WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Diesel and Alternative Fuels Grants
Scheme Bill 1999
Date Introduced: 22 June 1999
House: House of Representatives
Portfolio: Treasury
Commencement: The Act commences on the
commencement of the proposed Diesel and Alternative Fuels
Grants Scheme (Administration and Compliance) Act 1999.
However, commencement is also conditional on the adoption of
certain motor vehicle emission standards, and the appropriation of
funds for specified programs aimed at improving the environment as
provided for in clause 2.
The measures in this Bill (the Grants Bill) and
in the Customs and Excise Amendment (Diesel Fuel Rebate Scheme)
Bill 1999 (the Rebates Bill) implement the proposal in the A
New Tax System (ANTS)(1) as modified by the agreement between
the Government and the Australian Democrats:
-
- to provide assistance to regional areas, by a Diesel and
Alternative Fuels Grants Scheme (DAFGS) to reduce the cost of
diesel and certain other fuels used in transporting goods and
passengers, and
-
- to extend the Diesel Fuel Rebate Scheme (DFRS) to additional
activities and other specified fuels, and to allow the full rebate
to activities now receiving only a part rebate.
The purpose and background to the Grants Bill
and the Rebates Bill are considered in this Bills Digest. The
reader is referred to the Bills Digest on the Rebates Bill for an
explanation of the main provisions of that Bill.(2)
A New Tax
System
Under the ANTS scheme, the Government undertook
to reduce the amount of excise on diesel. The proposal had two
elements: a reduction (of about seven cents) in the amount of
excise to 36 cents per litre, and a 'GST credit' equal to 'around
half the excise paid on the diesel'. The GST credit is not to be
confused with the 'input tax credit' under which businesses will be
able to claim the GST paid on fuel used for business purposes. In
the Grants Bill the credit is termed 'grants'. The effect of these
two elements would have been to reduce the 'effective' rate of
excise paid from 43 cents to 18 cents per litre. (3)This would
apply to vehicles weighing over 3.5 tonnes and to railways.
Vehicles weighing less than 3.5 tonnes would receive a GST credit
'equal to the GST paid' on the diesel they used.(4)
Diesel fuel rebate scheme (DFRS)
The ANTS scheme also envisaged that the GST
credit would replace the DFRS. Under this scheme - whose legal
basis is the Customs Act 1901 and the Excise Act
1901 - a rebate of duty is paid for diesel used in certain
activities. These activities are 'off-road', and include
agriculture, mining, fishing, forestry, residential premises,
hospitals, aged persons homes, nursing homes and other medical
institutions. The precise rate of the rebate depends on the nature
of the activity in which the fuel is used. (All States, except
Tasmania, also exempted the off-road use of diesel from the
petroleum franchise fees).
The abolition of the DFRS would have meant that
all activities - on-road and off-road - would pay the same
effective rate of excise, thus abolishing the subsidy that off-road
activities receive. While the abolition of the DFRS would have
raised the costs of off-road activities, the reduction in the
effective rate of excise would have lowered their costs. From an
economic neutrality perspective - of not favouring some activities
over others - the ANTS proposal would have been an improvement over
the DFRS, since it would mean that certain activities were no
longer subsidised. The ANTS proposal would also have been an
administrative improvement since the DFRS is complicated to
administer and is subject to fraud. The Australian National Audit
Office in a May 1996 report titled Australian Customs Service -
Diesel Fuel Rebate Scheme, was critical of aspects of the
administration of the scheme.
Reaction to the ANTS proposal
Reaction to the ANTS proposals was mixed.
Favouring the proposal were those who saw the proposal as reducing
the cost of transporting goods especially to regional areas. The
proposal would have the effect of reducing the cost of inputs into
the road and rail transport industries. Given the generally
competitive nature of the road transport industry, these lower
costs would be reflected in lower freight charges - and passenger
fares - thus reducing the cost of supplying goods and services
including in regional areas.
Criticism of the proposals centred on alleged
adverse environmental consequences. Groups opposing the proposal
saw the reduction in excise as leading to an increase in the amount
of diesel used. That, in turn, would increase air pollution, with
adverse health effects and increased production of 'greenhouse'
gases. In particular, it was noted that the ANTS proposal would
mean that the effective rate of excise would be the same in both
major metropolitan and regional areas. Given that the concentration
of diesel pollutants is greater in urban than in regional areas,
some advocated that the cost of diesel used in urban areas should
be greater than in regional areas.
Agreement between the Government
and the Australian Democrats
The refusal of the Senate to pass the ANTS
legislation led to the agreement - announced on 28 May 1999 -
between the Government and the Australian Democrats, which modified
the ANTS proposal in a number of important respects. The key points
of the agreement are set out below.
-
- The effective rate of excise will rise by two cents to 20 cents
compared to the ANTS package, by reducing the GST credit.
-
- The agreement seeks to target assistance to regional areas by
limiting the availability of the GST credit to regional areas.
-
- Eligibility for the grants would be limited to vehicles
weighing between 4.5 and 20 tonnes travelling 'in service of
regional areas', and to all vehicles weighing more than 20
tonnes.
-
- 'Regional' is defined widely. In general, the agreement
specifies that diesel used in major urban areas is not subject to
the grant. However, region is also defined to include all of
Tasmania. That the agreement and clause 10 of the
Grants Bill discriminate among the States and Territories as well
as areas within States raises the question of whether
clause 10 of the Grants Bill is constitutional.
This issue is discussed under the section on Concluding Comments in
this Digest.
-
- A consequence of the agreement is that the DFRS is not only
retained but is expanded. The agreement specifies that the scheme
be extended to provide full credits (100 per cent rebate) for
certain off-road activities now eligible for only part credits, and
that the rebate should also apply to 'like fuels'. These changes to
the DFRS are dealt with in the Rebates Bill.
-
- The effect of the agreement is therefore to have two schemes
for reducing the cost of the excise on diesel: the DFRS for
off-road use, and the DAFGS proposed in the Grants Bill for on-road
use in regional areas. The initial proposal in ANTS for a GST
credit as opposed to credits on inputs appears to have been merged
with the grants under the DAFGS. The agreement will increase both
the cost and complication of administration compared to the ANTS
scheme. Indeed the administrative arrangements for the DAFGS are a
major issue and, according to the Minister's Second Reading Speech,
will be the subject of a further Bill to be introduced in the
spring sittings of Parliament.
Clause 4 of the Bill notes that the Government
intends to combine the DFRS and the DAFGS into one scheme - the
Energy Grants (Credits) Scheme. The stated purposes of the latter
scheme - as set out in subclauses (2) and (3) -
are to encourage the use of 'cleaner' fuels, 'maintain
entitlements' under the DFRS and DAFGS and, in the case of diesel,
to restrict entitlements to ultra low sulphur fuel from 1 January
2006.
Clause 5 contains definitions
including of 'alternative fuel'. This encompasses compressed
natural gas, liquefied petroleum gas, recycled waste oil, ethanol,
canola oil, and other fuels as specified by regulation.
Conditions for eligibility for
grants
Part 2 of the Grants Bill deals with the
conditions attached to eligibility to receive fuel grants. These
conditions include the need to register using the 'approved form'
[subclause 7(1)].
Vehicles of 20 tonnes or more
Clause 9 of the Grants Bill
sets out the conditions for entitlement to grants for vehicles of
20 tonnes or more. The main requirement is that the diesel fuel or
alternative fuel is used in carrying on an enterprise in operating
a vehicle 20 tonnes or more on any public road in Australia.
Vehicles of 4.5 tonnes or more, but less
than 20 tonnes
Clause 10 of the Bill sets out
the conditions when an entity which uses diesel or alternative fuel
in a vehicle of 4.5 tonnes or more, but less than 20 tonnes
(referred to as a 'specified vehicle' in this Digest) may be
entitled to a grant. The special requirement of its use is set out
in subclause 10(2).
Subclause 10(2) of the Grants
Bill provides that a person is only entitled to the grant where
diesel fuel or alternative fuel is used in operating a specified
vehicle on a journey:
(a) between a point outside the
metropolitan areas and another point outside the metropolitan
areas, or (b) between a point outside the metropolitan areas
and a point inside a metropolitan area, or (c) between
different metropolitan areas.
Thus a specified vehicle using diesel fuel or
alternative fuel will not be entitled to a grant for operating a
vehicle within a metropolitan area.
Subclause 6(1) of the Grants
Bill provides the following definition of 'metropolitan areas'.
(1) These are the
metropolitan areas:
(a) the
Newcastle-Sydney-Wollongong metropolitan area
(b) the Melbourne-Geelong
metropolitan area
(c) the Sunshine
Coast-Brisbane-Gold Coast metropolitan area
(d) the Perth metropolitan
area
(e) the Adelaide metropolitan
area, and
(f) the Canberra metropolitan
area.
(2) The area included in each metropolitan
area referred to in subsection (1) is the area specified in the
 regulations in
relation to that metropolitan area.
There are three aspects of the definition of
'metropolitan areas' which may have constitutional
implications.
Exclusion of any part of Tasmania from the definition of
'metropolitan area'
It will be seen that no part of Tasmania is
classified as a 'metropolitan area'. Hence subclause
10(2) of the Grants Bill shows a preference in favour of
the whole of Tasmania in that the grant will be available for
operating a specified vehicle using diesel fuel or alternative fuel
within the whole of Tasmania whereas in the case of New South
Wales, Victoria, Queensland, South Australia and Western Australia
operations within metropolitan areas will not qualify for the
grant. Consequently, it may be taken that these latter States have
been discriminated against in the DAFGS in comparison with
Tasmania.
Grants for interstate travel using diesel or alternative
fuels in specified vehicles
Paragraph 10(2)(a) which
provides that a grant is due where diesel or alternative fuel is
used in operating a specified vehicle on a public road between a
point outside the metropolitan areas and another point outside the
metropolitan areas, may include interstate travel. This provision
may also cover intrastate travel.
Paragraph 10(2)(b) states that
the grant will be available where diesel fuel or alternative fuel
is used in a specified vehicle on a journey on a public road
between a point outside the metropolitan areas and a point inside a
metropolitan area. This provision could cover interstate travel
although it may cover intrastate travel as well where the journey
begins and ends within a State.
Under paragraph 10(2)(c) a
grant is due where diesel or alternative fuel is used in operating
a specified vehicle on a public road between different metropolitan
areas. This would cover the case of interstate travel. This
provision can only include interstate travel, on the basis of the
definition of 'metropolitan areas' in subclause
6(1), subject to regulations which may be made under
subclause 6(2).
Grants for intrastate travel using diesel or alternative
fuels in specified vehicles
As was indicated above the grant is also
available under paragraphs 10(2)(a) and
10(2)(b) for intrastate travel in specified
vehicles.
The constitutionality of the provisions in
clause 10 is dealt with under 'Concluding
Comments' in this Digest.
Clause 11 deals with the
amounts of the fuel grants. These are essentially the volume of
fuel used multiplied by the amount of the grant per litre. The
grants will be promulgated by regulation.
Clause 12 specifies that fuel
grants will not be payable on fuel used on or after 1 July 2002,
when the proposed Energy Grants (Credits) Scheme is to come into
operation.
Subclause 10(2) specifies that
fuel grants are intended only for fuel used on-road, whereas the
DFRS is for fuel used off-road. Clause 13
reinforces this point and is designed to exclude 'double dipping'
by specifying that fuel grants cannot be claimed for fuel eligible
for rebate under the DFRS.
Constitutional Issues
The measures in the Rebates Bill and the Grants
Bill provide for two schemes for reducing the cost of customs and
excise duty for certain users of diesel and alternative fuels: the
DFRS for off-road use, and the DAFGS proposed in the Grants Bill
for on-road use in regional areas. Basically, the measures in both
Bills are intended to assist business by reducing the cost of
transport by paying back to users of diesel or alternative fuels
the customs duty or excise duty paid under the Customs Act
1901 or the Excise Act 1901.
The measures in clause 10 of
the Grants Bill in particular are designed to meet concerns of
pollution in metropolitan areas. The Government has stated that the
measures in the Grants Bill are not based on the taxation power in
section 51(ii) of the Constitution and it is therefore proposed to
examine some of the constitutional powers the Commonwealth may rely
on to support the measures in clause 10 of the
Grants Bill to allay environmental concerns.
A recent Senate Committee report titled
Commonwealth Environment Powers considered the range of
powers available to the Commonwealth to support environmental
legislation. (5)The report noted that in Murphyores Inc. Pty
Ltd v Commonwealth(6) the High Court had held that there was
no constitutional obstacle to the Commonwealth's use of various
heads of power to regulate activities in order to protect and
conserve the environment, even though those heads of power did not
necessarily have any apparent environmental purpose behind them. So
long as Commonwealth environmental legislation rests on some head
of power - even though not directly touching the environment - the
Commonwealth is entitled to act for environmental reasons
alone.(7)
The various heads of power relied upon by the
Commonwealth to enact environmental legislation was noted in the
report as follows.
[C]ommonwealth environmental legislation
frequently relies on various heads of power in order to make
certain that the federal legislation passes Constitutional muster.
Key Commonwealth powers that have been used repeatedly to support
legislation for environmental purposes include: the trade and
commerce power (section 51(i)), the taxation power (section
51(ii)), the quarantine power (section 51(ix)), the fisheries power
(section 51(x)), the corporations power (section 51(xx)), the race
power (section 51(xvi)), the external affairs power (section
51(xxix)), the incidental power (section 51(xxxix)), the power over
Commonwealth instrumentalities and public service (section 52), the
power over customs, excise and bounties (section 90), the financial
assistance power (section 96), and the territories power (section
122).(8)
In this section of this Digest the
constitutional basis for the provisions of clause
10 of the Grants Bill will be examined. It appears from
the Second Reading Speech that the Commonwealth does not rely on
the taxation power, and consequently the power over customs and
excise as these are species of taxes, to support the Grants Bill.
The Second Reading Speech stated:
The Government's objective has always been to
reduce the price of transport fuels for business. However, in order
to honour the agreement reached with the Democrats, it is no longer
possible to deliver this entirely through the tax system. As the
intention is to offset costs for only a specified part of the
transport fleet and its users - those serving regional areas - the
tax system is, on legal advice, an inappropriate means by which to
deliver the benefits. Thus we will deliver this measure through a
grants scheme. In addition, the use of a broad-ranging grants
scheme will make the transition to the new long-term scheme of
energy credits foreshadowed in the Bill much easier, reducing the
impact on industry of multiple changes to arrangements.(9)
In this Digest the question whether the grants
power (section 96), the trade and commerce power (section 51(i))
and the bounties power (section 51(iii)) support the measures in
the Grants Bill will be examined. This will be accompanied by
considering the question whether clause 10 shows a
preference to Tasmania in the regulation of trade and commerce
contrary to the provisions of section 99 of the Constitution.
Finally, this section of the Digest will explain
why the Commonwealth has not relied on the taxation power in
section 51(ii) of the Constitution. It indicates that the
discrimination shown in favour of Tasmania in clause
10 of the Grants Bill may breach the requirement in
section 51(ii) that laws dealing with taxation shall not
discriminate between States or parts thereof.
Is the
Grants Bill dependent upon the grants power in section 96 of the
Constitution?
The Commonwealth has power to make grants under
section 96 of the Constitution. The relevant parts of section 96
are as follows:
During a period of ten years after the
establishment of the Commonwealth and thereafter until the
Parliament otherwise provides, the Parliament may grant financial
assistance to any State on such terms and conditions as the
Parliament thinks fit.
The literal meaning of the section is that the
Commonwealth may make grants to any State on such terms and
conditions that the Parliament thinks fit. Section 96 does not
authorise the making of grants to individuals or business
entities.
Clause 7 of the Grants Bill
authorises an entity to apply for registration for entitlements to
fuel grants in respect of a particular vehicle or vehicles used in
an enterprise. Entity is defined in clause 5 and
has the same meaning as in section 37 of the A New Tax System
(Australian Business Number) Act 1999. As defined in section
37 it has a very wide meaning and includes an individual, a body
corporate, a corporation sole, a body politic, a partnership, any
other unincorporated association or body of persons, a trust and a
superannuation fund. Enterprise is defined in clause
5 and has the same wide meaning as in section 38 of the
A New Tax System (Australian Business Number) Act
1999.
It would therefore appear that the Grants Bill
does not depend on the grants power for its constitutionality as
the grants are not being made through the States but directly to
entities.
The certain
exception to the rule against discrimination is when the
Commonwealth makes grants directly to the States under the grants
power in section 96 of the Constitution. Thus the Commonwealth may
tax residents of all States equally but then provide for the
reimbursement of certain residents in parts of one or other State
under section 96 without offending section 51(ii). This was the
view of the High Court and confirmed by the Privy Council in W.
R. Moran Pty Ltd v DFCT (NSW):
[T]here is nothing in section 51 to prevent the
Commonwealth Parliament from passing measures in concert with any
State or States with a view to a fair distribution of the burden of
the tax proposed, provided always that the Act imposing taxes does
not itself discriminate in any way between States or parts of
States, and that the Act granting pecuniary assistance to a
particular State is in its purpose and substance unobjectionable.
(10)
In Moran, five Commonwealth Acts
imposed certain taxes on wheat and flour and a sixth Commonwealth
Act provided for the appropriation of the proceeds of the taxes in
payments to the States, including an additional payment to
Tasmania. An Act of the State of Tasmania provided for the
distribution of such additional payment amongst payers of tax on
flour consumed in that State. The object of the scheme was to
ensure that wheat growers in all the States were paid an affordable
average price for wheat and to raise the necessary sum by imposing
a tax on flour sold in Australia for home consumption.
Again, in Grasstree Poultry Enterprises P/L
v Bycroft(11)a federal poultry levy was imposed on all States;
the States were reimbursed under section 96 discriminately and the
Commonwealth agreed with Queensland's plan to allocate 97 percent
to North Queensland. A challenge to this scheme was rejected by the
High Court.
The Commonwealth could have made fuel grants
available to the States for payment to qualifying entities but this
option which was available to the Government has not been used in
implementing the DAFGS.
Is the Grants Bill
based on section 51(i) of the Constitution?
Section 51(i) of the Constitution is generally
referred to as the trade and commerce power and provides:
The Parliament shall, subject to the
Constitution, have power to make laws for the peace, order, and
good government of the Commonwealth with respect to:-
Trade and commerce with other countries, and
among the States:
It has been held that the phrase 'trade and
commerce' in section 51(1) is wide enough to include not only the
sale and disposition of goods, but the transport of goods and
persons. Further, it not only includes the transport of goods and
persons incidentally to the disposition of goods, but includes such
transport as an end in itself. In Australian National Airways
Pty Ltd v Commonwealth, Dixon J, as he then was, expressed the
view that the commerce power was wide enough to include all
carriage for reward of goods or persons between States and was
within Commonwealth legislative power.
There is, I think, some logical force in the
view that, if inter-State transportation is relegated to the
position of an operation that is merely ancillary or incidental to
the commercial interchange of goods among the States and is not of
itself commerce, then it follows that the Airlines Act is
wider than the power. For it provides an air service, and an
exclusive air service, for passengers independently of the
commercial or non-commercial character of their journey. But I am
not prepared to accept the hypothesis and to give effect to it as
restrictive of the trade and commerce power. On the contrary, I
shall act upon the opinion that, if not all inter-State
transportation, at all events all carriage for reward of goods or
persons between States is within the legislative power, whatever
may be the reason or purpose for which the goods or persons are in
transit. (12)
Lane takes the view that regulation of, or
government engagement in, overseas or interstate trade is within
section 51(i). Relevant examples of regulation are penalties for
misdescriptions of imports or exports(13) and customs controls of
drugs and pornography.(14) Lane adds that the Commonwealth can
negatively, control and protect or even altogether prohibit some
forms of trade, making due allowance for section 92 in interstate
trade.(15)
Thus the making of grants, which is an
inducement and therefore a negative penalty, under the Grants Bill
to regulate the use of diesel and other specified fuel for
interstate transport in specified vehicles will be within the
commerce power in section 51(I) of the Constitution.
The Commonwealth could therefore rely on the
trade and commerce power to support the payment of the amounts
described as grants in the Grants Bill as part of a scheme to
regulate the use of diesel and alternative fuels for interstate
transport.
Whilst regulation of, or government engagement
in, overseas or interstate trade is within section 51(i), the High
Court has also invoked the implied incidental power in order to
extend section 51(i) to take in an intrastate act. The underlying
principle was stated by Fullagar J in O'Sullivan v Noarlunga
Meat Ltd (No. 1)(16) as follows.
Where any power or control is expressly granted,
there is included in the grant, to the full extent of the capacity
of the grantor and without special mention, every power and every
control the denial of which would render the grant itself
ineffective.
In Noarlunga Meat the High Court
permitted federal control of premises where beasts were slaughtered
for export.
The Commonwealth may therefore rely on the trade
and commerce power to support the payment of the amounts described
as grants for intrastate travel in specified vehicles under
subclause 10(2) in the Grants Bill as part of a
scheme to regulate the use of diesel and alternative fuels.
The main obstacle to the use of the trade and
commerce power in relation to the Grants Bill lies in section 99 of
the Constitution which requires that the Commonwealth should not
show a preference to one State or a part thereof in any law
regulating trade or commerce. Section 99 states:
The Commonwealth shall not, by any law or
regulation of trade, commerce, or revenue, give preference to one
State or any part thereof over another State or any part
thereof.
By treating the whole of Tasmania only, among
all the States, as a regional area clause 10(2)
would appear to breach section 99 of the Constitution.
A preference under section 99 must be tangible,
definite and commercial or given in connection with commercial
dealings. In the words of Latham CJ in Elliott v The
Commonwealth:
What section 99 prohibits is giving preference
'to one State or any part thereof over another State or any part
thereof'. In order to apply this section it is necessary to
determine that there is a preference: it is necessary also to
ascertain what the preference is, and to identify the State or part
of a State to which the preference is given and the other State or
part of another State over which the preference is given. The
Constitution appears to be based upon the view that differentiation
in some laws or regulations of trade or commerce (namely, those
which do not relate to taxation, including customs duties, or
bounties) may be proper and desirable or at least permissible, even
as between different States, but such differentiation must not
amount to the giving of preference to one State or any part
thereof.(17)
As clause 6 of the Grants Bill
does not classify any part of Tasmania as a 'metropolitan area' a
grant is available to a vehicle 4.5 tonnes or more but less than 20
tonnes, using diesel or alternative fuel for transporting
passengers or goods on public roads throughout Tasmania. This is a
preference in favour of the whole of Tasmania in comparison with
New South Wales, Victoria. Queensland, South Australia and Western
Australia in that similar grants will not be available for
operations within metropolitan areas in those States.
This commercial benefit would appear to satisfy
the tests laid down by Latham CJ to make clause 10
a provision that contravenes section 99 of the Constitution.
Are the grants to be paid under the Grants Bill
bounties under section 51(iii) of the Constitution?
A bounty is monetary aid or a direct pecuniary
grant and section 51(iii) of the Constitution enables the
Commonwealth to make bounties. Section 51(iii) of the Constitution
provides.
The Parliament shall, subject to the
Constitution, have power to make laws for the peace, order, and
good government of the Commonwealth with respect to:-
Bounties on the production or export of goods,
but so that such bounties shall be uniform throughout the
Commonwealth.
The relevant issue whether grants under the
Grants Bill will qualify as bounties under section 51(iii) will
rest on the need for grants to be uniform throughout Australia. The
exclusion of metropolitan areas from grants under clause
10 may preclude the Grants Bill being based on the
bounties power. In Elliott v The Commonwealth Latham CJ
emphasised the requirement for uniformity in section 51(iii) as
follows:
There must not be, in the case of bounties, any
variation based upon locality within the Commonwealth. In
considering this provision it is not necessary to inquire whether
there is absence of uniformity as 'between States or parts of
States'. Any absence of 'geographical uniformity' (which includes
the presence of any discrimination or preference based on locality)
would constitute a breach of section 51(iii). The marked difference
in language between the words of this section and those used in
section 99 cannot, in my opinion, be ignored. In the case of
section 51(iii) it is sufficient, in order to invalidate
legislation, to find any differentiation based upon locality in the
widest sense. In the case of section 99 it is necessary to show
that a preference is given to one State or part of a State over
another State or a part of a State.(18)
Thus clause 10 would be invalid
if reliance is placed on section 51(iii) of the Constitution to
validate the Grants Bill .
Is the Grants Bill based on the taxation
power in section 51(ii) of the Constitution?
As indicated above, the Minister in his Second
Reading speech emphasised the fact that there was legal difficulty
in using the tax system to implement the DAFGS and hence on the
face of it the Grants Bill is not dependent upon the taxation power
in section 51(ii) of the Constitution.
Section 51(ii) of the Constitution provides
-
The Parliament shall, subject to the
Constitution, have power to make laws for the peace, order, and
good government of the Commonwealth with respect to:-
Taxation; but so as
not to discriminate between States or parts of States:
The objective of the DAFGS and the DFRS is to
reduce the transport costs for business as was clearly indicated in
the Second Reading Speech cited above. The grant reduces the cost
to the end user as much as the rebate does, and in the entire
scheme for the collection of revenue from excise on fuel, the grant
as well as the rebate is an adjustment of the excise. The Grants
Bill by itself does not impose taxation. However, it needs to be
examined whether the Grants Bill has measures to make rebates of
the diesel fuel excise (although labelled 'grants') which are
similar and have the same objectives as the Rebates Bill to achieve
reductions in the price paid for diesel fuel for certain users.
A connection between the 'grant' and the
'rebate' may appear to be established by the provisions of
clause 13 and subclause 10(2)
which state that fuel grants are not payable for use of diesel fuel
or alternative fuel if a rebate is payable in respect of the fuel
under section 164 of the Customs Act 1901 or section 78A
of the Excise Act 1901. However, considering that the
diesel fuel rebate is payable for off public road use and the
diesel fuel grant will be payable for public road use it is unclear
whether there could be an overlap of legitimate claims in respect
of the rebate as well as the grant.
A connection between the grant and the fuel
excise would also appear to be established by the provisions of
subclause 11(2) which state that the amount of the
grant cannot exceed the amount payable for the diesel fuel or
alternative fuel. Paragraph 11(2)(b) provides that
the amount per litre of the grant will be specified in the
regulations in respect of each type of fuel. Based on the
objectives of the ANTS package and the costings provided, it is
likely that the regulations will specify a figure of grant per
litre which does not exceed the excise payable on that fuel.
The question whether the Grants Bill is a stand
alone Bill or whether with the Rebates Bill it is part of a scheme
to reduce the excise of diesel fuel certain users is a matter of
interpretation. This will depend on the approach of the High Court
to examining the existence of schemes in measures to be found in
different pieces of legislation. Will that approach be based on the
New Realism which began in the 1970s or on the basis of a
more legalistic interpretation which has been the trend of High
Court decisions in recent times?
According to Lane under the High Court's New
Realism the:
'[N]ew interpretative method is to eschew a
strict literal and/or legal inquiry into the effect of a challenged
law, or into the nature of a transaction, or into the
interpretation and application of a constitutional provision.
Instead, the court seeks out the practical effect, or what is
achieved in substance or 'in reality'. (19)
The argument that the DFRS and the DAFGS is in
effect one scheme is supported by the provisions of Clause
4 of the Grants Bill which envisages the creation of the
Energy Grants (Credit) Scheme to start on 1 July 2002 or earlier to
replace the DFRS and the DAFGS.
Subclause 4(2) states:
The purpose of the energy Grants (Credits)
Scheme will be to provide active encouragement for the move to the
use of cleaner fuels by measures additional to those under this
Act, while at the same time maintaining entitlements that are
equivalent to those under this Act and the Diesel Fuel Rebate
Scheme, including for use of alternative fuels.
The writer takes the view that given the
provisions in the Grants Bill which establish a connection between
the DFRS and the DAFGS and the extrinsic material such as the ANTS
package and the Second Reading Speech cited above which are
admissible under section 15AB of the Acts Interpretation Act
1901 for interpretative purposes, there is adequate evidence
to conclude that the DAFGS is merely an extension of the DFRS to
reduce to certain consumers the cost of fuel.
In consequence it
may be argued that the Grants Bill must be based on taxation power
in section 51(ii) of the Constitution.
If the Grants Bill is based on the taxation
power and the grants adjust the customs and excise duty payable on
diesel fuel, the question arises whether there has been a breach of
the non-discriminatory provisions in section 51(ii). Clause
6 of the Grants Bill does not classify any part of
Tasmania as a 'metropolitan area'. In consequence, an adjustment to
the customs duty or excise duty is available to a vehicle 4.5
tonnes or more but less than 20 tonnes, using diesel or alternative
fuel for transporting passengers or goods on public roads
throughout Tasmania. This discriminates against New South Wales,
Victoria. Queensland, South Australia and Western Australia in that
a similar adjustment of duty will not be available for operations
within metropolitan areas in those States as defined in
clause 6 of the Grants Bill.
A parallel may be drawn with the varying
allowance of zone rebates for income tax purposes based on
classification of regions. In Commissioner of Taxation v
Clyne(20) the provisions of the zonal rebate scheme in section
79A of the Income Tax Assessment Act 1936 were challenged
as being outside the constitutional powers under section 51(ii) of
the Constitution. In the event, the High Court did not find it
necessary to decide in that case whether or not section 79A was
constitutional. However certain observations of Dixon CJ, which had
the support of the majority of the High Court, may be regarded as
expressing the view that the zone allowance provisions do conflict
with the Constitution.
Thus if the Grants Bill and the Rebates Bill are
considered as a legislative scheme for the adjustment of customs
duty and excise duty on diesel and alternative fuel the provisions
of clause 10 of the Grants Bill may breach the
non-discriminatory provisions of section 51(ii) of the
Constitution.
On the other hand if the Grants Bill is
considered as a stand alone Bill and based on the trade and
commerce power in section 51(i) of the Constitution clause
10 of the Grants Bill may be in breach of section 99 of
the Constitution.
In either event, there is the possible
consequence that grants under the Grants Bill may not be available
for vehicles of 4.5 tonnes or more, but less than 20 tonnes if
clause 10 which is the offending provision is
severable from the rest of the Bill.
-
- Tax Reform: not a new tax; a new tax system: The Howard
Government's Plan for a New Tax System (ANTS); circulated by
the Hon. Peter Costello MP, Treasurer of the Commonwealth of
Australia (AGPS) August 1998.
- This Bills Digest and its companion Bills Digest No. 20
1999-2000 on the Rebates Bill are being distributed for use as
information material by Senators and Members in their
constituencies.
- Ibid., p. 23.
- Ibid., p. 86.
- Commonwealth Environmental Powers: Report of the
Senate Environment, Communications, Information Technology and the
Arts References Committee; (May 1999).
- (1976) 136 CLR 1 at p. 22.
- Commonwealth Environmental Powers: Report of the
Senate Environment, Communications, Information Technology and the
Arts References Committee; paragraph 2.13; pp. 6-7.
- Ibid., paragraph 2.14; p.7.
- House of Representatives Hansard; 22 June 1999; p. 7049.
- (1940) 63 CLR 338 at page 349
- (1969) 119 CLR 390
- Australian National Airways Pty Ltd v Commonwealth (1945)
71 CLR 29; pp. 81-83.
- Griffin v Constantine (1954) 91 CLR 136.
- Radio Corp Pty Ltd v Commonwealth (1938) 59 CLR 170.
- Lane's Commentary on The Australian Constitution
(Second Edition) (1997); pp. 154 to 155.
- (1954) 92 CLR 565, pp. 597-598.
- (1936) 54 CLR 657 at p. 668.
- Ibid., p. 673.
- Lane's Commentary on The Australian Constitution
(Second Edition) (1997); p. 25.
- (1957-58) 100 CLR 246.
Bernard Pulle and Richard Webb
18 August 1999
Bills Digest Service
Information and Research Services
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is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
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ISSN 1328-8091
© Commonwealth of Australia 1999
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