Before The High Court

Taxpayers Appeal to Highest Tribunal

Future Status Of New Guinea Before The High Court

The High Court of Australia in late August will consider "a challenge to the whole constitutional structure of the Territory of Papua-New Guinea.

IHE challenge has been made by p-NG residents, angered at the manner in which the Federal jvernment introduced income tax to the Territory, and with what « consider to be high-handed litical tactics in New Guinea

’airs generally. Nominal plaintiff

Mr. M. W. Fishwick.

Income tax began operating in e Territory on August 1, despite pitched battle by residents over veral months to have it postponed.

The challenge in the High Court on the grounds that (a) the pua-New Guinea Act is invalid on Feral grounds; (b) that even if :t is valid the way the Tax Ordin ce was passed means that this linance is not valid because the gislative Council is not properly nstituted (not having its three icted members); and (c) the Tax dinance conflicts with the Com mwealth Taxation Act.

Phis is in effect a full-scale at ;k on the validity of an Act which, destroyed, could mean that legis ion in Papua and New Guinea go l back many years could be in lid—including the Taxation Ord ince.

"Cause Confusion"

Experts pointed out in August it if the Papua-New Guinea Act invalid it can and probably will quickly amended by Common alth Parliament, but meanwhile ire would be confusion. The future itus of Papua and New Guinea as :ombined territory with one Legis ive Council could be in question, d it could mean there might have be separate Councils.

Phe experts said that there would no doubt that taxation would be ide legal again, but those behind i attack on the Act would cer hly have proved their nuisance ue.

Jo legal blocks have been thrown the way of the High Court action the Commonwealth Government, dch could, if it had wanted, have the action through technic ties. fhe Federal Government itself, idously wants to clear up once i for all the doubts that have in surrounding the Papua-New

Guinea Act for some years. The Australian Attorney-General, Sir Garfield Barwick, QC, Australia’s leading constitutional lawyer before he was appointed to Cabinet last year, is believed to have been the main influence in this attitude.

Sir Garfield personally will lead the Crown case, assisted by Mr. A.

Mason, who handled the case for the Crown during another similar challenge before the P-NG Supreme Court.

For the applicants will be Mr.

Gordon Wallace, QC, assisted by Mr. D. L. Mahoney and Mr. W.

Deane.

What's Happened

These are the events which im mediately lead up to this vital court action (for the background to the whole series of developments of the last few months, see p. 61) : • In June, Mr, Bob Bunting applied to the Papua-New Guinea Supreme Court to declare the Legis lative Council incompetent, because it did not comply with Section 36 of the Papua and New Guinea Act. • In July the Court rejected the application, and the triumphant

Administration, having got the Tax Ordinance through the Council on July 15, brought the tax gathering machines into being to operate from August 1. • Mr. Bunting and other leading community members being unwill ing to attack the Papua and New Guinea Act itself, refused to appeal to the High Court. Thereupon, the Taxpayers' organisation split and re-formed. • Taxpayers, directed by a Rabaul group under Mr. Dudley Jones and (Over)

Mr. M. W. Fishwick, and a Port Moresby group under Mr. Craig Kirke, at this point decided to actively boycott the by-elections and also to launch another legal cam paign, this time to the High Court of Australia. • Dissident taxpayers, consisting mostly of a Port Moresby group, re fused to support the High Court action, and decided to support new men for the Legislative Council who would not resign. • About July 27, Mr. Fishwick lodged his application to the High Court.

Mr. Fishwick’s application began quietly enough. It was handled by Messrs. Patience and Mclntyre (acting for Dudley Jones and Craig Kirke, New Guinea solicitors).

Beat the Gun Council contacted Mr. Justice Taylor, of the High Court, at home, and asked for an injunction re straining Tax Ordinance from be ing proclaimed. His Honour arranged to hear the application on July 30.

But only two hours before the hearing began in Sydney the Ordin ance was proclaimed in Port Moresby. Mr. Wallace reported this, rather glumly, in Court and men tioned that this action had been taken by the Crown despite a re quest by the applicant for it to be delayed. However, there was still the application against the validity of the Act.

Mr. A. Mason (for the Crown) told Mr, Justice Taylor that the Crown was anxious to take the matter to finality and it would not object to it going to the Full Court.

On August 4, Mr. Justice Taylor met counsel in chambers, and it was later announced that the application attacking the validity of the Act, would be considered by the Full Bench of the High Court, probably about August 17 or 18.

Tax Machinery in Action Before July ended, every employer in the Territory who might be regarded as a likely taxpayer had received, from the new Taxation Section of the Treasury in Port Moresby, a mass of documents out lining his or her new liabilities.

A large staff must have been working overtime, for weeks, to pre pare, print and get all this stuff into addressed envelopes.

Territorians, still uninstructed and completely befogged regarding their tax obligations, began to learn, in this hard and painful way, what they are in for. The following is by no means a complete picture, but it

is an outline of what has come into operation since August 1.

By July 31, “taxation advice officials” had been placed in most Territory centres.

The tax operates from August 1. (It was to be July 1, but the Supreme Court application held up the machine for two or three weeks.) New Guinea’s new tax system is the full-blooded, complex and vicious Australian tax system—as compared with the much simplified income tax systems of Malaya, or Solomons or Fiji.

This new system is subject to PAYE (pay-as-you-earn) —in other words, to Provisional Tax. It actually goes beyond the Australian system, in that it forces companies, as well as individuals, to pay provisional tax.

It includes the double-tax pro vision—that is, a company is taxed on its profits; and then, after the remaining profits are distributed, the shareholders who receive the dividends are taxed again, as if the dividends were new income. Very few countries in the world are sub jected to this system.

The employer, under threat of severe penalties, is obliged, from August 1, to collect the tax at each pay-day from employees subject to tax, and transmit same regularly to the Taxation Section.

Professional men and traders, in cluding Companies, not on a fixed income—who therefore cannot be put on a Provisional Tax from August I—are obliged to send to Taxation Section, by January next, an estimate of what their income will be in the current year; and after March 31, 1960, they are

obliged to pay Provisional that—presumably each mo: is not cLar whether this retrospective—that is whethi ing calculated their probj* come, they must pay Prr Tax at that rate from Aug

Undistributed Profits

There are different tax public and private compan in New Guinea, hitherto, tl; been only one kind of Comp* new law introduces a se measuring sticks (mostly, tl; ber of shareholders) by( officialdom will decide when Company is private or pufcd Public Companies will pa the £. Private Companies for the first £5,000 of pro 3/6 thereafter.

Private Companies are su the Undistributed Profits T of Australia's most oppress laws. The NG private Co will be allowed to retain,] serves, 40 per cent, of thein but, if the sum remaining at ment of dividend is more per cent., it becomes subjeiE Undistributed Profits Tax o the £.

Directors of some privac panics in Australia, anxiouj tain some of their profits i as working capital in t fiationary world, distribub profits to shareholders; a:i the latter hand back the 6 (less the income tax they H to pay) to the Company toe as a loan, at interest, forr use. The interest paid o loans is a deductible expq course.

But the newly-fledgedE Moresby tax-collectors are a this procedure; and provih been made whereby interest); as dividends sent away toe outside the Territory, m r taxed as income—and the O is responsible for the collee

(Continued on page 1493

Brigadier D. M. Cleland.

In , calculatin g the wages of an employee who gets board and lodg ing, 10 /" P er week must b added for lodging, and 30/- for board. . it A person without dependants escapes tax up to £7/10/- per week, After that, tax starts at 3d per £1 Per week, and mounts steadily until *t *l2 P|{* week it is,2/6; at £l5 5 / 9 > £ * B - 10/3 » , an s,. £2O P; 1 W( cfk» 13/ 6 , T 15 Q uite a healthy slug for the single man or woman. t r . What Middle Classes Face However, at the present stage, there are liberal allowances made j or p erso ns who have to pay health anc j e d UCa tion charges; and persons with one or two dependants pay only a bout half the single person’s tax. t Where a man In the T f rltory has two dependants, and a taxable in xr^,«iTa d ve th tT^ 14/3 per week in provisional tax Liberal allowanc s have been made to primary producers, miners and timber-millers, in various direc

tions; but the rank and file of high wage-earners are going to pay a quite perceptible amount, without any correspondingly perceptible reduction in the cost of living.

What the big planters (which inelude some big traders) lose in income tax liability they will gain in the abolition of export taxes.

But two things are going to happen which will affect the middleclass taxpayer, and for which no adequate provision has been made by the Administration. The cost of

collecting this tax is going to be very much more than estimated; and no one is going to get any benefit in reduced cost of living brought about by the removal of import tax from a limited line of commodities.

There already are signs that the Administration, having introduced income taxation on the ground that cost-of-living will be reduced by abolition of import duties, will take the next logical step and bring in a larger measure of price control.