1. I entirely agree with the Prime Minister’s analysis of the political pros and cons of the taxation proposals as stated in P.M. 53. The only matter which I was anxious about was the legal aspect, as it would be possible for any of the six states to challenge the legislation in the High Court.
2. Solicitor-General’s telegram P.M. 52 shows that the proposal is much less drastic than appeared from the newspaper reports here, which suggested that the Commonwealth legislation would specifically forbid the States to exercise their own legislative power to tax during war. For reasons which appear in my book The King and His Dominion Governors quoting Sir Robert Garran, such a direct attack on the States’ constitutional powers would probably be declared ultra vires.
3. Proposals outlined are of a far more moderate and plausible character. Clearly the Commonwealth can insist on payment to itself in priority to any other person including the States. In one or two instances this has already been done in principle. With regard to Income Tax for War Purposes Bill Commonwealth has the expressed power to take over the State officers. With regard to joint returns the Commonwealth has the power to get possession of these documents so long as the State is not completely debarred from access to them for State purposes. Financial assistance is clearly covered by section 96 of the Constitution. With regard to the agreements of 1923 the Courts would not in any event specifically enforce them against the Commonwealth.
4. I do not think that the Alberta case⁽¹⁾ is in point. It would be impossible for the States to prove that the taking over of staffs etc. was for the indirect purpose of forcing the abandonment of the field of taxation.
5. In short I think the proposals of the joint Committee are sound from a political point of view in the present emergency and will survive an attack in the High Court.
6. If the case is litigated it is most important to have Mitchell argue it as well as Fullagar.

[Vol. 34, p. 466]

(1) [1939] AC 117.