DIVIDING UP THE SPOILS

The Bathurst Financial Scheme Illustrated
By DR. QUICK

MEMORANDUM on the financial scheme proposed by the Bathurst Federal Convention (November, 1896), showing how it would possibly affect the Colonies represented in the Australian Federal Convention on the basis that the Federal Government would take over the following revenue earning departments and burdens, as recommended by that scheme, but not the railways.

REVENUE EARNING DEPARTMENTS.

BURDENSOME SERVICES.

'The principle of the Bathurst scheme called the "separate account system" is (1) that the Federal Government shall take over certain revenues and services (2) crediting the federating states with revenue earned and collected therein; (3) debiting them with the actual cost of certain departments and services of which they have been relieved, and (4) debiting them with what is called "federal services" and "new and additional federal expenditure" in proportion to the population and (5) handing over the surplus if any to the States entitled, or (6) charging the deficiency if any to the State in which it occurs. A different mode of charging or debiting is proposed for the period preceding the adoption of a uniform federal tariff from that which follows the adoption of such a tariff.

BEFORE ADOPTION OF UNIFORM TARIFF.

During the period preceding the adoption of a federal tariff, the Bathurst scheme proposes that all the revenue earned and collected in a State should be credited to a State, that the expenditure of which each State has been relieved and which has been paid by the Federal Government should be charge in full no more and no less against the State. The new and additional expenditure caused by federation, such as the new executive, new parliament, new Judicary [sic] and new departments would be charged against the States in proportion to their population. That is to say that before the adoption of a federal tariff, each state would be credited with the exact amount of customs and excise and post and telegraph revenue earned and collected therein. It would be debited with the actual costs and expenses incurred in earning such revenue. It would be debited with the actual cost and expenses incurred within its territory and jurisdiction in connection with the following services and burdens:- Defence, Quarantine, Ocean beacons and buoys, Ocean light-ships and lighthouses, and interest on its own share of the public debt. It would be debited with its proportionate share of the new federal expenditure. Thus there would at this stage be two classes of public expenditure; 1st, the new and additional federal expenditure to be charge according to population, and 2nd, the relieved expenditure to be charged according to the amount actually incurred…

AFTER ADOPTION OF UNIFORM TARIFF.

The Bathurst scheme provides for a different method of distributing burdens to come into force after the adoption of a uniform federal tariff. The revenue earned or collected in a State is to be credited to that State. 1. As to duties of Custom or Excise, provision shall be made for ascertaining as nearly as may be, the amount of duties collected in each State or part of the Commonwealth in respect of dutiable goods, which are afterwards exported to another State or part of the Commonwealth, and the amount of the duties so ascertained shall be taken to have been collected in the State or part to which the goods have been so exported, and shall be added to the duties actually collected in that State or part, and deducted from the duties collected in the State or part of the Commonwealth from which the goods were exported. 2. As to the proceeds of direct taxes, the amount contributed or raised in respect of income earned in any State or part of the Commonwealth, or arising from property situated in any State or part of the Commonwealth, shall be taken to have been raised in that State or part. 3. The revenue derived from all other sources and services of each State taken over by the Federal Government shall be ascertained. Each State shall be credited with the amounts so ascertained. The following relieved expenditure is to be charged against each State according to the amount actually incurred within the State irrespective of population:

The following other kinds of expenses are federalised and charged against each State on a population basis:

The following tables will show the re-distribution of expenditure in respect of items 2 to 5 inclusive:-

DEFENCE, NAVAL AND MILITARY.

*Australian Statistics, 1895, p. 14 and 16.

QUARANTINE, LIGHTS, ETC.

*Australian Statistics, 1895, p. 14 and 16.

OBJECTIONS TO THE BATHURST SCHEME.

Some serious objections have been raised to the separate account system. One is that it assumes that under a uniform tariff there will be the same amount of revenue to credit each state [sic] with as under the different tariff [sic] which at present exist. There can be no doubt that a uniform tariff would cause a serious disturbance in the Customs and Excise revenue of each State. This has been well illustrated by two sets of figures complied by MR. E. D. MILLEN, M.L.A. AS FOLLOWS:-

Under a uniform tariff MR. MILLEN points out to secure the same total revenue viz:- £1,712,004 the duty would have to be fixed at £1.8s.6d. per £1 value of these goods consumed; at this rate:-

The discrepancy is due to the the [sic] omission of fractions.

There would thus have to be levied on these goods in New South Wales additional taxation to the amount of £127,510 per year and her account in the books of the Federal Treasury would be increased to that amount under this heading; in other words she would receive credit for that additional sum which would go to swell her surplus or to reduce any possible deficiency. On the other hand Victoria would be short by that sum and her credit in the Federal Account Book would be to that extent reduced and her share in any possible resulting surplus would be proportionately reduced and her responsibility for any possible deficiency would be likewise increased[.] Tasmania collects £95,574 in duty on £43,687 of intoxicants and narcotics equal to £2 3s. 10d. per £ value. To bring her tariff down to the level of New South Wales would be to reduce her revenue by £40,421 whilst to raise the New South Wales tariff up to that of Tasmania would be to levy £732,486 additional customs taxation on the people of New South Wales and thus probably unnecessarily increase her credit with the Federal Treasurer by that sum. These figures complied by Mr Millen, are extremely valuable as showing the possible disturbances in the finances of States which may result from a uniform tariff. They show the difficulty of estimating the Federal revenue which will have to be credited to each State under the operation of a uniform tariff but of course they do not assail the equitable character of the proposed distribution of expenditure nor do they challenge the estimates of expenditure which will be charged to the several States under the separate account system.

The adoption of a uniform tariff by the Federal Parliament will be followed by Intercolonial Free-trade and the consequent abolition and loss of border customs duties which prior to the late adoption of a free-trade policy in New South Wales were collected as follows:-

The loss of these sources of customs revenue would not cause such a serious disturbance as is anticipated by some federalists. It would merely necessitate a re-adjustment of the incidents of burden requiring the imposition of additional taxation of imports from the outside world.

The adoption of a uniform post and telegraph system as well as a uniform customs and excise tariff might justify the federalisation of the Post and Telegraph expenditure and the Customs and Excise expenditure. Pending the adoption of such uniformity of rates and uniformity of customs and excise tariff there are many arguments in favor of the application of the separate account system to those departments of expenditure.

The most serious objection to the Bathurst Scheme as well as to the Commonwealth Bill Scheme is that they do not finally close accounts between the Federation and the States. Under the Bathurst Scheme taking over the Railways as well as the Public Debts there would be enormous annual surpluses accuring [sic] to each State except one every year as under the Commonwealth Bill Scheme. Under the Bathurst Scheme without the Railways being transferred but with the liability for the various Public Debts taken over there would be large deficiencies arising every year against the several States. These deficiencies might lead to friction[,] controversary [sic] and unpleasantness between the States and the Federation. For instance suppose a State Parliament refuse to appropriate such sum of money as might be necessary to provide for a deficiency in its account with the federation.

No doubt the Bathurst Scheme in its entirety contemplated the transfer of the Railways as well as the Public Debts to the Federation and in that case there would be hardly any possibility of deficiencies arising. But the general feeling is against the transfer of the Railways. So that other means will have to be considered by which an approximated equilibruim [sic] between revenue transferred to and obligations undertaken by the Federal Government may be established avoiding on the one hand the creation of a surplus in favor of and on the other hand a deficiency against the Federating States. …