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Background Paper 5 1995-96
'Beer and Cigs Up!': A Recent History of Excise in Australia
Denis James
Economics, Commerce and Industrial Relations Group
- In 1995-96, the Commonwealth expects to receive around $16.5 billion,
or 13.9 per cent of total Commonwealth tax revenue, from customs and
excise duties. Of this amount, $13 billion takes the form of excise
collections while $3.5 billion will be raised from customs duties. Of
the excise collections, $10.3 billion will be raised from petroleum
products, $1.1 billion will be raised from alcohol and $1.6 billion
from tobacco products.
- An excise is a tax imposed upon the domestic production of a specified
product. Customs duties are taxes imposed upon imported products. In
order to achieve equitable tax treatment, a nexus generally exists between
the rates of excise duty imposed on domestic production and the customs
duties imposed on imports.
- Customs and excise duties were the main sources of taxation available
to the Colonies prior to Federation. Upon Federation, section 90 of
the Constitution gave the Commonwealth the exclusive power to impose
duties of customs and excise.
- Duties of customs and excise were the sole source of Commonwealth
taxation until 1910, when land tax was imposed. During World War 1,
the Commonwealth introduced a range of new taxes, including income tax,
entertainments tax and estate duties. Over the first two decades of
this century, the Commonwealth also had to provide significant grants
to the States to compensate them for the loss of their customs and excise
revenues.
- Virtually all excises in Australia have been applied as 'specific'
duties, that is, as a rate of duty per unit of production. This has
required excise rates to be raised from time to time to prevent tax
collections from being eroded by inflation. This problem was systematically
addressed for the first time in the initial Hawke Budget (August 1983)
when it was announced that excise rates would be adjusted at six-monthly
intervals in line with movements in the Consumer Price Index.
- In addition to being an important source of revenue, excises have
also been used to regulate social behaviour. Over the last 3 years,
there have been large increases in excise rates on tobacco products,
designed to curtail smoking. In both 1984 and 1988, excise arrangements
on beer were altered to favour the consumption of low alcohol beers.
The 1993 Budget imposed a surcharge on leaded petrol to encourage the
use of less polluting, unleaded fuel.
- Excise duties have also been used to facilitate cost recovery in the
provision of Commonwealth services. Between 1926 and 1959, a component
of Commonwealth duties on motor fuel was explicitly earmarked for road
funding. The earmarking of fuel taxes for roads has again applied since
1982. Duties applied to aviation gasoline and aviation turbine fuel
have also been used to recover the costs of providing airways services,
air safety regulation and other aviation facilities.
- Excises are quite regressive taxes, in that households on lower incomes
tend to spend a higher proportion of their income on the consumption
of excisable goods than higher income households. Analysis of household
expenditure patterns shows that the most regressive excises are those
on tobacco products.
- Where excises are imposed upon inputs into other industries (as in
the case of fuel) economic efficiency is likely to be reduced due to
their distorting effect on the pattern of national production. This
arises firstly from the fact that rates of excise vary considerably
according to the type of fuel used and the industry using the fuel and
secondly, because resources are redirected away from those industries
which use fuel more intensively. The Government has been urged by several
of its major advisory bodies, such as the Industry Commission, to examine
the whole question of the impact of intermediate input taxation on economic
efficiency.
Experience has shown that movements in excise rates and revenue collections
on refined petroleum, alcoholic and tobacco products are of considerable
interest to Parliamentarians and their constituents. The aim of this paper
is to provide a comprehensive catalogue of the changes in excise rates
on major excisable products over the past three decades and to give a
brief explanation of the reasons underlying such changes.
Prior to Federation, the main tax revenues available to the Colonies
were duties of customs and excise. In 1896-97, for example, customs and
excise represented 76 per cent of total taxation revenue in the Colonies.
Upon Federation, the power to raise such duties was ceded exclusively
to the Commonwealth under the provisions of section 90 of the Constitution(1).
This is one of the very few exclusive powers granted to the Commonwealth.
Most of the Commonwealth's powers are concurrent with those of the States,
although section 109 of the Constitution allows Commonwealth law to be
paramount in the event of any inconsistency between Commonwealth and State
law. The Commonwealth is bound to impose excise and customs duties, or
any other taxation for that matter, on a nationally uniform basis under
the provisions of section 51(ii) and section 99 of the Constitution.
In the first two decades following Federation, there was a need for
considerable grants from the Commonwealth to the States to compensate
them for the loss of their customs and excise revenue. However, during
this period the States, which had been levying small amounts of income
tax, began to develop this as a primary source of tax revenue. Of course,
the States also derived a reasonable amount of non-tax revenue from other
sources, such as railway profits, land sales and royalties. However, it
was not until the 1920s that the States began to become more financially
independent of the Commonwealth. Whereas in 1909-10, Commonwealth grants
made up 31 per cent of total State revenue, by 1918-19 this proportion
had declined to only 17 per cent, stabilising at around 14 per cent by
1929. This situation lasted until 1942, when the Commonwealth took exclusive
control of the income taxing field under the Uniform Taxation Arrangements.(2)
Naturally, customs and excise duties were also the major revenue source
available to the fledgling Commonwealth Government. They were the sole
source of Commonwealth tax revenue until 1910, when Commonwealth land
tax was levied. The tax system was further extended during World War I
when, in 1915, the Commonwealth began to impose income taxation and also
introduced a range of other taxes to finance the war effort. By 1918-19,
customs and excise duties raised 53 per cent of Commonwealth taxation
revenue, income tax accounted for 32 per cent and the remainder was raised
from other taxes such as land tax, war-time profits tax and estate duties.
However, even as late as 1938-39, for example, customs and excise duties
still contributed 63 per cent of Commonwealth tax receipts, income tax
amounted to 16 per cent and sales tax raised 13 per cent. This situation
changed dramatically after 1942, when the Commonwealth became the sole
collector of income tax. By 1946-47, for example, customs and excise duty
contributed only 27 per cent of Commonwealth taxation, while income tax
raised 54 per cent.
Customs and excise duties are still very important taxes today, even
if they are not as significant as in previous times. In 1995-96, such
taxes are estimated to raise $16.5 billion dollars, or 13.9 per cent of
total Commonwealth tax revenue. Of this amount, $13 billion will be raised
from duties of excise and $3.5 billion will be raised from customs duties.
Of the excise collections, $10.3 billion is to be raised from duties on
refined petroleum products, crude oil and LPG, while the remaining $2.7
billion will be raised from excise on tobacco and alcoholic products.
Table 4 shows Federal excise receipts from major excisable products since
1970.
An excise is a tax which is imposed upon goods which have been produced
domestically, as against customs duties which are imposed on imported
goods. Of course, in order to achieve equitable tax treatment, a nexus
generally exists between the rates of excise duty imposed on domestic
production and the customs duties imposed on imports. An excise is usually
applied at the point of production, for example, being paid by the oil
refiner or by the cigarette manufacturer. In this respect, an excise is
different from a sales tax, which is usually imposed at the wholesale
or retail level and which generally does not discriminate between domestically
produced and imported goods. This concept of what constitutes an excise
appears to differ from the interpretation of the High Court which, in
its wisdom, has defined an excise to be a tax on goods applied anywhere
in the production or distribution chain. It is this broader definition,
in conjunction with section 90 of the Constitution (which gives the Commonwealth
the exclusive power to levy customs and excise duties), which has effectively
prevented the States from applying any form of tax on the production or
distribution of goods.(3)
It should also be noted that duties of customs and excise are only imposed
on products consumed within Australia. Duty is not payable on any products
which are exported. This includes fuel used by ships plying the international
trades or aircraft flying international routes.
Although excise has traditionally been applied to alcohol, tobacco and
petroleum products, a range of other products have been excisable at various
times in the past, including such commodities as starch, rice, sugar,
saccharin, glucose, golden syrup and canned fruit. One reason for the
popularity of excises is that they are easy to impose on goods of a relatively
homogeneous nature and produced by a small number of producers. They have
also frequently been applied to products which are characterised by relatively
'inelastic' demand, that is, despite an increase in the price of such
commodities, demand for them does not fall by a proportionately large
amount. Hence, excise increases on such goods will generally be translated
into increased revenue flows to the government, making them an excellent
tax base.
An excise may be applied as a specific tax or on an ad valorem
basis, although most excises in Australia have been specific. A specific
duty is one which is applied per unit of production, for example, so many
cents per litre of petrol. An ad valorem tax is levied on the value
of production. Earlier this century, for example, certain agricultural
machinery was taxed on the basis of a specified percentage of the value
of the equipment produced.
One problem in imposing a specific tax, of course, is that the tax rate
must be continually raised to prevent inflation from eroding the tax collections.
It was for this reason that the Hawke Government announced, in August
1983, that the excise rates on 'traditional' commodities (that is, refined
petroleum, tobacco and alcoholic products) would be indexed, at six-monthly
intervals, to changes in the consumer price index (CPI). Since 1983, excise
rates have been increased in early February, based on the CPI increase
in the preceding September and December quarters, and in early August,
based on the CPI increase in the preceding March and June quarters(4).
The indexation factors which have been applied to excise rates since 1983
are shown in Table 5 in the Appendix.
While excises are important as a source of revenue for the government,
they have also frequently been used to regulate community behaviour. There
have been sharp rises in tobacco excise rates in recent years to discourage
smoking. The formula currently used to set beer excise considerably favours
low-alcohol beer, encouraging a switch to that beverage. The 1993 Budget
imposed a higher rate of excise on leaded petrol to make it more attractive
for motorists to move to less polluting, unleaded fuel.
Taxes on various petroleum products have been applied by the Commonwealth
since Federation. Most of these taxes took the form of customs duties
in the early part of the century and excises only began to be imposed
once domestic production commenced.
The details of the imposition of excise on each individual petroleum
product will be discussed below. However, there was a significant factor
which affected the excise rates on all refined petroleum products in the
period March 1986 to December 1987. This concerns the nexus which the
Government made between excise rates on refined petroleum products and
excise collections from the crude oil levy during that period.
Under the Commonwealth's crude oil taxation scheme, a levy was collected
on the production of crude oil from certain 'old' wells, mainly in Bass
Strait. The crude oil levy, which itself was a form of excise, was related
to the international price of oil. In this sense, the levy could almost
be regarded as a 'pseudo' resource rent tax. As international oil prices
rose and profits from the old wells increased, the levy collections would
increase, and vice versa(5).
When world oil prices began to decline in 1986, Commonwealth receipts
from the crude oil levy also began to decline. Faced with a difficult
budgetary situation, the Government decided to compensate for most of
the loss of crude oil levy receipts by increasing the excise rates on
refined petroleum products. This explains the large increase in all refined
petroleum products excise in that year.
The Government pledged, however, that if oil prices rose and crude oil
levy collections increased, the excise rates on refined petroleum products
would be reduced. This pledge was adhered to and, over the period 1986
to 1987, there were frequent fluctuations in refined petroleum products
excise rates as world oil prices varied. This procedure, superimposed
upon the six-monthly indexation process, explains the large number of
different excise rates applicable to all refined petroleum products over
the period in question. It was only at the end of 1987, when changes were
made to the crude oil marketing arrangements, that the nexus was eventually
broken.
Table 1 in the Appendix shows excise rates on major refined petroleum
products since 1956 while excise collections from petroleum products are
shown in Table 4 in the Appendix. It might be noted that virtually all
refined petroleum products excise is derived from petrol and diesel. In
1995-96, for example, of the estimated excise collections of $10.3 billion,
$2.4 billion will be raised from excise on leaded petrol, $3.9 billion
from unleaded petrol and a further $3.9 billion from diesel (the figure
for diesel being gross collections before rebates are paid). Excise on
all remaining refined petroleum products amounts to a mere $164 million.
2.1 Excise on Petrol and Diesel
Petrol has been taxed by the Federal Government since early this century.
The tax originally took the form of a customs duty, since all petrol was
imported. With the establishment of domestic refineries, petrol excise
was first imposed in 1929 at the rate of 1 penny per gallon (0.18 cents
per litre).
Over the period 1926 to 1959, there was formal hypothecation of petrol
excise for Commonwealth roads grants to the States,(6) although it should
be noted that, apart from 192627, there was never any time when roads
grants exceeded the amount of petrol tax collected. During this period
when hypothecation applied, petrol excise was raised on a number of occasions
in order to generate sufficient revenues to finance road funding programs.
Excise was first applied to diesel in 1957. Given the link which existed
between petrol taxation and road funding, it was felt that the users of
diesel powered vehicles should also be making a contribution to roads.
Excise was initially imposed at the rate of 1 shilling per gallon (2.203
cents per litre), which was slightly higher than the excise on petrol
at the time (2.108 cents per litre). It is interesting to note that the
excise on diesel always remained marginally higher than that on petrol
until August 1973, when the two rates were made equal.
Since the primary purpose of imposing the excise on diesel was for road
cost recovery purposes, it is not surprising that the excise was only
paid on diesel fuel used by on-road vehicles. All off-road users of diesel
were exempt from the excise. This remained the case until 1982, when a
variety of off-road users were also required to pay some or all of the
excise. This will be described in more detail below in the section dealing
with the diesel fuel rebate scheme.
In 1959, the nexus between road funding and fuel taxation was broken.
The Treasurer, Mr Holt, argued(7) that it was an unsound practice to allocate
the proceeds of any one tax for one particular class of expenditure in
that it cut across the fundamental budgetary principle that all government
receipts should be paid into a common account from which particular expenditures
can be met by lawful appropriation. Moreover, Mr Holt argued that receipts
from fuel excise had fluctuated greatly in recent years, leading to uncertainty
in the level of road funding for the States. By breaking the nexus, a
more predictable program of road funding could be provided to the States.
Over the period from 1959 to 1982, petrol and diesel excise was regarded
simply as a general revenue raising measure and was increased from time
to time in response to budgetary needs. This situation changed in 1982.
In that year, the Fraser Government felt that it had to react to the criticism
that the level of real road funding had been falling significantly since
the late 1970s. In August 1982, the Government decided to boost road funding
by around 50 per cent by initiating the Australian Bicentennial Road Development
program.
Under the terms of that program, a surcharge of one cent per litre was
applied to duties of customs and excise on petrol and diesel fuel from
17 August 1982 until 30 June 1983, when the surcharge increased to two
cents per litre and remained at that level until the end of the program
on 31 December 1988. This had the effect of raising the excise rate on
petrol and diesel from 5.155 cents per litre to 6.155 cents per litre
on 17 August 1982 and to 7.155 cents per litre on 1 July 1983. The proceeds
of the surcharge were paid into the Australian Bicentennial Road Trust
Fund to be used for grants to the States for road construction.(8)
In its first budget on 22 August 1983, the newly elected Hawke Government
increased petrol and diesel excise by a discretionary 1.5 cents per litre
and simultaneously applied its first six-monthly indexation adjustment
(a 4.3 per cent increase). The combined effect was to set the level of
petrol and diesel excise at 9.027 cents per litre as from Budget night.
Between August 1983 and February 1986, the increases in petrol and diesel
excise rates related only to indexation adjustments. As mentioned above,
however, the period from March 1986 to December 1987 was characterised
by a rapid increase in excise collections and considerable fluctuations
in excise rates, in response to the link between refined petroleum products
excise and crude oil levy collections. From 1988 until August 1993, the
increases in the excise rates were again only due to indexation(9).
In the 17 August 1993 budget, the Government announced that it was imposing
an immediate 3 cents per litre increase on all petroleum products except
aviation gasoline and aviation turbine fuel. This raised the excise on
petrol and diesel from 26.573 cents per litre to 29.573 cents per litre.
The Government further announced that, in addition to the normal indexation
adjustments, an additional 1 cent per litre would be added to the excise
on most refined petroleum products in each of February and August 1994.
In subsequent negotiations with the Western Australian Green Senators
and Senator Harradine, however, it was agreed that these latter two adjustments
would only apply to petrol and diesel fuel.
By August 1994, therefore, excise on unleaded petrol and diesel had
increased by 5 cents per litre plus the indexation adjustment, compared
with the rates obtaining immediately prior to budget night. However, in
order to curtail the use of leaded petrol, an additional 1 cent per litre
was also imposed on this fuel in each of February and August 1994. The
overall discretionary increase in leaded petrol was thus seven cents per
litre from budget night. The Government had also originally proposed that
a further 3 cents per litre would be imposed on leaded fuel in February
1995, which would have made the discretionary increase 10 cents and created
a 5 cent differential between the price of leaded and unleaded petrol.
This measure was, however, abandoned following post-budget negotiations
between the Government and the Australian Democrats.
Since August 1994, increases in petrol and diesel excise have simply
reflected the six-monthly indexation process.
2.2 The Diesel Fuel Rebate Scheme
As stated earlier, excise was imposed on diesel fuel in 1957 as a contribution
towards Commonwealth expenditure on roads. As a result, the excise was
imposed only on diesel fuel used 'for the purposes of propelling a road
vehicle on a public road'. Any user who could demonstrate that diesel
fuel purchases were not being used for this purpose was eligible to receive
a certificate of exemption, which enabled that consumer to purchase diesel
fuel free of excise. These arrangements applied from 1957 until 1982.
In 1982, the Fraser Government was concerned by what it saw as 'rorting'
of the certificate of exemption scheme. In that year, the Diesel Fuel
Taxes Amendment Act 1982 was passed. This did two things. Firstly,
the certificate of exemption scheme was abolished. Instead, all users
of diesel fuel are now required to pay the full excise, with certain exempt
users having the duty they have paid either wholly or partially rebated
to them. Secondly, whereas all off-road users of diesel fuel had been
exempt, under the 1982 legislation only primary producers (those in agriculture,
forestry and fishing), miners (including the beneficiation, i.e. processing,
of ore) and users of diesel for heating, lighting, hot water, air-conditioning
and cooking for domestic purposes or in hospitals, nursing and old-aged
persons homes were exempted from duty.
As a result of the 1982 legislation, a large number of users who previously
had been exempt are no longer exempt. These include government railways,
coastal shipping, manufacturers, tourist resort operators, cruise operators
and so forth.(10)
Up until the first Hawke Government Budget (August 1983), the rebate
for the specified exempt users was equal to the excise paid. Just prior
to that Budget, for example, both the excise rate and the rebate rate
were 7.155 cents per litre. In the August 1983 Budget, several changes
were announced to petrol and diesel excise. Firstly, it was announced
that excise would be indexed twice yearly to movements in the Consumer
Price Index, beginning on Budget night. Secondly, a small discretionary
increase in excise rates was also imposed. The upshot of these changes
was that the excise on petrol and diesel rose to 9.027 cents per litre
on Budget night. However, the rebate was kept at 7.155 cents per litre.
Hence even the previously exempted users of diesel fuel began to pay a
small amount of excise (the gap between the excise rate and rebate being
1.872 cents per litre).
Over the next two years, excise rates continued to be indexed, while
the rebate remained the same. By early 1986, the gap had thus risen to
2.388 cents per litre. After a noisy protest by farmers outside Parliament
House, the Government agreed that from February 1986, the rebate arrangements
would be changed. Under these changed arrangements, primary producers
had the 'gap' removed and the rebate began to be indexed along with the
excise rates. Thus today, primary producers receive a total rebate of
duty paid. Miners receive whatever rebate is required to ensure that they
continue to pay only 2.388 cents per litre. They have thus paid this amount
ever since February 1986.
For domestic users and hospitals, nursing and old-aged persons' homes,
rebate indexation continued from the old rate of 7.155 cents per litre.
Given that the same indexation factor was applied to the higher excise
rate, the gap between the two has steadily grown. The gap has also reflected
various discretionary changes to excise rates between 1986 and the present.
Just prior to the 1995 Budget, this gap was 7.764 cents per litre.
In the 1995 Budget, it was announced that domestic users (apart from
domestic diesel use by primary producers and miners) would no longer receive
any rebate.(11) The rate of duty payable by such users therefore jumped
from 7.764 cents per litre to the standard rate of 32.537 cents per litre.
It must be noted that this decision was in accordance with recommendations
in a recent Report of the Industry Commission on petroleum products(12),
which observed that it appeared that the Government had originally intended
the residential category to cover remote households which relied on diesel
to generate electricity for light, heat and cooking.
The Commission argued that many domestic users would have access to
'town' electricity, leading it to conclude that it would be less costly
for the Government to subsidise the remote households directly. However,
not all domestic users have been excluded from the rebate. The definition
of 'residential' has been narrowed (in the Customs and Excise Legislation
Amendment Act 1995) to premises situated on an agricultural property
where a core agricultural activity is carried on, or premises where the
residents carry on eligible mining operations. Such residential users
now attract the rate of rebate applying to their relevant industry sector.
Under the same legislative package, eligible activities in the primary
production and mining sectors were also redefined so as to prevent the
rebate being paid for 'marginal' activities for which the rebate was never
really intended (e.g. the use of diesel in the maintenance of city parks,
bowling greens, or other 'amenity horticulture'(13)). The particular focus
of the Customs and Excise Legislation Amendment Act 1995 has been
to redefine 'agriculture' and 'mining operations' and to remove the 'sweeper
clauses' employed in their definitions in the previous legislation. The
sweeper clauses have been the source of most of the litigation in the
life of the scheme through their inclusion of activities 'connected with'
agriculture and mining operations for eligibility of the rebate. Despite
these changes, payments of diesel fuel rebate are still quite significant.
It is estimated that in 1995-96, $705.3 million will be paid as a rebate
to the mining sector while $551.2 million will be paid to primary producers.
Table 6 shows the effective diesel fuel excise rates paid by the various
categories of users, reflecting the diesel fuel rebate arrangements.
2.2.1. Marine Diesel Rebate Scheme
While a number of industries derive some relief from diesel fuel excise
through the operation of the diesel fuel rebate scheme, some relief is
also provided to the coastal shipping industry through another avenue.
In 1989, the government announced that, as part of its shipping reform
program, a rebate of diesel fuel excise would be provided to ships of
Australia's coastal trading fleet as from 1 July 1992. The rebate is restricted
to major trading ships (as defined in the Ships (Capital Grants) Act
1987) and does not include such vessels as offshore oil industry vessels,
passenger vessels, tugboats and other craft used primarily in harbours,
and pleasure craft.
The rebate is set at 5.31 cents per litre. This was the amount of excise
which was notionally hypothecated to roads in 1992. Even though the amount
currently being hypothecated to roads has fallen to 3.53 cents per litre,
the marine diesel rebate has continued to apply at the 1992 level.
2.3 Fuel Oil, Heating Oil and Kerosenes
The first Hawke Budget (August 1983) also imposed excise on fuel oil,
heating oil and kerosene (other than aviation kerosene) for the first
time. On Budget night, it was announced that these products would be excisable
at the same rate as diesel and petrol, that is, 9.027 cents per litre.
Within a few days of the Budget, the Government backtracked on this decision
in the face of considerable industry opposition. Instead of applying the
9.027 cents per litre, the Government explicitly gave the users of these
products the benefit of the diesel fuel rebate (which, it will be remembered,
was 7.155 cents per litre) by subtracting this from the initially proposed
excise rate. As a result, these products became excisable at the rate
of 1.872 cents per litre.
Due to a combination of indexation, the impact of the crude oil price
adjustments in the mid-1980s, and the discretionary 3 cents per litre
increase in excise in the 1993 Budget, the excise on fuel oil, heating
oil and kerosene had risen to 8.512 cents per litre by August 1993. However,
the 1993 excise increase (from 5.512 cents per litre to 8.512 cents) was
criticised by users since it represented a much higher percentage increase
than the 5 cents per litre increase in diesel excise. In the 1994 Budget,
excise on fuel oil, heating oil and kerosenes was therefore reduced to
6.586 cents per litre to equate the percentage excise increase for these
products with that of diesel. Since that discretionary change, the only
increases in fuel oil, heating oil and kerosene excise rates have been
those due to indexation.
Fuel oil consists of many grades, ranging from heavy fuel oil (such
as that used in ships' engines), to light fuel oil which is only slightly
heavier than diesel. It is technically feasible to convert equipment requiring
diesel fuel to use light fuel oil and in those industries which have not
qualified for any diesel fuel rebate, the incentive has been very great
to do so (e.g. at February 1995 light fuel oil excise was only 6.751 cents
per litre compared with 32.537 cents per litre for diesel). In recent
years, V/Line and Australian National have invested in technology which
has enabled them to switch from diesel to light fuel oil. More recently,
Westrail and the NSW State Rail Authority have done likewise and Queensland
Rail had begun the process of conversion. Industrial users of diesel-powered
electricity generators had also begun to convert and there is some evidence
that the same had occurred with coastal shipping (which uses a significant
amount of diesel fuel in their auxiliary motors).
In the 1995 Budget, the Commonwealth announced that, from 1 July 1995,
the excise on light fuel oil would be raised to equal the diesel fuel
excise rate in order to 'address the tax-driven substitution of 'light'
fuel oil for diesel which is taking place at some cost to economic efficiency
and the environment'.(14) This change has been effected by redefining
diesel fuel so as to include light fuel oil.
2.4 Aviation Turbine Fuel (AVTUR) and Aviation Gasoline (AVGAS)
Prior to March 1956, aviation gasoline was excisable at the same rate
as motor spirit. However, when announcing an increase in motor spirit
excise at that time, the Government agreed to maintain aviation gasoline
excise at its existing rate. The nexus between AVGAS and motor spirit
excise thus ceased to exist from that date.
Aviation turbine kerosene was free of any duty until September 1957,
when duty was imposed. It is significant that excise was levied on AVTUR
in the same Customs Tariff Proposal which also imposed excise on diesel
for the first time, since similar arguments were offered in each case.
The Government noted that already, the users of AVGAS were making a contribution
towards the cost of aviation facilities and argued that the growing number
of commercial operators using AVTUR should make a reasonable contribution
to the heavy costs of providing airport and air route facilities.
Until recently, there had been no formal hypothecation of aviation fuel
excise collections for the provision of aviation facilities. Certainly,
various Airlines Agreements (between the Commonwealth, Ansett and TAA)
included clauses which set limits on the rate of growth of aviation fuel
excise rates and which explicitly noted that revenue from aviation fuel
excise would be regarded as a cost recovery contribution. Prior to the
formation of the Federal Airports Authority (FAC) and the Civil Aviation
Authority (CAA) in 1988, aviation fuel taxes and air navigation charges
were the principle sources of aeronautical revenues which the Government
used to meet the notional cost recovery targets it set for the aviation
sector. In a submission to the Bosch Committee on Aviation Cost Recovery
in 1984, the Department of Aviation advised that 'fuel excise collections
had been taken into account informally since 1961 in setting the cost
recovery levels the Government would seek through air navigation charges'.(15)
However, as from 1 July 1987, the air navigation charges applying to
AVGAS aircraft (which took the form of an annual registration fee unrelated
to aircraft use) were abolished and replaced by a 3.9 cents per litre
surcharge on AVGAS excise. On 1 January 1988, a further 0.5 cent per litre
excise was added to AVGAS excise to meet the cost of terminal navigation
services at Coolangatta, Essendon and Launceston airports.
Since 1988, the charging mechanisms of the FAC and the CAA have had
a significant impact on the levying of excise on aviation fuels. Both
of these organisations were required to operate on a commercial basis
and to devise a set of appropriate cost recovery charges, although the
Government did offer to continue funding the safety regulation and search
and rescue activities of the CAA. For its part, the FAC has developed
a schedule of aeronautical user charges which are centred around the imposition
of landing charges at airports other than general aviation airports and
the introduction of an airport usage fee, called the general aviation
infrastructure tariff (GAIT charge), at general aviation airports.(16)
The CAA also has developed a schedule of aeronautical fees, including
en-route navigation charges, terminal navigation charges and rescue and
firefighting charges.
With the advent of these commercial charges by the CAA and the FAC,
the Commonwealth abolished its excise on AVTUR on 1 July 1988. However,
it was obvious that practical difficulties would prevent the effective
imposition of aeronautical charges on AVGAS aircraft. Since such aircraft
often did not file flight plans, the en-route charges levied by the CAA,
for example, could not really be applied. As a result, the Commonwealth
agreed to pay virtually all of its annual AVGAS excise receipts to the
CAA in lieu of en-route charge collections from such aircraft (and in
lieu of terminal navigation and rescue and firefighting charges at non-primary
airports).
Throughout the 1990s, there have been a number of discretionary changes
to AVGAS and AVTUR excise rates. These have stemmed from three main causes.
Firstly, given the strong link between AVGAS excise collections and the
cost recovery policies of the CAA for the general aviation sector, AVGAS
excise rates have frequently changed in response to the CAA's commercial
activities. Secondly, the Commonwealth had been recovering, through the
AVGAS excise, some of the costs associated with the operation of its Aerodrome
Local Ownership Plan, (ALOP) under which the Commonwealth provided development
and maintenance assistance to local authorities which had taken over aerodromes
previously owned by the Commonwealth. With the phasing out of this scheme
in the early 1990s, AVGAS excise rates were reduced.
Thirdly, as mentioned earlier, the Commonwealth had pledged, when establishing
the CAA, that it would continue to fund the cost of safety regulation
and search and rescue. In the 199091 Budget, the Commonwealth announced
that it would phase-in full cost recovery for aviation safety standard
setting and enforcement services. It would, however, continue to bear
the cost of search and rescue activities. The CAA consulted with industry
in order to determine an appropriate cost recovery system. As part of
the process of increasing the aviation industry's contribution to the
cost of safety regulation, there have been a number of discretionary increases
in both AVTUR and AVGAS excise rates.
These three mechanisms have all played a part in determining the current
levels of AVGAS and AVTUR excise rates. On 1 July 1991, AVGAS excise was
reduced by 0.321 cents per litre in association with the withdrawal of
rescue and firefighting services from capital city secondary airports.
On May 7 1992, AVGAS excise was reduced by 1 cent per litre as part of
the process of phasing out the cost of the ALOP scheme. A further 1 cent
per litre ALOP-related reduction occurred on 19 August 1992, in conjunction
with a 0.1 cent per litre reduction on the same date due to reduced costs
of firefighting services. On 1 July 1993 another reduction of 1.013 cents
per litre represented the final step in passing on the cost savings from
the abolition of the ALOP. On the same date, a further reduction of 2
cents per litre was also made to compensate for new CAA charging arrangements
for firefighting and meteorological services.
On 1 September 1993, recovery of safety regulation costs was initiated
by reimposing AVTUR excise at the rate of 0.264 cents per litre, as well
as by increasing AVGAS excise by the same amount. An increased industry
contribution towards such activities was also pursued through the imposition
of an international airline charge. A further increase in both AVGAS and
AVTUR excise rates of 1.194 cents per litre took effect on 1 July 1994,
while 0.883 cents per litre was added to both rates on 1 July 1995. These
increases again represented greater industry contributions towards the
cost of providing safety regulation services.
It might be noted that the 1 July 1994 increase in safety cost recovery
through AVGAS excise was more than offset, on the same date, by a 7.521
cents per litre reduction in the AVGAS excise rate due to the introduction
of marginal cost pricing for the provision of CAA services to the general
aviation sector. However, the increase in AVGAS excise on 1 July 1995
for safety cost recovery was augmented by a concurrent increase in airways
cost recovery of 0.964 cents per litre. This combined increase in AVGAS
excise of 1.847 cents per litre was disallowed in the Senate. Instead
of refunding the excise which had been paid, the Government decided to
reduce the AVGAS excise rate as from 28 November 1985 by 1.536 cents per
litre.
In 1995, the CAA was disbanded and was replaced by two new organisations
- Airservices Australia (AA), which has responsibility for the provision
of air traffic services, air navigation facilities, rescue and firefighting
services and search and rescue, and the Civil Aviation Safety Authority
(CASA), which is responsible for air safety regulation. Between them,
these two authorities receive the entire aviation fuel excise collected
by the Commonwealth. All AVTUR excise is paid to CASA and of the AVGAS
excise rate, which is currently 18.478 cents per litre, 16.051 cents per
litre is paid to AA while 2.427 cents per litre is paid to CASA.
Excise on alcohol has been a traditional source of Commonwealth revenue
since Federation. Excise is currently applied to beer, potable spirits
and liqueurs.(17) Prior to 1978, a large range of different excise rates
applied to the various alcoholic beverages, but in the August 1978 Budget,
the rate structure was rationalised, with one rate for beers, another
for most common spirits and liqueurs and a third rate for spirits and
liqueurs not elsewhere included. In the 1979 Budget, it was decided that
the excise on brandy, the main spirit characterised by a significant amount
of local production, would be reduced. Brandy has been treated on this
more favourable basis since that time.
Since 1983, excise on all potable spirits and liqueurs has simply increased
in line with the indexation provisions. There have been no discretionary
changes in respect of these products. There have, however, been quite
significant changes in the way in which beer has been taxed.
Until the 1984 Budget, beer excise was simply imposed per litre of beverage,
regardless of alcohol content.(18) However, in order to encourage greater
consumption of low alcohol beers for health and road safety reasons, the
1984 Budget drew a distinction between low alcohol and full strength beers
for excise purposes. Low alcohol beer was defined as any beer having an
alcohol content of between 1.15 and 3.8 per cent by volume. Full strength
beer was defined as any beer with an alcohol content exceeding 3.8 per
cent. While full strength beer continued to attract the existing rate
of excise (66 cents per litre), the excise on low alcohol beer was reduced
to 58 cents per litre.
The method of imposing excise on beer was again changed in the 1988
Budget. Instead of having two categories of beer, it was decided that
the excise would be levied on the basis of the actual alcohol content
of the beer. Thus, excise was imposed in terms of dollars per litre of
alcohol in excess of 1.15 per cent alcohol by volume. It might be noted
that this formula has the effect of more than proportionately increasing
the excise payable on beer as its alcohol content increases. This effect
can be clearly seen from Table 2 which, in addition to showing the excise
rate imposed on beer, also gives examples of the impact of this excise
formula on beers of different strengths.(19)
Not only was the method of imposing beer excise changed in 1988, but
the level of excise on all beer was reduced significantly. The excise
on full strength beer, for example having an alcohol content of 4.9 per
cent, fell from 88.4 cents per litre to 43.9 cents per litre. Low alcohol
beer excise fell even more, from 77.7 cents per litre to only 18.1 cents
per litre for a 2.7 per cent alcohol beer, for example. The stated reason
for reducing excise by such a large amount was to encourage the consumption
of low alcohol beverages, such as beer, as against higher alcohol beverages
such as spirits. The 'favoured' excise position of beer can be seen from
the fact that the current excise rate on beer is only $15.66 per litre
of alcohol (in excess of 1.15 per cent), while the rate applying to most
spirits is $36.44 per litre of alcohol.
However, it should be noted that while the 1988 Budget reduced the excise
on beer, the same Budget also imposed a 20 per cent wholesale sales tax
on beer, thus bringing its sales tax treatment into line with wine and
spirits.(20) Currently, sales tax on beer and spirits is 22 per cent,
while the sales tax on wine (which is not subject to excise) is 26 per
cent.(21) In terms of overall federal taxation per litre of alcohol, wine
of average quality(22) is still the most lightly taxed alcoholic beverage,
followed by beer and spirits.
Table 2 in the Appendix shows excise rates on major alcoholic beverages
since 1965.
Along with alcohol, tobacco products have also been a traditional source
of excise revenue since Federation. In recent years, however, excise rates
on tobacco have been raised significantly in an attempt to discourage
smoking, which is seen as a major health hazard which imposes significant
costs on the public health system. It might be noted from Table 4, that
any decline in tobacco usage has been less than the proportional increase
in excise rates, with the result that revenue from tobacco excise is still
increasing.
Up to 1983, there were various discretionary increases in tobacco excise
rates. From August 1983, such excise rates were, of course, subject to
indexation. Furthermore, since 1983, there has also been a rationalisation
of the excise rates applying to various tobacco products.(23) Prior to
1983, manufactured cigarettes attracted a higher rate of excise than manufactured
cigars, with manufactured tobacco (pipe tobacco, roll-your-own tobacco,
etc) being taxed at only around half of the rate of cigarettes. In the
1983 Budget, it was announced that the excise rate on cigars would be
raised to equal that of cigarettes, while the excise rate on manufactured
tobacco was raised by $5 per kilogram. A further $5 per kilogram was added
to manufactured tobacco excise in each of the 1984 and 1985 Budgets. The
1986 Budget added a further discretionary $1.90 to the manufactured tobacco
excise rate, this being the last step in the process of equating the excise
rates for all major tobacco products.
A first attempt to 'get tough' on tobacco use occurred in the 1992 Budget,
when a discretionary $5 per kilogram was added to the excise rate for
all tobacco products. It was stated that 'this measure will complement
the range of health policies the Government already has in place which
are aimed at discouraging smoking and hence reducing the health care and
other costs to the community associated with smoking'.(24)
The 1993 Budget, which sought to impose significant increases in excise
rates on refined petroleum products, also announced that excise rates
on tobacco products would be increased by 3 per cent on Budget night with
a further four increases in excise (each of 3 per cent) occurring at the
time of indexation, that is in February and August 1994 and February and
August 1995. However, as discussed in the section of this paper dealing
with fuel excise, several of the fuel excise hikes proposed in the 1993
Budget were opposed by the Democrats, the Greens and Senator Harradine.
In order to recoup some of the fuel excise revenue forgone, the Democrats
proposed to the Government that each of the remaining four increases in
tobacco excise should be 5 per cent, instead of the 3 per cent proposed
by the Government. The Government acceded to this request.
The timetable for imposing these increases was, however, not entirely
adhered to. The 1995 Budget imposed a discretionary 10 per cent increase
in tobacco excise rates (equal to $7.18 per kilogram) effective from Budget
night (9 May 1995). Subsumed within this 10 per cent increase was the
final 5 per cent increase which was to have been imposed in August 1995.
Table 3 in the Appendix shows excise rates on major manufactured tobacco
products since 1965.
Although excises represent an important revenue source to the Commonwealth
Government, they have frequently been criticised on the grounds of equity
and economic efficiency. Excises are quite a regressive form of taxation,
in that they have a proportionately greater impact on lower income earners
than higher income earners. Also, where excise is imposed upon products
which are used as inputs to other industries, especially in the case of
petroleum products, it is likely that the different tax treatment of the
various fuels distorts the pattern of production, hence reducing economic
efficiency.
Table 7 in the Appendix shows the degree of regressivity of excises.
Based on the Australian Bureau of Statistics Household Expenditure
Survey for 1993-94, the Table shows the relative significance of excisable
products in the consumption patterns of households of different income
levels.(25) In the case of all products (petrol, excisable alcohol and
tobacco), the relative proportion of income spent on such products declines
as income increases. Thus the excise paid on such products falls relatively
more heavily on households at lower income levels. As the Table shows,
measured in terms of the relative proportions of income spent, households
in the lowest twenty per cent income bracket are 3.8 times harder hit
by excises than households in the top twenty per cent bracket. The impact
is greater for tobacco products, where the lowest income households are
7.5 times harder hit than high income households.
The regressive nature of excise has been a cause for concern in policy
making. For example, one of the reasons why the Senate disallowed the
final 3 cents per litre imposition of excise on leaded petrol was due
to concerns that such a tax might represent a heavy burden upon lower
income households which could not afford to purchase a later model, unleaded
petrol vehicle. Another problem identified during Parliamentary debate
on this matter was the inequity of imposing large fuel tax increases on
people in country areas, when lead pollution would have its greatest impact
in the cities.
Concerns have also been expressed about the impact of fuel excise on
economic efficiency.(26) Firstly, there is a wide variation in the taxation
of fuel used by different industries as well as between different types
of fuel. As has been shown above, different industries face different
liability for diesel fuel excise, with primary industry being exempt,
miners paying 2.388 cents per litre and all other industries paying the
full rate. Industries paying the full rate of diesel excise are currently
paying 34.183 cents per litre, other industries using fuel oil are only
paying 7.093 cents per litre, while those industries using liquefied petroleum
gas pay no excise at all.
Secondly, economic theory indicates that the imposition of a pure tax
on inputs (such as fuel) into other industries is likely to lead to a
misallocation of resources within the economy. A fuel tax is likely to
increase the costs of those industries using fuel more intensively, causing
resources to move away from such industries and into other avenues of
production. The impact of the tax on the relative prices charged by such
industries will also distort consumer decisions. These distortions fail
to meet one of the desirable attributes of any taxation system, that of
'neutrality', which requires a well designed tax system to have the least
possible impact on consumption and production decisions.
A number of Reports to the Government from such bodies as the Industries
Assistance Commission, the Inter-State Commission and the Industry Commission
have expressed concern over the taxation of intermediate inputs and have
urged the Government, among other things, to abolish excise on fuel used
by railways and coastal shipping and to examine the whole question of
intermediate input taxation in general.(27)
It should be noted, however, that these economic efficiency concerns
relate only to the imposition of 'pure' taxes on intermediate inputs.
There is a valid economic argument for imposing some appropriately designed
impost upon industries which generate unpriced net social costs, such
as pollution, or upon those industries where the impost is the only feasible
method of applying a user charge, such as in the road transport industry
or the operation of AVGAS aircraft. Such an impost could well take the
form of an excise.
However, even in these instances, it may be difficult to devise a truly
appropriate tax. Difficulties arise in attempting to value pollution and
other social costs. There is also some evidence that excise imposed as
a user charge may not have been efficiently applied. The National Road
Transport Commission, for example, has assessed the road track cost for
heavy vehicles to be 18 cents per litre, although no assessment was made
of a charge to offset social costs.(28) The road freight industry is,
however, currently paying 34.183 cents per litre in excise. It has also
been argued that the users of AVGAS aircraft, especially in uncontrolled
airspace, may be paying excise for services they are not using. It was
this concern which led to the Senate disallowing the last discretionary
increase in AVGAS excise.
- Section 90 reads, in part:
'On the imposition of uniform duties of customs the power of the
Parliament to impose duties of customs and excise, and to grant bounties
on the production or export of goods, shall become exclusive. On the
imposition of uniform duties of customs, all laws of the several States
imposing duties of customs or of excise, or offering bounties on the
production or export of goods, shall cease to have effect...'
- In 1942, as a war time emergency measure, the Commonwealth obtained
the consent of the States for the Commonwealth to become the sole imposer
of income tax for the duration of the war plus one year. The States,
in turn, were to receive tax reimbursement grants from the Commonwealth.
However, in 1946, the Commonwealth announced that these arrangements
would continue to apply indefinitely.
- The States do impose business franchise fees on petroleum, alcoholic
and tobacco products. These 'taxes' are portrayed as licence fees for
the right to purvey such products and are carefully constructed so as
to make it appear that the tax is not related to the level of current
sales. This is usually done by imposing the tax on sales in some specified,
previous period. Note that the High Court interpretation would not prevent
the States from imposing any tax on services, although practical problems
may arise if such services were to include some goods component.
- There have been a number of occasions when the indexation has not
been carried out due to insignificant or negative movements in the CPI
over the relevant six-monthly indexation period. In these instances,
the full year's indexation has been carried over to the next indexation
period. In addition, in February 1988, excises were indexed by an arbitrary
2.5 per cent, following upon a pledge by the Prime Minister that during
1987-88, excise rate indexation would be limited to around 6 per cent.
If full indexation had applied, excises would have risen by 3.4 per
cent in February 1988.
- As from 1 July 1990, the crude oil levy began to be replaced by a
true resource rent tax. Currently only a small amount of crude oil and
LPG excise is collected from fields in the North West Shelf production
licence areas not subject to the petroleum resource rent tax. This paper
will not address the details of crude oil excise.
- Hypothecation is the process whereby all or part of a tax is 'earmarked'
for a specified form of public expenditure.
- See the Second Reading speech for the Commonwealth Aid Roads Bill
1959.
- For a description of roads programs operating in Australia since 1980,
see Denis James, Commonwealth Road Funding Since 1980. Background
Paper No. 35. Parliamentary Research Service. December 1993.
- It should be noted that, from 1 July 1985 until the current time,
a portion of the excise collections on petrol and diesel have been hypothecated
to roads under the Australian Land Transport Program and the Australian
Centennial Roads Development program (which was renamed the Australian
Land Transport Development program in 1990). These hypothecated funds
were raised simply as a designated portion of the existing excise rates,
rather than being a surcharge, and hence did not influence the setting
of those excise rates. Currently, the 'hypothecated' rate of excise
is calculated and declared retrospectively once the Commonwealth has
determined the level of road funding it is willing to provide. The term
'hypothecation' is thus currently somewhat of a misnomer.
- It might be noted that where transport, other than on public roads,
is involved in moving ore from a mining site to a place of beneficiation,
such transport is eligible for a rebate of diesel excise at the same
rate as any other mining operation. As such, several private railways
and even some coastal shipping involved in this form of transport receive
the rebate.
- It was also announced on budget night, however, that indigenous communities
using diesel for domestic purposes would be compensated, through other
means, for the removal of the rebate.
- Industry Commission. Petroleum Products. Report No. 40. 5 July
1994. p. 281
- According to the Financial Review, 8 June 1995, p. 3, 'The
claimed eligibility of parks and gardens has particularly angered the
Government, especially a letter from the NSW Golf Association inviting
golf clubs to seek the rebate through accountancy firm Ernst & Young
on a 25 percent success fee basis. That alone could cost $40 million,
according to government estimates.'
- Budget Speech. May 1995. p. 12.
- Aviation Cost Recovery: Report of the Independent Inquiry.
AGPS. Canberra. November 1984. p. 176
- The general aviation sector includes charter, flying training, agricultural,
business, private and other aerial work activities. While a growing
number of general aviation aircraft are turbo-prop and use aviation
turbine kerosene, a large number of general aviation aircraft have piston
engines and use aviation gasoline.
- 'Potable' spirits are those spirits which are fit for human consumption.
- Since 1973, beer has been defined as any beverage brewed from a mash
and containing hops or other bitters and having an alcohol content in
excess of 1.15 per cent by volume.
- A formula can be used to calculate the effective excise paid, in cents
per litre, of a litre of beer of known alcohol content. Using the current
gazetted excise rate of $15.66 per litre of alcohol in excess of 1.15
per cent, excise per litre of beer having an alcohol content of 4.9
per cent would be:
(.049 - .0115) x $15.66 = 58.725 cents per litre of beverage
- It should be noted that sales tax is imposed on the value of a commodity
including the cost of excise. It is thus a tax on a tax. The States
also impose business franchise taxes on alcohol, tobacco and (with the
exception of Queensland) fuel. These taxes are imposed on top of any
federal taxes included in the wholesale price of the commodity concerned.
- In the 1993-94 Budget, the Government had proposed that alcoholic
wine and cider should be made subject to a 31 per cent wholesale sales
tax as from Budget night, increasing to 32 per cent as from 1 July 1995.
This move was designed to remove the taxation advantage these products
might enjoy over beer and spirits, which are subject to both excise
duty and sales tax. This proposal was blocked in Parliament by the Opposition
and minority parties and instead, sales tax on wine was reduced to 22
per cent as from 20 October 1993. It was further agreed that sales tax
on wine would rise to 24 per cent on 1 July 1994 and to 26 per cent
on 1 July 1995. In the meantime, the Government referred the issue to
a Committee of Inquiry into the Winegrape and Wine Industry for review.
Given that the members of the Review Committee could not agree on appropriate
taxation levels, the Government, on 2 November 1995, announced that
it would maintain the rate of sales tax on wine at 26 per cent.
In the same announcement, the Government also signalled its intention
to change the taxation treatment of cider, non-grape fruit wines and
certain 'designer drinks'. Currently such drinks are taxed at the
same rate as wine, but since they appear to compete with beer, the
Government proposed that, from 1 July 1996, such drinks should be
taxed like beer, that is, at the beer rate of excise and sales tax.
However, legislation to this effect had not been introduced by the
time Parliament was dissolved for the March 1996 election.
- Since sales tax is levied on the wholesale price of a product, the
more expensive the product, the higher the tax. Premium quality wines
would thus be subject to higher tax than wines of average quality.
- The 1983 Budget also removed the excise from such other commodities
as matches, cigarette papers and tubes, playing cards, amylic alcohol
and fusel oil.
- Budget Paper No. 1, 1992-93. p. 4.14
- ABS. Household Expenditure Survey - Australia. 1993-94. Cat.
No 6535.0
- This issue has been canvassed in depth in James, D. Revenue Before
Rhetoric: A Critique of Fuel Taxation in Australia. Parliamentary
Research Service. Current Issues Brief No. 50. June 1995.
- See, for example, Industries Assistance Commission. Certain Petroleum
Products - Taxation Measures. Report No. 397, November 1986; Inter-State
Commission. Road Use Charges and Vehicle Registration: A National
Scheme. March 1990; Industry Commission. Rail Transport.
Report No. 13. August 1991; and Industry Commission. Petroleum Products.
Report No. 40. July 1994.
- National Road Transport Commission. Heavy Vehicle Charges Determination.
June 1992.
In the following tables:
.. Not excisable.
n.c. No change to excise rate.
n.s.i. Not separately identified.
< Less than...
> Greater than...
Sources for the following tables:
Commonwealth Budget Papers; Commonwealth Gazettes; Commonwealth Acts;
and Hansard.
Table 1: Excise Rates on Major Refined Petroleum Products
Table 1: Excise rates on major refined petroleum products - Cents per litre
----------------------------------------------------------------------------
Date Petrol Diesel Fuel oil AVTUR* AVGAS**
Heating oil
Kerosenes
--------------------------------------------------------------------------------
15 March '56 2.018 .. .. .. 1.558
4 September '57 2.108 2.203 .. 1.191 n.c.
16 August '61 2.154 n.c. .. n.c. n.c.
18 August '65 2.706 2.750 .. 1.738 2.104
14 February '66 n.c. n.c. .. n.c. 2.105
19 August '70 3.366 3.410 .. 2.398 2.765
18 August '71 3.806 3.850 .. n.c. 3.205
1 July '72 n.c. n.c. .. 2.840 n.c.
21 August '73 4.905 4.905 .. 3.940 4.305
16 August '77 5.155 5.155 .. 4.190 4.555
17 August '82 6.155 6.155 .. n.c. n.c.
1 July '83 7.155 7.155 .. 6.190 6.555
23 August '83 9.027 9.027 1.872 6.978 7.358
2 February '84 9.397 9.397 1.949 7.264 7.660
2 February '85 9.641 9.641 2.000 7.709 8.116
2 August '85 10.007 10.007 2.076 8.002 8.424
4 February '86 10.437 10.437 2.165 8.346 8.786
15 March '86 15.766 15.766 3.270 12.608 13.272
17 April '86 18.388 18.388 3.814 14.705 15.479
17 May '86 19.200 19.200 3.982 15.354 16.163
14 June '86 18.822 18.822 3.904 15.052 15.845
18 July '86 19.240 19.240 3.991 15.386 16.197
1 August '86 20.010 20.010 4.151 16.001 16.845
16 August '86 20.884 20.884 4.332 16.700 17.581
19 August '86 23.884 23.884 4.954 19.099 20.107
13 September '86 20.185 20.185 4.187 16.141 16.993
16 October '86 19.706 19.706 4.088 15.758 16.589
17 January '87 19.655 19.655 4.077 15.717 16.546
4 February '87 20.756 20.756 4.305 16.597 17.473
14 February '87 18.720 18.720 3.883 14.969 15.759
14 March '87 19.150 19.150 3.972 15.313 16.121
16 May '87 19.840 19.840 4.115 15.865 16.702
1 July '87 n.c. n.c. n.c. n.c. 20.602
18 July '87 19.808 19.808 4.108 15.839 20.569
15 August '87 20.097 20.097 4.168 16.070 20.870
17 October '87 20.830 20.830 4.320 16.656 21.631
14 December '87 20.295 20.295 4.209 16.228 21.076
1 January '88 n.c. n.c. n.c. n.c. 21.576
3 February '88 20.802 20.802 4.314 16.634 22.115
1 July '88 n.c. n.c. n.c. 0.000 n.c.
1 August '88 21.530 21.530 4.465 .. 22.889
5 February '89 22.391 22.391 4.644 .. 23.805
1 August '89 23.152 23.152 4.802 .. 24.614
5 February '90 24.124 24.124 5.004 .. 25.648
6 August '90 24.920 24.920 5.169 .. 26.494
18 February '91 25.767 25.767 5.345 .. 27.395
1 July '91 n.c. n.c. n.c. .. 27.074
3 February '92 26.154 26.154 5.425 .. 27.480
7 May '92 n.c. n.c. n.c. .. 26.480
19 August '92 n.c. n.c. n.c. .. 25.380
2 February '93 26.232 26.232 5.441 .. 25.456
1 July '93 n.c. n.c. n.c. .. 22.443
2 August '93 26.537 26.537 5.512 .. 22.735
17 August '93 29.537 29.537 8.512 .. n.c.
1 September '93 n.c. n.c. n.c. 0.264 22.999
Unleaded Leaded
-------------------
2 February '94 30.75 31.75 30.750 8.563 0.266 23.137
11 May '94 n.c. n.c. n.c. 6.586 n.c. n.c.
1 July '94 n.c. n.c. n.c. n.c. 1.460 16.810
1 August '94 32.088 34.099 32.088 6.658 1.476 16.995
1 February '95 32.537 34.576 32.537 6.751 1.497 17.233
1 July '95 n.c. n.c. n.c. n.c. 2.380 19.080
1 August '95 33.513 35.613 33.513 6.954 2.451 19.652
28 November '95 n.c. n.c. n.c. n.c. n.c. 18.116
1 February '96 34.183 36.325 34.183 7.093 2.500 18.478
--------------------------------------------------------------------------------
* AVTUR is aviation turbine kerosene
** AVGAS is aviation gasoline.
Table 2: Excise Rates on Alcoholic Beverages
Table 2: Excise rates on alcoholic beverages
---------------------------------------------
Date Beer Brandy Fruit
brandy,
Rum,
Whisky, Spirits
Prescribed and
Spirits and Liqueurs
Liqueurs n.e.i.
----- ------------------------------
Cents $ per litre of alcohol
per
litre
---------------------------------------------------------------------------------
18 August '65 25.2778 3.08 4.27(w) 4.70
4.35(r&g)
21 August '73 n.c. 6.00 6.80(w) 7.23
6.88(r&g)
23 July '74 n.c. 8.55 9.35(w) 9.78
9.43(r&g)
17 August '74 n.c. 8.95 n.c. n.c.
19 August '75 39.4 10.21 10.21(w) 10.64
10.29(r&g)
15 August '78 52.0 18.75 18.75 19.25
9 November '79 n.c. 16.00 n.c. n.c.
17 August '82 60.0 n.c. n.c. n.c.
23 August '83 63.0 16.69 19.56 20.08
2 February '84 66.0 17.37 20.36 20.90
-----------------
> 3.8% > 1.15%
alcohol and
< 3.8%
alcohol
-----------------
21 August '84 66.000 58.000 n.c. n.c. n.c.
2 February '85 67.716 59.508 17.82 20.89 21.44
2 August '85 70.289 61.769 18.50 21.68 22.25
4 February '86 73.311 64.425 19.30 22.61 23.21
1 August '86 76.243 67.002 20.07 23.51 24.14
4 February '87 80.513 70.754 21.19 24.83 25.49
15 August '87 83.331 73.230 21.93 25.70 26.38
3 February '88 85.414 75.061 22.48 26.34 27.04
1 August '88 88.403 77.688 23.27 27.26 27.99
------------------------------------
Excise: Example: Example:
$ per litre 4.9% 2.9%
of alcohol alcohol alcohol
in excess of content content
1.15% alcohol Expressed Expressed
by volume as cents as cents
per litre per litre
------------------------------------
23 August '88 11.70 43.875 18.135 n.c. n.c. n.c.
5 February '89 12.17 45.638 18.864 24.20 28.35 29.11
1 August '89 12.58 47.175 19.499 25.02 29.31 30.10
5 February '90 13.11 49.163 20.321 26.07 30.54 31.36
6 August '90 13.54 50.775 20.987 26.93 31.55 32.39
18 February '91 14.00 52.500 21.700 27.85 32.62 33.49
3 February '92 14.21 53.288 22.026 28.27 33.11 33.99
2 February '93 14.25 53.438 22.088 28.35 33.21 34.09
2 August '93 14.44 54.150 22.382 28.72 33.64 34.53
2 February '94 14.53 54.488 22.522 28.89 33.84 34.74
1 August '94 14.69 55.088 22.770 29.21 34.21 35.12
1 February '95 14.90 55.875 23.095 29.62 34.69 35.61
1 August '95 15.35 57.563 23.793 30.51 35.73 36.68
1 February '96 15.66 58.725 24.273 31.12 36.44 37.41
--------------------------------------------------------------------------------
n.c. No change to existing rate w Whisky r Rum g Gin
Table 3: Excise Rates on Major Tobacco Products
Table 3: Excise rates on major tobacco products
------------------------------------------------
($ per kilogram of tobacco)
Date Cigarettes Cigars Tobacco
----------------------------------------------------
18 August '65 9.26 7.39 4.94
19 August '70 10.36 8.49 5.38
18 August '71 11.46 9.59 5.93
21 August '73 14.00 12.00 7.20
23 July '74 16.10 13.80 8.25
19 August '75 19.36 16.56 9.88
15 August '78 24.75 21.12 12.58
17 August '82 29.70 25.34 15.10
23 August '83 30.98 30.98 20.10
2 February '84 32.25 32.25 20.92
21 August '84 n.c. n.c. 25.92
2 February '85 33.09 33.09 26.59
2 August '85 34.35 34.35 27.60
20 August '85 n.c. n.c. 32.60
4 February '86 35.83 35.83 34.00
1 August '86 37.26 37.26 35.36
19 August '86 n.c. n.c. 37.26
4 February '87 39.35 39.35 39.35
15 August '87 40.73 40.73 40.73
3 February '88 41.75 41.75 41.75
1 August '88 43.21 43.21 43.21
5 February '89 44.94 44.94 44.94
1 August '89 46.47 46.47 46.47
5 February '90 48.42 48.42 48.42
6 August '90 50.02 50.02 50.02
18 February '91 51.72 51.72 51.72
3 February '92 52.50 52.50 52.50
2 February '93 57.67 57.67 57.67
2 August '93 58.42 58.42 58.42
2 February '94 63.56 63.56 63.56
1 August '94 67.47 67.47 67.47
1 February '95 71.84 71.84 71.84
10 May '95 79.02 79.02 79.02
1 August '95 81.39 81.39 81.39
1 February '96 83.02 83.02 83.02
----------------------------------------------------
Table 4: Excise Revenue from Major Excisable Products
Table 4: Excise revenue from major excisable products
------------------------------------------------------
($ million)
------------------------------------------------------------------------
Year Refined Beer Potable Tobacco Total
petroleum spirits products
products
------------------------------------------------------------------------
1970-71 n.s.i. 382 n.s.i. 272 1,053
1971-72 n.s.i. 398 n.s.i. 307 1,212
1972-73 n.s.i. 420 n.s.i. 328 1,268
1973-74 646 461 45 391 1,543
1974-75 698 480 65 475 1,718
1975-76 740 706 68 549 2,063
1976-77 772 740 71 555 2,138
1977-78 867 765 77 565 2,274
1978-79 910 953 100 659 2,622
1979-80 905 989 99 699 2,692
1980-81 925 991 111 704 2,731
1981-82 970 1,011 121 732 2,834
1982-83 1,364 1,123 114 799 3,400
1983-84 2,137 1,159 118 864 4,278
1984-85 2,387 1,148 133 896 4,564
1985-86 3,044 1,258 135 951 5,388
1986-87 5,142 1,363 144 1,018 7,667
1987-88 5,250 1,487 146 1,105 7,988
1988-89 5,780 910 161 1,151 8,002
1989-90 6,367 797 169 1,270 8,603
1990-91 6,601 866 169 1,322 8,958
1991-92 7,110 829 176 1,312 9,427
1992-93 7,200 804 179 1,370 9,553
1993-94 (Est) 8,578 828 183 1,394 10,983
1994-95 (Est) 9,568 821 188 1,481 12,058
1995-96 (Est) 10,305 875 199 1,636 13,015
------------------------------------------------------------------------
Est Estimated
n.s.i. Not separately identified
Table 5: Excise Indexation Factors Applied
Table 5: Excise indexation factors applied
-------------------------------------------
(CPI Adjustments)
Date Indexation Factor
----------------------------------
23 August '83 1.043
2 February '84 1.041
2 February '85 1.026
2 August '85 1.038
4 February '86 1.043
1 August '86 1.040
4 February '87 1.056
15 August '87 1.035
3 February '88* 1.025
1 August '88 1.035
5 February '89 1.040
1 August '89 1.034
5 February '90 1.042
6 August '90 1.033
18 February '91 1.034
3 February '92 1.015
2 February '93 1.003
2 August '93 1.013
2 February '94 1.006
1 August '94 1.011
1 February '95 1.014
1 August '95 1.030
1 February '96 1.020
----------------------------------
* In February 1988, excises were indexed by an arbitrary 2.5 per cent
following upon a pledge by the Prime Minister that during 1987-88,
excise rate indexation would be limited to around 6 per cent.
Table 6: Excise Rates Paid by Users of Diesel Fuel, Net of Diesel
Fuel Rebate
Table 6: Excise rates paid by users of diesel fuel net of diesel fuel rebate
-----------------------------------------------------------------------------
(Cents per litre)
Date Non-Rebatable Primary Miners Other
users producers Rebatable
Users*
------------------------------------------------------------------
17 August '82 6.155 0 0 0
1 July '83 7.155 0 0 0
22 August '83 9.027 1.872 1.872 1.872
2 February '84 9.397 2.242 2.242 2.242
2 February '85 9.641 2.300 2.300 2.300
2 August '85 10.007 2.388 2.388 2.388
4 February '86 10.437 0 2.388 2.490
15 March '86 15.766 0 2.388 3.761
17 April '86 18.388 0 2.388 4.386
17 May '86 19.200 0 2.388 4.580
14 June '86 18.822 0 2.388 4.490
18 July '86 19.240 0 2.388 4.590
1 August '86 20.010 0 2.388 4.774
16 August '86 20.884 0 2.388 4.983
19 August '86 23.884 0 2.388 5.699
13 September '86 20.185 0 2.388 4.816
16 October '86 19.706 0 2.388 4.702
17 January '87 19.655 0 2.388 4.690
4 February '87 20.756 0 2.388 4.953
14 February '87 18.720 0 2.388 4.467
14 March '87 19.150 0 2.388 4.570
16 May '87 19.840 0 2.388 4.735
18 July '87 19.808 0 2.388 4.727
15 August '87 20.097 0 2.388 4.796
17 October '87 20.830 0 2.388 4.971
14 December '87 20.295 0 2.388 4.843
3 February '88 20.802 0 2.388 4.964
1 August '88 21.530 0 2.388 5.138
5 February '89 22.391 0 2.388 5.343
1 August '89 23.152 0 2.388 5.525
5 February '90 24.124 0 2.388 5.757
6 August '90 24.920 0 2.388 5.947
18 February '91 25.767 0 2.388 6.149
3 February '92 26.154 0 2.388 6.241
2 February '93 26.232 0 2.388 6.260
2 August '93 26.537 0 2.388 6.341
2 February '94 30.750 0 2.388 7.338
1 August '94 32.088 0 2.388 7.657
1 February '95 32.537 0 2.388 7.764
1 August '95 33.513 0 2.388 7.997
1 February '96 34.183 0 2.388 8.157
------------------------------------------------------------------
* Includes hospitals, nursing homes, aged persons homes and, until 1995,
residential premises where diesel was used for meeting the domestic
cooking, lighting, heating and other requirements of residents.
Table 7: Regressivity of Excise
Table 7: Regressivity of excise
--------------------------------
( Average Weekly Income Spent on Excisable Products)
Income Level
-------------------------------------------------------------------
Lowest 2nd 3rd 4th Highest Average Ratio
20 % 20 % 20 % 20 % 20 % highest
to
lowest
------------------------------------------------------------------------------------
Income: $151.66 $353.91 $592.28 $909.22 $1,608.77 $723.26
------------------------------------------------------------------------------------
Expenditure:
------------
Petrol $11.18 $17.63 $24.24 $30.44 $36.06 $23.90
7.37% 4.98% 4.09% 3.35% 2.24% 3.30% 3.29
------------------------------------------------------------------------------------
Beer $4.72 $6.96 $9.87 $11.47 $13.42 $9.29
3.11% 1.97% 1.67% 1.26% 0.83% 1.28% 3.73
Spirits $1.24 $2.22 $3.06 $3.52 $5.63 $3.13
0.82% 0.63% 0.52% 0.39% 0.35% 0.43% 2.34
Total alcohol* $6.27 $9.75 $14.11 $16.61 $21.79 $13.70
4.13% 2.75% 2.38% 1.83% 1.35% 1.89% 3.05
------------------------------------------------------------------------------------
Cigarettes $5.90 $8.61 $9.52 $9.92 $8.63 $8.51
3.89% 2.43% 1.61% 1.09% 0.54% 1.18% 7.25
Other tobacco $0.48 $0.81 $0.77 $0.90 $0.43 $0.68
0.32% 0.23% 0.13% 0.10% 0.03% 0.09% 11.84
Total tobacco $6.38 $9.42 $10.29 $10.82 $9.06 $9.19
4.21% 2.66% 1.74% 1.19% 0.56% 1.27% 7.47
+===================================================================================
Total Excisable $23.83 $36.80 $48.64 $57.87 $66.91 $46.79
15.71% 10.40% 8.21% 6.36% 4.16% 6.47% 3.78
------------------------------------------------------------------------------------
* Includes certain unclassified alcoholic beverages but excludes wine, which is
not excisable.
Source: ABS, Household Expenditure Survey: Australia. 1993-94. Cat. No. 6535.0
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