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Monday, 13 May 1985
Page: 1840


Senator RYAN (Minister for Education)(6.20) —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-

EXCISE TARIFF AMENDMENT BILL 1985

This Bill proposes to amend the Excise Tariff Act 1921 to incorporate into that Act the excise alterations to crude oil as announced on 23 October 1984 by the then Minister for Resources and Energy.

As part of a package of incentives for the oil industry the Minister announced the introduction of special excise arrangements for crude oil fields discovered on or before 17 September 1975, but which had not been developed before 23 October 1984. These fields are now eligible for concessional excise treatment under what is to be called an intermediate excise scale.

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. Oil discovered after 17 September 1975, termed 'new oil', attracts excise at a rate very much lower than the excise on 'old' oil.

In formulating the intermediate excise scale the Government was aware that up to 140 million barrels of oil was contained in 'old' oil fields that had not been developed at least partly because of inadequate returns to producers under the 'old' oil excise scale. As a result of the introduction of the intermediate excise scale and a related decision to modify the existing substantial new development policy the Bass Strait producers, Esso and BHP, have decided to proceed with the development of Bream and Tuna B, and, subject to delineation drilling, Barracouta and Turrum in Bass Strait with a total investment involved in the order of $1.8 billion. This program will provide a welcome boost to employment opportunities in the region over the next few years, provide a further boost to oil self-sufficiency and postpone the impending decline, at the same time it is expected to contribute significantly to government revenue.

The intermediate scale will apply to production from areas discovered on or before 17 September 1975 but undeveloped as at 23 October 1984, which lie in areas specifically excluded from the 'greenfields' resource rent tax-that is, in Bass Strait, the North West Shelf, and onshore

The excise liability for crude oil produced from these areas will be determined by applying the intermediate excise scale to the ruling government determined import parity price for Bass Strait crude oil.

The modest excise rates and concessional excise free allowance for this oil, which are set out in clause 8 of the Bill, reflect the Government's desire to provide development incentives to the oil industry.

The Bill also proposes certain adjustments to the excise rate on naturally occurring liquefied petroleum gas following the setting of new wholesale prices for naturally occurring LPG. As in past determinations, the excise rate has been calculated using a weighted average of the LPG export prices over the preceding six months and the current domestic price. This Bill reduces the excise rate by $2.26 per kilolitre to $34.70 per kilolitre for the period 1 October 1984 to 31 March 1985, and increases the excise rate by $2.24 per kilolitre to $36.96 per kilolitre on and from 1 April 1985. A technical adjustment has also been made to the excise rate for the period 1 July 1984 to 30 September 1984 to reduce it from $35.96 per kilolitre to $35.55 per kilolitre.

Financial impact statement

The introduction of the intermediate excise scale will generate additional revenue to the Commonwealth above that which it would otherwise have received under the 'old' oil excise scale. Under that scale several projects were considered uneconomic and would not have been developed.

Excise from projects to which the intermediate excise is to apply is expected to yield in excess of $300m to government revenue in net present value terms from the Bream, Turrum, Perch and Dolphin projects over the next 20 years.

The reduction in the excise rate applying to naturally occurring LPG from 1 October 1984 is expected to reduce Commonwealth revenue by approximately $2m in 1984-85. The increase in the excise rate with effect from 1 April 1985 will increase revenues by almost $1m in 1984-85, while the adjustment to the LPG excise rate from 1 July 1984 will involve a refund of excise of approximately $0.5m. The net impact of the alterations is expected to result in a reduction in revenue of about $1m in 1984-85 compared with the Budget Estimates.

I commend the Bill to the Senate.

CUSTOMS TARIFF AMENDMENT BILL 1985

The Customs Tariff Amendment Bill 1985 which is now before the Senate proposes amendments to the Customs Tariff Act 1982.

The Bill contains four Schedules and is necessary to enact tariff changes which have been introduced into the Parliament in the 1985 autumn sittings by Customs Tariff Proposals Nos. 1-4 (1985). Honourable senators may recall that details of the tariff changes contained in the Bill were outlined at the time of introduction of those Customs Tariff Proposals in the House of Representatives.

Certain of the amendments contained in the Bill arise from the Government's decisions on the Industries Assistance Commission's reports on:

certain consumer electronic equipment and components; and

separate articles direction No. 1 (1983).

The Bill also contains amendments relating to:

the decision taken by the Government in respect of the Steel Industry Authority's August 1984 report on cold rolled strip and sheet excluding tinplate:

continuation of the textiles, clothing and footwear sectoral policy, including acceptance by the Government of recommendations made in the May 1984 report of the Textiles, Clothing and Footwear Advisory Committee;

the introduction of a special concessional tariff item to enable removal of the 2 per cent revenue duty from imported goods used in the construction or modification of ships eligible for bounty;

measures which the Government has decided to apply to specific aspects of the post-1984 arrangements for passenger motor vehicles;

implementation of phasing duty arrangements under the Australia-New Zealand closer economic relations-trade agreement;

the updating of the names of certain countries specified in Schedule 1 to the Customs Tariff Act; and

further simplification of Schedule 3 to the Customs Tariff Act.

The purpose of the main provisions in the Bill is to effect changes to assistance arrangements for certain industries. Any assessment of the financial impact of these arrangements must therefore anticipate the effect the tariff changes might have on the volume and origin of imports and, hence, on revenue collections. Having made this observation, it is estimated that the financial impact of these provisions will be as follows:

(1) the removal of separate articles direction No. 1 (1983) following the IAC's report on this matter is expected to have minimal financial impact. Indeed, the IAC noted that the direction had declined in scope and usage and that its impact in assistance terms was small;

(2) in respect of the changes relating to certain consumer electronic equipment and components, the assistance measures contained in the Bill are estimated to result in a $2m net gain to revenue in the first year of their operation. In subsequent years, however, when the longer-term tariff rates come into effect, a net reduction to revenue of some $5.5m is anticipated. This reduction may be offset to some extent by increased levels of imports:

(3) the removal of the 2 per cent or less duty on goods for use in the construction or modification of bountiable vessels is estimated to reduce revenues by $0.7m a year. This concession removes a cost disadvantage for vessels constructed in Australia which was not borne by imported vessels; and

(4) the impact of the Government's decision on certain steel will have little impact in this financial year. The decision could, however, result in additional revenue of up to $3m next financial year if there is no change to present import levels.

In respect of the post-1984 arrangements for the passenger motor vehicle industry, a net gain to the revenue is likely, particularly in the short term. This gain cannot be quantified with any precision.

In regard to the other provisions of the Bill it has also not been possible to quantify their financial impact with any degree of accuracy.

There are no 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.

Debate (on motion by Senator Reid) adjourned.