In re Uniform Income Tax Acts

FURTHER SUPPLEMENTARY OPINION

In our No. 2 opinion¹ we omitted to state our views upon the question whether the plan as outlined contravenes section 51(ii) of the Constitution which in relation to laws with respect to taxation prohibits discrimination between States and parts of States. The plan, as outlined, envisages three Acts, an Act imposing taxation, an Assessment Act, and the War Time Arrangements Act. All these Acts are Acts with respect to taxation, and the prohibition against discrimination contained in section 51(ii) applies not only to the Act imposing taxation but to the other Acts as well.

The Act imposing the uniform tax will not discriminate and the Assessment Act will not discriminate. The War Time Arrangements Act will provide largely different sums for grants for financial assistance to the States, and the question is whether the large differences between the grants to be allocated to the different States constitute discrimination within the meaning of section 51(ii). We think this question is resolved satisfactorily by the application of the principles explained by the Privy Council in Moran’s case 63 C.L.R. 338, see particularly p. 348–350.

Having set out at p. 348 the text of section 96 of the Constitution Viscount Maugham observed ‘Apart from the restrictions contained in section 51 which must be considered in a moment—the Parliament may in the matter of financial assistance discriminate between States as much as it thinks fit’.

Proceeding from this starting point Viscount Maugham then pointed out that section 51(ii) prohibits discrimination but is not concerned to deal with the matter of equality of burden and he emphasised again that section 96 does not prohibit discrimination. Then he continued by stating as follows:

There is nothing in section 51 to prevent the Commonwealth Parliament from passing measures in concert with any State or States with a view to a fair discrimination of the burden of the taxation proposed, provided always that the Act imposing taxes does not itself discriminate in any way between States or parts of States, and that the Act granting pecuniary assistance is in its purpose and substance unobjectionable.

We think the passage just cited applies exactly to the present circumstances. The object of the plan is to distribute justly as between the Commonwealth and the several States the burden of taxation proposed, and whilst there is necessarily a great disparity in the amount proposed to be allocated to the different States the basis of the allocation is to be the same for all, namely, provision for their needs according to the average of State collections in the two war-time financial years 1939–1940, and 1940–1941. Quoting from paragraph 15 of the report of the Special Committee ‘The apparent disproportion in the proposed compensation to different States arises from the extent to which States have used income taxation as a source of revenue and from the desire of the Committee to leave existing financial arrangements in the States substantially undisturbed.’²

For these reasons we think the proposed grants should be regarded as genuine grants of financial assistance designed to equalize, as nearly as may be, the burden on all the States of the Commonwealth of Taxation which was being imposed on taxpayers inside and outside the Commonwealth ‘for an end which might reasonably be considered to be both just and expedient’.

Accordingly, we think there is no contravention of the constitutional prohibition of discrimination. Leaving this subject, we desire to add that other problems may arise in determining the procedure to be adopted in ascertaining how the Commonwealth is to be satisfied that during the period during which this Act is in operation a State has not imposed and will not impose a tax on incomes (see section 13 and 16 of the proposed War Time Arrangements Act). We think the law authorities should consider how this machinery is to be made to work in practice. We think the position may be that in some of the States the taxation Acts are not limited to one year and continue to operate until repealed or altered. See Income Tax Act (N.S.W.) No. 47 of 1941, section 2 and Notes to Gunn’s Book p. 1079.

Note: The opinion is not dated in the Opinion Book.