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Monday, 21 June 2004
Page: 30961

Mr PROSSER (6:26 PM) —I rise to speak today in support of the Excise and Other Legislation Amendment (Compliance Measures) Bill 2004. This bill proposes to amend the Excise Act 1901 to provide the Australian Taxation Office with greater compliance provisions for revenue protection and improve administrative arrangements in respect of the payment of excise.

The bill contains four groups of amendments, each contained in separate schedules to the bill. The first such schedule deals with the delivery of excisable goods for export. The fundamental control of the Commissioner of Taxation over all excisable goods is provided for in section 61 of the Excise Act 1901. Other controls include permission requirements and offences for contravening those requirements over the movement of excisable goods on which duty has not been paid. However, movement of excisable goods for exportation may occur without the permission given under excise legislation.

At present, excisable goods on which duty has not been paid may be moved away from excise licensed premises for exportation on the basis of an authority to deal with the goods provided by Customs. This authority is taken as permission to move the goods from an excise licensed place to a place prescribed under the Customs Act 1901. This means that excisable goods pass out of the Commissioner of Taxation's controls upon delivery of the goods to a Customs licensed premises. Accordingly, the Australian Taxation Office is unable to apply the usual compliance and revenue protection measures to the movement of these goods that it may provide to all other movements of excisable goods.

The current arrangement dates back to the time when Customs administered both customs and excise legislation. With the separation of these functions it is necessary to update the provisions to ensure adequate compliance arrangements. The diversion of excisable goods from export, particularly tobacco products, is considered to be high risk. There have been instances where excisable goods for export have not reached the place of export or have been diverted from within the place of export. In other cases, the goods have not reached their overseas destinations and it is unclear to where they have been diverted. Containers have been found empty or not containing the goods as described.

The proposed changes will therefore specify that the commissioner may instead give permission for the delivery for exportation and will enable excisable goods for which an export authority has been withdrawn to be returned to a specific place and provide that this movement must be in accordance with the commissioner's declaration. The amendments will also extend the provisions that allow the commissioner to demand payment of excise where a person has not kept the goods safe or cannot otherwise account for the goods—that is, the commissioner will have the power to recover excise in relation to goods that go missing without evidence of where they were exported to.

These amendments are aimed at persons who attempt to avoid payment of excise by exploiting weaknesses in the ATO's ability to control the movement of such goods that are or were ostensibly intended for export. The weakness relates to movements of goods that are legislatively under ATO control but are actually authorised by the Australian Customs Service. Such authorisations originate from the fact that Customs used to administer both customs and excise legislation, whereas excise, as I mentioned, is now administered by the ATO.

The second group of amendments applies specifically to the movement of tobacco seed, plant and leaf and aims to provide consistency in provisions and offences relating to movement of the range of tobacco products. Tobacco manufactured as specified in the Excise Tariff Act 1921 is an excisable good and is dealt with in the excise legislation under the arrangements applying to excisable goods. However, the illicit trade in tobacco is considered a major revenue risk and, while unprocessed tobacco seed, plant and leaf are not excisable, the Excise Act 1901 provides considerable controls on their production, dealing and storage, which must be carried out under an excise licence.

The Excise Act 1901 requires permissions for movement of tobacco leaf and applies substantial penalties, including imprisonment, for offences of unauthorised movement of tobacco leaf and unlawful buying, selling and possession of tobacco seed, plant and leaf. The Excise Act currently provides that permission is required from the commissioner for movement of tobacco leaf only. The proposed changes will include tobacco seed and tobacco plant in these provisions. The changes also provide for an offence where tobacco seed, plant and leaf delivered for export are not exported within a specified time. I note that new section 44(8) adds a provision making it an offence where a person has permission to deliver tobacco seed, plant or leaf for export and the tobacco seed, plant or leaf is not exported within 30 days—or other period specified in the permission—after the day of delivery, and the person fails to return the seed, plant or leaf to a place specified in the permission for its return within five days after the end of the 30 days or other specified period.

The third group of amendments proposes to extend the criteria for the immediate disposal of seized goods and to enable evidentiary certificates to be used in proceedings in relation to those goods. These changes will streamline administration of excise prosecutions by removing the costly need to store large quantities of illegal products, while providing appropriate safeguards for the rights of the owners.

The Excise Act enables the commissioner to destroy seized goods if they are perishable and constitute a danger to public health. However, in most cases seized excisable goods or tobacco seed, plant or leaf do not satisfy both the perishable and danger to public health criteria. Seized forfeited goods may constitute a public health risk only if returned to the owner or the market. They may only be perishable without special storage arrangements. For example, tobacco is highly perishable but can be preserved with special storage arrangements. Goods may be neither a public health risk nor perishable but cannot be returned to the market as they do not meet applicable quality standards. For example, alcohol extended with other products or illegally blended petroleum that would not meet the relevant food or fuel standards respectively do not meet the current criteria for immediate destruction. Such goods are generally not perishable and whether or not they are a danger to public health depends on the contents. However, they cannot be appropriately returned to the market. The proposed amendments therefore alter the provisions to provide for immediate destruction where the goods are perishable or do not meet any applicable quality standard or the goods, if made available to the public, would constitute a risk to public health or public safety.

However, where the goods are destroyed, provisions will be made for sampling and recording of goods, appointment of an analyst and use of evidentiary and analyst certificates in proceedings. Also, to protect the rights of the owner of goods, the proposed amendments will include a provision that ensures the owner has a right to recovery of the market value of the destroyed goods where a court is satisfied that the grounds on which the goods were destroyed did not exist, and in such cases compensation will be payable.

The fourth group of amendments relates to confidentiality and aims to improve compliance arrangements by enabling licensing information about a person to be disclosed to another person where it is necessary in order for that other person to comply with the law. The Excise Act 1901 has a comprehensive licensing system for the production of, and dealing in, tobacco and the manufacture and storing of excisable goods generally and provides for licences to be suspended or cancelled in certain circumstances. In addition, through permission requirements and offences for contravening these requirements, there are controls over the movement and possession of tobacco seed, plant and leaf and other excisable goods. Licences or permissions may be subject to certain conditions such as restriction to specified quantities of goods.

The excise legislation confidentiality provisions prevent the Australian Taxation Office from disclosing information about excise licences and permissions to a second person also dealing with the goods under the excise legislation. Information on whether a person is licensed or has permission to deal with particular goods or quantities of goods is at times a prerequisite for a second person to comply with the provisions of the legislation. The problem is illustrated in the illicit trade in tobacco, which poses a significant risk to the revenue base. It is an offence for a person to buy tobacco seed, leaf or plant from an unlicensed producer, manufacturer or dealer. However, the ATO is unable to provide information about licence status and conditions.

Therefore, a tobacco cooperative with a dealer's licence cannot be advised whether a member is licensed as a producer or when a member's licence is cancelled or suspended. A tobacco grower cannot be informed if the company to which tobacco is to be sold is licensed. Where a licence is cancelled, it may be necessary to amend or cancel permissions held by suppliers for the movement of goods to the person whose licence has been cancelled. Currently, the ATO cannot give the permission holder information relating to the cancelled licence, despite the fact that it will need to amend or cancel the permission.

There are also disclosure issues around remission certificates, which are administrative documents stating that the holder may obtain quantities of excisable goods from a supplier according to the conditions set out in the regulation. These conditions normally allow the holder to obtain goods at concessional or duty-free rates—for example, alcohol for industrial purposes. A supplier to a remission certificate holder may need to be informed that a remission certificate has been amended or cancelled. Therefore, the proposed changes will allow disclosure of information about the licence of a person to another person who is dealing with the goods. The disclosure will be permitted when the information is necessary to ensure that the second person's dealings will not contravene provisions of the Excise Act. The various measures contained in this bill assist the effectiveness of the ongoing campaign by the ATO against the illegal tobacco sector and require a greater accountability of persons involved in the tobacco and export sectors. I commend the bill to the House.