Spadijer_Is the GST Unconstitutional?

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Is the GST unconstitutional? Some s 55

problems revisitedSteven Spadijer*

Section 55 of the Australian Constitution requires that laws imposing taxation,except duties of customs or of excise, shall deal with one subject of taxationonly. Yet, in substance, the Goods and Services Tax (GST) itself is a duty ofexcise, a customs duty, a services tax, a tax on a tax, a land transfer tax, andmuch more. In order to arrive at this conclusion, however, this article makesthree key points. First, it argues that, based on general conceptions andordinary understanding, neither final private consumption nor supply canpossibly constitute the subject of taxation of the GST Act. Secondly, the articleexamines the political backdrop that led to the passage of the GST. It revealsthat not only did 29 Senators expressly reject the characterisation that the GST

Act dealt with a single subject of taxation, but argues the GST was a textbookexample of tacking, that is, combining a number of controversial, possiblyunpopular, tax proposals such as an indirect tax on services and indirect taxon State imposts with other more anodyne or innocuous, possibly popular,tax measures. Finally, the article presents a number of hypothetical scenariosin order to demonstrate the absurdities that would result if supplies is treatedas a single subject of taxation. The article concludes by asking whether theAustralian Treasury has actually discovered a clever drafting technique tosuccessfully evade the constraints found within s 55, or whether the drafters ofthe GST were simply hoping the High Court would refuse to place any practicallimit on the federal taxation power even if it meant rendering s 55 unable tofulfil its intended purpose of protecting the people of the States from financialaggression on the part of the Commonwealth.

PART I: INTRODUCTION

The purpose of this article is to revisit an issue discussed among academic commentators,1 theAustralian Senate,2 and the popular press3 when the Goods and Services Tax (GST) was first enacted:

* BA, LLB (Hons) (ANU); Barrister, Wentworth Chambers, Sydney. The author would like to thank Dr Terry Dwyer, thePersonal Private Secretary to the late Senator Brian Harradine, the Father of the Senate, for providing useful feedback on thisarticle; the late Professor Leslie Zines, who despite his retirement remained keen to discuss constitutional matters with ANUstudents, and who provided very helpful feedback in relation to this article. The author also appreciates the very usefulcomments received from two anonymous referees, Dr Gavin Putland, David Cominos, and Christopher Bevan. He would alsolike to thank Professor Rick Krever, Professor Geoffrey Lindell, Chris Sievers, Gordon Brysland, as well as numerous othersfrom all walks of life who have discussed the obvious constitutional problems associated with the GST. This article is dedicatedto all of them, collegially and with thanks.

1 Dabner J, Are the Capital Gains Tax Provisions Constitutional? (1992) 1 Taxation in Australia (Red Edition) 70 at 76;Cominos D and Dwyer T, Constitutional Question Marks Over GST (1999) 25 Weekly Tax Bulletin 586 at [751] (Cominos

and Dwyer I); Cominos D and Dwyer T, Constitutional Problems in the Goods and Services Tax (1999) 28 AT Rev 69(Cominos and Dwyer II); Cominos D, Goods and Services Tax: The Conceptual Framework (1999) 3 The Tax Specialist61 at70-71; Bevan C, Constitutional Aspects of the Goods and Services Tax (1999) 28 AT Rev 173; Brysland G, Chapter 1: GSTand Government in 2010 in Peacock C (ed), GST in Australia (Thomson Reuters, 2010) pp 1, 6, fn 24. See also Email fromGordon Brysland to the author (23 October 2013) noting that Justice Graham Hill also expressed the view, at a GST conferencein 2003 in Noosa, that the s 55 arguments against the GST had legs; Email from Geoffrey Lindell to the author (14 January2014): I know I remember having considerable doubts about the validity of the GST when I was teaching s 55.

2 Editor, Is the GST Constitutional? The Senate Debate Continues (1999) 18 Weekly Tax Bulletin 431 at 531.

3 Grattan M, Nil by Month, The Sydney Morning Herald(24 April 1999) p 40; Cleary P, Government Solicitor Queries GSTLegislation,The Australian Financial Review (11 June 1999) p 1 (late edition) (Cleary I); Cleary P, GST: The Nightmare onMain St, The Australian Financial Review (11 June 1999) p 4 (Cleary II); Cleary P, Legal Claim May Make GST Invalid,The Australian Financial Review (18 June 1999) p 4 (Cleary III); Cleary P, Validity of GST Untested for Months, The

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does A New Tax System Goods and Services Tax (General) Act 1999 (Cth) (GST Act) violate theone subject of taxation limit found in s 55 of the Constitution? Fifteen years on, the High Court has

yet to address the question as to whether or not the GST Act passes constitutional muster. Presumably,there are two key reasons why legal practitioners have been reluctant to bring about any High Courtchallenge against the GST Act. One reason is that the High Court always defers to the Commonwealthin all major cases dealing with the single subject limit. The very fact the High Court in its entire111-year history has never invoked the one subject of taxation limit that hitherto ineffectualmenace4 to invalidate a single piece of federal tax legislation strengthens this view. Another reasonis the view among some tax practitioners that the GST is something akin to the Ark of the Covenant:too sacred to ever be touched, even by the High Court. Indeed, according to this realpolitik view ofconstitutional law, s 55 is nothing more than a toothless inscription in the Constitution; despite anyjudicial assertions to the contrary, the High Court would simply be too timid to ever actually enforcethe single subject mandate because it would result in invalidating an entire piece of tax legislation the all too real consequence associated with any holding that a law has transgressed the single subjectlimit.5

Or perhaps at long last the once in a century political backdrop which led to the passage of theGST might give the High Court a unique opportunity to invoke the single subject limit. In doing so,the High Court might be given the chance to refute the prevailing perception amongst the powers thatbe in the Australian Tax Office that the single subject of taxation limit is a dead letter provisionincapable of ever actually being enforced in practice. Indeed, if future reforms to the GST become partof the political agenda, then it seems inevitable the question will be raised again: were the host ofacademic commentators and 29 Senators correct to claim the GST Act violated the single subject limitfound in s 55 of the Constitution? This article argues they were correct in their objections. Inparticular, it points to a number of salient factual distinctions between the GST Act and other taxlegislation which has been upheld under s 55.

Part II of this article summarises the relevant s 55 case law. Part III applies the relevant principlesto the legislative history surrounding the passage of the GST and the language found within the GSTAct. It explains why the GST is not a tax on final private consumption, as well as why supply

cannot be a subject of taxation in and of itself. It then asks what, if anything, would be left of s 55once a noun derived from a verb (supply) is treated as a subject of taxation. Finally, the articleconcludes that the GST clearly deals with a collection of subject matters necessarily separate anddistinct.

PART II: SECTION 55 A HISTORICAL AND JURISPRUDENTIAL SUMMARY

The second paragraph of s 55 of the Constitution provides (emphasis added):

Laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with onesubject of taxation only; but laws imposing duties of customs shall deal with duties of customs only, andlaws imposing duties of excise shall deal with duties of excise only.

Australian Financial Review(5 July 1999) p 5 (Cleary IV); Richards R, Taxation: A Constitutional Snag for GST (1999) 37Law Society Journal26. Since 1999, citizens from all walks of life have continued to express the view that the GST violates

s 55 of the Constitution: Drury A, Letters to the Editor, Central Coast Herald(1 June 2000) p 10; Drury A, Letters to theEditor, The Newcastle Herald (1 June 2000) p 10; Quilty B, Constitutional Validity of GST and Professional Negligence ofGST Advisers (2000) 32 Weekly Tax Bulletin 943 at [1341]; Nixon S, Legal Challenge; The Tax Revolution, The Sydney

Morning Herald(3 July 2000) p 12; Baines N, GST Fails The Test of Law,The Daily Mercury (26 December 2008) p 9.

4Moore v Commonwealth(1951) 82 CLR 547 at 569 (Dixon J). To be sure, other parts of s 55 have been enforced: see, forexample,Air Caledonie International v Commonwealth (1988) 165 CLR 462; Mutual Pools & Staff Pty Ltd v FCT(1992) 173CLR 450; 22 ATR 856; Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480. However 111 years on the High Court has yet to invalidate a single piece of tax legislation for violating the one subject of taxationlimit.

5 Richards R, Validity of The GST (2003) 73 Australian CPA Journal 26 at 26, asserting that even if there was a theoreticalbasis for invalidating the GST Act, it is inconceivable that the courts would strike down, in totality, any law as fundamental asa tax law.

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Rather than discussing everything which has ever been said about the second paragraph of s 55, itmight be easier to reduce the relevant history and case law to the 35 core propositions.6

General principles

(1) The purpose of s 55 is to protect the Senate from any possible abuse of the restriction placedupon it by s 53 of the Constitution, which provides that the Senate may not amend proposedlaws imposing taxation.7 In particular, it prevents the Senate from being coerced by the processknown as tacking8 that is, bundling together a number of different kinds of tax proposals,perhaps an unlimited number, into one measure.9 Tacking is particularly deplorable wherethe Senate, for whatever reason, supports taxes on some subjects, while it opposes a tax onsome other distinct subject, but is still forced to accept the entire agglomeration, either becauseit bows to political pressure to avoid crippling the finances of the Commonwealth, or becauseit likes the overall tax package despite a few bad apples.10 Section 55, however, combatstacking by requiring each distinct tax to be contained in a separate bill, thereby allowingeach proposed tax to be considered individually on its merits and voted on individually, rather

than as one element in an overall tax package.11

This, in turn, allows the Senate to protect theStates from financial aggression on the part of the Commonwealth12 by allowing the Senate tovote down each proposed tax that might be regarded as an outrage to the people of the Statesas they happen to be represented in the Senate (or, perhaps, by allowing the Senate to refuse topass a tax on a specific subject, at least until specific amendments or exemptions recommendedby the Senate relating to an offensive aspect of a particular tax is acceded to by the House ofRepresentatives).

(2) According to Quick and Garran, the United Kingdom Paper Duties Precedent can be used toillustrate how s 55 might be able to protect the Senate. In 1861, the Liberal Chancellor of theExchequer, William Gladstone, sought to repeal paper duties a tax on paper used to produce

6 This updates and expands the list compiled by Bevan, n 1 at 175-179.

7

Resch v FCT(1942) 66 CLR 198 at 222-223 (Dixon J). Note Dixon J says s 54 imposes this limit; in fact, it is s 53 whichimposes this limit. See also Quick J and Garran R, The Annotated Constitution of the Commonwealth of Australia (Angus andRobertson, 1901) pp 678-679; R v Barger(1908) 6 CLR 41 at 134 (Higgins J), describing s 55 as the corollary of ss 53 and54;MacCormick v FCT(1984) 158 CLR 622 at 653 (Brennan J); 15 ATR 437; Commonwealth, Parliamentary Debates, Senate,23 April 1999, p 4262 (Peter Cook), accusing the government of using the section 53 gun to pass the GST Act; Williams vCommonwealth (2012) 248 CLR 156 at 205 (French CJ), noting s 53 highlights the relative weakness of the Senate against anExecutive Government which has the confidence of the House of Representatives.

8 Offcial Record of the Debates of the Australasian Federal Convention, Melbourne, 8 March 1898, pp 2005, 2034-2035 (JohnDowner); Quick and Garran, n 7, pp 678-679; National Trustees, Executors and Agency v FCT (1916) 22 CLR 367 at 371(Griffith CJ);Harding v FCT(1917) 23 CLR 119 at 130 (Barton J); DFCT (NSW) v WR Moran Pty Ltd(1939) 61 CLR 735 at779 (Evatt J); Resch v FCT(1942) 66 CLR 198 at 210 (Rich J).

9Buchanan v Commonwealth(1913) 16 CLR 315 at 323 (Barton J); Quick and Garran, n 7, pp 678-679; Mutual Pools & StaffPty Ltd v FCT (1992) 173 CLR 450 at 456 (Deane J). Of course, tacking includes grouping together of tax bills of differentkinds and unlimited number in one measure: Osborne v Commonwealth (1911) 12 CLR 321 at 352-353 (Barton J). But thequestion is always one ofsubstance rather than mere form: see Propositions 7 and 9.

10

Quick and Garran, n 7, pp 678-679; Stephens v Abrahams (No 2) (1903) 29 VLR 229 at 235 (Alfred Deakin); Osborne vCommonwealth (1911) 12 CLR 321 at 352-353 (Barton J); Harding v FCT(1917) 23 CLR 119 at 134 (Isaacs J); Buchanan vCommonwealth (1913) 16 CLR 315 at 323-324 (Barton J); Resch v FCT(1942) 66 CLR 198 at 223 (Dixon J); Luton v Lessels(2002) 210 CLR 333 at 357 (Kirby J); 49 ATR 471; Transcript of Proceedings,Permanent Trustees Australia Ltd v CSR [2004]HCA Trans 43 at 671, 676-677 (Gleeson CJ).

11 Offcial Record of the Debates of the Australasian Federal Convention, Melbourne, 8 March 1898, pp 2026-2027 (HenryDobson), 2029 (George Reid); Osborne v Commonwealth(1911) 12 CLR 321 at 363 (Isaacs J); Harding v FCT(1917) 23 CLR119 at 134 (Isaacs J); State Chamber of Commerce & Industry v Commonwealth (The Second Fringe Benefits Tax Case) (1987)163 CLR 329 at 341 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ).

12 Osborne v Commonwealth(1911) 12 CLR 321 at 353 (Barton J); Buchanan v Commonwealth(1913) 16 CLR 315 at 323-324(Barton J), 335 (Isaacs J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 341 (Mason CJ, Wilson, Dawson,Toohey and Gaudron JJ). See also FCT v Munro (1926) 38 CLR 153 at 185-186 (Isaacs J).

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newspapers, popularly called a tax on knowledge.13 His proposal passed in the Commons by219 votes to 210, a bare majority of nine votes. However, the more conservative,

Tory-dominated House of Lords rejected the Paper Duties Repeal Bill by 193 votes to 104because it was feared that cheaper newspapers might make it easier to disseminate radical orsubversive left wing ideas. The Commons then rebranded its entire budget for the forthcomingyear into a single omnibus tax bill consisting of (a) a reduction in income tax; (b) an increasein property taxes, (c) an increase in stamp duties, (d) a reduction of tea and sugar duties, and(e) a repeal of paper duties. Overwhelmed, their Lordships apparently supporting a reductionin tea and sugar duties but opposing the repeal of paper duties were forced to either assent orreject the whole scheme, and assent they did. Such a composite or general tax bill could notbe submitted by the House of Representatives to the Senate; it would be unconstitutional, themaxim being one tax, one bill, except in the case of bills dealing with customs and excise. 14

Thus, it is correct to say that s 55 is concerned with political relations, and contemplates broaddistinctions betweenpossiblesubjects of taxation based on common understanding and generalconceptions, rather than being based on any analytical or logical classification. 15

(3) Section 55 is merely a procedural restraint, given that it requires tax bills to be framed in acertain form; it is not designed to control the precise scope of any legislative head of power,nor does it entrench a particular individual right.16 Nevertheless, any taxpayer has standing toinvoke s 55 because s 55 exists in order to vindicate not only the rights of the Senate, but alsoto protect the liberty of the individual.17

(4) Upholding the rule of law,18 and the liberty of the individual (cf Proposition 3), as well asprotecting smaller States from a lawless Senate majority composed of larger States passing anomnibus tax bill19 helps to explain why s 55 contains no limitation which prevents the HighCourt from invalidating a federal tax statute several years after it is enacted into law. That is tosay, s 55 contains no constitutional statute of limitations five, 10, 20 or 100 years might passbefore a tax law is finally invalidated by the High Court under s 55.

(5) Section 55 extends to laws in the form in which they stand from time to time after the originalenactment, that is, the law as written when the relevant statute happens to be challenged.Therefore, in a case where a subsequent amendment inserts a new provision dealing with morethan one subject of taxation in an otherwise perfectly valid statute, it seeks to bring about

13 Paul HW, The Life of William Ewart Gladstone (Devon College, 1909) pp 93-100; Jennings I, Cabinet Government(Cambridge University Press, 1936) pp 182-183; Plucknett TFT, English Constitutional History (11th ed, Sweet and Maxwell,1960) pp 548-549; Roseveare H, The Treasury (Allen Lane, 1969) p 140; Sabine B, Great Budgets: VI (1972) British Tax

Review111; Feuchtwanger E, Gladstone (Allen Lane, 1975) pp 110-111; Bebbington B, William Ewart Gladstone (EerdmansPublishing, 1993) p 95; Matthew HCG, Gladstone 1809-1898 (Clarendon Press, 1997) pp 113-114, 135; Hoppen T, The

Mid-Victorian Generation (OUP, 1998) pp 215-216; Hennessy P, The Prime Minister (Palgrave Macmillan, 2001) p 48;Stebbings C, The Victorian Taxpayer and the Law (Cambridge University Press, 2009) pp 62-64.

14 Quick and Garran, n 7, pp 678-679; Offcial Record of the Debates of the Australasian Federal Convention, Melbourne,8 March 1898, pp 2064-2065 (Edmund Barton). Note, however, a s 55 violation can also arise by either accident or design:Quick and Garran, n 7, p 679.

15Resch v FCT(1942) 66 CLR 198 at 222-223 (Dixon J); MacCormick v FCT(1984) 158 CLR 622 at 652 (Brennan J); The

Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 343 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ); Austin vCommonwealth (2003) 215 CLR 185 at 274 (Gaudron, Gummow and Hayne JJ); 51 ATR 654.

16MacCormick v FCT (1984) 158 CLR 622 at 653 (Brennan J); Mutual Pools & Staff Pty Ltd v FCT(1992) 173 CLR 450at 455 (Mason CJ, Brennan and McHugh JJ).

17 Offcial Report of the National Australasian Convention Debates, Adelaide, 14 April 1897, pp 581 (Bernard Wise), 593-594(Josiah Symon).

18 Offcial Report of the National Australasian Convention Debates , Adelaide, 14 April 1897, pp 591-592 (Richard OConnor),593-594 (Josiah Symon).

19 Offcial Report of the National Australasian Convention Debates, Adelaide, 14 April 1897, p 594 (Josiah Symon/George Reidexchange); Offcial Record of the Debates of the Australasian Federal Convention, Melbourne, 8 March 1898, pp 2003-2006,2009-2010 (Patrick Glynn, Josiah Symon and John Downer generally).


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something which given the general wording of s 55 the Constitutionexpressly forbids andwhich therefore is not within the competence of Parliament to achieve.20

(6) A law that violates the one subject of taxation requirement is invalidated in its entirety21

since it is the law as a whole that infringes the constitutional mandate22 and there is noordinary means of knowing which subject of taxation represents more than the other (or others)the will of Parliament itself.23 Note, however, some academic commentators have noted thatthe latter difficulty does not really apply in an instance where, for example, a subsequentamendment introduces a land value tax into an otherwise perfectly valid income tax statute: thesubsequent amendment alone would be invalid (subject, of course, to the doctrine ofseverability).24

(7) The singleness of a subject cannot be conclusively determined by the mere fact that Parliamenthas chosen to group together several distinct subjects,25 and that is true even if Parliamentchooses to give a collective name to the group.26 Thus, the fact a particular label or a generalname has been given to the Act is of little or no importance where there is no ambiguity in theprovisions of the Act. Rather, one must look at the actual substance of the provisions of the Actbeing challenged.27

(8) One subject of taxation is a phrase that must depend for its application on the circumstances.A tax on land, a tax on ships, and a tax on furniture are, in one respect, taxes on three separatesubjects. But if a man dies leaving an estate which as a single mass includes the three classesof property, then by general understanding and long-existing usage, a tax on the whole estatewhich he has left, indiscriminately considered as a unity, is a tax on one subject.28

20 The basis for this proposition is the fact that all the other limbs of s 55 have been interpreted in this way: Air CaledonieInternational v Commonwealth(1988) 165 CLR 462 at 471-472 (Mason CJ, Wilson, Brennan, Deane, Dawson, Toohey andGaudron JJ); Mutual Pools & Staff Pty Ltd v FCT(1992) 173 CLR 450 at 461, 464 (Deane J), 465, 471 (Dawson, Toohey,Gaudron JJ); Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480 at 507-508 (Mason CJ,Brennan, Deane and Gaudron JJ).

21 Quick and Garran, n 7, p 679; Moore H, The Constitution of the Commonwealth of Australia (John Murray, 1902) p 178;Moore H, The Constitution of the Commonwealth of Australia (2nd ed, Maxwell, 1910) p 247; Osborne v Commonwealth(1911) 12 CLR 321 at 335, 340 (Griffith CJ); AG (Qld) v AG (Cth) (1915) 20 CLR 148 at 164 (Griffith CJ), 177 (Isaacs J);

Harding v FCT(1917) 23 CLR 119 at 134 (Isaacs J);Resch v FCT(1942) 66 CLR 198 at 210 (Rich J); Collector of Customs(NSW) v Southern Shipping Co Ltd(1962) 107 CLR 279 at 302 (Menzies J); The Second Fringe Benefits Tax Case (1987) 163CLR 329 at 342 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ); Mutual Pools & Staff Pty Ltd v FCT(1992) 173 CLR450 at 471-472 (Dawson, Gaudron and Toohey JJ).

22 FCT v Munro (1926) 38 CLR 153 at 184-185 (Isaacs J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 374(Deane J); Mutual Pools & Staff Pty Ltd v FCT(1992) 173 CLR 450 at 456 (Deane J).

23 Offcial Record of the Debates of the Australasian Federal Convention , Melbourne, 8 March 1898, p 2068 (Isaac Isaacs);Osborne v Commonwealth(1911) 12 CLR 321 at 353 (Barton J); The Second Fringe Benefits Tax Case(1987) 163 CLR 329 at342-343 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ); Mutual Pools & Staff Pty Ltd v FCT(1992) 173 CLR 450 at470-471 (Dawson, Toohey, Gaudron JJ).

24 Lane PH, The Australian Federal System (Law Book Co, 1972) p 285, fn 63, proposing the bright line rule that only thesubsequent amendment results in pro tanto invalidity; Dabner, n 1 at 75-76, citing judicial restraint as another reason for thisrule. Compare Mutual Pools & Staff Pty Ltd v FCT (1992) 173 CLR 450 at 471-472 (Dawson, Gaudron and Toohey JJ),applying a similar logic in the excise context.

25National Trustees, Executors & Agency Company of Australasia Ltd v FCT (1916) 22 CLR 367 at 378 (Isaacs J); Harding v

FCT(1917) 23 CLR 119 at 135 (Isaacs J).26Harding v FCT(1917) 23 CLR 119 at 135 (Isaacs J). See also National Trustees Executors & Agency Company v FCT(1916)22 CLR 367 at 380 (Duffy and Rich JJ); Resch v FCT(1942) 66 CLR 198 at 210-211 (Rich J).

27Resch v FCT(1942) 66 CLR 198 at 210-211 (Rich J); National Trustees Executors & Agency Company v FCT (1916) 22CLR 367 at 375 (Barton J), 380 (Duffy and Rich JJ). Of course, this principle is well established in the ss 90 and 92 context:Peterswald v Bartley (1904) 1 CLR 497 at 511 (Griffith CJ); Commonwealth v South Australia (1926) 38 CLR 408 at 423(Isaacs J), 438 (Starke J); FCT v Munro (1926) 38 CLR 153 at 189 (Isaacs J); DFCT (NSW) v WR Moran Pty Ltd (1939) 61CLR 735 at 779 (Evatt J);Attorney-General (NSW) v Homebush Flour Mills Ltd(1937) 56 CLR 390 at 416, 418-419 (Evatt J);

Ha v New South Wales (1997) 189 CLR 465 at 498 (Brennan CJ, McHugh J, Gummow J and Kirby J); 36 ATR 319.

28National Trustees, Executors & Agency Company v FCT(1916) 22 CLR 367 at 378 (Isaacs J). See also Perpetual Trustee CoLtd v FCT(1932) 47 CLR 402 at 415 (Dixon J); Knowlton v Moore 178 US 41 (1900) at 48-49, 58.

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(9) It is really a question of fact whether the subject matter of an Act is single.29 The test iswhether, looking at the subject matter that is dealt with as if it were a unit by Parliament, it can

then, in the aspect in which it has been so dealt with, be fairly regarded as a unit, or whether itthen consists of matters necessarily distinct and separate.30

(10) The characterisation of a subject matter as fairly being dealt with as a unit may depend on (a)the application of certain indicia or on the circumstances of life, which are ever-changing31 or(b) the aspect from which it has been viewed by Parliament because, from the interlacing ofthe circumstances of life, the thing may from one standpoint stand apart from everything else,and from other points of view may become a component part of other things. 32

(11) The federal Parliament, in selecting its subject of taxation, is entitled to take things as it findsthem in rerum natura (in their natural state), irrespective of any positive laws of the Statesprescribing rules to be observed with regard to the acquisition or devolution of formal title toproperty.33

(12) Where the main or substantial subject of the tax has first been ascertained (if that is possible),the question arises whether particular provisions directed at defining or widening the area orincidence of the tax, or the liability to it, or preventing avoidance or evasion or facilitatingcollection have in truth introduced a new or second subject; this must be determined byconsidering their natural connection with or relevance to the main subject.34

(13) Section 55 permits the insertion into an imposition Act of any provision that is fairly relevantand incidental to the imposition of tax upon a single subject of taxation35 (such asanti-avoidance provisions, exemptions, evidentiary presumptions, and penal provisions for taxevasion,36 as well as matters dealing with the administration, collection, recovery, andappeals)37 and in the event some incidental or unimportant provision might strictly be held to

29Harding v FCT(1917) 23 CLR 119 at 135, 141 (Isaacs J), 142 (Duffy and Rich JJ); Resch v FCT (1942) 66 CLR 198 at210-211 (Rich J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 344 (Mason CJ, Wilson, Dawson, Toohey andGaudron JJ).

30National Trustees Executors & Agency Company v FCT(1916) 22 CLR 367 at 379 (Isaacs J); Harding v FCT(1917) 23 CLR119 at 135 (Isaacs J); Resch v FCT (1942) 66 CLR 198 at 210-211 (Rich J);The Second Fringe Benefits Tax Case (1987) 163CLR 329 at 350 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ); Austin v Commonwealth (2003) 215 CLR 185 at 272,275 (Gaudron, Gummow and Hayne JJ). Compare Permanent Trustee v CSR (Vic) (2004) 220 CLR 388 at 398 (Kourakis QC,in arguendo), suggesting that obvious or distinct policy considerations might justify separate consideration, bill by bill, of thevarious matters being taxed.

31National Trustees Executors & Agency v FCT(1916) 22 CLR 367 at 378 (Isaacs J).

32Harding v FCT(1917) 23 CLR 119 at 135 (Isaacs J).

33Morgan v DFCT(1912) 15 CLR 661 at 666 (Griffith CJ); Cornell v DFCT (1920) 29 CLR 39 at 46 (Isaacs, Higgins, GavanDuffy, Rich and Starke JJ).

34Resch v FCT(1942) 66 CLR 198 at 223-224 (Dixon J); MacCormick v FCT(1984) 158 CLR 622 at 654 (Brennan J); TheSecond Fringe Benefits Tax Case (1987) 163 CLR 329 at 351 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ); Mutual

Pools & Staff Pty Ltd v FCT (1992) 173 CLR 450 at 457-459 (Deane J).35 Osborne v Commonwealth (1911) 12 CLR 321 at 373 (Higgins J); Harding v FCT (1917) 23 CLR 119 at 134 (Isaacs J);

Resch v FCT(1942) 66 CLR 198 at 213 (Starke J); Cadbury-Fry-Pascall Pty Ltd v FCT(1944) 70 CLR 362 at 384 (Starke J).

36 Waterhouse v DFCT (SA) (1914) 17 CLR 665 at 674 (Barton J), 675-678 (Isaacs J), 678 (Gavan and Duffy JJ); NationalTrustees Executors & Agency v FCT (1916) 22 CLR 367 at 372 (Griffith CJ), 376-377 (Barton J), 379 (Isaacs J); British

Imperial Oil Co Ltd v FCT(1925) 35 CLR 422 at 434 (Isaacs J), 443-444 (Rich J); Colonial Gas Association Ltd v FCT(1934)51 CLR 172 at 181 (Starke J), 188-189 (Dixon J); FCT v Trautwein (1936) 56 CLR 211 at 217 (Evatt J); Resch v FCT (1942)66 CLR 198 at 213 (Starke J), 226 (Dixon J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 349-351 (Mason CJ,Wilson, Dawson, Toohey and Gaudron JJ).

37Munro v FCT(1926) 38 CLR 153 at 209-210 (Higgins J), 215-216 (Starke J, with Duffy J agreeing). See also PermanentTrustee v CSR (Vic) (2004) 220 CLR 388 at 419 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).


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introduce a second subject matter, the court, where two constructions are possible, shouldchoose a more benign interpretation of such a provision, so the statute may survive rather than

perish (ut res magis valeat quam pereat).

38

(14) The mere fact that a law imposing taxation deals with one category or species of taxation doesnot necessarily mean it also deals with one subject of taxation only. For example, whilecustoms and excise items are considered as appertaining to one form or species oftaxation,39 the second paragraph of s 55 clearly indicates that customs and excise duties woulddeal with multiple subjects of taxation were they not expressly exempt from the singlesubject mandate, with the subject of taxation here being each distinct type of commodity oritem being taxed.40 Similarly, although in the 1930s the wholesale sales tax (WST) wasregarded as being a popular species of taxation internationally,41 because of the one subject oftaxation limit (a constitutional requirement unique to Australia) it was necessary to introducenine separate assessment bills and nine separate rates bills for nine different types of sales todo precisely what, in Canada, can be done with one assessment act and one rates act42 andindeed it was originally thought that there would have to be 36 bills43 for 36 subjects oftaxation.

(15) There is a common understanding that an income tax is a form of direct taxation, whileexcises and custom duties are a form of indirect taxation;44 with the former species of tax

38 Osborne v Commonwealth (1911) 12 CLR 321 at 337 (Griffith CJ), 353 (Barton J), 364 (Isaacs J); Waterhouse v DFCT (SA)(1914) 17 CLR 665 at 676-677 (Isaacs J).

39AG (NSW) v Collector of Customs (NSW)(1908) 5 CLR 818 at 850-851 (Isaacs J); Osborne v Commonwealth (1911) 12 CLR321 at 363 (Isaacs J): Customs items and Excise items being respectively considered as appertaining to one species of tax;Philip Morris Ltd v Commissioner of Business Franchises (1989) 167 CLR 399 at 427 (Mason CJ and Deane J): An excise isa particular form or category of tax, 465 (Dawson J): It has never been questioned that in speaking of duties of excise, s 90is referring to a limited category of taxes; Roy Morgan Research Pty Ltd v FCT (2011) 244 CLR 97 at 107 (French CJ,Gummow, Hayne, Crennan and Bell JJ): Section 90 of the Constitution is directed to what otherwise might have been theconcurrent powers of the Parliament of the Commonwealth and other Australian legislatures to impose particular forms oftaxation, namely duties of customs and excise. See also Lane HP, Commentary on the Australian Constitution (2nd ed, LBC,1997) p 403; Cominos and Dwyer II, n 1 at 70, 72, 76.

40

Quick and Garran, n 7, pp 550-551: A law imposing customs duties may include any number of items of taxation, and a lawimposing excise duties may deal with any number of items of taxation; Knowlton v Moore 178 US 41 (1900) at 88-89, 94:Excises usually look to a particular subject, and levy burdens with reference to the act of manufacturing them, selling them,etc. They are or may be as varied in form as are the acts or dealings with which the taxes are concerned;Notts Bros & Co Ltdv Barkley (1925) 36 CLR 20 at 26 (Isaacs J): While singleness of subject of taxation is secured in general it was recognizedthat, in framing Customs and Excise Acts, that general rule would be impossible In the result, so long as a customs law dealsonly with customs duties, it matters not on what subjects or on what conditions those duties are imposed; Mutual Pools & StaffPty Ltd v FCT (1992) 173 CLR 450 at 471 (Dawson, Toohey and Gaudron JJ, with Mason CJ, Brennan and McHugh JJagreeing): The second paragraph of s 55 proceeds upon the assumption that duties of customs or of excise may involve morethan one subject of taxation. Thus, where duties of excise are imposed by a law, the law may deal with more than one subjectof taxation provided the law is confined to duties of excise. Any other subject is impermissible. For a contrary assertion thatcustoms and excise duties are one subject of taxation, see General Practitioners Society v Commonwealth (1980) 145 CLR 532at 569 (Aickin J). Historically, in the United Kingdom, an excise tax was used as a convenient label for a mass of heterogeneoustaxes that had nothing in common except for the mere fact that they were taxes, and that they were collected by the exciseadministration: Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263 at 267 (Latham CJ); Parton v Milk Board(1949) 80 CLR 229 at 244 (Latham CJ); Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529 at 559 (Kitto J). Of course,virtually all of these disparate taxes could be subsumed into a single subject of taxation if one seriously believes taxable

supplies is a single subject of taxation in and of itself.41 The WST was introduced as an emergency measure in Germany, France, Czech Slovakia, Canada, Belgium, Italy, Hungary,Boumania, Austria, and Turkey after WWI: Commonwealth, Parliamentary Debates, House of Representatives, 30 July 1930,pp 4930-4931 (James Scullin).

42 Commonwealth,Parliamentary Debates, House of Representatives, 30 July 1930, p 4932 (James Scullin).

43 Commonwealth,Parliamentary Debates, House of Representatives, 29 September 1932, p 1025 (James Scullin); Cominosand Dwyer II, n 1 at 74.

44National Trustees, Executors & Agency Co v FCT (1916) 22 CLR 367 at 378 (Isaacs J); GG Crespin & Son v ColacCo-operative Farmers Ltd(1916) 21 CLR 205 at 218-219 (Isaacs J) (there is a common understanding that an excise is aform indirect taxation); Commonwealth v South Australia (1926) 38 CLR 408 at 420 (Knox CJ), 435 (Higgins J), 437 (Rich J);437-438 (Starke J); Attorney-General (NSW) v Homebush Flour Mills Ltd (1937) 56 CLR 390 at 416, 419-420 (Evatt J)

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being one which is demanded from the very persons whom it is intended or desired should payit, while the latter species is one which is demanded from a specific person, in the expectation

and intention that he or she will indemnify himself or herself at the expense of another.

45

Object versus subject of taxation(16) The second paragraph of s 55 only prohibits a law containing two or more subjects of

taxation, not two or more objects of taxation.46 There may be as many objects of taxation meaning persons taxed as Parliament pleases.47 (One way to conceptualise the difference isas follows: object of taxation deals with who is being taxed or who is required to pay the tax,while subject of taxation deals with whatis being taxed).48

(17) Therefore, the definition of a subject of taxation may be selectively confined, but if the burdenof a tax falls discriminately, artificially, or even arbitrarily on a variety of distinct objects (thatis, different classes of taxpayers), this will not result in a s 55 violation.49

(18) The nature of the subject taxed is not changed merely because actual liability to pay the tax isimposed upon a person not necessarily enjoying the income or increase in wealth, but onsomeone having or obtaining, or having had a means or opportunity of recoupment or

indemnification, out of the subject of taxation involved.50

(19) Legislation does not violate s 55 merely because it taxes an interposed entity (such as acompany) standing between the subject of taxation (such as land) and the taxpayer (such as ashareholder). In reality, the only subject of taxation is the ultimate subject matter of the tax,namely, land there is in such a case no tax imposed on shares or interests in companies (asopposed to land) merely because of the choice of the shareholder as the object of the taxation(being the ultimate quasi-owner of the land) rather than the company (who is the actual legalowner of the land).51

(20) Property of a deceased person which ceases to be his or her property before his or her death(that is, what the deceased owned during his or her lifetime) is the same subject of taxation asthe property forming part of the estate after his or her death the test of subject matter depends

(indirectness is a well-known characteristic of an excise); Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263 at285 (excise duties ordinarily exhibit this characteristic of indirectness); Parton v Milk Board (Vic) (1949) 111 CLR 229 at 259

(Latham CJ) (an excise duty is plainly indirect); Moore v Commonwealth (1951) 82 CLR 547 at 577 (Fullagar J); BrownsTransport Pty Ltd v Kropp (1958) 100 CLR 117 at 129 (an excise will generally be an indirect tax); Dennis Hotels Pty Ltd vVictoria (1961) 104 CLR 529 at 546 (Dixon CJ), 560 (Kitto J), 575-576 (Taylor J) (indirectness is commonly regarded as acharacteristic of an excise duty).

45 Peterswald v Bartley(1904) 1 CLR 497 at 509 (Griffith CJ); GG Crespin & Son v Colac Co-operative Farmers Ltd(1916) 21CLR 205 at 218 (Isaacs J); AG (Manitoba) v AG (Canada) [1925] AC 561 at 566 (Lord Haldane); Matthews v Chicory

Marketing Board(1938) 60 CLR 263 at 277-278 (Latham CJ), 285 (Starke J). Indirect taxes tend to be more concerned with thecommodity itself, and less with the particular taxpayer than direct taxes: AG (British Columbia) v Kingcome Navigation Co[1934] AC 45 at 59.

46 Osborne v Commonwealth (1911) 12 CLR 321 at 373 (Higgins J); FCT v Hipsleys Ltd (1926) 38 CLR 219 at 236-237(Higgins J); MacCormick v FCT (1984) 158 CLR 622 at 651, 655-656 (Brennan J).

47 Osborne v Commonwealth (1911) 12 CLR 321 at 372-373 (Higgins J); FCT v Hipsleys Ltd(1926) 38 CLR 219 at 236-237(Higgins J). Thus, a tax, despite having more than one object of taxation, may deal only with one subject of taxation: ColonialGas Association Ltd v FCT(1934) 51 CLR 172 at 180-181 (Starke J), 188-189 (Dixon J); Resch v FCT(1942) 66 CLR 198 at224 (Dixon J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 351 (Mason CJ, Wilson, Dawson, Toohey and

Gaudron JJ), 375-376 (Deane J).48 The distinction between subjects and objects is well recognised in wills and deeds; that is, certainty as to the subjectsof thegift (whatis being given) and certainty as to the object(whoreceives the gift): cfFCT v Hipsleys Ltd(1926) 38 CLR 219 at236-237 (Higgins J).

49 Osborne v Commonwealth(1911) 12 CLR 321 at 373 (Higgins J); The Second Fringe Benefits Tax Case(1987) 163 CLR 329at 375-376 (Deane J).

50Resch v FCT(1942) 66 CLR 198 at 224 (Dixon J); British Imperial Oil Co Ltd v FCT(1925) 35 CLR 422; Colonial GasAssociation Ltd v FCT(1934) 51 CLR 172 at 180-181 (Starke J), 188-189 (Dixon J); The Second Fringe Benefits Tax Case(1987) 163 CLR 329 at 351 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ).

51 Osborne v Commonwealth(1911) 12 CLR 321;Morgan v DFCT(1912) 15 CLR 661; AG (Qld) v AG (Cth) (1915) 20 CLR148 at 176 (Isaacs J); Resch v FCT(1942) 66 CLR 198 at 224 (Dixon J).


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on the ultimate subject, which relevantly is all the property owned by a person within12 months before his or her death, rather than on the object of the taxation (be it the executor

or the deceased person during his or her lifetime).

52

(21) In ascertaining whether a law imposes a tax, the prescribed criteria of liability must beconsidered. Clearly the subject of taxation must be found among those criteria. For thepurposes of the second paragraph of s 55, it is possible to say of some criteria that they pertainmore to a description of the subject of taxation than to the persons to be taxed (the objects).53

Judicial deference

(22) The case law does not deny that any enactment that offends against the one subject of taxationrequirement will be invalidated by the High Court,54 for if the High Court were unable toinvalidate a law that violated s 55, then s 55 would be a vain inscription in the Constitution.55

However, before striking down an entire piece of tax legislation which Parliament itselfthought dealt with a single subject of taxation, and thereby potentially throwing the finances ofthe Commonwealth into disorder, the introduction of more than one subject matter must be

demonstrably clear, and a court must be extremely cautious before it concludes that a violationexists (according to the common and general understanding of the community).56

(23) The characterisation of the subject matter of a tax is a question of fact, which may beextremely complicated, and the court will naturally give great weight to the fact thatParliament, drawn from the whole nation and being familiar with its circumstances, itself hasthought that the subject of the tax as dealt with by it was in fact a unity. 57 Apparently, this isbecause the application of the test involves what is in substance a question of fact or valuejudgment.58

(24) If the two Houses of Parliament, each alert as to its (respective) duties and rights andregarding the matter from the broad standpoint of the community, both consider that aproposed tax is laid upon a single subject, then it would require a very clear demonstration oferror to lead a court to say that was wrong, because the ingredients, so to speak, of the taxablesubject were necessarily separate and distinct.59

52National Trustees Executors & Agency Co(1916) 22 CLR 367 at 371-372 (Griffith CJ), 379-380 (Gavan Duffy and Rich JJ).

53MacCormick v FCT (1984) 158 CLR 622 at 652, 654 (Brennan J); Ha v New South Wales (1997) 189 CLR 465 at 497(Brennan CJ, McHugh, Gummow and Kirby JJ); Waterhouse v DFCT (SA) (1914) 17 CLR 665 at 675-676 (Isaacs J); FCT v

Hipsleys Ltd(1926) 38 CLR 219 at 229-230 (Isaacs J). This suggests the Parliamentary understanding of the subject of taxationis primarily revealed from the ordinary and natural meaning language of the statute in dispute: cf Bevan, n 1 at 174, 178, 181;Lane, n 24, p 283.

54Resch v FCT(1942) 66 CLR 198 at 222 (Dixon J); Australian Communist Party v Commonwealth (1951) 83 CLR 1 at 193(Dixon J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 343 (Mason CJ, Wilson, Dawson, Toohey andGaudron JJ).

55National Trustees Executors & Agency (1916) 22 CLR 367 at 379 (Isaacs J). Of course, if the High Court were to rubberstamp whatever a bare majority of Parliament asserts is a single subject, then that would involve the abdication of its judicialfunction under ss 71, 75(iii) and 76 of the Constitution, thereby allowing Parliament to become the final (as opposed to an)arbiter of its own jurisdiction: Bevan, n 1 at 176, fn 21. This would be the constitutional equivalent of putting the foxes incharge of the henhouse.

56 Osborne v Commonwealth (1911) 12 CLR 321 at 363-364 (Isaacs J); AG (Qld) v AG (Cth) (1915) 20 CLR 148 at 177(Isaacs J); National Trustees Executors & Agency (1916) 22 CLR 367 at 379 (Isaacs J); Harding v FCT(1917) 23 CLR 119 at134-136 (Isaacs J); FCT v Munro (1926) 38 CLR 153 at 180 (Isaacs J); Shell Co of Australia Ltd v FCT[1931] AC 275 at 298(Lord Sankey);Resch v FCT(1942) 66 CLR 198 at 211 (Rich J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at344 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ); Austin v Commonwealth (2003) 215 CLR 185 at 272, 274-275(Gaudron, Gummow and Hayne JJ).

57Harding v FCT(1917) 23 CLR 119 at 135 (Isaacs J); Resch v FCT(1942) 66 CLR 198 at 223 (Dixon J).

58 The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 343-344 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ);Austin v Commonwealth (2003) 215 CLR 185 at 272 (Gaudron, Gummow and Hayne JJ).

59National Trustees Executors & Agency Co v FCT (1916) 22 CLR 367 at 378-379 (Isaacs J);Harding v FCT(1917) 23 CLR119 at 134-136 (Isaacs J); Osborne v Commonwealth (1911) 12 CLR 321 at 364 (Isaacs J).

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(25) The expression one subject of taxation does not presuppose some recognised classificationof taxes according to subject matter (but see Proposition 31 below) and the High Court has

uniformly refused to give the expression one subject of taxation a narrow or inflexibleapplication.60 Thus, while the subject of the tax may be gathered from a general considerationof the enactment (or enactments) in question, it is for the legislature to choose its own subject,and its choice is fettered neither by existing nomenclature nor by categories that have beenadopted for other purposes.61

(26) No doubt, if the court is convinced that there has been a violation of the constitutionalprohibition, it must give effect to the organic law, regardless of the (fiscal) consequences;62 butat the same time, the court will require clear evidence that a law is invalid especially when:

(a) a s 55 challenge occurs during wartime; in such a context, tax legislation deservesparticular deference;63 or

(b) there was no violent protest in the Senate that the proposed legislation dealt with morethan one subject of taxation only and Parliament clearly understood that the law in disputewas a single legislative initiative64 (Propositions 22-24); or

(c) the legislation challenged was drafted with meticulous care and is so carefully framedto avoid any collision with s 55.65

Common understanding approach

(27) Section 55 is not concerned with taxonomies used by economists or lawyers who use theirown jargon when discussing subjects of taxation: economists look at the incidence andeconomic consequences of a tax, while lawyers look at the legal mechanism employed tosecure the collection and operation of a tax and its creation, transfer and devolution of rights.But these are not the considerations to which s 55 is directed.66 Rather, the question is whetheron common understanding and general conceptions67 the statute in dispute deals with two ormore subject matters which are broadly distinguishable from one another.

60Resch v FCT(1942) 66 CLR 198 at 222 (Dixon J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 343-344(Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ).

61Resch v FCT(1942) 66 CLR 198 at 222-223 (Dixon J). Here, Dixon J cites no authority for this proposition, although he maysimply be rewording Proposition 11 or 32; it is unclear. See also The Second Fringe Benefits Tax Case(1987) 163 CLR 329 at343-344 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ); Austin v Commonwealth(2003) 215 CLR 185 at 272, 274-275(Gaudron, Gummow and Hayne JJ).

62Harding v FCT(1917) 23 CLR 119 at 135 (Isaacs J). Compare AG (Qld) v AG (Cth) (1915) 20 CLR 148 at 177 (Isaacs J);FCT v Munro(1926) 38 CLR 153 at 180 (Isaacs J). More recently, the argument that the court should resist avoid overruling itsprecedents or striking down a statute simply because it might cause much inconvenience was rejected in Ha v New South Wales(1997) 189 CLR 465 at 503 (Brennan CJ, Gummow, McHugh and Kirby JJ) and Re Wakim (1999) 198 CLR 511 at 554, 556(McHugh J), 569 (Gummow and Hayne JJ). See also Williams v Commonwealth (No 2) (2014) 309 ALR 41 at 55-56(French CJ, Hayne, Kiefel, Bell and Keane JJ).

63Harding v FCT (1917) 23 CLR 119 at 135 (Isaacs J). Note also that all the leading s 55 cases advocating judicial deferencewere decided at the height of WWI or WWII.

64 Permanent Trustee v CSR (Vic) (2004) 220 CLR 388 at 413 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ),

468-469 (Kirby J, concurring); Harding v FCT(1917) 23 CLR 119 at 137 (Isaacs J). Compare Commonwealth, ParliamentaryDebates, Senate, 23 April 1999, p 4262 (Peter Cook).

65Moore v Commonwealth(1951) 82 CLR 547 at 569 (Dixon J), 573 (McTiernan J). The 1930s sales tax, with its nine classesof sales, was also drafted in a similarly meticulous fashion: Commonwealth, Parliamentary Debates, House of Representatives,30 July 1930, pp 4930, 4934 (James Scullin); Commonwealth, Parliamentary Debates, Senate, 6 August 1931, p 5053 (JohnDaley);DCT (SA) v Ellis & Clark Ltd(1934) 52 CLR 85 at 89 (Dixon J); Cominos and Dwyer II, n 1 at 74; Hill G,CCH SalesTax Guide (CCH Ltd, 1989). See also DFCT (NSW) v WR Moran Pty Ltd(1939) 61 CLR 735 at 779 (Evatt J).

66Resch v FCT(1942) 66 CLR 198 at 213 (Starke J), 223 (Dixon J);Mutual Pools & Staff Pty Ltd v FCT(1992) 173 CLR 450at 456-457 (Deane J); Austin v Commonwealth(2003) 215 CLR 185 at 272, 275 (Gaudron, Gummow and Hayne JJ). One hereis reminded of insights offered by Peckham J in Nicol v Ames, 173 US 509 (1899) at 516.

67MacCormick v FCT (1984) 158 CLR 622 at 654 (Brennan J);National Trustees Executors & Agency (1916) 22 CLR 367 at378-379 (Isaacs J);Harding v FCT(1917) 23 CLR 119 at 126 (Barton J), 134-136 (Isaacs J); Resch v FCT(1942) 66 CLR 198


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(28) To determine whether a law deals with a single subject of taxation, one must look at theordinary, everyday meaning and usage of the words found in the text of the tax statute being

challenged.

68

Sources such as past or present Parliamentary speeches or debates,

69

or even caselaw interpreting the statute in dispute70 can all be used as evidence to determine whether a lawdeals with a single subject. For example, in the course of Parliamentary Debates, neitherWilliam Pitt nor Sir Robert Peel believed they were distorting the English language whenusing the word income to describe monetary receipts derived from property.71 Similarly,judicial decisions, when analysing the word income, have naturally assumed that income canbe derived from many diverse sources, including the rental value of their homes72 and capitalprofits (distributed by a company in a winding up).73 Thus, income, as generally understood,can come from many sources and the use of artificial standards for the purpose ofquantifying income (be it gross income, net income, or provisionally ascertained but notassessed income) does not necessarily deprive a tax on sums so calculated as being just that: atax on income.74

(29) Equally, the insights provided by lexicographers rather than textbooks written by

economists or lawyers can be used to determine what the nature (or precise contours) of apurported subject of taxation actually is.75 For example, it was argued the statutory definitionof fringe benefits exceeded the ordinary meaning of the phrase by extending the term toinclude benefits derived from sources other than the employer.76 However, the commonunderstanding of fringe benefits was neither as narrow nor as precise as has been suggested.The definition of fringe benefits was supplied, not by any legal or economic textbook, but byThe Macquarie Dictionary (1981) and indicated that the common understanding of theexpression of fringe benefit is notconfined to benefits provided by an employer to his or heremployee. Rather, the definition of fringe benefits extends to any benefits which are related toemployment, whether or not they are provided by the employer. The statutory definitionexpressly gave effect to this understanding by specifically defining fringe benefits as thosereceived in respect of the employment.77

at 210 (Rich J), 222-223 (Dixon J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 343, 348-351 (Mason CJ,Wilson, Dawson, Toohey and Gaudron JJ); Austin v Commonwealth (2003) 215 CLR 185 at 274 (Gaudron, Gummow andHayne JJ).

68Harding v FCT (1917) 23 CLR 119 at 138-141 (Isaacs J); see also the cases cited in nn 69-77 below. For application of thisrule in the GST context, see Bevan, n 1 at 174, 178, 181-182; Cominos and Dwyer II, n 1 at 79.

69Harding v FCT (1917) 23 CLR 119 at 139-141 (Isaacs J).

70Harding v FCT (1917) 23 CLR 119 at 130 (Barton J), 135, 140-141 (Isaacs J); Resch v FCT (1942) 66 CLR 198 at 213(Starke J), 225 (Dixon J).

71Harding v FCT(1917) 23 CLR 119 at 127, 139-140 (Isaacs J). During the 1890s, the framers debated whether an income taxdealt with more than a single subject of taxation. The question was whether income derived from rent and income derived frompersonal exertion were two different subjects of taxation. The consensus appears to be that they were both income, that is,merely one aspect or component of a single unified subject: Offcial Record of the Debates of the Australasian FederalConvention, Melbourne, 8 March 1898, pp 2050 (Vaiben Solomon), 2053 (Edmund Barton).

72Harding v FCT (1917) 23 CLR 119 at 130-131 (Barton J), 133, 140 (Isaacs J); cf DCT v Kirk [1900] AC 588 at 592(Lord Davey); London County Council v AG [1901] AC 26 at 35 (Lord McNaughton), 44 (Lord Davey).

73Resch v FCT(1942) 66 CLR 198 at 225 (Dixon J).

74British Imperial Oil Co Ltd v FCT(1925) 35 CLR 422 at 434 (Isaacs J); FCT v Munro(1926) 38 CLR 153 at 193 (Isaacs J),209 (Higgins J), 216 (Starke J); Colonial Gas Association Ltd v FCT(1934) 51 CLR 172 at 188 (Dixon J);Resch v FCT (1942)66 CLR 198 at 213 (Starke J); Moore v Commonwealth (1951) 82 CLR 547 at 569 (Dixon J), 573 (Webb J); FCT v Clyne(1958) 100 CLR 246 at 271 (Webb J); Austin v Commonwealth(2003) 215 CLR 185 at 274 (Gaudron, Gummow and Hayne JJ).

75Harding v FCT(1917) 23 CLR 119 at 133 (Isaacs J); The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 348-351(Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ).

76 The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 348 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ);Bevan, n 1 at 178, 181.

77 The Second Fringe Benefits Tax Case (1987) 163 CLR 329 at 348-351 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ).

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Historical and comparative approach

(30) Historically, a land value tax is a tax on a single subject of taxation, namely, land (or, perhaps

more precisely, land values).78

(31) One must look at what the accepted meaning of the phrase one subject of taxation was atthe time of Federation that is, one must ask: does the legislation deal with what historicallywould be regarded as more than a single subject of taxation as that term was originallyunderstood to mean in 1900, when the Constitution was adopted?79

(32) However, another line of authority suggests that the material date to determine whether a taxdeals with one subject of taxation is not the year 1900, but the year the tax being challengedactually passed.80 This is because the Constitution is presumably to stand for all time; andwhat was a single subject in 1900 may not be so a century hence, and vice versa.81 Therefore,a court must ask itself: in the year when the statute in dispute was first enacted, that is, at thetime when the Act was passed imposing the new tax, did it deal with what then in thecircumstances of the Commonwealth at that time would be fairly regarded as a single

subject?

82

(33) The two approaches might be immaterial, given that, either way, recourse to the practice of aBritish legislature or a dominion or colonial legislature may serve as a guide in determiningwhether a provision of a particular kind could be regarded as falling within a particular subjectmatter,83 at least for the types of taxes commonly found throughout the 18th or 19th century that is, prior to 1900.84

78 Osborne v Commonwealth (1911) 12 CLR 321 at 340 (Griffith CJ), 351 (Barton J), 373 (Higgins J); AG (Qld) v AG (Cth)(1915) 20 CLR 148 at 176 (Isaacs J), 180 (Higgins J). The unimproved value of the land is determined at the date of itsvaluation:McGeoch v Commissioner of Land Tax(1929) 43 CLR 277 at 290-291 (Knox CJ and Dixon J), 303 (Isaacs J).

79National Trustees Executors & Agency Co (1916) 22 CLR 367 at 372-373 (Griffith CJ); Harding v FCT(1917) 23 CLR 119at 129-131 (Barton J); Lane, n 24, pp 283-284: For all that [referring to Propositions 24 and 32], no doubt the Court would beimpressed by the fact that the challenged law dealt with two or more subjects of taxation which existed persistently as severalsubjects, say, in the nineteenth century History, especially pre-1900 history, is one factor which enables the Court to

appreciate the current usage of taxation terms.80Harding v FCT(1917) 23 CLR 119 at 136 (Isaacs J); Lane, n 24, p 283: For the Court has suggested that the time at whichthe challenged Act is passed is the date at which one ascertains whether the law dealt with what is considered then one subjectof taxation.

81Harding v FCT(1917) 23 CLR 119 at 136 (Isaacs J). The very fact that a well-known category of taxation like income taxcan consist of more than one subject of taxation in 100 years hence suggests the folly of reading the words one subject oftaxation as one form or species of taxation.

82Harding v FCT(1917) 23 CLR 119 at 136 (Isaacs J); Bevan, n 1 at 177 (Proposition 17). But this is not to say history iscompletely irrelevant to the analysis: Lane, n 24, p 283: The very Justice who prescribed the material date as the date of theenactment of the legislation of the challenged Act was himself prepared to be guided by pre-Federation understanding of onesubject of taxation, although the Commonwealth scheme was enacted in 1914, citing National Trustees, Executors & AgencyCompany v FCT(1916) 22 CLR 367 at 378-379 (Isaacs J). Indeed, in Harding itself Isaacs J spent several pages analysing the18th and 19th century usage of the word income: Harding v FCT (1917) 23 CLR 119 at 136-141.

83Resch v FCT(1942) 66 CLR 198 at 222-223 (Dixon J).

84 GG Crespin & Son v Colac Co-operative Farmers Ltd(1916) 21 CLR 205 at 219-221 (Isaacs J);

National Trustees, Executors& Agency Company v FCT(1916) 22 CLR 367 at 378-379 (Isaacs J); Harding v FCT(1917) 23 CLR 119 at 130 (Barton J),136-141 (Isaacs J). Of course, it is unlikely the framers of the Constitution ever envisaged the possibility that tacking mightoccur by amalgamating well-known categories or kinds of indirect taxes like excise duties, custom duties, services tax, adebit tax, and land transfer tax etc into a hybrid supertax like the GST. Yet today, as will be seen below, this is precisely whatis occurring in most legislatures around the world, be they unicameral in nature, or with weak upper houses. Therefore, the GSTprovides a historical precedent whereby a number of historically distinct taxes can be tacked together into an omnibus supertax.However, for reasons given below, if a noun representing a verb can be a subject of taxation, then an Income and Tea Tax(that is, a tax on the supply of tea and a tax on the supply of income) or a Land and Inheritance Tax (that is, a tax on the valueof land and a tax on the value of any inherited estate) would now represent a single subject of taxation, namely, the verbssupply or value respectively. It would effectively mean s 55 permits the very thing it was designed to prevent because itwould allow the executive government to bundle together proposals of different kinds into a single bill simply by giving acollective name to the group of subjects taxed (Propositions 1 and 7).


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(34) However, Propositions 31-33 only appear to be useful where Parliamentary understandingitself is divided or unclear (cf Proposition 26);85 or where the historical approach coincides

with, rather than overrides, the popular use of an everyday scope or meaning of a word (cfProposition 28).86

Deeming provisions

(35) Parliament cannot, by any definition or provision that it may adopt, contravene the provisionsof the Constitution.87 Nor can s 55 be avoided by deeming facts to be as they are not, or bydeeming things to have a character which they do not bear.88 Accordingly, Parliament cannotdeem two (or more) different subjects of taxation to be only one subject, for example, bydeeming a poll tax or land transfer tax to be a land value tax;89 or by pretending that incometax is a poll tax or a tax having for its true subject the failure of the real taxpayer to dischargehis or her tax liability;90 or by deeming a finished in situ swimming pool forming part of theland to be an excise which is obviously not a tax on goods, but a tax on land or somethingthat forms part of realty to land.91

PART III: APPLICATION

With the above propositions in mind, it is necessary to look at the prescribed criteria of tax liabilityimposed under the GST Act to determine whether the GST deals with more than one subject oftaxation (Proposition 21). Under s 9-5, a GST liability is payable if a supply is made for considerationin the course or furtherance of a registered enterprise connected with Australia (a so-called taxablesupply). Clearly, however, the key concept which permeates the GST Act is supply, which isdefined in s 9-10(2) as follows:

(1) A supply is any form of supply whatsoever.

(2) Without limiting subsection (1), supply includes any of these:

(a) a supply of goods;

(b) a supply of services;

(c) a provision of advice or information;

(d) a grant, assignment or surrender of real property;

(e) a creation, grant, transfer, assignment or surrender of any right;

(f) a financial supply;

(g) an entry into, or release from, an obligation;

(i) to do anything; or

(ii) to refrain from an act; or

(iii) to tolerate an act or situation;

85 Compare Permanent Trustee v CSR (Vic) (2004) 220 CLR 388 at 413 (Gleeson CJ, Gummow, Hayne, Callinan andHeydon JJ).

86 See Austin v Commonwealth (2003) 215 CLR 185 at 274 (Gaudron, Gummow and Hayne JJ), citing Harding v FCT (1917)23 CLR 119 for the broad historical understanding of the nature of income.

87

Resch v FCT(1942) 66 CLR 198 at 213 (Starke J), quoted approvingly in Mutual Pools & Staff Pty Ltd v FCT(1992) 173CLR 450 at 469 (Dawson, Toohey and Gaudron JJ). See also University of Woollongong v Metwally (1984) 158 CLR 447.

88Resch v FCT (1942) 66 CLR 198 at 213 (Starke J); Mutual Pools & Staff Pty Ltd v FCT (1992) 173 CLR 450 at 469(Dawson, Toohey and Gaudron JJ).

89 Waterhouse v DFCT (SA) (1914) 17 CLR 665 at 673-674 (Barton J), 675-676 (Isaacs J). See also MacCormick (1984) 158CLR 622 at 637-638 (Gibbs CJ, Wilson, Deane and Dawson JJ); Mutual Pools & Staff Pty Ltd v FCT(1992) 173 CLR 450 at469 (Dawson, Toohey and Gaudron JJ).

90 FCT v Hipsleys Ltd(1926) 38 CLR 219 at 229-230 (Isaacs J).

91Mutual Pools & Staff Pty Ltd v FCT (1992) 173 CLR 450 at 454-455 (Mason CJ, Brennan and McHugh JJ), 470 (Dawson,Toohey and Gaudron JJ), as discussed in Austin v Commonwealth (2003) 215 CLR 185 at 275 (Gaudron, Gummow andHayne JJ).

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(h) any combination of any 2 or more of the matters referred to above.

In order for the High Court to dismiss a case challenging the validity of the GST, it must endorse the

argument that the GST is either a tax on supply92

or the act of supply.93

However, in order for the GST to be declared unconstitutional, the High Court must be preparednot to characterise the GST as being a direct tax on a supply or even a direct tax on a supply forconsideration. Rather, it must be prepared to characterise the number of specified matters94 listed inthe shopping list above matters which can and do exist independently of each other and do not robone another of their distinctiveness95 as representing, in effect, indirect taxes on a range ofnecessarily distinct and separate matters (Propositions 7, 9). That is to say, the High Court must beprepared to characterise the GST as being an indirect tax on goods when various goods are renderedfor a consideration at the point of supply (tax proposal 1); an indirect tax on services when variousservices are rendered for a consideration at the point of supply (tax proposal 2); an indirect tax on realproperty when real property is rendered for a consideration at the point of supply (tax proposal 3); anindirect tax on the creation, grant, transfer, assignment or surrender of any intangible right when suchrights are rendered for a consideration at the point of supply (tax proposal 4); an indirect tax on

financial transactions when financial supplies are rendered for a consideration at the point of supply(tax proposal 5); and an indirect tax on any release or entry into any contractual obligations when suchobligation is rendered for a consideration at the point of supply (tax proposal 6), and, in the case ofs 81-5 of the GST Act, an indirect tax on State taxes when State taxes are supplied whether with orwithout consideration (tax proposal 7), plus any other residual thing capable of being provided orfurnished for a consideration by a registered enterprise in Australia. Thus, the act of furnishing orproviding something for a consideration in Australia represents the critical event or occasion, thecondition precedent, the taxing point, which renders the disparate subjects of taxation listed ins 9-10(2) as being liable to taxation, but a supply without more is not the subject of taxation in andof itself.96

There are, however, at least three facts which can be immediately discounted from this analysis.First, the mere fact that the GST is today an internationally recognised category or species ofindirect tax does not necessarily mean it also deals with one subject of taxation only. After all,

customs and excise duties, like the GST, are an internationally recognised category or species ofindirect tax, yet the Constitution itself recognises, on its face, that excises and customs can deal withmultiple subjects of taxation hence why they are expressly exempt from the single subject mandate(Proposition 14).97 Therefore, the best way to read s 55 is to assume it means what it says: it prohibits

92 Commonwealth,Parliamentary Debates, Senate, 23 April 1999, pp 4260-4261 (Rod Kemp); Economic Legislation EstimatesCommittee, Parliament of Australia, Canberra, 8 June 1999, pp E189-E193 (Greg Smith); 9 June 1999, pp E354-E367:Senator Murphy: What are the three respective subjects of taxation of the three GST imposition bills? Greg Smith: You areasking me a legal question, and I am not in a position to provide legal opinions. The information I can give you is that there arethree bills which would, if passed, provide for the imposition of the tax. One of them is a general bill. One of them is an excisebill and the other is a customs bill. They are the three that are there. I think I said yesterday that the tax is a tax on supply. Sothat is, if you like, the key phrase in the assessment bill.

93 Hill P, Taxation of Goods and Services in Australia Past, Present and Future (2009) Australian GST Journal 21 at 24;Thomson Reuters, Australian GST Handbook(2012) at [1.105]: The argument is that because the GST legislation imposesGST in respect of goods, services, and other things, it is a tax on more than one subject, and therefore is in breach of Section 55.

The counterargument is that rather than imposing a tax on the various types of things supplied, the GST legislation confinesitself to taxing the act of supply. In turn, this view is countered by the argument that as the GST law also taxes taxableimportations, it cannot be said to only tax the act of supply.

94 Travelex Ltd v FCT(2010) 241 CLR 510 at 516 (French CJ and Hayne J); 76 ATR 329.

95 Travelex Ltd v FCT (2010) 241 CLR 510 at 535-536 (Bell and Crennan JJ).

96 Cominos and Dwyer II, n 1 at 77, 79; Cominos, n 1 at 70-71.

97 Of course, the mere fact the Constitution recognises that customs and excise duties can deal with multiple subjects oftaxation implicitly recognises the possibility that a single category or species of indirect tax can, at the same time, deal withmany disparate subjects of taxation. Indeed, it seems to this author, what excise and custom duties were to the 19th century,the GST is to the 21st century, namely, a form or species of indirect tax imposed on a number of disparate subjects oftaxation.


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any tax bill from tacking together two or more subjects of taxation. If a new category or speciesof tax legislation emerges which combines two or more subjects of taxation, it is unconstitutional. 98

To further appreciate why this must be the case, suppose the Commonwealth, drawing inspirationfrom the legislatures of 150 foreign countries, developed the novel idea to create a broad-basedcategory or species of direct tax by tacking together inefficient State taxes, such as a hearth tax,a property tax, a gift duty, various forms of inheritance tax such as estate and succession duties, and aland value tax together (Propositions 2, 8 and 30) into a new kind of hybrid supertax. They do thisby imposing a 5% tax on taxable valuations, which is defined as any form of taxable valuationwhatsoever (the collective name given to the group of distinct subjects: Proposition 7). Valuationsis then defined as follows: (a) the value of any fixture or structure annexed to any parcel of landowned by any person; (b) the unimproved value of any parcel of land owned by any person; (c) thetotal value of all property a deceased predecessor had owned at any time within a period of one yearbefore their death and inherited by any person, the successor; (d) the value of any gift withoutconsideration given from one person to some other person; and (e) any two or more matters listed in(a) to (d) above. Suppose these foreign legislatures call this new broad-based category or speciesof tax Valuations Tax (VT). However, the Australian Parliament calls the tax A New Tax System Land and Inheritance Tax (LIT) with only valuations over $1,500 dollars being hit with the tax.Assume further that the main object of the tax happens to be the wealthy, and the tax is imposedannually through self-assessments, albeit there are some special rules for some matters, like inheritedproperty, which is only factored once into calculating the tax liability.99 Suppose just over half of theAustralian Senate opposes a tax on land and tax on gifts, but a large majority of the Senate stronglysupports a tax on all forms of inherited property (with the Senate being lukewarm about a tax onfixtures). Nevertheless, suppose, like with the GST, the LIT narrowly passes in the Senate because thegovernment of the day manages to put in certain exemption sweeteners for charitable and educationalinstitutions insofar as the tax applies to land, and then pressures the cross-benchers to pass the taxdespite their concerns that the tax violates s 55 of the Constitution.

If subject of taxation is rewritten to read category or form of taxation, then s 55 wouldplainly allow the very thing it was designed to prevent, namely, that the Senate would be forced totake the good, the bad and the ugly (Propositions 1-2). After all, in substance, a LIT would involve

tacking together tax proposals of different kinds into a single measure, including a direct tax onfixtures, a direct tax on land, a direct tax on any inherited property, and a direct tax on gifts. Insubstance, this would traditionally amount to a tax on four distinct subjects of taxation (cfPropositions 2, 8, 20, 30), despite in form being presented as a single category or species oftaxation called VT or LIT.100 Thus, the mere fact a tax may be a well-recognised category or formof taxation does not necessarily mean it also deals with only one subject of taxation; otherwise theability of the Senate to protect the States from financial aggression on behalf of the Commonwealth

98 It is probably for this reason the federal Parliament could not impose an Estate and Gift Tax in the form of a single tax bill:Estate and Gift Duties Act 1955(NZ); Estate and Gift Duties Act 1968 (NZ); cf Gift Duty Assessment Act 1941 (Cth); EstateDuty Assessment Act 1914 (Cth). Nor could Parliament impose a Land and Income Tax in the form of a single tax bill:Taxation Act 1884(SA); Land and Income Tax Act 1895 (NSW); Land and Income Tax Act 1916(NZ); Land and Income Tax

Act 1923 (NZ); cf Land Tax Assessment Act 1910 (Cth); Income Tax Act 1915 (Cth). Nor could the Parliament impose aCustoms and Excise Tax in a single tax bill: Customs and Excise Act 1996(NZ), which clearly violates the second paragraph

of s 55, which it requires customs and excise duties be contained in separate taxing acts.99 Thus, if a person believes, via self-assessment, that they happen to have owned in the previous year $800,000 worth of land(5% x 800,000 = $40,000); and $35,000 worth of fixtures annexed to that land (5% x 35,000 = $1,750); and they happened tohave received in the previous year a $300,000 inheritance (5% x 300,000 = $15,000); and they have transferred a gift worth$30,000 to someone (5% x 30,000 = $1500), then their aggregate LIT (or VT) tax liability would be $58,250.

100 Obviously, valuations is not the subject of taxation. Just as the verb supply invites us to ask supply ofwhat?, the verbvaluation invites us to ask the valuation of what? The term is meaningless without a subject which fills in the blank and,obviously, the subject of a valuation might be as varied as the subject of any supply. Thus, just like the making of a supplyin the indirect tax context is a condition precedent required to impose GST in the indirect tax context, in the direct tax contextthe making of a valuation is a condition precedent to the imposition of a tax. The law which provides for the imposition andcollection of a tax must also include valuation: Offcial Record of the Debates of the Australasian Federal Convention,Melbourne, 8 March 1898, p 2056 (Edmund Barton).

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would effectively be wiped away by any Machiavellian economist who devises some clever way tocombine disparate taxes together into a new omnibus category or species of taxation. Melding

together four narrowly based direct (or in case of the GST several indirect) taxes into a conglomeratespecies or form of supertax simply by grouping a number of distinct subjects together andgiving a collective name to a group (cf Proposition 7) does not change the fact that, in substance, thetax is still a law dealing with four different subjects of taxation. To claim otherwise would allow theCommonwealth to override the s 55 mandate of the Constitution by disguising the real nature andeffect of its enactments through clever drafting devices. The real nature and effect of the GST is to taxgoods. Its real nature and effect is to tax services. Its real nature and effect is to tax State imposts, andso on. In short, while Parliament is free to create any tax ingenuity it may devise, any such tax sodevised must always be subject to any express or implied limitations prescribed by the Constitutionitself.

In any event, neither bicameral, let alone unicameral, legislatures elsewhere have had to considerany of 35 propositions set out above when drafting their tax regimes, and therefore they operate on adifferent analytical framework to that of the Australian Constitution. Indeed, blindly reciting

international precedent simply begs the question whether these foreign jurisdictions have found acreative way to tack together disparate kinds of taxes together, and whether these foreignlegislatures thought of their GST legislation as a unit, or as a collection of matters necessarily distinctand separate. Furthermore, common understanding and general conceptions might differ acrosscountries, meaning that what might appear to be a single subject to a Canadian might not appear so toan Australian, and the political relations between a bicameral legislature with an elected Upper Housemight differ substantially from some post-Asquithean legislature with an unelected Upper House.

In fact, if anything, international precedent ought to invite damaging admissions: the tax regimesof some of the countries mentioned above would clearly run afoul of a number of other requirementsfound in s 55 of the Constitution,101 which suggests the GST tax regimes found elsewhere should, atbest, be taken with a grain of salt when assessing the constitutional validity of the Australian GSTregime. Indeed, one only has to look at India as a more recent example to see that the GST can becharacterised as effectively tacking together proposals relating to taxation of different kinds

including duties of excise and services tax into a centralised tax measure.

102

But surely the modern101 In many ways, the GST regimes in other foreign jurisdictions exemplify exactly what s 55 was designed to prevent: ExciseTax Act, RSC 1985 (Canada), Pts II-III, IX combines a duty of excise with a telecommunications services tax and GST on thesale of real property, which clearly violates the requirement under s 55 that laws imposing excise deal with duties of excise only.A tax on services and a tax on real property is obviously nota tax on goods. At one point the Canadian GST also recognises thattaxable supplies is actually imposing taxes on different kinds of subject matters, see, for example, Excise Tax Act, RSC 1985,s 212, Tax on Importation of Goods and s 217, Tax on Imported Taxable Supplies, which is further delineated into s 220.05,Subdivision A: Tax on Tangible Personal Property and s 220.08, Subdivision B: Tax on Intangible Property and Services.See also Goods and Services Tax 1985 (NZ), s 2, which defines goods to include real property, a deeming provision whichwould be instantly fatal in the excise context by virtue of Proposition 35, given it prevents deeming one subject of taxation(such as goods) to be another subject of taxation (such as realty). See also Value Added Tax Act 1994 (UK), Sch 4, s 4, whichdeems an interest in land, such as a fee simple or a long-term lease to be a supply of goods, again contrary to Proposition 35;Sch 8, Pt 1, which groups together 16 zero-rated topics according to subject matter, including books and newspapers (Group3), realty (Group 5), and imports (Group 13). Were it not for the fact they were otherwise exempt, all of these disparate subjectmatters would look suspiciously like excise duties on newspapers, custom duties on imported goods and other taxes on other

subjects being tacked together into an omnibus tax bill (a United Kingdom style VAT on books, newspapers and imported goodswould, in Australia, all be imposed under a separate Excise or Customs Imposition Act). Of course, it goes without saying thatunitary states like New Zealand and the United Kingdom, as well as federal states like Canada, have an unfettered plenarypower to tack together in whatever way they please any number of disparate taxes (excises include) in order to generate thebroadest possible tax base. This itself suggests the prevalence of VAT or GST in other legislatures with weak (or otherwisenon-existent) Upper Houses should be given little weight, since these legislatures frequently ignore the sort of finely wroughtchecks and balances found within the federal Australian Constitution.

102 Mukhopadhyay S, Time to Move Forward with a New GST Model, Business Standard (25 August 2014) p 14: CentralExcise, additional excise duties, service tax, and all cess and surcharges will be subsumed into the central GST (emphasisadded); Ernst and Young,Worldwide VAT, GST and Sales Tax Guide (2013) pp 337-338: The GST is intended to subsumemostof the central and state level indirect taxes currently in force (emphasis added); Singh R, Indian Economy Civil Service

Examinations (McGraw Hill, 2010) at [20.5]: The taxes to be withdrawn or merged into GST are: Central Taxes: CENVAT,Service Tax, Sales Tax and Stamp Duty. State Taxes: State excise, sales tax, entry tax, lease tax, works contract tax, luxury tax,


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practice of bundling different kinds of indirect taxes together under a conveniently vague umbrellaterm103 like supply does not change the substance of what is going on, namely, that the underlying

GST tax base consists of a chaotic vista of distinct and separate subject matters. Indeed, the very factthat in Australia, like in India, the GST Act was advertised as a new tax system in other words, asa grouping of taxes across a wide area104 and not just a bill to amend the tax law, but to create anentire new system embracing several forms of tax law105 should raise a number of alarm bells fromthe perspective of s 55, given that:

We cannot fail to remember the Constitution designed the Senate to be a House of greater power thanany ordinary second chamber. Not only by its express powers, but by the equality of its representationof the States, the Senate was intended to be able to protect the States from aggression. And from nosource could aggression be more dangerous than from measures of finance when unjustly boundtogether.106

I return to the strong connection between sec 51(ii) and sec 55. Both of them are in a form devised forthe protection of State interests They are checks on a Parliament primarily intended to exercise greatlegislative powers with a due regard to those interests.107

However, in framing the GST Act the executive government in 1999 failed to pay due regard tovarious State interests. This is because the GST Act has in substance, although not in form, boundtogether an unprecedented federal services tax with a controversial a tax on a tax both of which werespecifically viewed as an act of aggression by a number of Senators from smaller States likeQueensland, Tasmania and Western Australia with a number of anodyne, formerly indirect Statetaxes on various financial and realty transactions. As will be seen below, this disabled the Senate fromwatering down even further the more regressive impact of the GST on tourism services, and variousother State imposts like the fire services levy.

Secondly, it is irrelevant that right now in 2014 one might regard the GST as dealing with a singlesubject of taxation. Rather, what must be examined is whether the GST was generally understood todeal with one subject of taxation either back in 1999, when the GST Act was first enacted, or backin 1900, when the Constitutionwas first adopted. Thus, what is relevant legally is whether the peopleback in either 1999 or 1900, not in 2014 or 2015, would have fairly regarded the GST as imposing atax on a single subject of taxation (Propositions 31-32).

Finally, the GST Act does not become unconstitutional simply because it is possible to drawanalytical or logical distinctions between the different forms of supply prescribed in s 9-10 ofthe GST Act (Proposition 2). Rather, the High Court will probably need to look at whether theexecutive government was abusing the constitutional constraints imposed on the Senate; whether thereare special federalism or other distinct policy issues which make the matters listed in s 9-10

octroi, turnover tax and cess (emphasis added); Joshi SP, GST and Taxation Reform in India, Australian Business News(online) (14 March 2012): It integrates the federal excise duties, customs duties, service tax and state VAT into a single pointlevy, ie GST (emphasis added); Organisation for Economic and Co-operative Development, Consumption Tax Trends 2008VAT/GST(2008) pp 13, 114: The Indian Government announced its intention, in partnership with the States, to merge all taxeslike Services Tax, Excise and VAT into a nation-wide Goods and Services Tax (GST) by 2010 (emphasis added); Schenk A,Radical Tax Reform for the 21st Century: The Role for A Consumption Tax (1999) 2 Chapman Law Review133 at 137, 139:During the last several decades of the twentieth century, the most dramatic change in tax systems around the world has beenthe conversion of turnover and other national sales taxes to value added taxes (emphasis added). But surely these frank andopen admissions of merging together different kinds of indirect taxes (including duties of excise) into a new species ofsupertax cannot override the express constitutional mandate faced by the Australian Parliament, namely, that laws imposingtaxation deal with one subjectof taxation only: Cominos and Dwyer II, n 1 at 72.

103 Cominos and Dwyer II, n 1 at 72, 76.

104 Commonwealth,Parliamentary Debates, Senate, 23 April 1999, p 4264 (Andrew Murray).

105 Commonwealth,Parliamentary Debates, Senate, 23 April 1999, pp 4266, 4268 (Peter Cook).

106 Osborne v Commonwealth (1911) 12 CLR 321 at 353 (Barton J); Buchanan v Commonwealth (1913) 16 CLR 315 at328-329 (Barton J). Note that not even the United States Constitution has anything like a s 55 analogue: Lane, n 24, p 274.

107Buchanan v Commonwealth(1913) 16 CLR 315 at 329-330 (Barton J). Recognition of the States as the protector of Stateinterests can be seen in Victoria v Commonwealth (1975) 134 CLR 81 at 169 (Stephens J) and Western Australia vCommonwealth (1975) 134 CLR 201 at 246-247 (Gibbs J).

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necessarily separate and distinct (Propositions 1-2, 9, 10, 25-26), and what the ordinary meaning ofthe word supply happens to be (Propositions 27-29). However, let us first dispose of the myth that

final private consumption is the one subject of taxation for the purposes of s 55.Is final private consumption the single subject of taxation for the purposes

of s 55?

In 2003, Hely J rejected a claim that the GST Act violated the one subject of taxation limit found ins 55 of the Constitution, claiming that:

There is, as the report of the Asprey Committee confirms, a common understanding as to the nature ofa broadly based goods and services tax. That is reflected in the Explanatory Memorandum for A NewTax System (Goods and Services Tax) Bill 1998 (p 5): Broadly speaking, the GST is a tax on privateconsumption in Australia. T

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Spadijer_Is the GST Unconstitutional?