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The Tax Power Notes

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This is an extract of our The Tax Power document, which we sell as part of our Federal Constitutional Law Notes collection written by the top tier of University Of New South Wales students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Federal Constitutional Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

The Tax Power

1. The Taxation Power


The interpretation of the tax power in s 51(ii), along with the High Court's interpretation of s 96 has played a central role in the evolution of the federal structure
- enabling the CTH to wrest income taxation from the states


The power of taxation is expressly limited by the requirement that it not be used to "discriminate between States or parts of States - but the power to distribute resulting revenues is not so limited


Other relevant provisions include o

S 53 - proposed laws imposing taxation shall not originate in the Senate - this is non justiciable since it refers to the internal workings of the Parliament ('proposed') - Osborne v Cth [1911] HCA + others*


Osborne also said that, unlike s 53, s 55 which requires that laws imposing taxation deal only with the imposition of taxation (else it is of 'no effect') are justiciable since it extends to laws rather than proposed laws

But despite this the second paragraph of s 55 carries the same conclusion - it requires that laws imposing taxation 'shall deal with one subject of taxation only' (SCCI v Cth [1987] HCA) but challenges on this ground have failed due to the broad interpretation of what a tax is, as advocated by Dixon J in Resch v Fed Comm. Of Tax who posed a two part test in noting that 'the subject of taxation' must be taken as contemplating a broad distinction rather than an analytical/logical classification o

The main or substantial subject of the tax is to be gathered from a general consideration fo the impugned legislation bearing in mind that it is for the legislature to choose its own subject unfettered by nomenclature or categories


Once the subject has been ascertained the question whether ancillary provisions ahave introduced a different subject must be answered by considering their natural connection with the relevance to the main subject

There has also been a general tendency to split enactments dealing with imposition of tax and machinery to assess it o

But given the view in PT AU v Comm. Of State Revenue [2004] HCA (endorsing Higgins J in Osborne) the words in both paragraphs of s 55 allow the insertion of any provision fairly relevant or incidental to the imposition of a tax on one subject of taxation (which include, according to Starke J in Fed Comm of Tax v Munro provisions for administration, returns, assessments, reviews of assessments etc.)


These rulings have generally thrown into question the need for splitting enactments - the only reason for doing so to restrict the powers of the Senate

a) What is a tax

* The classical statement was given by Latham CJ in Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263 citing Lower Mainland Dairy Products Sales Adjustment Committee v Crystal Dairy Ltd [1933] AC 168 A tax "is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered"


A string of cases questioned the completeness of this definition and subsequently expanded it

Air Caledonie International v Commonwealth (1988) 165 CLR 462 Facts: Section 7 of the Migration Amendment Act sought to impose a fee for immigration clearance of $5 (set by the regulations) on international airline passengers entering Australia by the insertion of s 34A in to the Migration Act. The plaintiffs argued that it was a tax for the purposes of s 55 and hence s 34A could not be inserted as the Act dealt with other matters than the "imposition of taxation"

The Court noted the definition of Latham CJ and also the fact that in MacCormick v Fed Comm of Tax [1984] HCA the court also ruled that a "tax is not by way of penalty and that it is not arbitrary". They made 3 points concerning Latham CJ's ruling: I. It should not be seen as providing an exhaustive definition of tax (e.g. no reason why a tax has to take the form of an exaction of money or that it can't be imposed by a non-public authority or for non-public purposes) ? (O: tend to disagree with the last point here) II. Logan Downs v QLD [1977] - Gibbs J made explicit that the reference to services being rendered in Latham CJ's conception refers to the services being rendered to, at the direction or request of, the person required to make the payment III. The negative attribute of "payment for services rendered" is but an example of various types of exaction that may not be taxes even though the positive attributes are present (hence charges for use of property, fines for criminal conduct etc. are not taxes even though they fulfil the other requirements)

Furthermore they noted that compulsory exaction by a public authority for public purposes needn't not be a tax just because it is a "fee for services' - if the person is given no choice about acquiring the services and the amount of exaction has no relationship with the value of what is acquired - the circumstances may be such that the exaction is a tax.

Held: The fee was a tax - but this did not invalidate the whole Act since the law which was to be denied legal effect was the one that sought to produce the unconstitutional consequence (the amending Act)


The scope of tax was further widened in...

Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480 Facts: Part VC of the Copyright Act, passed in an amendment (1989) to deal with widespread taping of sound recordings in breach of copyright by providing a royalty to copyright owners in return for permitted copying of sound records for domestic use. Under s 135ZZP(1) the royalty was payable by a vendor of each blank tape when distributed - and it

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