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Sales Tax (Customs) (Deficit Reduction) Bill 1993



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House: House of Representatives

Portfolio: Treasury

Purpose

To increase the rate of sales tax payable on wine and cider and to provide for two 1% increases in the general rates of sales tax.

Background

This Bill forms part of a package of eight Bills that replace the Taxation (Deficit Reduction) Bill 1993. The initiative follows debate on the constitutional validity of the original Bill, which contained amendments to a range of taxes. The change to the package of eight Bills was announced by the Treasurer on 21 September 1993 and followed the report of the Senate Standing Committee on Legal and Constitutional Affairs which found that there was a real risk that the High Court would find that the Bill, once it became an Act, would breach section 55 of the Constitution. 1

The package of Bills contains five sales tax Bills which reflect the nature of sales tax. Depending on the circumstance in which sales tax is imposed, the tax may be defined to be a customs duty, an excise duty or a tax.

To satisfy section 55 of the Constitution, there are three separate Bills imposing the change in sales tax. These are:

* Sales Tax (Customs) (Deficit Reduction) Bill 1993;

* Sales Tax (Excise) (Deficit Reduction) Bill 1993; and

* Sales Tax (General) (Deficit Reduction) Bill 1993.

In addition, the Sales Tax (In Situ Pools) (Deficit Reduction) Bill 1993 is necessary to amend the separate Act that imposes sales tax in respect of in situ pools. Again, this is necessary to prevent a possible challenge under section 55 of the Constitution.

Also refer to the Digests for the related Bills listed on the cover to this Digest.

Main Provisions

Wine and Cider

Unlike beer and spirits, wine and cider are not subject to excise. However, all of these products are subject to the general rate of sales tax, currently 20%. The result has been to give wine and cider a price advantage when compared to beer and spirits. In the Budget, the Treasurer announced that the rate of sales tax on wine would increase from 20% to 31%. A similar percentage increase also applies to low alcohol wines. This will lead to an increase in wine prices, estimated at approximately 50 cents for a $10 bottle of wine. While the increase in sales tax should result in a drop in domestic sales, exports should not be affected as sales tax does not apply to goods exported from Australia before sale here. The increase in sales tax is expected to raise $70 million in 1993- 4.

Rates of Sales Tax

Wholesale sales tax contributed $9440 million to consolidated revenue in 1992- 3 and is estimated to increase by 10.6% this year to $10 230 million. Currently, goods may fall into one of five categories for sales tax purposes, the may be exempt or taxed at 10%, 15%, 20% or 30%. The majority of goods are taxed at the general rate of 20%. (This Bill will introduce a new rate of 45% for part of the price of luxury cars - see above.) In the 1993- 94 Budget speech the Treasurer announced that the 10%, 15%, 20% and 30% rates would increase by 1% from 18 August 1993 and by a further 1% on 1 July 1995. The measures are estimated to raise an additional $435 million in 1993- 4, increasing to $1345 million in 1996- 7.

The increases in sales tax will be achieved by clauses 5 and 6 which give effect to Schedules 1 and 2 of the Bill.

Endnotes

1. Senate Standing Committee on Legal and Constitutional Affairs, Constitutional Aspects of the Taxation (Deficit Reduction) Bill 1993, September 1993, p. 1.

C. Field (06 2772439)

Bills Digest Service 28 September 1993

Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1993.

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1993.