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Bills Digest No. 107 2000-01
Excise Tariff Amendment Bill (No. 1) 2001
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Excise Tariff Amendment Bill (No. 1) 2001
Date Introduced: 8 March
2001
House: House of Representatives
Portfolio: Treasury
Commencement: The amendments
increasing the rate of excise duty on aviation kerosene are taken to have
effect from 13 May 2000. The amendments relating to the excise on alcoholic
beverages are taken to have effect from 1 July 2000. The amendments relating
to the reduction in excise duty by 1.5 cents per litre on specified petroleum
products are taken to have effect 2 March 2001.
The major amendments proposed by
the Bill:
- increase the rate of excise duty for kerosene for use as fuel in aircraft
- introduce a new 3 tiered excise duty structure for beer, and
- reduce by 1.5 cents per litre the excise duty for unleaded petrol,
leaded petrol, diesel and other petroleum products.
As there is no central theme to the amendments proposed
by this Bill, a background to each major amendment is contained in the
Main Provisions section of this Digest.
Aviation Kerosene
The amendment proposed by item 1 of Part 1
of Schedule 1 substitutes a new rate of excise duty for kerosene
used as fuel in aircraft (avtur). The current rate of excise duty for
kerosene for use as fuel in aircraft is 2.759 cents per litre. The proposed
new rate of excise duty will be 2.795 cents per litre.
The increase in the rate of excise duty was announced
in the 2000-2001 Budget. At the time of the Budget it was announced that
the measure would be used to fund regulatory activities by the Australian
Competition and Consumer Commission (ACCC). Specifically, it was announced
that funds raised by the excise increase would be used to fund ACCC activities
relating to:
- airport access arrangements
- assessing compliance with airport price caps
- monitoring prices of aeronautical related services at airports
- monitoring quality of service, and
- performing other related functions.(1)
A further rationale for the increased rate of excise
duty is given by the Government in the Second Reading Speech to this Bill,
that is:
The regulation activities for airports are more extensive
than originally envisaged and require more funding. An increase in
the rates of excise and customs duty for avtur was considered an administratively
efficient method of cost recovery. The increase is taken to have effect
from 13 May 2000 and will provide $900,000 per annum to fund the regulatory
arrangement.
The proposed increase in the rate of excise duty will
be taken to have effect from 13 May 2000 (Budget night) (item 2).
Alcoholic Beverages
The principal effect of item 5 of Part 2 of
Schedule 1 of the Bill is to introduce a new 3 tiered excise duty
structure for beer. The structure is based on the percentage of alcohol
by volume exceeding an excise free threshold of 1.15%. The rates of applicable
excise duty are:
- beer not exceeding 3% by volume of alcohol -$41.67 per litre of alcohol
- beer exceeding 3% but not exceeding 3.5% by volume of alcohol - $35.38
per litre of alcohol, and
- beer exceeding 3.5% by volume of alcohol - $30.46 per litre of alcohol.
The proposed amendments also provide a new rate for 'other
excisable beverages' of an alcoholic strength by volume not exceeding
10%. The Government in its Explanatory Memorandum to the Bill indicates
that this measure is intended to bring designer drinks, alcoholic sodas,
coolers etc., into the excise regime.
In respect to spirits and other excisable beverages of
an alcoholic strength by volume of more than 10%, the rates of applicable
excise duty are:
- brandy - $48.7 per litre of alcohol
- fruit brandy - $51.58 per litre of alcohol
- whisky - $51.58 per litre of alcohol
- rum - $51.58 per litre of alcohol
- liqueurs - $51.58 per litre of alcohol
- other excisable beverages of an alcoholic strength by volume exceeding
10% - $51.58 per litre of alcohol
- spirit for fortifying Australian wine or for fortifying Australian
grape, subject to regulations - Free
- methylated spirits, subject to regulations - Free
- spirits, n.e.i. - $51.58 per litre of alcohol
- spirit for scientific or educational purposes, subject to regulation
for use in universities or for use in approved technical colleges or
other educational institutions prescribed by By-law - Free
- spirit for use in public hospitals, or for use in the manufacture
of medicinal preparations for use in public hospitals and universities,
subject to regulations - Free, and
- denatured ethanol for use as a fuel in internal combustion engines,
as prescribed by by-law.
The amendments relating to alcoholic beverages proposed
by the Bill give effect to the Government's tax reform measures, particularly
the replacement of the whole sales tax with the goods and services tax.
The amendments have been in effect since 1 July 2000.
The amendments relating to excise duty on beer have attracted
considerable media attention. Outlined below is a selection of media reports
relating to the issue.
- The Financial Review - 8 May 2000 - The Australian Democrats
are reported as standing by an earlier undertaking to block government
moves to lift the beer excise rate.
- The Sydney Morning Herald - 3 June 2000 - The Australian Labor
Party and the Australian Democrats are reported as saying they will
amend the excise regime to make it conform with the Prime Minister's
1998 election campaign promise that the price of ordinary beer would
rise by no more than 1.9 per cent.
- The Age - 1 July 2000 - It is reported that Australian Hotels
Association Victorian chief executive Alan Giles said hoteliers were
in a no-win situation because they had to collect the tax now. Mr Giles
is reported as saying: 'One section of the government is saying the
price has been increased but the other is saying they will reject it.
... We believe the Federal Government should immediately freeze this
increase. It puts us in a shocking position. It's unethical and unconscionable
to insist we collect the excise rise when the Senate says it will overturn
it.' The Treasurer is reported as saying that the Government always
said it would adjust excise and the price of ordinary beer - defined
as packaged beer sold in a bottle shop not a beer served over a bar
- would rise by only 1.9 per cent. The author of the article expresses
an opinion that 'Mr Costello has adopted a risky strategy by announcing
the excise rise in the House of Representatives but delaying it being
put to a vote in the Senate for 12 months. Labor and the Democrats said
they would oppose it.
- The Financial Review - 5 July 2000- It is reported that the
row over the extra $500 million beer excise to be collected under the
new tax system intensified when the major brewers, including Lion Nathan
and Foster's Brewing Group, confirmed they would challenge its collection
in the Federal Court. The brewers are reported as having told the chief
of Customs that they would pay the higher excise rate on draught beer
under protest, arguing its collection was illegal because Labor and
the Democrats have resolved not to endorse it in the Senate.
- The Sun Herald - 14 January 2001 - It is reported that major
brewers are working on plans to refund the tax already paid by drinkers
in anticipation that the beer excise increase will be declared illegal
when Parliament resumes. According to this media article, both houses
of Parliament must ratify the excise rise by midnight on June 20 to
make it legal retrospectively and that if the ratification were to fail
the Government would have to refund the extra excise, estimated at $200
million to $240 million over 12 months.
- The Financial Review - 19 January 2001 - The Australian
Associated Brewers are reported as confirming that it had lodged statements
of claim against the Federal Government to enable member companies to
claim back disputed beer excise (being collected under the excise tariff
proposal which this Bill proposed to give effect to). The AAB is reported
as saying it believes the excise levies set by the Government breach
a promise by the Prime Minister that beer prices would not increase
by more than 1.9 per cent. The article also reports a Government source
as saying that the Treasurer was confident the Brewers' case was misconceived.
- The Canberra Times - 19 January 2001 - Carlton & United
Breweries, Lion Nathan, Coopers and J. Boag & Sons are reported
as confirming that they were seeking a return of disputed beer excise
being collected. Australian Associated Brewers are reported as saying
'[O]ur legal action will enable us to claim back the disputed excise
that has driven beer prices well above the 1.9 per cent the Government
promised. To date, this amount is in excess of $100 million.' Australian
Associated Brewers are also reported as saying that they would not profit
from the disputed excise and would return it to beer drinkers, possibly
through price reductions, or give it to charities.
- The Courier Mail - 19 January 2001 - Lion Nathan spokesperson,
Gabriel McDowell is reported as saying that all four major brewing groups
promised to immediately cut beer prices at the pub by the full amount
of the excise. McDowell is quoted as saying '[T]he price of beer at
the pub will fall immediately by about 8% after the excise is declared
illegal, none of the brewers will profit and all savings will be passed
on to drinkers.'
- The Sydney Morning Herald - 22 January 2001 - It is reported
that in a survey commissioned by the brewing industry, drinkers voted
to devote a prospective Government windfall from the Labor and the Democrats
rejecting the beer excise rise to help alcohol related medical research,
remedial programs and charities. The Australian Associated Brewers is
reported as saying it would use the money to establish the Beer Drinkers
Foundation which would be the biggest charitable foundation in the country
with well over $100 million to invest.
Fuel Tax Reductions
On 1 March 2001, the Prime Minister announced a package
of cuts to fuel taxes. As part of this package, a number of legislative
changes to the rates of excise on certain petroleum products are required.
Items 13-17 of Part 5 of Schedule 1 of the Bill give
effect to the relevant changes to the rates of excise. Under the proposed
amendments:
- the rate of excise on unleaded petrol, diesel and other petroleum
products that attract the equivalent rate of duty is reduced by 1.5
cents per litre to $0.38143 cents per litre (item 13)
- the rate of excise on leaded petrol and other petroleum products that
attract the equivalent rate of duty is reduced by 1.5 cents per litre
to $0.40516 cents per litre (item 14)
- the rate of excise on petroleum products attracting concessional rates
of duty is reduced by 0.297 cents per litre to $0.07557 cents per litre
(item 15)
- the rate of excise on avtur is reduced by 0.112 cents per litre to
$0.02845 cents per litre (item 16), and
- the rate of excise on aviation gasoline is reduced by 0.110 cents
per litre to $0.02808 cents per litre (item 17).
Note: The Government's Explanatory Memorandum
to the Bill states that:
Rates of excise for aviation fuels and those petroleum
products attracting concessional rates of duty are reduced by an amount
per litre that is proportional to that of the 1.5 cents per litre
reduction applying to unleaded petrol and diesel.(2)
Prime Minister's Rationale For Reduction In Fuel
Excise
Based on the contents of the transcript of the Prime
Minister's Press Conference at which he announced the 1.5 cent per litre
reduction in fuel excise, a number of reason for the decision can be identified,
the clearest of which is:
... it is designed to do what governments should
always do and that is respond to the strongly held feelings of the
Australian community. The Australian community was, has clearly sent
us a message that it's unhappy that we haven't done more - even though
they recognise that the main reason petrol prices are high because
of the high price of crude oil, they recognise that - but they really
think that we could have done a bit more. And they were obviously
not persuaded about the argument on the cost savings last year when
the GST was introduced. Even though when you look at the ACCC report
you find there's plenty of evidence that there was an absorption of
cost by the oil companies at the time of the introduction of the GST.
So for all of those reasons we have come to the conclusion that we
do need to recognise that concern, acknowledge that there has been
an unwillingness for reasons they feel are well based to accept what
the Government has said on that issue and others and through this
not only to meet those concerns and re-establish that connection as
John puts it very well, but also to make some contribution towards
reducing the price of petrol at the bowser, I mean it will help a
little. It's not going to cut it dramatically, I've never, you know,
pretended that. The only way you can cut it dramatically is to see
the world price fall.(3)
Media Comment
The Prime Minister's announcement of 1 March 2001 has
received considerable media attention. Outlined below is a selection of
media reports relating to the issue.
- The Age - 2 March 2001 - It is reported that the petrol package
was welcomed by key interest groups. The National Farmers Federation
is reported as hailing 'it as the third tax break for farmers in eight
days'. In addition, motoring organisations, including the RACV is reported
as saying that they were pleased with the petrol price relief and planned
review of the fuel tax system. In contrast to such support, the article
also reports that economist Chris Richardson, director of Access Economics,
said that the Government had an excellent record on budget management
but was now 'letting populism win out over policy because it feared
losing the election.'
- The West Australian - 2 March 2001 - The WA Motor Trade Association
and the RAC is reported as welcoming the decision to cut fuel excise.
However, both organisations are also reported as agreeing that it would
do nothing to reduce the gap between city and country prices in WA.
- The Canberra Times - 2 March 2001 - Liberal Gary Nairn, Member
for Eden Manaro, who holds a slim margin, is reported as saying that
the Government had responded to the legitimate concerns of country voters
and that '[W]hile high oil prices will still have an impact on fuel
prices, farmers, rural families and small businesses will know that
the Coalition Government is doing as much as is economically responsible
to help ease the burden.'
- The Financial Review - 2 March 2001 - Oil companies confirmed
they would pass on the Federal Government's excise cut of 1.5 cents
a litre. However, Mobil is reported as saying that an instant flow through
was conditional on the Government refunding pre-paid excise on fuel
products already in stock.
- The Sydney Morning Herald - 2 March 2001 - The Chief Executive
officer of the NRMA, Mr Rob Carter, is reported as saying that the abolition
of six-monthly indexation was more significant than the 1.5 cents per
litre cut. Market economists are also reported as saying that overseas
investors would view the about-turn on petrol tax as a reaction to special
interests and this would undermine investor confidence in Australia.
- The Age - 2 March 2001 - Access Economics director Chris Richardson
is reported as calculating that by 2004-5 the scrapping of indexation
and the 1.5 cents a litre tax cut would cost the budget $2 billion.
BT Funds Management senior economist Ian Cassie is reported as saying
he was concerned that the budget could fall into deficit next financial
year because of the spending blowout and lower than expected tax collection
and higher social security payments. Mr Cassie stated 'the GST was the
big wild card. Revenue from the new tax could help fill the hole the
spending blowout left, but it was difficult to predict the size of the
surplus because the government had given little information on GST revenue
being collected.'
- The Australian - 2 March 2001 - Small business is reported
as being under-whelmed by the excise cut with operators seeing the cut
as laughably small. Sydney garage door repair man Bruce Moller is reported
as saying 'so what?... I just paid 99c a litre to fill up.' APM courier
Allan Moxan is reported as saying that the cut would not make any difference
because petrol prices were all over the place. Dianna Dalton, franchise
manager of household cleaning company Bizzi Bees, is stated 'We have
100 franchisees all over NSW and we're not territorial and so they're
driving all over to their customers. This price cut will be appreciated
because the higher petrol prices and the costs of the GST have not been
passed on to our customers.' Gold Coast-based Fastway Couriers Rachel
Bennett and Wade Gallagher are reported as having been over-whelmed
by the petrol price rise, arguing that the dollar cost and the time
impost of the GST have made business life much tougher. Ms Bennett is
said to have calculated that she will save around $85 a year from the
fuel excise cuts.
- The Australian - 7 March 2001 - International oil companies
are reported as having wiped out the Government's excise cut with price
increases of up to 10c a litre in Melbourne and Adelaide. The price
rises are said to have lifted the cost of petrol in Melbourne and Adelaide
above its levels before the Government cut petrol taxes on 1 March 2001.
Excise Tariff Amendment (Petrol Tax Cut) Bill
2001
On 7 February the Deputy Leader of the Opposition in
the Senate, Senator Cook, introduced the Excise Tariff Amendment (Petrol
Tax Cut) Bill 2001. This Private Members Bill amends the Excise Tariff
Act 1921 to prevent the 1 February 2001 indexation of rates of excise
duty applying to specified petroleum products.
The rationale given by Senator Cook in introducing the
Bill was:
The bill I am introducing in the Senate today seeks
not only to ease the pain of high fuel taxes, caused by the Howard
Government's attempt to leach millions of dollars out of Australian
through its fuel tax squeeze, but to stop this Government lining its
pockets at the expense of families and communities, industries, businesses
and voluntary organisation, both in the cities and the bush.
The Excise Tariff Amendment (Petrol Tax Cut) Bill
2001 amends the Excise Tariff Act 1921 to provide relief from the
1 February 2001 indexation of rates of excise duty applying to petroleum,
and give much needed fuel tax relief.(4)
The second reading debate on Senator Cook's Bill was
adjourned on 8 March 2001.
The leader of the Opposition, Kim Beazley, introduced
a Bill of the same title and effect in the House of Representatives on
5 March 2001. The second reading of that Bill has been made an order of
the day for the next sitting.
The amendments proposed by this Bill and the Customs
Tariff Amendment Bill (No. 2) 2001 give effect to excise and custom tariff
proposals introduced last calendar year and in March 2001. There has been
some debate relating to the power of Parliament to reject tariff proposals.
The possible rejection of the amendments relating to alcoholic beverages
proposed by the Bills is illustrative of the problem with excise and customs
tariff proposals.
Excise Tariff Proposal No. 2 (2000) was introduced into
the House of Representatives on 21 June 2000. The amendments to the Excise
Tariff Act 1921 contained in that Proposal were deemed to have effect
on and from 1 July 2000. In practical terms, the new excise regime for
alcoholic beverages came into effect from that date, or in other words,
excise became payable and was collected under the new excise regime. Now,
if the Senate were to reject the amendments to the Excise Tariff Act
1921 proposed by this Bill, the Government faces the problem of having
to pay back that excise which was collected and paid without the requisite
parliamentary approval.
The conventional procedure for effecting excise and customs
tariff amendments is a tariff proposal followed by validating legislation.
Ultimately a government cannot increase or reduce excise or customs tariffs,
which are legislatively based, without parliamentary approval.
However, a government can introduce a tariff proposal
which, temporarily, is not subject to parliamentary approval. While tariff
proposals must be validated, it is the government which determines when
the validating legislation is to be introduced. This can be a considerable
time after the proposal comes into effect. Convention in the past 10 years
has seen governments introduce validating legislation within 3 to 12 months
of a proposal coming into effect.
It should be understood that a tariff proposal is not
legislation but an executive instrument. The Minister has absolute power
with respect to tariff proposals. While a tariff proposal can be debated,
by either Chamber, an amendment to a tariff proposal is a prerogative
of the executive. Certainly a Chamber can debate the merits of a tariff
proposal or pass a motion expressing its concern with it. A Chamber could
even indicate that it would reject the validating legislation.
The law on the matter of how long a Government has to
introduce a Bill to validate a tariff proposal is uncertain. The relevant
law on the matter is contained in section 273EA of the Excise Tariff
Act 1921 and section 266 of the Customs Act 1901. The only
certain matter in respect of excise and customs tariff proposals is that
a government must introduce validating legislation at some point. Convention
dictates that the legislation be introduced within 3 to 12 months of the
proposal coming into effect. The House of Representatives Practice,
however, states that in the absence of the Government introducing a tariff
amendment bill, changes 'may be affirmed towards the end of a period of
sittings by means of a tariff validation bill'. The full text of House
of Representatives Practice should be recalled:
In the absence of a tariff amendment bill, tariff
proposals then before the House may be affirmed towards the end of
a period of sittings by means of a tariff validation bill. In this
case the proposals are not discharged from the Notice Paper as they
have not yet been incorporated in the tariff schedule by means of
a tariff amendment bill. A validation bill merely extends the force
of tariff proposals (p. 415).
- Budget Measures 2000-01, Budget Paper No. 2, p. 25.
- Excise Tariff Amendment Bill (No. 1) 2001, Explanatory Memorandum,
p. 32.
- http://www.pm.gov.au/news/interviews/2001.780.htm
- http://search.aph.gov.au/search/ParlIn.../Second+reading+speeches&action+view&WC
Ian Ireland
23 March 2001
Bills Digest Service
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ISSN 1328-8091
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