Customs and Excise Legislation Amendment Bill (No.2) 1996
Referral of the Bill
The Customs and Excise Legislation Amendment Bill (No.2) 1996 was introduced
into the House of Representatives on 12 December 1996 and was subsequently
passed by that House. The Bill was introduced into the Senate on 10 February
1997, after having been referred by the Selection of Bills Committee to
the Senate Economics Legislation Committee on 6 February 1997 for inquiry
and report by 6 March 1997. [1] The report
date was subsequently extended until 18 March 1997.
The Committee received 20 submissions to its inquiry (Appendix I). A
public hearing was conducted in Parliament House on Friday 28 February
1997. Witnesses who gave evidence at the hearing are listed in Appendix
II.
Origins of the Bill
The Bill gives effect to the 1996-97 Budget announcement of the Government's
intention to amend the diesel fuel rebate legislation, namely the Customs
Act 1901 and the Excise Act 1901. The Minister described the
Government's objectives in the second reading speech:
The Budget announced the Government's intention to achieve savings in
the scheme by tightening eligibility and containing growth in outlays
which have resulted from decisions of the Administrative Appeals Tribunal
(AAT) and the Federal Court which have had the effect of widening eligibility
under the scheme, beyond its intent.
In its recent performance audit on the diesel fuel rebate scheme, the
Australian National Audit Office recommended that the purpose and objective
of the scheme be clarified and that a range of measures be introduced
to improve administration and accountability. [2]
Background to the Bill
The diesel fuel rebate scheme has attracted much scrutiny and been the
subject of much debate over recent years. Amendments to the current scheme,
which was introduced in 1982, have refined eligibility for the rebate
so that the scheme is now "highly focussed on activities which contribute
directly to the competitiveness of the mining and primary production sectors".
[3]
Indicative of the interest generated by the diesel fuel rebate scheme
are the legislative packages introduced over the last two years to amend
the scheme. The former Government introduced the Customs and Excise Legislation
Amendment Bill 1995 to give effect to the measures announced in the 1995-96
Budget to amend the scheme to "restore the integrity of the diesel
fuel rebate scheme". [4] That Bill
was referred by the Senate to the Senate Economics Legislation Committee
on 8 June 1995 and the Committee tabled the relevant report of its consideration
of the Bill in June 1995. That Bill was subsequently passed with amendments.
On 21 September 1995, the Senate referred the Customs and Excise Legislation
Amendment Bill (No.2) 1995 to the Senate Economics Legislation Committee
for inquiry and report. The purpose of the Bill was to correct certain
transcription errors which had been identified in the earlier amending
Act and to address substantive problems with the commencement and savings
provisions in that Act. During the Committee's consideration of the Bill
various matters were raised in relation to the operational aspects of
the diesel fuel rebate scheme. [5]
In addition, the diesel fuel rebate scheme has been scrutinised in the
course of the Senate's Estimates process. The extensive examination of
the scheme in the Estimates hearings is testament to the importance which
attaches to the scheme by Government and industry alike. [6]
After taking office in March 1996, the Coalition Government recognised
that as part of addressing the budget deficit, the high growth rate of
expenditure under the diesel fuel rebate scheme had to be contained. The
Government's approach in seeking to formulate appropriate measures to
contain that growth was to consult with industry, the Minister for Customs
and Ministerial representatives. industry agreed to set up an industry-Government
High Level Group to examine ways in which the Government could achieve
its dual objectives of containing expenditure under the scheme, whilst
"facilitating an expanding, competitive minerals sector" [7].
It was the Government's intention to contain expenditure particularly
in those areas where overclaiming had been identified and where decisions
of the AAT and the Federal Court had widened eligibility under the scheme.
Following a series of meetings of the High Level Group, an agreed position
was reached between industry and Government regarding the concessions
which industry was prepared to make to enable the Government to amend
the scheme. The Bill was subsequently introduced and has been the subject
of ongoing discussions between Government and the minerals industry. [8]
Statistical information provided to the Committee by the ACS shows the
cost of the diesel fule rebate scheme in dollar terms. The following table
comprises a break down of the expected outlays by the Government over
the period 1995/6 to 1999/20 in relation to claims for rebate in the mining,
primary production and other sectors.
| |
1995/96 |
1996/97 |
1997/98 |
1998/99 |
1999/20 |
| Mining |
$M |
749.8 |
793.7 |
812.9 |
885.5 |
964.6 |
| |
% |
|
5.9 |
2.4 |
8.9 |
8.9 |
| Primary |
|
|
|
|
|
|
| Production |
$M |
546.2 |
584.6 |
608.1 |
637.2 |
669.7 |
| |
% |
|
7 |
4 |
4.8 |
5.1 |
| |
|
|
|
|
|
|
| Other |
$M |
11.5 |
11.2 |
11.9 |
12.7 |
13.5 |
| |
% |
|
|
|
|
|
| |
|
|
|
|
|
|
| TOTAL |
$M |
1307.5 |
1389.5 |
1432.9 |
1535.4 |
1647.8 |
| |
% |
|
6.3 |
3.1 |
7.2 |
7.3 |
Source: 1996/97 Budget Paper No1.
The following table shows the total outlay in relation to the diesel
fuel rebate scheme for the years 1990/91 to 1995/96:
| 1995/6 |
1994/5 |
1993/4 |
1992/3 |
1991/2 |
1990/91 |
| Total Scheme Outlay |
$1,316,627,749 |
$1,256,099,654 |
$1,038,558,468 |
$906,173,515 |
$889,227,423 |
$831,250,274 |
This statistical information was provided by the ACS: Source - Extracted
from the ACS REEF system and may vary slightly from the data contained
in the Budget Papers.
Effect of the Bill
According to the Government's explanatory memorandum the amendments contained
in the Bill fall within three broad categories:
a) amendments restricting eligibility in the “mining operations”
category following consultation with the mining industry;
b) amendments to address recent Federal Court and Administrative Appeals
Tribunal (AAT) decisions in the “mining operations” category;
and
c) amendments to improve accountability under the Scheme, and to assist
in reducing expenditure under the Scheme due to misuse (modernisation
amendments). [9]
In respect of the amendments designed to restrict eligibility in the
'mining operations' category, the Minister said:
The changes put forward by the mining sector have been accepted by the
Government. The Government accepts that these changes contribute to achieving
the savings identified at the time of the Budget.
The Government accepts that growth in rebate payments for eligible activities
under the revised arrangements will occur. Once growth levels are established
and forward estimates of expenditure are set it may be necessary as part
of the budget planning process to ensure the overall budgetary strategy
is achieved. Consideration is being given to appropriate means of ensuring
that the expenditure levels will not be exceeded. [10]
The amendments relate to excluding from "mining operations"
eligibility for rebate in respect of nearly all light vehicles (vehicles
not exceeding 3.5 tonnes Gross Vehicle Weight) and certain off-site activities.
Further amendments restricting eligibility relate to sea transport, off-site
rail, sea and public road use, and quarrying.
The Bill has introduced amendments to the scheme to counteract the effect
of certain AAT and Federal Court decisions, specifically the Dampier Salt
decision, the Dyno Wesfarmers decision and the Temco decision. In respect
of those amendments the Minister said:
The particular amendments will ensure the continuation of rebate for
diesel fuel used in carrying out mining activities but will preclude from
eligibility certain activities, best described as undertaken for economic/marketing
reasons, rather than the physical extraction of minerals, and activities
which essentially involve the transport of inputs/materials for mining
or beneficiation.
The Government's clear intention is that rebate paid under the legislation
should be confined to the narrow definition of eligible activities in
the legislation (that is the intention is not that the legislation be
defined broadly and beneficially). [11]
The Government's view of the Dampier Salt decision is that the court
allowed certain operations to be rebateable under the scheme which were
conducted by the applicant company for its own subjective economic reasons
and that it allowed rebate to be paid to the point where a seller had
a saleable product. The concern of the Government was that that interpretation
had the potential to substantially widen eligibility under the scheme.
The Minister said:
The full Federal Court's judgment is considered to be the most far reaching
ever delivered in relation to the diesel fuel rebate scheme. It represents
a fundamental shift from a scheme based on the concept of an activity
(in this case mining) being regarded as a physical act (that is the extraction
of a product from the ground) to a concept of the activity being an economic
one. [12]
In the Dyno Wesfarmers case, the AAT held that diesel fuel used for an
on-road activity which essentially involved a specialised explosives truck
making trips on public roads between the explosives depot and mining sites
to undertake "mining operations" at those sites was eligible
for rebate. The amendments in the Bill exclude all activity on public
roads from eligibility in the "mining operations" category.
In the Temco decision, the AAT held that the beneficiation process extended
to include a process transforming recovered ore into an alloy. The amendments
in the Bill exclude from eligibility any process which produces a man-made
or synthetic substance. [13]
The third broad category of amendments in the Bill is designed to improve
accountability and administration. The Minister said:
A range of amendments are proposed which will improve accountability
requirements, assist in enabling a clamp down on misuse of the scheme
and improve its administration. These changes apply to all claimants
under the scheme...
Arrangements to modernise the administration of the scheme have been
under way for some time. These focus on legislative reform to underpin
self-assessment, to place the onus on claimants to make and retain documentation
which will substantiate their applications for rebate with effective
risk assessment measures in place to assess compliance. This will be
backed by effective penalty arrangements which rely on strict liability
requirements for claimants to maintain records to substantiate claims.
To ensure that risk assessment measures are well grounded and effective
claimants will be required to provide from time to time information on
the nature of their operations relevant to their use of diesel fuel. While
the Government recognises these requirements impose obligations on claimants
to provide more extensive information than that presently required, this
is not considered too great a burden for a scheme which outlays around
$1.4 billion of taxpayer's funds. It will serve to ensure that those entitled
to rebate receive their full benefits and the scheme is not diluted by
misuse. [14]
Further Amendments to the Bill
Throughout the Committee hearing there were various matters highlighted
as constituting a departure from the package formulated by the High Level
Group negotiations. These matters are outlined in greater detail below.
The Government has indicated that there may be amendments to this Bill
introduced in the Senate.
Issues Raised in Evidence
The Possible Capping of Scheme Expenditure
According to the Minerals Council of Australia, Government-industry consultation
resulted in industry agreeing to modifications of the eligibility criteria
in return for Government not limiting normal growth of expenditure under
the scheme. The Minerals Council of Australia is concerned that this agreement
has not been honoured and that measures are being considered to cap the
expenditure. [15] The Council referred
to the Second Reading Speech as indicating that the Government is considering
capping expenditure:
The Government accepts that growth in rebate payments for eligible
activities under the revised arrangements will occur. Once growth levels
are established and forward estimates of expenditure are set it may
be necessary as part of the budget planning process to put in place
measures to ensure the overall budgetary strategy is achieved. Consideration
is being given to appropriate means of ensuring that the expenditure
levels once set will not be exceeded. [16]
Amendments to the Definition of “Minerals”
Mining of Limestone for the Recovery of Calcite
It has been submitted that the definition of “minerals” in
the Bill should be amended so as to clarify the eligibility for the diesel
fuel rebate of the cement industry in respect of the mining for limestone
in the pursuit of mineral recovery, namely calcite or calcium. [17]
It is contended that this would remove the ambiguity and uncertainty which
exists in the proposed legislation as it is currently drafted.
The cement industry mines limestone and other material to recover calcite
for use in the manufacture of cement. Prior to amendments passed to the
Customs and Excise Legislation in July 1995, the cement industry was able
to claim the rebate. The 1995 amendment, however, introduced a clause
which excluded, amongst other things, “limestone (other than agricultural
use limestone)”. [18] The cement
industry contends that it was never the legislature's intention to exclude
mined limestone, only quarried limestone and that the blanket exclusion
of “limestone” was an unintended consequence which has caused
unnecessary confusion.
The cement industry obtained written confirmation from the then Minister
for Small Business, Customs and Construction, the Hon. Senator Chris Schacht
(9 August 1995) and the Hon. Geoffrey Prosser MP, Minister for Small Business
and Consumer Affairs (16 October 1996) that the mining of limestone by
the cement industry is within the intent of the diesel fuel rebate legislation
and is “mining for minerals”.
The cement industry considers that the Bill goes only part of the way
to rectifying the situation. Whilst the Bill introduces a new clause in
subsection 164(7) (Item 21, definition of “mining operations”)
which excludes quarrying or dredging operations that are for obtaining
materials for use in building and road making etc, the confusion will
still exist because the 1995 exclusion clause has not been removed. The
cement industry has submitted that the matter would be clarified by an
amendment to the definition of “minerals” in subsection 164(7)
by adding after (B) limestone (other than agricultural use limestone)
the words “or where it is mining for minerals”. [19]
It is claimed that the cost of excluding the cement industry from the
diesel fuel rebate is estimated to be about $2.5 million [20]
and the loss of the rebate will reduce the industry's competitiveness
in the South East Asian region. [21]
The Exclusion of Man-made Minerals
It has been submitted that the amendment to the definition of “minerals”
in the Bill limits eligibility for the rebate to “naturally occurring
minerals formed by geological processes”. [22]
The effect of this provision would be to exclude operations associated
with the production of synthetic rutile from the diesel fuel rebate scheme.
The Association of Minerals and Exploration Companies (AMEC) has argued
that as synthetic rutile accounted for $146 million in Australian exports
in 1995-96, exceeding that of naturally occurring rutile, there is no
rational basis for the inclusion of certain minerals in the scheme and
the exclusion of others.
AMEC noted that the exclusion of man-made minerals from the diesel fuel
rebate scheme goes beyond the substance of the agreement reached between
industry and Government. [23]
Eligibility of Salt Formed by Evaporation
The restriction of the amended definition of “minerals” to
“naturally occurring minerals formed by geological processes”,
has the consequence of excluding the mining of salt which has been formed
by evaporation from eligibility for the rebate. Evaporation is not a geological
process. AMEC has submitted that, notwithstanding that proposed paragraph
(b) of subsection 164(7) (definition of "mining operations")
specifically includes operations for the recovery and beneficiation of
salt by evaporation, the new definition of beneficiation, being contingent
on the definition of “minerals”, has the potential to exclude
the process from eligibility for the rebate. [24]
The definition of beneficiation begins:
“beneficiation, in relation to minerals or ores bearing minerals,
means an activity that is an integral part of recovery of those minerals,
being ...”.
Exclusion of Certain Minerals
Concern was expressed at the sectoral approach in Item 12 subsection
164(7) of continuing to exclude certain minerals, for example sand, from
the diesel fuel rebate scheme. [25]
Amendments to the Definition of "Mining Operations"
Exclusion of Extraction Processes
Concerns were raised about the narrowing of the definition of "mining
operations" in Item 21, subsection 164(7)(x) and the targeting of
one sector of the mining industry by the exclusion of operations for obtaining
materials for certain uses such as road building. Against this approach
it was argued in evidence that the extraction of industrial minerals are
mining operations and any such exclusion from the rebate is inequitable.
[26]
Amendments to the Definition of Beneficiation
The Minerals Council of Australia asserted that the changes to the definitions
of "beneficiation" and “minerals” result in the eligibility
for diesel fuel rebate being unfairly restricted. The Minerals Council
contended that the effect of the amendments is to render a range of integrated
processes for physical recovery of minerals ineligible for rebate as a
result of the exclusion of certain processes. Those processes are roasting,
sintering, smelting, calcining, dewatering and leaching.
The Minerals Council stated that restricting entitlements to the rebate
would have the ultimate consequence of increasing "an inefficient
tax on Australia's most important export industry" and would have
a negative effect upon other factors affecting the economy such as employment,
growth and investment in that industry. [27]
In its submission, the Minerals Council requested that the proposed definition
of "beneficiation" be amended (and other relevant references
in the Bill) so that eligibility for the diesel fuel rebate is retained
for currently eligible, integrated pyrometallurgical processes. [28]
The Minerals Council contends that under the current proposal the Becher
process (mineral sands), roasting, sintering, smelting and other above
ambient temperature processes would be excluded. The Minerals Council
identified and listed specific processes in relation to particular minerals
as requiring amendment to retain current eligibility for the rebate. Amongst
the processes identified are:
a) Calcination in the abrasive grade bauxite recovery process;
b) Product stockpile dewatering as a step in the coal recovery process
and roasting, smelting converting and anode casting as steps in the copper
recovery process;
c) Leaching in copper/uranium processes;
d) Roasting as a step in the gold recovery process;
e) Sintering as a step in the iron-ore recovery process;
f) Sintering, smelting and drossing as steps in the lead recovery process;
g) Calcination and leaching in the lithium recovery process;
h) Calcination as a step in the magnesite recovery process;
i) Sintering and smelting as steps in the manganese recovery process;
j) Converting and smelting as steps in the nickel recovery process;
k) Leaching as a step in the recovery of nickel from laterites;
l) Thermal reduction and leaching as steps in synthetic rutile recovery;
m) Smelting as a step in the tin recovery process;
n) Roasting as a step in the tungsten recovery process;
o) Imperial Smelting Process (ISP) as a step in the lead and zinc recovery
process;
p) Roasting, leaching and electrowinning as steps in the recovery process
for zinc. [29]
The Minerals Council expressed concern with a number of terms used in
the definition of “beneficiation” which, it suggested, may cause
uncertainty as to meaning and interpretation and impact adversely on the
eligibility of processes for the rebate. In particular, the Minerals Council
was concerned about the terms “ambient temperature”, ”hydraulic
classification” and “concentrates”. In respect of the use
of “ambient temperature” the Council stated that “the legislation
should recognise there is no need for hydrometallurgical processes to
be at ambient temperatures” and recommended that the term “ambient
temperature” be deleted from Item 10, subsection 164(7)(a)(iii).
[30]
The Minerals Council identified other areas where it was concerned that
the proposed definition of “beneficiation” might adversely impact
on currently eligible processes. It referred specifically to the beneficiation
process of calcination which is excluded from eligibility notwithstanding
that it is an integral part of the recovery process of abrasive grade
bauxite, lithium, magnesite and uranium. Further, the Council mentioned
the exclusion of the recovery process of nickel matte which has been eligible
for rebate for over a decade and the exclusion from rebate of the production
of anode copper by pyrometallurgical processes. [31]
Other issues of concern was the uncertainty about whether the electro-magnetic
separation of sands would continue to attract eligibility and the loss
of eligibility of the synthetic rutile process. [32]
The Minerals Council of Australia recommended that there be accepted
the general principle that where ambiguities arise as to eligibility for
the rebate which were not contemplated at the time of the passage of the
legislation, a finding of eligibility will be made in favour of those
activities which are currently eligible and which are not part of the
industry-Government consultation agreement. [33]
The Australian Petroleum Production & Exploration Association Limited
(APPEA) called on the Government to amend the definition in the Bill to
provide a clear and unambiguous definition of what constitutes beneficiation
for petroleum operations. [34] APPEA
claimed that the definition in the Bill potentially limits the eligibility
of petroleum liquids to the rebate scheme under clause (b) to crude oil
and the eligibility of non-liquids under clause (c) to natural gas. The
definition under clause (b) might result in the exclusion of condensate
and liquified petroleum gas and the definition under clause (c) might
only cover natural gas. APPEA advised that this ignores the requirements
of the industry's upstream petroleum facilities which may have to handle
any of a number of components such as, amongst others, commercial gas,
ethane, propane and butane. [35]
APPEA was also concerned that a literal interpretation of the definition
of beneficiation, in new section 164(7)(c)(ii) which deals with gas for
storage and introduction into a pipeline, might result in beneficiation
being deemed to have ceased when the gas enters the pipeline at the wellhead,
or even prior to the point where gas is recovered from the well. Such
an interpretation would fail to take into account the stabilisation requirements
of extracted hydrocarbons. APPEA considered that these difficulties highlighted
the uncertainties generated by the use of the “inclusive” approach
to legislation and recommended that the Government should remove the uncertainty
and make a clear statement of intent in the legislative process. Further,
APPEA recommended that a clear definition of beneficiation should be included
in any administrative guidelines that are developed. [36]
The position adopted by APPEA in respect to the definition of beneficiation
was supported by Esso Australia [37]
and Santos Ltd. [38]
In summary, APPEA submitted that the effect of the changes to the diesel
fuel rebate scheme contained in the Bill will “severely discriminate
against the petroleum industry to the extent that certain petroleum sector
claimants will largely be excluded from the scope of the scheme, leading
to a substantial increase in costs that will impact on competitiveness.
Such an outcome is to the detriment of individual companies and the nation
as a whole”. [39]
The Association of Mining and Exploration Companies submitted that the
proposed definition of beneficiation in the Bill will create gaps in coverage,
goes beyond what was agreed in negotiations [40]
and contradicts the government's policy of encouraging downstream processing.
Like the Minerals Council of Australia, AMEC was concerned that the definition
specifically excludes sintering, smelting and roasting of ores. AMEC described
the definition as providing an exclusive list of the beneficiation activities
which the government wants to include. Such an exclusive list results
in gaps and allows no opportunity for new processes or technologies to
be eligible.
AMEC asserted that the exclusion of drying, sintering, smelting and dressing
from the definition of "beneficiation" will have the flow-on
effect of also excluding them from the definition of a "mining operation".
Activities such as the construction and maintenance of power lines will
only be eligible if they are "solely" for use in a mining operation.
AMEC advised that if the processes of drying, sintering etc., involve
the use of power lines, the whole of the construction of the power lines
may be excluded from rebate as they will no longer be for use in a mining
operation. [41]
AMEC claims that the definition will restrict the processes for eligibility,
in particular those beneficiation activities associated with coal, copper,
gold (refractory), iron-ore, lead, lithium, magnesite, manganese, synthetic
rutile, nickel, salt, tin, tungsten and zinc. According to AMEC, the industry
will now not be able to claim rebate for activities in respect of which
it has been able to claim for over a decade. [42]
AMEC stated that:
The definition means that most beneficiation activities that occur after
the physical processing of the minerals/ore will no longer be eligible
for rebate. [43]
Another matter AMEC raised in respect of the definition of beneficiation
was that it specifically excludes non-ambient hydrometallurgical processes
as well as ambient temperature hydrometallurgical processes carried out
on concentrates derived from gold, copper and uranium ores. AMEC criticised
the approach as to what will be eligible under the definition as “arbitrary”.
[44]
AMEC also commented upon the difficulty that would be encountered by
a mine operator calculating what percentage of the total quantity of fuel
consumed during the various processes is eligible for rebate. [45]
The new definition also excludes a physical process used to obtain concentrates
from ores bearing the mineral if it involves a chemical change to the
mineral in the ore. AMEC noted that this results in the exclusion of beneficiation
to produce nickel. [46]
Further, AMEC claimed that the removal from eligibility of certain beneficiation
activities that occur after the physical processing of the ore is a direct
contradiction to the Government's stated policy of encouraging downstream
processing. [47]
The Chamber of Minerals and Energy of Western Australia expressed concern
that the restrictive definition of beneficiation would result in loss
of the rebate for a “significant number of currently eligible basic
mineral processing activities”. Specifically, the Chamber was concerned
that these would include the production of upgraded ilmenite (known by
its other name, synthetic rutile and which is produced using the Becher
process), nickel smelting, silicon smelting and possibly the production
of uranium oxide. [48]
Beneficiation Amendment: Salt Production
One of the major criticisms of the proposed amendment to the definition
of beneficiation in the Bill is that it unfairly discriminates against
salt producers relative to other mining operations by applying a restrictive
definition of beneficiation to salt producers only. WA Solar Salt Producers
submitted that the purpose of the restrictive definition was to address
Government's concerns that the Dampier Salt Case opened the way for a
raft of claims based on economic factors. industry denies the interpretation
which has been placed upon the decision and claims that the restrictions
are unnecessary. The Salt Producers argue that the judgment was specific
to the physical process involved in the production of salt and did not
depend on arguments about “economic factors”. [49]
Some of the amendments in the Bill have the support of the Salt Producers
as they purport to give effect to the original intention of the legislature
that salt producers should be on an equal footing with other mining operations.
In particular, the salt producers approve of the deletion of paragraph
(g) from subsection 164(7) and the inclusion of salt producers under amended
paragraphs (a) and (b) of subsection 164(7). [50]
WA Solar Salt Producers argue that the discriminatory provisions complained
of may have the effect of reversing those provisions. Proposed new subsection
164(7)(7B) and the new definition of beneficiation have specific application
to salt producers. The definition of beneficiation arbitrarily excludes
significant aspects of the salt production process from eligibility under
the diesel fuel rebate scheme. [51]
WA Solar Salt Producers described the provisions as constituting “a
breach of faith” because under the current legislation, salt operations
are eligible for the rebate and salt operations were not identified during
the industry-government agreement as being one of the existing eligibilities
which would be removed. [52]
The Minerals Council of Australia also argued that the proposed provisions
which discriminate against salt producers should be removed so that salt
producers are placed on an equal footing with other mining operations
in respect of eligibility for diesel fuel rebate. The words "or common
salt" in subparagraph (a) and sub-paragraph (d) should be deleted
from the definition of "beneficiation" at subsection 164(7)
and 164(7)(7B) should be deleted. [53]
Light Vehicles
A measure imposed by the Bill which has been met with particular opposition
is the exclusion of light vehicles from eligibility under the scheme.
It was claimed on behalf of the mining industry that the exclusion of
light vehicles will effectively sideline from eligibility the majority
of activities associated with the mineral exploration and prospecting
industry. [54]
AMEC advised that exploration companies have extremely limited budgets
and the loss of the rebate will increase their production costs. This,
it is claimed, will reduce the amount of finance available for exploration
within Australia and increase the outflow of capital from Australian mining
in overseas mineral exploration and petroleum search. [55]
APPEA and Esso Australia Ltd submitted that vehicles of less than 3.5
tonnes gross weight should be eligible for rebate when used within a petroleum
exploration or production permit area comparable to the situation of farmers.
[56] APPEA noted that the use of light
vehicles can account for over 50% of total fuel consumption in the context
of onshore petroleum operations. APPEA described the policy to eliminate
eligibility for rebate in respect of light vehicles which play a central
role in the operations of the petroleum industry as “plainly inequitable
and represents bad policy”. [57]
Sea Vessels / Offshore Vessels
APPEA submitted that prior to mid 1995, sea vessels engaged in petroleum
exploration and production operations were eligible for rebate under the
diesel fuel rebate scheme because of the integral nature of the functions
of such vessels in the business of petroleum exploration and development
processes. The Bill seeks to exclude this category from eligibility notwithstanding
that its removal was not identified during the government-industry High
Level Group agreement. APPEA claims that to remove those sea vessels from
eligibility “fundamentally ignores the operational structure of the
offshore industry as well as effectively discriminating against an industry
that by necessity must operate in remote marine environments”. [58]
Woodside Offshore Petroleum Pty Ltd raised a number of matters in relation
to the retention of the diesel fuel rebate for offshore support vessels.
The impact of the exclusion of offshore support vessels from the rebate
could increase the operating costs for "Woodside" and its co-venturers
by $6,000,000 per annum. The exclusion ignores industry realities such
as the need to continually replenish exploration drilling rogs, production
platforms which have limited storage capacities. The safety stand-by function
performed by offshore support vessels is integral to the safe production
of hydrocarbons. It was also submitted that the rebate was necessary to
maintain international competitiveness. [59]
“At the Place” / "on-site”
AMEC expressed concern at some of the narrow interpretations formulated
by the Australian Customs Service. According to AMEC, industry agreed
to a number of exclusions in respect of activities which do not occur
“on-site”. The Bill links the words :”on site” to
other expressions such as “at the place”. AMEC foresees difficulties
in that the Australian Customs Service understands those words to mean
“limited to the actual mine pit” whereas industry's meaning
includes “the conglomeration of all mining, exploration and special
purpose leases constituting a working mine”. AMEC is concerned that
there are no guidelines issued as to the proper interpretation of these
expressions and complains that the “uncertainty surrounding this
legislation has increased exponentially”. [60]
AMEC recommends that “at the place” should be defined in the
Bill to incorporate all mining, exploration and special purpose leases
constituting a working mine. [61]
APPEA recommended that a “transparent and equitable definition be
adopted in terms of what represents a “site” (or the “place”)
for petroleum operations based on the boundaries delineated by an exploration
permit”. [62]
Mine Site
Santos Australia Ltd is Australia's largest onshore oil and gas explorer
and producer. Santos has been eligible to receive the diesel fuel rebate
in respect of diesel used for the exploration and production of oil and
gas. Santos submitted that it understands that the current interpretation
of a “mine site” is a single wellhead. Santos holds that this
is inappropriate for the gas industry and, in most cases, for the oil
industry. Santos submits that this interpretation does not reflect the
reality that a “mine site” is a diverse area. Accordingly, Santos
Ltd calls upon the Government not to adopt as the definition of “mine
site”, a wellhead, but urges it to adopt instead the meaning of a
permit area or exploration area which is comparable to a “mine site”
for the mining industry. [63]
Transportation
The Bill introduces a revised formula for determining whether journeys
undertaken where minerals or ores are beneficiated at a place other than
the mining site are eligible for the diesel fuel rebate. AMEC has raised
problems which may be encountered with the formula particularly where
the transport of minerals or ores between the mine site and the place
of beneficiation is relayed in stages by different vehicles. AMEC has
raised various combinations of transport which would not be eligible for
rebate under the proposed provisions. Further, AMEC claims that there
is a need for clarification of “direct journey”. [64]
According to AMEC, these matters were not the subject of the High Level
Group agreement. Given that AMEC's members could be adversely affected
by interpretations of such provisions, AMEC recommended that clear all-inclusive
legislation replace the current proposed provisions in the Bill.
It was noted that in respect of processes such as the production of synthetic
rutile and silicon smelting, it is often the loss of the rebate for the
transport of ores which is of greatest concern. [65]
The Minerals Council of Australia called upon the Government to correct
the error in the Explanatory Memorandum (and possibly in the Bill) regarding
proposed new paragraph 164(7)(c)(ii) [item 14] to ensure that the return
journey by stages for the purpose of repeating a journey under (c)(i)
will continue to be eligible for rebate. [66]
The Minerals Council of Australia has raised the question of whether
a “direct journey” undertaken by different modes of transport
would be eligible for rebate. The Council is of the view that the intention
of the wording of the Bill is that such journeys will retain their current
status of eligibility. The comments in the Explanatory Memorandum, however,
seem to conflict with this conclusion. The Council submits that if it
is the case that none of the return legs of the journey are eligible then
the matter goes beyond the agreement reached between Government and industry
and the Bill should be amended.
Transport Networks
AMEC submitted that the definition of "at the place" will adversely
affect the mining industry's ability to claim rebate particularly in the
area of service, maintenance and repair of networks. [67]
Other Issues
Other issues raised about the proposed legislation relate to the eligibility
of water containment systems (the bill apparently excludes the storage
of mineralised water), materials handling (the eligibility should be addressed
and clarified in the Guidelines) and tailings treatment, etc, (which according
to the ACS remain eligible). [68]
Administrative Guidelines
There was widespread agreement in the evidence that comprehensive scheme
guidelines were necessary to enable claimants to determine the types of
activities which are eligible for the diesel fuel rebate. The ACS advised
that such guidelines will be developed and industry expressed approval
at that commitment. There was, however, considerable criticism about the
Government's intention to provide the guidelines six months after the
Bill is enacted. There was general agreement between industry that the
guidelines should be available at the time the legislation is enacted.
This is necessary to avoid future legal disputation which might otherwise
arise in the absence of clear guidelines. [69]
In the same vein, APPEA recommended that administrative guidelines should
be developed in consultation with industry and be implemented prior to
the date of any amendments to the rebate scheme. [70]
Government-Industry Agreement
There was widespread agreement amongst industry that the Bill went far
beyond the substance of the Agreement negotiated at the High Level Group
discussions. AMEC stated the case succinctly: “We signed an agreement
and acted in good faith in that agreement yet we have ended up with a
set of amendments which goes far beyond what was agreed both in a practical
and a financial sense. AMEC's view is that the Government has not acted
in good faith.” [71]
Similarly, the Minerals Council of Australia asserted that the provisions
in the Bill have gone beyond the substance of the negotiated industry/Government
Agreement in two specific ways. First, that the Minister indicated in
the second reading speech that, contrary to the Agreement, Government
was considering ways in which expenditure could be capped. [72]
Secondly, that as a result of the definition of “beneficiation”
and the new definition of “minerals” a range of integrated processes
for physical recovery of minerals are rendered ineligible for the rebate
which were not identified during the negotiations. [73]
The Minerals Council of Australia estimated that the additional exclusions
beyond the agreement will cost an extra $30 million annually and asserted
that this was clearly not anticipated in the financial impact statement
in the Explanatory Memorandum which estimated savings of about $35 million
a year from the amendments restricting eligibility in the “mining
operations” category. The Government stated, in the Explanatory Memorandum,
that the amendments to address recent Federal Court and AAT decisions
were not designed to achieve savings. [74]
It was asserted that as a result of the consultation between industry
and Government, the industry had agreed to accept a 5% reduction in rebate.
It was claimed that if the amendments retaining current eligibilities
are not made, the reduction to the rebate would be 9%. [75]
WA Solar Salt Producers claim that the provisions in the Bill exceed
the industry/Government agreement because it was agreed that existing
eligibilities would be protected, apart from those explicitly identified
for removal. As salt operations were not so identified and have been ruled
as eligible by the Federal Court, WA Solar Salt Producers "consider
it a breach of faith that provisions have been introduced into the Bill
specifically aimed at removing the eligibility for the rebate beyond the
first salt stockpile". [76]
Changes to Administrative Arrangements
There is widespread concern in the evidence that the revised administrative
arrangements, principally the compliance and audit arrangements, are too
onerous in that they would impose a significant additional reporting and
administrative burden on rebate claimants. [77]
The concerns include:
1. That the amendments to the administrative arrangements will substantially
increase the compliance cost burden of average claimants under the scheme.
[78]
2. That the amendments may result in significant additional record keeping
requirements being imposed upon claimants. [79]
3. That the imposition of additional record keeping requirements would
breach the government's commitment to reducing compliance costs as outlined
in the Government's Small Business Deregulation Task Force. The increase
would also be contrary to recommendation 10 of the National Audit Office
Report No. 20 May 1996 which recognised the need to minimise record keeping
requirements on claimants under the Diesel Fuel Rebate Scheme. [80]
4. That the changed arrangements do not facilitate self-assessment. It
was submitted that there is an apparent lack of appropriate mechanisms
by which claimants under the scheme can be guided in making self assessments.
There is no legislative proposal to allow for the rulings on eligibility
to be binding; there is no protection from retrospective recovery action,
and there is no system provided for the publication of rulings on eligibility.
[81]
5. That the proposed requirement in item 36 that claimants must retain
records and supporting documentation for the rebate for a period of five
years under new subsections 240A(1) and (2) is onerous. [82]
6. That the record creating and keeping requirements in item 36, new
subsection 240A(1),(2) have widened the current requirements. The current
legislation requires claimants to keep all relevant documents which come
into the claimants' possession relevant to a claim for the rebate. The
provision in item 36 will require claimants to create and retain specific
documentation. According to the National Farmers Federation this "...
could conceivably result in farmers being required to keep a logbook for
every tractor used on his property and records kept each time the farmer
used the tractor, stating the date, fuel used and nature of use”.
[83]
7. That the Bill replaces the current audit provisions with more extensive
audit provisions under proposed section 164AC. It was contended that the
low level of prosecutions for non-compliance does not support the need
for the extension of the powers. [84]
8. That the system of benchmarking for standard rates of fuel consumption
is fundamentally flawed. The Bill proposes that standard rates of diesel
fuel consumption will be published for specific vehicles to establish
benchmarks which the ACS can use to determine appropriateness of claims.
It was claimed that such a process could not provide accurate benchmarks
because in practice, rates for a specific vehicle may vary considerably
depending on its function and some vehicles do not have an effective means
for measuring hours of operation for calculating fuel consumption rates.
Further, vehicles which do not possess metered/calibrated fuel receptacles
will not be able to accurately measure output from or fuel remaining in
tanks. [85]
9. That the administrative penalty regime, which is intended to operate
on a strict liability basis, represents a shift in the burden of proof
from the ACS to the claimant. At present the ACS is required to prove
an overclaim for rebate or a misuse of fuel for ineligible purposes. It
is submitted that the new provisions require that the ACS need only state
that, in its opinion, a particular claimant is unable to substantiate
a claim. It is submitted that the penalty regime which may result is in
conflict with established legal principles. [86]
10. That the introduction of the strict liability regime and administrative
penalties for failure to notify the ACS of certain matters and for failure
to substantiate a claim would be harsh and unreasonable in the circumstances
given the complexity of the legislation. [87]
11. That ACS is not the appropriate body to administer the system and
to have the power to impose administrative penalties. [88]
The Government's View
General
The Government's motives for amending the Customs and Excise legislation
are expressed in the Minister's second reading speech:
The Budget announced the Government's intention to achieve savings
in the scheme by tightening eligibility and containing growth in outlays
which have resulted from decisions of the Administrative Appeals Tribunal
(AAT) and the Federal Court which have had the effect of widening eligibility
under the scheme, beyond its intent. [89]
The Minister referred to the recent recommendation by the Australian
National Audit Office that the purpose and objective of the scheme should
be clarified and that a range of measures should be introduced to improve
administration and accountability. The Government described the scheme
as providing rebate of duty on diesel fuel for certain activities, mainly
in the mining and agricultural industries:
Its primary purpose is to maintain competitiveness in these key export
industries, in a manner consistent with the Government's broader fiscal
objectives. [90]
The characterisation of the scheme was a matter raised in evidence before
the Committee. Senator the Hon. Warwick Parer, representing the Hon. Geoff
Prosser MP, Minister for Small Business, Consumer Affairs & Customs,
rejected the suggestion that the diesel fuel rebate was either a form
of compensation or an incentive or a motivational device to purchase diesel
fuel. Senator Parer described the diesel fuel rebate as a refund of tax
paid or of a diesel excise paid. [91]
The origins of the proposed amending legislation were described in evidence
before the Committee. After the election, the new Government was committed
to addressing the budget deficit and, in so doing, all programs were under
consideration. The Treasury Department brought the diesel fuel rebate
scheme to the attention of the Government. It was decided to call industry
together to address the problem of the exponential growth rate of the
scheme and the effect upon the scheme of various Administrative Appeals
Tribunal and Federal Court decisions which have resulted in the rebate
being applied to areas where the Government never intended that it should
apply. industry coordinated a High Level Group to negotiate with the Minister
for Customs to find ways to address the loopholes in the legislation and
to remove the uncertainty which the Government considered had arisen from
the recent AAT and Court decisions. [92]
Beneficiation
In response to criticisms by industry that the Bill went beyond the terms
agreed to during the High Level Group negotiations, the Committee was
advised that:
... - there are things within the existing bill that were not part
of the agreements with the industry, and one in particular. ...That
is the beneficiation side. [93]
Senator Parer explained that the Bill appeared early containing the amended
definition of beneficiation so that industry could have the opportunity
of viewing it and comparing it with the industry agreement "because
there was some urgency in getting the bill through". As to the necessity
for amending the definition, Senator Parer suggested that:
... it is probably worthwhile getting a technical reason for this from
the Customs people, because the difficulty, as you will appreciate,
was a matter of definition. My belief is that it was all done in good
faith in an attempt to close what might become a future loophole which
would then go before the AAT or the courts and then open up areas where
it was never intended that diesel fuel rebate would be paid. [94]
In drafting the present Bill, the Government's objective was to take
into account those matters agreed to between industry and Government and
also those matters of concern to the Government arising from the AAT and
court decisions. In the process, some activities were excluded from the
definition of beneficiation which are presently eligible for the rebate.
In evidence it was said:
That became quite apparent when the legislation was put on the table
and available for discussion with the Minerals Council. That has been
the subject of quite considerable discussion between ourselves and other
agencies, the Minerals Council and other parties and individual companies.
You are quite correct: you made the comment that it is very difficult
to draw lines and to get experts to agree. We have been working with
them to try and get a definition that will take us to the point where
the outcome of those High Level Group discussions and the effects of
the court decisions and AAT are accurately reflected. We have not reached
that point as yet. We have got some positions that we will put to government
and the government will then decide whether they bring them forward.
[95]
This position was restated at a later time when Senator Parer addressed
the five dot points set out on page 3 of the Minerals Council of Australia
submission. In relation to the first point where the Council seeks an
amendment to the definition of beneficiation to retain eligibility for
currently eligible, integrated pyrometallurgical processes, Senator Parer
commented that, although the matters sought by the Minerals Council were
not what the High Level Group agreed, the Government has not made a decision
yet. In respect of the matters set out in section 5 of that submission
Senator Parer told the Committee that the matters were under consideration.
[96]
Dampier Salt Case
In response to the amendment of the definition of beneficiation in the
Bill which discriminates against salt producers relative to other mining
operations by applying a restrictive definition of beneficiation to salt
producers only, the Government referred to the Dampier Salt Case and the
possible flow-on effects of that decision were they not stemmed.
Senator Parer said:
... the industry had to make some hard decisions. One of them was to
counteract the Dampier Salt case. The industry agreed with that. The
concern was not Dampier Salt. On its own, it was not a major thing,
but the flow-on effects to a whole range of other industries in regards
to that could have been enormous. [97]
It was acknowledged that the cost to the Dampier Salt Company of having
to pay tax where they would otherwise have been eligible for a rebate
is about $660,000. The Government's position, however, is that this is
insignificant compared to the cost of the flow-on effects if the loophole
is not closed. The potential cost of the flow-on effects was estimated
as being "up to $100 million a year". [98]
It was also acknowledged that the salt producers were only a party to
the agreement reached at the High Level Group negotiations insofar as
the High Level Group represented the mining industry and the salt producers
are part of the mining industry. In response to the salt producers objection
to the amended definition of beneficiation, Senator Parer said:
Naturally, the decisions that were made meant some people had to take
a bit of pain. That was certainly an agreement with the high level group,
no doubt about it. ... It was unfortunate but it was the only way you
could close off the exponential growth into other areas which would
have been very significant. [99]
The Salt producers were eligible up until 1991 when the Australian Customs
Service challenged their eligibility. The Federal Court found for Dampier
Salt, and the High Court refused leave to appeal. The amendment to the
definition of beneficiation excludes the salt producers from eligibility
under the scheme. The Government's view of that case and its effects were
explained to the Committee:
In the judgment that came down in the Federal Court there were a series
of six or seven principles laid out which, in effect, suggested that
the point to which rebate should be paid was an economic position to
be taken by the seller, and that was the point at which the seller considered
he had a product that was saleable. We had appealed Dampier Salt back
in 1991 and I think it was mentioned this morning that the AAT agreed
with us. Dampier Salt pursued it to the Federal Court and we lost it.
We took it to the High Court, seeking leave to appeal. The High Court
did not give leave to appeal but did observe in the case of one of the
judges that it was a financial issue and in the hands of the parliament
to resolve. ... If the economic principles that were espoused by Justice
Lee were allowed to flow-on, and that is where the flow-on consequences
come, we believe, and we put this forward to the government, that it
would cost a significant amount of money. I think the fear of $100 million
is in the explanatory memorandum. [100]
One of the major issues raised was the extent to which the Bill reflected
the agreement reached by the High Level Group negotiations. One particular
area of disagreement seemed to be whether it was the understanding of
both industry and Government that the High Level Group traded off the
Dampier Salt issue. In response to the suggestion that Dampier Salt Company
and the Minerals Council of Australia considered that the Group had not,
Senator Parer commented that that was not his understanding. He said:
All I can say to you, Senator, is that the language used - and I will
quote it - is not specific. But the discussions - and I was certainly
part of some of those discussions - recognised the fact that if we were
to close a loophole that there would be a casualty. What it says is
this: "To modify eligibility criteria to avoid further widening
of the scheme by decisions based on economic or market related tests
rather than physical recovery of minerals." All the advice we had
... was that if something was not done about that Dampier Salt decision,
the growth of the diesel fuel rebate into areas that were never intended
could have been, according to advice we had from Customs - up to $100
million a year. [101]
Capping of Expenditure
One of the issues raised in evidence to the Committee was that, contrary
to the agreement reached by the High Level Group negotiations, the Minister
had indicated in the second reading speech that the Government was considering
capping or limiting normal growth of expenditure under the diesel fuel
rebate scheme. The Committee was advised that there had been no proposals
put before the Government in relation to that aspect of the scheme. [102]
Administrative Guidelines
In evidence, industry had made the recommendation that there should be
clear guidelines developed in consultation with industry and made available
at the time the legislation is enacted. Such guidelines would assist in
self assessment. The Committee was informed that the question of guidelines
was not a matter which was discussed in the course of the High Level Group
discussions although it was generally agreed that such guidelines should
be developed:
We have had quite considerable discussion with a number of areas of
industry about guidelines, particularly in a self-assessment context.
The scheme itself is a self assessment at the moment. Yes, we agree
that guidelines need to be written. We have agreed with industry that
we will write them in consultation. It will not be physically or practically
possible to write them by the time this is enacted, if it goes through
in the current timeframe. [103]
Unintended Consequences
It was recommended by the Minerals Council of Australia in their submission
[104] that there should be a general
principle to be applied in situations involving unintended consequences
of the amending legislation. The Council stated that where unintended
consequences are identified, the principle that should be applied is that
those activities which are currently eligible and which were not part
of the industry/Government agreement should retain eligibility under the
scheme. In response, Senator Parer commented:
... the Government is very conscious of the fact that high level agreement
was reached between the government and industry which we will do our
best to honour. ... Apparently the drafting of legislation to really
cover off loopholes to cover unintended consequences without catching
other people is a difficult thing. It is very difficult. [105]
"Site"
In response to the concerns raised about the issue of "site",
it was contended on behalf of the Government that there were few difficulties
attaching to that issue. Referring to a paper presented in the course
of the Committee hearing by Mr Maynard from the Association of Mining
and Exploration Companies Taxation Committee, it was said:
We have not analysed it fully, but certainly the impression given -
that the question of site is as difficult as portrayed - is not correct.
We have spoken with the Minerals Council and I know site is an issue
for APPEA and it is an issue for other people. But the Minerals Council
and ourselves are not aware of any significant problems in defining
a mining site. ... Airstrips was an amendment put in in the Senate in
1995. We are not silly enough to suggest it has to be in the pit. We
have been quite conscious of that and the legislation suggests it had
to be 'at the place' but if it is at a place adjacent, we accept it.
So, aside from the APPEA issues that were brought forward there are
not, in our understanding, major issues. The major issues in relation
to site and at the place relate to transport and, of course, that is
fairly important in the terms of light vehicles and transport at sea.
[106]
The Committee addressed the concerns of industry regarding the treatment
by the Australian Customs Service of areas such as Barrow Island where
there are a multitude of well heads. In relation to the issue whether
the Australian Customs Service would regard each well head as a separate
mine site rather than the whole of the field being regarded as a mine
site, it was put to the Committee that:
No, on the Barrow Island issue. That issue, once again, only comes
to the fore when you start talking about transport. For the purposes
of claims for rebate we treat that island and all those activities as
one. [107]
Scrutiny of Bills
The Senate Scrutiny of Bills Committee has produced a report, Digest
1, 1997, which raised some issues in relation to this Bill. Of interest
to the Committee were the matters raised in relation to the right to remain
silent and circumstances where it might be appropriate for that principle
to be overruled, the lack of appeal rights and the changes which affect
all claimants under the diesel fuel rebate scheme. The Committee was advised
that the Australian Customs Service was aware of the Scrutiny of Bills
report and the Attorney General's Department was preparing a response
to that Committee. [108]
Cement
The Committee sought clarification of the Government's view as to the
eligibility of the cement industry for the diesel fuel rebate. The 1995
amendment to the Customs and Excise legislation introduced a clause which
excluded, amongst other things "limestone (other than agricultural
use limestone)". [109] This amendment
appeared to remove the mining for limestone for the recovery of calcite
from eligibility for diesel fuel rebate. The Committee referred to the
letter from the former Minister for Small Business, Customs and Construction,
the Hon., Senator Chris Schacht dated 9 August 1995 advising the industry
that the mining of limestone by the cement industry is within the intent
of the rebate legislation and does constitute "mining for minerals".
In response, the Committee was advised that nine companies have challenged
the ACS decision not to pay the rebate and that matter is before the AAT.
Should the decision of the AAT be that the mining of limestone for the
recovery of calcite for use in the manufacture of cement is eligible for
the rebate, the Committee was advised that the Government would not accept
that decision and move to exclude it:
No, our understanding of the current situation is that limestone will
now only get the diesel fuel rebate if it is used for agricultural purposes.
... We will be back here again. [110]
The Committee also sought comment from the Government as to the situation
described in evidence where some cement manufacturers were allowed the
rebate whereas others were not. The Committee was told that such payments
were a mistake and the matter would be rectified.
Senator Parer reminded the Committee that the exclusion of mining of
limestone (other than for agriculture) was introduced in the 1995 amendment
by the previous Government. He said:
What was agreed is that the diesel fuel rebate would apply to limestone
that was mined for agricultural purposes. ... That actually went through
the Senate and it meant that, if you used it for agricultural purposes,
you would get the diesel fuel rebate, but not for cement. That was a
decision of the Parliament. [111]
Offshore Vessels
The Committee drew the attention of the Government to an apparent inequity
which exists in relation to offshore vessels. Under the legislation, a
fishing vessel sailed out of a port by a fisherman will attract the diesel
fuel rebate, but a vessel sailed out of a port to service an offshore
oil rig will not. In response it was pointed out that it had been a decision
of the previous Government to exclude those offshore vessels from the
diesel fuel rebate. The view of the Government is that a principle underlies
the exclusion which can be illustrated by the analogy of goods being supplied
to mines. Goods which are supplied to mines are supplied by a vehicle
which does not attract the diesel fuel rebate. [112]
The exclusion extends to "work boats" which are required, by
regulation, to be in attendance at offshore oil rigs. The Committee was
advised that the same principle applies, that the attendance of four wheel
drives around a mine site does not attract the rebate and that the principle
applies by extension to the workboats. In view of the evidence which had
been given, however, Senator Parer said that he would look at the issue
although he "would not raise false expectations" about it. [113]
Light Vehicles
Evidence was given before the Committee about the importance of the mining
industry to Australia. The business of prospecting is central to that
industry and, in order to maintain Australia's current base as a mining
country, high levels of prospecting should be maintained. The use of light
vehicles is essential to the business of prospectors. Further, light vehicles
are an integral part of mining operations for small mines. In response
to the criticism of the exclusion of light vehicles from the diesel fuel
rebate Senator Parer advised that the exclusion was part of the agreement
reached with the High Level Group. He said that some of the decisions
made were painful and gave credit to the industry for assisting in addressing
the budget deficit. [114]
Industry/Government Agreement
One of the major issues before the Committee was the extent to which
the proposed legislation in its current form reflected the agreement reached
at the High Level Group negotiations. In response to the suggestion that
there appeared to be some conflict between the Government's view of the
Agreement and that of industry's, Senator Parer said:
No, it is a matter of degree, Senator, because when the Customs officials
drafted those amendments they did it in a way that would go down the
line of adhering to that agreement between the industry and the government
and addressing loopholes. Where there have been unintended consequences
as a result of that, that is what the Department is now looking at.
[115]
The Committee was advised that the exact terms of the agreement are contained
in the press statement :
... the press statement outlines the Government's consideration of
the material put forward by the group, which is referred to as the agreement.
The only other comments that are made are in the Minister's second reading
speech, which the Minerals Council referred to this morning, on the
issue of whether there will be other measures to ensure that levels
of expenditure are met. [116]
It was agreed, however, that on the subject of the definition of beneficiation,
the Bill went further than the agreement with industry but that that is
a matter which the Government is considering. [117]
Further Amendments Anticipated
In relation to the issue of whether there would be further amendments
presented in relation to this Bill, Senator Parer advised that the process
was not complete and that there were still many matters under consideration.
The process of reviewing the diesel fuel rebate scheme to date has involved
consultation with industry, encouraging the High Level Group negotiations,
the development of the Bill, the Committee process and a consideration
of the issues raised consequently by industry. In describing the origins
of the process Senator Parer said:
... the concern we had when we spoke to the industry first up was that
on the information we had, the growth was exponential, it was growing
at a rate that was substantially higher than the growth of the industry
and the CPI. A lot of this was to do with - as we have said earlier
- various court cases, AAT decisions, which brought certain projects
and made them eligible when it was not the intent that they should be
eligible. ... This was what was addressed: it was to say, "How
can we tackle what was clearly an exponential growth well in excess.
So the agreement reached with the industry was we would try and make
the savings that were offered in a way that would curb that exponential
growth but still allow for full industry growth and inflation. That
was the agreement reached between the government and the industry. [118]
In evidence it was agreed that there was a likelihood of there being
further amendments to the Bill. Throughout his evidence, Senator Parer
had referred to various matters as being under consideration and that
the reason for the early introduction of the Bill was to elicit relevant
comments from industry. Further, Senator Parer referred to the Minister's
second reading speech:
The Minister, in the second reading speech, made it very clear that,
following further discussions with the industry, there would be further
amendments coming forward. I would guess, and I would be surprised if
your next question is not: why did I not put the amendments on the table
today? The answer I have to that is that because the committee decided
to have a hearing on this matter, we felt it would be improper to do
that because otherwise it could well have pre-empted the sort of evidence
given to the committee which would have meant that all these good people
who travel so far to give evidence would have wasted their time. ...we
would not have had the benefit of any additional information that may
have come out from these witnesses. [119]
Senator Parer undertook to make the proposed amendments available to
the Committee within a time frame which would give the Committee sufficient
time to consider them. Senator Parer also pointed out that the subject
of further amendments did not preclude the Committee from making a report
on the Bill as it stands. The Committee noted that it was not unusual
for Governments to move amendments in the Senate and that the Senate could
take into account any recommendations for amendment to the Bill made by
the Committee. [120]
Recommendation
The Committee recommends that the Bill be passed.
Senator A.B. Ferguson
Chairman
Footnotes
[1] Journals of the Senate No.74, dated 6 February
1997.
[2] Prosser, the Hon.G., Minister for Small
Business and Consumer Affairs, House of Representatives, Hansard, 12
December 1996.
[3] Prosser, the Hon.G., Minister for Small
Business and Consumer Affairs, House of Representatives, Hansard, 12
December 1996.
[4] Senate Economics Legislation Committee,
"Report on the Consideration of the Customs and Excise Legislation
Amendment Bill 1995, June 1995, p.1.
[5] Senate Economics Legislation Committee,
"Report on the Consideration of the Customs and Excise Legislation
Amendment Bill (No.2) 1995, October 1995.
[6] See Senate Hansard Economics Legislation
Committee, 1 June 1995, p.E40; Senate Hansard Economics Legislation
Committee, 26 June 1995, p.E258.
[7] Minerals Council of Australia Submission
p.4 (referring to letter from the Prime Minister dated 19 August 1997).
[8] Minerals Council of Australia Submission
p. 6.
[9] Customs and Excise Legislation Amendment
Bill (No.2) 1996, Explanatory Memorandum, p.1.
[10] Prosser, the Hon.G., Minister for Small
Business and Consumer Affairs, House of Representatives, Hansard, 12
December 1996.
[11] Prosser, the Hon.G., Minister for Small
Business and Consumer Affairs, House of Representatives, Hansard, 12
December 1996.
[12] Prosser, the Hon.G., Minister for Small
Business and Consumer Affairs, House of Representatives, Hansard, 12
December 1996.
[13] Customs and Excise Legislation Amendment
Bill (No.2) 1996, Explanatory Memorandum, p.3 (outline).
[14] Prosser, the Hon.G., Minister for Small
Business and Consumer Affairs, House of Representatives, Hansard, 12
December 1996.
[15] Minerals Council of Australia Submission
p.2.
[16] Prosser, the Hon. G, Minister for Small
Business and Consumer Affairs, House of Representatives Hansard
12 December 1996.
[17] Cement Industry Federation Submission
p.1.
[18] Customs and Excise Legislation Amendment
Act 1995 (Act No.87 of 1995).
[19] Cement Industry Federation Submission
p.2.
[20] Cement Industry Federation Submission
p.2.
[21] Cement Industry Federation Submission
p.4.
[22] Association of Mining and Exploration
Companies (Inc.) Submission p.9.
[23] Association of Mining and Exploration
Companies (Inc.) Submission p.9.
[24] Association of Mining and Exploration
Companies (Inc.) Submission p.9.
[25] CSR Limited Submission p.3-4.
[26] CSR Limited Submission p.3-4.
[27] Minerals Council of Australia Submission
p.3.
[28] Minerals Council of Australia Submission
p.3.
[29] Minerals Council of Australia Submission
p.14-15.
[30] Minerals Council of Australia Submission
p.9-11.
[31] Minerals Council of Australia Submission
p.11.
[32] Minerals Council of Australia Submission
p.12.
[33] Minerals Council of Australia Submission
p.15.
[34] Australian Petroleum Production &
Exploration Association Limited Submission p.1.
[35] Australian Petroleum Production &
Exploration Association Limited Submission p.9.
[36] Australian Petroleum Production &
Exploration Association Limited Submission p.9-10.
[37] Esso Australia Submission p.3.
[38] Santos Ltd Submission p.6.
[39] Australian Petroleum Production &
Exploration Association Limited Submission p.7.
[40] Also supported by Chamber of Minerals
and Energy of Western Australia Submission p. 5.
[41] Association of Mining and Exploration
Companies (Inc.) Submission p.ii.
[42] Association of Mining and Exploration
Companies (Inc.) Submission p.10-11.
[43] Association of Mining and Exploration
Companies (Inc.) Submission p.10.
[44] Association of Mining and Exploration
Companies (Inc.) Submission p.10.
[45] Association of Mining and Exploration
Companies (Inc.) Submission p.11.
[46] Association of Mining and Exploration
Companies (Inc.) Submission p.11.
[47] Association of Mining and Exploration
Companies (Inc.) Submission p.11.
[48] Chamber of Minerals and Energy of Western
Australia Submission p.6.
[49] WA Solar Salt Producers Submission p.4.
[50] WA Solar Salt Producers Submission p.4.
[51] WA Solar Salt Producers Submission p.4-5.
[52] WA Solar Salt Producers Submission p.5.
[53] Minerals Council of Australia Submission
p.12-13, 15. See also Chamber of Minerals and Energy of Western Australia
Submission p.7.
[54] Association of Mineral and Exploration
Companies Submission p.14.
[55] Association of Mineral and Exploration
Companies Submission p.14.
[56] Australian Petroleum Production &
Exploration Association Limited Submission p.8; Esso Australia Ltd Submission
p.3.
[57] Australian Petroleum Production &
Exploration Association Limited Submission p.1. Also see Santos Ltd Submission
p.2 and 6.
[58] Australian Petroleum Production &
Exploration Association Limited Submission p.8. See also Esso Australia
Ltd Submission at p.3. Esso Australia Ltd calculates that the removal
of the rebate for offshore vessels could add up to $2.5 million per year
to the cost of operations in Bass Strait. See p.41. The view of APPEA
is also supported by Santos Ltd Submission p.6 and Woodside Offshore Petroleum
Pty Ltd Submission p.1.
[59] Woodside Offshore Petroleum Pty Ltd Submission
p.1.
[60] Association of Mining and Exploration
Companies Submission p.15.
[61] Association of Mining and Exploration
Companies Submission p.15. See also the comments by the Association of
Mining and Exploration Companies Submission p.17 in respect of interpretations
of “at the place” in the context of transport networks.
[62] Australian Petroleum Production &
Exploration Association Limited Submission p.1 and 10.
[63] Santos Ltd Submission p.4-5.
[64] See Association of Mining and Exploration
Companies Submission p.16.
[65] Chamber of Minerals and Energy of Western
Australia Submission p.6.
[66] Minerals Council of Australia Submission
p.15.
[67] Association of Mining and Exploration
Companies (Inc.) p.iii.
[68] Minerals Council of Australia Submission
p.13-14.
[69] Minerals Council of Australia Submission
p.14. See also Association of Mining and Exploration
Companies p.8.
[70] Australian Petroleum Production &
Exploration Association Submission p.1.
[71] Association of Mining and Exploration
Companies p.4.
[72] See also the Chamber of Minerals and Energy
of Western Australia Submission p.2.
[73] Minerals Council of Australia Submission
p.2-3.
[74] Minerals Council of Australia Submission
p.3. See Customs and Excise Legislation Amendment Bill (no.2) 1996, Explanatory
Memorandum, p.7 (outline).
[75] Mineral Council of Australia Submission
p.3.
[76] WA Solar Salt Producers Submission p.5.
[77] National Farmers Federation Submission
p.5. See also Association of Mining and Exploration Companies Submission
p.68, The Western Australian Farmers Federation (Inc.) Submission and
Kalgoorlie Consolidated Gold Mines Submission.
[78] National Farmers Federation Submission
p.5.
[79] National Farmers Federation Submission
p.5.
[80] National Farmers Federation Submission
p.5.
[81] National Farmers Federation Submission
p.6.
[82] National Farmers Federation Submission
p.6.
[83] National Farmers Federation Submission
p.6. See also Association of Mining and Exploration Companies Submission
p.18.
[84] National Farmers Federation Submission
p.7.
[85] National Farmers Federation Submission
p.7.
[86] National Farmers Federation Submission
p.8.
[87] The Western Australian Farmers Federation
Submission p.1.
[88] The Western Australian Farmers Federation
Submission p.1.
[89] Prosser, the Hon. G., Minister for Small
Business and Consumer Affairs, House of Representatives Hansard 12
December 1996.
[90] Prosser, the Hon. G., Minister for Small
Business and Consumer Affairs, House of Representatives Hansard, 12
December 1996.
[91] Evidence, Hansard 28 February 1997,
p.54-55 per Senator W.Parer.
[92] Evidence, Hansard 28 February 1997,
p.E48 per Senator W.Parer.
[93] Evidence, Hansard 28 February 1997,
p.E 50 per Senator W.Parer.
[94] Evidence, Hansard 28 February 1997,
p.E50 per Senator W.Parer.
[95] Evidence, Hansard 28 February 1997,
p.E51 per Mr John Jeffrey, National Manager, Inland Revenue, ACS.
[96] Evidence, Hansard 28 February 1997,
p.E53 per Senator W.Parer.
[97] Evidence, Hansard 28 February 1997,
p.E51 per Senator W.Parer.
[98] Evidence, Hansard 28 February 1997,
p.E57 per Senator W.Parer.
[99] Evidence, Hansard 28 February 1997,
p.E51 per Senator W.Parer.
[100] Evidence, Hansard 28 February
1997, p.E51-52 per Mr John Jeffrey, National Manager, Inland Revenue,
ACS.
[101] Evidence, Hansard, 28 February
1997, p.E57 per Senator W.Parer.
[102] Evidence, Hansard 28 February
1997, p.E53 per Senator W.Parer.
[103] Evidence, Hansard 28 February
1997, p.E54 per Mr John Jeffrey, National Manager, Inland Revenue, ACS.
[104] Minerals Council of Australia Submission
p.3.
[105] Evidence, Hansard 28 February
1997, p.E54 per Senator W.Parer.
[106] Evidence, Hansard 28 February
1997, p.E55-56 per Mr John Jeffrey, National Manager, Inland Revenue,
ACS.
[107] Evidence, Hansard 28 February
1997, pE61. per Mr John Jeffrey, National Manager, Inland Revenue, ACS.
[108] Evidence, Hansard 28 February
1997, p.E56 per Mr John Jeffrey, National Manager, Inland Revenue, ACS.
[109] Customs and Excise Legislation Amendment
Act 1975 (Act No.87 of 1995).
[110] Evidence, Hansard 28 February
1997, p.E59 per Senator W.Parer.
[111] Evidence, Hansard 28 February
1997, p.E55 per Senator W.Parer.
[112] Evidence, Hansard 28 February
1997, p.E59 per Senator W.Parer.
[113] Evidence, Hansard 28 February
1997, p.E60 per Senator W.Parer.
[114] Evidence, Hansard 28 February
1997, p.E60 per Senator W.Parer.
[115] Evidence, Hansard 28 February
1997, p.E60 per Senator W.Parer.
[116] Evidence, Hansard 28 February
1997, p.E60 per Mr John Jeffrey, National Manager, Inland Revenue, ACS.
[117] Evidence, Hansard 28 February
1997, p.E61 per Mr John Jeffrey, National Manager, Inland Revenue, ACS.
[118] Evidence, Hansard 28 February
1997, p.E48 per Senator W.Parer.
[119] Evidence, Hansard 28 February
1997, p.E48 per Senator W.Parer.
[120] Evidence, Hansard 28 February
1997, p.E50 per Senator A.B.Ferguson.