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Wednesday, 29 April 1987
Page: 2199


Mr BARRY JONES (Minister for Science and Minister Assisting the Minister for Industry, Technology and Commerce)(4.32) —I move:

That the Bill be now read a second time.

The Excise Tariff Amendment Bill proposes amendments to the Excise Tariff Act 1921 to incorporate into that Act all excise tariff proposals tabled in this Parliament as at 1 April 1987. The majority of the amendments at clauses 5 to 11 of the Bill involve alterations that have occurred since 1 October 1986 to the excise duty on certain refined petroleum products and naturally occurring liquefied petroleum gas. The alterations to the excise on petroleum products have been made as a consequence of the policy since 1 March 1986 of fully offsetting changes in revenue from crude oil excise and royalty by corresponding across the board changes in excise duty on petroleum products. The net result is that, as crude oil prices change, Government revenues remain the same overall and petrol price changes are kept to a minimum.

Consistent with this policy, the proposals in this Bill reflect that on 1 October 1986, 1 January 1987 and 1 February 1987 the import parity prices of indigenous crude oils were increased in line with upward movements in world oil prices and changes in the Australian exchange rate. Corresponding reductions to the excise rates on refined petroleum products were subsequently made with effect from 16 October 1986, 17 January 1987 and 14 February 1987 respectively. On 1 March 1987 the import parity price of indigenous crude oil was decreased in line with a downward movement in world oil prices and an increase in the Australian exchange rate. Corresponding increases to the excise rates on refined petroleum products were made with effect from 14 March 1987. I should mention that customs duties are also levied on imports of most petroleum products at a rate equivalent to the rate of excise levied on the same products.

The alterations to the excise on naturally occurring LPG at clauses 5, 7 and 11 of the Bill are made in conformity with the Government's LPG excise policy which provides for the excise rate on LPG to be calculated on the basis of 60 per cent of the amount by which the average realised wholesale price for naturally occurring LPG exceeds $147 per tonne. Other excise alterations at clauses 3 and 4 respectively of the Bill involve a reduction in the top marginal rate of excise on old oil and the introduction of a mechanism to permit the collection of a duty differential on certain manufactured goods.

The top marginal rate of excise on old oil was reduced on 1 August 1986 from 87 per cent to 80 per cent of the Bass Strait import parity price. This reduction was made at that time to offset a substantial decline in world crude oil prices which had severe ramifications for the cash flow and financial viability of all Australian crude oil producers. When reducing the top marginal rate we indicated that the position would be reviewed if world oil prices recovered to $20 per barrel. The price has in fact recovered beyond this level but we have decided to leave the arrangements in place for the time being, pending the outcome of a major examination of the revenue measures applying to the oil industry generally. We expect to make an appropriate announcement on this matter shortly.

The only other proposal in this Bill is the mechanism to collect a duty differential on certain manufactured goods. Under section 24 of the Excise Act permission may be given for the use of imported goods upon which duties of customs have not been paid to be used in the manufacture of excisable goods. For example, it is common for imported tobacco to be used in a blend with Australian tobacco in the manufacture of cigarettes. If the rate of customs duty that would have been payable on the imported product exceeds the rate of excise duty payable on the mixed goods, as is sometimes the case, it is our not unreasonable policy-in fact one may go even further and say it is our reasonable policy-to collect the duties of excise on the mixed goods plus an amount of duty on the imported component equal to the difference between the rate of customs that would have been payable on the imported component and the rate of excise duty on the mixed goods. The provisions of clause 4 of the Bill propose to implement this policy.

Financial Impact Statement

The decreases in refined petroleum product excise rates effective from 16 October 1986, 17 January 1987 and 14 February 1987 are expected to result in decreases in revenue of about $85m, $5m and $176m respectively in 1986-87. That is consistent with what I said in my second reading speech on the Customs Tariff Amendment Bill 1987. The increase in refined petroleum product excise rates effective from 14 March 1987 is expected to result in an increase in revenue of about $30m in 1986-87. As I mentioned earlier, these changes are expected to offset the changes in revenue from crude oil excise and royalty. The alterations to the LPG excise at clauses 5, 7, and 11 of the Bill are expected to result in a net reduction in revenue of about $50m in 1986-87.

At the time of our announcement in July 1986, the reduction in the top marginal rate of excise on old oil to 80 per cent was expected to reduce excise revenues by approximately $67m in 1986-87. However, we were confident that this reduction would be outweighed by net revenue gains flowing from increased production and a resumption of exports of crude oil from Bass Strait. This confidence has proven to be well founded. Exports of Bass Strait crude oil resumed in August 1986 and to date have exceeded 25 million barrels. These exports have contributed more than $300m by way of excise revenues and more than $500m to our balance of payments, a very important contribution at a critical time. Finally, collection of duty differentials pursuant to clause 4 are estimated to be in the vicinity of $200,000 in a full year. I commend the Bill to the House and present the explanatory memorandum to the Bill.

Debate (on motion by Mr Cadman) adjourned.