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Thursday, 4 October 1984
Page: 1282


Senator RYAN (Minister for Education and Youth Affairs)(9.40) —I move:

That the Bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows-

CUSTOMS TARIFF AMENDMENT BILL (No. 3) 1984

The Customs Tariff Amendment Bill (No. 3) 1984 which is now before the Senate proposes amendments to the Customs Tariff Act 1982. The Bill contains six schedules and is necessary to enact tariff changes which have been introduced into the Parliament by customs tariff proposals during the 1984 autumn and budget sittings. The bill also contains amendments to two sections of the Customs Tariff Act 1982 which have not previously been introduced into the Parliament.

Some of the changes contained in the Bill relate to Budget decisions to alter the customs tariff rates applying to certain beer, manufactured tobacco and aviation fuels. These changes are complementary to changes proposed to the Excise Tariff Act 1921. The relevant customs tariff rates are varied by the same monetary amounts as the respective rates in the Excise Tariff Act. A number of amendments contained in the Bill arise from Government decisions on the following Industries Assistance Commission's reports:

(1) Computer hardware and software, typewriters, calculating and other office machines, parts and accessories, recording media, and

(2) Electric motors (interim report).

The Bill also contains amendments relating to:

(1) The interim tariff arrangements for the period 30 May-31 December 1984 decided upon by the Government in the context of its motor vehicle industry assistance package;

(2) The concessional and preferential tariff arrangements to apply to certain goods or to imports from certain countries and places;

(3) The restoration of the level of assistance intended for certain locally manufactured goods following rulings handed down by the Administrative Appeals Tribunal or a court;

(4) A number of technical or administrative amendments to correctly reflect the intention, scope or wording of various provisions of the Customs Tariff Act; and

(5) The further simplification of the Customs Tariff Act.

The Bill also contains two changes to sections of the Customs Tariff Act which have not previously been introduced into the Parliament. The first of these changes relates to an amendment to sub-section 13 (4) to ensure that a reference to phasing rates of duty in relation to paragraph (A) of that sub-section is made only in respect of tariff classifications in Schedule 3 to the Act. This change merely corrects a drafting oversight in the Act. Secondly, the Bill includes amendments to sub-sections 26A (2) and 26A (3) of the Customs Tariff Act. These amendments are technical in nature and are made in order to clarify, for the purposes of the indexation of certain amounts of customs duty, that substitution of those amounts of customs duty shall occur on a particular day.

The changes in the Bill which emanate from the Government's Budget decisions are complementary to changes made in a budgetary context in respect of the Excise Tariff Act. The combined financial impact of these measures is contained in statement No. 4 of Budget Paper No. 1. In regard to the decision on the IAC report on computer hardware etc., it is not possible to provide meaningful estimates of the customs revenue forgone. Rapid changes in the nature of products, demand and sourcing for many of the goods covered by the decision create difficulties in predicting the composition and level of imports and thereby calculating duty collection changes. A particular complication with the computer decision involved the removal of duties on computer software. It is not possible to determine the proportion of imports that were previously attracting duties.

It is also not possible to determine with any degree of accuracy the financial impact of the customs duty change in the decision on the IAC interim report on electric motors. Other amendments contained in the Bill are not expected to have a significant financial impact. There are no additional significant administrative costs associated with the Bill. A summary of amendments for each schedule of the Bill has been prepared and copies are available from the records and tables office. I commend the Bill.

EXCISE TARIFF AMENDMENT BILL (No. 2) 1984

This Bill proposes to amend the Excise Tariff Act 1921 to incorporate into the Act the excise alterations introduced during the winter recess and tabled in the Parliament on 21 August 1984 and the excise alterations emanating from the 1984- 85 Budget. On 18 April this year new taxation initiatives were announced to apply to the petroleum sector from 1 July 1984. One of the initiatives was the introduction of an excise on crude oil produced from areas discovered after 17 September 1975, called ''new oil''.

By way of background I should mention that the taxation arrangements on crude oil produced from areas discovered on or before 17 September 1975, called ''old oil'', were modified from 1 July 1983 to correct a number of anomalies. The excise scale was restructured so that increased production from each prescribed production area, as defined in the Excise By-laws, attracted progressively higher rates of excise. In formulating the policy on ''new oil'' the Government had to find a reasonable balance between the interests of the community as a whole and those of the oil exploration companies who must be adequately rewarded if they are to continue in the high risk activity of oil exploration. Several generous concessions have therefore been made in the ''new oil'' excise scale compared to the scale applicable to ''old oil''. There is an annual excise free allowance of 500 megalitres (approximately 3.1 million barrels) exempting the majority of onshore fields from any levy at all. Also, the ''new oil'' excise scale imposes excise rates far below those imposed on ''old oil''. The rate on ' 'new oil'' at the beginning of the ''new oil'' scale is 10 per cent compared to 80 per cent for the same level of ''old oil'' production, while the top rate is 35 per cent for ''new oil'' compared with 87 per cent for ''old oil''.

The excise payments for all prescribed production areas in relation to ''old'' and ''new'' oil are determined by applying the excise scale to the ruling Government determined import parity price for Bass Strait crude oil. The modest rates for ''new oil'', which are set out in clause 7 of the Bill, reflect the Government's desire to encourage and maintain exploration and development incentives in the oil industry. Clause 4 of the Bill proposes to clarify the procedure for imposition of duty on ''new'' and ''old'' oil.

The practice has been to back allocate elements in a crude oil mixture through a mass balance procedure to the production areas from where they were derived. Excise duty is then determined for each production area by applying the excise scale accordingly.

Legal advice has been given that the current legislation might not extend to the ''back allocation'' of all elements in a crude oil mixture. This method of imposing duty on crude oil production accords with the Government's intention when the modified arrangements were introduced from 1 July 1983. For this reason the provisions of clause 4 are proposed to operate retrospectively from that date. The retrospective operation of this provision will not impose any additional liabilities upon producers.

In keeping with previous practice, on 27 June 1984 the Minister for Resources and Energy announced a revision in the excise rate applying to naturally occuring liquefied petroleum gas (LPG) from 1 July 1984. As in past determinations, the excise rate has been calculated using a weighted export and domestic LPG price over the preceding six months. The reduction in the excise rate by $12.27 per kilolitre to $36.96 per kilolitre, as contained in clause 9 of the Bill, reflects the current soft state of the world export market for LPG.

The provisions in clause 8 of the Bill remove the excise on grape spirit for fortifying wine with effect from 8.00 p.m. standard time on 22 June 1984 as announced by the Treasurer on the same date. Re-introduction of the duty on this spirit at a rate of $2.61 per litre was announced in the 1983/84 Budget. The rate was subsequently reduced to $1.50 per litre with effect from 23 August 1983 . In his speech on the 1984/85 Budget the Treasurer announced that, with the introduction of the general sales tax on wine and alcoholic cider and to avoid double taxation on fortified wines, excise paid in 1983/84 on fortifying spirit will be refunded in full. Necessary amendments have been made to the Excise Regulations to allow the refunds to be paid and persons who believe they are entitled to a refund should submit their applications to the Collector of Customs in their State as soon as possible and no later than 30 June 1985.

With effect from 18 July 1984 the number of decimal places in the excise rate for beer was increased from 2 to 5. This change, which is set out in clause 10 of the Bill, follows representations by the brewing industry that the excise duty rate on beer had suffered repeated roundings upward as a result of the application of indexation. The Government believes that the increase in the number of decimal places will alleviate this problem.

The other provision in clause 10 of the Bill omits on and from 18 July 1984, the requirement that Australian gin must be made only from grape, grain or fruit spirit. A similar provision relating to imported gin was removed from 1 January 1983. The removal of this requirement is consequential upon a review of wines and spirits legislation, conducted by the National Health and Medical Research Council in conjunction with Commonwealth Government Departments. That review identified that this imposition is outdated and results in unnecessary costs on the industry.

I now turn to the excise alterations emanating from the 1984/85 Budget. The provisions of clause 11 of the Bill operate at 8.00 p.m. on Budget night and alter, as a consequence of the new taxing arrangements for beer, the definition of beer in the Excise Tariff Act and introduce new excise rates which vary according to the alcoholic strength of beer. The other changes in this clause increase the excise duties on tobacco, aviation gasoline and aviation kerosene. The increase in the tobacco excise represents a further step towards aligning the excise on that product with that applying to cigarettes and cigars.

Increases in the excise on the fuels are made as a cost recovery measure. Finally, the provisions of clause 5 of the Bill modify, as announced by the Treasurer on Budget night, the arrangements for six-monthly indexation of excise duty rates, except for crude oil and LPG, so that Consumer Price Index decreases are taken into account in a similar manner to the treatment of pensions and benefits under the Social Security Act.

Financial Impact Statement

In 1984-85 the introduction of the excise on 'new' oil is expected to yield about $317m in revenue and the lower LPG excise is expected to reduce Commonwealth revenue from LPG excise by approximately $24m to about $70m. Refunds of excise on fortifying spirit between 21 August 1983 and 22 June 1984 are expected to amount to about $5m. The reduction in the excise on low alcohol beers is expected to reduce Commonwealth revenue by approximately $10m in 1984- 85 and $12m in a full year.

Increases in the excise on tobacco, aviation gasoline and aviation kerosene are expected to yield about $7m in revenue in 1984-85 and $8m in a full year.

The modification of the indexation arrangements, in line with pensions and benefits, is expected to result in a decrease in excise revenue of approximately $4m in 1984-85. However, it is important that I mention that the nature of the last measure is such that a reliable estimate cannot be provided. I commend the Bill to the Senate.

CUSTOMS TARIFF (COAL EXPORT DUTY) AMENDMENT BILL 1984

This Bill proposes to amend the Customs Tariff (Coal Export Duty) Act 1975 to provide an exemption from the payment of the export duty under that Act on high quality coking coal produced from certain open-cut mines if specified quantities of underground coal from those mines are included in production for export. The Government's decision to exempt this coal from the $3.50 per tonne export duty on and from 28 May 1984 was announced by the Minister for Resources and Energy on 29 May 1984.

The Customs Tariff (Coal Export Duty) Act was introduced in 1975 because the Government of the day wished to channel to the community a proportion of the windfall profits then being made by coal export producers. The duty arrangements have been varied on a number of occasions to the extent that the only coal now dutiable is high quality coking coal mined from depths no greater than 60 metres in open-cut mines in production before 1 July 1980. In practice duty is currently only paid on production from eight mines in Queensland.

The Government considers that the most desirable course is to incorporate the coal export duty into a Commonwealth/State resource rent tax package. However, we recognise that this may not be practicable in the immediate future.

In an international market characterised by a substantial over-supply of coking coal, the intense competition for available markets will continue for some time to come. Producers have been forced to accept price reductions and a substantial up-turn is unlikely in the immediate future. Against this background, in 1983 the Government received representations from CSR and Thiess Dampier Mitsui for relief from the export duty on production from the Moura and South Blackwater mines located in the Bowen Basin in Queensland.

Both mines must blend significant quantities of higher quality coal from their underground operations with coal from their open-cuts in order to obtain product of a quality suitable to meet export contract specifications. The addition of higher cost underground product to their open-cut coal increased costs to the point where the imposition of the export duty on the open-cut coal in the exported product was having a significant impact on the rate of return to the producers.

In order to assist the viability of these operations, the Government has decided to exempt from duty open-cut production in the situation where mines are , and have been, dependent on significant underground operations to maintain coal quality. The Government considers that the maintenance of underground operations in the Bowen Basin will retain skills which will ultimately be of benefit to the industry as a whole in that region. It also demonstrates the Government's concern to assist employment security in the industry in the present difficult international marketing environment.

Financial Impact Statement

It is estimated that this exemption will mean an annual loss to the revenue of less than $10m. I commend the Bill to the Senate.

Debate (on motion by Senator Reid) adjourned.