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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using information available at the time of production. The views expressed
do not reflect an official position of the Information and Research Service,
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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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