The Customs Tariff Amendment Bill (No. 1) 2000, which is now before the Senate, contains amendments to the Customs Tariff Act 1995. This is the second of a package of two Bills which introduce per stick rates of duty on lightweight tobacco products that are marketed in stick form and tariff measures to further combat fuel substitution.

The amendments contained in this Bill have been previously tabled as Customs Tariff Proposals and now require incorporation in the Customs Tariff Act.

Schedule one of the Bill introduces a per stick rate of customs duty of $0.18872 per stick, a rate which has operated since the first of November 1999.

Schedule two of the Bill commences on the fifteenth of November 1999 and contains customs tariff measures to deter fuel substitution.

I commend the Bill.

The amendments proposed in this Bill ratify changes to the Excise Tariff Act 1921 in relation to tobacco and petroleum excise which have already taken effect. These proposals were tabled in Parliament on 21 October 1999 and 24 November 1999, respectively.

The changes are part of the Government's reforms for a new tax system.

Tobacco products

From 1 November 1999 a `per stick' rate of excise for tobacco has applied on most cigarettes, lightweight cigars, bidis and any other light weight tobacco products marketed in stick form.

Prior to the per stick rate, tobacco was taxed on a per kilogram rate. This encouraged the manufacture of low value, low weight cigarettes packaged in large packets. The taxation advantage had skewed consumption towards light weight, high volume cigarettes, which experts consider more harmful on health grounds.

The per stick arrangements are similar to those used for taxing tobacco in most other countries.

All other tobacco products, such as heavy cigarettes, cigars, roll your own and pipe tobacco will pay duty on a per kilogram rate. The rates have been set so that there is parity between cigarettes subject to the per stick rate and roll your own tobacco.

These arrangements also replace the complex arrangements that were introduced as a measure to shore-up state revenue, when business franchise fees on tobacco products were held to be unconstitutional by the High Court.

To address the illicit tobacco industry, this Bill also inserts a definition of tobacco to clarify when tobacco leaf becomes excisable. This will restrict access to tobacco leaf to registered growers, dealers and licensed manufacturers.

Petroleum products

This Bill also addresses petroleum excise evasion activities.

Petroleum excise was being evaded by some parties by exploiting weaknesses in the tariff structure that allowed certain fuel substitution activities to occur. These activities, such as replacing petrol or diesel fuel used as a transport fuel with product which is subject to a lower rate of excise, lead to unfair competition and destabilisation of the marketplace.

As of 15 November 1999, the particular tariff items that were being abused were removed.

The changes do not impose an additional excise liability. Arrangements are in place to ensure that those with a legitimate need to access certain products at a free rate of duty can do so.

The changes compliment the marker system the Government introduced in January 1998 that required excise free petroleum products to carry a chemical marker. The marker system also makes it illegal to sell these products in circumstances that attract the highest rate of excise, such as for use in an internal combustion engine and on road use.

The changes also more clearly deliver the Government's decision to make certain recycled products subject to excise.

As I mentioned earlier, this Bill simply confirms changes to the excise tariff made by proposal which the Parliament has already considered.

Full details of the measures in this Bill are contained in the explanatory memorandum.

I commend the Bill.