Victoria v Commonwealth (1957)

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Victoria v Commonwealth
Coat of Arms of Australia.svg
Court High Court of Australia
Full case nameThe State of Victoria & another v The Commonwealth; The State of NSW & another v The Commonwealth
Decided 23 August 1957
Citation(s) [1957] HCA 54, (1957) 99  CLR  575
Case opinions

(7:0) The State Grants Act 1942 was valid under the taxation power

Contents

(4:3) Section 221 of the Income Tax and Social Services Contribution Assessment Act is not a valid exercise of the taxation power (per Dixon CJ, McTiernan, Kitto and Taylor JJ)
Court membership
Judge(s) sitting Dixon CJ, McTiernan, Williams, Webb, Fullagar, Kitto and Taylor JJ
This case overturned a previous ruling
South Australia v Commonwealth
(First Uniform Tax case)

Victoria v Commonwealth, [1] ("the Second Uniform Tax case") is a High Court of Australia case that affirmed the Commonwealth government's ability to impose a scheme of uniform income tax, adding to Australia's vertical fiscal imbalance in the spending requirements and taxing abilities of the various levels of government.

High Court of Australia supreme court

The High Court of Australia is the supreme court in the Australian court hierarchy and the final court of appeal in Australia. It has both original and appellate jurisdiction, the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the states, and the ability to interpret the Constitution of Australia and thereby shape the development of federalism in Australia.

The fiscal imbalance in Australia is the disparity between the revenue generation ability of the three levels of governments in Australia relative to their spending obligations; but in Australia the term is commonly used to refer more specifically to the vertical fiscal imbalance, the discrepancy between the federal government's extensive capacity to raise revenue and the responsibility of the States to provide most public services, such as physical infrastructure, health care, education etc., despite having only limited capacity to raise their own revenue. In Australia, vertical fiscal imbalance is addressed by the transfer of funds as grants from the federal government to the states and territories.

Overview

The Uniform Tax system was implemented in 1942 and relied upon 4 pieces of legislation, all held to be constitutionally valid in the First Uniform Tax case. [2] Some of the laws were justified under the defence power, but the scheme was not dismantled after the end of wartime conflict.

<i>South Australia v Commonwealth</i>

South Australia v Commonwealth is a decision of the High Court of Australia that established the Commonwealth government's ability to impose a scheme of uniform income tax across the country and displace the State. It was a major contributor to Australia's vertical fiscal imbalance in the spending requirements and taxing abilities of the various levels of government, and was thus a watershed moment in the development of federalism in Australia.

It was held that the Income Tax Act 1942, [3] could not be challenged because it was within the Commonwealth's taxation power. The Income Tax (Wartime Arrangements) Act 1942, [4] was not an issue because it had already been repealed.

In the first Uniform Tax case the High Court decided that the Commonwealth Parliament had the power to tax incomes. The Commonwealth had passed legislation that allowed them to nationally tax incomes. Prior to this each state had their own income tax laws. The new Commonwealth taxation was so high that people could not effectively pay both taxes. The states challenged this in the High Court and argued that; Taxation was a concurrent power; the Commonwealth tax was so high that people would not be able to pay both taxes and therefore the states would no longer be able to tax incomes. The High Court disagreed and held that section 109 ensured that Commonwealth law overrode inconsistent state laws on concurrent powers, the Commonwealth could impose income Taxation.

Decision

The High Court affirmed the position of the First Uniform Tax case, with some exceptions.

The States Grants Act 1942, [5] was held to be valid, despite a section 96 issue. The Commonwealth can use the section 96 grants power to induce a state to exercise its own powers as well as abstain from using its powers. Hence the Commonwealth can do such things to encourage or discourage a state from exercising its powers. However, while it can induce such things, it cannot coerce a state into accepting a grant. Nonetheless, indirect compulsion is constitutional. While the Income Tax Act 1942 raised Commonwealth income tax rates to a level that made it politically impossible for the states to impose their own, this was not at the level of coercion that was prohibited.

The decision in the First Uniform Tax case was overruled in relation to section 221 of the Income Assessment Act 1942. Section 221 required taxpayers to meet their Commonwealth tax liabilities before state tax liabilities and this section was held to be invalid. The majority (Dixon CJ, McTiernan, Kitto and Taylor JJ) thought that it was not pursuant to the taxation power. Dixon CJ held that it could only possibly be a valid exercise of the implied incidental taxation power. However, the scope of section 51(ii) is federal taxation for federal purposes. Hence any taxation law made pursuant to the incidental power must also be federal taxation for federal purposes. Dixon CJ saw the purpose of the legislation as the exclusion of the state's ability to impose income tax, which is not a federal purpose. Although this section was challenged and overturned, it was not important because in a practical sense the states could no longer impose income taxes.

The Commonwealth cannot restrain states in terms of their governmental functions. Dixon CJ inferred from this principles that there should be some restraints on interpretation of section 96 of the constitution. Section 96 grants must be confined to grants of money, and is not a power to make laws with respect to general subject matter. It must be concerned with state finance and must not be coercive. The power to attach conditions to section 96 grants is broad but they must be within the state's constitutional competence to fulfil.

See also

The constitutional basis of taxation in Australia is predominantly found in sections 51(ii), 90, 53, 55, and 96, of the Constitution of Australia. Their interpretation by the High Court of Australia has been integral to the functioning and evolution of federalism in Australia.

Australian constitutional law

Australian constitutional law is the area of the law of Australia relating to the interpretation and application of the Constitution of Australia. Several major doctrines of Australian constitutional law have developed.

Related Research Articles

Section 51 of the Constitution of Australia grants legislative powers to the Australian (Commonwealth) Parliament only when subject to the constitution. When the six Australian colonies joined together in Federation in 1901, they became the original States and ceded some of their powers to the new Commonwealth Parliament. There are 39 subsections to section 51, each of which describes a "head of power" under which the Parliament has the power to make laws.

<i>R v Kirby; Ex parte Boilermakers Society of Australia</i>

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The reserved powers doctrine was a principle used by the inaugural High Court of Australia in the interpretation of the Constitution of Australia, that emphasised the context of the Constitution, drawing on principles of federalism, what the Court saw as the compact between the newly formed Commonwealth and the former colonies, particularly the compromises that informed the text of the constitution. The doctrine involved a restrictive approach to the interpretation of the specific powers of the Federal Parliament to preserve the powers that were intended to be left to the States. The doctrine was challenged by the new appointments to the Court in 1906 and was ultimately abandoned by the High Court in 1920 in the Engineers' Case, replaced by an approach to interpretation that emphasised the text rather than the context of the Constitution.

Section 51(vi) of the Australian Constitution, commonly called the defence power, is a subsection of Section 51 of the Australian Constitution that gives the Commonwealth Parliament the right to legislate with respect to the defence of Australia and the control of the defence forces. The High Court has adopted a different approach to the interpretation of the defence power, which emphasises the purpose of the legislation, primarily the defence of Australia, rather than the subject matter.

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<i>R v Barger</i>

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<i>Fairfax v Commissioner of Taxation</i>

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<i>Pape v Commissioner of Taxation</i>

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Deakin v Webb was one of a series of cases concerning whether the States could tax the income of a Commonwealth officer. The High Court of Australia overruled a decision of the Supreme Court of Victoria, holding that the States could not tax the income of a Commonwealth officer. This resulted in conflict with the Privy Council, a conflict which was ultimately resolved by the passage of Commonwealth law in 1907, that permitted the States to tax the income of a Commonwealth officer. The constitutional foundation of the decision was overturned by the subsequent decision of the High Court in the 1920 Engineers' Case.

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References

  1. ↑ Victoria v Commonwealth (Second Uniform Tax case) [1957] HCA 54 , (1957) 99 CLR 575(23 August 1957), High Court.
  2. ↑ South Australia v Commonwealth (First Uniform Tax case) [1942] HCA 14 , (1942) 65 CLR 373 (23 July 1942), High Court.
  3. ↑ Income Tax Act 1942 (Cth).
  4. ↑ Income Tax (Wartime Arrangements) Act 1942 (Cth).
  5. ↑ States Grants Act 1942 (Cth).

George Graham Winterton was an Australian academic specialising in Australian constitutional law. Winterton taught for 28 years at the University of New South Wales before taking up an appointment of Professor of Constitutional Law at the University of Sydney in 2004.

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