Victoria v Commonwealth

[1971] HCA 16
(1971) 122 CLR 353
(1971) 45 ALJR 251
[1971] ALR 449
(1971) 2 ATR 249

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(Decision by: Gibbs J)

Victoria
v Commonwealth

Court:

Judges: Barwick CJ
McTiernan J
Menzies J
Windeyer J
Owen J
Walsh J

Gibbs J

Hearing date: 26, 27 and 30 November; 14 December 1970; 1-3 May 1971
Judgment date: 14 May 1971

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Decision by:
Gibbs J

By the Pay-roll Tax Act 1941-1966 (Cth) a tax at the rate of 2 1/2% is imposed on all wages paid or payable by any employer. The tax, which is known as pay-roll tax, is levied in accordance with the provisions of the Pay-roll Tax Assessment Act 1941-1969 (Cth) ("the Assessment Act"). The employer who pays, or is liable to pay, the wages is required to pay the tax (s 4 of the Pay-roll Tax Act 1941-1966; s 13 of the Assessment Act). S 3(1) of the Assessment Act provides that in that Act, unless the contrary intention appears, "employer" means any person who pays or is liable to pay any wages and includes (inter alia) the Crown in the right of a State. Returns to enable the tax to be assessed are normally furnished monthly (s 18) and for the purposes of determining the tax payable an amount of $1,733.33 is deducted from the amount of an employer's wages in any month (s 14). If the wages paid or payable by an employer in any year do not exceed $20,800 the tax is refunded or rebated (s 16). Certain exemptions, to which later reference will be made, are allowed by s 15. By Div 2 of Pt III rebates of tax are allowable by reference to the exports of the employer for the year in question and s 16V, which forms part of Div 2, provides:

Where a trade or business, or more than one trade or business, is carried on by the Crown in right of a State, this Division applies as if --

a

the Crown were, in respect of each trade or business, a separate employer; and

b

the Crown were not, as such an employer, entitled to any deduction under section fourteen of this Act.

S 64 of the Assessment Act provides that each State shall, for the purposes of that Act, be represented by such officer or officers as the State appoints and that nothing in that Act imposing any penalty on an employer shall be construed as imposing a penalty on a State or any officer representing that State.

By this legislation, if it is valid, the Commonwealth has obliged the States, in common with other employers, to pay a tax on all wages paid or payable to their employees. The State of Victoria challenges the validity of this tax so far as it is imposed on the wages of certain of its officers and employees who may, speaking imprecisely, be described as public servants employed to carry out the ordinary functions of government.

It may at first sight appear somewhat surprising that the Commonwealth, which each year makes large payments to the States, should at the same time seek to raise money from the States by a tax on the wages paid or payable to State public servants, and thus with one hand take money from the treasury into which the other hand pays it. The history of the tax, which was originally designed to provide funds for the payment of child endowment, the burden of which it was thought should properly fall upon employers, of which each State was one, may reveal the reason why the tax was first imposed on the States, whether or not it also discloses a reason for the continuance of the imposition upon them. However, we are not concerned to inquire into the wisdom, merit, expediency or economic or political justification for the legislation; those are questions for the Parliament if the tax is within its legislative competency. We are solely concerned with a strictly legal question; whether it is within the constitutional power of the Parliament to impose the tax in question.

By s 51(ii) of the Constitution, the Parliament is given power, subject to the Constitution, to make laws for the peace, order, and good government of the Commonwealth with respect to taxation, but so as not to discriminate between States or parts of States. There is no doubt that a law imposing a pay-roll tax is a law with respect to taxation. However, the State of Victoria contends that in so far as the legislation imposes this tax on the States it is invalid. First, the State advances the general proposition that the power given by s 51(ii) does not enable the Parliament to make laws taxing the States, although it is conceded that there may be exceptions to this general rule, for example in the case of duties of customs and excise. In support of this proposition it is said that the ordinary meaning of the term "taxation" is the raising of money for the purposes of government by exaction from subjects and that the States are not subjects of the Commonwealth. Further, it is submitted that the Commonwealth's power to make laws with respect to taxation is subject to the Constitution, which recognizes and protects the coexistence of the Commonwealth and the States as separate independent governments, and in consequence impliedly forbids the Commonwealth to tax the States, or a State to tax the Commonwealth. If this proposition is not accepted in its generality, it is submitted that at least the Commonwealth has no power to impose on a State a tax on the employment of civil servants who are employed in activities that can only be carried on by a government and whose employment is essential to the very existence of the State. In reply to these arguments it is urged by the Solicitor-General for the Commonwealth that it is settled by Amalgamated Society of Engineers v Adelaide Steamship Company Ltd (the Engineers' Case) (1920) 28 CLR 129 that the Parliament of the Commonwealth has power to make laws binding on the States with respect to the matters set forth in s 51 of the Constitution, subject only to the limitations arising from the words used in s 51 to describe the various topics upon which the Parliament may legislate and to such other limitations as are expressly imposed by the Constitution; no further limitations, he says, are to be implied. He submits that there is nothing in the words of s 51(ii) themselves which gives rise to an implication that a tax should not be imposed on the States, and that the Commonwealth Parliament accordingly has power to impose a tax on the States, provided that the express limitations contained in the Constitution, particularly in s 51(ii) itself and in ss 55, 99 and 114, are not infringed.

Although it is true that the word "taxation" is sometimes thought to connote the levying of revenue by a sovereign from its subjects, in my opinion its meaning is not limited in that way. Compulsion is an essential feature of taxation (Lower Mainland Dairy Products Sales Adjustment Committee v Crystal Dairy Ltd (1933) AC 168, at p 175) but it is not necessary that the authority which imposes the tax and the person who is compelled to pay it should stand in the relation of sovereign and subject. Obvious examples of taxation imposed on persons who are not subjects of the power levying the tax are customs duties exacted from foreign traders and land taxes payable by absentee landowners. In Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263, at p 276, Latham CJ described a tax in the following words, which were later adopted by the Court in Browns Transport Pty Ltd v Kropp (1958) 100 CLR 117, at p 129: "It is a compulsory exaction of money by a publci authority for public purposes, enforceable by law, and is not a payment for services rendered." A compulsory contribution levied on the States by the Commonwealth, for the purposes of the government of the Commonwealth, may be taxation, notwithstanding that the States are not subjects of the Commonwealth.

The important question that arises is, therefore, whether the words of s 51(ii) must be read subject to an implied restriction which prevents the Commonwealth from taxing the States, either at all, or in circumstances which would include the present case.

In the Engineers' Case (1920) 28 CLR 129 the Court rejected the doctrine of the immunity of instrumentalities which had been based on implications thought to be rendered necessary by a federal system of government and laid down the rule that "laws validly made by authority of the Constitution, bind, so far as they purport to do so, the people of every State considered as individuals or as political organisms called States -- in other words, bind both Crown and subjects" (1920) 28 CLR, at p 153. The majority of the Court said (1920) 28 CLR, at p 154 that "where the affirmative terms of a stated power" (granted by the Constitution to the Commonwealth Parliament) "would justify an enactment, it rests upon those who rely on some limitation or restriction upon the power, to indicate it in the Constitution", and that "it is a fundamental and fatal error to read s 107 as reserving any power from the Commonwealth that falls fairly within the explicit terms of an express grant in s 51, as that grant is reasonably construed, unless that reservation is an explicitly stated". Although the judgments of the majority laid stress on the need to turn to the language of the Constitution itself, to read it naturally and to permit it "to speak with its own voice", the case did not decide that in the interpretation of the Constitution no implications whatever are to be made. On the contrary, it was said (1920) 28 CLR, at p 155: "The doctrine of 'implied prohibition'" (as their Honours called the doctrine of the immunity of instrumentalities) "finds no place where the ordinary principles of construction are applied so as to discover in the actual terms of the instrument their expressed or necessarily implied meaning." The ordinary principles of statutory construction do not preclude the making of implications when these are necessary to give effect to the intention of the legislature as revealed in the statute as a whole. The intention of the Imperial legislature in enacting the Constitution Act was to give effect to the wish of the Australian people to join in a federal union and the purpose of the Constitution was to establish a federal, and not a unitary, system for the government of Australia and accordingly to provide for the distribution of the powers of government between the Commonwealth and the States who were to be the constituent members of the federation. In some respects the Commonwealth was placed in a position of supremacy, as the national interest required, but it would be inconsistent with the very basis of the federation that the Commonwealth's powers should extend to reduce the States to such a position of subordination that their very existence, or at least their capacity to function effectually as independent units, would be dependent upon the manner in which the Commonwealth exercised its powers, rather than on the legal limits of the powers themselves. Thus, the purpose of the Constitution, and the scheme by which it is intended to be given effect, necessarily give rise to implications as to the manner in which the Commonwealth and the States respectively may exercise their powers, vis-a-vis each other.

The necessity to make implications in construing the Constitution has been recognized in a number of judgments of this Court. In West v Commissioner of Taxation (NSW) (1937) 56 CLR 657, at pp 681, 682 Dixon J said: "Since the Engineers' Case (1920) 28 CLR 129 a notion seems to have gained currency that in interpreting the Constitution no implications can be made. Such a method of construction would defeat the intention of any instrument, but of all instruments a written constitution seems the last to which it could be applied. I do not think that the judgment of the majority of the Court in the Engineers' Case meant to propound such a doctrine. It is inconsistent with many of the reasons afterwards advanced by Isaacs J himself for his dissent in Pirrie v McFarlane (1925) 36 CLR 170, at p 191 ." It may be added that it is also inconsistent with reasons that have since been advanced by Rich and Starke JJ, who were also members of the majority in the Engineers' Case (1920) 28 CLR 129, (see South Australia v The Commonwealth (1942) 65 CLR 373, at p 447, R v Commonwealth Court of Conciliation and Arbitration; Ex parte Victoria (1942) 66 CLR 488, at pp 515, 516, and Melbourne Corporation v The Commonwealth (1947) 74 CLR 31, at pp 65, 66, 70-75).

The question what limitations may be implied on the power of the Commonwealth to make laws affecting the operations of the States was considered by Dixon J in a number of cases before the matter finally fell for decision in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31. In Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319, at p 390 and West v Commissioner of Taxation (NSW) (1937) 56 CLR, at p 682 that learned Judge suggested that the principle that prima facie a grant of legislative power to the Commonwealth enables it to make laws affecting the operations of the States or their agencies may be subject to two reservations, the first relating to cases where the State is acting in the exercise of the Crown's prerogative and the second to laws discriminating against the States or their agencies. In Essendon Corporation v Criterion Theatres Ltd (1947) 74 CLR 1, at pp 19, 22, 23, he suggested a third reservation, viz that the taxation power might by reason of its special nature be subject to implied restraints. In the same case, Latham CJ tentatively expressed a similar view. He said: "The Commonwealth can impose customs duties upon importation of goods by a State. . . but it has never been held that the general Commonwealth power of taxation extends to a State or that a State can tax the Commonwealth. This question was not fully argued. As at present advised I am of opinion that it seems to be necessarily involved in the very conception of a federal Constitution that the Commonwealth or Dominion cannot, except within some limits which would need very careful definition, tax the States or Provinces and that the States or Provinces cannot tax the Commonwealth or Dominion." (1947) 74 CLR, at p 14.

In Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 the Court held, by a majority, that s 48 of the Banking Act 1945 (Cth), which provided that "Except with the consent in writing of the Treasurer, a bank shall not conduct any banking business for a State or for any authority of a State, including a local governing authority", was not a valid exercise of Commonwealth power. Although different reasons were given by the various members of the majority to support their decision, in my opinion all of them held or recognized that implications must be made in the Constitution because of its federal nature. Rich J (1947) 74 CLR, at p 67 held that the section was invalid because it impaired the power of the States freely to use the facilities provided by banks, a power which is essential to the efficient working of the business of government. In his opinion, any action on the part of the Commonwealth in purported exercise of its constitutional powers, which would prevent a State from continuing to exist and function as such is invalid. He went on to say: "Such action on the part of the Commonwealth may be invalid in two classes of case, one, where the Commonwealth singles out the States or agencies to which they have delegated some of the normal and essential functions of government, and imposes on them restrictions which prevent them from performing those functions or impede them in doing so; another, where, although the States or their essential agencies are not singled out, they are subjected to some provision of general application, which, in its application to them, would so prevent or impede them. Action of the former type would be invalid because there is nothing in the Commonwealth Constitution to authorize such action by the Commonwealth. A general income tax Act which purported to include within its scope the general revenues of the States derived from State taxation would be an instance of the latter." (1947) 74 CLR, at p 66

Starke J rejected the notion that any distinction should be drawn between governmental, or primary and inalienable, and trading functions, and did not agree that the presence or absence of discrimination was a decisive test. He held that the question is "whether the legislation or the executive action curtails or interferes in a substantial manner with the exercise of constitutional power by the other." (1947) 74 CLR, at pp 74-75 Dixon J applied the principle that he had previously enunciated, and held the section bad as a law which discriminated against the States (1947) 74 CLR, at p 84. He explained his notion of discriminatory legislation as follows (1947) 74 CLR, at pp 78-79: "The reservation relates to the use of federal legislative power to make, not a general law which governs all alike who come within the area of its operation whether they are subjects of the Crown or the agents of the Crown in right of a State, but a law which discriminates against States, or a law which places a particular disability or burden upon an operation or activity of a State, and more especially upon the execution of its constitutional powers. . . . Legislation of that nature discloses an immediate object of controlling the State in the course which otherwise the Executive Government of the State might adopt, if that Government were left free to exercise its authority." In other words, the Commonwealth cannot make "a law aimed at the restriction or control of a State in the exercise of its executive authority." (1947) 74 CLR, at p 83 He remarked that it was unnecessary to say anything about the possible reservation relating to the taxation power, which did not enter into the determination of the case before him (1947) 74 CLR, at p 78, but he did say (1947) 74 CLR, at p 81: "What is important is the firm adherence to the principle that the federal power of taxation will not support a law which places a special burden upon the States. They cannot be singled out and taxed as States in respect of some exercise of their functions. Such a tax is aimed at the States and is an attempt to use federal power to burden or, may be, to control State action."

The judgments of the other two members of the majority reveal a somewhat different approach. Latham CJ commenced by holding (1947) 74 CLR, at p 50 that "the argument that s 48 is not legislation with respect to banking should not be accepted" and further held that the section was not legislation with respect to State banking, but upheld the challenge to its validity because it was a law which singled out and was aimed at or directed against the States. He held (1947) 74 CLR, at p 60 that federal laws which "discriminate" against the States, in the sense that they single out the States for taxation or some other form of control, and laws which "unduly interfere" with the performance of what are clearly State functions of government, are invalid. The reason why discriminatory laws are invalid is, he said (1947) 74 CLR, at p 61: ". . . that what is called 'discrimination' shows that the legislation is really legislation by the Commonwealth with respect to a State or State functions as such and not with respect to the subject in respect of which it is sought to bind the State." He added (1947) 74 CLR, at pp 61, 62: "Similarly, federal legislation which, though referring to a subject of federal power, is really legislation about what is clearly a State governmental function, may be said to 'interfere unduly' with that function and therefore to be invalid. . . . In my opinion the invalidity of a federal law which seeks to control a State governmental function is brought about by the fact that it is in substance a law with respect to a subject as to which the Commonwealth Parliament has no power to make laws." I find this reasoning rather difficult to reconcile with his finding that the law which he held invalid in the case before him was a law with respect to banking. Williams J said (1947) 74 CLR, at p 99 that: ". . . there arises from the very nature of the federal compact, which contemplates two independent political organisms, each supreme within its own sphere, existing side by side and exerting divided authority over the same persons and in the same territory, a necessary implication that neither the Commonwealth nor the States may exercise their respective constitutional powers for the purpose of affecting the capacity of the other to perform its essential governmental functions. Therefore a federal law which purports to bind the States must be examined to ascertain whether it is really a law for the peace, order and good government of the Commonwealth with respect to one of the enumerated subjects, or a law which, under colour of such a purpose, is really a law the purpose of which is to interfere with such functions." In his opinion, a discriminatory law is not necessarily bad, although the presence of discrimination points strongly to the law being aimed at the States (1947) 74 CLR, at p 99. He held (1947) 74 CLR, at p 100 that s 48 was in pith and substance a law aimed at giving directions to the States as to the manner in which they should exercise part of their sovereign powers and was invalid.

The reasons given for the decision in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 do not reveal one ground common to all of the judgments upon which the decision of the majority rested. In my opinion, however, it is not right to regard the case simply as a decision that s 48 of the Banking Act, properly understood, was not a law for the peace, order and good government of the Commonwealth with respect to banking. In my opinion the decision is authority for the view that although s 48 was such a law it was invalid because it infringed an implied restriction on the power of the Commonwealth. In two later cases Latham CJ expressed the ratio of the decision in words which in my opinion show that, whatever his earlier view, he understood the width of the principle for which it is authority. In Bank of New South Wales v The Commonwealth (1948) 76 CLR 1, at pp 242, 243 he said: "In the Melbourne Corporation Case (1947) 74 CLR 31 it was held that a system of federal government, involving the co-existence of Commonwealth and States, involved the continuance of the existence of the States as political entities not subject to any form of Commonwealth control in respect of the discharge of their own lawful functions. The States may be bound by some Commonwealth laws (Engineers' Case (1920) 28 CLR 129) but, as governments, the States are independent of the Commonwealth and are not subjects of the Commonwealth; and in respect of the functions which are left to the States the Commonwealth has no power by means of legislation of restricting the States in the performance of the normal and essential functions of government: per Rich J (1947) 74 CLR, at p 66. Thus the Commonwealth Parliament cannot destroy, curtail or interfere with the exercise of constitutional power by a State, and the management and control by the States of their revenues and funds is a constitutional power of vital importance to them: per Starke J (1947) 74 CLR, at p 75. The Constitution should not be understood as authorizing the Commonwealth to make a law 'aimed at the restriction or control of a State in the exercise of its executive authority': per Dixon J (1947) 74 CLR, at p 83. Williams J (1947) 74 CLR, at p 99 held that s 48 of the Banking Act 1945 was a law which discriminated against the States and their agencies and was in substance a law which sought to give direction to the States as to the manner in which they should exercise their executive, legislative, judicial or governmental functions and that it was therefore invalid."

In Wenn v Attorney-General (Vic) (1948) 77 CLR 84, at p 113. he said that in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31: ". . . it was held that federal legislation was invalid if it curtailed or interfered in a substantial manner with the exercise of State constitutional power -- if federal power was used for a purpose of restricting or burdening the State in the exercise of its constitutional powers -- or if the law was aimed at restriction or control of a State in the exercise of its executive authority."

The questions raised by these authorities, so far as they are relevant to the present case, have not been settled by subsequent decisions. In Ex parte Professional Engineers' Association (1959) 107 CLR 208, at p 239, Dixon CJ suggested that in the Engineers' Case (1920) 28 CLR 129 "the reservations and qualifications therein expressed concerning the federal power of taxation and laws directed specially to the States and also perhaps the prerogative of the Crown received too little attention" but he did not amplify his discussion of this question.

In my opinion these authorities do not support the proposition that the power of the Commonwealth Parliament to make laws with respect to taxation is subject to an implied limitation that excepts from the scope of the power any law that imposes taxation on the States. There is, on the contrary, authority that the Commonwealth Parliament may validly pass such a law. R v Sutton (1908) 5 CLR 789 and Attorney-General (NSW) v Collector of Customs (NSW) (Steel Rails Case) (1908) 5 CLR 818 establish that Commonwealth laws imposing duties of customs are binding on the States. It is true that in those cases the Court attached some significance to the fact that the Commonwealth's power to impose duties of customs and excise is exclusive and to the unfortunate consequences that might result if the States were not subject to the customs legislation of the Commonwealth. Nevertheless, the duties were clearly taxes imposed by the Commonwealth Parliament by virtue of the power conferred by s 51(ii) and these decisions, which have remained authoritative for over sixty years, could not have been correct if the taxation power were subject to a prohibition against its exercise so as to affect the States. Moreover, the inclusion in the Constitution of s 114, which expressly forbids the Commonwealth to impose any tax upon property of any kind belonging to a State, would hardly have been necessary if the Commonwealth had lacked power to impose any tax upon the States. In any case, it seems to me that the federal nature of the Constitution, and its scheme and purpose, do not give rise to any implication that no general law imposing taxation may validly be extended to the States. Such an implication goes beyond what is required to preserve and protect the position of the States as independent members of the federation, and would, on the other hand, lead to complexities and difficulties in many cases. I hold that there should not be implied in the Constitution a limitation upon the legislative powers of the Commonwealth that would render invalid any law to the extent to which it purports to impose a tax upon the States. No doubt, however, laws imposing taxation upon the States will be more likely than many other laws to offend against the limitations that apply generally to Commonwealth powers.

It then becomes necessary to determine whether the legislation in the present case is rendered invalid by any such general limitation on Commonwealth power. It is unnecessary to discuss fully the subject of the implied limitations on the power of the Commonwealth to make laws binding on the States. Such matters as the extent of the Commonwealth power to affect the prerogative, or whether the Commonwealth can compel the States to make appropriations of money in satisfaction of liabilities imposed on them, or can impair or affect the Constitution of a State, do not fall for consideration. Still less is it necessary to discuss the implications that may be made as to the immunity of the Commonwealth from action by the States. In my respectful opinion, the view of Sir Owen Dixon, that a Commonwealth law is bad if it discriminates against States, in the sense that it imposes some special burden or disability upon them, so that it may be described as a law aimed at their restriction or control, should be accepted. With all respect, however, I am not disposed to agree that a law which is not discriminatory in this sense is necessarily valid if made within one of the enumerated powers of the Commonwealth. A general law of the Commonwealth which would prevent a State from continuing to exist and function as such would in my opinion be invalid. It is true that in many cases a law which offended in this way would prove to be discriminatory, and I am conscious of the imprecision of the test so far as it applies to general and nondiscriminatory laws. The further formulations of the test by Rich and Starke JJ in the Melbourne Corporation Case (1947) 74 CLR 31 are not free from difficulty. To say that what the Constitution impliedly forbids is a law which would prevent the States from performing the normal and essential functions of government or impede them in doing so is to draw a distinction between essential and inessential functions of government which is inappropriate to modern conditions and has probably never been valid (cf per Windeyer J in Ex parte Professional Engineers' Association (1959) 107 CLR, at pp 274-276). To inquire whether a law curtails or interferes in a subsantial manner with the exercise of constitutional power by the States leads only to the further question what is the constitutional power of the States that is protected. For the purposes of the present case it is, however, unnecessary to attempt to resolve these difficulties because the pay-roll tax in its present form would not be invalid on any view of the question. Although in some cases it may be possible to show that the nature of a tax on a particular activity, such as the employment of servants, renders the continuance of that activity practically impossible, it has not been shown that the tax in the present case prevents the States from employing civil servants or operates as a substantial impediment to their employment. The tax has now been imposed upon and paid by the States for nearly thirty years, and it has not been shown to have prevented the States from discharging their functions or to have impeded them in so doing. They may have less money available for public purposes because they have to pay the tax, but that could be said in every case in which a tax is imposed on the States, and in itself it cannot amount to an impediment against State activity sufficient to invalidate the tax.

The question that remains is whether the legislation discriminates against the States. S 15 of the Assessment Act provides that the provisions of Pt III (which deals generally with the liability to the tax) shall not apply to wages paid by certain employers. These exemptions are not so extensive that it can be said that the tax is aimed at the States, but one particular exemption, granted by para (bb) of s 15 is in favour of wages paid --

". . . by a school or college (other than a technical school or a technical college) which --

i

is carried on by a body corporate, society or association otherwise than for the purpose of profit or gain to the individual members of the body corporate, society or association and is not carried on by or behalf of a State; and

ii

provides education at or below, but not above, the secondary level of education".

The provision exempts from the tax the wages paid to the employees of most private schools in Australia but it does not exempt wages paid by the States to teachers whom they employ. The wages paid to teachers in State schools amount in total to a large sum and their inclusion for the purpose of the assessment of pay-roll tax is far from being insignificant. It might, therefore, be said that the State is under a substantial burden which is not placed generally on other persons who employ school teachers. Although I do not regard this as altogether an easy question, I have reached the conclusion that it is not right to look at the matter in that way. It was understandable that the legislature should have wished to assist the advancement of education by exempting the wages paid by schools which were not conducted for profit or gain. Most taxing statutes contain provision for exemptions and exceptions, and it is of the nature of such statutes that not all taxpayers are treated with absolute equality. The fact that certain private employers are given an exemption which is denied to the States does not necessarily mean that the statute discriminates against the States in the sense defined by Sir Owen Dixon. The question is, to some extent, one of degree. The most that can be said is that in respect of one field of employment the State is taxed although certain private employers escape. If the position of the States is compared with that of private employers generally, it is not possible to say that the States are under such a special burden or disability that the legislation is aimed at the restriction or control of the States. The provisions of s 16V of the Assessment Act, which I have already quoted, seem to place the States in a special position, but we were informed by the Solicitor-General for the Commonwealth that the real aim and apparent effect of the section is to give an advantage to the States in the collection of rebates, and those who attacked the validity of the legislation did not challenge this statement or place any reliance upon the provisions of the section in their submissions. I, therefore, conclude that the legislation does not discriminate against the States in the sense to which I have referred.

For the reasons I have given I have reached the conclusion that the legislation in question does not infringe any implied prohibition to which the Commonwealth's power to make laws with respect to taxation is subject. It is clear that the legislation does not offend against any express constitutional prohibition; in particular, it is not a tax on the property of a State within s 114. The challenge to the validity of the legislation therefore fails.

I would allow the demurrer.