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Thursday, 20 March 1997
Page: 2064


Senator ALSTON (Minister for Communications and the Arts)(7.53 p.m.) —I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard

Leave granted.

The speech read as follows—

The purpose of this bill is to amend the Excise Tariff Act 1921 (the Tariff Act) to ensure the continuing excisability of all beverages which contain distilled alcohol, including spirits, regardless of their alcohol content.

Under item 2 of the Schedule to the Tariff Act, "spirituous beverages" are subject to duties of excise, which are calculated at a dollar amount per litre of alcohol in each beverage. The term was introduced into the Tariff Act in 1985 with the intention of making excisable any beverage that contained a spirit. Since that time, all such beverages have been treated as excisable regardless of their alcohol content, including beverages whose alcohol content ranges from 5% to 9% (for example the rum and cola mixer drinks).

In November 1994, Carlton and United Breweries (CUB) commenced the manufacture of the product known as "Subzero Alcoholic Soda" which had an alcohol content of approximately 5.5%. The Australian Customs Service (the ACS) considered "Subzero" excisable under sub-item 2(H) of the Schedule to the Tariff Act as a spirituous beverage. CUB appealed the decision of the ACS to the Administrative Appeals Tribunal (AAT).

On 7 June 1996, the AAT determined that the production of "Subzero", with such a low alcohol content by volume, could not be described as spirituous and was therefore not excisable under sub-item 2(H). The decision was based on what the AAT considered is commonly regarded as the definition of "spirit" in the community, which is a strong alcoholic liquor usually containing not less than 37% alcohol by volume. The ACS is appealing this decision to the Federal Court

Since the AAT decision, CUB has ceased manufacturing "Subzero" using alcohol derived by distillation. However, there are several other companies (UDA, Remy Australia, Swift & Moore and Angove) who manufacture beverages of low alcohol content which are based on, for example, brandy or whisky. The ACS has continued to impose excise duty under sub-item 2(H) on these beverages as they are considered by the ACS to be spirituous beverages. The payments of excise duty by these other manufacturers are being made under deposit in accordance with section 154 of the Excise Act 1901 on the basis that, since the AAT "Subzero" decision, these manufacturers allege that these beverages are no longer excisable. Prior to this decision, all producers of beverages containing distilled alcohol had been paying duty on the alcohol content of the beverage. There was no dispute with manufacturers of the low alcohol beverages using distilled alcohol as to their excisability or their proper classification to sub-item 2(H) of the Schedule to the Tariff Act.

In order to ensure the continuing excisability of all beverages containing distilled alcohol, it is proposed to amend the Tariff Act to:

(i) delete all references to "spirituous beverages" in the Schedule and item 2 (item 1 of Schedule 1 refers); and

(ii) clarify that excise liability is imposed upon all beverages which contain distilled alcohol (new sub-item 2(H), item 2 of Schedule 1 refers).

The combination of these amendments will remove any connotation that there is a minimum strength that an alcoholic beverage must be before it will be excisable. All such beverages will continue to be excisable regardless of their alcohol content and the excise duty will be calculated according to the alcohol content of the beverages.

It is also proposed that the amendments will take effect on and from 3 February 1996. The effect of the retrospective commencement date of the amendments will be to extinguish all rights of appeal to the AAT in relation to the excisability of low alcohol beverages and all rights to refunds of excise duty in respect of such beverages.

The commencement of the amendments on this date is considered justifiable on the following grounds:

(a) The intention of the term "spirituous beverages" was to make excisable any beverage that contained a spirit and there had never been any dispute as to this intention prior to the "Subzero" case. It is considered that the amendments are not altering the law with respect to alcoholic beverages as it stood at the time of the "Subzero" decision. They are merely clarifying what was the status quo. It is, therefore, considered appropriate that the amendments commence on 3 February 1996 to remove the technical loophole which was uncovered in the Tariff Act by that decision and which this amending legislation is now removing.

(b) The commencement of the amendments on 3 February 1996 will not require the retrospective recovery of any excise duty from the manufacturers of the alcoholic beverages. The excise duty has continued to be paid by the manufacturers, under deposit, and the 3 February 1996 commencement will protect the government against all claims for recovery of this duty. If the amendments do not commence on 3 February 1996, however, the government might be liable to pay $12.6 million in refunds of excise duty if the Federal Court confirms the AAT decision in favour of CUB. Given that the products manufactured by these companies have been sold duty paid, such a favourable decision to the companies would represent a windfall gain to them, with little chance that it would be returned to the consumers of the product.

The proposed amendments, including their financial impact, are outlined in greater detail in the Explanatory Memorandum.

Ordered that further consideration of the second reading of this bill be adjourned until the first day of sitting in the winter sittings 1997, in accordance with standing order 111.