Bills Digest No. 43 2002-03
Excise Laws Amendment Bill (No. 1) 2002
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
Contact Officer & Copyright Details
Amendment Bill (No. 1) 2002
26 September 2002
House: House of Representatives
The measures in
Schedule 1 commence on 14 May 2002 at 7:30 pm in the Australian
Capital Territory. The other sections commence on the day when the
Act receives the Royal Assent.
The main purpose
is to levy excise on the higher of the actual alcohol content or
the labelled content of alcoholic beverages. Several other purposes
are described below.
See also the Bills Digest for the Excise Tariff
Amendment Bill (No. 2) 2002.
Basis of Policy Commitment
On 14 May 2002, the Minister for Revenue and
Assistant Treasurer, Senator the Hon. Helen Coonan, announced that
through the 2002 03 Budget, the Government would amend the Excise
Act 1901 (Excise Act) to impose excise duty on the higher
of the actual alcoholic strength or the labelled strength of
beverages subject to excise. This measure would take effect from
7.30 pm Eastern Standard Time on 14 May 2002.(1)
Under existing legislation, excise on
Australian-made alcoholic beverages is levied on actual alcohol
content. Customs duty on imports, on the other hand, is levied on
the higher of labelled or actual alcohol content. The Bill would
bring the basis on which excise is levied into line with the method
used to calculate customs duty.
Levying customs duty and excise on the same
basis would prevent manufacturers from taking advantage of the
Australian and New Zealand Food Standards Code (the Code).
According to the Minister's second reading speech and the
Explanatory Memorandum (EM), some manufacturers are taking
advantage of the Code to gain a market advantage. The Code allows
for variations between labelled strength and actual strength for
alcoholic drinks. Some manufactures are labelling their products as
having a higher alcohol content than they actually have, giving
rise to a market advantage. Presumably, buyers are attracted to
such drinks because they seem to offer more 'bang for buck' than
The Excise Act does not specify how the volume
of alcohol in a beverage is to be ascertained. The Bill would also
allow the Commission of Taxation to establish rules for
ascertaining the volume of alcohol.
Pros and Cons
A general principle underlying customs and
excise legislation is that customs duty and excise should be levied
on the same basis. In that way, importers and domestic producers
face a 'level playing field'. Different bases for levying customs
duty and excise could give rise to unintended protection for or
disadvantaging of domestic production compared to imports. A
positive feature of the Bill is that customs duty and excise would
be levied on the same basis. The Bill would also prevent
manufacturers from taking advantage of the tolerance between actual
and labelled alcohol levels in the Code.
The Bill would amend three Acts:
The main provisions relate to the Excise Act.
The provisions in the other two Acts complement the amendments to
the Excise Act.
The Schedule to the
Excise Tariff Act 1921 lists various goods and the rates
of excise that apply to them under various 'item' headings. To
define 'alcoholic beverages' to which rules will apply,
item 5 would insert a new section in the Excise
Act, proposed section 77A, which refers to certain
items in the Schedule as alcoholic beverages.
Item 6 would insert
proposed sections 77FA and
- proposed subsection 77FA(1) would make the
basis for levying excise the higher of the labelled alcohol content
or the actual content. It does so by providing that if the labelled
volume exceeds the actual volume, excise is be levied on the
labelled volume. Proposed subsection 77FA(2)
provides that where alcoholic beverages are entered for home
consumption with some labelled and some not, the unlabelled goods
are to be treated as if they were labelled.
- proposed section 77FB empowers the
Commissioner for Taxation to set rules for determining the alcohol
content of beverages. Proposed subsection 77FB(1)
allows the Commissioner to make written determinations of the
rules. Proposed subsection 77FB(2) allows the
rules to specify sampling methods and take account of 'unavoidable
variations directly attributable to the manufacturing process'.
Proposed subsection 77FB(4) provides that a
determination applies only to goods entered for home consumption on
or after the time when the determination is made.
Distillation Act and Spirits Act
Items 1 and 7
insert identical wording into the Distillation Act and the Spirits
Act respectively. Item 1 inserts two proposed
- proposed subsection 6(2A) provides that the
volume of alcohol may be determined in accordance with the rules
established in section 77FB of the Excise Act, and
- proposed subsection 6(2B) provides that if
section 77FB of the Excise Act applies, then customs duty is to be
determined in accordance with that section. In other words, the
effect would be for excise and customs duty to be levied on the
With the adoption of rules for ascertaining
alcohol content, the existing provision (section 46) of the
Distillation Act for determining the strength of spirits becomes
redundant. Item 2 repeals section 46.
The amount of alcohol in distilled products is
sometimes difficult to determine. Section 47 of the Excise Act uses
the word 'obscuration' to refer to this problem and sets out how to
deal with it. Item 3 repeals section 47 and
replaces it with a proposed section 47. The latter
provides that when alcoholic strength cannot be ascertained by
application of rules, the strength may be ascertained 'after
distillation or in any prescribed manner'.
The practice of labelling drinks as having a
higher alcohol content than they actually have would seem at least
to violate business ethics if not the Trade Practices Act
Paragraph 1.5 of the EM states that levying
excise on the actual content rather than the (higher) labelled
content could result in a loss of revenue. This assumes
that excise should be levied on the same basis as customs duty,
which is levied on the higher of the labelled or actual content.
But since excise is currently levied on actual content, there is,
under existing excise legislation, no loss of revenue. Indeed, as
the EM confirms, a small revenue gain is likely.
- Senator the Hon. Helen Coonan, 'Imposition of Excise on Higher
of Labelled or Actual Alcoholic Strength',
Press Release C56/02, 14 May 2002.
11 October 2002
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