Mr MILES (Parliamentary Secretary [Cabinet] to the Prime Minister)(8.57 p.m.) —by leave—I move government amendments Nos 1 to 7:

(1)   Schedule 1, item 1, page 3 (after line 9), after the definition of competition agreement , insert:

Commonwealth surcharge means the variation effected by a Surcharge Act in the rate of duty of customs or excise payable on specified goods or in the rate of sales tax applicable to specified taxable dealings (as the case may be).

Sales Tax (Surcharge) Acts means the following Acts:

(a)   the Sales Tax (Customs) (Alcoholic Beverages) Act 1997 ;

(b)   the Sales Tax (Excise) (Alcoholic Beverages) Act 1997 ;

(c)   the Sales Tax (General) (Alcoholic Beverages) Act 1997 .

   Note:   These Acts increase the rates of tax that apply to taxable dealings with the following goods:

(a)   goods covered by Item 1 of Schedule 7 to the Sales Tax Exemptions and Classifications) Act 1992 ;

(b)   beer, spirits, liqueurs or spirituous liquors;

(c)   beverages that contain beer, spirits (other than spirits for fortifying wine or other beverages), liqueurs or spirituous liquors.

Secretary means the Secretary of the Department.

Surcharge Acts means the following Acts:

(a)   the Customs Tariff Amendment Act (No. 3) 1997 ;

(b)   the Excise Tariff Amendment Act (No. 3) 1997 ;

(c)   the Sales Tax (Surcharge) Acts;

(d)   any Act that varies:

   (i)   the rate of the duty of customs payable on goods falling to subheadings of Chapter 24 or 27 of the Customs Tariff Act 1995 ; or

   (ii)   the rate of the duty of excise payable on goods falling to items 6, 7, 8 or 11 of the Schedule to the Excise Tariff Act 1921 ; or

   (iii)   the rate of sales tax applicable to any of the taxable dealings to which the Sales Tax (Surcharge) Acts relate;

   and is prescribed for the purposes of this definition.

   Note 1:   The Customs Tariff Amendment Act (No. 3) 1997 increases the rate of the duty of customs payable on goods falling to certain subheadings of Chapters 24 and 27 of Schedule 3 to the Customs Tariff Act 1995 . The relevant subheadings of Chapter 24 deal with tobacco and manufactured tobacco substitutes. The relevant subheadings of Chapter 27 deal with petroleum products.

   Note 2:   The Excise Tariff Amendment Act (No. 3) 1997 increases the rate of the duty of excise payable on goods falling to items 6, 7, 8 and 11 in the Schedule to the Excise Tariff Act 1921 . Items 6, 7 and 8 in that Schedule deal with tobacco, cigars and cigarettes. Item 11 deals with petroleum products.

(2)   Schedule 1, item 3, page 4 (after line 14), after section 11, insert:

11A Revenue replacement payments

   Subject to this Act, each State is to be paid by way of financial assistance, in relation to a grant year, a revenue replacement payment worked out in accordance with the applicable Schedule.

11B Franchise fees windfall tax reimbursement payments

   Subject to this Act, each State is to be paid by way of financial assistance, in relation to a grant year, a franchise fees windfall tax reimbursement payment worked out in accordance with the applicable Schedule.

(3)   Schedule 1, page 4 (after line 18), after item 4, insert:

4A After section 12A

   Insert:

12B Overpayment of grant

   If a State has been paid an amount in excess of the amount that, under a provision of this Act, it was entitled to receive by way of financial assistance in relation to a grant year, the Treasurer may deduct an amount equal to the excess from any amount that the State is entitled to receive by way of financial assistance in relation to the year immediately following the grant year.

(4)   Schedule 1, page 5 (after line 14), after item 5, insert:

5A At the end of section 17

Add:

(4)   In working out:

   (a)   for the purposes of subsection (1), the sum of the amounts payable to a State in relation to the grant year commencing on 1 July 1997; and

   (b)   for the purposes of subsection (2), the total amount payable under this Act in relation to that grant year;

   the revenue replacement payment made to a State in relation to that grant year is taken to be the amount worked out by using the formula:

   AA X 12

   _______

   12

where:

AA (actual amount) means the amount of the revenue replacement payment worked out in accordance with clause 4A in Schedule 4 in relation to that State.

(5)   Schedule 1, page 5 (after line 18), after item 7, insert:

7A After paragraph 21(c)

Insert:

   (ca)   the Commissioner of Taxation; or

   (cb)   the Chief Executive Officer of Customs; or

   (cc)   the Secretary; or

7B After section 21

Insert:

   21A Regulations

         The Governor-General may make regulations:

   (a)   prescribing matters required or permitted by this Act to be prescribed; or

   (b)   prescribing matters necessary or convenient to be prescribed for carrying out or giving effect to this Act.

(6)   Schedule 1, item 8, page 5 (after line 25), after the definition of base assistance amount , insert:

CEO means the Chief Executive Officer of Customs.

Commissioner means the Commissioner of Taxation.

(7)   Schedule 1, item 8, page 6 (after line 14), after clause 4, insert:

4A Revenue replacement payments

(1)   For the purposes of section 11A, the revenue replacement payment to be made to a State is worked out by using the formula:

[ABA] X AS] + [TBA X TS] + [PBA X PS]

where:

ABA (alcohol base amount) means the sum of:

(a)   the amount determined by the Commissioner, before 15 June 1998, to be the additional amount of sales tax on taxable dealings to which the Sales Tax (Surcharge) Acts relate that was collected before 1 June 1998 because of a Commonwealth surcharge (whether under those Acts or any other Surcharge Act); and

(b)   the amount determined by the Commissioner, before 15 June 1998, to be the additional amount of sales tax on taxable dealings to which the Sales Tax (Surcharge) Acts relate that the Commissioner estimates to be likely to be collected during the month of June 1998 because of a Commonwealth surcharge (whether under those Acts or any other Surcharge Act);

less the amount determined by the Commissioner to be the additional administrative costs incurred by the Commonwealth in the grant year because of that surcharge or those surcharges.

AS (alcohol share) means the number set out opposite the name of the State in the following table.

Alcohol Share   

State    Alcohol Share

New South Wales   0.33796

Victoria   0.22332

Queensland   0.19314

Western Australia   0.11147

South Australia   0.07857

Tasmania   0.02415

Australian Capital Territory   0.01569

Northern Territory   0.01569

TBA (tobacco base amount) means the sum of:

(a)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of customs duty on goods falling to subheadings of Chapter 24 of Schedule 3 to the Customs Tariff Act 1995 that was collected before 1 June 1998 because of a Commonwealth surcharge (whether under the Customs Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act); and

   Note:   Chapter 24 of Schedule 3 to the Customs Tariff Act 1995 deals with tobacco and manufactured tobacco substitutes.

(b)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of customs duty on goods falling to subheadings of Chapter 24 of Schedule 3 to the Customs Tariff Act 1995 that the CEO estimates to be likely to be collected during the month of June 1998 because of a Commonwealth surcharge (whether under the Customs Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act); and

(c)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of excise duty on goods falling to items 6, 7 and 8 of the Schedule to the Excise Tariff Act 1921 that was collected before 1 June 1998 because of a Commonwealth surcharge (whether under the Excise Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act); and

   Note:   Items 6, 7 and 8 of the Schedule to the Excise Tariff Act 1921 deal with tobacco, cigars and cigarettes.

(d)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of excise duty on goods falling to items 6, 7 and 8 of the Schedule to the Excise Tariff Act 1921 that the CEO estimates to be likely to be collected during the month of June 1998 because of a Commonwealth surcharge (whether under the Excise Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act);

less the amount determined by the CEO to be the amount of the additional administrative costs incurred by the Commonwealth in the grant year because of those surcharges.

TS (tobacco share) means the number set out opposite the name of the State in the following table.

Tobacco Share   

State    Tobacco Share

New South Wales   0.33319

Victoria   0.22731

Queensland   0.19616

Western Australia   0.10121

South Australia   0.08180

Tasmania   0.02940

Australian Capital Territory   0.01444

Northern Territory   0.01648

PBA (petroleum base amount) means the sum of:

(a)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of customs duty on goods falling to subheadings of Chapter 27 of Schedule 3 to the Customs Tariff Act 1995 that was collected before 1 June 1998 because of a Commonwealth surcharge (whether under the Customs Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act); and

   Note:   Chapter 27 of Schedule 3 to the Customs Tariff Act 1995 deals with petroleum products.

(b)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of customs duty on goods falling to subheadings of Chapter 27 of Schedule 3 to the Customs Tariff Act 1995 that the CEO estimates to be likely to be collected during the month of June 1998 because of a Commonwealth surcharge (whether under the Customs Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act); and

(c)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of excise duty on goods falling to item 11 of the Schedule to the Excise Tariff Act 1921 that was collected before 1 June 1998 because of a Commonwealth surcharge (whether under the Excise Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act); and

   Note:   Item 11 of the Schedule to the Excise Tariff Act 1921 deals with petroleum products.

(d)   the amount determined by the CEO, before 15 June 1998, to be the additional amount of excise duty on goods falling to item 11 of the Schedule to the Excise Tariff Act 1921 that the CEO estimates to be likely to be collected during the month of June 1998 because of a Commonwealth surcharge (whether under the Excise Tariff Amendment Act (No. 3) 1997 or any other Surcharge Act);

less the following amounts:

(e)   the amount determined by the CEO to be the amount of the additional administrative costs incurred by the Commonwealth in the grant year because of those surcharges;

(f)   the amount determined by the Secretary to be the amount of public debt interest incurred by the Commonwealth in the grant year because payments of amounts of customs duty that included an amount payable because of a Commonwealth surcharge were deferred in accordance with permissions granted under section 69 of the Customs Act 1901 for the delivery into home consumption of goods falling to subheadings of Chapter 27 of Schedule 3 to the Customs Tariff Act 1995 .

PS (petroleum share) means the number set out opposite the name of the State in the following table.

Petroleum Share   

State    Petroleum Share

New South Wales   0.30039

Victoria   0.20153

Queensland   0.19593

Western Australia   0.17118

South Australia   0.07549

Tasmania   0.02453

Australian Capital Territory   0.01291

Northern Territory   0.01804

(2)   In determining, for the purposes of subsection (1), the additional amount of customs duty or excise duty that was collected, or is likely to be collected, during a particular period because of a Commonwealth surcharge, the CEO is to take into account the impact of the operation of:

   (a)   section 19 of the Customs Tariff Act 1995 ; or

   (b)   section 6A of the Excise Tariff Act 1921 ;

   as the case requires.

   Note:   Section 19 of the Customs Tariff Act 1995 and section 6A of the Excise Tariff Act 1921 provide for the automatic indexation of certain rates of duty which include rates payable on tobacco etc. and petroleum products.

(3)   In working out, for the purposes of a determination under paragraph (f) of the definition of PBA in subsection (1), the total of the amounts of customs duty whose payment was deferred in accordance with a permission granted under section 69 of the Customs Act 1901 , the Secretary is to disregard any part of those amounts of customs duty collected because of a Commonwealth surcharge.

4B Franchise fees windfall tax reimbursement payments

   For the purposes of section 11B, the franchise fees windfall tax reimbursement payment to be made to a State is equal to the sum of:

(a)   the amount determined by the Commissioner, not later than 22 June 1998, to be the total of the amounts of tax collected, and remitted to the Commissioner, by the State under the Franchise Fees Windfall Tax (Collection) Act 1997 on or before 21 June 1998; and

(b)   the amount determined by the Commissioner, not later than 22 June 1998, to be the total of the amounts of tax likely to be collected, and remitted to the Commissioner, by the State under that Act during the month of June 1998.

As announced by the Treasurer (Mr Costello) on 6 August, the Commonwealth has agreed to introduce safety net measures to protect state and territory revenues, following the High Court decision of 5 August which cast serious doubt on the constitutional validity of state business franchise fees. The High Court decision affects annual state revenues of around $5 billion and leaves the states open to refund claims amounting to many billions of dollars in respect of past business franchise fee payments. The Commonwealth will use its tax powers to collect the revenues that the states and territories previously collected by way of business franchise fees on petroleum products, tobacco and alcoholic beverages.

The states and territories acknowledge that this will represent a state tax imposed and collected by the Commonwealth at their request and on their behalf. The safety net arrangements are intended to be temporary and will be reviewed within six months. The proposed amendments provide authority for the Commonwealth to pay the states and territories a revenue it collects under safety net arrangements. It is intended that revenue replacement payments, expected to exceed $5 billion in 1997-98, be made together with the Commonwealth's weekly payments of general revenue assistance.

Some states will receive more revenue than they previously raised under their business franchise fees. This is necessary if no state or territory is to be worse off as a result of the High Court decision, since the Australian constitution requires that the Commonwealth apply taxes uniformly across the states, whereas states' business franchise fees vary in their rates and coverage. However, the states and territories have indicated that these excess revenues will be refunded to manufacturers or wholesalers in order to avoid, as far as possible, price increases for consumers and petroleum users. To ensure the safety net arrangements operate as intended, the Australian Competition and Consumer Commission is monitoring price movements of affected products.

The amendments also include a provision which returns to the states any tax revenues the Commonwealth might receive under the franchise fees windfall tax collection arrangements of 1997. This will ensure that state finances are protected from claims for refunds on the grounds of constitutional invalidity of past payments of business franchise fees. The safety net arrangements are revenue neutral for the Commonwealth. The payments made under these amendments will simply return to the states amounts raised by the Commonwealth on their behalf, after allowing for Commonwealth administrative costs.

It is vital to the integrity of state and territory finances that legislation to give effect to the safety net arrangements be enacted without delay. Accordingly, the government will be giving this bill and the associated revenue bills the highest priority. I present the supplementary explanatory memorandum for the additional amendments to the bill and I commend the bill to the House.