Section 51 of the Commonwealth of Australia Constitution says that the Commonwealth Parliament will have the power to make laws with respect to taxation but so as not to discriminate between states or parts of states. There are two major aspects to this question that I want to discuss with you today. First, what is taxation or what's a tax and second how does this power relate to the states?
How does the Commonwealth taxation power work with respect to the operation of the states. Hello everyone, my name is Renato Costa, this is Aussie Law, and today we'll look at the taxation power in section 51 of the Commonwealth Constitution. Section 51 deals with taxation.
There are plenty of cases involving this topic, and this is a massive area in any legal system. In this video I don't propose to tackle all that is related to it, but I will try to make an introduction at least to the central ideas presented in section 51.2. So it is only proper for us to start answering the following question.
What is a tax? The classic definition of a tax in Australia comes from Chief Justice Latham opinion in Matthew and Chicory marketing board from 1938. His honor said 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 I should say that this is not an exhaustive Definition in other cases the High Court of Australia has taken a more flexible approach to this The court has said that a tax is not necessarily an exaction of money or even that it needs to be necessarily demanded by a public authority, so Although overall Chief Justice Latham's notion fits with what we generally understand as a tax, the High Court of Australia has escaped from actually providing a definition of what a tax is. Justice Kirby in Luton and Lessel from 2002 was pretty helpful though, when he tried to summarise the idea of a tax in saying that the most significant feature that distinguishes a law-imposing taxation from one that does not is that such a law, with very few exceptions, has the purpose and effect of raising general revenue for the government.
The weight of authority supports the proposition that the issue of revenue raising is a significant, if not determinative, feature of law with respect to taxation. So, a tax is this compulsory payment that ultimately and generally has the purpose of raising revenue for the government. And more.
As per the last part of Latham's definition in Matthews, a tax is not a payment for service rendered. That is, when paying a tax, you do not expect a quid pro quo. When paying a tax, you receive nothing in return of comparable value for the payment you've made.
Well, if I may add one more negative requirement in our definition of understanding of a tax, is that a tax is not a penalty. Financial penalties exist as remedy for some sort of illegal attitude, whereas taxes can be imposed on both legal and illegal actions. There's an old saying in Latin that goes like this, pecunia non ole.
This literally means money does not stink. There's no smell in money. This means that taxes can be imposed on legal and even illegal actions.
And of course then, it is not as simple and clear to distinguish between penalties taxes. But hey, I think you understood that defining a tax is hard, but I still hope you got the gist of it. Now, as we know, a law will be supported by the taxation power if it is a law with respect to taxation.
And a law with respect to taxation must somehow impose this compulsory appropriation of revenue for the government. But there are some restrictions on that law, or better, on the exercise of that taxation power in section 51. The Constitution contains five express qualifications or limits to the taxation power. First, the legislation deal with tax must only deal with tax.
According to section 55 of the Constitution, laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect. The legislator cannot try to mask it, pretending the tax is not there by including some other provisions in the law but if that even happens everything else that is tax in that taxation law will be of no effect. In the exercise of the power of section 51.2 the Parliament must be clear our tax law can only deal with the imposition of a tax.
Second the Commonwealth cannot impose a tax on any property belonging to a state. This is the nub of section 114. If you would like us to make a video explaining this section click the like button here subscribe to our channel and leave a comment below The third qualification I want to highlight is the provision in section 92 of the constitution, the absolute freedom of trade, commerce and intercourse. Hey, we have many videos about section 92, not only explaining the meaning of the provision, but also some relevant constitutional cases that you should really take note of.
Click the top right corner and check out the videos that are linked there. A fourth limitation comes from section 99. That section says that the commonwealth shall not by Any law or regulation of trade, commerce or revenue give preference to one state or any part thereof over another state or any part thereof. Basically, the Commonwealth cannot legislate in a manner that favors one state over the other.
And that brings us to the fifth express qualification. This one is in relation to the operation of the states and its relationship with the Commonwealth's taxation power. This is the qualification expressed in the second part.
of section 51.2. The taxes imposed by the Commonwealth cannot discriminate between the states or parts of states. Quicken-Garren teaches us that this particular provision was basically shaped in the Melbourne Convention in 1890. Initially, the provision said that all taxation shall be uniform throughout the Commonwealth and that no tax or duty shall be imposed on any goods passing from one state to the other.
The phrase changed to remove the uniformity requirement, and later the last part about trade between states was also omitted as superfluous. But there is a lesson here, one that will help us understand what the second part of this provision aims to do. The nub of the second part of section 50.1.2 is to guarantee that no state will be discriminated against when it comes to the imposition of financial burdens. This is a federal protection.
A protection given to states that otherwise would not have sufficient strength to resist the imposition of taxes by the Commonwealth on its people or properties. There can be no discrimination between states when it comes to the imposition of taxes by the Commonwealth. Lemon Mullins are very clear here.
They say, a law with respect to taxation does not discriminate, contrary to the terms of Section 51.2, if its operations is general throughout the Commonwealth. Even though, by reason of circumstances existing in one or other states, it may not operate uniformly. Hence the word uniformity being removed from the final draft.
But the thing is, the Commonwealth should not attempt to tax in a way that will place special burdens on particular states or parts of states, even if, because of some specific circumstances, a state or part of state is more affected by it than others. If you want to understand more about the dynamics of the Australian Federation, I strongly recommend you check out the playlist up here on your screen. And if you are curious to know where all the revenue appropriated goes to and what it can be spent, check out the video linked here on the site as well. I will see you there.
Ciao.