Denis James
Economics, Commerce and Industrial Relations Group
- In 1995-96, the Commonwealth expects to receive around $16.5
billion, or 13.9 per cent of total Commonwealth tax revenue, from
customs and excise duties. Of this amount, $13 billion takes the
form of excise collections while $3.5 billion will be raised from
customs duties. Of the excise collections, $10.3 billion will be
raised from petroleum products, $1.1 billion will be raised from
alcohol and $1.6 billion from tobacco products.
- An excise is a tax imposed upon the domestic production of a
specified product. Customs duties are taxes imposed upon imported
products. In order to achieve equitable tax treatment, a nexus
generally exists between the rates of excise duty imposed on
domestic production and the customs duties imposed on imports.
- Customs and excise duties were the main sources of taxation
available to the Colonies prior to Federation. Upon Federation,
section 90 of the Constitution gave the Commonwealth the exclusive
power to impose duties of customs and excise.
- Duties of customs and excise were the sole source of
Commonwealth taxation until 1910, when land tax was imposed. During
World War 1, the Commonwealth introduced a range of new taxes,
including income tax, entertainments tax and estate duties. Over
the first two decades of this century, the Commonwealth also had to
provide significant grants to the States to compensate them for the
loss of their customs and excise revenues.
- Virtually all excises in Australia have been applied as
'specific' duties, that is, as a rate of duty per unit of
production. This has required excise rates to be raised from time
to time to prevent tax collections from being eroded by inflation.
This problem was systematically addressed for the first time in the
initial Hawke Budget (August 1983) when it was announced that
excise rates would be adjusted at six-monthly intervals in line
with movements in the Consumer Price Index.
- In addition to being an important source of revenue, excises
have also been used to regulate social behaviour. Over the last 3
years, there have been large increases in excise rates on tobacco
products, designed to curtail smoking. In both 1984 and 1988,
excise arrangements on beer were altered to favour the consumption
of low alcohol beers. The 1993 Budget imposed a surcharge on leaded
petrol to encourage the use of less polluting, unleaded fuel.
- Excise duties have also been used to facilitate cost recovery
in the provision of Commonwealth services. Between 1926 and 1959, a
component of Commonwealth duties on motor fuel was explicitly
earmarked for road funding. The earmarking of fuel taxes for roads
has again applied since 1982. Duties applied to aviation gasoline
and aviation turbine fuel have also been used to recover the costs
of providing airways services, air safety regulation and other
aviation facilities.
- Excises are quite regressive taxes, in that households on lower
incomes tend to spend a higher proportion of their income on the
consumption of excisable goods than higher income households.
Analysis of household expenditure patterns shows that the most
regressive excises are those on tobacco products.
- Where excises are imposed upon inputs into other industries (as
in the case of fuel) economic efficiency is likely to be reduced
due to their distorting effect on the pattern of national
production. This arises firstly from the fact that rates of excise
vary considerably according to the type of fuel used and the
industry using the fuel and secondly, because resources are
redirected away from those industries which use fuel more
intensively. The Government has been urged by several of its major
advisory bodies, such as the Industry Commission, to examine the
whole question of the impact of intermediate input taxation on
economic efficiency.
Experience has shown that movements in excise rates and revenue
collections on refined petroleum, alcoholic and tobacco products
are of considerable interest to Parliamentarians and their
constituents. The aim of this paper is to provide a comprehensive
catalogue of the changes in excise rates on major excisable
products over the past three decades and to give a brief
explanation of the reasons underlying such changes.
Prior to Federation, the main tax revenues available to the
Colonies were duties of customs and excise. In 1896-97, for
example, customs and excise represented 76 per cent of total
taxation revenue in the Colonies. Upon Federation, the power to
raise such duties was ceded exclusively to the Commonwealth under
the provisions of section 90 of the Constitution(1). This is one of
the very few exclusive powers granted to the Commonwealth. Most of
the Commonwealth's powers are concurrent with those of the States,
although section 109 of the Constitution allows Commonwealth law to
be paramount in the event of any inconsistency between Commonwealth
and State law. The Commonwealth is bound to impose excise and
customs duties, or any other taxation for that matter, on a
nationally uniform basis under the provisions of section 51(ii) and
section 99 of the Constitution.
In the first two decades following Federation, there was a need
for considerable grants from the Commonwealth to the States to
compensate them for the loss of their customs and excise revenue.
However, during this period the States, which had been levying
small amounts of income tax, began to develop this as a primary
source of tax revenue. Of course, the States also derived a
reasonable amount of non-tax revenue from other sources, such as
railway profits, land sales and royalties. However, it was not
until the 1920s that the States began to become more financially
independent of the Commonwealth. Whereas in 1909-10, Commonwealth
grants made up 31 per cent of total State revenue, by 1918-19 this
proportion had declined to only 17 per cent, stabilising at around
14 per cent by 1929. This situation lasted until 1942, when the
Commonwealth took exclusive control of the income taxing field
under the Uniform Taxation Arrangements.(2)
Naturally, customs and excise duties were also the major revenue
source available to the fledgling Commonwealth Government. They
were the sole source of Commonwealth tax revenue until 1910, when
Commonwealth land tax was levied. The tax system was further
extended during World War I when, in 1915, the Commonwealth began
to impose income taxation and also introduced a range of other
taxes to finance the war effort. By 1918-19, customs and excise
duties raised 53 per cent of Commonwealth taxation revenue, income
tax accounted for 32 per cent and the remainder was raised from
other taxes such as land tax, war-time profits tax and estate
duties.
However, even as late as 1938-39, for example, customs and
excise duties still contributed 63 per cent of Commonwealth tax
receipts, income tax amounted to 16 per cent and sales tax raised
13 per cent. This situation changed dramatically after 1942, when
the Commonwealth became the sole collector of income tax. By
1946-47, for example, customs and excise duty contributed only 27
per cent of Commonwealth taxation, while income tax raised 54 per
cent.
Customs and excise duties are still very important taxes today,
even if they are not as significant as in previous times. In
1995-96, such taxes are estimated to raise $16.5 billion dollars,
or 13.9 per cent of total Commonwealth tax revenue. Of this amount,
$13 billion will be raised from duties of excise and $3.5 billion
will be raised from customs duties. Of the excise collections,
$10.3 billion is to be raised from duties on refined petroleum
products, crude oil and LPG, while the remaining $2.7 billion will
be raised from excise on tobacco and alcoholic products. Table 4
shows Federal excise receipts from major excisable products since
1970.
An excise is a tax which is imposed upon goods which have been
produced domestically, as against customs duties which are imposed
on imported goods. Of course, in order to achieve equitable tax
treatment, a nexus generally exists between the rates of excise
duty imposed on domestic production and the customs duties imposed
on imports. An excise is usually applied at the point of
production, for example, being paid by the oil refiner or by the
cigarette manufacturer. In this respect, an excise is different
from a sales tax, which is usually imposed at the wholesale or
retail level and which generally does not discriminate between
domestically produced and imported goods. This concept of what
constitutes an excise appears to differ from the interpretation of
the High Court which, in its wisdom, has defined an excise to be a
tax on goods applied anywhere in the production or distribution
chain. It is this broader definition, in conjunction with section
90 of the Constitution (which gives the Commonwealth the exclusive
power to levy customs and excise duties), which has effectively
prevented the States from applying any form of tax on the
production or distribution of goods.(3)
It should also be noted that duties of customs and excise are
only imposed on products consumed within Australia. Duty is not
payable on any products which are exported. This includes fuel used
by ships plying the international trades or aircraft flying
international routes.
Although excise has traditionally been applied to alcohol,
tobacco and petroleum products, a range of other products have been
excisable at various times in the past, including such commodities
as starch, rice, sugar, saccharin, glucose, golden syrup and canned
fruit. One reason for the popularity of excises is that they are
easy to impose on goods of a relatively homogeneous nature and
produced by a small number of producers. They have also frequently
been applied to products which are characterised by relatively
'inelastic' demand, that is, despite an increase in the price of
such commodities, demand for them does not fall by a
proportionately large amount. Hence, excise increases on such goods
will generally be translated into increased revenue flows to the
government, making them an excellent tax base.
An excise may be applied as a specific tax or on an ad
valorem basis, although most excises in Australia have been
specific. A specific duty is one which is applied per unit of
production, for example, so many cents per litre of petrol. An
ad valorem tax is levied on the value of production.
Earlier this century, for example, certain agricultural machinery
was taxed on the basis of a specified percentage of the value of
the equipment produced.
One problem in imposing a specific tax, of course, is that the
tax rate must be continually raised to prevent inflation from
eroding the tax collections. It was for this reason that the Hawke
Government announced, in August 1983, that the excise rates on
'traditional' commodities (that is, refined petroleum, tobacco and
alcoholic products) would be indexed, at six-monthly intervals, to
changes in the consumer price index (CPI). Since 1983, excise rates
have been increased in early February, based on the CPI increase in
the preceding September and December quarters, and in early August,
based on the CPI increase in the preceding March and June
quarters(4). The indexation factors which have been applied to
excise rates since 1983 are shown in Table 5 in the Appendix.
While excises are important as a source of revenue for the
government, they have also frequently been used to regulate
community behaviour. There have been sharp rises in tobacco excise
rates in recent years to discourage smoking. The formula currently
used to set beer excise considerably favours low-alcohol beer,
encouraging a switch to that beverage. The 1993 Budget imposed a
higher rate of excise on leaded petrol to make it more attractive
for motorists to move to less polluting, unleaded fuel.
Taxes on various petroleum products have been applied by the
Commonwealth since Federation. Most of these taxes took the form of
customs duties in the early part of the century and excises only
began to be imposed once domestic production commenced.
The details of the imposition of excise on each individual
petroleum product will be discussed below. However, there was a
significant factor which affected the excise rates on all refined
petroleum products in the period March 1986 to December 1987. This
concerns the nexus which the Government made between excise rates
on refined petroleum products and excise collections from the crude
oil levy during that period.
Under the Commonwealth's crude oil taxation scheme, a levy was
collected on the production of crude oil from certain 'old' wells,
mainly in Bass Strait. The crude oil levy, which itself was a form
of excise, was related to the international price of oil. In this
sense, the levy could almost be regarded as a 'pseudo' resource
rent tax. As international oil prices rose and profits from the old
wells increased, the levy collections would increase, and vice
versa(5).
When world oil prices began to decline in 1986, Commonwealth
receipts from the crude oil levy also began to decline. Faced with
a difficult budgetary situation, the Government decided to
compensate for most of the loss of crude oil levy receipts by
increasing the excise rates on refined petroleum products. This
explains the large increase in all refined petroleum products
excise in that year.
The Government pledged, however, that if oil prices rose and
crude oil levy collections increased, the excise rates on refined
petroleum products would be reduced. This pledge was adhered to
and, over the period 1986 to 1987, there were frequent fluctuations
in refined petroleum products excise rates as world oil prices
varied. This procedure, superimposed upon the six-monthly
indexation process, explains the large number of different excise
rates applicable to all refined petroleum products over the period
in question. It was only at the end of 1987, when changes were made
to the crude oil marketing arrangements, that the nexus was
eventually broken.
Table 1 in the Appendix shows excise rates on major refined
petroleum products since 1956 while excise collections from
petroleum products are shown in Table 4 in the Appendix. It might
be noted that virtually all refined petroleum products excise is
derived from petrol and diesel. In 1995-96, for example, of the
estimated excise collections of $10.3 billion, $2.4 billion will be
raised from excise on leaded petrol, $3.9 billion from unleaded
petrol and a further $3.9 billion from diesel (the figure for
diesel being gross collections before rebates are paid). Excise on
all remaining refined petroleum products amounts to a mere $164
million.
2.1 Excise on Petrol and Diesel
Petrol has been taxed by the Federal Government since early this
century. The tax originally took the form of a customs duty, since
all petrol was imported. With the establishment of domestic
refineries, petrol excise was first imposed in 1929 at the rate of
1 penny per gallon (0.18 cents per litre).
Over the period 1926 to 1959, there was formal hypothecation of
petrol excise for Commonwealth roads grants to the States,(6)
although it should be noted that, apart from 192627, there was
never any time when roads grants exceeded the amount of petrol tax
collected. During this period when hypothecation applied, petrol
excise was raised on a number of occasions in order to generate
sufficient revenues to finance road funding programs.
Excise was first applied to diesel in 1957. Given the link which
existed between petrol taxation and road funding, it was felt that
the users of diesel powered vehicles should also be making a
contribution to roads. Excise was initially imposed at the rate of
1 shilling per gallon (2.203 cents per litre), which was slightly
higher than the excise on petrol at the time (2.108 cents per
litre). It is interesting to note that the excise on diesel always
remained marginally higher than that on petrol until August 1973,
when the two rates were made equal.
Since the primary purpose of imposing the excise on diesel was
for road cost recovery purposes, it is not surprising that the
excise was only paid on diesel fuel used by on-road vehicles. All
off-road users of diesel were exempt from the excise. This remained
the case until 1982, when a variety of off-road users were also
required to pay some or all of the excise. This will be described
in more detail below in the section dealing with the diesel fuel
rebate scheme.
In 1959, the nexus between road funding and fuel taxation was
broken. The Treasurer, Mr Holt, argued(7) that it was an unsound
practice to allocate the proceeds of any one tax for one particular
class of expenditure in that it cut across the fundamental
budgetary principle that all government receipts should be paid
into a common account from which particular expenditures can be met
by lawful appropriation. Moreover, Mr Holt argued that receipts
from fuel excise had fluctuated greatly in recent years, leading to
uncertainty in the level of road funding for the States. By
breaking the nexus, a more predictable program of road funding
could be provided to the States.
Over the period from 1959 to 1982, petrol and diesel excise was
regarded simply as a general revenue raising measure and was
increased from time to time in response to budgetary needs. This
situation changed in 1982. In that year, the Fraser Government felt
that it had to react to the criticism that the level of real road
funding had been falling significantly since the late 1970s. In
August 1982, the Government decided to boost road funding by around
50 per cent by initiating the Australian Bicentennial Road
Development program.
Under the terms of that program, a surcharge of one cent per
litre was applied to duties of customs and excise on petrol and
diesel fuel from 17 August 1982 until 30 June 1983, when the
surcharge increased to two cents per litre and remained at that
level until the end of the program on 31 December 1988. This had
the effect of raising the excise rate on petrol and diesel from
5.155 cents per litre to 6.155 cents per litre on 17 August 1982
and to 7.155 cents per litre on 1 July 1983. The proceeds of the
surcharge were paid into the Australian Bicentennial Road Trust
Fund to be used for grants to the States for road
construction.(8)
In its first budget on 22 August 1983, the newly elected Hawke
Government increased petrol and diesel excise by a discretionary
1.5 cents per litre and simultaneously applied its first
six-monthly indexation adjustment (a 4.3 per cent increase). The
combined effect was to set the level of petrol and diesel excise at
9.027 cents per litre as from Budget night.
Between August 1983 and February 1986, the increases in petrol
and diesel excise rates related only to indexation adjustments. As
mentioned above, however, the period from March 1986 to December
1987 was characterised by a rapid increase in excise collections
and considerable fluctuations in excise rates, in response to the
link between refined petroleum products excise and crude oil levy
collections. From 1988 until August 1993, the increases in the
excise rates were again only due to indexation(9).
In the 17 August 1993 budget, the Government announced that it
was imposing an immediate 3 cents per litre increase on all
petroleum products except aviation gasoline and aviation turbine
fuel. This raised the excise on petrol and diesel from 26.573 cents
per litre to 29.573 cents per litre. The Government further
announced that, in addition to the normal indexation adjustments,
an additional 1 cent per litre would be added to the excise on most
refined petroleum products in each of February and August 1994. In
subsequent negotiations with the Western Australian Green Senators
and Senator Harradine, however, it was agreed that these latter two
adjustments would only apply to petrol and diesel fuel.
By August 1994, therefore, excise on unleaded petrol and diesel
had increased by 5 cents per litre plus the indexation adjustment,
compared with the rates obtaining immediately prior to budget
night. However, in order to curtail the use of leaded petrol, an
additional 1 cent per litre was also imposed on this fuel in each
of February and August 1994. The overall discretionary increase in
leaded petrol was thus seven cents per litre from budget night. The
Government had also originally proposed that a further 3 cents per
litre would be imposed on leaded fuel in February 1995, which would
have made the discretionary increase 10 cents and created a 5 cent
differential between the price of leaded and unleaded petrol. This
measure was, however, abandoned following post-budget negotiations
between the Government and the Australian Democrats.
Since August 1994, increases in petrol and diesel excise have
simply reflected the six-monthly indexation process.
2.2 The Diesel Fuel Rebate Scheme
As stated earlier, excise was imposed on diesel fuel in 1957 as
a contribution towards Commonwealth expenditure on roads. As a
result, the excise was imposed only on diesel fuel used 'for the
purposes of propelling a road vehicle on a public road'. Any user
who could demonstrate that diesel fuel purchases were not being
used for this purpose was eligible to receive a certificate of
exemption, which enabled that consumer to purchase diesel fuel free
of excise. These arrangements applied from 1957 until 1982.
In 1982, the Fraser Government was concerned by what it saw as
'rorting' of the certificate of exemption scheme. In that year, the
Diesel Fuel Taxes Amendment Act 1982 was passed. This did
two things. Firstly, the certificate of exemption scheme was
abolished. Instead, all users of diesel fuel are now required to
pay the full excise, with certain exempt users having the duty they
have paid either wholly or partially rebated to them. Secondly,
whereas all off-road users of diesel fuel had been exempt, under
the 1982 legislation only primary producers (those in agriculture,
forestry and fishing), miners (including the beneficiation, i.e.
processing, of ore) and users of diesel for heating, lighting, hot
water, air-conditioning and cooking for domestic purposes or in
hospitals, nursing and old-aged persons homes were exempted from
duty.
As a result of the 1982 legislation, a large number of users who
previously had been exempt are no longer exempt. These include
government railways, coastal shipping, manufacturers, tourist
resort operators, cruise operators and so forth.(10)
Up until the first Hawke Government Budget (August 1983), the
rebate for the specified exempt users was equal to the excise paid.
Just prior to that Budget, for example, both the excise rate and
the rebate rate were 7.155 cents per litre. In the August 1983
Budget, several changes were announced to petrol and diesel excise.
Firstly, it was announced that excise would be indexed twice yearly
to movements in the Consumer Price Index, beginning on Budget
night. Secondly, a small discretionary increase in excise rates was
also imposed. The upshot of these changes was that the excise on
petrol and diesel rose to 9.027 cents per litre on Budget night.
However, the rebate was kept at 7.155 cents per litre. Hence even
the previously exempted users of diesel fuel began to pay a small
amount of excise (the gap between the excise rate and rebate being
1.872 cents per litre).
Over the next two years, excise rates continued to be indexed,
while the rebate remained the same. By early 1986, the gap had thus
risen to 2.388 cents per litre. After a noisy protest by farmers
outside Parliament House, the Government agreed that from February
1986, the rebate arrangements would be changed. Under these changed
arrangements, primary producers had the 'gap' removed and the
rebate began to be indexed along with the excise rates. Thus today,
primary producers receive a total rebate of duty paid. Miners
receive whatever rebate is required to ensure that they continue to
pay only 2.388 cents per litre. They have thus paid this amount
ever since February 1986.
For domestic users and hospitals, nursing and old-aged persons'
homes, rebate indexation continued from the old rate of 7.155 cents
per litre. Given that the same indexation factor was applied to the
higher excise rate, the gap between the two has steadily grown. The
gap has also reflected various discretionary changes to excise
rates between 1986 and the present. Just prior to the 1995 Budget,
this gap was 7.764 cents per litre.
In the 1995 Budget, it was announced that domestic users (apart
from domestic diesel use by primary producers and miners) would no
longer receive any rebate.(11) The rate of duty payable by such
users therefore jumped from 7.764 cents per litre to the standard
rate of 32.537 cents per litre. It must be noted that this decision
was in accordance with recommendations in a recent Report of the
Industry Commission on petroleum products(12), which observed that
it appeared that the Government had originally intended the
residential category to cover remote households which relied on
diesel to generate electricity for light, heat and cooking.
The Commission argued that many domestic users would have access
to 'town' electricity, leading it to conclude that it would be less
costly for the Government to subsidise the remote households
directly. However, not all domestic users have been excluded from
the rebate. The definition of 'residential' has been narrowed (in
the Customs and Excise Legislation Amendment Act 1995) to
premises situated on an agricultural property where a core
agricultural activity is carried on, or premises where the
residents carry on eligible mining operations. Such residential
users now attract the rate of rebate applying to their relevant
industry sector.
Under the same legislative package, eligible activities in the
primary production and mining sectors were also redefined so as to
prevent the rebate being paid for 'marginal' activities for which
the rebate was never really intended (e.g. the use of diesel in the
maintenance of city parks, bowling greens, or other 'amenity
horticulture'(13)). The particular focus of the Customs and
Excise Legislation Amendment Act 1995 has been to redefine
'agriculture' and 'mining operations' and to remove the 'sweeper
clauses' employed in their definitions in the previous legislation.
The sweeper clauses have been the source of most of the litigation
in the life of the scheme through their inclusion of activities
'connected with' agriculture and mining operations for eligibility
of the rebate. Despite these changes, payments of diesel fuel
rebate are still quite significant. It is estimated that in
1995-96, $705.3 million will be paid as a rebate to the mining
sector while $551.2 million will be paid to primary producers.
Table 6 shows the effective diesel fuel excise rates paid by the
various categories of users, reflecting the diesel fuel rebate
arrangements.
2.2.1. Marine Diesel Rebate Scheme
While a number of industries derive some relief from diesel fuel
excise through the operation of the diesel fuel rebate scheme, some
relief is also provided to the coastal shipping industry through
another avenue. In 1989, the government announced that, as part of
its shipping reform program, a rebate of diesel fuel excise would
be provided to ships of Australia's coastal trading fleet as from 1
July 1992. The rebate is restricted to major trading ships (as
defined in the Ships (Capital Grants) Act 1987) and does
not include such vessels as offshore oil industry vessels,
passenger vessels, tugboats and other craft used primarily in
harbours, and pleasure craft.
The rebate is set at 5.31 cents per litre. This was the amount
of excise which was notionally hypothecated to roads in 1992. Even
though the amount currently being hypothecated to roads has fallen
to 3.53 cents per litre, the marine diesel rebate has continued to
apply at the 1992 level.
2.3 Fuel Oil, Heating Oil and Kerosenes
The first Hawke Budget (August 1983) also imposed excise on fuel
oil, heating oil and kerosene (other than aviation kerosene) for
the first time. On Budget night, it was announced that these
products would be excisable at the same rate as diesel and petrol,
that is, 9.027 cents per litre. Within a few days of the Budget,
the Government backtracked on this decision in the face of
considerable industry opposition. Instead of applying the 9.027
cents per litre, the Government explicitly gave the users of these
products the benefit of the diesel fuel rebate (which, it will be
remembered, was 7.155 cents per litre) by subtracting this from the
initially proposed excise rate. As a result, these products became
excisable at the rate of 1.872 cents per litre.
Due to a combination of indexation, the impact of the crude oil
price adjustments in the mid-1980s, and the discretionary 3 cents
per litre increase in excise in the 1993 Budget, the excise on fuel
oil, heating oil and kerosene had risen to 8.512 cents per litre by
August 1993. However, the 1993 excise increase (from 5.512 cents
per litre to 8.512 cents) was criticised by users since it
represented a much higher percentage increase than the 5 cents per
litre increase in diesel excise. In the 1994 Budget, excise on fuel
oil, heating oil and kerosenes was therefore reduced to 6.586 cents
per litre to equate the percentage excise increase for these
products with that of diesel. Since that discretionary change, the
only increases in fuel oil, heating oil and kerosene excise rates
have been those due to indexation.
Fuel oil consists of many grades, ranging from heavy fuel oil
(such as that used in ships' engines), to light fuel oil which is
only slightly heavier than diesel. It is technically feasible to
convert equipment requiring diesel fuel to use light fuel oil and
in those industries which have not qualified for any diesel fuel
rebate, the incentive has been very great to do so (e.g. at
February 1995 light fuel oil excise was only 6.751 cents per litre
compared with 32.537 cents per litre for diesel). In recent years,
V/Line and Australian National have invested in technology which
has enabled them to switch from diesel to light fuel oil. More
recently, Westrail and the NSW State Rail Authority have done
likewise and Queensland Rail had begun the process of conversion.
Industrial users of diesel-powered electricity generators had also
begun to convert and there is some evidence that the same had
occurred with coastal shipping (which uses a significant amount of
diesel fuel in their auxiliary motors).
In the 1995 Budget, the Commonwealth announced that, from 1 July
1995, the excise on light fuel oil would be raised to equal the
diesel fuel excise rate in order to 'address the tax-driven
substitution of 'light' fuel oil for diesel which is taking place
at some cost to economic efficiency and the environment'.(14) This
change has been effected by redefining diesel fuel so as to include
light fuel oil.
2.4 Aviation Turbine Fuel (AVTUR) and Aviation Gasoline
(AVGAS)
Prior to March 1956, aviation gasoline was excisable at the same
rate as motor spirit. However, when announcing an increase in motor
spirit excise at that time, the Government agreed to maintain
aviation gasoline excise at its existing rate. The nexus between
AVGAS and motor spirit excise thus ceased to exist from that
date.
Aviation turbine kerosene was free of any duty until September
1957, when duty was imposed. It is significant that excise was
levied on AVTUR in the same Customs Tariff Proposal which also
imposed excise on diesel for the first time, since similar
arguments were offered in each case. The Government noted that
already, the users of AVGAS were making a contribution towards the
cost of aviation facilities and argued that the growing number of
commercial operators using AVTUR should make a reasonable
contribution to the heavy costs of providing airport and air route
facilities.
Until recently, there had been no formal hypothecation of
aviation fuel excise collections for the provision of aviation
facilities. Certainly, various Airlines Agreements (between the
Commonwealth, Ansett and TAA) included clauses which set limits on
the rate of growth of aviation fuel excise rates and which
explicitly noted that revenue from aviation fuel excise would be
regarded as a cost recovery contribution. Prior to the formation of
the Federal Airports Authority (FAC) and the Civil Aviation
Authority (CAA) in 1988, aviation fuel taxes and air navigation
charges were the principle sources of aeronautical revenues which
the Government used to meet the notional cost recovery targets it
set for the aviation sector. In a submission to the Bosch Committee
on Aviation Cost Recovery in 1984, the Department of Aviation
advised that 'fuel excise collections had been taken into account
informally since 1961 in setting the cost recovery levels the
Government would seek through air navigation charges'.(15)
However, as from 1 July 1987, the air navigation charges
applying to AVGAS aircraft (which took the form of an annual
registration fee unrelated to aircraft use) were abolished and
replaced by a 3.9 cents per litre surcharge on AVGAS excise. On 1
January 1988, a further 0.5 cent per litre excise was added to
AVGAS excise to meet the cost of terminal navigation services at
Coolangatta, Essendon and Launceston airports.
Since 1988, the charging mechanisms of the FAC and the CAA have
had a significant impact on the levying of excise on aviation
fuels. Both of these organisations were required to operate on a
commercial basis and to devise a set of appropriate cost recovery
charges, although the Government did offer to continue funding the
safety regulation and search and rescue activities of the CAA. For
its part, the FAC has developed a schedule of aeronautical user
charges which are centred around the imposition of landing charges
at airports other than general aviation airports and the
introduction of an airport usage fee, called the general aviation
infrastructure tariff (GAIT charge), at general aviation
airports.(16) The CAA also has developed a schedule of aeronautical
fees, including en-route navigation charges, terminal navigation
charges and rescue and firefighting charges.
With the advent of these commercial charges by the CAA and the
FAC, the Commonwealth abolished its excise on AVTUR on 1 July 1988.
However, it was obvious that practical difficulties would prevent
the effective imposition of aeronautical charges on AVGAS aircraft.
Since such aircraft often did not file flight plans, the en-route
charges levied by the CAA, for example, could not really be
applied. As a result, the Commonwealth agreed to pay virtually all
of its annual AVGAS excise receipts to the CAA in lieu of en-route
charge collections from such aircraft (and in lieu of terminal
navigation and rescue and firefighting charges at non-primary
airports).
Throughout the 1990s, there have been a number of discretionary
changes to AVGAS and AVTUR excise rates. These have stemmed from
three main causes. Firstly, given the strong link between AVGAS
excise collections and the cost recovery policies of the CAA for
the general aviation sector, AVGAS excise rates have frequently
changed in response to the CAA's commercial activities. Secondly,
the Commonwealth had been recovering, through the AVGAS excise,
some of the costs associated with the operation of its Aerodrome
Local Ownership Plan, (ALOP) under which the Commonwealth provided
development and maintenance assistance to local authorities which
had taken over aerodromes previously owned by the Commonwealth.
With the phasing out of this scheme in the early 1990s, AVGAS
excise rates were reduced.
Thirdly, as mentioned earlier, the Commonwealth had pledged,
when establishing the CAA, that it would continue to fund the cost
of safety regulation and search and rescue. In the 199091 Budget,
the Commonwealth announced that it would phase-in full cost
recovery for aviation safety standard setting and enforcement
services. It would, however, continue to bear the cost of search
and rescue activities. The CAA consulted with industry in order to
determine an appropriate cost recovery system. As part of the
process of increasing the aviation industry's contribution to the
cost of safety regulation, there have been a number of
discretionary increases in both AVTUR and AVGAS excise rates.
These three mechanisms have all played a part in determining the
current levels of AVGAS and AVTUR excise rates. On 1 July 1991,
AVGAS excise was reduced by 0.321 cents per litre in association
with the withdrawal of rescue and firefighting services from
capital city secondary airports. On May 7 1992, AVGAS excise was
reduced by 1 cent per litre as part of the process of phasing out
the cost of the ALOP scheme. A further 1 cent per litre
ALOP-related reduction occurred on 19 August 1992, in conjunction
with a 0.1 cent per litre reduction on the same date due to reduced
costs of firefighting services. On 1 July 1993 another reduction of
1.013 cents per litre represented the final step in passing on the
cost savings from the abolition of the ALOP. On the same date, a
further reduction of 2 cents per litre was also made to compensate
for new CAA charging arrangements for firefighting and
meteorological services.
On 1 September 1993, recovery of safety regulation costs was
initiated by reimposing AVTUR excise at the rate of 0.264 cents per
litre, as well as by increasing AVGAS excise by the same amount. An
increased industry contribution towards such activities was also
pursued through the imposition of an international airline charge.
A further increase in both AVGAS and AVTUR excise rates of 1.194
cents per litre took effect on 1 July 1994, while 0.883 cents per
litre was added to both rates on 1 July 1995. These increases again
represented greater industry contributions towards the cost of
providing safety regulation services.
It might be noted that the 1 July 1994 increase in safety cost
recovery through AVGAS excise was more than offset, on the same
date, by a 7.521 cents per litre reduction in the AVGAS excise rate
due to the introduction of marginal cost pricing for the provision
of CAA services to the general aviation sector. However, the
increase in AVGAS excise on 1 July 1995 for safety cost recovery
was augmented by a concurrent increase in airways cost recovery of
0.964 cents per litre. This combined increase in AVGAS excise of
1.847 cents per litre was disallowed in the Senate. Instead of
refunding the excise which had been paid, the Government decided to
reduce the AVGAS excise rate as from 28 November 1985 by 1.536
cents per litre.
In 1995, the CAA was disbanded and was replaced by two new
organisations - Airservices Australia (AA), which has
responsibility for the provision of air traffic services, air
navigation facilities, rescue and firefighting services and search
and rescue, and the Civil Aviation Safety Authority (CASA), which
is responsible for air safety regulation. Between them, these two
authorities receive the entire aviation fuel excise collected by
the Commonwealth. All AVTUR excise is paid to CASA and of the AVGAS
excise rate, which is currently 18.478 cents per litre, 16.051
cents per litre is paid to AA while 2.427 cents per litre is paid
to CASA.
Excise on alcohol has been a traditional source of Commonwealth
revenue since Federation. Excise is currently applied to beer,
potable spirits and liqueurs.(17) Prior to 1978, a large range of
different excise rates applied to the various alcoholic beverages,
but in the August 1978 Budget, the rate structure was rationalised,
with one rate for beers, another for most common spirits and
liqueurs and a third rate for spirits and liqueurs not elsewhere
included. In the 1979 Budget, it was decided that the excise on
brandy, the main spirit characterised by a significant amount of
local production, would be reduced. Brandy has been treated on this
more favourable basis since that time.
Since 1983, excise on all potable spirits and liqueurs has
simply increased in line with the indexation provisions. There have
been no discretionary changes in respect of these products. There
have, however, been quite significant changes in the way in which
beer has been taxed.
Until the 1984 Budget, beer excise was simply imposed per litre
of beverage, regardless of alcohol content.(18) However, in order
to encourage greater consumption of low alcohol beers for health
and road safety reasons, the 1984 Budget drew a distinction between
low alcohol and full strength beers for excise purposes. Low
alcohol beer was defined as any beer having an alcohol content of
between 1.15 and 3.8 per cent by volume. Full strength beer was
defined as any beer with an alcohol content exceeding 3.8 per cent.
While full strength beer continued to attract the existing rate of
excise (66 cents per litre), the excise on low alcohol beer was
reduced to 58 cents per litre.
The method of imposing excise on beer was again changed in the
1988 Budget. Instead of having two categories of beer, it was
decided that the excise would be levied on the basis of the actual
alcohol content of the beer. Thus, excise was imposed in terms of
dollars per litre of alcohol in excess of 1.15 per cent alcohol by
volume. It might be noted that this formula has the effect of more
than proportionately increasing the excise payable on beer as its
alcohol content increases. This effect can be clearly seen from
Table 2 which, in addition to showing the excise rate imposed on
beer, also gives examples of the impact of this excise formula on
beers of different strengths.(19)
Not only was the method of imposing beer excise changed in 1988,
but the level of excise on all beer was reduced significantly. The
excise on full strength beer, for example having an alcohol content
of 4.9 per cent, fell from 88.4 cents per litre to 43.9 cents per
litre. Low alcohol beer excise fell even more, from 77.7 cents per
litre to only 18.1 cents per litre for a 2.7 per cent alcohol beer,
for example. The stated reason for reducing excise by such a large
amount was to encourage the consumption of low alcohol beverages,
such as beer, as against higher alcohol beverages such as spirits.
The 'favoured' excise position of beer can be seen from the fact
that the current excise rate on beer is only $15.66 per litre of
alcohol (in excess of 1.15 per cent), while the rate applying to
most spirits is $36.44 per litre of alcohol.
However, it should be noted that while the 1988 Budget reduced
the excise on beer, the same Budget also imposed a 20 per cent
wholesale sales tax on beer, thus bringing its sales tax treatment
into line with wine and spirits.(20) Currently, sales tax on beer
and spirits is 22 per cent, while the sales tax on wine (which is
not subject to excise) is 26 per cent.(21) In terms of overall
federal taxation per litre of alcohol, wine of average quality(22)
is still the most lightly taxed alcoholic beverage, followed by
beer and spirits.
Table 2 in the Appendix shows excise rates on major alcoholic
beverages since 1965.
Along with alcohol, tobacco products have also been a
traditional source of excise revenue since Federation. In recent
years, however, excise rates on tobacco have been raised
significantly in an attempt to discourage smoking, which is seen as
a major health hazard which imposes significant costs on the public
health system. It might be noted from Table 4, that any decline in
tobacco usage has been less than the proportional increase in
excise rates, with the result that revenue from tobacco excise is
still increasing.
Up to 1983, there were various discretionary increases in
tobacco excise rates. From August 1983, such excise rates were, of
course, subject to indexation. Furthermore, since 1983, there has
also been a rationalisation of the excise rates applying to various
tobacco products.(23) Prior to 1983, manufactured cigarettes
attracted a higher rate of excise than manufactured cigars, with
manufactured tobacco (pipe tobacco, roll-your-own tobacco, etc)
being taxed at only around half of the rate of cigarettes. In the
1983 Budget, it was announced that the excise rate on cigars would
be raised to equal that of cigarettes, while the excise rate on
manufactured tobacco was raised by $5 per kilogram. A further $5
per kilogram was added to manufactured tobacco excise in each of
the 1984 and 1985 Budgets. The 1986 Budget added a further
discretionary $1.90 to the manufactured tobacco excise rate, this
being the last step in the process of equating the excise rates for
all major tobacco products.
A first attempt to 'get tough' on tobacco use occurred in the
1992 Budget, when a discretionary $5 per kilogram was added to the
excise rate for all tobacco products. It was stated that 'this
measure will complement the range of health policies the Government
already has in place which are aimed at discouraging smoking and
hence reducing the health care and other costs to the community
associated with smoking'.(24)
The 1993 Budget, which sought to impose significant increases in
excise rates on refined petroleum products, also announced that
excise rates on tobacco products would be increased by 3 per cent
on Budget night with a further four increases in excise (each of 3
per cent) occurring at the time of indexation, that is in February
and August 1994 and February and August 1995. However, as discussed
in the section of this paper dealing with fuel excise, several of
the fuel excise hikes proposed in the 1993 Budget were opposed by
the Democrats, the Greens and Senator Harradine. In order to recoup
some of the fuel excise revenue forgone, the Democrats proposed to
the Government that each of the remaining four increases in tobacco
excise should be 5 per cent, instead of the 3 per cent proposed by
the Government. The Government acceded to this request.
The timetable for imposing these increases was, however, not
entirely adhered to. The 1995 Budget imposed a discretionary 10 per
cent increase in tobacco excise rates (equal to $7.18 per kilogram)
effective from Budget night (9 May 1995). Subsumed within this 10
per cent increase was the final 5 per cent increase which was to
have been imposed in August 1995.
Table 3 in the Appendix shows excise rates on major manufactured
tobacco products since 1965.
Although excises represent an important revenue source to the
Commonwealth Government, they have frequently been criticised on
the grounds of equity and economic efficiency. Excises are quite a
regressive form of taxation, in that they have a proportionately
greater impact on lower income earners than higher income earners.
Also, where excise is imposed upon products which are used as
inputs to other industries, especially in the case of petroleum
products, it is likely that the different tax treatment of the
various fuels distorts the pattern of production, hence reducing
economic efficiency.
Table 7 in the Appendix shows the degree of regressivity of
excises. Based on the Australian Bureau of Statistics Household
Expenditure Survey for 1993-94, the Table shows the relative
significance of excisable products in the consumption patterns of
households of different income levels.(25) In the case of all
products (petrol, excisable alcohol and tobacco), the relative
proportion of income spent on such products declines as income
increases. Thus the excise paid on such products falls relatively
more heavily on households at lower income levels. As the Table
shows, measured in terms of the relative proportions of income
spent, households in the lowest twenty per cent income bracket are
3.8 times harder hit by excises than households in the top twenty
per cent bracket. The impact is greater for tobacco products, where
the lowest income households are 7.5 times harder hit than high
income households.
The regressive nature of excise has been a cause for concern in
policy making. For example, one of the reasons why the Senate
disallowed the final 3 cents per litre imposition of excise on
leaded petrol was due to concerns that such a tax might represent a
heavy burden upon lower income households which could not afford to
purchase a later model, unleaded petrol vehicle. Another problem
identified during Parliamentary debate on this matter was the
inequity of imposing large fuel tax increases on people in country
areas, when lead pollution would have its greatest impact in the
cities.
Concerns have also been expressed about the impact of fuel
excise on economic efficiency.(26) Firstly, there is a wide
variation in the taxation of fuel used by different industries as
well as between different types of fuel. As has been shown above,
different industries face different liability for diesel fuel
excise, with primary industry being exempt, miners paying 2.388
cents per litre and all other industries paying the full rate.
Industries paying the full rate of diesel excise are currently
paying 34.183 cents per litre, other industries using fuel oil are
only paying 7.093 cents per litre, while those industries using
liquefied petroleum gas pay no excise at all.
Secondly, economic theory indicates that the imposition of a
pure tax on inputs (such as fuel) into other industries is likely
to lead to a misallocation of resources within the economy. A fuel
tax is likely to increase the costs of those industries using fuel
more intensively, causing resources to move away from such
industries and into other avenues of production. The impact of the
tax on the relative prices charged by such industries will also
distort consumer decisions. These distortions fail to meet one of
the desirable attributes of any taxation system, that of
'neutrality', which requires a well designed tax system to have the
least possible impact on consumption and production decisions.
A number of Reports to the Government from such bodies as the
Industries Assistance Commission, the Inter-State Commission and
the Industry Commission have expressed concern over the taxation of
intermediate inputs and have urged the Government, among other
things, to abolish excise on fuel used by railways and coastal
shipping and to examine the whole question of intermediate input
taxation in general.(27)
It should be noted, however, that these economic efficiency
concerns relate only to the imposition of 'pure' taxes on
intermediate inputs. There is a valid economic argument for
imposing some appropriately designed impost upon industries which
generate unpriced net social costs, such as pollution, or upon
those industries where the impost is the only feasible method of
applying a user charge, such as in the road transport industry or
the operation of AVGAS aircraft. Such an impost could well take the
form of an excise.
However, even in these instances, it may be difficult to devise
a truly appropriate tax. Difficulties arise in attempting to value
pollution and other social costs. There is also some evidence that
excise imposed as a user charge may not have been efficiently
applied. The National Road Transport Commission, for example, has
assessed the road track cost for heavy vehicles to be 18 cents per
litre, although no assessment was made of a charge to offset social
costs.(28) The road freight industry is, however, currently paying
34.183 cents per litre in excise. It has also been argued that the
users of AVGAS aircraft, especially in uncontrolled airspace, may
be paying excise for services they are not using. It was this
concern which led to the Senate disallowing the last discretionary
increase in AVGAS excise.
- Section 90 reads, in part:
'On the imposition of uniform duties of customs the power of the
Parliament to impose duties of customs and excise, and to grant
bounties on the production or export of goods, shall become
exclusive. On the imposition of uniform duties of customs, all laws
of the several States imposing duties of customs or of excise, or
offering bounties on the production or export of goods, shall cease
to have effect...'
- In 1942, as a war time emergency measure, the Commonwealth
obtained the consent of the States for the Commonwealth to become
the sole imposer of income tax for the duration of the war plus one
year. The States, in turn, were to receive tax reimbursement grants
from the Commonwealth. However, in 1946, the Commonwealth announced
that these arrangements would continue to apply indefinitely.
- The States do impose business franchise fees on petroleum,
alcoholic and tobacco products. These 'taxes' are portrayed as
licence fees for the right to purvey such products and are
carefully constructed so as to make it appear that the tax is not
related to the level of current sales. This is usually done by
imposing the tax on sales in some specified, previous period. Note
that the High Court interpretation would not prevent the States
from imposing any tax on services, although practical problems may
arise if such services were to include some goods component.
- There have been a number of occasions when the indexation has
not been carried out due to insignificant or negative movements in
the CPI over the relevant six-monthly indexation period. In these
instances, the full year's indexation has been carried over to the
next indexation period. In addition, in February 1988, excises were
indexed by an arbitrary 2.5 per cent, following upon a pledge by
the Prime Minister that during 1987-88, excise rate indexation
would be limited to around 6 per cent. If full indexation had
applied, excises would have risen by 3.4 per cent in February
1988.
- As from 1 July 1990, the crude oil levy began to be replaced by
a true resource rent tax. Currently only a small amount of crude
oil and LPG excise is collected from fields in the North West Shelf
production licence areas not subject to the petroleum resource rent
tax. This paper will not address the details of crude oil
excise.
- Hypothecation is the process whereby all or part of a tax is
'earmarked' for a specified form of public expenditure.
- See the Second Reading speech for the Commonwealth Aid
Roads Bill 1959.
- For a description of roads programs operating in Australia
since 1980, see Denis James, Commonwealth Road Funding Since
1980. Background Paper No. 35. Parliamentary Research Service.
December 1993.
- It should be noted that, from 1 July 1985 until the current
time, a portion of the excise collections on petrol and diesel have
been hypothecated to roads under the Australian Land Transport
Program and the Australian Centennial Roads Development program
(which was renamed the Australian Land Transport Development
program in 1990). These hypothecated funds were raised simply as a
designated portion of the existing excise rates, rather than being
a surcharge, and hence did not influence the setting of those
excise rates. Currently, the 'hypothecated' rate of excise is
calculated and declared retrospectively once the Commonwealth has
determined the level of road funding it is willing to provide. The
term 'hypothecation' is thus currently somewhat of a misnomer.
- It might be noted that where transport, other than on public
roads, is involved in moving ore from a mining site to a place of
beneficiation, such transport is eligible for a rebate of diesel
excise at the same rate as any other mining operation. As such,
several private railways and even some coastal shipping involved in
this form of transport receive the rebate.
- It was also announced on budget night, however, that indigenous
communities using diesel for domestic purposes would be
compensated, through other means, for the removal of the
rebate.
- Industry Commission. Petroleum Products. Report No.
40. 5 July 1994. p. 281
- According to the Financial Review, 8 June 1995, p. 3,
'The claimed eligibility of parks and gardens has particularly
angered the Government, especially a letter from the NSW Golf
Association inviting golf clubs to seek the rebate through
accountancy firm Ernst & Young on a 25 percent success fee
basis. That alone could cost $40 million, according to government
estimates.'
- Budget Speech. May 1995. p. 12.
- Aviation Cost Recovery: Report of the Independent
Inquiry. AGPS. Canberra. November 1984. p. 176
- The general aviation sector includes charter, flying training,
agricultural, business, private and other aerial work activities.
While a growing number of general aviation aircraft are turbo-prop
and use aviation turbine kerosene, a large number of general
aviation aircraft have piston engines and use aviation
gasoline.
- 'Potable' spirits are those spirits which are fit for human
consumption.
- Since 1973, beer has been defined as any beverage brewed from a
mash and containing hops or other bitters and having an alcohol
content in excess of 1.15 per cent by volume.
- A formula can be used to calculate the effective excise paid,
in cents per litre, of a litre of beer of known alcohol content.
Using the current gazetted excise rate of $15.66 per litre of
alcohol in excess of 1.15 per cent, excise per litre of beer having
an alcohol content of 4.9 per cent would be:
(.049 - .0115) x $15.66 = 58.725 cents per litre of beverage
- It should be noted that sales tax is imposed on the value of a
commodity including the cost of excise. It is thus a tax on a tax.
The States also impose business franchise taxes on alcohol, tobacco
and (with the exception of Queensland) fuel. These taxes are
imposed on top of any federal taxes included in the wholesale price
of the commodity concerned.
- In the 1993-94 Budget, the Government had proposed that
alcoholic wine and cider should be made subject to a 31 per cent
wholesale sales tax as from Budget night, increasing to 32 per cent
as from 1 July 1995. This move was designed to remove the taxation
advantage these products might enjoy over beer and spirits, which
are subject to both excise duty and sales tax. This proposal was
blocked in Parliament by the Opposition and minority parties and
instead, sales tax on wine was reduced to 22 per cent as from 20
October 1993. It was further agreed that sales tax on wine would
rise to 24 per cent on 1 July 1994 and to 26 per cent on 1 July
1995. In the meantime, the Government referred the issue to a
Committee of Inquiry into the Winegrape and Wine Industry for
review. Given that the members of the Review Committee could not
agree on appropriate taxation levels, the Government, on 2 November
1995, announced that it would maintain the rate of sales tax on
wine at 26 per cent.
In the same announcement, the Government also signalled its
intention to change the taxation treatment of cider, non-grape
fruit wines and certain 'designer drinks'. Currently such drinks
are taxed at the same rate as wine, but since they appear to
compete with beer, the Government proposed that, from 1 July 1996,
such drinks should be taxed like beer, that is, at the beer rate of
excise and sales tax. However, legislation to this effect had not
been introduced by the time Parliament was dissolved for the March
1996 election.
- Since sales tax is levied on the wholesale price of a product,
the more expensive the product, the higher the tax. Premium quality
wines would thus be subject to higher tax than wines of average
quality.
- The 1983 Budget also removed the excise from such other
commodities as matches, cigarette papers and tubes, playing cards,
amylic alcohol and fusel oil.
- Budget Paper No. 1, 1992-93. p. 4.14
- ABS. Household Expenditure Survey - Australia.
1993-94. Cat. No 6535.0
- This issue has been canvassed in depth in James, D. Revenue
Before Rhetoric: A Critique of Fuel Taxation in Australia.
Parliamentary Research Service. Current Issues Brief No. 50. June
1995.
- See, for example, Industries Assistance Commission. Certain
Petroleum Products - Taxation Measures. Report No. 397,
November 1986; Inter-State Commission. Road Use Charges and
Vehicle Registration: A National Scheme. March 1990; Industry
Commission. Rail Transport. Report No. 13. August 1991;
and Industry Commission. Petroleum Products. Report No.
40. July 1994.
- National Road Transport Commission. Heavy Vehicle Charges
Determination. June 1992.
In the following tables:
.. Not excisable.
n.c. No change to excise rate.
n.s.i. Not separately identified.
< Less than...
> Greater than...
Sources for the following tables:
Commonwealth Budget Papers; Commonwealth Gazettes; Commonwealth
Acts; and Hansard.
Table 1: Excise Rates on Major Refined
Petroleum Products
Table 1: Excise rates on major refined petroleum products - Cents per litre
----------------------------------------------------------------------------
Date Petrol Diesel Fuel oil AVTUR* AVGAS**
Heating oil
Kerosenes
--------------------------------------------------------------------------------
15 March '56 2.018 .. .. .. 1.558
4 September '57 2.108 2.203 .. 1.191 n.c.
16 August '61 2.154 n.c. .. n.c. n.c.
18 August '65 2.706 2.750 .. 1.738 2.104
14 February '66 n.c. n.c. .. n.c. 2.105
19 August '70 3.366 3.410 .. 2.398 2.765
18 August '71 3.806 3.850 .. n.c. 3.205
1 July '72 n.c. n.c. .. 2.840 n.c.
21 August '73 4.905 4.905 .. 3.940 4.305
16 August '77 5.155 5.155 .. 4.190 4.555
17 August '82 6.155 6.155 .. n.c. n.c.
1 July '83 7.155 7.155 .. 6.190 6.555
23 August '83 9.027 9.027 1.872 6.978 7.358
2 February '84 9.397 9.397 1.949 7.264 7.660
2 February '85 9.641 9.641 2.000 7.709 8.116
2 August '85 10.007 10.007 2.076 8.002 8.424
4 February '86 10.437 10.437 2.165 8.346 8.786
15 March '86 15.766 15.766 3.270 12.608 13.272
17 April '86 18.388 18.388 3.814 14.705 15.479
17 May '86 19.200 19.200 3.982 15.354 16.163
14 June '86 18.822 18.822 3.904 15.052 15.845
18 July '86 19.240 19.240 3.991 15.386 16.197
1 August '86 20.010 20.010 4.151 16.001 16.845
16 August '86 20.884 20.884 4.332 16.700 17.581
19 August '86 23.884 23.884 4.954 19.099 20.107
13 September '86 20.185 20.185 4.187 16.141 16.993
16 October '86 19.706 19.706 4.088 15.758 16.589
17 January '87 19.655 19.655 4.077 15.717 16.546
4 February '87 20.756 20.756 4.305 16.597 17.473
14 February '87 18.720 18.720 3.883 14.969 15.759
14 March '87 19.150 19.150 3.972 15.313 16.121
16 May '87 19.840 19.840 4.115 15.865 16.702
1 July '87 n.c. n.c. n.c. n.c. 20.602
18 July '87 19.808 19.808 4.108 15.839 20.569
15 August '87 20.097 20.097 4.168 16.070 20.870
17 October '87 20.830 20.830 4.320 16.656 21.631
14 December '87 20.295 20.295 4.209 16.228 21.076
1 January '88 n.c. n.c. n.c. n.c. 21.576
3 February '88 20.802 20.802 4.314 16.634 22.115
1 July '88 n.c. n.c. n.c. 0.000 n.c.
1 August '88 21.530 21.530 4.465 .. 22.889
5 February '89 22.391 22.391 4.644 .. 23.805
1 August '89 23.152 23.152 4.802 .. 24.614
5 February '90 24.124 24.124 5.004 .. 25.648
6 August '90 24.920 24.920 5.169 .. 26.494
18 February '91 25.767 25.767 5.345 .. 27.395
1 July '91 n.c. n.c. n.c. .. 27.074
3 February '92 26.154 26.154 5.425 .. 27.480
7 May '92 n.c. n.c. n.c. .. 26.480
19 August '92 n.c. n.c. n.c. .. 25.380
2 February '93 26.232 26.232 5.441 .. 25.456
1 July '93 n.c. n.c. n.c. .. 22.443
2 August '93 26.537 26.537 5.512 .. 22.735
17 August '93 29.537 29.537 8.512 .. n.c.
1 September '93 n.c. n.c. n.c. 0.264 22.999
Unleaded Leaded
-------------------
2 February '94 30.75 31.75 30.750 8.563 0.266 23.137
11 May '94 n.c. n.c. n.c. 6.586 n.c. n.c.
1 July '94 n.c. n.c. n.c. n.c. 1.460 16.810
1 August '94 32.088 34.099 32.088 6.658 1.476 16.995
1 February '95 32.537 34.576 32.537 6.751 1.497 17.233
1 July '95 n.c. n.c. n.c. n.c. 2.380 19.080
1 August '95 33.513 35.613 33.513 6.954 2.451 19.652
28 November '95 n.c. n.c. n.c. n.c. n.c. 18.116
1 February '96 34.183 36.325 34.183 7.093 2.500 18.478
--------------------------------------------------------------------------------
* AVTUR is aviation turbine kerosene
** AVGAS is aviation gasoline.
Table 2: Excise Rates on Alcoholic
Beverages
Table 2: Excise rates on alcoholic beverages
---------------------------------------------
Date Beer Brandy Fruit
brandy,
Rum,
Whisky, Spirits
Prescribed and
Spirits and Liqueurs
Liqueurs n.e.i.
----- ------------------------------
Cents $ per litre of alcohol
per
litre
---------------------------------------------------------------------------------
18 August '65 25.2778 3.08 4.27(w) 4.70
4.35(r&g)
21 August '73 n.c. 6.00 6.80(w) 7.23
6.88(r&g)
23 July '74 n.c. 8.55 9.35(w) 9.78
9.43(r&g)
17 August '74 n.c. 8.95 n.c. n.c.
19 August '75 39.4 10.21 10.21(w) 10.64
10.29(r&g)
15 August '78 52.0 18.75 18.75 19.25
9 November '79 n.c. 16.00 n.c. n.c.
17 August '82 60.0 n.c. n.c. n.c.
23 August '83 63.0 16.69 19.56 20.08
2 February '84 66.0 17.37 20.36 20.90
-----------------
> 3.8% > 1.15%
alcohol and
< 3.8%
alcohol
-----------------
21 August '84 66.000 58.000 n.c. n.c. n.c.
2 February '85 67.716 59.508 17.82 20.89 21.44
2 August '85 70.289 61.769 18.50 21.68 22.25
4 February '86 73.311 64.425 19.30 22.61 23.21
1 August '86 76.243 67.002 20.07 23.51 24.14
4 February '87 80.513 70.754 21.19 24.83 25.49
15 August '87 83.331 73.230 21.93 25.70 26.38
3 February '88 85.414 75.061 22.48 26.34 27.04
1 August '88 88.403 77.688 23.27 27.26 27.99
------------------------------------
Excise: Example: Example:
$ per litre 4.9% 2.9%
of alcohol alcohol alcohol
in excess of content content
1.15% alcohol Expressed Expressed
by volume as cents as cents
per litre per litre
------------------------------------
23 August '88 11.70 43.875 18.135 n.c. n.c. n.c.
5 February '89 12.17 45.638 18.864 24.20 28.35 29.11
1 August '89 12.58 47.175 19.499 25.02 29.31 30.10
5 February '90 13.11 49.163 20.321 26.07 30.54 31.36
6 August '90 13.54 50.775 20.987 26.93 31.55 32.39
18 February '91 14.00 52.500 21.700 27.85 32.62 33.49
3 February '92 14.21 53.288 22.026 28.27 33.11 33.99
2 February '93 14.25 53.438 22.088 28.35 33.21 34.09
2 August '93 14.44 54.150 22.382 28.72 33.64 34.53
2 February '94 14.53 54.488 22.522 28.89 33.84 34.74
1 August '94 14.69 55.088 22.770 29.21 34.21 35.12
1 February '95 14.90 55.875 23.095 29.62 34.69 35.61
1 August '95 15.35 57.563 23.793 30.51 35.73 36.68
1 February '96 15.66 58.725 24.273 31.12 36.44 37.41
--------------------------------------------------------------------------------
n.c. No change to existing rate w Whisky r Rum g Gin
Table 3: Excise Rates on Major Tobacco
Products
Table 3: Excise rates on major tobacco products
------------------------------------------------
($ per kilogram of tobacco)
Date Cigarettes Cigars Tobacco
----------------------------------------------------
18 August '65 9.26 7.39 4.94
19 August '70 10.36 8.49 5.38
18 August '71 11.46 9.59 5.93
21 August '73 14.00 12.00 7.20
23 July '74 16.10 13.80 8.25
19 August '75 19.36 16.56 9.88
15 August '78 24.75 21.12 12.58
17 August '82 29.70 25.34 15.10
23 August '83 30.98 30.98 20.10
2 February '84 32.25 32.25 20.92
21 August '84 n.c. n.c. 25.92
2 February '85 33.09 33.09 26.59
2 August '85 34.35 34.35 27.60
20 August '85 n.c. n.c. 32.60
4 February '86 35.83 35.83 34.00
1 August '86 37.26 37.26 35.36
19 August '86 n.c. n.c. 37.26
4 February '87 39.35 39.35 39.35
15 August '87 40.73 40.73 40.73
3 February '88 41.75 41.75 41.75
1 August '88 43.21 43.21 43.21
5 February '89 44.94 44.94 44.94
1 August '89 46.47 46.47 46.47
5 February '90 48.42 48.42 48.42
6 August '90 50.02 50.02 50.02
18 February '91 51.72 51.72 51.72
3 February '92 52.50 52.50 52.50
2 February '93 57.67 57.67 57.67
2 August '93 58.42 58.42 58.42
2 February '94 63.56 63.56 63.56
1 August '94 67.47 67.47 67.47
1 February '95 71.84 71.84 71.84
10 May '95 79.02 79.02 79.02
1 August '95 81.39 81.39 81.39
1 February '96 83.02 83.02 83.02
----------------------------------------------------
Table 4: Excise Revenue from Major Excisable
Products
Table 4: Excise revenue from major excisable products
------------------------------------------------------
($ million)
------------------------------------------------------------------------
Year Refined Beer Potable Tobacco Total
petroleum spirits products
products
------------------------------------------------------------------------
1970-71 n.s.i. 382 n.s.i. 272 1,053
1971-72 n.s.i. 398 n.s.i. 307 1,212
1972-73 n.s.i. 420 n.s.i. 328 1,268
1973-74 646 461 45 391 1,543
1974-75 698 480 65 475 1,718
1975-76 740 706 68 549 2,063
1976-77 772 740 71 555 2,138
1977-78 867 765 77 565 2,274
1978-79 910 953 100 659 2,622
1979-80 905 989 99 699 2,692
1980-81 925 991 111 704 2,731
1981-82 970 1,011 121 732 2,834
1982-83 1,364 1,123 114 799 3,400
1983-84 2,137 1,159 118 864 4,278
1984-85 2,387 1,148 133 896 4,564
1985-86 3,044 1,258 135 951 5,388
1986-87 5,142 1,363 144 1,018 7,667
1987-88 5,250 1,487 146 1,105 7,988
1988-89 5,780 910 161 1,151 8,002
1989-90 6,367 797 169 1,270 8,603
1990-91 6,601 866 169 1,322 8,958
1991-92 7,110 829 176 1,312 9,427
1992-93 7,200 804 179 1,370 9,553
1993-94 (Est) 8,578 828 183 1,394 10,983
1994-95 (Est) 9,568 821 188 1,481 12,058
1995-96 (Est) 10,305 875 199 1,636 13,015
------------------------------------------------------------------------
Est Estimated
n.s.i. Not separately identified
Table 5: Excise Indexation Factors Applied
Table 5: Excise indexation factors applied
-------------------------------------------
(CPI Adjustments)
Date Indexation Factor
----------------------------------
23 August '83 1.043
2 February '84 1.041
2 February '85 1.026
2 August '85 1.038
4 February '86 1.043
1 August '86 1.040
4 February '87 1.056
15 August '87 1.035
3 February '88* 1.025
1 August '88 1.035
5 February '89 1.040
1 August '89 1.034
5 February '90 1.042
6 August '90 1.033
18 February '91 1.034
3 February '92 1.015
2 February '93 1.003
2 August '93 1.013
2 February '94 1.006
1 August '94 1.011
1 February '95 1.014
1 August '95 1.030
1 February '96 1.020
----------------------------------
* In February 1988, excises were indexed by an arbitrary 2.5 per cent
following upon a pledge by the Prime Minister that during 1987-88,
excise rate indexation would be limited to around 6 per cent.
Table 6: Excise Rates Paid by Users of Diesel
Fuel, Net of Diesel Fuel Rebate
Table 6: Excise rates paid by users of diesel fuel net of diesel fuel rebate
-----------------------------------------------------------------------------
(Cents per litre)
Date Non-Rebatable Primary Miners Other
users producers Rebatable
Users*
------------------------------------------------------------------
17 August '82 6.155 0 0 0
1 July '83 7.155 0 0 0
22 August '83 9.027 1.872 1.872 1.872
2 February '84 9.397 2.242 2.242 2.242
2 February '85 9.641 2.300 2.300 2.300
2 August '85 10.007 2.388 2.388 2.388
4 February '86 10.437 0 2.388 2.490
15 March '86 15.766 0 2.388 3.761
17 April '86 18.388 0 2.388 4.386
17 May '86 19.200 0 2.388 4.580
14 June '86 18.822 0 2.388 4.490
18 July '86 19.240 0 2.388 4.590
1 August '86 20.010 0 2.388 4.774
16 August '86 20.884 0 2.388 4.983
19 August '86 23.884 0 2.388 5.699
13 September '86 20.185 0 2.388 4.816
16 October '86 19.706 0 2.388 4.702
17 January '87 19.655 0 2.388 4.690
4 February '87 20.756 0 2.388 4.953
14 February '87 18.720 0 2.388 4.467
14 March '87 19.150 0 2.388 4.570
16 May '87 19.840 0 2.388 4.735
18 July '87 19.808 0 2.388 4.727
15 August '87 20.097 0 2.388 4.796
17 October '87 20.830 0 2.388 4.971
14 December '87 20.295 0 2.388 4.843
3 February '88 20.802 0 2.388 4.964
1 August '88 21.530 0 2.388 5.138
5 February '89 22.391 0 2.388 5.343
1 August '89 23.152 0 2.388 5.525
5 February '90 24.124 0 2.388 5.757
6 August '90 24.920 0 2.388 5.947
18 February '91 25.767 0 2.388 6.149
3 February '92 26.154 0 2.388 6.241
2 February '93 26.232 0 2.388 6.260
2 August '93 26.537 0 2.388 6.341
2 February '94 30.750 0 2.388 7.338
1 August '94 32.088 0 2.388 7.657
1 February '95 32.537 0 2.388 7.764
1 August '95 33.513 0 2.388 7.997
1 February '96 34.183 0 2.388 8.157
------------------------------------------------------------------
* Includes hospitals, nursing homes, aged persons homes and, until 1995,
residential premises where diesel was used for meeting the domestic
cooking, lighting, heating and other requirements of residents.
Table 7: Regressivity of Excise
Table 7: Regressivity of excise
--------------------------------
( Average Weekly Income Spent on Excisable Products)
Income Level
-------------------------------------------------------------------
Lowest 2nd 3rd 4th Highest Average Ratio
20 % 20 % 20 % 20 % 20 % highest
to
lowest
------------------------------------------------------------------------------------
Income: $151.66 $353.91 $592.28 $909.22 $1,608.77 $723.26
------------------------------------------------------------------------------------
Expenditure:
------------
Petrol $11.18 $17.63 $24.24 $30.44 $36.06 $23.90
7.37% 4.98% 4.09% 3.35% 2.24% 3.30% 3.29
------------------------------------------------------------------------------------
Beer $4.72 $6.96 $9.87 $11.47 $13.42 $9.29
3.11% 1.97% 1.67% 1.26% 0.83% 1.28% 3.73
Spirits $1.24 $2.22 $3.06 $3.52 $5.63 $3.13
0.82% 0.63% 0.52% 0.39% 0.35% 0.43% 2.34
Total alcohol* $6.27 $9.75 $14.11 $16.61 $21.79 $13.70
4.13% 2.75% 2.38% 1.83% 1.35% 1.89% 3.05
------------------------------------------------------------------------------------
Cigarettes $5.90 $8.61 $9.52 $9.92 $8.63 $8.51
3.89% 2.43% 1.61% 1.09% 0.54% 1.18% 7.25
Other tobacco $0.48 $0.81 $0.77 $0.90 $0.43 $0.68
0.32% 0.23% 0.13% 0.10% 0.03% 0.09% 11.84
Total tobacco $6.38 $9.42 $10.29 $10.82 $9.06 $9.19
4.21% 2.66% 1.74% 1.19% 0.56% 1.27% 7.47
+===================================================================================
Total Excisable $23.83 $36.80 $48.64 $57.87 $66.91 $46.79
15.71% 10.40% 8.21% 6.36% 4.16% 6.47% 3.78
------------------------------------------------------------------------------------
* Includes certain unclassified alcoholic beverages but excludes wine, which is
not excisable.
Source: ABS, Household Expenditure Survey: Australia. 1993-94. Cat. No. 6535.0
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