COMMONWEALTH AND STATES

Evening Star, Issue 21721, 16 May 1934, Page 2

COMMONWEALTH AND STATES

FUNCTIONING AND TAXATION DIFFICULTIES The chief article in the ‘ Bank of New South Wales Circular,’ issued today, deals with the relations between the Commonwealth and States of Australia. It points out that the most fundamental issues raised by the January Premiers’ Conference were ■■ closely bound up with the problem of preserving an l appropriate balance between the allocation of functions to the Commonwealth and the States on the one hand, and the division of fields of taxation on the other. There has for some time been a feeling- of unrest among the States in face of the growing power of the Commonwealth, but instead of discussing the original intentions of the makers of the Constitution, it is more important to achieve that balance which will best foster the material progress of Australia. . The financial relations of a federation are never easy to adjust. . In ii unitary country, or inside a State which is a member of a federation, taxation from wealthy regions is regularly spent in the poorer areas, for education, for unemployment relief; and other purposes, and' no controversy arises as to the legitimacy of such transfers. But in a federal State complications arise because there arc component States with claims to sovereignty, which implies a right to collect and spend revenues as the States themselves may determine. Since 1901 the differences between the Australian States have become more obvious, as Commonwealth legislation has given benefits to some States and imposed burdens on others. So far the problem has found a partial and rather unsatisfactory solution in special grants from the Commonwealth to three of the States. ' At the conference it was pointed out that,, while the States had found it impossible to make ends meet, the Commonwealth had ii substantial surplus for' the last financial year, and had been able to remit a great deal f of taxation-without incurring a deficit. This was attributed to - the superior taxing-, power of the Commomvji.'.h, and the question was whether the States could lie given any additional power of taxation. ’ Three main proposals were discussed in this connection. To the proposal of the Premier of South Australia that CO per f, eut. of Customs and Excise revenue should he returned to the States, the objection was raised that Customs duties were liable to a great deal of fluctuation, which would make State Budgetting difficult; and that the States would have a definite interest in the tariff, which might lend to undesirable political complications. The Victorian proposal that the Constitution should be amended so as to exclude the Commonwealth from income taxation received even less support, ns it wi-s felt that the authority responsible for defence cannot do .without such a flexible source of revenue as the income tax, and- that such an amendment would give little substantial relief to the States who needed it most. The Commonwealth Government proposal that the States should bo given concurrent power in respect of Excise was more seriously considered. But tbo greatest danger involved in this proposal was tho threat which it made possible to freedom of interstate trade, which might wipe out the slender remains of section 92 of the Constitution, which provides that “ trade commerce and intercourse among tho States . . . shall be absolutely free.” Clear and uncompromising as it seems, there is probably no other section of the Constitution concerning which more uncertainty exists. Various States have found means of making it meaningless, by railway freight rates, which discriminate against the products of other States, although they do not appear to bo, discriminatory, by using the power of quarantine in cases in which there is no need for it, and by a variety of other means. 'The decisions of the High Court in complaints concerning breaches of the section have settled nothing, and are in some respects contradictory; and further complications arise from the marketing schemes which have become so fashionable in recent years. The conference came to the conclusion that the whole matter of interstate free trade needed further consideration and postponed it to a later conference, but it is fairly clear that, in view of the further threat to interstate trade involved, the. Commonwealth's suggestion will not be proceeded with. But if it is impossible or impractic- ' able to curb the Commonwealth’s power to raise revenue, it may be desirable to hand over to it additional functions on which it may spend its surplus revenue. The States, however, are jealous of their powers, and are likely to look on any transfer of functions as another step towards unification. 'There remains the solution that the Commonwealth should take over some additional part of the debts of the States. This proposal has the merit of being both simple and providing a solution with some degree of permanency. 'The Commonwealth Government,- however, declared that while it might give consideration to helping the small States, it would not give anything to New South Wales, Victoria, or Queensland. It may be that the major portion of tho difficulties of these States is of a’ temporary nature, iii which cases temporary accommodation is all that is needed. But the troubles of the smaller States seem to he more deeprooted, and some assistance from the Commonwealth on a more permanent basis appears necessary. If tho Commonwealth took over some portion of the debts of the small States, by amendment of tho financial agreement, the concurrence of the other States would he necessary, and pronouncements at tho conference showed little opposition to this course.