Payment to States for five years after uniform tariffs.

93. During the first five years after the imposition of uniform duties of customs, and thereafter until the Parliament otherwise provides392—

  • (i.) The duties of customs chargeable on goods imported into a State and afterwards passing into another State for consumption393, and the duties of excise paid on goods produced or manufactured in a State and afterwards passing into another State for consumption, shall be taken to have been collected394 not in the former but in the latter State:
  • (ii.) Subject to the last sub-section395, the Commonwealth shall credit revenue, debit expenditure, and pay balances to the several States as prescribed for the period preceding the imposition of uniform duties of customs.

HISTORICAL NOTE.—The provisions of the 1891 Bill with respect to distribution before the uniform tariff (see Hist. Note, sec. 89), were to apply after the uniform tariff “until the Parliament otherwise provides,” except that there was a book-keeping adjustment with regard to customs and excise, and a provision for debiting the States with any bounties taken over. (See pp. 134, 139, supra.)

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Briefly, all revenue was to be credited to the State in which it was collected, and all expenditure was to be debited per capita; but only until the Parliament should make different provision. From the date of the imposition of the federal tariff, the Parliament was to have an absolutely free hand. (Conv. Deb., 1891, pp. 802–833.)

Adelaide Session, 1897 (Debates, pp, 877–908, 1067–70).—The system of distribution recommended by the Finance Committee, and embodied in the first draft, provided for three periods:—(1) Before the uniform tariff, the provision was the same as in 1891. (2) For five years after the uniform tariff, the same basis was to be retained, subject to the book-keeping adjustments necessitated by intercolonial free-trade. (3) After five years, revenue was to be credited and expenditure debited on a per capita basis. (See pp. 169–170, supra.)

These provisions were debated (pp. 877–908) on the consideration of the clause dealing with distribution before the uniform tariff. Mr. McMillan pointed out that the difficulty of distribution arose from the fact that the federal tariff and its operation were unknown quantities. The problem was to secure fair distribution without unnecessary taxation in any colony, and yet without leaving an undue shortage of revenue in any colony. There were two aspects of the problem: the question of guarantees (see Historical Note, sec. 87) and the question of distribution. As to the latter, the per capita system would be unfair to New South Wales for some years. Mr. Reid had wished to postpone it for ten years, but the Finance Committee had compromised with five. The “detestable book-keeping system” on the borders was an unwelcome necessity, to be abolished as soon as possible. Mr. Holder, Sir George Turner, and Mr. Reid all agreed that if the book-keeping could be done away with it would be a great blessing; and eventually the clause was postponed to enable the Treasurers to consult on the subject. Subsequently (Debates, pp. 1067–70) the Treasurers brought up the sliding-scale system, which only involved book-keeping for one year, and a subsequent scaling down, by equal gradations, from the contribution basis of the test year to a per capita basis at the end of five years. The sliding scale, on the recommendation of the Treasurers, was adopted with hardly any debate, though Mr. McMillan feared that, owing to probable “loading up” of dutiable goods, the test year would be a bad one for New South Wales. (See pp. 176–8, supra).

Sydney Convention, 1898 (Debates, pp. 35–222).—The sliding scale was unfavourably criticized in New South Wales, as well as in all the other colonies except South Australia, where it was lucidly explained and strongly championed by Mr. Holder. In the general debate at the Sydney Convention it did not receive much support, and a new Finance Committee was appointed, to which the whole question was referred. (See p. 188, supra.)

Melbourne Convention, 1898 (Debates, pp. 775 et seqq., 1041–84).—In accordance with the report of the Finance Committee, the sliding scale and the ultimate per capita distribution were struck out, and the book-keeping system was restored for five years and “thereafter until the Parliament otherwise provides” (see p. 197, supra.)

The basis of charging expenditure was also altered (see Historical Note, sec. 89). There was little debate upon the mode of distribution—the discussion turning chiefly on the question of guarantees. Drafting amendments were made before the first Report and after the fourth Report.