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
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.
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.
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)
See the Bills
Digest for the Fuel Tax Bill 2006.
See the Bills
Digest for the Fuel Tax Bill 2006.
The main consequence is that the fuel tax credits scheme could
not be implemented. Administration of aspects of the Customs Act
would remain difficult.
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)
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.
- Explanatory Memorandum, paragraphs 9 and 10, p. 5.
- 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.
- Budget strategy and outlook 2003 04 , Budget Paper No.
1, 2003, Canberra, pp. 1 22
and 1 23.
- 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.
- Australian Government, Securing Australia s Energy
Future, op. cit.
- Explanatory Memorandum, p. 3.
- Explanatory Memorandum, paragraph 28, p. 8.
- Explanatory Memorandum, paragraph 37, p. 9.
Richard Webb
Economics, Commerce and Industrial Relations Section
22 May 2006
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 2006
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Published by the Parliamentary Library, 2006.
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