set-off of losses against profits, or combining
 these two principles when cal--ulating
 the statutory income for purposes
 of assessment, in order that the
State may share as a partner would do
in the net results of a business over
a series of years. The Federal Government
 has recognized the principle of
averaging for the purpose of calculating
 the rate of tax, and the principle
of allowing a set-off of losses for the
purpose of calculating the amount of
the assessable profit, but these principles
 have not been fully accepted in
the legislation of the States. The insquity
 of a system which does not
recognize such principles is illustrated
in the Report of the Queensland Land
Settlement Advisory Board, 1927, paragraphs
 118-126. We recommend that
the principle of averaging or of allowing
 a set-off for losses should be fully
recognized by the Australian Governments
 in making assessments for income
 tax.
4. Double Taxation (Great Britain
and Australia—Commonwealth and Interstate
 Tax). —It is alleged, and we
believe, that the arrangements to avoid
double taxation of income in Australia
are not yet wholly satisfactory. This
matter is one of considerable importance
 in view of the necessity for
attracting capital to Australian enterprise,
 because the investor is scared
by the idea of double taxation. We,
therefore, suggest that every effort
should be made by the Governments
and the taxing authorities to further
any action which is being taken to
remedy the anomaly of such a double
imposition. We also suggest that the
true basis for any final determination
is to charge the taxpayer the higher
of the two taxes that may be legally
imposed by two taxation authorities
concurrently, leaving such authorities
to apportion such amount, though we
think that it might be equitably
apportioned by division between two
authorities in the ratio of the agreed
claims by each of them, and that the
taxpayer should only be required to
deal with one taxation authority and
pay oue, the larger, imposition.
5. Taxation of Shipping.—We had
placed before us an alleged grievance
of the overseas shipping companies.

'n the words of the Report of the
mperial Economic Committee the posision
 is as follows:— In the case of
he non-resident ship-owner, the
Tederal Act assumes an Australian
rofit equal to 10 per cent. of the
wmount received for freight, passeners
 and mails shipped at Australian
yorts for carriage overseas. The taxasion
 is applicable to both liners and
ramps and is accompanied by power
0 refuse clearance of a ship until the
sax is paid, or satisfactory arrangenents
 made for its payment. Similar
onditions apply generally as regards
he State taxation, but the percentage
n this case is generally 5 per cent.
There is no option under the Federal
\ct, or under the Acts of the separate
States, of claiming an assessment om
-ealised profits. In Western Austraia,
 as the law is drawn, a ship-owner
s taxed on an assumed net income
»f 5 per cent. of the gross proceeds of
all inward and outward traffic; but it
‘s stated that in practice the assessment
 is based on the outward traffic
mly.”’
It was alleged to us that the arbirary
 proportion of the freight is more
han the actual profits, and that no
llowance is made for losses. We sugrest
 that the ship-owners should fornulate
 proposals for the taxation of
she profits of shipping on the same
yasis as other income, and that the
jovernments should be prepared to
wecept such proposals if they are equitible
 and practicable.
6. Foreign Firms and Companies
Yelling in Australia.—As a result of
suggestions we have received, we reommend
 that any necessary amendnents
 to the law should be made to
srevent the avoidance of income tax
hy companies and/or persons imyorting
 goods into Australia through
he medium of subsidiary companies
wnd Jor agents; so as to secure the payment
 of the appropriate tax on the
eal profits of such companies and/or
ersons.
7. Inheritance Duties.—It is sugzested
 that a similar course to that
suggested in paragraph 2 might be
»ursued in regard to inheritance
luties, i.e., that such taxes, both for
tha States and for the Commonwealth.