feel certain that, if a workable scheme is evolved, a number of the growers will voluntarily cease production for the time being, so as to stabilize the industry. I do not know whether the figures which I have are correct, but for the purpose of my argument they are near enough. 1 am informed that the production this year will be 10,000 bales, and the requirements of the Australian market 8,000 bales, leaving a surplus of 2,000 bales. To stabilize the industry it will be necessary to make a levy - I suggest a compulsory levy under either the Commonwealth or State law - of id. a lb. on brewers, agents and growers. This will return l£d. per lb. on the total production. Prom the fund so created, it will be possible to pay 6d. per lb. to those growers who undertake not to string their hops for two or three years. On a crop of six bales to the acre, which is rather under the average, this will provide compensation equal to £36 per acre to those growers who cease production. It has been suggested that the Government may contribute another 2d. per lb. to the stabilization fund. If it does, this additional amount will bring the compensation payment up to £48 per aero per annum, which is rather more than growers have received for their hops in recent years. Hops exported to Ireland have realized 8d. per lb. c.i.f. United Kingdom ports, so the compensation necessary to stabilize the industry will give to those growers who, for the time being, cease production, more than they have obtained in the open market in recent years. I have it on good authority that those interested in the scheme will submit to a levy without the necessity to pass legislation. This scheme should stabilize the industry until the market recovers. The bill contains no reference to the disposal of the existing surplus. This is an important omission. I am informed that at the present time there is in Australia 12,000 bales of hops and that the brewers could have carried on without this year’s production. If the Government had directed its attention to the disposal of the surplus, by offering an advance of 5d. or 6d. per lb. for a term of years, something would have been done to stabilize the industry.

The scheme which I have outlined will not mean the elimination of the small grower. I have as much practical sympathy for the small growersas I have fox the hig men in the industry. A stahilization scheme which provided for the payment of fair compensation, would be acceptable to the big growers, some of whom would be glad to take advantage of it, and turn their attention to some other form of production. It will, I think, be necessary to prohibit by legislation or by agreement the planting of further areas.

Senator H E ELLIOTT:
VICTORIA · NAT

– Does the honorable senator suggest that Victorian growers also should be included in the scheme f

Senator J B HAYES:

– Certainly. The honorable senator’s interjection clearly indicates his belief that, if action is taken in Tasmania to restrict production, a splendid opportunity will be presented to growers in Victoria to extend the industry in that State, and engage in what will be a profitable trade. I would prohibit any growers from planting further areas. It would be necessary, also, to place an embargo on the importation of hops from overseas, because importations have primarily been responsible for all the trouble in the industry. If the Government placed an embargo on importations; if it prohibited the planting of further areas, and if it brought in a measure to provide for compensation to be paid to growers who elected not to string their hops for two or three seasons, I should support it as it would make the industry prosperous, and those engaged in it contented. This bill will not achieve that purpose, so I must vote against it.

Senator H E ELLIOTT:
VICTORIA · NAT

– Apparently certain Tasmanian growers of hops would like me to vote for a measure the effect of which will be to put the Victorian growers out of action. Senator Dunn just now made an impassioned appeal on behalf of returned soldiers who are engaged in the hop-growing industry in the Derwent Valley. A few minutes later he admitted that he did not know how many were in the business. Evidently he knows nothing about the conditions of the industry in that State.

Senator Barnes:

– Several returned soldiers are growing hops in Tasmania.

Senator H E ELLIOTT:
VICTORIA · NAT

– Returned soldiers are also growing hops in Victoria. If I supported a bill which would put them out of the business, they would have something to say to me. I have received a communication from growers of 1,500 bales out of a total of 1,700 bales grown in Victoria, asking me to vote against this measure. I understand that they have written to the right honorable the Prime Minister (Mr. Scullin), to the same effect. The telegram to me reads as follows: -

The growers of over 1,600 bales out of 1,700 grown in Victoria have made written protest against proposed hop marketing legislation, which will gravely disadvantage them for the benefit of the growers of small portion of Tasmanian crop who are pushing this legislation. Urge you to reject legislation. From press reports the pool and board suggested to be elected by growers, irrespective of acreage, is quite unfair. £75,000 invested in the industry, and employing 7.50 men as pickers, will be in the hands of a board elected by small growers.

Senator Daly:

– What is the date of that telegram?

Senator H E ELLIOTT:
VICTORIA · NAT

– It was despatched yesterday, the 6th August. I have also received a telegram from Colonel Cohen on behalf of the brewing interests of Victoria protesting against any Commonwealth interference with the industry.

SenatorHoare. - I have received information to the effect that that gentleman is not opposed to the bill.

Senator H E ELLIOTT:
VICTORIA · NAT

– That is contrary to the message which I received. This measure will not be of any assistance to the hop industry generally, and I certainly cannot support a proposal which will have a very detrimental effect upon a large number of persons engaged in the industry in Victoria. Under this proposal the Melbourne brewers may be compelled to obtain portion of their requirements from Tasmania.

Senator Daly:

– That is not possible under this legislation.

Senator H E ELLIOTT:
VICTORIA · NAT

– I understand that the area under crop is to be restricted, and that possibly a portion of the Victorian requirements will have to be supplied by Tasmanian growers.

Senator Daly:

– As Commonwealth legislation can affect only interstate trade, there will he no interference with the Victorian hop industry.

Senator H E ELLIOTT:
VICTORIA · NAT

– I do not see how the industry is to benefit unless the area at present under crop is reduced. I presume that if this industry expands, and the growers in Tasmania or Victoria desire to dispose of their surp?us product in New South Wales or in Queensland, the Commonwealth Government can intervene.

Senator Daly:

– Tes, but that is not the intention.

Senator H E ELLIOTT:
VICTORIA · NAT

– I have merely expressed the opinions of certain persons who are strongly opposed to the passage of the bill.

Senator HOARE:
South Australia

.- Senator H. E. Elliott has just informed the Senate that he has received a communication from Colonel Cohen, who, I understand, is a chairman of directors of the Carlton and United Breweries Limited, to the effect that if this measure is enacted it will inflict a great deal of hardship on the Victorian hop-growers. I cannot understand why such a message should have been despatched when the same gentleman has informed others that the bill will not have any detrimental effect on the hop industry in that State.

Senator H E ELLIOTT:
VICTORIA · NAT

– Has the honorable senator anything in writing to that effect?

Senator HOARE:

– No; but I understand that other honorable senators have been verbally informed in that direction. Further, I understand that one of the largest hop-growers in Victoria has definitely stated that the measure will not interfere with the industry.

Senator Herbert Hays:

Mr. Gunn’s report is to the contrary.

Senator HOARE:

– Possibly the persons who gave certain information to Mr. Gunn have since changed their opinions.

Senator H E ELLIOTT:
VICTORIA · NAT

– Will the honorable senator give the name of the large grower in Victoria who said that he was not opposed to this scheme?

Senator HOARE:

Mr. Panlook. He is, I believe, one of the largest hop growers in Victoria, and is not opposed to the bill.

Senator H E ELLIOTT:
VICTORIA · NAT

– That is the person who forwarded the message which I read.

Senator HOARE:

– The Leader of the Opposition and Senator J. B. Hayes said that they could not see how this bill will assist the hopgrowing industry; but we have been informed that if some control is not exercised, 120 small growers will be compelled to cease producing hops. It would appear that an effort is being made by the big hopgrowers to squeeze out the small producers, and then to increase prices to the detriment of the consumer. I am totally opposed to monopolies in any form. According to the opinions expressed by a number of growers, this measure should have the effect of stabilizing the industry and limiting production. I am informed that if the measure is passed, 120 families will be able to continue in the industry, which means that, apart from manual workers, no fewer than 700 persons will benefit. Apparently, it is the intention of Henry Jones and Company, of Hobart, to exercise a controlling interest in the industry. The ballot which was taken was conducted in a most unsatisfactory manner, because it was assumed that those who did not return their ballot papers were opposed to the pool. The present pool was due to expire on the 30th April of this year. A ballot-paper was issued and each grower was asked to vote for or against a continuance of the pool. An instruction with the ballot-paper stated that those who did not return their ballotpapers would be considered to have voted against a continuance of the nool. About 34 papers were returned on twenty of which an affirmative vote, and on fourteen a negative vote was recorded. The real result of the ballot, excluding those who did not return their papers, was that 20 voted “Yes” and 14 voted “No”. It was then announced that taking it that those who failed to return their ballot papers were against the pool, there was a substantial majority against its continuance, that the pool was at an end, .and that each grower would have to look after himself in the future. That is a most unusual way to obtain an opinion of thu growers. No one had a right to say that the papers which were not returned could he regarded as votes for or against the proposal. Only votes received should have been counted. Before the vote was taken the directors expressed themselves in favour of a federal pool. Jones & Company, the principal hop-growers and sellers, said they would not agree, and offered to the directors of the pool and a few others a contract for their own hops. The directors accepted the contract, thus acting contrary to the interests of the other growers who had elected them. They played safe ; but who will say they played cricket? When the facts became known there was great indignation among the other growers. Jones and Company gave contracts to 26 persons. The larger number of 126 were to be absolutely excluded, and driven from the industry. A public meeting was held, and the matter fully discussed. A defence committee was formed, and an appeal made to the Federal Government to protect 126 families and their dependants and workers from destruction and ruin by the combine. The Government sent Mr. Gunn to report on the industry. Mr. Gunn’s investigation was necessarily hurried, but he got a fair grasp of the position. The main fact revealed by him is that 126 families will be driven out of this highly protected industry unless this Parliament comes to their assistance. A defence committee was set up, and a defence fund, to which the whole Derwent Valley district subscribed, was created Apparently these people were afraid of the combine. Otherwise what was the reason for their request for an investigation, and government assistance? Senator J. B. Hayes stated that he would not support the bill, although he admitted that it contained some redeeming features. He probably referred to the licensing of men to export hops. There seems to be a good deal of uncertainty as to the effect of this measure if passed. Some growers believe that it would benefit them; others are opposed to the bill. It is a pity that all the growers did not take the trouble to record their votes, for then we should have known whether a majority of them favoured the Government’s proposals or wanted something different. In the circumstances, we can- not do better than accept the opinion of the Premier of Tasmania. The VicePresident of the Executive Council (Senator Daly) has told us that Mr. McPhee informed him that he was prepared to accept the bill. All honorable senators may not fully understand the position of the hop industry in Tasmania to-day. They should, therefore, be willing to be guided by the Premier of that State, who Bhould know what is best for the industry. I hope that Senator J. B. Hayes will reconsider his decision to vote against the bill. Even if it does not accomplish all that we desire, it can do no harm. Honorable senators should be prepared to give it a trial. I do not want to benefit a few hop-growers at the expense of the many. The object of the bill is to assist the small growers of hops. If honorable senators find later that the results are less favorable than the Government expects them to be, they will be able to claim that they followed the advice of the Premier of Tasmania.

Senator Sir Hal Colebatch:

– When did Mr. McPhee tell’ the Leader of the Senate that he would accept the bill?

Senator HOARE:

– Yesterday.

Senator Sir Hal Colebatch:

– He told me the very opposite.

Senator Daly:

– The bill would never have been introduced but for a conversation I had with the Premier of Tasmania.

Senator HOARE:

– There seems to be a mass of contradictions. It would appear that the Premier of Tasmania has expressed differing views. Nevertheless, I think that in the interests of the small growers of hops the measure should be passed. If my vote can help the small man, rather than the monopolist, the small man will get it every time. I trust that the Senate will pass the bill.-

Senator MILLEN:
Tasmania

– Reference has been made to the opinion of the Premier of Tasmania regarding this bill. Having heard that Mr. McPhee had expressed himself as in favour of this legislation I asked him to-night if that were the case. He said that it was not.

Senator Daly:

– He told me that the Tasmanian Government would offer no opposition to the bill seeing that it appeared to be the only possible means of granting relief to the industry.

Senator MILLEN:

– I do not dispute the honorable senator’s word. I am merely stating the reply I received from Mr. McPhee. Mr. Gunn strikes the nail on the head when, in his report, he says that the Commonwealth Government- in introducing any legislation into this Parliament to assist the hop industry should have the active cooperation of the Tasmanian Parliament, ff that were done, we should be proceeding on sound lines. The position would be still better if we could obtain the co-operation of the Victorian Parliament. I desire to refer to clause 3 which reads -

This act shall be read and construed subject to the Constitution and so as not to exceed the legislative power of the Commonwealth, to the intent which where any enactment thereof would but for this section have been construed as being in excess of that I lower it shall nevertheless be a valid enactment to the extent to which it is not in excess of that power.

As that clause throws a doubt on the constitutionality of the billy we are led to seek the reason for its insertion. The reason is found in clause 15, which contains a proposal to restrain trade between the States. Under section 92 of the Constitution that cannot be done. It might possibly be done if each State Parliament passed an act permitting it. At present, however, it is not constitutional to restrain trade as between the States, and therefore the bill would accomplish no good purpose if it were passed. I have as much sympathy with the small growers of hops in Tasmania as lias any other honorable senator. Tasmanian senators oppose this measure, not because we stand for any particular class of hop-grower, but because we do not want this Parliament to pass any measure which will lead the hop-growers of Tasmania into false hopes, and to expect great things where they are impossible. I say definitely that it would be a shameful thing for any Parliament to break down contracts that had been honorably entered into. If something were wrong with the contracts, or if there had been restraint of trade, the position would be different. But where a man who has been producing something enters into contracts to dispose of it, it would be wrong to interfere. I very much regret that some growers have experienced difficulty in disposing of their crop. The scheme suggested by Senator J . B. Hayes is an admirable one. I shall oppose the second reading of the bill.

Senator PAYNE:
Tasmania

– It is a pity that a bill of such importance should have to be debated at this early hour. No measure lately introduced into this Parliament has caused me more concern than this one has. It has been represented to me that unless this measure is passed, a great injustice will be inflicted on numbers of worthy people. I am not one to cast my vote in favour of an injustice being done to any one.

Senator Daly:

– I understood that the honorable senator was in favour of the bill. Apparently someone has been “ pulling my leg “.

Senator PAYNE:

– What does tho honorable senator mean? Does he attempt to dictate what I shall do in this chamber ? If he thinks so, he will very soon find himself mistaken. I resent his interjection. Reference has been made to the attitude of the Premier of Tasmania towards this bill. Yesterday, in company with a number of other Tasmanian members, I met Mr. McPhee in a room in this building where we discussed the proposals contained in this bill. I say without hesitation that Mr. McPhee gave us no indication whatever that ha was in favour of the bill. His statement was that the Tasmanian Government had no intention of bringing in any legislation to deal with the matter.

Senator Dunn:

– Did Mr. McPhee say anything against the bill!

Senator PAYNE:

– He said very little about the bill; certainly nothing in favour of it. During the debate it has been claimed that a very large number of people will be thrown out of their occupation if this bill does not become law. I know the hop industry fairly well. I say definitely that the growers who are producing at least two-thirds of the total output of hops in Australia are giving more employment than is the section which we are asked to protect by this MIL It might be gathered from the debate that there are no workers to be considered in connexion with the hop-growers who have entered into contracts. I point out that those growers employ at least 150 families throughout the year, in addition to a large number of casual workers during harvesting operations. We should not Jo them an injustice. I understand that there are many returned soldiers among the families employed by the growers who have entered into contracts. I make that statement in reply to one by Senator Dunn, claiming that we shall throw many returned soldiers out of employment if we reject the bill.

Senator J. B. Hayes put the matter very clearly when he stated that the hop industry in Tasmania has for some time been in a very difficult position through over-production, that the demand for hops has been decreasing, while the production has increased considerably. It is essential that there should be a curtailment of the growth of hops in that State.

This bill cannot appeal to any fairminded man, because it provides that those who are producing two-thirds of the total quantity of hops grown in Tasmania are to have no voice whatever in the control of the marketing of their hops. The measure provides that the members of the board that it is proposed to set up shall be elected by the growers, each grower who has two acres and over under hops to have a vote. There are 44 or more growers who have been able to make contracts, and 120 who have not been able to make contracts. Does it not follow that the 44, who are producing more than two-thirds of the total output, will have no voice in the election of the board that is to control the industry in the future? I have never heard of a more unfair suggestion.

Senator Daly:

– Could we not decide that in committee?

Senator PAYNE:

– Is the honorable senator prepared to accept an amendment that the voting shall be in accordance with the production?

Senator Daly:

– I am prepared to give the proposal most favorable consideration if the bill goes into committee.

Senator PAYNE:

– That does not commit the honorable senator sufficiently. I listened very attentively to the alternative scheme outlined by Senator J. B. Hayes, and I have been forced to the conclusion that if this suggestion were put into practice it would be infinitely better for the growers generally than would the operation of this bill. Many of the small growers have not received anything like the cost of production for their hops.

SenatorRae. - How have they lived. On their losses?

Senator PAYNE:

– I do not know the individual circumstances of those men. A great deal has been said about the firm of Henry Jones and Company, and a good deal of opprobium has been directed to it. One honorable senator suggested that the name of Tasmania should be altered to “ Jonesmania “. Tasmania has a great deal to thank the firm of Henry Jones and Company for.

Senator Hoare:

– Tasmania made Henry Jones a millionaire.

Senator PAYNE:

– No; hig marvellous brains made him a millionaire. Having known the late Sir Henry Jones, I am aware that it was his undoubted ability and industry that put him into the position that he attained in industry, and the island State should be thankful that it had such an excellent citizen. I know many scores of small men who were saved by the generosity of the firm of Henry Jones and Company during adverse seasons.

Senator Millen:

– Including hopgrowers.

Senator PAYNE:

– That is so. I remember an occasion when there was a magnificent crop of plume in Tasmania, and no market for them. That firm paid every plum-producer in the island State a price per bushel for his plums on an estimated crop calculated by an official appointed by the firm, which did not take delivery of one plum. It did that in order to help those people tide over the had season. I should be less than a man if I did not resent imputations cast on the memory of Henry Jones, a name that is respected throughout Tasmania. There is always antagonism towards any man who does well out of industry, particularly in Australia. The following letter was written by the firm of Henry Jones and Company to the Premier of Tasmania. It is dated 1st August and reads -

With reference to the discussion which the deputation of hop-growers had with yon this morning on the subject of the Federal Government’s proposal to establish a hops control board, we wish to advise that, with the object of assisting those growers who have not sold their’ hops, we are now in a position to submit the following proposition: -

Subject to the Federal or State Government finding one-third of the amount involved, we are prepared to guarantee as amount of £3 per bale of not less than 240 lb. net weight of hops to the said growers.

The payment of £3 per bale would be payable only to those growers who produced hops in season 1030, and the number of bales would be determined according to the allocation made to each grower in season 1930 by the Tasmanian Hopgrowers Limited, but in no ease is it to exceed the actual production.

In the case of growers who were not members of Tasmanian Hopgrowers Limited, the payment would be based upon the number of bales for which gale is substantiated by the grower by the production of account sales or other acceptable documentary evidence. For the purpose of arriving at the number of bales on which the £3 per bale would be payable to their “ outside “ growers, the quantity sold by them in 1930 as ascertained from the aforesaid documentary evidence would be reduced by 26 per cent., this being the same reduction a3 members of Tasmanian Hopgrowers Limited had to bear at the time their allocations were made to them for the 1030 season.

A first condition of this payment of £3 per bale to growers as above would be that the grower would be required to sign an undertaking not to produce any hops, or allow them to be produced, on the property he owns or occupies, or has in the past grown hops on, and further agreeing not to. grow hops on any other land in Tasmania.

The proposed payment of £3 per bale to be made to the growers in question for seasons 1931 and 1932 only.

The total number of bales upon which the amount of £3 per bale is to be payable shall not exceed 2,000 bales in any season. In the event of it being in excess of this, a proportionate amount only to be paid. At the same time, it is confidently believed that 2,000 bales will be the very maximum quantity that is likely to be established for purposes of this payment.

All of the foregoing is, of course, contingent upon there being no Government control of the industry in any shape or form.

This proposition has been drawn up somewhat hurriedly, in view of your departure for the mainland to-morrow morning, and as it is subject to ratification in certain quarters we would mention that if through any unforeseen cause’ it should have to be withdrawn we shall telegraph you to this effect to reach you at Canberra not later than midday on Tuesday next, August 5th.

Yours faithfully, for H.Jones and Company Pty. Ltd.

Ross, Director.

P.S. - It is the definite opinion of the deputation that the payment proposed herein of £3 per bale is actually substantially more than the majority of the growers concerned would earn even if they had a market for their hops.

Re Financing of 120 non-contract Growers. - The approximate production per annum of these growers is 2,000 to 2,500 bales, and the amount required to finance the growing and harvesting of this quantity would involve an expenditure of, roughly, £25,000 to £30,000 per annum. Owing to the inferior quality of hops produced by the majority of these growers, it costs considerably more to market their product than is realized in the sale of them. Ninety per cent. of the hops grown by the growers referred to would not be acceptable to the Australian brewers, and, therefore, would (and have been in previous years) be shipped overseas, if it be possible to effect a sale, at about6d. per lb. f.o.b. Hobart, which would result in a loss to the growers, or the company financing, of half the cost of production.

That offer would partially overcome the existing difficulty. If it were supplemented hy a scheme based on that suggested by Senator J. B. Hayes, I feel that the position could be met, and that, eventually, the small growers, some of whom will have to go out of production in the near future, would be much better off than they would be under the protection that would be afforded by this bill. This bill would not give them protection. The whole thing would break down with its own weight eventually, and for that reason I cannot see my way to support the second reading of the bill. If a measure came before us which I felt would meet the case and there was nothing in it to inflict an injustice on a portion of the people engaged in the hop industry, I should be found supporting it, but I am not going to be a party to breaking a contract or a party to preventing the possible realization of the ideal in regard to this industry as I understand it, namely, that its future depends entirely on the quality of the article produced, together with a limitation of the output to the bare needs of the consumers in Australia. For the reasons I have mentioned I oppose the second reading.

Senator Sir HAL COLEBATCH (Western Australia) [4.32 a.m.]. - I have taken advantage of the presence in Canberra of the Premier of Tasmania, and an Honorary Minister of the Tasmanian Government, to invite their opinions on this measure, and they have both given me clearly and definitely to understand that they do not appreciate the interference of the Commonwealth Government in this matter. I am greatly enamored of the suggestion thrown out by Senator J. B. Hayes that a bonus of 8d. a lb. should be given to every hop-grower for all the hops he does not grow, and I suggest in all seriousness that theidea be carried to its logical conclusion - that we remove entirely the present duty on hops and import our hops paying for them about1d. or 2d. a lb. in the countries in which they are grown, and that out of the money . we save in that way we pay 8d. a lb. to all the present growers of hops in Australia indefinitely on condition that they permanently refrain from any further growing of hops. We should be considerably better off by doing so and should get cheaper beer. I challenge any honorable senator to find a flaw in that argument. I also contend very seriously that there are a number of industries in Australia which we bolster up under equally unsound, uneconomic conditions, and that it is largely because of that we are rapidly drifting into national bankruptcy. I oppose the second reading of this bill.

SenatorRAE (New South Wales) [4.34 a.m.]. - It appears that the hop industry is in a very queer condition. We Are told that the law of supply and demand rules these matters, but it is apparently working backwards in this case, because more hops are being produced than there is demand for, and hops that could be obtained from overseas are so very cheap in comparison with the cost of production in Tasmania that the whole industry is in a more or less hazardous position. There are, I understand, 44 growers whose interests are diametrically opposed to those of 26 others; so that although the industry is confined to a small corner of the Commonwealth there are so many engaged in growing hops that they form two diverse factions and one section, in order to save itself, is willing to send the other to perdition. Senator Colebatch Bays that it would pay us to allow hops to be imported free of duty and subsidize the Tasmanian hop growers on condition that they cease growing hops. Obviously the honorable senator fully realises the anomaly of the present situation, but at the same time he does not see that the capitalistic system of which he is an upholder is founded on equally contradictory and idiotic methods. It is only as that system progresses to the fulfilment of its destiny that we find it is condemned to destruction by reason of its inherent contradictions. Time after time we see sermons in the press, and politicians and publicists tell us that the economic salvation of this country depends on more production; but as soon as we start producing anything, we get orders that we must destroy some of our crops or cease to produce so much in order that a market may be found for a smaller quantity than is capable of being produced.

Senator Herbert Hays:

– That is because we cannot export.

Senator RAE:

– We cannot live by what we produce and consume ourselves but by what we send away to some one else. It is but another of the anomalies inherent in our present system that we must export the very best we produce, and eat rubbish ourselves. For two or three successive years I have spent a few months in Tasmania, and I could never get there a better apple than I could get at Darwin or Alice Springs. The best apples were sent to England or Germany.

Senator Herbert Hays:

– Or Sydney.

Senator RAE:

– Yes. Your policy is the same in regard to butter. We send our best butter to England and sell it there at a price which is less than that which we pay for the second grade quality we consume ourselves. That policy is not singular to Australia.. It is followed more or less all over the world. It is due to the fact that instead of producing for use as sane beings would do we are idiotic enough to try always to secure a profit whether the article we produce is good or not, and, unless we can sell it for more than it is worth, we are plunged into poverty. There waa a time when the human race suffered actual shortage of necessities of lifebecause people in these days were not sufficiently advanced in the use of irrigation and other methods of fighting the powers of nature. Now we find that the more we produce the poorer we are. When our marts and stores are glutted with an abundance of the good things of life every second man is thrown out of employment and cannot find means of livelihood. We perish in the midst of plenty. I invite honorable senators to consider the fundamental causes of these things. If they do so they will find that the whole system we are trying to bolster with this palliative legislation is doomed to destruction because it is inherently self-contradictory :md destructive of all the best elements of human kind.

Senator O’HALLORAN:
SOUTH AUSTRALIA · ALP

– A most extraordinary set of circumstances has developed during the time this bill has been before the Senate. Honorable senators were first of all assured that certain interests most whole-heartedly supported the measure, but a few days afterwards similar assurances from other quarters indicated an entirely opposite view. My main reason for rising at this late hour of the morning to offer a few observations on the bill is the hope that some of those who have changed their minds during the last few hours, may again change them. We have listened to most extraordinary arguments, more particularly from some honorable senators representing the State which is most vitally interested in the bill. We are told by one that this proposal is an unnatural interference with trade. I venture to suggest that the proposed action of the Government is that of the policeman who steps in to protect a weak section of the community from the oppressive action of a strong section. The action of the strong section of the community in squeezing out an industry which exists under the tariff wall built by this Commonwealth seems to me to be something in the nature of restraint of trade. I remind honorable senators that there may come a time when the majority of this Parliament may reconsider the giving of protection to the hop industry if those who happen to have the power today use it to smash the weaker but more numerous section of the industry. I do not say that I advocate that course. I think that the saner course is for the Commonwealth Parliament, which has already protected the industry, to see that the benefits are reasonably distributed among all who are entitled to participate therein. The result of the defeat of this bill will be that growers who have been growing hops, some of them for 40 years, others on holdings selected by their forefathers a century ago, will be forced off the land, and thrown into an already overstocked labour market to work as -employees for those who will benefit by the arrangement which will be consummated if this legislation is not passed. So much for the alleged unnatural regulation of the industry.

We are told that the principal difficulty as regards the marketing of hops, is the huge surplus which hangs like a dark cloud over the industry. I have searched the various documents that have been submitted in connexion with this proposal, and I have not discovered any evidence of a serious surplus. I do not blame Jones & Co. for the arrangement which they have made with a limited number of Tasmanian growers. I have never taken up an attitude of hostility to any hig combine merely because it is a combine. If the people of Australia are foolish enough to approve of a Constitution under which big business organizations can obtain a strangle-hold on industry, they deserve to suffer. The remedy lies in an alteration of the Constitution to permit this Parliament to legislate against that condition of affairs. The Hop Growers Defence Association contends that the surplus is not nearly so serious as honorable senators would have us believe, and Mr. Gunn’s report seems to endorse the views of that body.. In a review of the hop-growing industry from 1921-22 to 1929-30 he states that the average annual production is 9,726 bales and the average annual consumption 10,548 bales. That does not look like a. serious over-production. - I understand also that it is possible to grow in Tasmania a type of hops which will render it unnecessary to import hops. That statement has not been denied. It is not fair to. base any argument of over-production on figures relating to production and consumption for one year only. The only safe course is to consider these figures over a certain period and the longer the period the more accurate is the estimate likely to be. A period of ten years is, I suggest, sufficiently long to arrive at a correct estimate of the position. During the period mentioned by Mr. Gunn, the acreage under crop ranged from 1,400 to 1,500 acres. This does not bear out the contention of those who oppose the bill that the Australian market cannot absorb the present production.

Senator Herbert Hays:

– If the position were as stated by the honorable senator, the industry would not be in its present difficulty.

Senator O’HALLORAN:

– I agree that owing to the present depression some difficulty has been experienced in the last year or two in disposing of the crop. Mr. Gunn has recommended that legislative action be taken to improve the position of the industry. Failing action by this Parliament, the alternative is for the Tasmanian Government to restrict planting and arrange for the disposal of the production of that State. But legislation passed by the Tasmanian Parliament will be ineffective because the consumption of hops in Tasmania is infinitesimal compared with the demands of the market in the mainland States. Because of its power to control interstate trade, the Commonwealth Parliament is the only legislative authority which can regulate the industry. It has been urged by opponents of the bill that the small growers are inefficient. These people have been producing hops for the last 40 or 50 years. It was not until the Government had announced its intention to introduce this bill that critics of the scheme discovered that the small hop-growers of Tasmania were inefficient. It is indeed remarkable that it is only at this late hour that we hear complaints of inefficiency as regards the 120 growers who are to be squeezed out of the business by the arrangement made between H. Jones and Company and the 26 selected growers.

Senator Herbebt Hays:

– How will this bill help the small growers?

Senator O’HALLORAN:

– It will help them by compelling all those engaged in the industry to take their fair share of the market which is available on the mainland. This Parliament passed legislation on similar lines with regard to the producers of dried fruits. No contract made between certain hop-growers and H. J ones and Company need be prejudicially affected. There is ample provision in the bill to guarantee those who made the contracts as to quality and quantity, if the business is properly regulated. I trust that despite the opposition of Tasmanian representatives in this chamber the Senate will pass the bill, so that arrangements may be made to assist the hops industry. Senator J. B. Hayes propounded a scheme for the repatriation of surplus growers of hops. Senator Colebatch immediately pointed out that a much more effective proposal would be to remove the import duty upon hops, to allow the Belgian product to be imported at1½d. or 2d. a lb., close down the industry in Tasmania, and pay the growers8d. per lb. on the understanding that they ceased production. He went on to point out that if this policy were adopted the people of Australia would be in pocket over the transaction. But I do not favour that proposal. I believe that the period of low prices in the continental market for hops will soon pass. Even in cheap labour countries I cannot visualize the possibility of continued production at present price levels. I believe, therefore, that the Australian industry should be regulated and encouraged. I hope that the second reading will be passed. When the bill is in committee we shall be able to consider carefully any amendments that may be suggested.

Senator HERBERT HAYS:
Tasmania

– The whole of the argument of the honorable senator who has just resumed his seat (Senator O’Halloran) went to prove that the introduction of this bill was unnecessary. He told us that there was no serious surplus of hops in Tasmania, clearly implying that there was no need to control the industry.

Senator O’Halloran:

– I said that the surplus was not nearly so serious as had been alleged.

Senator HERBERT HAYS:

– The honorable senator said also that this bill need not interfere with those contracts that had been made. I remind him that Mr. Gunn has pointed out that because these contracts have ‘been entered into it is impossible for the small growers to continue in the business.

Senator O’Halloran:

– I was referring more particularly to the contracts mentioned by Senator McLachlan.

Senator HERBERT HAYS:

– Those are not the contracts referred to in the bill. I was surprised to hear the Minister (Senator Daly) say that this measure, if enacted, will not have any effect upon the industry in Victoria, which is the only other State producing hops. If that is so it would appear that instead of asking this Parliament to enact legislation that will affect only Tasmania, the proper course would be to pass State legislation providing the necessary control over the industry. Mr. Gunn, the Director of Development, in his report, quotes the following concerning the position in Victoria -

We, the undersigned Victorian hop-growers note with alarm that a certain section of the Tasmanian hop-growers are calling for a Federal pool, and wish to raise an emphatic protest against any pool, either Federal or State, being formed in relation to hops.

I fail to see how this measure can prevent over-production, which has been the trouble for a number of years, or stabilize the industry. Some years ago, a deputation of hop-growers which waited upon the Treasurer in Melbourne, asked for a substantial advance on surplus production which was then being exported at a loss. Those supporting the bill have stressed the fact that a number of small hop-growers will be unable to continue in the industry if this measure is not passed. While I and other honorable senators representing Tasmania are particularly anxious to assist such growers, we cannot overlook the fact that our responsibility is to assist all sections of the community and in this instance to record a vote for the benefit of the whole industry. Mr. Gunn shows clearly in his deport that the demand for hops is diminishing instead of increasing. Even the brewers and the bakers are not using as large a quantity as they did years ago. From whatever angle we study this subject, we cannot overlook the fact that this industry is not likely to expand, and that in common with other primary industries it cannot without substantial financial assistance profitably market its product overseas. Mr. Gunn further states that hops can be purchased in other countries at prices from 50 per cent. to 90 per cent. lower than those now ruling in the Commonwealth. This measure does not provide a solution of the difficulty, and if it is enacted it will be even more difficult to help the hop-growers in the future.

Senator McLachlan:

– The Tasmanians should have as a slogan “ Drink more beer.”

Senator HERBERT HAYS:

– Unfortunately, the quantity of hops used by brewers and bakers is smaller than it was some years ago. After giving the matter the most careful consideration, and closely studying the opinions expressed both for and against the proposal, I am firmly convinced that it will not he of advantage to the industry. We have received telegrams, letters and information in other forms from many sources, from which it would appear that the only way in which the industry can be assisted is by reducing the area under hops and compensating those who are compelled to go out of production. I oppose the bill.

Senator SAMPSON:
Tasmania

– I do not propose to discuss this measure in detail although I have an extraordinary mass of data supplied from both parties to what I was about to term the dispute. There is no disguising the fact that in the Derwent Valley in Tasmania, which is the centre of the hopgrowing industry, there are two distinct parties. I should like to read to the Senate a letter which I received to-day from my colleague (Senator Ogden) who unfortunately is still in hospital. The honorable senator who has paired on this measure desires me to have his views on this measure placed on record. The communication reads -

Canberra Hospital. 5th August, 1930.

Dear Senator,

I am not aware what attitude my colleagues from Tasmania are adopting towards the proposed “ Hop Control “. I have seen a copy of the bill and I am not enthusiatic about it, and since carefully thinking the matter over, I fail to see how the proposal will help the small grower in any way, as the real problem la that hops is not an exportable product beyond our own market, and our production exceeds local demand. The market, therefore, for hops, unlike that of other primary products cannot be improved or widened by any form of control, and the inevitable solution is a reduction of area and quantity. I think this is a more fitting problem for the State than for the Federal Government. Some growers have undoubtedly to go out or reduce production, and the most efficient must survive or the whole industry will be threatened.

I cannot see any material advantage to be gained (after careful thought) and the possibility of direct harm by inexpert meddling. If you need my vote utilize it against the bill if you care. Dixon and Fyle were up to see me early last week, and I gave them an indecisive reply which they may take to be favorable, but up to that time I had given the matter no thought and did not really know what the proposal was. You may inform them of my decision, especially if you pair me, and my reasons.

I give you this in order that my position may be clear.

Yours,

  1. E. Ogden.

P.S. - The only effective service the Federal Government might render would be an embargo against all importations, and this really would be more justifiable than many of the embargoes already imposed.

These are substantially my views. The hop problem in Tasmania has occasioned me more thought and serious consideration than probably any other matter i hat has been before this chamber for some time. The issue is very obscure. On the one side we have the case submitted by the defence committee, which has gone into great detail; but which has used rather extravagant and intemperate language. We also have had made available to-day the report of Mr. Gunn, the Director of Development, who conducted an investigation into the industry, and which has been quoted so extensively. We have also other reports from as far back as the time when the Board of Trade investigated the subject. Honorable senators supporting this measure appear to overlook the crux of the whole matter. It is that there is overproduction and hops cannot be profitably exported. In some cases it is difficult to obtain the cost of production. There is no overseas market, and unfortunataely the local demand is limited. The brewers are the masters of the situation. It is easy to provide Government control ; but when we get down to bedrock it is the actual brewers - not the brewing companies - who will say what hops they will purchase and the price they will pay. In his report Mr. Gunn stated -

It has been laid down by certain brewers that it is necessary to import foreign hops for blending purposes in order to manufacture a mild beer.

The managing director of one of the largest breweries in Australia has stated that his company has not imported any hops for the past three years, with the exception of four bales imported for comparative purposes. He aid that the exclusive use of Australian hops has only been made possible by his brewers exercising the greatest care in selection and in blending, and also by providing expensive cold storage for hops purchased.

The arrangements whereby the brewers agree to limit their imports to 15 per cent, of their annual requirements is purely a voluntary one, and is renewed from year to year. With the present low prices for overseas hops there is always a possibility that the brewers might refuse to renew the agreement, thus leaving themselves free to import any quantity they de lire.

That is the crux of the matter. It might be necessary, later, to give effect to the postscript to the letter from Senator Ogden that an embargo be imposed on imports. Senator Dunn spoke of the ruthless and cruel strangling of a poor legislative child just born. The bill, which I saw for the first time yesterday, appears to have been ill-conceived and hastily prepared. I- cannot see how by passing this legislation we can assist the hop growing industry. On the contrary, a careful examination of the bill forces me to the conclusion that it is more likely to destroy the industry than to help it. The election of a board to control the industry is to be conducted on the basis of one grower, one vote. That may be democratic, but it is unsound. Why should the grower of ten bales have the same voting power as a grower of 500 bales. It might even result in a person with no knowledge of the marketing of hops being placed on the board. I have received numbers of telegrams supporting the Government’s proposal, and just ‘as many condemning it. The only thing that can be said for those telegrams is that they will assist the revenue of the Postmaster-General’s Department. In dealing with this measure we have to consider its possible effectwhether it is likely to benefit or to injure the industry. This bill is another pathetic attempt to do impossible things by legislation. I must confess to my disappointment with the measure ; I frankly admit that I expected something better - something that would really help the industry and not hamstring it as this bill would do. As there is already an over production of hops in Australia the industry must be so controlled that only sufficient hops will be grown to meet the requirements of the Commonwealth. It is obvious that we cannot export hops a* a profit, at world’s parity.

A good deal has been said about the returned soldier hop-growers in the Derwent Valley. An appeal was made to the Senate to save them from ruin. As a returned soldier I get very tired of the way in which the returned soldier is used, in season and out of season, as a stalking horse to aid some project or other. What about the returned soldier who has entered into contracts and employs other returned soldiers and their families? What of the 44 growers who have entered into contracts, and provide employment for about 130 families, many of whom are returned soldiers? One group of 35 contractors produces about 7,000 bales of hops from 900 acres. Then we have 100 growers who produce 2,000 bales, of hops from 250 acres. When an appeal is made on behalf of the returned soldiers in an industry, I immediately want to investigate it to ascertain whether it is genuine, because I am a returned soldier myself. I am weary of the way that returned soldiers are dragged into various matters, as though they were persons apart from the rest of the community. When we soldiers discarded khaki, we became ordinary citizens of the Commonwealth and desired to be treated as such. Having carefully considered what action I should take in connexion with this bill, I cannot see that any good can result from it, and therefore I shall not vote for it. The board to be set up might, by incapable management through inexpert knowledge, do the industry a great deal of harm so that its last state would be worse than the first. In the past, so much trouble has been caused by governmental control of industry, that I have no faith that this board could do its job effectively. For the reasons that I have given I am not prepared to support the bill. Whatever appeal the bill may make to my heart, it does not appeal to my head. If I thought that it would assist the industry, and particularly the smaller growers, I would support it, but as I feel that to pass it would be to cause chaos, waste and muddle in the hop-growing industry, I cannot support it.

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

Senate long in replying to the various arguments that have been advanced. I agree with Senator Colebatch that it would be an audacious act on the part of the Commonwealth Government to attempt to step in over a State Government and regulate what, after all, is one of the means of production in a State. If ever the members of a Government were misled, we have been misled on this occasion. This bill was introduced in the belief that it would assist Tasmania.

Senator Sampson:

– No one questions the good intentions of the Government.

Senator DALY:

– Believing that the bill was in the interests of Tasmania, the Government expected to receive support for it from Tasmanian senators. For the purpose of this bill I am simply representing the Minister for Markets and Migration. As Senator Dunn said, it is a compliment to this chamber that the bill was introduced here first. I am convinced that the Minister for Markets and Migration honestly believed that the appeal made by the hop-growers met with the approval of the public men of Tasmania. I am not in the habit of repeating conversations, but, in the course of an interview with the Premier of Tasmania within the precincts of this House - an interview which I did not seek - he asked me when thebill was coming on. When I asked him what was his opinion on the matter he said that it appeared to him to be the best thing the Government could do in the circumstances. In answer to his question I informed him that I did not think the bill would come on that day. He said that he was meeting the Tasmanian senators, and I naturally assumed from his remarks that he was in favour of the bill. He said nothing to indicate that he was opposed to it. Had he given me any idea to that effect, I would certainly have gone to the Prime Minister and pointed out to him the absolute futility of introducing into the Senate a bill of this description against the wishes of the Premier of Tasmania.

Senator Sir Geoege Pearce:

– It is strange that the Government did not do that in regard to Victoria.

Senator DALY:

– Although in theory this bill will affect Victoria, actually it will not. Tasmania is the only State which exports locally grown hops beyond its own borders.

Senator Herbert Hays:

– Victoria exported 300 bales of hops to New South Wales last year.

Senator DALY:

– That is another instance of the contradictory information which has been furnished to honorable senators. Despite the fact that there appears to he a good deal of confusion, I still believe that the bill would be a very good thing for the hop growers of Tasmania. The Government is not pledged to the actual wording of the bill. I suggest that honorable senators should allow the bill to go into committee, so that it may be reshaped in a manner which will be suitable to Tasmanian representatives. If that is done we may be able to frame a measure which will meet with the approval of the majority in another place. I feel certain that if once the bill gets into committee we shall be able to amend it in such a way as to satisfy the Tasmanian growers, and even make it acceptable to Jones & Co., whose name has been frequently mentioned in the course of this debate. However, if honorable senators from Tasmania feel that there is no merit in the bill, I cannot blame other honorable senators for not desiring to force it on Tasmania.

Question - That the bill be now read a second time - put. The Senate divided. (The President-Senator the Hon. W. Kingsmill.)

AYES: 7

NOES: 15

Majority . . 8

AYES

NOES

Question so resolved in the negative.

page 5406

CONCILIATION AND ARBITRATION BILL

Bill returned from the House of Representatives, with a message intimating that for the following reasons it disagreed with the amendments made by the Senate, and asked that they be reconsidered: -

Because the amendments contain provisions which are contrary to the principles of the bill.

Because the amendments do not effectuate the policy for which the Government received a mandate at the last elections.

In committee: (Consideration of House of Representatives’ message).

Senator DALY:
South AustraliaVicePresident of the Executive Council · ALP

.- I move-

That the committee does not insist on the amendments of the Senate disagreed to by the House of Representatives.

The subject-matter of the various amendments has already been fully discussed in this chamber, and I can add nothing useful, except to say that the amendments have gone to another place, have been considered there, and have been returned to the Senate for reconsideration. The Senate having attained its object by making its protest, I submit that it should not further insist upon the amendments.

Senator Sir GEORGE PEARCE (Western Australia) [5.45]. - I ask the committee to vote against the motion submitted by the Leader of the Government in the Senate, so that the whole of these amendments may be referred back to another place for further consideration. I shall follow the example of Senator Daly and not debate them further, except to intimate that not only has another place rejected the amendments made by the Opposition, but that it has treated both sides alike, and also rejected those inserted by the representatives of the Government.

Question - That the motion be agreed to - put. The committee divided.

AYES: 7

NOES: 14

Majority . . 7

AYES

NOES

Question so resolved in the negative.

Resolution reported; report adopted.

page 5407

APPROPRIATION BILL, 1930-31

Debate resumed from 5th August (vide page 5240), on motion by Senator Barnes -

That the bill be now read a second time.

Senator Sir GEORGE PEARCE (Western Australia) [5.55 a.m.]. - I do not feel inclined to discuss the Appropriation Bill at this hour of the morning, and I ask leave to continue my remarks later on.

Leave granted; debate adjourned.

page 5407

ADJOURNMENT

Question of Privilege

Senator DALY:
VicePresident of the Executive Council · South Australia · ALP

– I do not like to ask honorable senators to continue after such an extended sitting. I therefore move -

That the Senate do now adjourn.

Senator DUNN:
New South Wales

– As a matter of privilege I wish tobring under your notice, Mr. President, the fact that, while the Senate was in committee on the Income Tax Assessment Bill, a stranger other than a government official or person advising the Leader of the Opposition, was on the floor of the Senate, or in that section of it set apart for the officials advising the Opposition. I regard it as a breach of privilege.

The PRESIDENT (Senator the Hon W Kingsmill:
WESTERN AUSTRALIA

– If the honorable senator wishes to call attention to a matter of privilege he cannot do so on the adjournment. He may, however, ask for an explanation.

Senator DUNN:

– I brought this matter under notice of the Chairman of

Committees, and I should like to know from you if it is not a breach of privilege for some one other than the MiniatePs secretary or a department official to be occupying the space which it is understood is reserved for officials.

The PRESIDENT:

– The honorable senator has called my attention to the fact that some one, presumably a stranger, was occupying the small compartment set aside for those who are permitted to be in attendance on the floor of the Chamber for the purpose of advising the Leader of the Opposition. The honorable senator is correct; but the gentleman in question had my full permission to occupy the place. While I do not wish to make any tu quoque remarks I may call attention to the fact that when the Wheat Marketing Bill, which is no longer on the businesspaper, was before the Senate, we saw occupying a seat in theenclosure for officials on the Government side of the House a gentleman who I have since learned was not a public official. At all events, public officials or not, it lies within my province to give permission to any one who I think may be useful and aidful to the respective leaders on either side of the chamber to occupy the seats on the floor of the chamber reserved for officials.

Question resolved inthe affirmative.

Senate adjourned at 5.58 a.m. (Thursday).

Cite as: Australia, Senate, Debates, 6 August 1930, viewed 22 October 2017, <http://historichansard.net/senate/1930/19300806_senate_12_126/>.