SUMMARY OF ALTERATIONS
EXCISE TARIFF PROPOSAL (No. 1) 2013
CUSTOMS TARIFF PROPOSAL (No. 2) 2013
Reasons for changes: To increase the excise and excise equivalent customs rates of duty applying to tobacco, cigars, cigarettes and snuff from $0.35731 to $0.40197 per stick not exceeding 0.8 grams actual tobacco content in weight, and from $446.65 to $502.48 per kilogram of tobacco content for other tobacco.
To index excise and excise equivalent duty on tobacco and tobacco products using average weekly ordinary time earnings (AWOTE) instead of the Consumer Price Index (CPI).
Date of effect: 1 December 2013
Alterations to the Excise Tariff Act 1921
Alterations to the Customs Tariff Act 1995
Excise is imposed on petroleum, alcohol and tobacco produced in Australia. When imported these types of goods, known as excise equivalent goods, are subject to customs duty which includes a component at the same rates as the excise duty applied to locally-produced goods.
On 6 November 2013, the Government announced that the indexation of rates of tobacco excise and excise equivalent customs duty would change to AWOTE, instead of the Consumer Price Index (CPI). It was also announced that the Government would proceed with a series of four 12.5 per cent increases in excise and excise equivalent customs duty for tobacco and tobacco products, scheduled for 1 December 2013, 1 September 2014, 1 September 2015 and 1 September 2016.
On 29 November 2013, separate notices for excise duty and excise equivalent customs duty were published in the Commonwealth Gazette to provide for these announced changes.
The tabling of Excise Tariff Proposal (No. 1) 2013 and Customs Tariff Proposal (No.2) 2013 in the House of Representatives is necessary to give effect to the changes.
Staged increases to excise and excise equivalent customs duty
Excisable goods are defined in the Excise Act 1901 and duty is imposed on those goods in accordance with rates in the Schedule to the Excise Tariff Act 1921 (ETA). Item 5 of the Schedule to the ETA currently establishes the rate of excise duty for tobacco, cigars, cigarettes and snuff. Excise equivalent customs duty rates are set out in the Schedules to the Customs Tariff Act 1995 (CTA). Subheadings 2401.10.00, 2401.20.00, 2401.30.00, 2402.10.20, 2402.10.80, 2402.20.20, 2402.20.80, 2403.11.00, 2403.19.10, 2403.19.90, 2403.91.00 and 2403.99.80 apply for the equivalent tobacco and tobacco products.
The first of the staged increases raised the rates of excise and excise equivalent customs duty on tobacco and tobacco products from $0.35731 to $0.40197 per stick not exceeding 0.8 grams actual tobacco content in weight, and from $446.65 to $502.48 per kilogram of tobacco content for other tobacco, with effect on and from 1 December 2013.
The changes retain the existing tariff classifications of items and subheadings but adjust the rates of excise and excise equivalent customs duty in the ETA and CTA.
Change in indexation to AWOTE from CPI
At present, excise and excise equivalent customs duty for tobacco products is indexed bi‑annually on 1 February and 1 August using the CPI. However, from 2014, the indexation of rates of excise and excise equivalent customs duty for tobacco and tobacco products is scheduled to occur on 1 March and 1 September based on AWOTE. As a result, there is no 1 February 2014 CPI indexation adjustment for tobacco and tobacco products.
Movements in average weekly earnings (including AWOTE) may be affected by changes in both the level of earnings per employee and in the composition of the labour force. Factors which can contribute to compositional change include, for example, variations in the proportion of full-time, part-time, casual and junior employees; variations in the occupational distribution within and across industries; and variations in the distribution of employment between industries.
Indexing tobacco excise and excise equivalent customs duty based on wages and salaries ensures that the rates of duty keep pace with incomes. This ensures that additional consumer demand is not encouraged in the longer term by a decline in the duty component of the price of tobacco, relative to wages and salaries.
The amendments also incorporate a technical correction to the indexation provisions in the ETA, to provide certainty that indexation is not applied to rates of excise duty on condensate. The amount of excise duty payable on condensate is instead determined under section 6CA of the ETA.
Reproduction of indexation provisions for excise equivalent goods in the CTA
Currently, section 19 of the CTA has the effect of increasing excise equivalent customs duty on excise equivalent goods, where there is an indexation increase in the rate of excise duty under section 6A of the ETA. Section 19 currently sets out the subheadings of goods that are subject to excise equivalent rates of customs duty for both alcohol and tobacco products.
However, from 2014, rates of duty on alcohol and tobacco are to be indexed using different methods. The indexation of rates of duty on tobacco and tobacco products is calculated using AWOTE, whereas indexation of rates of duty on alcohol continues to be calculated using CPI.
As a result, the Excise Tariff Proposal (No. 1) 2013 and Customs Tariff Proposal (No. 2) 2013 provide for the different methods of alcohol and tobacco indexation, and set out the two applicable indexation calculation methods.
New sections 6A of the ETA and 19 of the CTA set out how CPI indexation of alcohol duty rates applies. New section 19 of the CTA reproduces the ETA indexation provision in full (with appropriate adjustments) in the CTA. New section 19AA of the CTA lists the alcohol product subheadings affected.
For tobacco products, new sections 6AA of the ETA and 19AB of the CTA set out how AWOTE indexation of rates of duty applies. New section 19AB of the CTA reproduces the ETA indexation provision in full (with appropriate adjustments) in the CTA. The affected tobacco and tobacco product subheadings are set out in new section 19AC of the CTA.
The above changes provide greater clarity for Australia’s alcohol and tobacco importers, as all information relating to the AWOTE or CPI indexation of their products are contained within the CTA. There will be no further need to cross‑reference the indexation of excise equivalent goods with section 6A of the ETA.