Opinion No. 1752
FURTHER JOINT OPINION OF W.K.FULLAGAR AND K.H.BAILEY ON VALIDITY OF PROPOSED UNIFORM FEDERAL INCOME TAX SCHEME: SUGGESTED MODIFICATIONS TO PROPOSED UNIFORM FEDERAL TAX SCHEME
INCOME TAX ASSESSMENT ACT 1942: INCOME TAX (WAR-TIME ARRANGEMENTS) BILL 1942
28 April 1942
Schedule of suggested Amendments2
Income Tax Assessment Bill
(1)(a) In the body of our Opinion we included the text of a suggested amendment of cl. 26, to link the proposed new s. 221 with considerations of defence, and to limit the operation of the section to the war period. We wish to mention also a practical matter concerning the period during which Commonwealth income tax is to have priority under proposed new s. 221. Priority is conferred only in respect of assessments received by the tax-payer prior to 31st March in the calendar year following the year of income. The assumption of course is that there will continue to be State income tax (though the State may draw only on the resources available to a tax-payer after he has paid his Commonwealth tax). In view of the terms of cl. 16 of the Income Tax (War-Time Arrangements) Bill this assumption may appear to be rather academic in character. If however any State does continue to impose income tax, the date fixed seems rather early, particularly in the case of companies, assessments of which may easily be made at a much later stage. There appears to us to be no constitutional objection to a provision which would prohibit a tax-payer from paying State income tax unless and until he has paid Commonwealth Tax or has received from the Commissioner a certificate notifying him that the tax is no longer payable.
(b) In sub-clause 2(b) the words ‘whether assessed before or after the date of the order of sequestration’ appear to have been copied from paragraph (a) of the sub-clause, but are inapplicable to winding up proceedings. We suggest that parenthesis should read ‘whether assessed before or after the commencement of the winding up’.
II. Income Tax (War-Time Arrangements) Bill
(2)(a) In cl. 3 of the Bill we think that the considerations of defence upon which the Treasurer founds an exercise of the powers conferred might usefully be stated with rather more particularity. We agree also with the view expressed by Mr. E.M. Mitchell K.C. and Mr. A.R. Taylor, that the Treasurer’s notification might usefully be required to contain an explicit avowal that in his opinion an exercise of the power conferred is necessary for defence purposes.3 We think indeed that the clause as it stands implies that the Treasurer will not act unless he does form that opinion, and also that the safeguard imposed by making this requirement explicit is one of form rather than substance. But no disadvantage could possibly, in our view, arise from making the alteration that Mr. Mitchell and Mr. Taylor suggest.
We propose accordingly that clause 3 should be amended to read thus:
The Treasurer may at any time and from time to time, by notice in writing addressed to the Treasurer of any State, notify him that as from a date specified in the notice it is in his opinion necessary for the efficient collection of revenue required for the prosecution of the war, for the effective use of man-power, or otherwise for the defence of the Commonwealth or the efficient prosecution of the war, that any officers ...
(b) It may be noted that in the draft amendment above we have substituted the phrase ‘any officers’ for the phrase ‘such officers’, which reads awkwardly when followed by ‘who’, as it is in the Bill.
(3)(a) In respect of power, cl. 4 of the Bill is no doubt merely incidental to cl. 3, though the provisions of sub-clause (1) are not so clearly connected with the main scheme, or with defence considerations, as the other two sub-clauses are. In view especially of the control of the conditions of employment of transferred officers provided for by cl. 5 of the Bill, we think that sub-clause (1) could be omitted, and that its omission would be desirable.
(b) It was suggested to us that possibly sub-clause (2) (retransfer of officers after the war) might perhaps be stated permissively, as a power to be exercised by the Commonwealth if so required by the States, instead of imperatively as at present. The change is, we think, entirely consistent with the scheme as a whole, and in our opinion it would be desirable to make it.
(c) If sub-clause (1) were omitted, the clause as a whole would deal not with ‘termination of transfer’ but with ‘retransfer’. The phrase ‘termination of the transfer’ seems in any case unidiomatic. If sub-clause (1) is retained, we suggest the substitution for ‘termination of his transfer’ some such alternative as ‘termination of his period of transfer’. The phrase occurs also in cl. 9(2).
(4) In cl. 5(1) the words ‘of employment’ have by a slip been omitted from the phrase which was plainly intended to run: ‘the terms and conditions of employment of every transferred officer’.
(5) In cl. 6, jocularity is prompted by the fact that, until the concluding phrases are reached, the sentence reads as though an officer who (inter alia) dies is to ‘be retransferred to the State for the purpose of being retired’. The cases of retirement and of death respectively could appropriately be dealt with in separate sub-clauses.
(6) In cl. 13 we have been puzzled by the conditions under which the Commonwealth is authorised to make an agreement for the collection of arrears of State tax. The Treasurer must first be satisfied that during the operation of the Income Tax (War-Time Arrangements) Act the State ‘has not imposed, and will not impose, a tax upon incomes’. Whether or not the State has imposed a tax on incomes at the time when the agreement is negotiated will be a matter of fact, and readily ascertainable. As to the future, presumably the Treasurer could not be satisfied except upon an undertaking given by the State concerned. But neither the fact of present, nor the promise of future, abstention by the State from imposing income tax seems to us at all obviously appropriate as a condition precedent to the making of an agreement for the collecting and funding of arrears of State tax by the Commonwealth. When it comes to the grant of financial assistance to a State under cl. 16, present abstention from imposing tax and the existence of an agreement regarding arrears are expressly made conditions of the grant. We have wondered whether the promise of future abstention does not also logically belong to cl. 16. Through the combination of cll. 13 and 16, all three elements are indeed required by the Bill as it stands before a grant can be made, for present abstention and a promise of future abstention are made conditions of an agreement about arrears, and an agreement about arrears is itself made a condition of a grant. But we think consideration should be given to the removal from cl. 13 of the conditions now expressed therein, and the inclusion of all the necessary conditions in cl. 16. The practical result may be the same. But the route at present adopted is one for which no clear explanation has occurred to us, and which may possibly suggest some attempt to conceal what is being done. In our view such attempt would be both unsuccessful and unnecessary.
(7)(a) In cl. 15, the marginal note refers (erroneously) to the ‘cancellation’ of existing agreements (regarding the collection of income tax), and the reference to the Income Tax Assessment Act should presumably now be to the Act of 1936–1941.
(b) We have not had under consideration the text of the agreements referred to in cl. 15. It is possible that some provision may be required in this Bill to preserve the rights of officers under these agreements.
1 Footnote 1 to Opinion No. 1697 stated that the date was incomplete in the Opinion Book, although the Supplementary Observations at the end of the opinion were dated 26 April 1942. A copy of the opinion has since been found, with the date 26 April 1942.
2 This opinion is the Schedule to Opinion No. 1697. In that opinion counsel wrote: ‘We wish to suggest some minor modifications in the two Bills [the Income Tax Assessment Bill 1942 and Income Tax (War-Time Arrangements Bill 1942] … It will be convenient to place most of these suggestions separately in a schedule …’. At the time of publication of Opinion No. 1697, the schedule had not been found. It has since been located. The schedule is dated two days after the opinion. In Opinion No. 1753 dated 11 May 1942, counsel refer in paragraph 7 to ‘the schedule of proposed modifications which we later forwarded in support of our former opinion’.