Bills Digest no. 154 2009–10
Excise Tariff Amendment (Tobacco) Bill 2010
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
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Excise Tariff Amendment (Tobacco) Bill
2010
Date introduced: 12 May 2010
House: House
of Representatives
Portfolio: Treasury
Commencement: The proposed amendments in the Bills have
retrospective application from 30 April 2010 in accordance with the
Customs Tariff Proposal (No.2) 2010 and Excise Tariff Proposal
(No.1) 2010. These changes were published in the Commonwealth
Government Special Notices Gazette on 29 April 2010 with effect
from 30 April 2010 and tabled in Parliament on 12 May 2010 by the
Minister for Health and Ageing.
Links: This is the
link to the Excise Tariff Amendment (Tobacco) Bill 2010 and the
link to the Customs Tariff Amendment (Tobacco) Bill 2010, their
Explanatory Memorandums and second reading speeches can be found on
the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To amend
- the Excise Tariff Act 1921 to increase the excise
tariff applying to tobacco products by 25 per cent, and the
- Customs Tariff Act 1995 to increase the rates of duty
applying to tobacco products imported into Australia by 25 per
cent.
An excise is ‘a tax on goods levied at
some point in their production or distribution which has the effect
of increasing the price of the goods supplied to the
customer.’[1]
Customs duty is ‘a monetary fee imposed
on imported or, less commonly exported goods by the government as a
condition of their importation or exportation. The power to impose
customs and excise duties is reserved solely to the
Commonwealth.’[2]
On 29 April, the Prime Minister, Mr Rudd announced a
comprehensive anti-smoking package. The package made reference to
the following initiatives which derive from recommendations of a
report of the National Preventative Health Taskforce. Those
initiatives included the following:
- increase in tobacco excise of 25 per cent
- cigarettes to be sold in plain packaging
- restricting Australian internet advertising of tobacco
products
- injecting an extra $27.8 million into hard-hitting anti-smoking
campaigns.[3]
In April 2008, the Minister for Health and Ageing announced the
setting up of the National Preventative Health Taskforce (the
Taskforce) to develop strategies in areas which the Government
considered needed to be addressed urgently. The Taskforce undertook
to investigate the health challenges faced by Australians created
by tobacco, alcohol and obesity. The Taskforce delivered its final
report to Government in September 2009[4] and the Government formally responded
to the report in May 2010 in Taking Preventative Action: a
response to Australia: the Healthiest Country by 2020: the report
of the National Preventative Health Taskforce.[5]
The Government response referred to the 2008 National Health
Care Agreement by Council of Australian Governments (COAG) and
their commitment to ‘By 2018, reduce the national smoking
rate to 10 per cent of the population and halve the Indigenous
smoking rate.’[6] The Government further commented in the response
As a key part of the crackdown on tobacco, from
30 April 2010, the Government raised the tobacco excise by 25 per
cent. This will increase the price of a pack of 30 cigarettes by
about $2.16 and will push the total price of an average pack of 30
cigarettes above $15. This measure alone is expected to reduce the
consumption of tobacco by about six per cent, and the number of
smokers by two to three per cent or around 87 000 Australians.
The $5 billion in extra revenue generated by this increase will be
used wholly to invest in better health and better hospitals for all
Australians.[7]
The following measures are also planned as part of this smoking
initiative:
- to mandate plain packaging for tobacco products from 1 January
2012
- update graphic health warnings on cigarette packaging and
consider improvements to the availability of ingredients and
emissions data
- restrict Australian internet advertising of tobacco
products
- commitment of $85 million for tobacco social marketing
campaigns
- $14.5 million for the Indigenous Tobacco Control Initiative
which is piloting innovative projects in 18 communities in various
metropolitan, regional and remote areas of Australia. Lessons from
these initiatives will feed into the $100 million Government
commitment Tackling Smoking measure under the COAG Closing the Gap
in Indigenous Health National Partnership.[8]
The Government response stated in agreeing with
the recommendation by the National Preventative Health Taskforce
that increasing prices is one of the most effective measures
governments can take to reduce tobacco consumption and
prevalence.[9]
The report of the Henry Review noted the following about tobacco
taxation:
8.4 Tobacco taxation
The strongly addictive qualities of tobacco,
its serious health impacts and its uptake by minors, justify
government intervention in the tobacco market. The costs that
smoking imposes on non-smokers also support the case for government
intervention. Tobacco taxes raise prices and reduce both smoking
rates and smoking intensity.
There is a strong case for a substantial
one-off increase in tobacco excise. Australian retail prices for
cigarettes are moderate by international standards and taxes
constitute a relatively small share of the retail price.
To maintain its policy effectiveness tobacco
excise should be indexed to wages rather than consumer prices.
Indexation of excise to consumer prices means that excise will fall
as a proportion of average wages over time.[10]
The Customs Tariff Proposal (No.2) 2010 and the Excise Tariff
Proposal (No.1) 2010 were tabled in Parliament on 12 May 2010. The
Customs Tariff Proposal applies to goods imported into Australia on
or after 30 April 2010 and to goods imported before 30 April 2010
where the rate of import duty had not been worked out before 30
April 2010. The Excise Tariff Proposal will operate on and from 30
April 2010. Notices were published in the Commonwealth Government
Special Notices Gazette No. S63 and No. S62. The changes were
gazetted in accordance with section 160B of the Excise Act
1901 and section 273EA of the Customs Act
1901.[11]
The Senate Selection of Bills Committee resolved to recommend at
its meeting of 13 May 2010 that the Excise Tariff Amendment
(Tobacco) Bill 2010 and the Customs Tariff Amendment (Tobacco) Bill
2010 not be referred to committees.[12]
According to a press report, voters generally have approved the
increase in the excise on tobacco.[13] ‘The latest Herald/Nielsen poll
finds 71 per cent of all voters support the tax increase, which
added between $2 and $3 to a packet of cigarettes, while only 26
per cent were opposed.’[14] The press report further noted that ‘Tony
Abbott has labelled the move a tax grab but has committed the
Coalition to supporting it nonetheless.’[15] In the past Mr Abbott had
proposed a 20 per cent increase in tobacco excise to
‘subsidise the expansion of income management, or welfare
quarantining, to all families in receipt of income support
payments’[16]
and Mr Turnbull proposed a 12.5 per cent increase in tobacco excise
in his ‘2009-10 Budget reply speech as a means of increasing
government revenue while improving public health.’[17]
The financial implications are set out in detail in the
Explanatory Memorandum.[18]
Excise Tariff Amendment (Tobacco) Bill
2010
Item 1 repeals and substitutes the rate
of duty in the Schedule to the Act at subitem 5.1 and
inserts the new rate of duty per stick of $0.32775.
Item 2 repeals and substitutes the rate of duty at
subitem 5.5 in the Schedule to the Act and inserts the new
rate of duty of $409.71 per kilogram of tobacco content.
Schedule 1 of the Customs Tariff Amendment (Tobacco) Bill 2010
amends the various schedules to the Customs Tariff Act
1995 in the following way:
Items 1-3, 5, 7, 9-11 of the Bill repeal and
substitute the existing rate with the new rate of duty
$409.71/kg of tobacco content. Items 4, 6 and 8 of the Bill
repeal and substitute the existing rate with the new rate
of duty $0.32775/ stick.
Items 12-14, 16, 18, 20-22 repeal and
substitute the existing rate and insert the new rate
$409.71/kg of tobacco content. Items 15, 17 and 19 repeal
and substitute the existing rate and insert the new rate
of duty $0.32775/stick.
Items 23-25, 29, 31-33 repeal and substitute
the existing rate and insert the new rate of duty $409.71/kg of
tobacco content. Items 26, 28 and 30 repeal and
substitute the existing rate and insert the new rate of
duty $0.32775/stick.
Items 34-36, 38, 40, 42-44 repeal and
substitute the existing rate and insert the new rate of
duty of $409.71/kg of tobacco content. Items 37, 39 and 41
repeals and substitutes the existing rate of duty and
inserts the new rate of duty $0.32775/stick.
Items 45-47, 49, 51, 53-55 repeal and
substitute the existing rate and insert the new rate
$409.71/kg of tobacco content. Items 48, 50 and 52 repeal
and substitute the existing rate of duty and insert the
new rate $0.32775/stick.
The Explanatory Memorandum
also notes that Schedules 5, 6, 7 and 8 of the Customs Tariff
Act 1995 specify rates of duty for certain goods imported
under free trade agreements with the United States, Thailand, Chile
and the ASEAN-New Zealand agreement. The
increased rates of duty will apply to tobacco products imported
under these free trade agreements.[19]
See the Budget Review
2010-11: Health produced by Matthew Thomas of the Parliamentary
Library on this topic which gives detailed background information
to the increase in the tobacco excise.[20]
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2784.
Moira Coombs
26 May 2010
Bills Digest Service
Parliamentary Library
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