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The Uniform Tax Case 1942

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Uniform Tax Case 1942 Prior to 1942 income tax was payable to the Commonwealth and State Governments. In 1942, the Commonwealth Government passed a law assuming exclusive control over income taxes. The scheme had two essential features:

  1. The use of Commonwealth taxing power to impose an income tax at a rate equal to the previous total of State and Commonwealth income taxes combined.

  2. The second, was the use of the grants power contained in Section 96 of the Constitution. Each State was to be granted an amount of money approximately equal to that which it would have raised through the imposition of its own income tax, but on the condition that the State itself imposed no such tax.

The States challenged the Commonwealth and lost. The court upheld a Commonwealth legislative scheme that had the practical effect of excluding the States entirely from the field of income tax. It was the greatest blow to the States' economic independence since Federation, creating the situation of vertical fiscal imbalance, whereby the States are financially dependent upon the Commonwealth to carry out their constitutional responsibilities.

Image of newspaper article

The Argus 24 July 1942
Courtesy Newspaper Collection
State Library of Victoria