The Secretary, Prime Minister's Department, has forwarded me for advice the following communication from the Local Auditor for Victoria:

During an audit of the accounts of the Commonwealth Shipping Line a voucher for £641 16s 2d paid to the Revenue Officer, Suva, Fiji, on 11 September 1922, as income tax on freight earned by the Bulla and Australford, vessels of the Commonwealth Government Line, which loaded at Fiji during 1921, came under notice.

The point raised is, as to whether freights earned by Commonwealth Government boats are subject to payment of income tax levied by a British colony, and as I understand the matter may involve a question of international law it is suggested that advice might be sought from the Attorney-General's Department as to the correct procedure.

Any rule of international law whereby the property of one country is exempt from taxation by another country does not apply as between parts of the British Empire.

The Commonwealth Government Line of Steamers, and its revenue, are the property of the Commonwealth and in taxing such revenue the Government of Fiji has taxed the Commonwealth.

I assume that the law under which the tax has been imposed is the Income Tax Ordinance 1921 of Fiji. The income which is taxable under that Ordinance is defined in section 3 as including the 'profits from a trade or commercial or financial or other business or calling or otherwise howsoever directly or indirectly received by a person from any . . . trade, manufacture or business or otherwise howsoever'.

In section 2 'person' is defined as meaning 'any individual or person and any syndicate trust association or other body and any body corporate and the heirs executors administrators curators and assigns or other legal representatives of such person according to the laws of the Colony'.

The Commonwealth Government is not covered by the above definition. It follows, therefore, that the income earned in Fiji by the Commonwealth through its Line of Steamers is not within the scope of the Ordinance.

For the reasons above stated, I am of opinion that the freights received in Fiji in respect of services rendered by ships of the Commonwealth Line are not legally taxable under the Ordinance above referred to.

[Vol. 19, p. 239]