Bills Digest no. 139 2005-06 - Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006


Index

Bills Digest no. 139 2005–06

Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006

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


Passage History

Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006

Date introduced: 11 May 2006

House: House of Representatives

Portfolio: Attorney General

Commencement: 1 July 2006

Purpose

To amend the Customs Act 1901 to allow the implementation of the fuel tax credits scheme, and to implement various compliance and other arrangements to protect Commonwealth revenue and simplify customs administration.

Background

Excise is a tax on a step in the production, manufacture, sale or distribution of goods. Customs duties are taxes imposed on imports and currently apply to a much broader range of goods than excises. The Excise Act 1901 (the Excise Act) and Customs Act 1901 (the Customs Act) govern the major specific excises and customs duties.

Most excise and many customs duties are specific , that is, the excise or duty is levied at a certain amount per litre, kilogram etc. An example is the excise on petrol which is 38.143 cents per litre. However, some duties are ad valorem, that is, are levied at a certain percentage rate of the value of the good.

Customs duties on products, which would be excisable if not imported (that is, excise-equivalent goods) are usually set at the same rate to achieve equitable tax treatment. The Explanatory Memorandum contains a plain English definition of excise-equivalent goods:

Excise-equivalent goods are those imported goods that, if they were produced or manufactured in Australia, would be classified in the Schedule to the Excise Tariff and subject to excise duty. This basically covers petroleum products, alcohol, and tobacco and tobacco products. Excise-equivalent goods are subject to rates of customs duty that are equal to the rates of excise duty applying to their locally manufactured equivalents. Some are also subject to ad valorem rates of duty.

It is proposed to prescribe the excise-equivalent goods in the regulations by reference to their tariff classification under Schedule 3 to the Customs Tariff Act 1995 (the Customs Tariff Act). This is considered the most precise method of identifying those goods to which the new regime will apply.(1)

On 15 June 2004, the Government released the energy white paper titled Securing Australia s Energy Future.(2) The white paper proposed a fuel tax credit scheme to replace the Energy Grants Credits Scheme, and refunds and remissions for customs and excise duty in the Excise Act and Customs Act with effect from 1 July 2006.

As part of the reforms, the Excise Tariff which is Schedule 1 to the Excise Tariff Act 1921 and lists the goods subject to excise and the excise rates was reviewed. The review was contained in the Review of the Schedule to the Excise Tariff Act. Industry Discussion Paper. The review proposed wide-ranging changes to the Excise Tariff. The Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006 implements the review s findings. This review has also necessitated changes to the Customs Act to ensure consistency with the Excise Act.

The Customs Amendment (Fuel Tax Reform and Other Measures) Bill 2006 (the Bill) is one of several Bills required to introduce the fuel tax credits scheme. In addition to these amendments, the Bill amends the Customs Act for other purposes including:

  • to protect the revenue
  • repeal redundant legislation
  • strengthen and clarify compliance and other arrangements that apply to the use of excise-equivalent imported goods that are used to manufacture excisable goods, and
  • ensure consistency with the Excise Act.

Basis of policy commitment

The Government made four announcements about the fuel tax credits:

  • in the 2003 04 Budget, the Government outlined the reforms(3)
  • on 16 December 2003, the Prime Minister elaborated on the Budget announcement(4)
  • in March 2004, the Government extended the transition path for fuels becoming subject to excise, and
  • on 15 June 2004, the Government released the energy white paper titled Securing Australia s Energy Future and the accompanying Fuel Excise Reform document.(5)

Position of significant interest groups

See the Bills Digest for the Fuel Tax Bill 2006.

ALP/Australian Democrat/Greens/Family First policy position

See the Bills Digest for the Fuel Tax Bill 2006.

Any consequences of failure to pass

The main consequence is that the fuel tax credits scheme could not be implemented. Administration of aspects of the Customs Act would remain difficult.

Financial implications

The Explanatory Memorandum states:

There will be a slight impact on some manufacturers who utilise imported excise equivalent goods in manufacturing excisable goods. An existing anomaly in the legislation that has allowed certain manufacturers to use imported excise equivalent goods to manufacture excisable goods without the imported goods being required to be warehoused will be removed.

The changes will clarify that that activity must take place at a place licensed under both customs and excise legislation. Entities that currently do not hold a customs warehouse licence will incur the normal cost recovery charges associated with Customs warehouses.(6)

Main provisions

Schedule 1 Amendments

Item 3 inserts into subsection 4(1) of the Customs Act a definition of excise-equivalent goods. Item 3 provides that such goods will be those prescribed by regulation.

Item 13 inserts new section 105A. The Explanatory Memorandum explains that this section replicates the provision of section 11 of the Spirits Act 1906. The Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 repeals the Spirits Act 1906. The manufacture of spirits in Australia has largely ceased, and most of that Act s provisions are:

no longer relevant to the effective management of Australia s alcohol taxation regime. However, it was considered necessary to retain some of the requirements in the Spirits Act and these are being re-enacted in customs and excise related legislation.(7)

Item 14 inserts a new Part VAA Special provisions relating to excise-equivalent goods. New section 105B deals with the point at which liability to pay customs duty on excise-equivalent goods ceases. Subsection 105B(1) provides that liability ceases when:

  • the goods are entered for warehousing and
  • the excise-equivalent goods are used to manufacture excisable goods, and
  • the excise-equivalent goods are under the control of Customs when they are used in the manufacturing process and
  • manufacturing takes place at premises that are both a licensed warehouse and have a manufacturing licence under the Excise Act.

The latter is a dual-licensed place.

Subsection 105B(1) provides that liability to pay customs duty ceases when the excisable goods are manufactured.

As noted, some customs duties are levied on an ad valorem basis. This could give rise to an anomaly in certain cases:

it is only intended to extinguish the equivalent amount of the import duty that would be payable on excise-equivalent goods if they were excisable goods produced or manufactured in Australia. Therefore, subsection 105B(2) provides that subsection (1) does not apply to an amount of duty that is calculated as a percentage of the value of the excise-equivalent goods because of section 9 of the Customs Tariff Act. This duty is known as the ad valorem duty. This duty will then be payable in the circumstances set out in new section 105C of the Customs Act.(8)

Concluding comments

The Bill is one of several which require amendment to introduce the fuel tax credits scheme. The other Bills are

  • the Customs Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006
  • the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006, and
  • the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006.

However, most of the amendments in the Bill are essentially technical in nature in that they seek to clarify and improve the administration of the Customs Act. Such amendments are generally well described in the Explanatory Memorandum.

Endnotes

  1. Explanatory Memorandum, paragraphs 9 and 10, p. 5.
  2. Australian Government, Securing Australia s Energy Future, Canberra, 2004, p. 93, http://www.pmc.gov.au/publications/energy_future/docs/energy.pdf. Web address accessed on 27 March 2006.
  3. Budget strategy and outlook 2003 04 , Budget Paper No. 1, 2003, Canberra, pp. 1 22
    and 1 23.
  4. Hon. J. Howard (Prime Minister), Fuel excise reforms, media release, Canberra, 16 December 2003, http://www.pm.gov.au/news/media_releases/media_Release624.html. Web address accessed on 27 March 2005.
  5. Australian Government, Securing Australia s Energy Future, op. cit.
  6. Explanatory Memorandum, p. 3.
  7. Explanatory Memorandum, paragraph 28, p. 8.
  8. Explanatory Memorandum, paragraph 37, p. 9.

 

Contact Officer and Copyright Details

Richard Webb
Economics, Commerce and Industrial Relations Section
22 May 2006
Bills Digest Service
Information and Research Services

This paper has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Information and Research Service, nor do they constitute professional legal opinion.

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 2006

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by members of the Australian Parliament in the course of their official duties.

Published by the Parliamentary Library, 2006.

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