16th Parliament · 1st Session
The President (Senator the Hon. J. B. Hayes) took the chair at 11 a.m., and read prayers.
– Before the Senate adjourns for the Christmas vacation, will the Minister representing the Minister for the Navy make a statement similar to that made in the House of Representatives, relating to the arrangements made for dealing with mine laying and raiders ?
– I shall he glad to do so. I have asked Ministers who make ministerial statements in the House of Representatives to provide Ministers in the Senate with copies of such statements so that the announcements may be made simultaneously in both chambers.
– by leave - In referring to Senator Keane’s statement in the Senate on Wednesday night, the Minister for the Navy (Mr. Hughes) stated that the Naval Board is fully alive to the danger to shipping from raiders and mine-laying vessels in Australian waters. This, however, is an Empire problem, because, should a ship be sunk in Australian waters or elsewhere, the loss to the common cause is the same, and the Naval Forces of the Empire must be so disposed that the strongest force shall be in a position to meet the greatest threat. The first duty of the Australian naval forces is to safeguard Australian cities, coastline and trade, and to escort Australian troops overseas. Over 90 per cent, of the seagoing strength of the Royal Australian Navy is so employed. Senator Keane’s statement that, during the last war, the Empire could rely on the services of the fleets of France, Japan, and Italy only emphasizes the necessity for each part of the Empire to contribute its utmost to the common cause.
In reply to the honorable senator’s statement that a mine-sweeper followed one or more ships out of the Sydney harbour, I may say that that is probable and, in any case, a natural happening. Mine-sweepers are small vessels, which have to return to harbour occasionally for fuel, victuals, and to enable their crews to obtain the necessary rest. The fact that they returned to the scene of their operations about the same time as other ships left harbour was merely a coincidence. The honorable senator may not be aware of the method of carrying out these operations, but he can be informed if he so desires. His proposal that a convoy system should be instituted for the protection of ships trading in Australian waters and on the ocean routes between Australia and other countries is, unfortunately, quite impracticable. Not only would it entail a force of cruisers of about a quarter of the strength of the British Navy, but it would also cause delays to shipping, which would more than offset occasional losses. Nevertheless, the Navy is by no means entirely on the defensive: It has plans for seeking out and destroying enemy raiders. It has never claimed, either before or during the war, that it could afford 100 per cent, security for shipping; but it does claim that the number of ships which have safely completed their voyages compared with the number of vessels lost in or near Australian waters is evidence of the success of the methods adopted and of the efficiency of the Royal Australian Navy and the Royal Australian Air Force.
As to Senator Keane’s remarks on merchant shipbuilding, the Minister for the Navy states that the Naval Board has in hand a programme for the construction of over 50,000 tons of naval vessels which has led to the establishment, or re-establishment, of a number of shipbuilding yards, which, following experience gained in the work, will later be fitted to undertake other ship construction work when the present programme is completed. The Minister for the Navy states that the honorable senator appears to have based his criticism of naval administration on inadequate and unreliable data, and is confident that Senator Keane will appreciate the fact that the Naval Board is unable to make public replies to any such criticism. The Government is not in a position to reply publicly to such statements without divulging secret information which would materially assist the enemy. Obviously, such questions as “ What precautions were taken against the laying of mines by raiders ? “ cannot be answered without giving to the enemy the information it would be glad to have.
– “With reference to the announcement in this morning’s press of the further mechanization of the army - I assume that the home army is referred to - can the Minister representing the Minister for the Army say whether the military authorities have taken into consideration the results of the mountain fighting in Albania, where cavalry proved to be still most useful? Do they see in those successes a possible lesson for Australia, which has a dividing range extending almost for the full length of the eastern coast, and is it intended to place a higher value on the Australian Light Horse regiments than has been the case during recent years?
– I have no doubt that the extraordinarily fine achievements of our Greek allies, will teach many lessons in relation to military tactics. I am sure that those British officers who are associated with the operations in which the Greek armies are engaged will have much information to give to their Government. I assure the honorable senator that his suggestion will be brought under the notice of the Minister for the Army.
asked the Minister representing the Minister for Commerce, upon notice -
As it is reported that many small woolgrowers are urgently in need of money to tide them over Christmas, will the Government have another wool appraisement before Christmas in Western Australia?
– The Minister for Commerce states that the arrangement of wool apraisements comes under the control of the Central Wool Committee, to which the matter has been referred.
asked the Minister representing the Attorney-General, upon notice -
– The AttorneyGeneral has supplied the following answers : - 1 and 2. The National Security (Firearms and Explosives) Regulations control the sale and purchase offirearms and require British subjects having firearms in their possession to furnish to the police returns of firearms held by them. The regulations do not extend to the regulation of the use of firearms by employees of banking institutions.
Debate resumed from the 11th Decem ber (vide page 920), on motion by SenatorMcBride.
That the bill be now read a second time.
SenatorCOLLINGS (QueenslandLeader of the Opposition) [11.9]. - Since this bill was introduced last night I have had an opportunity to peruse its provisions. As the measure appears to relate to an important work which will benefit that portion of Australia through which the water will pass, I shall not oppose the second reading.
Question resolved in the affirmative.
Bill read a second time.
Clauses 1 to 3 agreed to.
.- The bill indicates that the Commonwealth will buy water from the State. Can the Minister say for what purpose that water will be used?
SenatorMcBride. - It will be used by the Commonwealth railways in connexion with both the Trans-Australian line and the railway to Alice Springs.
Schedule agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Bill read a third time.
Bill received from the House ofRepresentatives.
Standing and Sessional Orders suspended.
Bill (on motion by SenatorMcBride) read a first time.
– I move -
That the bill be now read a second time.
This bill represents a portion of the legislation necessary to give effect to the proposals outlined in the budget speech with respect to sales tax. Briefly stated, those proposals contemplate -
From these proposals the Government expects to obtain an additional £3,400,000 in the financial year 1940-41.
The present schedule to the Sales Tax Exemptions Act will, if this measure becomes law, be replaced by three schedules, the first of which will contain particulars of goods which will still be exempt; the second will contain particulars of goods which it is proposed should bear the tax at a rate of 5 per cent.; the third will contain particulars of goods which it is proposed shall bear tax at the rate of 15 per cent.; and the remainder of the goods sold or consumed in Australia will bear a tax at 10 per cent.
There has been a fairly widespread demand for a change of the incidence of sales tax, which would abolish the large number of exemptions, and reduce the burden of classification. The proposals for changes in the basis of levying the sales tax have ‘been many and varied, ranging from a multiple turnover tax to a tax imposed on every retail sale made. After a careful examination of the various suggestions, the Government is convinced that the present form of sales tax is to be preferred to any other form of tax tried in other countries. Perhaps the most persistent demand has been for the maintenance of the present form of tax, coupled with the abolition of all exemptions so that the tax may be spread over all goods consumed in Australia, and a comparatively low rate of tax maintained. The Government does not intend to follow that course. Exemptions from sales tax are based upon certain well defined criteria which may be briefly stated as follows: -
The Government considers that the total withdrawal of exemptions in the first, second and third categories, would so disturb the nation’s economy as to cause harm, and greatly outweigh the advantages to be derived from classification and the relatively lower rate. However, the Government believes that from groups 4 and 5 a limited selection can be made and upon which a relatively low rate of tax can be collected. A schedule has accordingly been compiled, including goods of a sale value of approximately £47,000,000 which itis proposed should be brought back to the taxable field. It is proposed that with one exception all the goods comprising the field will bear tax at the relatively low rate of5 per cent.
The exception is boots and shoes of a wholesale value in excess of 15s. per pair. These have been allowed to fall into the class of goods upon which the general rate of 10 per cent. is payable. The exception is considered to be justified because of the retention of the exemption for boots and shoes of all kinds, the wholesale value of which does not exceed 15s. per pair. Of the total estimated sale value of all boots and shoes of £8,000,000, more than one half will still be exempt. The exemption is expected to cover all boots for ordinary purposes, children’s boots and shoes, and the less expensive type of men’s and ladies’ shoes. The more expensive boots and shoes and slippers will be taxed at the general rate of 10 per cent. The additions will bring the value of the taxable field to approximately £251,000,000. Of the goods which it is estimated will be consumed in Australia, and valued at £565,000,000, goods to the value of £314,000,000 will still be exempt. The composition of the £314,000,000 is as follows : -
Even a cursory survey of the nature of the goods in this list will convince reasonable persons that the scope of the tax cannot be widened to any appreciable extent beyond what is already proposed. There may, of course, be room for differences of opinion concerning some of the items which the Government has included in the second schedule and taxed at o per cent. They are all goods for which undeniable claims to exemption can he made in times of peace, but standards formulated in peace time have to be adjusted to war-time necessities, and the Government considers that, having preserved the principle of preference by imposing only half rates, it has not acted harshly in bringing those goods again into the taxable field.
Consequent upon the re-introduction of sales tax on spectacles, eye glasses, and lorgnettes, it will be necessary to provide a special sale value upon which tax on these goods shall be paid. This is necessary in order that the value of skilled services not associated with the production of the articles concerned may not be made subject to tax. This matter is appropriately provided for in a proposed amendment of regulation 18a, and the sale value proposed is that which operated prior to the exemption of those goods, namely, 33-i per cent, of the total amount charged.
It would be appropriate at this stage to say that it is proposed to increase the sale value of made-to-measure clothing. This sale value at present is calculated at 50 per cent, of the total charge made to the customer, and in many cases has been found to be less than the total cost of production of the goods. It is proposed by regulation to increase the sale value to 66jj- per cent, of the total charge made for the goods.
For taxation at the relatively high rate of 15 per cent., the Government has chosen goods which are considered to supply less urgent needs than those contained in the other schedules, or those upon which the general rate will fall. Particulars of these goods will be found in the proposed third schedule. “Whereever possible, goods have been described by the names under which they are traded in commercially. This course has been followed in preference to the much easier method of describing groups of goods by generic terms. In the latter course, a specific classification is placed primarily upon the taxpayer, with penalty taxes for failure to classify the goods correctly, as well as the inability to recover the difference in tax.
Owing to the degree of secrecy which necessarily has had to be observed in the compilation of this special schedule, and to the adoption of the specific in preference to the generic definition of goods, it may be found that the list is incomplete, notwithstanding that every care has been exercised in its preparation. Should this prove to be the case, the Government will not hesitate at a later date to ask Parliament to amend the schedule to preserve the principles upon which it has been compiled. In furtherance of this plan, the Treasurer has announced, with the sanction of the Prime Minister,’ that a committee comprised of members of all parties would be set up to inquire into anomalies, difficulties and the incidence of the sales tax.
I do not propose at this stage to make any specific references to the individual items comprising the schedule, which should be self-explanatory. If any further information be desired by honorable senators on particular items, it will be given when the bill is in the committee stages.
It is provided that the new schedules shall become operative on and from the 22nd November, 1940, in respect of all goods, the subject of transactions which attract liability, including the importation of goods.
Provision is made to prevent sales tax from becoming payable on goods which up to the 21st November, 1940, were exempt from tax but which on and after the 22nd November, 1940, become subject to tax if those goods had passed the normal taxing point before the 22nd November, 1940. In other words, tax will not be payable by a retailer, or a retailerwholesaler, on goods sold by retail, which, prior to the 22nd November, 1940, were exempt, and had been treated as stock for sale by retail, or had been placed in a common stock for sale by retail or wholesale as the occasion arises. Goods sold by retail which have already borne tax at the rate hitherto in force will not be subject to further tax because of any increase now proposed. There are provisions in the machinery measures which will fully protect vendors of goods who are required to pay tax on goods at the new rates. Such vendors will be able to recover from customers who have not paid when the measures become law.
An appropriate machinery amendment will shortly he introduced which will permit agreements or contracts entered into in relation to goods previously exempt to he varied to cover the additional tax payable, or the additional costs borne on account of these amendments, as the co.se may be.
Proposals such as these would not be submitted in times of peace.
[‘11.29J. - I congratulate the Minister for Supply and Development (Senator McBride) upon having had copies of his second-reading speech on this measure circulated to honorable senators. His action is very much appreciated, because it has enabled us to follow his speech much more intelligently. Members of the Opposition will be mindful of the concluding paragraph of the speech, in which the Minister stated that, in their consideration of the individual items, they should not lose sight of the fact that such proposals would not be submitted in times of peace. The Opposition will certainly keep that in mind. Prom the outset the Opposition has agreed not to hamper the Government in its efforts to obtain the finance necessary for it to carry on Australia’s war effort, and that compact will be rigidly adhered to. The Opposition’s objection to indirect taxation has been well canvassed in the budget debate. Without repeating any portion of my budget speech I may say that the Opposition believes that there is an alternative to ever increasing indirect taxation. In spite of all precautions, traders will take advantage of the increase of the sales tax to make greater profits by charging the increased rates on old stock. I have no doubt that the public will be asked to pay more for their purchases than is justified. If the additional tax amounts to, say, id. traders will increase the price by Id.
They will therefore make enhanced profits out of this tax just as the publicans are making bigger profits as the result of charging more for beer and spirits than is justified by the increased excise. I shall reserve any remarks that I have to make on specific items until the bill is in committee.
– I should like the Minister for Supply and Development (Senator McBride) when replying to tell me how it is proposed to police the provisions designed
I’.o prevent individuals who hold goods bought under the old conditions from adding the increased rate of tax to the prices charged. It would be a tremendous task for the Taxation Department to prevent dishonest retailers from imposing upon customers.
.- The sales tax which was introduced into this country for the first time to meet the emergency created by the depression is now perpetuated in our taxation system. The rates of sales tax have risen to such a degree that it is probable that the purpose of the tax will be defeated owing to the inability of the public to continue to make purchases on the same scale as previously. The additional excise that has been imposed on beer, wines and tobacco has already resulted in a diminution of purchases. The net result of those tremendous increases of indirect taxes will be that purchases will be so reduced that the Government will not reap any additional revenue. The Government has already accepted amendments of the schedules in the House of Representatives. Honorable senators on this side of the chamber will ask that concessions be made to the men on the bottom rung of the social ladder when the bill is in committee.
– I know that I shall not achieve anything by speaking on this measure, but in the interests of the workers and the economy of Australia, something should be said. I look upon the sales tax as a tax which has caused more trouble than it is worth to the business community. Even in wartime the Government should seek to raise the money which it needs by other means instead of by increasing the worries and troubles of the business community and causing the expenditure of energy which would be better expended in other directions. The sales tax, like other indirect taxes, reduces the wages of the workers. As I have not read the debate in the House of Representatives on this proposed legislation, I should like the Minister for Supply and Development (Senator McBride), when he replies, to tell me what amendments were made in that chamber. It was announced by the Prime Minister (Mr. Menzies) that an all-party committee is to he appointed to investigate the sales tax. I commend the Government for that action. I take it that the Senate will be represented on the committee. I should like some information from the Minister on that point. We know that the tendency is to ignore the Senate. Comparisons are odious, hut many honorable senators have had just as valuable experience in business and industry as members of the House of Representatives. They are as intimately acquainted with the difficulties associated with the operation of this tax. The labour party has always urged the Government to rely to a greater degree upon the advice of practical men when dealing with industry. It is essential that the viewpoint of the workers be not ignored when we are dealing with industrial matters. In this instance the Government should be guided by the opinions of those who possess intimate knowledge of the difficulties associated with the imposition and collection of the sales tax. The appointment of a committee will enable Parliament to be assisted in that way. For that reason I commend the Government on its decision. I have received many communications from business people, setting out their views in relation to the sales tax, particularly in respect of softgoods. One suggestion made to me was that the tax should he. on a flat rate. I, and many other honorable senators, are not in a position to argue for or against that suggestion, but the inquiries of the committee will enable us to approach this problem in a proper way. The time has arrived when we should apply this method to taxation generally. We should overhaul our present methods with a view to eliminating much, if not all, of the unnecessary work and cost now involved in the imposition and collection of many classes of taxes. We may be able to raise the revenue we require by methods which will not involve one-tenth of the difficulties which now arise. Before the war is finished our methods of taxation will undergo a profound change. I am satisfied that such a development will be for the betterment of the nation. Although we shall resist the dictators with all the strength in our power, we can, nevertheless, learn something of advantage from Hitler and Mussolini so far as taxation is concerned. They have organized their countries on a national basis, and not from the point of view of transferring this, or that, tax to a particular section of the community in order to lighten the burden on the rich. They have organized their economies on a national basis, employing the most effective methods of conserving the energies of their people in order to achieve the aims they have in mind.
– I should not like to be suffering under their internal economies.
– I do not want to be misunderstood. I should rather a thousand times put up with all the disabilities and anomalies which arise under our democratic system in general, and in respect of taxation in particular, than be under the heel of a Mussolini or a Hitler.
– There is no argument about that.
– :However, our determination to overthrow the totalitarian regimes does not mean that we cannot learn a lesson or two from them in regard to methods of taxation. In our efforts, to evolve methods of taxation which will cause less disturbance to our economy, and reduce the costs of imposition and collection of taxes we can learn a lesson from the totalitarian countries by approaching this problem from the point of view of .what is best, not for individual or sectional interests, hut for the nation as a whole.’ We should endeavour, for instance, to discover to what degree our present methods of taxation reduce the capacity of industry to provide employment for our people at decent standards. We should ascertain which taxes are non-essential. Surely the Government will not deny that that is a correct approach to the problem of taxation. I regret that this measure has been placed before honorable senators in circumstances in which we cannot examine it as fully as we should. Such methods will not strengthen the cause of democratic government so far as this Parliament is concerned. If the great mass of the people realized the Condiitions under which we were asked to pass this measure they would naturally ask, “Is this democracy?”. Parliament should be given the fullest opportunity to consider measures of so important and complex a character as this bill.
– Under the totalitarian system the people are not asked for their views on anything at all.
– I admit that, under the totalitarian system a few men decide that certain things must be done, and they are done. However, we are now endeavouring to show to the world that democracy is workable even in a time of war. This struggle is a fight between two principles. We must employ democratic methods to the best advantage in order to organize the nation for war just as effectively as the totalitarian countries. We are anxious to prove that democracy will work just as effectively in war as in peace. We must prove to those who try to impose totalitarian methods upon us that our methods are just as effective as the methods of the dictator. The Government should he equally courageous in dealing with taxation. It should cut the painter, and abandon the old stupid methods. Sales tax is one of the worst forms of taxation. I realize that it was originally imposed in a time of economic crisis by a Labour government. At the same time, the Labour party to-day must not he tied inevitably, simply for that reason, .to systems of which they do not approve in the light of our experience.
– What alternative does the honorable senator suggest?
– The fairest tax is a tax on income.
– But that method of taxation has its limitations.
– The fact is that we require additional revenue, and we must obtain it. Through the sales tax we propose to raise a certain amount of revenue by indirectly taxing the community. If the money can be obtained by indirect taxation, it can also be obtained by direct taxation. We should obtain our requirements by the fairest means possible. It is there to be got.
– That is a funny argument. The honorable senator assumes that the amount collected by way of sales tax is taken from the profits of trading concerns.
– I did not say anything of the kind. When I am charged for an article, say, £1 more than the price which I would pay for it if no sales tax were levied, it means that that £1 is taken from me by the shopkeeper and given to the Government.
– I should be interested to hear the honorable senator’s arguments concerning income taxation.
– -There is no escape from my first argument. It is clear that the Government, and especially the present Government, is always anxious to lift the hurden of direct taxation from the shoulders of its supporters, with the view to spreading it over the community as a whole Therefore, I contend that the taxation of income is the fairest form of taxation.
– The honorable senator’s party insisted on a reduction of the income tax a week ago.
– My party believes that this country has not yet reached the stage at which taxes could be abolished, as advocated by the supporters of a certain monetary system. My party claims that taxes ‘should be imposed wisely, in order to maintain the purchasing power of the community, and prevent certain sections from receiving from the community more than they need.
During the last war, the financial policy of Great Britain resulted in the creation of millionaires. Undoubtedly, some people were made bankrupt, but wealth flowed into the pockets of the socalled newly rich. An effort is being made in the Old Country to prevent the rich from becoming richer, but history will repeat itself both in Britain and in Australia. As the war proceeds, money will become plentiful, and, as a result of the economic system, certain members of the community will increase their bank balances to a greater extent than during peace time. In the view of supporters of the Labour movement, it is essential to impose taxes in such a way as to prevent the accumulation of huge profits. A measure will shortly be placed before this chamber to curtail war-time profits. A Labour government would take unearned increment and use it in the interests of the nation. Bernard Shaw, in his book, The Intelligent Guide to Socialism, points out that the estates of certain persons in -Great Britain became the property of the Government during the last war, as a result of the effect of death duties. The power of taxation is one of the most effective weapons that an intelligent government can use for the purpose of giving equitable treatment to the masses, and preventing a small section of the people from increasing their wealth because of war activities. I hope that the whole subject of taxation will soon be investigated thoroughly by the Government, with a view to placing the system on a sound basis, so that the cost of tax collection will be reduced and justice will be done to the whole of the people.
– I support the second reading of this bill. Senator Brown would like the Senate to believe that the measure involves some new principles of taxation. All members of the Senate dislike taxes of this kind, but we recall that the sales tax was introduced by a Labour government years ago, at a time of financial crisis. As the financial position improved, the burdell of the tax wa3 reduced by a considerable increase of the number of exempt goods. The Government is faced with the necessity for financing the war effort, and surely it will not be suggested that the financial crisis during which the sales tax was first imposed was more severe than that being experienced at the present time!
According to Senator Brown, the fairest tax is the income tax. No doubt, all honorable senators will agree that the income tax is the most equitable in its incidence, but would the honorable senator support legislation to reduce the income tax exemption figure to the amount that would result in raising the same sum as will be obtained by this bill? Most of the goods on which the workers pay sales tax are manufactured in Australia, and no duty would be too high for the honorable senator, if it were required to prevent the importation of these goods from overseas. So it seems to me that the revenue to be raised might as well be obtained through the sales tax as through customs duties. The honorable senator desired to show that the burden of the sales tax is borne mainly by the workers, but the extra burden will be imposed in respect of all goods subject to sales tax. The honorable senator claims that the revenue desired should be raised by means of the income tax, but there must necessarily be a limit to that tax. If the captains of industry were called upon to pay such heavy income tax that their profits disappeared, they would have no incentive to carry on business. Successive governments have explored many avenues for raising additional revenue, but there is a limit to the burden that industry can bear. No tax is popular ; persons with big incomes object to high rates of income tax; honorable senators opposite object to the exemption being lowered to ‘bring into the field of income taxation persons in the low income group; they are also opposed to the sales tax. Those who object to the existing means of raising revenue are not always able to indicate other ways of finding it. Senator Brown certainly kept clear of dangerous ground by avoiding all reference to an extension of bank credit. No one likes increasing the sales tax, but if this means of raising revenue must be retained, every effort should be made to avoid irritating those who pay it. The Government should co-operate wholeheartedly with business people; taxation officials should administer the law sympathetically; and prompt steps should be taken to remove anomalies as they are revealed.
Honorable senators opposite who claim that huge profits are made in industry, and have referred to the “ millionaires “ created by the last war, should remember that immediately the present war broke out the Government took steps to control prices. They know that attempts at profiteering are being closely watched, and that interest rates are lower to-day than at the outbreak of war. Senator Brown, when speaking of the injustices associated with our system of taxation, said that only one form of taxation commended itself to him-
– I said nothing of the kind.
– The honorable senator certainly emphasized one form of taxation and steered clear of others. He urged that the income tax exemption should ‘be raised. Most people are like the Scot who said that, although he didn’t mind paying a fair amount to the taxation authorities, he did not believe in being robbed. In view of the need to obtain revenue for the prosecution of the war, I shall support the second reading of the bill.
– I regret that the Government has not found means of obtaining additional revenue without increasing the obnoxious sales tax, which, for many years, has placed a heavy burden on the people. Sales tax causes prices to rise, yet the Government professes to be strongly opposed to inflation. Immediately prices are inflated, the standard of living is lowered. I do not believe that all of the supporters of the Government desire to lower that standard.
– No one wishes to do 30.
– Yet that is the effect of the sales tax.
– It is the effect of every tax.
– The sales tax places a heavier hurden on people with low incomes more, than on those with incomes in the higher range, because the living standard of the latter group is not so seriously affected by it. Senator Herbert Hays said that there would not be any profits on the sales tax, hut I submit that profits will be made on the increased capital which will have to be invested in businesses because of the existence of this tax. A business man bases his estimated profits on his outlay; he must take into consideration what he will have to pay as sales tax. Therefore, it cannot be denied that profits will be made on the additional capital which the imposition of this tax will cause to be invested in businesses.
– The same argument would apply to an increase of wages.
– A business man must allow for the wages of his staff, but why should the burden on the people be increased hy allowing him to make a profit on the sales tax ?
– According to the honorable senator’s argument, wages should not be increased.
– I am dealing with sales tax, not wages. The Minister must not think that he can catch me on the subject of wages.
– Sales tax was introduced by a Labour government.
– That does not mean that it must continue indefinitely and be increased from time to time. In my opinion, the imposition of sales tax by a Labour government was a mistake; but two wrongs do not make a right. A fairer system of obtaining revenue should be in operation. Let us consider the effect of sales tax on a man with a wife and six’ children who is in receipt of £3 a week; there are plenty of them.
– In Tasmania?
– Yes, and in South Australia also. A man with a wife and six children has to buy commodities for eight persons, whereas a single man in receipt of the same salary pays the tax practically only on his clothing.
– Under all forms of taxation the single man escapes.
– Direct taxation places the burden upon those who are best able to pay it, hut indirect taxation, such as the sales tax, is more insidious in its operation. A single man can more easily pay £1 a week out of £3 a week than a married man with six children can afford to pay 10s. a week out of the same salary.
– In that respect the sales tax does not differ from customs and excise duties.
– The main purpose of customs duties is to protect local industries. That is not the purpose of the sales tax.
– The honorable senator has not yet said by what other means he would raise the money.
– I hope that I have made it clear that I would not raise it by means of a sales tax. If the amount must be found, it should be raised by means of a tax on incomes. The money must be there, otherwise the Government could not get it.
– It is not there.
– The honorable senator says that the money is not there, so perhaps he will indicate later where the money to be raised under this legislation is to be found. A man’s standard of living is affected not so much by the amount of money that is taken away from him, but by the amount which he has left. An analysis of incomes would reveal that there are still many persons who can well afford to pay a higher rate of income tax, and additional revenue should be obtained from those persons rather than from married men with families, the low wage earners, and the invalid and old-age pensioners by means of this unfair indirect tax. I mention these matters because I am not prepared to let this measure pass as though it had my wholehearted blessing. I have never been in favour of the sales tax. When I referred to this matter some days ago, the Minister informed me that sales tax was not imposed on boots and shoes. Of course, this bill was not then before the Senate, and the Minister was able to get away with what he said and had it recorded in IIansard. However, in his second-reading speech to-day, he has shown clearly that there is_ a sales tax of 10 per cent, on boots and shoes, the wholesale price of which exceeds 15s. This is a direct contradiction of the previous statement. What class of boots or shoes can be purchased at 16s.?
– Fifteen shillings wholesale.
– Even if that be so, the retail price would not be much higher because the Commonwealth Prices Commissioner does not permit more than a specified profit to be made. If the retail price is ls. or 2s. more than the wholesale price, the total price would be 16s. or 17s. I should like to know the quality of footwear that could be purchased at that price?
– Footwear costing 15s. wholesale is retailed at 22s. 6d. or 25s. a pair.
– What a Government ! Honorable senators opposite have tried to justify the imposition of the sales tax by claiming that revenue cannot be obtained from any other source, hut what of these business people who on Senator Spicer’s admission, make a profit of 10s. on a pair of shoes, the wholesale price of which is 15s. ? That is an enormous profit. The honorable senator has in effect made a suggestion which should be welcomed by the Government. Again I urge that the workers on low wages, and the invalid and old-age pensioners be not penalized by raising the sales tax, but rather should the Government further explore all avenues of direct taxation.
– The effect of the increases of sales tax will be to reduce the purchasing power of the workers, particularly the lower paid workers, by approximately £5,000,000, according to the estimate given by the Treasurer (Mr. Fadden). The important point that I wish to make is that as the purchasing power of the workers is lowered by means of the sales tax, so the possibility of strikes and industrial disputes will increase. Therefore, should this legislation be proceeded with, the Government will have been a contributing factor to whatever industrial- unrest may result. It will be useless blaming the workers for striking, if by means of this legislation the Government makes it impossible for them to carry on as they are expected to do. When the full effect of this tax is felt, protest meetings will be held on all the jobs to decide what action should be taken to counteract the ever-increasing cost of living. The workers will say “Here we are working day after day, as hard as we can; we are contributing 100 per cent, to the war effort, but we are not getting enough to live on “. They will realize that fellow employees in more favored spheres of production are getting more than they require of the necessaries of life such as food, clothing, and housing. No doubt the Leader of the Opposition (Senator Collings), Senator Keane and I, will be asked to explain the reason. We shall have to say to the workers, “We admit that you are right in making a protest. You are perfectly justified in raising an objection. The Government has no valid reason for reducing your standard of living. Thousands of people who are doing the same work, or perhaps not such valuable work, as you are, are receiving in excess of their needs “. As Senator Brown said., the money which is to be provided by means of this increase of the sales tax, could be obtained more equitably by raising the income tax. That would not deprive people of employment. Even if all incomes were taxed down to £500 a year, the result would be better, because the money would be collected by the Government, and it would be able to provide additional employment. We should think of the position in the terms of commodities. If this legislation be passed, the workers will have to purchase fewer commodities, or commodities of an inferior quality. The effect of the increase of the sales tax will be to withhold necessary commodities from the workers, whereas those in receipt of large incomes will contribute as little as possible, and business people will be enabled to make a profit out of war activities.
Recently, I asked a question about Australia’s interest bill in connexion with the war, and the answer was that the interest commitment for the financial year 1940-41 was estimated at £2,595,000. Most of that sum will go to persons who do not need it, or at least are in a much better position to do without it than are the poorer classes who will be heavily hit by the sales tax. If the purchasing power of the workers - particularly those upon whom the Government is relying to produce munitions and essential war equipment - is decreased, the injustice will not be tolerated without some protest, and further industrial unrest will be unavoidable. Men are prepared to work for the minimum living wage; they are prepared to do their best in the interests of their country and to forgo unnecessary luxuries, provided that the sacrifice be borne equally by all sections of the community. When it is pointed out to workers at union stopwork meetings how other people are living, the sense of injustice and resentment will result in industrial disputes and strikes, because all such upheavals have their origin in adverse working and living conditions. Why should this infamous tax be imposed when the services of many people who are now out of work, or are employed in nonessential industries, could be utilized in increasing the production of essential commodities? We are engaged in a war, and we should produce as many of the commodities necessary to carry on our war effort as we can. Although the injustice of the matter may he ignored in this chamber, and honorable senators opposite may laugh and sneer at what we say, the result will be as I have said, and the jeers, laughs and sneers of Government supporters will not in any way prevent industrial disputes taking place unless this problem is tackled as it should be tackled. The unemployed could be put to work to-morrow producing additional commodities. This is not a personal matter, but one which affects the livelihood of thousands of men, women and children. I do not propose to allow this Government to create the impression outside Parliament that it is acting in the interests of the country.
– Neither is the honorable senator when he incites people to strike in war-time.
– I am not inciting people to strike. I am merely pointing out how strikes originate. I am quite confident that I shall he able to justify my attitude before an audience of the working nien who will be directly affected by this legislation, whereas some honorable senators opposite would have the greatest difficulty in justifying their attitude on this bill.
Silting suspended from 12.46 to 2.15 p.m.
– The object of this tax is not only to obtain additional money for the purposes of war, but also to withhold commodities from those who are greatly in need of them. Why should those workers be forced to do with fewer loaves of bread, less meat, fewer oranges and apples and other commodities, and fewer of the amenities of life, when there is an abundance of consumers’ goods? Even if there were a scarcity, there would be no justification, because those who are unemployed could be employed in producing them, and the services of others who are employed in nonessential industries could be diverted to more useful activities. If we view the position, not in terms of money, but in terms of commodities which money can buy, there is no basis on which we can justify the imposition of this tax. Why, then is the tax imposed? The only conclusion that I can come to - 1 should be glad if I could be shown to be wrong - is that the tax is designed to ma.ke it possible for those who invest their capital to continue to profit from war-time industries. The Government is running those industries in name, but it depends on the money which it borrows from investors, and the degree to which it becomes indebted determines its power to provide for extending its activities and for the workers.
We have good reasons for opposing this tax. Senator Herbert Hays mentioned the limitation of taxation. There is a limit to this form of taxation. There is a limit to the degree to which one can impose on men - a limit to the degree to which the Government can capitalize their patriotism or goodwill. I warn the Government not to go to that limit, but to try to understand the workers’ point of view. If that be done it must be admitted by any intelligent person that there is no reason for this tax. I make that protest because after my long experience in the industrial movement I am certain that there will be an increase of industrial disputes and strikes, if this tax, which, I am informed, will reduce wages by at least 5s. a week, be imposed. If trouble occurs the Government, as the authority which has provoked men to take action to protect themselves against unwarranted taxation, must accept the principal share of the blame. It is necessary that I should stress that point, because, by implication and direct statement, the newspapers always attribute to the workers the blame for stopwork meetings or strikes. Members of the Opposition are bound to state the case in rebuttal for the workers whenever it is considered necessary. When they do so, all impartial and intelligent people will decide that the tax is unwarranted.
– The Minister’s second-reading speech contained this paragraph -
Consequent upon the re-introduction of sales tax on spectacles, eye-glasses and lorgnettes, it will tie necessary to provide a special sale value upon which tax on these goods should be paid. This is necessary in order that the value of skilled services not associated with the production of the articles concerned may not be made subject to tax. This matter is appropriately provided for in a proposed amendment of regulation 18a, and the sale value proposed is that which operated prior to the exemption of those goods, namely, 33J per cent, of the total amount charged.
Spectacle frames and lenses, which are not made in Australia, were among the first items placed in the list of restricted imports. On a former occasion sales tax was applied to glasses, but it was lifted when protests were made by the opticians’ society, thus showing that it was unnecessary and unjust. Tasmania was the first country in the British Empire to legislate to protect the people against eye-glass frauds. That legislation was passed when the late Mr. J. A. Lyons was Labour Premier of Tasmania. I am an optometrist with 25 years’ experience, and my younger son is optometrist to the Royal Hobart Hospital. The advisability of exempting spectacles from sales tax must be clear. Spectacles are not worn for fashion or fun. They are necessary to nine out of ten people after they reach 45 years of age. The Tasmanian Labour Government has established at the Royal Hobart Hospital an optical clinic where patients are examined pathologically by an oculist. If no disease be present, ‘but vision is abnormal, the patient is sent to the optometrist and spectacles are provided. The imposition of sales tax on glasses will result in many people going to chain stores for glasses when they find that their sight is failing. The cheap glasses sold in such places are not fitted with -optical lenses, but are made of window glass which has been curved to give it refraction. It has been calculated that there are 1,000.000 combinations of lenses. Serious trouble may eventuate if people whose eyes require expert attention are forced by the tax policy of this Government to purchase their glasses from unqualified salesmen. That is why the Tasmanian Government provides the pathological examination. This tax will react mo3t harshly on the poor. The trouble suffered by many people who have come to me for eye-tests has been caused through the wearing of cheap glasses. In many cases disease had supervened, and I was unable to do anything for them. Spectacles are essential to the health of many children. So prevalent is eye trouble among the children of Hobart that a special light school has been attached to principal public schools in that city. Nothing impedes a child’s work in school so much as defective eyesight. When travelling recently on the boat to Tasmania 1 met a gentleman and his daughter, and discovered that the latter, who looked the picture of health, had qualified as a teacher although during her school days she was unable to see figures on the blackboard from her desk. To-day she cannot recognize her own father across the street. The injustice of taxing articles of this kind is accentuated when we know that, according to the best authorities which I have quoted repeatedly in this chamber, the Government could raise all of the revenue it requires without increasing taxes, or incurring any material increase of the national debt. Sales tax is to be levied on numerous articles essential to the average person. Watches are essential articles, and they are to be taxed at the rate of 15 per cent. I am not so much concerned about the tax on lorgnettes, but I again protest against the taxing of spectacles which, owing to defective eyesight, so many of our people including principally the young and the aged, cannot do without
2.3’5. - I was unable to follow the second-reading speech of the Minister in charge of the bill. He said -
The present schedule of the Sales Ta. Exemption Act will, if this bill becomes law, be replaced by three schedules. The first will contain particulars of goods which will still bc exempt. The second will contain particulars of goods which it is proposed should bear a tax of 5 per cent.; and the third will contain particulars of goods which it is proposed should bear a tax at the rate of 15 per cent.
The Minister then said that the remainder of the goods sold, or consumed, in Australia would bear tax at the 10 per cent, rate. Surely we cannot be expected to deal intelligently with this measure unless we be given some indication of the classes of goods to be contained in the respective schedules.
All articles required for shaving will be subject to tax at the rate of 15 per cent.
These include shaving cream, razors, and razor blades. Cosmetics are to be taxed at a similar rate. Girls on low incomes, including many who are making their contribution to our war effort by their employment in war industries, will be penalized by this tax. In addition it will be an unjust burden on girls who, by reason of their occupation, are obliged to use cosmetics to a greater degree than they would normally. This is definitely a class tax. It will involve no sacrifice on the part of girls of well-to-do families. J. repeat that some indication should be given to honorable senators of the classes of goods which will remain exempt from sales tax.
– Foodstuffs are almost entirely exempt.
– Slippers will be taxed at the rate of 10 per cent. I have just received the following letter from the People’s Slipper Manufacturing Company Proprietary Limited, Sydney: -
We feel that the anomalies in the application of this tax are far-reaching, particularly in regard to all classes of slippers which have the imposition tax of 10 per cent, added to the cost price.
May we take the liberty of explaining to you the effect that this tax on slipper footwear must have on the masses of this country?
As slippers are the cheapest form of footwear manufactured, the 10 per cent, impost will naturally affect the basic wage earners’ spending power. To verify this statement we wish to inform you that in the depression period of 1931-32 onwards our factory had a production of approximately 700 to 1,000 pairs per day, but within twelve months from the onset of the depression our production increased up to 5,000 pairs per day, which proves that the majority of our basie wage earners were buying the best value according to their means.
We may state that to-day slippers are treated not as a luxury but as a necessity to the health and convenience of the public. This may also bo proved by the Government Statistician’s figures of 1938-30. which revealed that fi.000.000 pairs of ladies’ shoes were sold per annum, while 5,000,000 pairs of slippers were sold during the same period, which in itself is explanatory as to whether slippers are a necessity or a luxury.
We, therefore, feel that after viewing the contents of this letter you may feel disposed to use your influence to have these anomalies rectified so as to conform with the requirements of the masses.
Viewing the cost price of slippers, which is from ls. (Id. to 7s. per pair, showing an average cost of 2s. 4d. per pair, we would respectfully suggest that an exemption on all slippers under 5s. per pair come into effect.
It is wrong to impose sales tax on slippers. Many people suffering from foot troubles require cheap slippers for comfort. Honorable senators opposite may contend that a tax pf 10 per cent, on slippers, which can be purchased at a chain-store at 2s. 6d. a pair, will not amount to much; but it is the last straw that breaks the camel’s back. The fact that books have been placed on the list of exempt goods will not benefit families on the basic wage, who cannot afford to buy books. It is unfair to impose sales tax on the cosmetics used by working girls, and on the safety-razor blades required by invalid and old-age pensioners. Under the laws of New South Wales, if a man is unemployed and has two daughters working, even if they earn only about fi a week, neither the father nor the mother is entitled to charitable relief. Yet girls who contribute to the support of their parents will have increased charges levied upon them in the form of sales tax on their cosmetics. I hope that the Government will appoint a committee to investigate the anomalies that will arise under this legislation, and that the goods to which I have referred will be placed on the exempt list.
.- One of the proposals of the Government is to increase the sales tax on certain goods to 15 per cent., in respect of which the Government expects to obtain, under this measure, an additional £3,400,000 during this financial year. Being interested in boots, I am of the opinion that they are to be taxed too heavily. The Minister (Senator McBride), referring in his second-reading speech to the goods to be restored to the taxable field, said that the whole of them, with one exception, would bear tax at the relatively low rate of 5 per cent. He continued -
The exception is boots and shoes of a wholesale value in excess of los. a pair. These have been allowed to fall into the class of goods upon which the general rate of 10 per cent, is payable. The exception is considered to bs justified because of the retention of exemption for boots and shoes of all kinds, the wholesale value of which does not exceed 15s a pair. Out of the total estimated sale value of all boots and shoes of £8,000,000 more than half will still be exempt. The exemption is expected to cover all boots for ordinary purposes, all children’s boots and shoes, and the less expensive and elaborate type of men’s and ladies’ shoes.
What is meant by children’s boots? I know children who wear boots that cost more than 15s. a pair whose parents will have to pay this tax.
It is to be regretted that sales tax is to be charged on the sweets which children buy at practically every small shop throughout Australia. I hope that, the Government will give consideration to the claims of the children who will be the parents of future generations. I recently bought a tin of tobacco for which I was charged 2s. 4d., but another person secured the same line of tobacco elsewhere and was charged 2s. 5d. for it. In each case the stock was new. Such anomalies should be investigated. Senator Amour has stolen some of my thunder. Every man, regardless of his station in life or of his age, likes to see young women smartly dressed and with an attractive appearance. Visitors from overseas have commented on the smart appearance of Australian girls. I suggest that we should not prejudice their chances of matrimony by unnecessarily taxing their cosmetics. Men’s requisites of all kinds are to be taxed more heavily than in the past, and, as razor blades have been brought into the taxable field, I am afraid that we may soon see men returning to beards.
– in reply - It appears that, in the main, honorable senators opposite are opposed to the sales tax in principle, but every government in the British Empire has resorted to this impost. Even in New Zealand, where a Labour Government is in power, a sales tax is imposed. If the Opposition were in office in this Parliament, no doubt the sales tax would continue in operation. This tax was introduced originally by a Labour administration, and the parties now in power were instrumental in reducing the taxable field.
I can assure Senator Aylett that the tax is paid mainly by wholesale firms who are registered for the purpose. The department has a large and efficient investigation branch, and the Treasury will make it its business to see that, as far as possible, sales tax is not added to goods on which it has already been paid.
I am not in agreement with some of the contentions of Senator Brown. All honorable senators consider that taxation should be simplified as much as possible; but it is extremely difficult to simplify a complex procedure. The honorable senator said that a good deal of objection is taken to the manner in which goods are classified. During the regime of the Lyons Government, the cry was not raised that the exemptions secured by the party to which I belong would cause difficulties because of the inclusion of additional items on the exempt list.
– We asked for additional exemptions.
– At the moment, I am speaking of the simplification of the work of administration. All of us would like to see the list of exemptions extended, but in time of war revenue must be obtained, and accordingly the Government is of the opinion that certain goods should remain subject to this tax. I was pointing out that when exemptions were being sought the argument about simplification was not raised, although the exemption of certain items from the tax would cause just as much administrative difficulty as would the addition of other items.
– Surely the Minister does not expect us to complain when goods are removed from the field of taxation ?
– At the moment, I am speaking only of administrative difficulties. Senator Amour protested against cosmetics being includedin the schedule. Whatever good case may be made out against the taxing of some articles in the schedule, I suggest that the same case cannot be made out in favour of cosmetics.
– Apparently the Minister is not concerned as to how dowdy working-class girls look, so long as the girls in his own class can look nice.
– In Great Britain cosmetics are subject to a tax of 331/3 per cent. As I confidently expect the Senate to pass the bill, I shall not delay its passage.
Question resolved in the affirmative.
Bill read a second time.
Clauses 1 to 5 agreed to.
Clause 6 (Exemptions).
– Senator Keane in his second-reading speech, gave expression to an idea which, I think, is worth investigation. He said that as the general public did not know what goods were taxable, and sometimes paid sales tax on exempted goods, greater publicity should be given to the exemptions. I agree that it would be helpful if the exemptions were more generally known, as the purchasing public could then avoid payment of the tax. I admit that this is a complicated piece of legislation, . but I shall pass on the suggestion for the consideration of the committee that is to be appointed.
– I shall refer the honorable senator’s suggestion to the Treasurer (Mr. Fadden), but Ipoint out that it is almost impossible to pulblish a list of exemptions. The ibook which I hold in my hand, and which honorable senators see is a fairly big volume, contains the exemptions. They are so numerous that, even if they were published, half of the people would still not know what goods are exempt. It would be easier to publish lists of goods which are subject to the tax.
– Either method would be satisfactory so long as it served the purpose I have in mind.
– I am afraid that, whatever were done in that direction, the general public would not be much better informed. The people will know to what degree sales tax is imposed on such articles as boots, but more than that I scarcely hope for.
Clause agreed to.
Clause 7 (Wireless valves incorporated in sets).
– I should like to know the meaning of this clause, as without ‘reference to the principal act its meaning is not clear.
– It means that wireless valves incorporated in sets will still be exempt from sales tax. It is a drafting clause.
– There is nothing to indicate what that clause means, but I accept the Minister’s explanation.
Clause agreed to.
Clause 8 agreed to.
Clause 9 (Amendment of schedule).
- (Senator James Mclachlan). - I direct the attention of honorable senators to this clause, because it includes practically the whole of the balance of the bill.
– I take it, Mr. Chairman, that if an honorable senator wishes to draw attention to a particular item in the schedule, he must do so now.
– When I visited a chemists’ shop recently the chemist said “I cannot understand this sales tax. A woman who buys a bottle of cough mixture for her child has to pay sales tax on the medicine, but another woman who buys a bottle of mixture for her dog is not required to pay the tax “. He thought that that anomaly ought to be corrected. I ask the Minister (Senator McBride) to give consideration to this matter. Some days ago, a barber asked me whether tools of trade were exempt from sales tax. I said that I did not know, but that I thought that some tools of trade were exempt. I promised to inquire and let him know the result. Having made the promised inquiry, I advised him that his tools of trade, such as razors, scissors, clippers, &c, were subject to a tax of 10 per cent, and that articles used in dressing women’s hair, such as dryers, blowers, and marcelle wave equipment were subject to a tax of 15 per cent. I should like to know the position in regard to tools of trade generally. Are they subject to sales tax?
– Sales tax is payable in respect of practically all tools.
– It is not right that the pick, shovel or axe used by the basic wage worker should be subjected to this tax. I had intended .to refer to the sales tax on books, but I understand that, in the House of Representatives, the Minister gave an undertaking that books will not he taxed in future.
– I agree with the Leader of the Opposition (Senator Collings) that an anomaly exists in that medicines for animals are exempt from sales tax, whereas medicines required for human beings are taxable. The anomaly arose from the general exemption of articles used by primary producers. Preparations for horses, cattle, sheep, and other animals were, and still are, exempt, whereas other medicines are taxed as drugs. This is a matter which the Treasurer has undertaken to refer to the committee that is to be appointed.
The honorable senator is correct in saying that the books which have been exempt from sales tax will continue to be exempt.
– Is there any hope of tools of trade being included in the list of exemptions?
– I doubt it, but it is a matter which can be referred to the committee which is being set up to examine the schedule.
– I ask the Minister to make a note of my representations.
– Are all books and periodicals exempt?
– Some books and periodicals have always been subject to the tax. All books and periodicals previously exempt are still exempt under this schedule.
– I should like some information concerning the inclusion of chocolates and confectionery in the 15 per cent, class. This matter should be considered in order to ascertain whether these items should not be included in the 30 per cent, class. It can be argued that they are not necessities, but the manufacture of chocolates and confectionery is a big industry in Australia, and first-grade chocolate produced in this country is as good as that produced in any other part of the world. Although there is analogy between chocolate and ice cream, the latter commodity has been placed in the 10 per cent, class. It is true that ice cream contains primary products such as milk, cream and eggs, hut larger quantities of primary products, particularly milk, are also used in. the manufacture of chocolate. We must also bear in mind that the confectionery industry employs about 8,000 persons, and that its subsidiary industries employ almost 50,000 persons.
– A large quantity of sugar is used in its manufacture.
– Exactly. That is another primary product which is used extensively in the making of chocolate and confectionery. I hope that the Minister will give me an assurance that this matter will be referred to the committee which is to be appointed. I should not be so insistent on these matters if the committee were to include at least one member of this chamber.
– Will the incidence of the sales tax upon all the commodities in the schedule be examined by that committee?
– No. I understand that the committee has been appointed to search for anomalies. Doubtless anomalies referred to it will he considered.
– I assure the Leader of the Opposition (Senator Collings) that the committee will examine any matters specifically referred to it. The honorable senator’s suggestion that there should be at least one member of this legislature on the committee will be conveyed to the Treasurer (Mr. Fadden). We should be deluding ourselves if we believed that such commodities as confectionery and chocolate should not be treated as luxuries. I do not think that Senator Collings will suggest that such commodities are necessities. The framers of this legislation made a very careful survey of the field, and included only non-essentials in the list on which a tax of 15 per cent, is to be imposed. It is possible that there may be some exception, but I do not think that the honorable senator has made out a good case for the exclusion of chocolates. If he believes that an anomaly exists, he can recommend to the committee that ice cream be included in the 15 per cent, category. Possibly that would not meet with his approval, but that is what is most likely to happen. That is a matter that will be investigated by the committee and the honorable senator’s representations will no doubt be given consideration.
– I do not admit that chocolates and confectionery are not necessities. It depends entirely on what one believes to be necessities in an ordinary working-class home. It is unfortunate if we have reached a stage in which Pecksniffian methods have to be adopted in the raising of revenue. In Great Britain all profit over and above pre-war levels is being taxed 100 per cent. Why cannot that be done in Australia? Let us examine the effect of the tax on ice cream and confectionery on an ordinary working-class family. Children are sent to school nicely dressed and are given a penny to spend. Confectionery may not be the best food for children, but still, they derive great enjoyment from purchasing an ice cream, ice blocks, or a couple of chocolates. The Government considers that those things are not necessaries, and so the children may be unable to buy them. Obviously the Government has lost sight of the fact that a large section of the community is able to spend pounds on luxuries imported from other countries. The sales tax will not affect their standard of comfort; they will still get what they want regardless of the price. The Minister cannot convince me that this nation has at last reached the stage at which it is necessary to deprive working-class families of those little niceties of life. Surely the Minister does not suggest that the remedy for the anomaly is to place ice cream in the 15 per cent, class ? I urge that chocolates and confectionery by taxed at 10 per cent. That would deprive the Government of very little revenue, and at the same time would give pleasure to tens of thousands of kiddies whose only joy is to spend a penny or twopence on confectionery. Others in the community are able to afford luxuries such as dancing and cocktail parties, yet the little children are to be deprived of a simple pleasure.
.- What action was taken in the House of Representatives to exempt from sales tax explosives used in mining operations? I understand that following a discussion on this matter some undertaking was given.
– No action was taken in regard to explosives, and the tax to be imposed on that item remains at 5 per cent. Previously explosives were on the free list. In fact almost all goods now in the 5 per cent. category were previously on the free list.
– According to the explanation given by the Minister members of Parliament will be able to make suggestions to the committee.
– That will save a lot of argument. If representations are made to us we can pass them on. Looking through a list of so-called luxury items I see such appliances as vacuum cleaners, mechanical floor polishers and scrubbers. In a hot climate such at that of Queensland domestic mechanical appliances are certainly not luxuries. They are used in thousands of homes, and in many instances are purchased on terms. A tax of 15 per cent. will add considerably to their cost. I urge the Minister to see if such articles can be removed from the section in which they are now placed and included in a division where a lower tax is imposed.
Clause agreed to.
Clauses 10 and 11 agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Bill read a third time.
Bill received from the House of Representatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator Poll) read a first time.
– I move -
That the bill be now read a second time.
This is a short measure which becomes necessary in order to change the machinery for collecting sales tax to the new basis upon which the tax will be levied should the budget proposals receive the approval of Parliament. Section 8 of the Sales Tax Procedure Act is a penalty section. Amongst other things it provides that a penalty may be imposed for the omission from returns of particulars of taxable goods or for the inclusion of particulars relating to taxable goods in a column provided for goods in respect of which sales tax is not payable. That provision was adequate when there were only two classes of goods, namely, those subject to tax and those not subject to tax. In the new proposals goods will fall into four classes. There will still be one class not subject to tax, but the goods in the other three classes will be subject to tax at differing rates. New forms of return will be now necessary and these will provide separate columns for particulars of goods at the varying rates. It is considered essential for the proper control of understatement and evasion that the scope of section 8 be extended so that it may apply to cases in which goods taxable at any specific rate are included in a column provided for goods taxable at a lower rate. No new principle is involved. The section as it stands contains a proviso enabling the whole or any part of the penalty imposed to be remitted in circumstances in which the error is due to inadvertence. This proviso will also apply to the extension now proposed.
Question resolved in the affirmative.
Bill read a second time and passed through its remaining stages without amendment or debate.
(No. 1a) 1940.
Bill received from the House of Representatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator Foll) read a first time.
SenatorFOLL (Queensland - Minister for the Interior) [3.36]. - I move -
That the bill be now read a second time.
The amendments proposed in this bill are incidental to the proposals contained in the budget and are complementary to other legislation already introduced to give effect to those proposals. These amendments are designed to adjust the machinery to two new features appearing in sales tax legislation, viz. : - (i)the provision of differential rates for different categories of goods ; and
Section 3(5) of the act as it stands at present enables the Commissioner of Taxation, when taxable and exempt goods are sold together for one inclusive price, to apportion that sum between taxable goods and exempt goods so that a value upon which sales tax should be calculated may be ascertained. Under the altered basis of paying tax, it is expected that cases will arise in which goods taxable at varying rates will be sold for one inclusive price, and it is desired to have a similar power of apportionment of the lump sum so that the amounts to be taxed at the relevant rates may be ascertained. An amendment of section 3(5) is proposed to afford this power.
The existing law also contains a provision which enables agreements for the sale of goods entered into prior to the date of changes of the rates of sales tax to be varied to enable taxpayers who become liable for extra tax by reason of such increases to recover the additional amount payable, or, conversely, toenable purchasers of goods under such agreements to obtain the benefit of any reduction of rate. This provision is contained in section 70a of the act. It is now proposed to extend the scope of this provision so that agreements for the sale of goods which were hitherto exempt,but which are now being made taxable might be varied to enable the vendors to recover the amount of sales tax which they will now be called upon to pay.
A similar amendment is proposed in section 70b which relates to contracts for the erection ofbuildings or for the performance of work involving the supply of material. The section as it now stands authorizes variations because of changes of rate, but does not cover cases in which variation of the amount of tax occurs through the goods concerned being included in or excluded from the exemption schedule. The amendment proposed adjusts the position in this respect. In these proposals no new principle is involved, and the bill is submitted for favorable consideration.
Question resolved in the affirmative.
Bill read a second time and passed through its remaining stages without amendment or debate.
SALES TAX BILLS (Nos. 1a to 9a) 1940.
Bills received from the House of Representatives.
Motion (by Senator Foll) proposed -
That so much of the Standing Orders be suspended as would prevent the questions with regard to the several stages for the passage through the Senateof all or several of the Sales Tax Bills Nos. 1a to 9a being put in one motion, at each stage, and the consideration of all or several ofsuch bills together in committee of the whole.
The PRESIDENT (Senator the Hon. J. B. Hayes). - There being present an absolute majority of the whole number of senators, and no dissentient voice, I declare the question resolved in the affirmative.
Standing and Sessional Orders suspended.
Bills (on motion by Senator Foll) read a first time.
– I move
That the bills be now read a second time.
The first purpose of the sales tax bills now before the Senate is to increase the general rate of sales tax from81/3 per cent., to 10 per cent. Honorable senators have alreadybeen informed, in connexion with the bill to amend the Sales Tax Exemptions Act, of the considerations which actuated the Government in deciding to increase the rate, rather than to attempt the withdrawal of exemptions of sufficient magnitude to allow the present rate to be maintained. It is unnecessary for me to recapitulate at this stage the reasons for that decision. The increase was decided upon only after other possible means of obtaining the required revenue had been thoroughly explored and examined.
The second purpose of the measures is to provide differential rates in respect of two other classes of goods, the first being goods which were previously exempt but which, in the existing circumstances, it is considered can he brought into the taxable field without materially departing from the major principles upon which exemption from sales tax has been hitherto granted. For this class of goods it is proposed to have the relatively low rate of 5 per cent, and, as has been previously explained, the goods to which this rate will apply are set out in the proposed second schedule of the Sales Tax (Exemptions and Classifications) Bill. The second class of goods comprises items already subject to tax, but which, by reason of the fact that the needs they satisfy are less urgent or important, than those satisfied by the ordinary goods of commerce, might well bear a rate greater than that applied to the general goods of commerce. For this class of goods it is proposed to have a rate of 15 per cent., and the goods to which this rate will apply are specifically set out in the proposed third’ schedule to the Sales Tax (Exemptions and Classifications) Bill.
This is the first attempt in the history of sales taxation in Australia to differentiate between taxable goods so far as rate is concerned. Rate differentiation has been avoided in the past, not because of any view that a varying burden could not be justified, hut simply because it Av.as realized that the extra classifications involved would increase the difficulties of taxpayers in the compilation of returns, and place an added hurden upon the administration in interpreting, and policing, the legislation. However, the alternative appeared to he an increase in the general rate beyond 10 per cent., an alternative which the Government earnestly wished to avoid. The Government chose, therefore, to adopt the system of differential rates in the belief that the taxpayers upon whom the additional duties of dissection will fall will accept the additional burden as a necessary and inevitable result of the extraordinary revenue requirements of the day, and will prefer that course to a high general rate which might tend to depress sales.
The new rates are designed to come into operation on or after the commencement of business on Friday, the 2i2nd November, 1940. The specification of a particular date of commencement accords with the usual procedure when a change of rate is contemplated, and is designed to prevent dislocation of trade which would occur should there he delay between the date of the announcement of the Government’s intentions and the date when those intentions become effective. Provisions in the machinery of the existing law fully protect vendors who are required to pay the additional tax due to the imposition of the higher rates. Vendors will he enabled to recover the additional amount from any customers who have not paid it when the bill becomes law. If these bills do not .become law, vendors will he enabled to obtain refunds of the excess amounts paid -by them. Provisions in the existing machinery acts also enable vendors of goods previously taxable to recover the additional tax payable from their customers, and contractors to recover the additional cost of materials. Contracts and agreements are deemed to be altered accordingly. Steps will he taken to introduce an appropriate amendment of the machinery act, in order to provide that contracts, or agreements, entered into by vendors who become liable for additional tax, or contractors whose costs of supplying materials are increased by the taxing of goods previously exempt, may be varied to enable the additional amount payable to be recovered by the vendor or contractor.
The new rates will apply to all taxable transactions and operations in goods effected on and after Friday, the 22nd November, 1940, and will apply also in respect of goods imported on and after that date.
Even with the increases now proposed, the highest rate in Australia will still be below what is referred to in Great Britain’s purchase tax as the reduced rate, viz., 16$ per cent., whilst the basic rate in Great Britain, viz., 33-J per cent., is more than three times as great as the proposed Australian general rate of 10 per cent. As I have already indicated, the Government is setting up a special committee of all parties to inquire into any anomalies or difficulties which might arise in connexion with the new sales tax proposals.
Question resolved in the affirmative.
Bills read a second time, and passed through their remaining stages without requests or debate.
Senator LECKIE laid on the table reports and recommendations of the Tariff Board on the following subjects: -
Bounty on two-wheel tractors.
Silk and artificial silk piece-goods.
– This morning Senator Uppill asked the Minister representing the Minister in charge of Scientific and Industrial Research, upon notice -
The Minister in charge of Scientific and Industrial Research has now supplied the following answers to the honorable senator’s questions: -
Sitting suspended from4.3 to 8 p.m.
.- I move-
With the indulgence of honorable senators, I do not propose to ask the Senate to carry the debate on this motion very far at the present time, because I should prefer it to be discussed at a period when the Senate had settled down to routine business and could give the motion continuous attention until a vote had been taken upon it. It has been suggested at times, and, perhaps, unthinkingly, by those who have not paid close attention to the matter, that some ministerial responsibility might be involved in motions of this kind. This is not a common procedure, but it is one upon which I hope to he able to secure agreement among honorable senators. The opinion of the Senate of the Commonwealth should be sought at times on matters of world-wide importance, so that it may stand before the world, like the Senate of the United States of America, and earn the respect of at least the democratic nations as a body whose opinions are of consequence in the affairs of mankind. If I were privileged to continue to be a member of this chamber, I should he extremely ambitious to obtain the enthusiastic support of my fellow senators for this procedure.
It was almost tragic to hear Senator A. J. McLachlan last night give it as his experience, that during the fifteen years he has been a member of the Senate, the Financial Agreement is the only measure of national importance passed by this chamber. I pass no opinion on. that one way or another. If that remark of the honorable senator was justified, I respectfully and sincerely suggest to honorable senators that, after all, the blame rests not alone on us, hut on a succession of senates. Whatever the Senate of the United States of America may be - and we know that it has established certain committees which have a wide influence in the world - the fact remains that those committees do not exist under the Constitution of’ the United States of America. They exist to-day only because they are the product of the will of the men who have constituted the successive senates of that great republic. There is nothing to prevent the present Senate or any future Senate of the Commonwealth from placing this branch of the legislature in such a proud position that it will deserve something more than the flippant and almost foolish criticism which has been published in the press throughout Australia, and of which we have had occasion more than once to complain.
Under the Commonwealth Constitution, it is provided that, in matters on which we have laid down our own procedure, our Standing Orders are the rules by which we are to be guided; but, where the Standing Orders are silent, we follow the procedure of the Mother of Parliaments. We have provided for several ways of expressing the opinion of a house of parliament to the head of the Empire as the focal .point through whom we hope to attract the attention of the wider public, not only throughout our own Empire, but also throughout the whole world. It is laid down in May’s Parliamentary Practice that either House has an inherent right to express its opinion on a matter of domestic or foreign concern to His Majesty direct by resolution. The only exception, I think, is that the House may not deal with a matter which is before it at the time by way of a legislative proposal. So far from that restriction fixing responsibility upon His Majesty’s Ministers of the day, it does nothing of the kind, because, after the House has carried such a motion, the practice is for the motion to he presented by the Speaker or, in the Mother Parliaments, by the Lord Chancellor direct to His Majesty. A similar practice has been followed in this chamber. This motion, if passed, may be presented by you, Mr. President, accompanied, I presume, by the proposer and seconder, direct to His Excellency the Governor-General for transmission to the King. A similar motion, which was carried hy the Senate three or four years ago, was, in fact, submitted by the .then President of the Senate to His Excellency the GovernorGeneral, and transmitted to the King, and its receipt was acknowledged by His Majesty. Therefore, that precedent has been established. During the debate on that motion, members of the then Ministry, hy interjection, disclosed the idea, which seemed to he in their minds, that it was futile to send such a motion through that channel in that way, owing to the provisions of the Statute of Westminster. That statute certainly binds Great Britain, but not Australia. It was argued by the Ministry at that time that the only result would be that His Majesty, under the Statute of Westminster, would send the resolution hack to his Australian Cabinet for consideration by his Australian advisers; but that was entirely a misconception. The Statute of Westminster would certainly bind His Majesty constitutionally to do that in a case where the matter dealt with was a dominion one, but, in the case of a world-wide matter, that provision could not possibly apply. Therefore, Mr. President, I say, with the greatest respect for my friends, the honorable members of His Majesty’s Government “who are sitting in this chamber, that, in taking this course, I have no desire to be disrespectful in the slightest degree to His Majesty’s Ministry, or in any way to derogate its powers, dignities and functions. Therefore, I impress upon Ministers that there can be no question of ministerial responsibility being attached to this motion, which I hope to be able to convince the Senate should be passed. Ministers can either abstain from, or take part in, these proceedings as individual senators, because, if the motion he agreed to, it will only go out as the opinion of the Senate as a House exercising the inherent right of expression to which I have referred, and which has never been taken away by the Standing Orders. I reiterate that with no supercilious idea of thrusting any advice of my own upon my fellow senators; hut I beg them, and future generations of senators in Australia, to try to bring this Senate into such a position of importance in the affairs of the world that the cheap and miserable criticism that has so often been hurled at it should never again be justified. With confidence I ask honorable senators to take this matter closely to their hearts for the honour of Australia, and for the vindication of that democratic system which it is vital for us to preserve. I hope honorable senators will not think that, in inviting their close attention to this motion, I am asking them to par.tipicate in an idle, useless or time-wasting discussion.
I have referred to the question of procedure. I hope that I shall not have to deal with that matter at a later period. By referring to May, and to our own Standing Orders and to the Constitution, it is open to any honorable senator to verify what I have said. I have not intentionally said anything to mislead honorable senators. This Senate has the right to initiate any legislation, subject to the limited restrictions placed on it in respect of money hills. To the present Leader of the Senate (Senator McLeay), and to all future leaders of the Senate, I appeal for the exercise of this right from time to time. I hope that I shall not he called upon by my fellow senators, after they have given mature thought to this matter, to apologize for anything that I have said in relation to it. This is not an idle motion, nor something which I have introduced in order to direct the limelight to myself. I have no desire to inaugurate a pedantic debate. Before asking for leave to continue my remarks, which I shall do presently, I wish briefly to indicate to honorable senators what I mean by saying that this is not an idle motion or a stunt. I ask for the sincere co-operation of honorable senators in a matter of world importance. Only a week or two ago .a distinguished Minister of the Australian Government, in addressing a gathering in Sydney, spoke of the desirability of planning economically for reconstruction after the war. That thought is being expressed by leaders of thought in many countries. I want the Senate to take one step more towards crystallizing that thought. In economic, political, and constitutional spheres there is a nebulous idea that plans must be made now so that when real peace comes, and not merely a cessation of fighting, preparations will be well in hand.
– Is there such a thing as peace?
– There is not much evidence of it in the world to-day; but if the honorable senator will read the literature which I have prepared he will find that that question has been dealt with.
– Much credit is due to the honorable senator.
– The issuing of the order “ cease fire “ would not, of itself, bring peace, for peace comes only with security. The only peace worth having for the democracies of the world is a peace which will ensure that in the future no gangster, burglar, or aggressor, will again bring agony and misery to the world. We waste time and effort if we fight for anything less than that. I agree that there must he a wholehearted war effort on the part of not only Australia, but also every other part of the British Empire. The struggle may bring impoverishment hut if we retain a freedom in which we shall be entitled to express our opinions, and live according to our consciences, without the overshadowing presence of the Gestapo and the fear of internment camps the struggle will have been worth while. That is the only kind of peace that is worth having, even though it may mean a new order in many things. Here I say to Senator Darcey that I have read literature prepared by many who, like him, advocate reforms, and it appears that they are afraid of anything in the nature of a world federation. To a great degree I share that fear. I do not want to propose setting up machinery which in any way will mean the surrender of the freedom of nations. I propose to submit to the Senate a proposal for security in the matter of armaments. I want to see established a world in which private armament racketeering shall not exist. I ask honorable senators not to forget that there is also such a thing as national armament racketeering. If we suggest to the world that the control of armamentmaking shall be placed with one central body, we must be perfectly fair and grant equal representation to the peoples of the world. That means the establishment of an equal electoral system. Unfortunately, many nations do not understand the principles of democracy, and need educating. I agree with the Minister for the Army (Mr. Spender) and others that we must plan now for the post-war period, and not leave our preparations until the last minute. However beautiful, may be the schemes for the improvement of the world, whether economic, social or otherwise, what is their value if in 25 or 30 years’ time another cruel international gangster or burglar destroys that beautiful edifice that has been erected? Let us strive for security, under the shelter and protection of which mankind may erect an edifice which will make the world a better place. Let us hope that that will be the result of the misery and agony of this world war. I am no pacifist, although in times of peace I would do much to preserve peace. But it is a snare and an illusion to talk of peace when there is no guarantee of security for the peoples of the world. We tried it when we established the League of Nations. World peace and security were not then thought to be impracticable. We thought then that the sanctions behind the League Covenant would be an effective means of policing the world, but we learned that because its constitution was not indissoluble, and nations were free to withdraw from the League. When the time of testing came the League of Nations failed because other nations said to Britain, “ You can do the dirty work “.
– The League of Nations would not have failed had all the nations remained members.
– That is my point, and that is why I say that there must be an indissoluble constitution for the new world order. Members of the new league must not be able, of their own sweet will, to withdraw from it. The slogan must be, “ Once in, always in “. A centrally armed force might eventually compel nations to remain in the new league. I do not suppose that an ideal of this kind can be reached immediately by all the peoples of the world, but, as I have said, a trend in that direction is evident throughout the world. Day by day we see the great American republic drawing closer to us. The Britishspeaking peoples are lone rocks in the sea of totalitarianism that threatens to overwhelm the world. When we have won the victory over the evil forces that are in the world - and that day will come when the people of the United States of America, together with the people of Australia and other parts of the Empire, make a great united effort, each workman fighting on the home front as truly as our forces are resisting the enemy in the Libyan desert - there will be preserved to democracy something more precious than material wealth. Men are talking about the need to make a supreme effort to retain the principles of democracy, the right to live as free men, even though the generation be impoverished. If we put our all into the struggle in order to save the things that we believe to’ bo. worth while, we shall win, and the struggle will have been worth while. I ask honorable senators to think deeply on these matters. At a later date I shall appeal to them to assist me in sending this message out to the world. I have not taken this action on the spur of the moment. Honorable senators may remember that some time ago an organization was formed which many of them joined. I have a roll bearing the signatures of members of all parties in this House, of which I am proud. My action to-day is taken in accordance with one of the objectives of that organization. I have not made any great appeal to the public for money, but numbers of people have helped me financially, so that I have been able to do a good deal of work in sending propaganda overseas. “ The proposal now before the Senate is also in the possession of senators and members of the House of Representatives of the United States of America, and members of both Houses of the British Parliament. It has also been sent to various newspapers in the United States of America, and in the great republics of South America, as well as in Canada, Great Britain, and many parts of German-occupied Europe, where the proposal is known. When we pass this motion - and I shall ask honorable senators to pass it - it will go out to the world as a message of hope. We may set up something for which men in the future will work. I do not ask for slavish adherence to the details of my proposal. Details do not matter a great deal; the main factor is its underlying principle.
– The honorable senator should be on this side of the chamber.
– I hope that the honorable senator will not bring into this discussion any matter of party politics. This is something for every man in the world. I care little about a man’s religion or politics, or what is his colour or class. It is enough for me that he is a man. In the new world which we are resolved to build there must be some method by which security will be assured, for only then will be possible that peace and progress which we all desire. Without security, history will be repeated, and some future aggressor will come forward and destroy the edifice that has been erected. I ask leave to continue my remarks at a later date to enable me to deal further with the details of the motion.
Leave granted ; debate adjourned:
Debate resumed from the 10th December (vide page 672) on motion by Senator McBride -
That the papers be printed.
.- At this stage I do not propose to discuss the merits or demerits of the Government’s budget proposals, but I shall deal with two or three outstanding subjects which require consideration. I wish to make it quite clear that there are very many proposals in the budget with which I, and other honorable senators on this side of the chamber, do not agree. Although the budget contains the result of the compromise reached between the representatives of political parties in this Parliament, it is not in accordance with the Labour party’s policy. When the budget was introduced in the House of Representatives, Labour members attempted to obtain as many concessions as possible from the Government. It is pleasing to find that some were granted, but honorable senators on this side of the chamber would be happier had Labour’s representations with respect to invalid and old-age pensions and a statutory exemption of £250 been favourably considered by the Government. During the last twelve months, we have been hearing of obstacles being placed in the way of shipbuilding, and to-night I shall deal first with the background of that problem, and then with the obstacles which have been presented.
Shipbuilding could have been one of our greatest industries had sufficient attention been given to its development. Trouble first arose after the last war when, on the 24th March, 1920, the then Minister for Trade and Customs (Sir Walter Massy-Greene) brought down a tariff schedule, one of the objects of which was to establish and protect new industries, and to assist the expansion of existing industries. In that schedule a British preferential duty of 5 per cent. ad valorem, and a general rate of 35 per cent. ad. valorem, was imposed on vessels of a tonnage suitable for use in interstate or intra-state trade but the duties imposed were not to become operative until January, 1923. During those three years local requirements for many years were fulfilled and the local shipbuilding industry was completely disorganized. In 1919-20 the value of vessels imported into Australia was only £160,000; but as a direct result of the tariff, the value of ships imported in 1920- 21 increased to £1,700,000. In 1921- 22 the figures reached £4,334,000, in 1922-23 they were reduced to £2,750,000, and in 1923-24 they were approximately £250,000. Those figures speak for themselves. As soon as the new tariff was announced firms such as the Broken Hill Proprietary Company Limited, W. E. Carpenter and Company, the North Coast Steamship Company, and the Colonial Sugar Refining Company Limited, some of which owe their existence to the help given by the Australian people and Australian Governments, purchased vessels overseas, and during the threeyears’ period mentioned, ships of a total value of £9,000,000 were imported into Australia. Even as late as 1932, the Tariff Board recommended that action be taken to lay down in Australia the foundations of the shipbuilding industry. Had that been done this industry would have been established and would have provided one of our first lines of defence, but unfortunately the industry is still in its initial stages. In 1932, the Tariff Board reported that three vessels a year would meet Australian requirements. Nothing was done to implement the Tariff Board’s report. It is interesting to note that from 1932-33 to 1937-38, 43 vessels averaging 500 tons gross, and of a total value of £5,900,000, were imported. This represents a requirement of nearly ten vessels a year for the Australian trade. Of that number 41 were constructed in British shipping yards, one in Denmark and one in China. Had Australian interests been compelled to support the Australian shipbuilding industry during the last ten years, Australia would now be ‘building cargo vessels at a rate that would help to replenish the terrific losses which we have incurred during recent months, and concerning which Ministers probably know more than we do. Unfortunately, there is an aspect of the shipbuilding industry which is very unsavoury. Apart from the injustice done to Australia by the Australian business interests, which should have been forced to support the establishment of the Australian shipbuilding industry, it appears that pressure has been exerted by British interests which, no doubt, feared the loss of trade should shipbuilding in Australia be established on a sound basis. We are now facing a serious position. Huge losses are being inflicted on British shipping, and the gravity of the position should be emphasized. As Mr. Hanson Baldwin, military correspondent of the New York Times, said, “ The war is rapidly ‘becoming more and more a race for a victory at sea “. That opinion is held both by people with inside knowledge and by the man in the street. It is the considered opinion of almost every one that victory will depend on the ability of Great Britain to maintain and protect our shipping lanes. Shipping losses have increased to such an amazing total that Great Britain has been forced to appeal to the United States of America for assistance. Why should such an appeal be made to America and no action be taken to utilize Australia’s shipbuilding facilities. Undoubtedly, America has the facilities for building ships in large numbers as was done during the last war, but Australia’s claims have not been given sufficient attention. During the last three months, Great Britain has been losing ships at the rate of 4,000,000 tons a year. The position is made even worse by the fact that Great Britain cannot use its naval forces against the enemy with the same effect, or in the same strength as during the last war. At the outbreak of the last war, Great Britain had 218 destroyers, and France, Italy and Russia had 224, making a total of 442, of which only about ten had been lost up to September, 1915. At the outbreak of the present war, Great Britain had only 179 detroyers, and up to date, 40 of these have been lost. It is true that an additional 50 destroyers have been obtained from the United States of America, but those vessels do not compare favorably with British ships now on active service. For the last 25 years, the American destroyers have been out of commission, and I understand that they are not equipped with armoured decking, as are the British destroyers, which have been built to stand up to the attacks from the air. However, America’s gesture of friendship is welcome, and although the vessels are old they are of inestimable value to the Empire. The balance of sea-power swung towards our enemies when Italy entered the war. The French Navy is no longer able to protect British shipping, but owing to the shortage of naval craft, particularly destroyers, convoys of ships plying to and from Great Britain are inadequately protected. Proof of that was shown a few weeks ago, when it was revealed that a convoy of 30 or 40 ships was protected by only an armed merchantman or auxiliary cruiser. The shortage of shipping is the most serious problem now facing Great Britain, and will become more acute unless more adequate protection is provided for the convoys endeavouring to penetrate the German blockade. Whereas in 1914-18 Germany had no outlet to the sea, except through the ports of the Baltic and on its own short strip of North Sea coast, to-day it has bases from Narvik to Dakar. The gravity of the shipping problem is apparent to every one. In Australasian waters more than 100,000 tons of shipping has been sunk, bringing the war to our threshold. The Minister for the Navy in New Zealand, Mr. Jones, is pessimistic about the prospects of capturing the raiders which are taking toll of our shipping, but I am disinclined to agree with him, and I hope that the efforts that are being made from this side of the Tasman Sea to trap the enemy vessels will succeed. While raiders are at large we must expect to lose ships. In view of the gravity of our position, I am disappointed that, while the Government is applying a progressive policy of naval ship-building, it has not even tried to lay down the basis of a merchant shipbuilding industry. The production of merchant vessels to my mind is almost as important as the production of BristolBeaufort bombers.
– The honorable senator’s view is not in accordance with expert opinon.
– Mr. Churchill must be considered an expert and he has said that the TJ-boat is a greater menace to Great Britain than all the bombers which have attacked London, Southampton and Birmingham. There is nothing spectacular about the mercantile marine; its job is done without praise or publicity, but it is a most important job and it is done wonderfully well. We should use every facility we possess in order to build vessels for the merchant fleet.
– The Government is advised as to shipping needs by those who know them.
– Their advice is that naval ship-building must have priority, not that merchant vessels ought not be built. In Australian shipyards to-day about 40 naval vessels are either in course of construction or are projected. Those vessels include 1,900-ton destroyers of the “ Tribal “ class and sloops of 600 or ‘700 tons. It is not impossible for the industry also to engage in the building of freighters.
– Again the honorable senator is in conflict with those who know.
– I am supported by the Minister for the Navy (Mr. Hughes) who, according to yesterday’s Sydney Sun, declared that merchant shipbuilding was as vital to Australia as to Britain. That is on the ona hand. On the other the Minister for Trade and Customs (Mr. Harrison), whose department is directly concerned, says that Cabinet is examining shipbuilding “ as a long-range problem “. Hitler might not let the war last long enough for a long-range plan to be put into operation. France intended to fight this war on a long-range basis and thought that, safely behind the Maginot line, by means of a blockade it could starve Germany into submission. We know what happened to that long-range plan. Early in the war Great Britain had the same illusions about long-range planning. The Prime Minister (Mr. Menzies) says that the question of building merchant vessels is under review, but the Minister for the Army (Mr. Spender) has impressed upon the Government the need to add to our merchant fleet. He said -
Australia cannot blind herself to the gravity of recent British shipping losses … if Hitler can succeed in delivering these smashing blows to British shipping and continue unchecked this terrible punishment on our sea borne trade our national resistance will be gradually weakened and it may end in our undoing.
I have the support of the Minister for the Navy and the Minister for the Army ; the Prime Minister and the Minister for Trade and Customs want a review of the situation. The most pungent remarks about this position that I have read came from the Right Honorable W. M. Hughes, who was responsible in 1914-18 for the establishment of a highly successful shipbuilding industry in this country. He said -
But I am looking back on what was done twenty-five years ago, and I do not find the arguments against launching into the enterprise very convincing.
He went on to say -
The sinkings struck a blow at the roots of Australia’s export and primary industries, an integral part of Australia’s economic structure.
Owing to the German occupation of a large portion of Europe, Great Britain, with the exception of the United States of America, is about our only market. Our lack of shipping space, however, prevents our taking the fullest advantage of the opportunities that the British market offers. We have sold 36,000,000 bushels of wheat to Great Britain, but we cannot export it because of insufficiency of cargo space. That is something that the Minister cannot deny.
The Government cannot take refuge behind the excuse that there is an insufficiency of skilled labour in this country to build other than war vessels. I suppose that in 1914-18 the number of skilled shipbuilders in this country was small, but that did not prevent us achieving a great success when we embarked upon the construction of ships. I remind honorable senators that when the construction of Wirraway aircraft was started at Fisherman’s Bend by the Commonwealth Aircraft Corporation there was no superfluity of men skilled in aircraft construction. Mr. Wackett, who was entrusted with the foundation of the industry, said he had to search Australia for the men who had worked with him at Cockatoo Dock and Randwick years before. The experience gained by these men served as a base for the education and training of the workmen at present engaged in the aircraft industry. At the Fisherman’s Bend factory to-day there are between 2,000 and 3,000 men who have become either skilled or semiskilled in aircraft production. When the industry started Mr. Wackett did not go to labour bureaux and say “ I want 25 men skilled in the aircraft industry “.
As he has said, he had to go around the country and pick up men with whom he had worked at Cockatoo Dock. He drew them from poultry farms and from behind the counter where they had gone owing to the lack of continuity in the shipbuilding industry. If the Government can promise permanent employment in that industry the men who left it in desperation will return to it. Plenty of skilled men could be found if they were wanted.
– Nonsense ! Mort’s Dock wants 250 men to-day and cannot get them.
– The men are available if they are assured of permanency. To-day those men occupy permanent positions in other industries and they will not leave them without that assurance. Mr. Wackett got the men he wanted because he was able to offer them continuity of employment. On the same terms skilled men who have found other vocations because of broken work in the shipbuilding industry would go back to that industry. It is not necessary that ship yards be entirely staffed by skilled tradesmen. What is needed is a sufficient number of skilled tradesmen to train other workers. The Minister smiles but after Dunkirk the British Government was able to release many members of the Royal Air Force to come to Australia to instruct men in the Royal Australian Air Force.
– Many men?
– Yes, a sufficient number to do the -job. At every air force station which I have visited, including Cootamundra, Wagga, Narrandera, Rathmines, I have seen some of these Englishmen who have been sent out here to make No. 1 pilots of our airmen. As Great Britain has been able to supply us with so many of these experts at a time when it was facing the greatest attack in its history, it must be able to loan to Australia sufficient numbers of dockyard workers to enable us to establish and develop the shipbuilding industry in this country. Although for the most part we have been given to understand that only residences and shops have suffered at the hands of German bombers, news has seeped through during the last few days which indicates that war production in Britain has been seriously impeded as the result of German air attacks. The effect of indiscriminate bombing alone on production must be substantial. In a recent issue of the American magazine Life I saw aerial photographs of the Thames estuary produced by the German minister for propaganda. Such objects as oil tanks, docks and wharfs presented a wideopen target to air attack. This must be the case also in the other great industrial centres in Britain. “Whilst factories can, to a large degree, he effectively camouflaged against air attack, and can even be placed underground, it is almost impossible to disguise shipbuilding yards. Consequently, we can assume that British shipbuilding has suffered to some degree from aerial attack. In these circumstances it should bc possible for the British Government to make available to Australia the services of thousands of British workers skilled in shipbuilding. The development of shipbuilding is fundamental to our defence. If sufficient skilled men are not available in Australia to enable us to embark immediately upon this industry on a big scale, the Government should act on my suggestion and secure the necessary workmen from Britain. It would pay us to adopt such a plan regardless of cost. I should like to know whether the Government has given any consideration to such a proposal. Judging from its attitude towards all requests to go ahead as speedily as possible with shipbuilding in this country, the Government appears to have lost confidence in the Australian people. The progress which has been made at Whyalla is sufficient answer to such an attitude. Over 2,000 men are now employed at Whyalla in the iron and steel and shipbuilding industries, whereas a few years ago very few skilled men were employed there. Unfortunately, however, the Government prefers to dodge problems of this kind as long as it can. In most instances it fails to take action until circumstances force it to do so. Twelve months ago it appointed Mr. Townsend, an officer of the Customs Department, to report upon the possibility of shipbuilding in this country. That report has been in the hands of the Government for a considerable time.
Why has it not yet been made available to Parliament? Surely no sound reason can exist for withholding it, unless it be that it disposes of the contention of the Prime Minister (Mr. Menzies) and the Minister for Trade and Customs (Mr. Harrison) that we are not capable of establishing the industry in this country. The history of industry in Australia proves that the Australian workman has succeeded in every task which has been given to him. Admittedly the history of Mort’s Dock and Cockatoo Island makes disagreeable reading, particularly from the viewpoint of the workers. I recall that just after the outbreak of war unemployment among the ironworkers in Sydney had reached a record. It is only within the last few months that the ranks of those men have been gradually reduced. The failure of the company at Mort’s Dock to attract these workers is easily explained. That company’s reputation in regard to its treatment of employees is unfavorable. It does not show the slightest consideration for the welfare of its workers. It makes no effort to provide continuity of employment for its employees. Consequently the company had to look to such centres as Newcastle as a source of labour supply. But that action on its part cannot he accepted as evidence of a shortage of skilled labour. Last night, when we were discussing bills to provide assistance to primary industries, we learned that producers, including apple and pear growers, were unable to market large proportions of their products because no ships were available to transport them overseas. We were also told that over 36,000,000 bushels of wheat from last year’s crop was still on hand, although it had been sold to the British Government. Had past governments exercised a little foresight, and established the shipbuilding industry, our primary industries would not be faced with their present difficulties.
The story of Walsh Island makes tragic reading. At one time it gave promise of becoming one of the most important industrial centres in Australia. However, the plant was sold for £49,000. The Premier of New South Wales recently stated that the present cost of replacing that plant would not be less than £100,000. Mr. Telford Simpson, a director of Mort’s Dock, declared that the cost would he no less than £400,000. However, in view of the fact that a private company would naturally he disinclined to encourage in any way the establishment of an undertaking which would be a potential competitor after the war, I do not place much reliance on Mr. Simpson’s estimate. To-day we are paying dearly for the actions of anti-Labour governments in disposing of such valuable State-owned enterprises as the “Walsh Island dockyard. The Prices Commissioners in New South Wales would be much happier to-day if State-owned brickworks and timber-yards were operating in that State. The dismantling of Walsh Island dockyard was tragic. To-day a sad sight meets the eye of the visitor. On the spot where some years ago the dockyards were a hive of activity only rusting machinery can now be seen, leaving the onlooker to visualize what might have been. The fate of Walsh Island dockyard reminds me of the lines of Sheridan, who, in referring to the sorry state of India after Hastings’ rule, asked -
What monster has stalked over the country poisoning -with pestiferous breath what the greedy appetite could not devour?
The story of Walsh Island prompts me to ask the same question. Plant which could not be disposed of by anti-Labour governments to their friends in private enterprise was smashed under the hammer and sold as junk. Should there be any danger of a shortage of iron ore, I suggest that shipbuilding yards be established adjacent to Yampi Sound. The establishment of dockyards at Yampi Sound would forward Labour’s policy of decentralization and relieve the pressure of industry in the eastern States where factories are finding it almost impossible to enter upon a war production on as large a scale as they would like. To-day, only .corners of these factories are devoted to war production. In the building of ships much of the work can he sub-let to firms who carry on business away from the waterfront, only from 40 per cent, to 50 per cent, of the work has to be done in the dockyards. Before I became a member of the Senate, shipbuilding was under discussion, and it is high time that that thought was translated into action. The Townsend report on shipbuilding is available for guidance in this matter. In view of the fact that the Attorney-General (Mr. Hughes) and the Minister for the Army (Mr. Spender) have recommended that this work should be put in hand at the earliest possible date, there should be no further delay in the building of a mercantile marine for Australia. For the defence of the Empire, for the survival of our primary industries and, finally, for the establishment of a great Australian industry, this work must be commenced at once.
Insufficient attention has been paid to air-raids precautions work in Australia. In March, 1939, the Premiers of the States met in Canberra and agreed to make preparations for air raids, but for a long time little or nothing was done. In Sydney it was found at first that it was not difficult to recruit wardens for this work; but it was soon discovered that, owing to lack of long-range planning, and the necessary facilities for the training of wardens, interest in the movement waned. Six or eight months ago, there was an uproar in Sydney when it was realized that there was a shortage of thousands of wardens. If the Government considers that it is unnecessary to train men for the work they would have to do in the event of air raids, it should say so; but, if it believes that educational training is necessary, a Minister should be called upon to co-ordinate the activities of the State authorities. Training has been commenced in Sydney, but I understand that very few wardens have been trained in Melbourne. An official described as the Director of Civilian Defence and State Co-operation, who is stationed at Victoria Barracks, Melbourne, is paid £742 a year. Whether he discharges the duties which his title suggests is quite another matter.
I am surprised to find that the basis on which air-raids precaution work is being carried on to-day is the same as that laid down in March, 1939. The many lessons that have been learnt in London during the recent bombing raids have not been acted upon in Australia. When the wardens are recruited to-day they are given about eight lectures, four of which relate to gas attacks. No time at all is devoted to the study of organization, . which I should say is the most important phase of a warden’s work. It seems to me that it is urgently necessary to re-organize air-raids precautions work in Australia. Nobody seems to know which is the right kind of shelter to provide. Protest meetings have been held in Balmain where deep air-raid shelters are advocated; but the authorities in Sydney declare that deep shelters are traps. Recent experience in England showed that deep shelters were undesirable because the facilities available underground are insufficient to protect the health of the people using them. Mr. Mair, the Premier of New South Wales, and Mr. Bruxner, the Minister in charge of National Emergency .Services, do not seem to be able to agree as to what is the best course to follow in the interests of the civilian population. Although the war effort will cost Australia hundreds of millions of pounds, the sum provided for air-raids precautions this year by the Commonwealth is only £17,000. This amount includes £1,950 for the salaries of the Director of Civilian Defence and State Co-operation, five clerks, and a typist. Other items of expenditure are: - Provision and maintenance of anti-gas equipment for training purpose, £5,800; maintenance of reserves of anti-gas equipment and stores, £5,000; schools of training for personnel of Air Raids Precautions Services, £1,000 ; and incidental expenses, £1,000 ; a total of £12,S00. I have had some experience of the educational work being carried out for the training of wardens. In New South Wales, the classes consist of twenty persons, who receive a week’s training. More money than has been provided is required for the training of the necessary men. I notice that £500 is being made available for this work in the Australian Capital Territory. The money made available by the Government of New South Wales has been reduced by about £20,000. I do not know whether the necessary equipment has been purchased; but, as the menace draws nearer, the interest in this matter appears to dwindle.
As an alderman of the Sydney City Council, I have tried to assist in this movement. The first conclusion I reached was that many more men would have to be trained for the work, and that the personnel should be increased by about 1,000. Those who give their time for the training of wardens render a valuable service to the community, and they deserve every encouragement. There should be a paid organizer in each district to assist the district warden. If this job is worth doing, it should be done properly. There is a wide difference of opinion as to what is required in this direction. Mr. Bruxner claims that the organization in New South Wales is perfect. Addressing the aldermen on the City Council some weeks ago, he referred to the great success that had been obtained in connexion with the training of wardens in Moree, which is 560 miles from Sydney. One of the aldermen who represents Fitzroy suggested to Mr. Bruxner that it would be advisable for him to visit Woolloomooloo in order to see what had not been done there in the matter of airraids precautions. There should be Australiawide co-ordination of this work and financial assistance from the Commonwealth Government. Mr. Bruxner said that he had laid all his plans on the assumption that a period of six weeks would elapse between the first warning and the actual danger. I hope that he is right in that regard, but I have doubts on the matter. Sir Archibald Howie, who has been advising the Commonwealth Government with regard to building construction throughout Australia, has stated that at least six months would be required to provide reasonable air-raid shelters for Sydney and the inner-metropoltian areas* but, because of lack of co-ordination of this work, there is disagreement regarding it. ‘[Extension of time granted.] It is most important that a federal Minister should have the work of air-raid precautions co-ordination as part of his ministerial duties. It is only by this means that air-raids precautions organizations can be brought to a satisfactory state.
I now wish to refer to the Australian Broadcasting Commission. I do not join with the daily press, particularly that of New South Wales, in attacking the Australian Broadcasting Commission, although that body has not always pleased me. Some time ago I made some representations to the Leader of the Senate (Senator McLeay) regarding
Jim Davidson’s band, “which, I believe, is an acquisition (to any Broadcasting station. If the commission were to allow that band to disperse merely because a few thousand pounds is involved, it would be doing a grave injustice to the public of Australia. I have complained also of the treatment of Australian artists by the commission. Many of these men and women have moved in the highest musical circles abroad, yet on their return to Australia, they have been ignored by the Australian Broadcasting Commission. As I have said, I have not always been pleased with’ what the commission has done; but I shall not be a party to the attacks made upon it by the New South Wales press. I well remember that when the present Minister for Trade and Customs was Postmaster-General, the Sydney Sun launched a campaign against him. I am credibly informed that Mr. Harrison had an interview with representatives of Sydney newspapers, during which the language used was not that of a kindergarten. Trouble arose over advertising conditions for programmes which the Australian Broadcasting Commission wished to publish in various newspapers. When the disagreement occurred, Mr. Harrison said that there were other means of acquainting the public with the commission’s programme. The result was the establishment of the A.B.C. Weekly. I do not know whether inefficient management has caused that publication to lose money in the first twelve months of its existence; hut I do know that some of the principal newspapers of Australia lost large sums when first published. That was so in the case of Consolidated Newspapers, the Women’s Weekly and the Daily Telegraph. My recollection is that the Women’s Weekly lost a colossal sum in its first twelve months, although it had a circulation of between 150,000 and 200,000. To-day its circulation is much greater. In the early life of a journal, when expenses are extraordinary and non-recurring, losses are likely. The A.B.O. Weekly has been published at a loss. I do not know whether those losses are greater than they should have been, but the mere fact of losses is not sufficient to condemn the Australian Broadcasting Commission. Prior to the last federal election, there was a drive against certain men in the political sphere. It was suggested that the right men had not always been selected, and there was a search for “ outstanding candidates “. Am “ outstanding candidate “ was found to contest the Wentworth electorate against Mr. Harrison. The newspaper magnates did not forget that he had opposed them. Apparently the wound that he had made was deep and had not healed. For the first week or two of the campaign, Mr. Harrison could not get any publicity in the Sydney newspapers ; but later the proprietors of those journals realized that they were doing him more good than harm by their action, and so they gave some little publicity to his remarks. The first blow against the “ outstanding candidate” was struck in an interview reported in Truth. It was found that he was a solicitor associated with Consolidated Press, and that his campaign director had been relieved of his duties with the Daily Telegraph in order to ensure that the “ outstanding candidate “ for Wentworth would be returned to Parliament instead of Mr. Harrison, who had sanctioned the establishment of the A. B.C. Weekly. However, the electors of Wentworth realized that the drive against the retiring member had its foundation in his advocacy of a journal on behalf of the Australian Broadcasting Commission, and they re-elected Mr. Harrison. When I first heard of this attack on the Australian Broadcasting Commission, I looked for the “nigger in the woodpile “. For some time there has been a press campaign of misrepresentation and distortion of the activities of the Australian Broadcasting .Commission. Any artist whom the commission had employed and put off, could be sure of space in the newspapers to attack the commission. On the experience of Great Britain and New Zealand, it is essential that the Australian Broadcasting Commission shall have its own journal. Big business and monopolies are ruthless in seeking their own ends, and it would be a sorry day if the commission did not have its own mouthpiece. I firmly believe that if the commission decided to cease publication of its journal, it would receive advertising space in the Sydney newspapers free, or at reduced rates. That arrangement would last for a time, until the journal ceased publication, after which the gun would be held to the head of the commission, as before.
– The journal is necessary if the commission is to have a chance to defend itself.
– That is so. This publication is in active competition with big business; it is the only unfettered organ of propaganda in Australia; it is not working for profit as are the B-class stations. Australia needs such an unfettered journal. The Melbourne Herald controls an extensive chain of radio stations, as also does the Sydney Sun which has big interests in the Macquarie network, and so are in active business competition with the Australian Broadcasting Commission. In the last few months, the programmes of the Australian Broadcasting Commission have improved greatly. I have mentioned the excellent programmes that Jim Davidson’s band renders for the benefit of listeners. The losses on the A.B.C. Weekly are decreasing, whilst its circulation is increasing. That is only natural, and the day will come soon when this publication will be self-supporting. But even were it to continue to be run at a loss, so long as that loss was not excessive, its publication would be worth while in order to ensure that the commission would continue to be independent of the newspapers whose code of honour is not of the highest standard. The Australian Broadcasting Commission is a government enterprise, and although I disagree with some aspects of its administration, I would not lift my voice to assist the Sydney press to injure it. I doubt the validity of the attacks against the commission, and the truth of some of the statements that have appeared in the press. I say definitely that if I can do anything to assist the commission against private enterprise, I shall be happy to do so. I trust that the A..B.C. Weekly will be retained as a bulwark against the power of the press.
.- The Treasurer (Mr. Fadden) in introducing his budget, providing for the expenditure of £150,000,000 from revenue, said that he had the unhappy distinction to introduce the largest budget ever brought before an Australian Parliament. His predecessor said the same thing when he introduced an earlier budget providing for an expenditure from revenue of £100,000,000. If this record be maintained, one wonders where the money will be found. The Opposition agrees that the money must be found if the war is to be prosecuted to a successful conclusion. We on this side are concerned with two features of the budget, the first of which is its disregard of the principle that taxes should be imposed according to the ability to pay. Secondly, it is essential that the money be expended economically, and with due consideration to the claims of all States. I listened with interest to Senator Spicer, who expressed some concern for the people on low incomes, but he did not suggest any method by which relief could be afforded to them. The honorable senator seemed pleased to relate that in Vic- toria there are only 10,000 unemployed. I shall look forward to the time when there will be no unemployed in Victoria or in any other part of the Commonwealth. The honorable senator did not give the reason why unemployment in Victoria has decreased.
– The same old parish pump, I suppose.
– Not at all. The reason for the relatively prosperous conditions in Victoria is that the Commonwealth Government is expending an unnecessarily large proportion of money appropriated for defence purposes in that State.
– Does not New South Wales provide all the coal, iron and steel used in Victoria? What of the employees in those industries?
– If all the coal, iron and steel supplies are in New South Wales, that it a good reason why there should be more factories in that State.
– Apparently the honorable senator wants all industries to be established in New South Wales.
– I am not suggesting that. Figures supplied in answer to a question asked by Senator Clothier show that for every three persons engaged in the manufacture of arms and munitions in government factories in Victoria, only one is employed in similar establishments in New South Wales. The actual figures given are: Now South Wales 6,368 males and 455 females; Victoria, 17,015 males and 4,335 females. The weekly wages bill in New South Wales is £41,93S, compared with £119,349 in Victoria. Those figures do not take into consideration the clothing factories, the subsidized aircraft manufacturing industry, and many other defence undertakings located in Victoria. Only a few weeks ago, the following paragraph appeared in the press : -
Many New Plants in Australia.
Constructional work on munition factories, costing £3,000,540, is proceeding in South Australia, Victoria, and New South Wales. This is part of a programme involving approximately £5,000,000, for which sketch plans have been completed during the past four months.
The Minister for the Interior, Senator Foll, said to-day that the munitions building programme was most extensive in South Australia, where work costing £2,329,540 had commenced. The assistance of seven firms of private architects and several consulting engineers had been secured to facilitate the programme. In Victoria, the current programme involved £607,000, and in New South Wales £304,000.
It can he seen that in addition to the preponderance of defence work which has already been undertaken in Victoria, the current programme for that State is more than double that of New South Wales. Recently the Premier of New South Wales, Mr. Mair, said that, although he had no desire to be parochial, he felt that a greater share of the war expenditure should be given to New South Wales. The figures given by the Minister for the Interior (Senator Foll) indicated that the number of persons employed on defence work in New South Wales was proportionately far less than the number employed in Victoria. New South Wales has experienced similar disadvantages with respect to the expenditure on internment camps. At the outbreak of war internment camps were constructed, but when Italy entered the conflict it was necessary to extend the camps. Whilst enemy aliens are undoubtedly undesirable citizens, there is no reason why such a large proportion of the expenditure on internment camps should have been incurred in Victoria. The figures show that of a total allocation of £443,356 for this work the expenditure in the various States lias been as follows: - Victoria, £233,611, two camps; Queensland, £3,150, one camp; South Australia, £62,233, one camp; Western Australia, £45,330, one camp; and New South Wales, £99,000, two camps. It will he seen that £233,611 has been expended on this work in Victoria compared with a total of £209,713 for all other States. I hope that the Minister will give the reason for the unfair allocation. The Government’s defence programme has undoubtedly been very beneficial to Victoria, and I regret that New South Wales, where there are 40,000 unemployed, has not been treated in the same generous way.
– That figure is a very conservative estimate. In the compilation of these statistics, only registered trade unionists are included, but many others are unemployed. If people who are debarred by the permissible income regulations from registration for sustenance work were taken into account, the number of unemployed in New South Wales would be nearer 60,000 than 40,000. People who have subsisted on sustenance for years find it impossible to get work. Defence contractors want efficient employees, and will not consider employing men broken in spirit and starved by the dole. Some of the defence work should be done ‘by day labour in order to give to the unemployed work which would enable them to rehabilitate themselves and take their rightful place in industry.
– What works would the honorable senator suggest?
– The construction of military and internment camps.
– That is work for skilled tradesmen, none of whom is unemployed.
– There is plenty of labouring work to he done. I contrast the position of the unemployed who have not done any military training with those who have spent three months in camp as universal trainees. Those in the latter class have returned to civil life with an entirely changed mental outlook. They have been well fed and well clad, whereas before going into camp they had to go to the police station for the dole. They can now seek work with renewed confidence. If those over military age are given the opportunity to work and live under decent conditions similar results will be achieved. I welcome the appointment of the Minister for Labour and National Service (Mr. Holt), who is doing good work. 1 hope that his activities will embrace the formulation of a system under which the unemployed will, through work, be given the opportunity to live a normal life.
– When 150 nien from New South Wales were required to train in Victoria for work at the Chullora aircraft factory under award conditions, weeks elapsed before the quota was filled.
– That is news to me.
– The offer was advertised in the press for weeks.
– Most of the unemployed that I know are not in a position to buy even a newspaper.
A striking example of the preference which this Government gives to Victoria in the allocation of defence expenditure is the decision to establish the Royal Australian Air Force bombing school at Lake Victoria, which, although situated on the northern bank of the Murray River, is so near to Victoria that it can be regarded as a Victorian activity. A survey was made of various towns in New South Wales, and Condobolin, near Lake Cargelligo, appeared to have reasonable prospects of selection. The authorities, however, rejected Lake Cargelligo, which is five miles long by three wide, has good depth and would appear to be eminently suitable for bomb target practice, on the ground that it was not quite large enough. I do not think that the possibilities of that lake were investigated sufficiently, because it has since been discovered that the area of water could be increased by connecting the lake with the Wyangala Dam. The policy of “ do it in Victoria or as close to Victoria as possible “ is in decided contrast to the policy of decentralization which was featured in the campaign speeches of the United Austra lia party and United Country party candidates at the last general elections. Representatives of the parties opposite invariably preach, but never practice, decentralization, notwithstanding the fact that decentralization of defence activities would give a fillip to country towns which are languishing owing to the enlistment of their young men. I am not convinced that Lake Cargelligo would not meet all the needs of the Royal Australian Air Force for bombing practice, and I appeal to the Government to carry out its pledge to decentralize its defence activities at least to the degree of giving to Condobolin the advantage that it would derive from having the bombing school established at Lake Cargelligo. I ask leave to continue my remarks at a later date.
Leave granted; debate adjourned.
Bill received from the House of Representatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator McBbide) read a first time.
.- I move-
That the bill be now read a second time.
This bill relates to the imposition of a war-time tax upon public companies. The Government gave exhaustive consideration to many proposals for the raising of the additional revenue required to meet war expenditure, and it was finally decided, in order to obtain from public companies that proportion of the additional revenue which should be contributed by them, to impose a tax upon the amount by which the profit of a company exceeds a specified percentage of the capital employed.
This measure differs considerably from the War-time Profits Tax Assessment Act which operated in 1914-18. That act applied to businesses of individuals and partnerships as well as to those of companies. It imposed a tax on the amount by which the profits of the war-time years exceeded a pre-war standard. Businesses which made large profits in pre-war years and continued to make them in the war-time years paid little or no tax, although there was no doubt as to their ability to make a special contribution to the war effort. “Reference has been made on several occasions to a report by the former Commissioner of Taxation in his seventh annual report, on the operation of the War-time Profits Tax Assessment Act. As the present measure represents a distinct departure from the principle of that act, the Commissioner’s report will bear repetition. He said -
The tax is unequal and harsh in its incidence. These features of it are due to its peculiar construction, which, as shown by the figures quoted, permitted escape from the tax of the vast majority of large and oldestablished businesses which have made consistently substantial profits, both in amount and in percentage on capital employed, whilst small and struggling businesses, particularly those which were commenced before or after the outbreak of the recent war, were obliged to pay relatively heavy amounts in tax. Many young businesses, however, find themselves in positions of technical difficulty, from which there was no relief for them under the law. Some of those businesses had clearly benefited by the war, though it was impossible to ascertain whether their prices had been reasonable or unreasonable. Others of the young businesses had clearly made profits, apart from war conditions, and would probably have made greater profits if the war had not occurred.
The war-time profits tax was levied at a high flat rate on the profits in excess of the pre-war standard. Over the whole period of its operation the tax yielded less than £8,000,000, and affected less than 2 per cent, of the businesses in the Commonwealth. Much adverse criticism was directed against the war-time profits tax by various bodies. In the light of experience this measure has been framed in such a manner as to avoid the complications of the war-time profits tax, and to spread the burden of the tax more equitably.
The bill relates to public companies only. Later, circumstances may render it necessary to extend its scope. The Government had good reasons for confining the measure at present to public companies. Many individuals are carrying on businesses the profits of which depend upon, the personal qualifications of the proprietor. Little or no capital is required in such businesses, and, therefore, it would not be . equitable if they were brought within the scope of a measure which bases liability upon the productivity of capital. A further point which justifies the exclusion of individuals is the fact that a careful analysis has revealed that the total taxes payable by an individual with a substantial taxable income are much greater than those payable by a company with the same taxable income. In fact, it has been demonstrated that the total taxes payable by an individual, with a considerable taxable income, will compare with the amount, payable by a public company employing the same capital and earning the same return even after the tax proposed under this measure has been added to the income taxes payable by the company. The extension of the tax to individuals would add considerably to the complexities of the measure and, consequently, to the cost of administration without very materially increasing the revenue.
Special provision is contained in the Income Tax Assessment Act for the taxation of private companies. Such companies are liable for ordinary income tax at the rate of 2s. in the £1 and, in addition, for tax on the whole of their undistributed income to the extent of the additional tax that would be payable by the shareholders if the income were distributed. Private companies are, in a sense, incorporated partnerships. Such companies are. already bearing a substantial burden by way of taxation, and the conclusion has been reached that the imposition of tax under this bill, on the profits of private companies, would not he justified at this stage.
The bill places all public companies, whether they are new or old established, on the same basis. The fact that a company made large profits prior to the war will not affect its liability to tax under this measure. Tax will be payable by a company on the amount by which the taxable profit exceeds the percentage standard, i.e., an amount equal to 8 per cent, of the capital employed. It is considered that a company whose taxable profit exceeds 8 per cent, is in a position to make a special contribution to the war effort without impairing its earning power.
The tax will be graduated according to the percentage which the amount of a company’s taxable profit in excess of the percentage standard bears to the capital employed. If such excess does not exceed 1 per cent, the rate of tax will be 4 per cent, of such excess. If the excess exceeds 1 per cent., but does not exceed 2 per cent, of the capital employed, the first 1 per cent, of the excess will be taxed at 4 per cent., and the remainder at 8 per cent., and so on. The rate increases in steps of 4 per cent, for each 1 per cent, of capital represented by the excess until the maximum rate of 60 per cent, is reached. The maximum is reached when the excess is greater than 14 per cent, of the capital employed, that is, when the taxable profit is in excess of 22 per cent, of the capital employed. This maximum rate will apply to the whole of that portion of the taxable profit which exceeds 22 per cent, of the capital employed.
One objection to the war-time profits tax was that the heavy flat rate discouraged enterprise and encouraged extravagance. The graduated rate overcomes this objection. A company affected by the measure will be free from tax on profits up to 8 per cent, of capital, and will also be able to retain a substantial part of its profits in excess of S per cent. The economic effect of the tax was carefully considered. The Government is satisfied that the tax will not press harshly on those public companies which show a reasonable return on their capital. In those cases in which the return on capital is high, the tax will, of course, be more severe; but such companies should, in time of war, be expected to contribute the larger proportion of the amount to be raised by a tax of this kind.
It is realized that in a measure such as this the most complex problem is that of the ascertainment of capital employed by a company. In this connexion an endeavour has been made to remedy the defects of the War-time Profits Tax Assessment Act. The ascertainment of capital is of vital importance, because the relation of profits to capital determines the degree to which a company is liable. Briefly, the capital employed might be stated as the amount paid up in money, or other valuable consideration, plus accumulated profits. Accumulated profits will include reserves created out of profits. Every justification exists for treating accumulated profits as part of the capital employed. The paid-up capital represents merely what the shareholders contribute in the first instance, whilst the accumulated profits represent past profits which they have not withdrawn and utilized in personal expenditure, or in other forms of investment. These funds are represented by assets of the company with which it earns its income. They are shareholders’ funds which are just as much at stake in the enterprise as is the paid-up capital itself.
It is possible that some companies have created reserves through the writing up of the value of assets, and have used such reserves in order to enable them to issue bonus shares to their shareholders. If, in the ascertainment of capital employed by such companies, the assets were taken into account at their written-up values, those companies would receive an advantage over other companies. This position was foreseen, and, consequently, provision is contained in the hill for adjustment of the value of assets. If the assets are those in respect of which depreciation is allowed for income tax purposes, the value for purposes of capital will be the depreciated value of such assets as determined for income tax purposes. Any other assets which are purchased by the company will he taken into account at cost. If the assets consist of goodwill, secret processes, copyrights or patents, and have not been purchased, such assets will not be regarded as having any value whatever in the ascertainment of capital. A reserve created out of premiums received on the issue of shares will be treated as capital.
In the case of life assurance companies which are not wholly mutual, it is proposed to treat .as capital the amount, if any, by which the reserve for liabilities exceeds the amount ascertained as the “ calculated liabilities “ under the Income Tax Assessment Act. For income tax purposes these companies are allowed a. deduction of 4 per centum of the calculated liabilities. The calculated liabilities are ascertained, in accordance with a method prescribed in the Income Tax Assessment Act, on the basis of the actuarial valuation, and it is not unreasonable to regard the excess of the reserve over the calculated liabilities as part of the capital. The bill /provides for an increase of the capital of an insurance company carrying on insurance ‘business, other than life assurance.
Many companies carrying on insurance business in Australia re-insure risks with companies outside Australia. The income tax law .provides that they shall be allowed no deduction in respect of the premiums they pay over to the absentee companies for this re-insurance. Thus, in effect, their taxable income includes not only their own profits, but also the profits made on their business by the absentee companies with which they re-insure. The Government recognizes that it would be unfair to relate the total taxable profit to the capital of the local company, because the percentage would be inflated by the inclusion in the taxable profit of the re-insurance premiums paid out. It has been decided, therefore, to provide a prorata increase of the capital in order to remedy this position. Any capital, the income from which is not taken into account in assessing the income under the Income Tax Assessment Act, will be excluded in ascertaining the amount of capital employed, as will also any capital invested in shareholdings in any other company.
In the provisions of the bill relating to the ascertainment of the taxable profits, an endeavour has been made to adhere as closely as possible to the taxable income as assessed for income tax purposes. The taxable income will be the basic figure for the ascertainment of the taxable profit, and from that figure will be deducted the Commonwealth income tax payable in respect of the taxable income and so much of any dividends received by the company as is included in such taxable income. The provision for the deduction of dividends received from other companies has been inserted in order to avoid the double taxation which would otherwise arise, and in order to tax company profits once and for all in the hands of the company that makes them without regard to their receipt by other companies in the form of dividends.
State income tax paid during the accounting period will already have been allowed in the ascertainment of the tax- able income. In this connexion, however, a new company would be at a disadvantage compared with established companies in that in its first accounting period no State income tax would have been paid by the former, although provision would have to be made out of the profits for that tax. The bill contains provision for the deduction, in the case of the first accounting period, which is also the first year of income of the company for the purpose of income tax of any State taxes payable by the company on the income derived during that accounting period.
It is not necessary to provide specifically for the allowance of losses incurred in prior years, as such losses within the preceding four years are allowed for income tax purposes, and, therefore, would have been taken into account ‘before arriving at the taxable profit for the purposes of this measure.
The Government recognizes that the statutory percentage provided in the bill will not be sufficiently high for some classes of business. . The degree of risk incurred, or some factor peculiar to certain classes of business, may render it essential that a higher statutory percentage be allowed. It is not possible to make provision in a measure of this kind to meet the circumstances of every case. Therefore, provision is made in the bill for the appointment of an independent Board of Referees to consider cases in which it is claimed that, owing to some unavoidable condition associated with a particular class of business, it is just that a higher statutory percentage be prescribed in respect of that class of business. It is also proposed to empower the Board to deal with applications for a higher statutory percentage in cases in which the taxable profit is rendered abnormally large by the inclusion therein of profit which has relation to a period greater than the accounting period. The board of referees will also have authority to determine the amount of capital employed in those cases in which it is claimed that the capital, as ascertained in accordance with the act, does not represent the true capital.
The bill provides for the averaging of the taxable profits of the accounting period, and of the four immediately preceding accounting periods in the case.0 a company which is a primary producer, for the purpose of determining the rate of tax payable by such a company. This principle is consistent with that contained in the Income Tax Assessment Act. The income of a primary producer fluctuates according to seasonal conditions and it would not be fair to tax a company carrying on that class of business on the excess profits of a good year following several years of drought, at the rate of tax attributable to the actual taxable profit of that year. If the average taxable profit is not greater than 8 per cent. of the capital employed, no tax will be payable. If the average is greater than 8 per cent., the amount by which the actual taxable profit of the accounting period exceeds the percentage standard it will be taxed at the rate applicable to the excess of the average taxable profit.
A company, the taxable profit of which includes a net premium in respect of a lease, may elect to have the rate of tax determinedby reference to a deemed taxable profit. This will represent an amount which would be the taxable profit if the net premium were spread over the term of the lease. The principle is similar to that contained in the Income Tax Assessment Act, which provides for the ascertainment of the rate of tax by reference to a notional income.
The bill contains provision under which a holding company may elect to have its subsidiaries treated as branches of the holding company. The election is irrevocable without the consent of the Commissioner. If an election be not made, the taxable profits of each subsidiary company will Be separately assessed. In the event of a holding company, which has elected to have its subsidiaries treated as branches, failing to pay the tax assessed within the time prescribed, or within such further time as the Commissioner may allow, the election may be treated as void, and in that event a separate assessment will be made in respect of each subsidiary.
A feature of the proposed tax is that it will be linked as closely as possible with Commonwealth income tax. Companies will not, except in special cases, be called upon to furnish additional returns as returns furnished by them for income tax purposes will contain most of the information required for the purposes of this measure. In view of this, the delays in assessment which occurred under the War-time Profits Tax Assessment Act will be obviated, and the administration of the measure will be facilitated. In any case where a company, liable for tax under this measure, pays its preference shareholders a dividend ata rate in excess of the statutory percentage i.t may deduct from the dividend the amount of tax attributable to the excess. This provision will prevent the whole burden of the tax falling on the funds available for ordinary shareholders in such cases.
Any legislation imposing taxes on income should have regard to ability to pay. It is considered that this principle is embodied in the proposed measure. It is also considered that the bill will not have any serious effect upon dividends. Any form of tax levied upon companies will, of course, diminish the distributable pool of profits. A careful analysis indicates that the majority of investors in shareholdings have their interests in what might be termed safe investment companies, which, as a general rule, do not make profits in excess of 8 per cent. of their capital. In those cases where dividends were paid at a particularly high rate, the tax will, no doubt, result in a reduced, but still high, rate of dividend being paid in future.
These remarks will serve to give a general outline of the intention and scope of the bill. It is not proposed to deal with further details of the measure art this stage, as these may be considered in committee.
Debate (on motion by Senator Collings) adjourned.
Bill received from the House of Representatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator McBbide) read a first time.
Senator McBRIDE (South Australia -
Minister for Supply and Development) [10.35]. - I move-
That the bill be now read a second time.
This measure sets out the rates of tax which it is proposed to apply to the amount by which the taxable profit of a company exceeds the percentage standard. The percentage standard will be an amount equal to8 per cent. of the capital employed, unless, owing to special circumstances, that percentage is increased.
It will be noted that the rate of tax proposed in the case of a company which is not a primary producer, or a company the income of which includes a premium in respect of a lease, is a graduated one, commencing at 4 per cent. on the first one per cent. of capital employed by which the taxable profit exceeds the percentage standard. The rate applicable to the second one per cent. on capital employed by which the taxable profit exceeds the percentage standard is8 per cent. The rate increases progressively in steps of 4 per cent. on each one per cent. of capital by which the taxable profit exceeds the percentage standard until the maximum rate of 60 per cent. is reached. The maximum rate is reached when the taxable profit is more than twenty-two per cent. of the capital employed. This is the effect of the rates specified in the bill as applicable to companies which are not primary producers.
The table in the bill sets out in the simplest and shortest form the rates of tax applicable to companies whose excess of taxable profit over the percentage standard comprises more than one per centum of the capital employed. The rates of tax upon all percentages except the last have been expressed in the form of an average rate. This is the rate which appears in the third column of the table. In order more clearly to illustrate the point, let it be assumed that the excess of the taxable profit over the percentage standard exceeds 2 per cent. of the capital employed but is not greater than 3 per cent. The average rate for the first 2 per cent.is shown as 6 per cent. in the third column of the table. This represents the average of 4 per cent. which applies to the first one per cent. and 8 per cent. which applies to the second. This procedure has been followed down through the succeeding grades. Any other method would be complicated and would be difficult to express.
The rate to be applied to the excess of taxable profit in the case of a primary producer is that which would be applicable to the amount by which the average taxable profit of the accounting period and the four preceding accounting periods exceeds the percentage standard. This method is in accordance with the principles of the Income Tax Act.
Where the income of a company includes a net premium received in respect of a lease, the company may elect, for the purpose of ascertaining the rate of tax to have the net premium spread over the term of the lease. The rate of tax applicable would therefore be that which would apply if the taxable profit included, in respect of the premium, only that proportion attributable to the accounting period. This method is consistent with the principle adopted for income tax purposes.
Debate (on motion by Senator Collings) adjourned.
Bill received from the House of Representatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator McBride) read a first time.
Senator McBRIDE (South Australia-
Minister for Supply and Development) [10.39],- I move-
That the bill be now read a second time.
This is one of the machinery measures designed principally to give effect to certain of the Government’s taxation proposals to finance the wartime expenditure to which the Commonwealth is committed. The principle features of the bill are, first, the proposal to extend the income tax field by lowering the statutory exemption, and, secondly, the institution of a new system of collection of Commonwealth income taxby deductions from salaries and wages and other earnings of a like nature.
The amendment that most deeply affects the taxpaying community is the proposed reduction of the statutory exemption from £250 to £200. The purpose for which a statutory exemption from income tax is granted is to ensure that no member of the community shall be obliged to pay income tax unless his income is sufficiently large to justify a direct contribution by him to revenue. The amount of income upon which a statutory exemption should he based has proved to be a subject on which there is considerable controversy. The main factors that weigh in determining the amount of the concessional allowance are the ability of the citizen to bear some burden of direct taxation and the revenue that must be raised by means of income tax.
For many years the statutory exemption has been maintained at the comparatively high level of £250, and this exemption, combined with other concessional personal allowances, has resulted in relieving a considerable section of the income earning people of Australia from making any contribution to Commonwealth revenue in the form of income tax. As a consequence of the allowance of the statutory exemption and other liberal concessional deductions, an almost negligible amount of Commonwealth income tax has been payable on 70 per cent, of the total personal incomes in Australia. This means that approximately SO per cent, of families in this country have been practically freed from Commonwealth income tax.
Honorable senators are aware of the Government’s proposal to raise an amount of £30,500,000 in a full year by means of income tax from individuals. This is part of the Government’s plan to finance the enormous obligations that have been thrust on the people of Australia by the war. When additional income tax is being imposed, the natural tendency is to seek to place the bulk of the increased load, if possible, on the shoulders of the wealthier sections of the community. An examination of the capacity of higher incomes to pay additional tax has revealed, however, that incomes in excess of £1,000 cannot at this juncture be called upon to carry a greater burden than £20,000,000. In the middle ranges of income between £400 and £1,000 the income tax saturation point will almost have been reached by the extraction from that group of Commonwealth income tax aggregating £S,000,000.
The Government has accordingly found it to be necessary to seek some contribution in the form of income tax from the lower income group of £400 and under. This lower income group comprises £517,000,000 out of a total of personal incomes amounting to £745,000,000, or 70 per cent, of the total personal incomes in this country. From the total of £517,000,000 the Government proposes to take in income tax the amount of £2,500,000 or approximately one-half per centum of the total personal incomes in the lower group. In order to do this, it is unavoidable that the statutory exemption should be reduced to £200 from its present level of £250. The Government has been reluctant to adopt this course and has done so only after serious consideration has been given to the incidence of direct taxation on the various classes of the taxpaying community. The Government has been forced to the view that, if the necessary finance is to be obtained to place our war effort on a proper footing, some direct contribution must be made by citizens in the lower income group.
In entering the field of lower incomes, care has been exercised to ensure that there will be no serious encroachment on the living standards of the people, or any undue hardship in requiring the payment of some small measure of income tax out of the smaller incomes. Simultaneously with the lowering of the statutory exemption by £50, a concessional allowance of £50 is being provided for those taxpayers who are wholly maintaining dependent mothers. This concession will remove any possible hardship that might result from the lowering of the statutory exemption in those cases where taxpayers are subject to the expense of maintenance of their dependent mothers.
With the object in view of facilitating payment of income tax by spreading the burden over a long period, the Government proposes to institute a system of collection of tax instalments from salaries and wages and earnings of that nature. I shall explain the working of this plan at a later stage.
Included in the provisions in this bill is an amendment which withdraw:, from individual shareholders the rebate of tax allowed to them on dividends included in their taxable incomes. The rebate of tax at present allowed is based on the shareholders rate on property income or on the company rate whichever is the less. The tax rebate has been allowed on dividends on the ground that the profits which a company earns are in reality the profits of its shareholders, and that the allowance of the rebate is necessary to avoid double taxation that would be involved in the assessment of the company on its profits and the assessment of the shareholders on dividends paid out of those taxed profits. The doctrine that double taxation is involved in the taxation of company profits and of dividends paid out of those profits is open to challenge, but, whatever soundness is possessed by the principle, the Government has decided, as part of its plan for war-time finance, that the concessional rebate of tax should be withdrawn in the case of individual shareholders. The withdrawal of the rebate from individual shareholders will result in an addition to revenue of £1,700,000 for this financial year.
The rebate is being retained in respect of dividends received by resident companies from other companies. The reason for the retention of the rebate for application to holding companies is that those companies are merely intermediaries between the profit-earning companies and the individual shareholders to whom the profits are ultimately distributed. The assessment of a holding company on the dividends it receives without the allowance of a corresponding rebate of tax would impose an unfair burden on investors in holding companies. While the tax rebate is being retained in respect of dividends distributed to holding companies, the law is being amended to correct an anomaly that has arisen in relation to the rebate of tax allowed on dividends paid out of Commonwealth consolidated loan interest. By virtue of the provisions of section 45 of the Income Assessment Act, the portion of a dividend paid by a company out of consolidated loan interest is taxed in the hands of a recipient company at the rate of 16d. in the £1, and carries a rebate of tax at the rate of 2s. in the £1, resulting in a loss to revenue of Sd. in the £1. This anomaly is being removed from the law. Provision has also been made in the bill to allow a rebate of super-tax to holding companies in order to avoid a duplication of the imposition of super -tax.
Honorable senators are aware that companies, with some exceptions - principally private companies - will be liable to wartime company tax or a super-tax of ls. in the £1 on taxable income in excess of £5,000, whichever amount is the greater. As part of this plan of taxation, a super-tax will be imposed by the income tax rates bill. Companies to which the provisions of the war-time company tax are applicable will be liable to pay this super-tax at the same time as their ordinary income tax is paid. A separate assessment under the War-time (Company) Tax Assessment Act will he made in respect of any excess of the war-time company tax over the super-tax. The levying of the super-tax on operating companies necessitates an adjustment when dividends are distributed to holding companies out of profits which have been subject to super-tax. If the holding companies were subjected to the super-tax on the dividends they receive, there would be a double loading of the super-tax - first, in the hands of the operating company and, secondly, on the dividends distributed to the holding company out of those taxed profits. A rebate provision incorporated in the bill will avoid this duplication in the imposition of the super-tax.
A further important amendment, which is to be effected by the hill, is an alteration of the basis on which the undistributed profits of public companies are taxed. When this tax was enacted in May last, provision was made for the allowance of a deduction of 25 per cunt, of the profits of a company after certain adjustments had been made. The deduction of 25 per cent, of profits was allowed for the reason that, as a general rule, a reservation of company profits is necessary in order to provide for contingencies for the development of businesses and to cover expenditure which is not deductible for income tax purposes. The Government has. reviewed the allowance and has decided that, at the present time, the concession is not warranted. Reserved profits of a company will not be disturbed to any appreciable extent by the payment of an undistributed profits tax, so that the allowance of a 25 per cent, reservation of profits free from undistributed profits tax is not necessary. A similar concession, now granted to private companies, is also being withdrawn.
Amongst the deductions allowable in calculating the undistributed profits tax, is the amount of dividends paid out of taxable income within six months after the close of the year of income. The Government has given consideration to the delaying effect that the disturbed world conditions, particularly in the United Kingdom, have had upon the declaration of dividends. It is considered that the statutory period of six months within which the dividends must be distributed in order to qualify for the deduction is unreasonably short in the case of nonresident companies, and the period is accordingly being extended to nine months.
A further amendment contained in this bill rectifies a defect in section 122 of the principal act which provides for the allowance of a deduction of capital expenditure on plant and the development of mining properties. This provision in the law was designed to allow to mining enterprises a recoupment over the life of the mine of the capital expended in plant and the development of the mining property. The provision has been found in its practical application to be defective in that the deduction allowed does not amount to a full recoupment of capital expenditure. The amendment now proposed will remedy this defect.
The bill also includes an amendment to place a time limitation upon applications for rebates of tax where income is subjected to double or treble taxation in the United Kingdom, the Commonwealth and the States. At present, application for these rebates may be made in respect of assessments as far back as 1921. A limitation of six years on the allowance of these rebates is proposed. The period of six years will afford reasonable time in which applications for the rebates may be made, and will remove the unreasonable burden at present placed upon the Taxation Department of attempting to calculate rebates in respect of assessments that were made more than six years ago. This proposal corresponds with provisions in the United Kingdom law placing a similar limitation on allowances of dominion income tax relief.
I now turn to the provision in the bill for the collection of income tax payable on salaries, wages and earnings of that nature. The basis of this arrangement is that payment of income tax will be made by instalment deductions from the remuneration payable to employees, either by means of the purchase by the employer of tax instalment stamps, or by means of cash instalment deductions under approved group schemes. This method of collection of income tax is not new to Australia, as it has been employed successfully in Victoria, South Australia^ Western Australia and Tasmania for purposes of State taxation. The deductions which will commence as from 1st January next will be applied in payment of the tax that will be payable on income derived during the financial year ended the 30th J une last. There will be prescribed rates of deductions varying from 6d. to 5s. in the £1, according to the amount of remuneration of the employee, and varying also with the domestic responsibilities of the taxpayer. In effect, these deductions will be prescribed on a scale which will approximately meet the tax payable by instalments spread over the period from January to June next. In subsequent years the deductions will be made from August to May in each financial year. Flexibility will be provided in the scale of instalments to meet the case of employees with dependants, in order to ensure that the deduction to be made will be appropriate to the amount of tax payable by them.
Provision is also contained in the bill to obviate the deduction of instalments in cases in which no tax is payable, and to cause a cessation of deductions when the instalments have reached the amount of tax payable. The machinery provided for this purpose will be in the form of exemption certificates which will be issued by the Taxation Department authorizing the employer to refrain from making further deductions from the remuneration of the employee. Two methods will be employed in the collection of taxes by instalments, namely, bymeans of stamps and, alternatively, under approved group schemes. Under the stamp system, the employer will be required to hand to the employee a stamp, or stamps, of a value equivalent to the deduction which has been made from the employee’s salary or wages. The employee, in turn, will be required to affix the stamps which he receives in a stamp book, and cancel them. The cancelled stamps will be retained by the employee for production at the Taxation Department in payment, or part payment, of his assessment. After receipt of the notice of assessment, cash adjustment will be made either by the employee paying to the department the excess of the assessed tax over the value of stamps held by him, or by the department making to the employee a cash refund of the excess of the stamp value over the assessed tax.
The alternative method of collection of tax by means of approved group schemes is primarily designed to meet the convenience of employers and employees in large businesses and other organizations. These employers may, with the concurrence of their employees, obtain the sanction of the Taxation Commissioner to the formation of a group. The employers, instead of handing stamps to the employees, will pay to the Taxation Department the aggregate of the deductions which have been made from the salaries and wages of the employees. In place of the stamps which would otherwise be received by the employee, a certificate will be issued by the employer specifying the total of the deductions that have been made from salary or wages in respect of the tax. On receipt, of the notice of assessment, cash adjustments for over- or under-payment will be made as in the case of stamps. It will be within the power of the commissioner to cause the group system to be used in lieu of the stamp system in cases in which it appears desirable to do so. The use of tax instalment stamps may be voluntarily employed by taxpayers who are not embraced within the provisions for compulsory deductions from salaries and wages- The voluntary purchase of tax instalment stamps will enable taxpayers gradually to meet the payment of tax over a period, and thereby minimize the disturbance to their finances that might be caused in meeting the assessment by payment in a lump sum. Safeguards for the operation of the scheme are provided by heavy penalties for trafficking in stamps and for forging or uttering counterfeit stamps. The Commonwealth scheme for the collection of tax by instalments has been adopted after an exhaustive examination of the rival merits of comparable systems in operation in the States. The Commonwealth scheme corresponds with the systems inaugurated in Victoria and South Australia many years ago, and adopte’d by Western Australia and Tasmania for application as from July last. In these four States the introduction of the Commonwealth scheme can be effected most conveniently for employers, employees and the revenue authorities. In New South Wales and Queensland, the system of collection at the source is different from that which is now being adopted for Commonwealth purposes. Accordingly, in those two States the Commonwealth scheme will be operated independently of the State system, although both the Commonwealth and State systems will be administered by one taxation department.
The fundamental difference between the New South Wales and Queensland system and that in operation in the other States is that New South Wales and Queensland have adopted the principle of taxation at the source in respect of the current year’s income, whereas the collections in the other States are applied in payment of assessments based on income of the year immediately preceding the year of collection. Further marked differences are that the collections in New South Wales and Queensland make no complete recognition of the domestic responsibilities of taxpayers, and the collections are levied at rates applicable to regular and irregular earnings alike. There is in those two States no adjustment on annual assessment for under and over payments so that the taxation bears unevenly on the salary and wage earning section of the community.
The practice followed in New South Wales and Queensland is not in consonance with the views expressed by two royal commissions on taxation. Both the 1921 and 1934 commissions gave full support to the principle that taxation of salaries and wages at the source should provide for adjustments of under and over payments, on the ascertainment of the total tax payable, based on the annual amount of income.
The Government has carefully weighed the merits and advantages of the rival systems in operation in the States, and has decided to adopt the system employed in the four States, other than New South Wales and Queensland. The system now proposed for adoption by the Commonwealth has the support of a conference of expert taxation officers.
The present administration of the income tax acts will suffer no disturbance by reason of the adoption of the proposed scheme. It will be part of the machinery of the scheme, however, that the States, acting under agreements with the Commonwealth, will operate the scheme on behalf of the Commonwealth.
In those States where the instalment tax stamp is employed, the opportunity will be taken to use one joint stamp for both Commonwealth and State purposes; the tax collections to be appropriated in due proportions to the Commonwealth and the State.
The operation of the scheme generally will be facilitated by a provision in the amending bil] for the payment of the tax not less than 30 days after service of the notice of assessment in lieu of the 60 days at present allowed. This will enable the same due date to be fixed for payment of both Commonwealth and State taxes in those States where the system of collection corresponds with the Commonwealth system.
The present term of 60 days for payment will be preserved for taxpayers in New SouthWales and Queensland, and for all taxpayers in the Commonwealth who do not come within the provisions of the scheme. The additional taxes payable by private companies and the further tax payable by public companies will, however, be payable 30 days after service of the assessment notices.
I am confident that the new system that is being instituted by the Commonwealth for the collection of tax at the source will prove to be to the advantage of salary and wage earners and to the government income.
Investigations that have been made reveal that taxpayers generally prefer to pay income tax by instalments spread over a period, and so avoid the dislocation of their personal finances occasioned by payment of an annual assessment for which provision has not been made. The advantages of the instalment plan become more marked when war-time conditions heavily increase the burden of income tax.
The revenue will derive the advantage of an earlier and more regular flow of income taxes instead of heavy collections towards the end of the financial year.
I commend the bill to honorable senators.
Debate (on motion by Senator Collings) adjourned.
Bill received from the House of Representatives.
Standing and Sessional Orders suspended.
Bill (on motion by Senator McBride) read a first time.
– I move -
That the bill be now read a second time.
In introducing this bill, I warn honorable senators at the outset that a heavy increase of income tax is proposed. The necessity for a large increase is obvious. We are at war with a ruthless enemy whose avowed objects are the destruction of democracy, and the imposition of a form of government utterly repugnant to a free people. We are providing for our defence against this menace and have now to meet the huge expenditure involved. Financing a war, especially one of the magnitude of the present conflict, is a difficult problem. Sound finance is as important as adequate supplies of armaments, and in any programme of sound finance taxation must figure largely.
If honorable senators approve the Government’s proposals to prosecute the war with the utmost energy, they will, I am sure, support its taxation proposals. Throughout the Empire taxation, particularly income tax, has been greatly increased since the outbreak of war. The already heavy burden on the British taxpayer has been weighted still further by raising the standard rate to Ss. 6d. in the £1, by the extension of the sur- tax to lower incomes and by the reduction of personal allowances. In New Zealand the people have submitted to a new scale of severe basic rates, a sur-tax of 15 per cent., and a flat levy of ls. in the £1 on the gross amount of all incomes.
Under this bill a greatly increased burden will be placed on the wealthy sections of the community. That is as it should be, but when honorable senators have studied the figures I believe that they will agree that additional revenue must be obtained from other sections.
Personal incomes available for taxation amount to approximately £745,000,000, but of that total only about £85,000,000, or 11 per cent., represents incomes of more than £1,000 annually. Incomes of from £400 to £1,000 amount to £143,000,000, or 19 per cent., whilst those less than £400 total £517,000,000, or 70 per cent, of the total.
State taxation, which makes big inroads into high incomes, varies in the different States, but the limit of Commonwealth taxation on high incomes is governed by Hie rate in the State in which the highest tax is imposed.
In the interests of sound finance additional revenue must be raised by means of income taxes. The whole of the amount required cannot be collected from persons already paying income tax without placing an intolerable burden upon them. Therefore, the Government has been forced to lower the statutory exemption which will affect a great many persons who for the first time will be brought within the taxable field.
Hitherto incomes of less than £400 a year have contributed about £100,000 annually. Based on the rates enacted in May last it is expected that that amount will be increased to about £200,000, and largely as a result of the widening of the field, those incomes will now be asked to contribute £2,500,000. That amount, however, will be spread over a very wide field. The new rates are designed to produce £35,000,000, of which £20,000,000 will come from incomes over £1,000. That figure should be compared with £6,200,000 under the 1939-40 scale, and £9,800,000 .under the present scale. The contributions of those whose incomes are between £400 and £1,000 will .be raised from £1,300,000 and £2,000,000 to £8,000,000 under the proposed rates. The burden on salary and wage-earners will be eased considerably by a scheme of payment at the source” which is being introduced. Tables have been circulated showing the taxes payable on specified incomes in Australia and in New Zealand. It will he noticed that, generally speaking, the New Zealand taxpayer has to pay more than the Australian taxpayer. For example a taxpayer in New Zealand with a dependent wife and one child, with an earned income of £300, pays £30. Whereas i(n Australia under the new scale, a similar person will not be liable to pay Commonwealth income tax, and will pay in States taxes about £11. On an income of £350 a taxpayer in New Zealand pays £42; whereas in Australia a person with similar responsibilities will pay from £12 to £20.
I now turn to consider the various clauses and schedules of the hill, taking first the provisions relating to the personal exertion rates.
Sub-clause 1 of clause 6, as amplified by the first schedule, provides for a scale of rates of tax on personal exertion income. These rates represent a large increase on the rates enacted in May last. The Government does not propose to remove from the taxpayer the benefit of the concessional deductions for dependants, insurance, medical expenses and so on. In fact, the field of concessional deductions has been widened to allow a deduction of £50 in the case of a dependent mother wholly maintained by the taxpayer. Consequently, the taxpayer will not feel the full weight of the minimum rate until the income reaches a fairly high level. If, for instance, he be a married man with one child, that level is somewhat above £500 ; if he be a single man without dependants, it is not less than £400.
The proposed scale rises steeply and reaches 5s. in the £1 on a taxable income of £1,500. The excess over that amount will be taxed at a flat rate of 10s. in the £1. It is necessary to reduce the rate of increase as incomes rise in order that the tax shall not reach 20s. in the £1.
At the new rates, taxpayers in the highest-taxed .State will pay amounts of
Commonwealth tax roughly comparable with their State taxes, except in the lowest and highest ranges, where the State taxes are substantially higher than the Commonwealth. In most cases residents of the lowest-taxed States will find that their Commonwealth tax is considerably greater than their State tax.
The rates of tax on property income are provided in sub-clause 2 of clause 6 and the second schedule to the bill. The minimum rate applies to taxable incomes up to £400, beyond which point the rate so increases as to reach 5s. in the £1 at £1,200. The excess of the taxable income over £1,200 is subjected to a flat rate of 10s. in the £1.
The loading of the property rates when compared with the personal exertion rates remains substantial until the high incomes are reached. The difference then diminishes as incomes rise. When the rates for 1940-41 were adopted, it was recognized that in the higher personal exertion ranges, there was an increasing element of property, and for that reason, the two scales were tapered at the top. The same principle has been observed here. In fact, the proposed property scale has been designed on the same general principles as in the scale adopted in May. The personal exertion scale has first been determined on the basis of ability to pay, and the property rate has been derived from itby increasing by 25 per cent. the rates up to £1,200.
The rates applicable to companies are contained in sub-clause 8 of clause 6, clause 7, and the seventh schedule. In May last a tax similar to the longestablished tax on the undistributed profits of private companies was imposed on the undistributed profits of public companies. The provisions relating to that tax have not yet been applied. The rate of tax prescribed was1s., but the increase of individual rates has made an increase of that rate inevitable. It will be appreciated that if the shareholder were taxed at a high rate and the company at a relatively low rate, the shareholder might be tempted to avoid tax by the simple expedient of leaving his profits in the company. The hill, therefore, provides for a rate of 2s. in the £1 on the undistributed profits of public companies.
The committee which was appointed to discuss the war-time company tax recommended -
Cite as: Australia, Senate, Debates, 12 December 1940, viewed 22 October 2017, <http://historichansard.net/senate/1940/19401212_senate_16_165/>.