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This Digest was prepared for debate. It reflects the legislation as
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CONTENTS
Excise Tariff (Fuel Rates Amendments) Bill
1997
Date Introduced: 25 June 1997
House: House of Representatives
Portfolio: Industry, Science and Tourism
Commencement: On a day to be fixed by
Proclamation, or if no date is fixed, six months after the Bill
receives Royal Assent.
To amend the Excise Tariff Act 1921 so as to define the
petroleum products to which a prescribed fuel marker must be added,
prior to their distribution for home consumption.
Excise is a tax on goods which is administered by the Australian
Customs Service.It includes a tax on petroleum products which is
levied at a differential rate depending upon the intended end use
of the product.Currently a rate of 34.697 cents per litre is
payable on fuels intended for on-road use, such as diesel fuel and
unleaded petrol.Fuels sold for non-transport uses, such as heating
oils and kerosene, are taxed at a concessional rate of excise duty,
at present 7.2 cents per litre.Petroleum products sold for non-fuel
use, such as solvents, do not attract any excise duty.(1) The
chemical composition of the petroleum products taxed at
concessional rates may be similar or identical to the more highly
taxed road transport fuels.(2)
For a number of years, the Australian Customs Service (ACS) has
been drawing attention to the practice of avoiding excise duty on
transport fuels through the substitution or unauthorised blending
of lower rated petroleum products.(3) It was estimated in the
1997-98 Budget that the practice could deprive the Government of as
much as $25 million a year in uncollected excise duty.(4)
It has also been stated in Parliament that the practice of
blending or substituting fuels for on-road use is potentially
dangerous and can cause damage to vehicle engines.(5) This is
because the blends containing substituted fuel may have a much
lower flashpoint than diesel fuel.(6)
In 1993 Parliament passed amendments to the Excise Act
1901 and the Excise Tariff Act 1921 to address the
revenue loss resulting from the substitution of excise free or low
duty products for petroleum fuels.(7) The 1993 legislation requires
all premises, including refineries, service stations and other
businesses that blend petroleum and oil products, to be licensed,
and to pay duty on the blended substances at either the diesel or
leaded petrol rate.(8)
The current legislative package consists of the following seven
bills:
- Excise Tariff (Fuel Rates Amendments) Bill 1997;
- Customs Tariff (Fuel Rates Amendments) Bill 1997;
- Fuel Misuse (Penalty Surcharge) Bill 1997;
- Fuel Sale (Penalty Surcharge) Bill 1997;
- Fuel Blending (Penalty Surcharge) Bill 1997;
- Fuel (Penalty Surcharges) Administration Bill 1997; and
- Customs and Excise Legislation Amendment Bill (No.2) 1997.
This package of Bills is intended to extend and strengthen the
1993 legislation by making it easier for the Australian Customs
Service to determine when people are not complying with existing
legislation.
The Government announced in the 1997-98 Budget that a chemical
tracer (a marker dye or a colourless marker) would be added to
fuels which attract a concessional rate of excise duty.This will
happen just prior to the fuels leaving Customs' control and
entering the petroleum distribution system.(9) This will make it
easier for the Australian Customs Service to detect when these
products are blended with, or substituted for, excisable fuel.
(10)It will provide a standard of proof to enable prosecution of
people found using, selling, or illegally blending fuels for
on-road use.(11)
Dyes and colourless markers are already used successfully in
some European countries to enable authorities to differentiate fuel
uses for excise purposes.(12) The composition of the chemical
tracer has not yet been decided.(13) On 29 May 1997 the Government
announced the formation of a Technical Implementation Group which
will include representatives of the four major oil companies and
the Australian Institute of Petroleum, State Revenue Offices, and
motoring and consumer organisations, to advise on practical ways to
implement the new requirements.(14)
As noted above, when announced in the 1997-98 Budget, the
measure was estimated to raise an additional $25 million per
year.Against this amount must be off-set implementation costs of
$5.97 million over four years and additional, annual running costs
of $1.54 million.(15) The Explanatory Memorandum to the Bill notes
that since the announcement of the measure, industry has indicated
that the amount of revenue raised could be twice the Budget
estimate.
There are also differences in the estimated cost of the measure,
with the Explanatory Memorandum listing the Government's estimate
at around 0.004 cents per litre, while industry's estimate is
listed as approximately 0.15 centre per litre.As the cost will be
borne by the major oil companies, it can be expected that this
additional cost will be passed on to users.
The Excise Tariff (Fuel Rates Amendments) Bill 1997 amends the
Excise Tariff Act 1921 (the Principal Act).
The addition of a chemical tracer (referred to in the
legislation as a 'marker') to certain petroleum products for home
consumption is the cornerstone of the proposed measures to monitor
blending or substitution.Item 7 of Schedule 1
allows regulations to be made which prescribe the marker and the
proportion of the marker which will be required to be added to
certain petroleum products before their distribution for home
consumption.
The effect of Item 5 which redefines 'onshore
field' is to make production of onshore stabilised crude oil above
a threshold amount subject to excise duty.Item 6
inserts a definition of 'pre-threshold onshore oil' of which the
first 4767.3 megalitres of stabilised crude petroleum is exempt
from excise duty (Item 17).Item
18 brings petroleum condensate into the excise regime but
does not impose any excise duty on it.The purpose of these
amendments is to stop diversion of potential substitute fuels into
the transport fuel market without payment of the correct amount of
excise duty.
Item 15 amends the Schedule to the Excise
Tariff Act 1921 by repealing the current Items 11 and 12 and
substituting new items 11 and 12.It also introduces a new structure
for Item 11.The new subitems of the Schedule generally retain the
three-tiered excise tariff based on the intended use of the
products.Where certain products for use other than as fuels in
internal combustion engines are marketed in containers not
exceeding 210 litres, the addition of the marker is not required
and the prescribed rate of excise duty is payable. Item
15 also inserts a new Subitem 11(I) into
the Schedule of the Principal Act.This new subsection covers a
range of products not previously subject to excise duty, but which
have a potential for use as fuel substitutes.The products include
diesel fuel and gasoline recovered from waste oils by a recycling
process and other refined or partly refined petroleum products such
as naphthas and certain white spirits.No additional duty is payable
on recycled petroleum products provided they either contain the
marker and are used other than as a fuel in an internal combustion
engine, or, customs or excise duty has already been aid on
them.
- Second Reading Speech, Excise Tariff (Fuel Rates Amendments)
Bill 1997, House of Representatives, Debates, 25 June
1997: 6294.
- Explanatory memorandum, Excise Tariff (Fuel Rates
Amendments) Bill 1997: 2.
- Australian Customs Service, Annual report 1992/93: 113;
1994/5: 104.
- Budget measures 1997-98, (Budget paper no. 2):
197
- Sen the Hon C Schacht, Senate, Debates, vol. s.163, 2
March 1994: 1270; Hon G Prosser, Second Reading Speech, Excise
Tariff (Fuel Rates Amendments) Bill 1997, House of Representatives,
Debates, 25 June 1997: 6294.
- The flashpoint of a fuel indicates the temperature to which the
fuel must be heated to create sufficient vapours above the surface
of the liquid that they can be ignited in the presence of an
ignition source. Controlling flashpoint is important in order to
prevent the vapour space in storage and vehicle tanks from being in
the explosive range. (Encyclopedia of chemical technology,
vol. 12, 4th ed, John Wiley, New York, 1994: 377.
- Customs and Excise Legislation Amendment Bill 1993.
- Senate, Debates, vol. s.163, 2 March 1994: 1270.
- Budget measures 1997-98, (Budget paper no. 2) :
198.
- Second Reading Speech, Excise Tariff (Fuel Rates Amendments)
Bill 1997, House of Representatives, Debates, 25 June
1997: 6294.
- Second reading speech, Fuel (Penalty Surcharges) Administration
Bill 1997, House of Representatives, Debates, 25 June
1997: 6298.
- European Commission, [Report, prepared by an external
consultant], October 199
- Explanatory memorandum, Excise Tariff (Fuel Rates
Amendments) Bill 1997: 5.
- Minister for Small Business and Consumer Affairs, Hon G Prosser
MP, Media release, 168/97, 29 May 1997.
- Explanatory memorandum, Excise Tariff (Fuel Rates
Amendments) Bill 197: 7.
Rosemary Bell
4 September 1997
Bills Digest Service
Information and Research Services
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
IRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of
the public.
ISSN 1328-8091
© Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library,
1997.
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Last updated: 9 September 1997
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