to the mother and not to the wage earner, in many cases by the equalisation fund and not by the employer, and that they may be maintained during periods of unemployment or sickness of the worker. The workers' organisations, on the other hand, have continued to regard the allowances paid by the employers, whether directly or through equalisation funds, as part of their remuneration for labour, and maintain that if the allowance is in no way connected with the wage, but is a matter of social justice, then it should be paid, not by the employer but by the community as a whole. The idea of distinguishing the allowance from the wage does not appear to have been discussed to any great extent in Germany and other countries in Central Europe, the allowance being generally paid with the wage and regarded as part of the remuneration of the worker.

In Australia, the workers' organisations favour the payment of family allowances by the community as a whole to those with large families, but adopt the policy of endeavouring to secure for all workers a wage adequate for a family of average size. Many Australian employers are opposed to the system, believing that its application would result in an increase in the total wages bill. J. H. RICHARDSON

Geneva,

July 15, 1924.

1 The question as to whether or not the allowance should be regarded as part of the wage is of importance in fixing the indemnities for victims of industrial accidents. The tendency of the courts in France appears to be, for this purpose, to regard the allowance as part of the wage.

SOME PROBLEMS OF TAXATION IN AUSTRALIA

I. Need for Review of Taxation

FEDERATION in Australia was not achieved without misgivings regarding the future powers of the member States. There was much opposition to proposals calculated to reduce the taxing powers of the colonies; yet it was impossible to restrict the taxing power of the Commonwealth. Believing that "no Commonwealth can exist without possessing unlimited powers of taxation," as a delegate to the 1891 Convention declared, the founders of our Constitution gave the Commonwealth Parliament unlimited powers to make laws with respect to taxation, provided there was no discrimination between States or parts of a State.1 At the time it was thought that indirect taxation through customs and excise would yield much more revenue than would be required by Federal authority, and by the famous Braddon clause (87 of the Constitution) it was provided that only one-fourth of the revenue from customs should be retained by the Commonwealth, the balance being paid over to the States. This was to continue for ten years and thereafter until Parliament determined otherwise.

In this way it was hoped that the revenue of the States would not be unduly disturbed and there was little thought of the Commonwealth levying direct taxation. But time and circumstance and the centripetal tendency of Government have altered the situation beyond recognition. By 1910 the Federal Government, despite increases in the tariff, was finding the arrangement inconvenient and Parliament reviewed it. For the succeeding ten years and until Parliament decided otherwise the States were to receive 25s. per head of the population from the Commonwealth. In the same year the Labour Government introduced land taxation with a double object of providing revenue and breaking up the large estates. This committed the Commonwealth to direct 2 taxation, and on the outbreak of war

1 Throughout this article "State" refers to the six members of the Commonwealth of Australia originally independent colonies.

2 It may be argued that the land tax is not strictly a direct tax in that the whole incidence does not fall upon the landowner. In general it is very difficult to classify taxes into two well-defined groups, and the widespread assumption that State taxation is wholly direct is not quite correct. For example, a State entertainments tax is clearly indirect. But in general the State taxes are largely direct, while the main forms of indirect taxation levied by the Commonwealth are customs and excise duties. All other taxes will be regarded as direct, and the words "direct" and "indirect" are used throughout this article in this sense.

further steps were taken. Succession duties were introduced in 1914, a Federal income tax levied in 1915, and later a war-time profits tax and an entertainments tax. These measures were somewhat hastily devised to meet a pressing situation, and during the war there was little serious criticism of the financial policy of the Federal Government. But the situation was embarrassing to the States, there was much duplication of activities and many inconsistencies, and the steady increase in both State and Federal taxation brought to light grave blemishes in the taxation system of the country.2 Up to 1919 the Government had made some efforts to come to an understanding through conferences on at least five occasions of Premiers and Treasurers and taxation officers, and an agreement with respect to the collection of taxes had been entered into between the Federal Government and Western Australia. It was all mere patchwork, and nothing less than a complete review of the whole problem would suffice. Hence the appointment in September 1920 by the Federal Government of a Royal Commission. The Commissioners chosen were representative of the commercial, farming and labour interests, and though some were recognised as close students of economics and had carried out social and economic investigations for the Government, there was no recognised economist as such. This is generally the case in Australia, where the study of Economics is still very backward despite the great interest of the average man in economic and social problems. But the evidence of the expert and the interested party alike was eagerly sought by the Commission, and business and commercial organisations throughout the country prepared memoranda or appointed official witnesses. Sittings were held in all the States and altogether 191 witnesses were examined. A great mass of evidence upon the trade and finance of the country was collected which, together with that collected by the Royal Commission on the Basic Wage in the same year, should provide a mine of information for the future research student. Unfortunately the evidence is not published, but the Commission has prepared five lengthy

1 It is not suggested that the Labour Party when in opposition did not repeatedly censure the Government; its criticism with respect to loans and taxes was relevant, but the Government was merely following the policy inaugurated by the Labour Party when in office.

2 Taxation per head increased as follows:

Year ending June 30th.

State.

Total.

1911

1921

1923

Commonwealth.

reports upon all problems relating to direct taxation as well as "the harmonisation of Commonwealth and State taxation." It is with this latter problem, discussed in the Commission's second report, and later the subject of an important conference of Commonwealth and State authorities, that this article is concerned.

II. Taxation in Australia

Before dealing directly with this problem it is necessary to outline some of the main features of the taxation system of Australia. Customs and excise taxation is the prerogative of the Federal Parliament, and thanks to the growing protectionist sentiment in the country it has been a fruitful source of revenue. The 1920 tariff schedule is the highest on record. Favoured by heavy importations and increases in prices, the customs and excise revenue rose from £21,574,559 in 1919-20 to £31,809,906 in 1920-21. This represents 61 per cent. of the taxation of the Commonwealth and 44 per cent. of that of the Commonwealth and States together. The position in recent years is shown in the following table:

N.B.-As already indicated, the proportions given in the last column are not to be regarded as indicating the relative importance of direct and indirect taxation. Taking the year 1922-23, income and probate taxes yielded £26,182,000 (see Table II). This leaves a total of £9,569,000 for land tax, other stamp duties, licences and all other taxes. Assuming half of this to be direct taxation, the direct taxes would amount to approximately £31,000,000, or 44 per cent. of the total, and not 48 per cent. as might be assumed from the above table if customs and excise be regarded as the only form of indirect taxation, as is frequently the case in public discussion in Australia.

An encouraging feature of this table is the general decline of the proportion of taxation through customs and excise. But the high tariff of 1920 and the slight reductions in Commonwealth income tax recently is having the effect of increasing this proportion again.

The relatively lower yield of indirect taxation indicated by this table is in line with developments elsewhere and in keeping with recent thought on taxation.

As noted above, the Commonwealth levies probate duties, land and income tax, entertainments tax and war profits tax. Land and income taxes and probate or succession duties 1 and stamp duties are levied in all the States. In addition there are various licences and fees through which considerable revenue is obtained. The following table shows the amount raised by these taxes for the year ending June 30th, 1923:

TABLE II.

Taxation (other than Customs and Excise) in Commonwealth and States, 1922-23.

(Figures in thousands.)

C'wealth. N.S.W. Vic. Q'land. S.A. W.A. Tas. Total.

Taxation.

Probate and Suc

£

Other Stamp

Duties

This table shows that there are many differences in the taxation systems of the several taxing authorities. The varying emphasis given to the different taxes is due partly to the financial condition of the State (principally the burden of debt and the yield of public works) and partly to considerations of general policy. Some States have levied heavy land taxes or sought to obtain a large proportion of estates passing at death, whilst others prefer the income tax. Some, e.g. Queensland, have imposed a heavy burden on the upper classes, and others have relied as in Tasmania, mainly upon those of moderate incomes.

1 In Queensland both are levied, in South Australia succession duties only, and in all other States probate duties.