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Wednesday, 5 September 1984
Page: 446


Senator GARETH EVANS (Attorney-General)(10.20) —I move:

That the 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-

This Bill will amend the Sales Tax (Exemptions and Classifications) Act to alter the sales tax classification of certain goods, principally beer, wine, cider and similar alcoholic and non-alcoholic beverages, as announced by the Treasurer in the Budget Speech. The Bill will also restore an exemption from sales tax, removed in 1983, for film used in the production of commercial motion picture films. Third, the Bill will eliminate avenues for avoidance of sales tax through the export and re-import of goods as announced by the Treasurer (Mr Keating) on 7 May this year. The Sales Tax (Exemptions and Classifications) Act, which this Bill amends, classifies particular goods as exempt from sales tax, specifies the circumstances of the exemption and places other goods in one or other of the tax rate categories. Goods not specifically dealt with by the Act are taxable at the general rate of 20 per cent.

I turn now to discuss in more detail the changes proposed by this Bill. Under the present law, Australian beer is exempt from sales tax, but beer containing more than 1.15 per cent alcohol, that is, full strength and low alcohol beer, is subject to excise. With the introduction of very low alcohol beers, that is, beer containing not more than 1.15 per cent alcohol, an undesirable situation has arisen. Presently, the higher alcohol beers are excisable and brewed soft drinks are taxable at the general rate of 20 per cent; but very low alcohol beers are free from both excise and sales tax. The Government believes that there is no basis for this discrimination in the case of very low alcohol beers and, accordingly, they are now to be subject to tax at the same rate as brewed soft drinks. This change will operate from 8 p.m. on 21 August 1984. The sales tax treatment of very low alcohol imported beers, which are presently taxable at the general rate, will remain the same.

Mr President, I have already mentioned in my comments on the Sales Tax (Nos. 1 to 9) Amendment Bills, that the Government has decided to impose sales tax on Australian alcoholic grape wine and cider and to adjust the level of sales tax on non-grape wines and on imported grape wines and ciders. Under amendments proposed by those Bills, sales tax will be imposed on such beverages at the new rate of 10 per cent. The Government's decision follows a review of the overall sales tax and Customs duty treatment of wine and cider. Apart from Australian wine and cider, virtually the whole range of alcoholic beverages bears some kind of Federal tax. The Government believes that it is inappropriate to maintain any exception. At present, Australian grape wine and ciders are exempt from sales tax. Imported grape wines and ciders, as well as all non-grape wines, however, are taxable at the general rate of 20 per cent.

The Bill will classify in a new Sixth Schedule to the Act, those wines and ciders that are to be subject to the new 10 per cent rate of tax. Specifically, cider, mead, perry, sake and grape wine, as well as other similar fermented alcoholic beverages, such as fruit wine, vegetable wine and wine made from other food sources, will be covered by the new Sixth Schedule. However, alcoholic beverages containing not more than 1.15 per cent alcohol, generally regarded as non-alcoholic, and those that consist of, or contain, beer, spirits (other than fortifying spirits), liqueurs of spirituous liquors will be excluded. In the case of imported grape wine, which is presently subject to sales tax at the general rate of 20 per cent, the effect of the change proposed by the Bill will be to reduce the rate of sales tax to 10 per cent. The Government has decided, however, to retain the protection presently accorded to locally produced wine. Accordingly, an additional ad valorem customs duty will be imposed on imported alcoholic grape wines at a rate equivalent to a 10 per cent sales tax. My colleague, the Minister for Industry and Commerce (Senator Button), will shortly be introducing the Customs Tariff Amendment Bill (No. 2) 1984 for this purpose. Additionally, the Bill will alter the sales tax treatment of Australian and imported non-alcoholic, non-grape wines. These wines, which are presently taxable at 20 per cent, will now be exempt from tax. This change too will operate from 8 p.m. on 21 August 1984. I mention that Australian non-alcoholic grape wine and cider will remain exempt from sales tax.

A deficiency in the law, which has led to a sales tax avoidance practice involving the exportation and importation or re-importation of certain goods, will also be countered by measures in this Bill. The Government's clearly enunciated policy is to smash the tax avoidance industry and that policy applies equally to the sales tax avoidance industry. This Bill will alter the exemption from sales tax which is presently available for certain goods which, upon importation, qualify for duty free admission by virtue of provisions in the Customs Tariff. As the law is presently framed, a wide range of usually taxable goods, both imported and of Australian manufacture, could be obtained tax free by being exported and subsequently imported or re-imported, other than as passengers' personal effects. Apart from motor vehicles, there was little or no specific restriction on the wide range, value and quantity of goods which might be involved. The loop hole was therefore being used to avoid tax, particularly on goods subject to high rates of tax, otherwise payable on taxable goods, including furs, jewellery, boats and electronic equipment.

By this Bill the intended operation of the law, which is to exempt from sales tax at the time of importation or re-importation two particular classes of goods , will be restored. The first class comprises Australian manufactured goods which would have been exempt if they had gone into use or consumption in Australia but, because they are first exported and then imported back into Australia, become taxable by reason of being imported goods. The second class comprises goods in respect of which sales tax has already been paid and has not been refunded. The changes will prevent the loss of many millions of dollars of potential revenue. This particular measure will be made effective in relation to importations and re-importations of goods occurring after 7 May 1984, which was the date on which the Treasurer announced that the law would be amended in this way.

The final measure proposed by this Bill is to provide an exemption from sales tax for certain cinematograph film for use in the production of commercial motion picture films. While most cinematograph film used in the production of motion picture films can qualify for exemption as an aid to manufacture, in some situations for technical reasons only, certain classes of film can fall outside the scope of the present exemption. This Government has accepted claims by the motion picture industry that this is anomalous when compared with the 'aids to manufacture' exemption available to other classes of manufacturers. The Bill will correct this anomaly. The alteration will apply on and after 22 August 1984 . As I mentioned in my speech on the Sales Tax (Nos. 1 to 9) Amendment Bills, an explanatory memorandum covering technical aspects of those Bills and this Bill is being made available to honourable senators. This provides greater detail on the goods affected by these measures. I commend the Bill to the Senate.

Debate (on motion by Senator Reid) adjourned.