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 and Copyright Details
A New Tax System (Wine Equalisation Tax
Imposition-General) Bill 1999
Date Introduced: 24 March 1999
House: House of Representatives
Portfolio: Treasury
Commencement: 1 July 2000
To impose the tax
that is payable under the wine tax law (within the meaning of the
A New Tax System (Wine Equalisation Tax) Act 1999) to the
extent that it is neither a duty of customs nor excise.
1. Tax Reform Package
On 13 August 1998 the Federal Government
released proposals for reform of the Australian tax system(1) of
which, a goods and services tax (GST) was the centrepiece.
The tax reform plan proposes to:
-
- Introduce a GST which eliminates sales tax and a range of nine
other indirect taxes
-
- Change Commonwealth-State financial relations by providing
States and Territories with an independent revenue base
-
- Implement significant changes to individual marginal tax
rates
-
- Implement a major rationalisation of family assistance
-
- Replace the various existing taxation payment and reporting
systems of company tax, provisional tax, PAYE,(2) PPS(3) and RPS(4)
by one quarterly tax payment system, PAYG(5)
-
- Introduce a new universal business number system
-
- Move toward an entity taxation system which is directed toward
the elimination of tax advantages between different business
structures, and
-
- Simplify the imputation system and introduce refunds for excess
franking credits.
As part of the tax reform package the Government
proposed that wine, and beverages consisting primarily of wine,
will become subject to a Wine Equalisation Tax to replace the
difference between the current 41 per cent wholesale sales tax and
the proposed GST.
On 25 November 1998, the Senate referred issues
relating to the GST and the new tax system to a Select Committee
and three of its Reference Committees.(6) In February 1999 the
Senate Select Committee produced its First Report.(7) The three
Reference Committees produced their reports in March 1999.(8)
2. Wine Tax Overview
The proposed A New Tax System (Wine Equalisation
Tax) Bill 1999 will introduce a wine equalisation tax (Wine Tax)
from 1 July 2000 which is a tax additional to the proposed GST.
The introduction of Wine Tax means that after
the abolition of wholesale sales tax and its replacement with a
GST, wine prices are equalised back to current levels.
-
- Wine Tax is a single stage tax applying generally to assessable
dealings in wine, unless an exemption applies, at the wholesale
level
-
- Wine Tax is imposed on the wholesale selling price of wine
-
- If wine is not sold by wholesale:
-
- tax will be imposed on the retail sale or use of the wine,
and
-
- will be based on alternative values such as the notional
wholesale selling price
-
- If the wine has already been taxed, then a credit for the
earlier tax will reduce the tax payable on the later dealing,
and
-
- Wine Tax is calculated on the GST exclusive value of wine in
most cases.
For additional information on Wine Tax please
refer to the Bills Digest for the A New Tax System (Wine
Equalisation Tax) Bill 1999.
3. Constitutional restrictions create
necessity for separate taxation Acts
The Commonwealth Parliament derives its powers
from the Commonwealth of Australia Constitution Act. Its
power with respect to taxation is found in section 51, Placitum
(ii), which states that the 'Parliament shall, subject to this
constitution, have power to make laws for the peace, order, and
good government of the Commonwealth with respect to: - (ii)
Taxation; but so as not to discriminate between States or parts of
States.'
Other provisions in the Constitution
affect the power to tax, including section 55. Section 55 reads
'Laws imposing taxation shall deal only with the imposition of
taxation, and any provision therein dealing with any other material
shall be of no effect.'
Accordingly the convention of separate Acts for
those dealing with the subject of tax, its assessment and
collection and those imposing the tax, is actually a legislative
requirement pursuant to section 55 of the
Constitution.
Section 55 continues to state that 'Laws
imposing taxation, except laws imposing duties of customs or of
excise, shall deal with the subject of taxation only; but laws
imposing duties of customs shall deal with duties of customs only,
and laws imposing duties of excise shall deal with duties of excise
only.'
Thus it is necessary for laws imposing Wine Tax
to be separated into three Acts. One Act imposing taxation, a
second Act imposing duties of customs and a third Act imposing
duties of excise.
The following bills will impose the Wine Tax if
enacted: -
A New Tax System (Wine Equalisation Tax
Imposition-General) Bill 1999
A New Tax System (Wine Equalisation Tax
Imposition-Customs) Bill 1999, and
A New Tax System (Wine EqualisationTax
Imposition-Excise) Bill 1999.
1. Imposition of Wine Tax
Subclause 3(1) imposes the tax
that is payable under the wine tax law.(9) The tax is imposed under
the name of wine equalisation tax (wine tax).(10)
Subclause 3(2) imposes Wine Tax
only so far as it is neither a duty of customs nor excise within
the meaning of section 55 of the Constitution. Please
refer to the discussion above at paragraph 3 for further
information in relation to this issue.
2. Rate
Clause 4 imposes the rate of
the Wine Tax payable under the A New Tax System (Wine
Equalisation Tax) Act 1999 at 29 per cent.
3. State Property
Clause 5 ensures that the
legislation imposing Wine Tax does not apply to property of any
kind belonging to a State.(11) The Territories are not included
within the ambit of this section. Please refer to paragraph 1 in
'Concluding Comments' for further discussion on this topic.
1.
Taxing property belonging to a State
Section 114 of the Constitution(12) is
one of the few sections in the Constitution defining the
nature of intergovernmental immunities. It prevents the
Commonwealth Parliament from legislating so as to tax property of
any kind belonging to a State. The definition of a 'State' does not
include a Territory.(13)
Judicial decisions appear to have adopted a
narrow interpretation of section 114 so as only to protect the
States against a tax imposed by reason of the ownership or holding
of property. (14)
This approach has led the High Court to decide,
for example, that section 114 did not prevent the Commonwealth from
taxing car and housing fringe benefits provided by the State to its
employees. This is because section 114 'protects the property of a
State from a tax on the ownership or holding of property but it
does not protect the State from a tax on transactions which affect
its property, unless the tax can truly be characterised as a tax on
the ownership or holding of property.'(15)
Thus section 114 does not afford the States with
protection from Wine Tax in relation to every form of transaction
to which a State is a party. It is restricted to prohibiting the
imposition of a wine tax where such a tax is characterised as one
on the ownership or holding of property.
2. Naming of
tax reform package bills
From a practical perspective, the titles of all
tax reform package Bills appear to be unnecessarily lengthy and
indeed cumbersome. Presumably, the title has been used to make it
easier for the Parliament to identify those Bills that form part of
the tax reform package. The words 'A New Tax System' could be
deleted from each title without affecting the relevance of the
title to the particular piece of legislation.
3. Additional Comments in relation to
Wine Tax
Additional commentary in respect of Wine Tax
generally may be found in the Bills Digest for the A New Tax System
(Wine Equalisation Tax) Bill 1999.
There are four main issues discussed in the
'Concluding Comments' section of that Bills Digest under the
following headings:
- Volumetric v Ad valorem
The wine industry appears to be divided on whether any top-up tax
should be based on a 'by value' tax (ad valorem) or a tax based
upon alcohol content (volumetric). However, the Winemakers'
Federation of Australia (WFA), while recognising that they
represent members with divergent interests support an ad valorem
based tax.
- Rate - does it reflect revenue neutrality and is it 'locked in'
at 29 per cent?
The Wine Tax rate is 29 per cent. The rate is a critical issue for
the viability and competitiveness of the industry and the WFA has
suggested that the true Wine Tax level for revenue neutrality would
be somewhere between 19.6 per cent and 24.5 per cent.
- Wine Tax: should it be short term - to be removed in the long
term?
The WFA generally supports a Wine Tax but only in the short term.
All other industry bodies strongly oppose Wine Tax. The Wine Tax is
an additional or differential tax which represents a departure from
the principles of simplification and equality underpinning the
introduction of a GST.
- Exemption for small business for cellar-door sales and
promotional activity?
The wine industry has suggested that cellar-door sales from small
wineries should be exempt from Wine Tax. GST would, however, still
apply to such sales.
Under the current system, the Commonwealth collects 15 per cent of
the 41 per cent sales tax on wine for the States and then rebates
this amount to the States. The States then provide a rebate to
wineries for cellar door sales, mail order and own use. This
subsidy will apparently continue after the introduction of Wine
Tax.(16)
-
- Treasurer, Tax Reform: not a new tax - a new tax
system, Tax Reform Plan, 13 August 1998, Commonwealth of
Australia.
- Pay As You Earn.
- Prescribed Payments System.
- Reportable Payments System.
- Pay As You Go.
- Senate Select Committee on A New Tax System; Senate Community
Affairs References Committee; Senate Employment, Workplace
Relations, Small Business and Education References Committee and
Senate Environment, Communications, Information Technology and the
Arts References Committee.
- Senate Select Committee on A New Tax System, First
Report, February 1999.
- Senate Community Affairs References Committee, The Lucky
Country Goes Begging, Report on the GST and a New Tax System,
March 1999; Senate Employment, Workplace Relations, Small Business
and Education References Committee, Report of the Inquiry into
the GST and A New Tax System, March 1999 and Senate
Environment, Communications, Information Technology and the Arts
References Committee, Inquiry into the GST and a New Tax
System, March 1999.
- A New Tax System (Wine Equalisation Tax) Act 1999
Wine tax law means:
-
- this Act, and
- any Act that imposes wine tax, and
- the A New Tax System (Wine Equalisation Tax and Luxury Car
Tax Transition) Act 1999 so far as it relates to the Acts
covered by paragraphs (a) and (b), and
- the Taxation Administration Act 1953, so far as it
relates to any Act covered by paragraphs (a) to (c), and
- any other Act, so far as it relates to any Act covered by
paragraphs (a) to (d) (or to so much of that Act as is covered),
and
- regulations under an Act, so far as they relate to any Act
covered by paragraphs (a) to (e) (or such much of that Act as is
covered).
- A New Tax System (Wine Equalisation Tax) Act 1999
Wine tax means tax that is payable under the
wine tax law and imposed as wine equalisation tax by any of
these:
-
- the A New Tax System (Wine Equalisation Tax
Imposition-General) Act 1999, or
- the A New Tax System (Wine Equalisation Tax
Imposition-Customs) Act 1999, or
- the A New Tax System (Wine Equalisation Tax
Imposition-Excise) Act 1999.
- Property of any kind belonging to a State has the same
meaning as attributed to it by judicial interpretation in respect
of section 114 of the Constitution. It is not actually
defined in section 114.
- Section 114: A State shall not, without the consent of
the Parliament of the Commonwealth, raise or maintain any naval or
military force, or impose any tax on property of any kind belonging
to the Commonwealth, nor shall the Commonwealth impose any tax on
property of any kind belonging to a State.
- The Constitution, section 6.
- South Australia v Commonwealth (1992) 174 CLR 235 at
p. 248.
- Queensland v Commonwealth (1987) 162 CLR 74 at p. 98.
- Senate Select Committee on A New Tax System, Winemakers'
Federation of Australia Submission No. 938, at p. 38.
Lesley Lang
13 April 1999
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 1999
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