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Primary Industries (Excise) Levies Bill 1998
Bills Digest No. 76 1998-99
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal sta tus. Other sources should be consulted to determine the subsequent official status of the Bill.
Primary Industries (Excise) Levies Bill 1998
A significant proportion of the legislation of the each of the last four P arliaments has comprised legislation originating with the Agriculture, Fisheries and Forestry portfolio. A significant proportion of this activity is made up of legislation imposing levies and charges on agricultural, livestock and forestry products.
The principal uses of proceeds raided by such levies and charges include the funding of research and development, statutory marketing authorities and health and safety monitoring. Levy and charge legislation is imposed by the Commonwealth at the request of the relevant industry, and funds raised are matched by the Commonwealth up to a maximum of 0.5% of the relevant industry's gross value of production.
There are currently three principal pieces of legislation in the administration of agricultural, livestock and forestry products:
â¢ an imposition Act
â¢ a collection Act, and
â¢ a distribution Act.
An imposition Act imposes or sets the levy or charge. For example, the Coarse Grains Levy Act 1992 , the Oilseeds Levy Act 1997 and the Wine Grapes Levy Act 1979 are imposition Acts.
A collection Act provides for the collection of the levy or charge imposed by an imposition Act. The majority of primary industry levies and charges are collected under the provisions of the Primary Industries Levies and Charges Collection Act 1991 (the PILCC Act). Prior to the commencement of the PILCC Act each primary industry levy and charge comprised two pieces of legislation, an Act imposing the levy or charge and a collection Act. The principal effect of the PILCC Act 1991 was to do away with a separate levy or charge collection Act for each levy or charge imposed.
A distribution Act provides for the distribution and administration of moneys collected under a collection Act. For example, the Primary Industries and Energy Research and Development Act 1989 provides for the disbursement of proceeds collected under the relevant collection Act.
This Bill is part of a package of five Bills, the major purpose of which is to consolidate 40 levy and charge imposition Acts into two Acts. The other Bills in the package are:
â¢ Primary Industries (Customs) Charges Bill 1998
â¢ Pri mary Industries (Consequential Amendments) Bill 1998
â¢ National Residue Survey (Customs) Levy Amendment Bill 1998
â¢ National Residue Survey (Excise) Levy Amendment Bill 1998
The stated rationale given by the Government in the Second Reading Speech to the Bill for consolidation is to introduce administrative efficiencies and make the law more accessible to those involved in agriculture, fisheries and forestry.(1)
The stated benefits the Government expects to derive from the consolidation are:
It will enable the Government to better service industry by simplifying the process and reducing the long leadtimes surrounding changes to levies and charges and being more flexible and responsive to industry requests for such changes as well as for new or additional levies. It will introduce new efficiencies to the public sector by streamlining and improving the administration of levies and charges legislation. Finally it will reduce the call on the time of Parliament for the often involved process of making changes to levies and charges, by reducing the number of imposition Acts that will have to be amended to affect changes in the future from the current 40 to two.(2)
Primary Industries Levies Bill 1995, Primary Industries Charges Bill 1995 and Primary Industries Levies and Charges (Consequential Amendments) Bill 1995
On the 29 June 1995 the then Labor Government introduced the Primary Industries Levies Bill 1995, Primary Industries Charges Bill 1995 and Primary Industries Levies and Charges (Consequential Amendments) B ill 1995.
The Primary Industries Levies Bill 1995 and Primary Industries Charges Bill 1995 provided for levies and charges to be imposed on specified products:
â¢ in circumstances specified in the regulations
â¢ where the products were produce of primary industry and
â¢ where the levy/charge was an excise or customs duty.
The Bills provided for the rate of levy or charge to be determined in accordance with the regulations and that the regulations must specify, or specify a way of determining, the maximum total rate of levy that may be imposed on specified products. The levy or charge was to be payable by the person specified in the regulations as liable and the regulations could provide for exemptions from a levy or charge.
The rationale given by the then Government in the Explanatory Memorandum to the Primary Industries Levies Bill 1995 for the proposed amendments was:
A large proportion of the Department's legislation program is taken up with amending levy Acts. This amalgamation of levies into a standard framework will streamline the process and will involve significant savings in Parliamentary time. It will enable the operative rates of levies to be amended expeditiously at the request of the designated body/bodies by the tabling of a disallowable instrument rather than inclusion on the legislative program.
The then Liberal/National Party Opposition opposed the package of Bills in the House of Representatives. The Deputy Leader of the National Party, Mr Anderson M.P., in announcing that the Coalition would op pose the package, stated:
The numb of our concern is that these Bills would allow levies and charges to be imposed by regulation instead of having the present system, which requires legislation to establish levies and then to vary them. We know that the levies and charges in question are not imposed by the government but are sought by industry in order to undertake research and development and other activities beyond the scope of small scattered enterprises to organise and to put in place on their own.
The government's rationale in changing the process is to reduce the amount of time parliament spends amending levy and charge acts by introducing a standard framework that streamlines the process. But, so far as the coalition is concerned, this allows the government to fulfil an objective: it seems to want to remove one of the few opportunities afforded this parliament to debate the circumstances of industries whose efforts are fundamental to the economic health and prosperity of all Australian.
This is not our principal reason for opposing the legislation, important as it is. Our primary objection is to be found in the problems identified by the Senate Standing Committee for the Scrutiny of Bills, which has clearly identified problems that primarily concern the Coalition. The Committee found that the Primary Industries Charges Bill 1995 and the Primary Industries Levies Bill 1995 effectively delegate power to the minister to impose a tax. Quite simply, they remove from the primary legislation the power to establish a tax. The Coalition believes that this is inappropriate.(3)
The package of Bills were not debated in the Senate and lapsed with the dissolution of Parliament for the 1996 election.
It should be noted that th e regime proposed by this Bill and the Primary Industries (Customs) Charges Bill 1998 authorises the imposition of levy or charge by regulation where the levy or charge is an excise or customs duty. This will necessitate a determination each time a levy or charge is intended to be imposed by regulation of whether the levy or charge to be imposed is a duty of excise, a customs duty, or another type of impost such as a tax.
What is a tax?
The definition of what a tax is important, as duties of customs and exc ise are taxes, while royalties and fees for service are not.
The seminal definition of a tax is found in Matthews v Chicory Marketing Board (Vic) , where Latham CJ stated that a tax is:
a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.(4)
This definition was widened in Air Caledonie v Commonwealth , where the High Court said that there was no reason why:
the compulsory exaction of money under statutory powers could not be properly seen as taxation not withstanding that it was by a non-public authority or for purposes which could not properly be described as public.(5)
The elements which identify what is a tax were discussed further in Australian Tape Manufacturers Association Ltd. v Commonwealth(6) , in the context of an impost levied by the Commonwealth on blank tapes. The alleged royalty was to be paid by sellers of blank audio tapes according to sale, with the proceeds going towards a fund nominated by the Attorney-General. The High Court held that the levy was a tax, since it could not be categorised as a fee for a licence or privilege, fee for service, fine or penalty, or charge for the use of property. On the whole, the levy appeared to be an excise duty, as it was a charge imposed on vendors which could be passed on to the consumer.
This case shows that the traditional test of what is a tax is becoming more flexible, and that there is potentially scope for a wide range of imposts, levied by various authorities, to be classified as taxes and therefore subject to constitutional restrictions.
What is an excise?
On 5 August 1997 the High Court handed down a landmark decision on the customs and excise power in the Constitution (section 90): Ha and Hammond v NSW .(7) Section 90 provides in part:
On the imposition of uniform duties of customs the power of the Parliament to impose duties of customs and excise, and to grant bounties on the production or export of goods, shall become exclusive.
Over the past ninety years the High Court has been divided in its approach to the definition of 'duties of excise'. Initially such duties were confined to taxes on the production or manufacture of goods. This definition was gradually extended to include taxes on goods imposed at any point in the distribution process. Over time the Court came to accept that exceptions should be made for taxes on alcohol, tobacco and petrol, and hence the States have been permitted to tax these goods.
In Dennis Hotels Pty Ltd v Victoria(8) the High Court accepted in a 4:3 decision, that a licence fee calculated by reference to the value of alcohol purchased for sale in the previous year was not an excise. This backdating device has been upheld in Dickenson's Arcade v Tasmania(9) , in relation to tobacco, and in HC Sleigh Ltd v South Australia(10) , in relation to petrol, and was at issue in Ha and Hammond .
In Capital Duplicators Pty Ltd v Australian Capital Territory (No 2)(11) the High Court rejected the use of the backdating device when applied to the sale of X rated videos. The majority, however, refused to reconsider Dennis Hotels and Dickenson's Arcade.
In Ha and Hammond v NSW the plaintiffs were charged under the Business Franchise Licences (Tobacco) Act 1987 (NSW) with selling tobacco in NSW without a licence. The Act provides for a licence fee, which includes a set amount, plus an amount calculated by reference to the value of tobacco sold during the 'relevant period'. The 'relevant period' is defined as 'the month commencing 2 months before the commencement of the month in which the licence expires'. The plaintiffs argued that the licence fee imposed by the Act was an excise and hence invalid due to section 90 of the Constitution. A majority of the High Court (Brennan CJ, McHugh, Gummow and Kirby JJ) agreed:
Their Honours stated:
[D]uties of excise are taxes on the production, manufacture, sale or distribution of goods, whether of foreign or domestic origin. Duties of excise are inland taxes in contradistinction from duties of customs which are taxes on the importation of goods. Both are taxes on goods, that is to say, they are taxes on some step taken in dealing with goods. (12)
What are customs duties?
In Australia, there has been little judicial exposition of what constitutes a duty of customs for the purpose of section 90 of the Constitution, although early cases did suggest that there was somethin g unique which served to differentiate customs and excise duties from the range of other forms of taxation imposed by governments.
In Attorney-General (NSW) v Collector of Customs for NSW ,(13) the Steel Rails Case, the High Court considered the nature of a duty of customs, in the context of customs duty imposed on State property. The majority, Giffith CJ, Barton, O'Connor and Higgins JJ, found that duties of customs were imposed not on the goods the subject of the duty themselves, but on the act of importation. This conclusion was to be drawn from the language of the Constitution, most notably the recurrence of the use of the phrase 'duties of customs' when referring to federal import duties, in contrast to levies and charges of the States imposed for the purpose of inspection laws under section 112 of the Constitution. Furthermore, it appeared that the Commonwealth was given exclusive power over the subject of imports, thereby supporting the contention that customs duties related to the taxation of importation, rather than the goods themselves. The distinction between customs duties as being taxes on imported or exported goods and excise duties as being taxes on locally produced goods was maintained in a series of cases.
In Vacuum Oil Co. Pty. Ltd v Queensland(14) , both Dixon J and Starke J referred to customs duties as duties on import or export. The issue of customs duties also arose in Carmody v Lovelock(15) , where the High Court once again affirmed the view that such duties are taxes imposed on imports or exports. Gibbs J, with whom Windeyer J and Owen J agreed stated that:
It is clear that a tax imposed on the importation of goods into Australia is a duty of customs within the ordinary meaning of that expression and within the meaning it bears in the constitutional provisions … The impost in the present case answers that description. It purports to be a tax levied on goods imported into Australia. The evident object of the duty, the conditions in which it may be levied and the manner in which the amount of the duty is determined show that it is in reality what it purports to be, a tax imposed on the importation of goods. The fact that the tax might not become exigible until after the importation had been completed did not make it any the less a tax imposed in respect of the importation, or in other words the fact that the tax was retrospective in operation did not prevent it from being a duty of customs.(16)
Section 55 of the Constitution provides:
Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.
Laws imposing taxation, except laws imposing duties of customs or of excise shall deal with one subject of taxation only; but laws imposing duties of customs shall deal with duties of customs only, and laws imposing duties of excise shall deal with duties of excise only.
Given that this package of Bills seeks to consolidate 40 taxes into 2 Acts, the question might be asked whether the package is in breach of section 55 paragraph 2, by virtue of dealing with more than one subject of taxation.
The answer to t he above question is, in my opinion, no. Laws imposing customs and excise duties, even though they are taxes, are excepted from the requirement of section 55 paragraph 2 that laws imposing taxation shall deal with one subject to taxation only ( Mathews v Chicory Marketing Board (Vic) )(17). Thus, provided a customs law deals with customs, or an excise law with excise, multiple customs or excise items within the one document are, in my opinion, of no consequence.
The consolidation of 40 taxes into 2 Acts as proposed by this package also raises the question of why this action was not taken decades earlier. The answer to this question is unclear. Most probably the answer is a combination of reasons, including uncertainty of what an excise is was and political reasons such as those expressed by the then Opposition when opposing the Primary Industries Levies Bill 1995, Primary Industries Charges Bill 1995 and Primary Industries Levies and Charges (Consequential Amendments) Bill 1995.(18)
The Gover nment indicates in the Second Reading Speech to the Bill that it has consulted with industry about the consolidation package and that industry is in support of the package. There has been no adverse reaction to the Government's proposal reported in either the rural press or the major national dailies.
In addition to consolidating 27 levies into the one Act, this Bill provides for future levies to be imposed by regulation. By virtue of section 48 of the Acts Interpretation Act 1901 such regulations are subject to disallowance by Parliament.
In relation to Parliamentary scrutiny of levies imposed by regulation, the Government states:
The Government intends that such regulations will be required to be accompanied by a report setting out the extent to which the proposed levy or charge complies with the Government's general principles for new primary industry levies and charges, when tabled in Parliament and will be subject to disallowance by Parliament. In addition, the Office of Regulation Review examines new levies through its regulation impact process and a Regulation Impact Statement is required for each new levy or charge.(19)
Clause 6 provides that the Bill only authorises the imposition of levies in so far as the levies are duties of excise within the meaning of section 55 of the Constitution. The reader is referred to the 'Background' of this Digest for an explanation of why the proposed levies must be duties of excise.
Schedules 1-26 impose levies on 27 agricultural, livestock and forestry products. The Schedules do not impose any new levies or additional rates of levy. Schedules 1-26 replace provisions for the imposition of levies contained in 27 separate levy imposition Acts. These Acts, which are being repealed by the Primary Industries Levies and Charges (Consequential Amendments) Bill 1998 are the:
Beef Production Levy Act 1990
Buffalo Slaughter Levy Act 1997
Cattle Transactions Levy Act 1997
Coarse Grains Levy Act 1992
Cotton Levy Act 1982
Dairy Produce Levy (No. 1) Act 1986
Deer Slaughter Levy Act 1992
Deer Velvet Levy Act 1992
Dried Fruits Levy Act 1971
Forest Industries Research Levy Act 1971
Goat Fibre Levy Act 1989
Grain Legumes Levy Act 1985
Grape Research Levy Act 1986
Honey Levy Act (No. 1) 1962
Honey Levy Act (No. 2) 1962
Horticultural Levy Act 1988
Laying Chicken Levy Act 1988
Livestock Slaughter (Processors) Levy Act 1997
Livestock Transactions Levy Act 1997
Meat Chicken Levy Act 1969
Oilseeds Levy Act 1977
Pasture S eed Levy Act 1971
Pig Slaughter Levy Act 1971
Rice Levy Act 1991
Sugar Cane Levy Act 1987
Wheat Levy Act 1989
Wine Grapes Levy Act 1979
Item 2 of Schedule 27 provides that the regulations may impose a levy on the produce of a primary industry. The term 'produce of primary industry' is defined by item 1 of Schedule 27 to mean products that result from any of the following:
â¢ agriculture or the cultivation of land
â¢ the maintenance of animals for commercial purposes
â¢ forest operations
â¢ hunting or trapping
â¢ any other primary industry activity.
Two or more levies may be imposed on the same products or on different products ( item 3 of Schedule 27 ). In addition, a levy may be imposed on a particular product even if another Schedule of this Bill applies to the product ( item 5 of Schedule 27 ).
Item 6 of Schedule 27 provides that the rate of a prescribed levy is as set out in the regulations. Item 9 of Schedule 27 provides that the total rate of levy, or rates of levies, that may be imposed on animal products must not exceed whichever is the greater of the following maximums:
â¢ $5 per unit of the animal product
â¢ 35 cents per kilogram of the animal product, or
â¢ 7% of the value of the animal product.
The term 'animal product' is defined by item 1 of Schedule 27 to mean an animal, any part of an animal, anything produced by an animal, or anything wholly or principally produced or derived from an animal.
Item 10 of Schedule 27 provides that the total rate of levy, or rates of levies, that may be imposed on plant products must not exceed whichever is the greater of the following maximums:
â¢ $5 per unit of the plant product, or
â¢ 5% of the value of the plant product.
The term 'plant product' is defined by item 1 of Schedule 27 to mean a plant, any part of a plant, anything produced by a plant, or anything wholly or principally produced or derived from a plant.
The person liable to pay a prescribed levy will be as set out in the regulation ( item 11 of Schedule 27 ).
The regulations may provide for exemptions from levies ( item 12 of Schedule 27 ).
1. Primary Industries (Excise) Levies Bill 1998, Second Reading Speech , p. 1.
2. Ibid., p. 2.
3. Parliamentary Database, Extract from the Weekly House Hansard , 19 October 1995, p. 2485.
4. (1938) 60 CLR 263 at 276.
5. (1988) 165 CLR 462 at 467.
6. (1993) 176 CLR 480.
7. (1960) 104 CLR 529.
8. (1959-1960) 104 CLR 529.
9. (1974) 130 CLR 177].
10. (1977) 136 CLR 475.
11. (1993) 178 CLR 597.
12. (1997) 189 CLR 465 at 499.
13. (1908) 5 CLR 818.
14. (1934) 51 CLR 108.
15. (1970) 123 CLR 1.
16. (1970) 123 CLR 1 at 27.
17. (1938) 60 CLR 263.
18. See p. 3 of this Digest.
19. Primary Industries (Excise) Levies Bill 1998, Second Reading Speech , p. 3.
20 January 1999
Bills Digest Service
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