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Customs Tariff Amendment Bill (No. 3) 2001

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1998-1999-2000-2001

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

EXCISE TARIFF AMENDMENT BILL ( No. 2) 2001

CUSTOMS TARIFF AMENDMENT BILL (No. 3) 2001

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

(Circulated by authority of the

Treasurer, the Hon Peter Costello, MP)

 



T able of contents

General outline and financial impact.............................................. 1

Chapter 1      Indexation of rates of duty....................................... 3

Chapter 2      Regulation impact statement................................... 7

 



Excise Tariff Amendment Bill (No. 2) 2001 and Customs Tariff Amendment Bill (No. 3) 2001

The purpose of this legislation is to amend the indexation provisions of the Excise Tariff Act 1921 (Excise Tariff Act) to restrict the application of the provisions to all excisable goods other than petroleum fuels classified to items 11 and 12 of the Schedule to the Excise Tariff Act.

As a consequence of these amendments, the Customs Tariff Act 1995 is amended to remove certain excise equivalent imported petroleum fuels from the table of paired Customs subheadings and Excise Tariff items in subsection 19(1) that are subject to indexation.

Date of effect :  The amendments will commence on Royal Assent.

Proposal announced :  Abolition of excise and customs duty indexation for petroleum fuels was announced by the Prime Minister on 1 March 2001 as part of a package of cuts to fuel taxes.

Financial impact :  The cost to the Budget of the abolition of petroleum fuels indexation is $150 million in 2001-2002, $425 million in 2002-2003, $785 million in 2003-2004 and $1,135 million in 2004-2005.

Compliance cost impact :  Nil.

Summary of regulation impact statement

Regulation impact on business

Impact :  The abolition of petroleum fuels indexation is expected to affect petroleum manufacturers, importers and licensed distributors, and business users of petroleum fuels.

Main points :

·       There may be a minor reduction in ongoing compliance costs for petroleum manufacturers, importers and licensed distributors, as less frequent changes will be needed to their systems to cater for new duty rates.

·       Industries that use duty-paid petroleum fuels as inputs to production, including the aviation and transportation industries, should benefit from lower costs. The extent of the impact across industry sectors and for individual operators will vary.

·       Individual non-business consumers should benefit from lower retail prices for fuels, including petrol and home heating oil.

 



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Indexation of rates of duty

EXCISE TARIFF AMENDMENT BILL (No. 2) 2001

Outline of chapter

1.1         This chapter explains amendments to the indexation provisions of the Excise Tariff Act 1921 (Excise Tariff Act) that restrict the application of the provisions.

1.2         Item 1 of Schedule 1 to this Bill alters section 6A of the Excise Tariff Act.

Context of reform

1.3         The abolition of indexation of excise duty for all petroleum fuels was announced by the Prime Minister on 1 March 2001 as part of a package of cuts to petrol and diesel fuel excise. Alteration to the Excise Tariff Act will give effect to this decision.

Summary of new law

1.4         Section 6A of the Excise Tariff Act will be amended to remove certain petroleum products from the indexation provisions.

Comparison of key features of new law and current law

New law

Current law

Subsection 6A(1A) is inserted to exclude petroleum products classified to items 11 and 12 of the Schedule to the Excise Tariff Act from the indexation provisions (section 6A).

The indexation provisions (section 6A) include petroleum products classified to items 11 and 12 of the Schedule to the Excise Tariff Act.

Detailed explanation of new law

1.5         Automatic indexation of rates of excise duty is provided for in section 6A of the Excise Tariff Act. It applies, with certain minor exceptions, to all excisable alcohol, tobacco and refined petroleum products that attract a duty rate other than ‘free’.

1.6         Section 6A of the Excise Tariff Act will be amended by inserting a new subsection 6A(1A) to exclude all petroleum products classified to items 11 and 12 of the Schedule to the Excise Tariff Act from the application of the provisions, for the indexation period commencing on 1 August 2001 and any subsequent indexation period.

Customs Tariff Amendment Bill ( No . 3) 2001

Outline of chapter

1.7         This chapter explains amendments to the Customs Tariff Act 1995 (Customs Tariff Act) that will delete certain excise equivalent imported petroleum fuels from the indexation provisions of the Customs Tariff Act.

1.8         Item 1 of Schedule 1 to this Bill inserts an amended table in subsection 19(1) of the Customs Tariff Act.

Context of reform

1.9         The abolition of indexation of customs duty for all petroleum fuels was announced by the Prime Minister on 1 March 2001 as part of a package of cuts to petrol and diesel fuel excise. Alteration to the Customs Tariff Act will give effect to this decision.

Summary of new law

1.10       The Customs Tariff Act will be amended by repealing and replacing the table in subsection 19(1), thereby removing certain petroleum products from indexation on or after 1 August 2001.

Comparison of key features of new law and current law

New law

Current law

The table in section 19 of the Customs Tariff Act is amended to delete imported petroleum products equivalent to those classified to item 11 of the Schedule to the Excise Tariff Act for the purposes of indexation of duty rates.

The table in section 19 of the Customs Tariff Act includes imported petroleum products equivalent to those classified to item 11 of the Schedule to the Excise Tariff Act for the purposes of indexation of duty rates .

Detailed explanation of new law

1.11       The table in subsection 19(1) of the Customs Tariff Act contains Customs Tariff subheadings that are paired to equivalent Excise Tariff items for the purposes of indexation of rates of customs duty in line with excise rates of duty under the provisions of section 6A of the Excise Tariff Act.

1.12       The table will be repealed and reinserted without the paired Customs Tariff subheadings and Excise Tariff items for petroleum products, with the result that the customs duty on these products will no longer be subject to indexation on or after 1 August 2001.

Application and transitional provisions

1.13       These amendments will apply in respect of indexation that occurs on or after 1 August 2001.

 

 



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Regulation impact statement

Policy objective

2.1         In recognition of public concern about petrol prices, a package of Government measures to cut petrol and diesel fuel excise was announced by the Prime Minister on 1 March 2001.

2.2         As part of the package, the Prime Minister announced that legislation would be introduced in the Parliament as soon as possible to abolish indexation of excise and customs duty for all petroleum fuels

 - that is, leaded and unleaded petrol, diesel, aviation fuels and burner fuels (fuels for use otherwise than in an internal combustion engine).

Implementation options

2.3         Automatic indexation of rates of excise and customs duty is provided for in specific provisions of the Excise Tariff Act 1921 and the Customs Tariff Act 1995 . It applies, with some exceptions, to all excisable alcohol, tobacco and refined petroleum products that attract a duty rate other than ‘free’, and excise equivalent imported goods attracting customs duty.

2.4         As the change announced by the Government requires alteration to Excise and Customs legislation, other options were not applicable.

Assessment of impacts

2.5         The abolition of petroleum fuels indexation is expected to affect petroleum manufacturers, importers and licensed distributors, business users of petroleum fuels, and individual non-business consumers.

Analysis of costs / benefits

Costs of compliance

2.6         There may be a reduction in ongoing compliance costs for petroleum manufacturers, importers and licensed distributors (numbering around 30), as less frequent changes will be needed to their systems to cater for new duty rates. This reduction is likely to be minor, given that the procedures and systems these businesses have in place were designed to handle the regular indexation changes with minimal effort.

Administration costs

2.7         There will be very little impact on the administrative costs for the Australian Taxation Office and Australian Customs Service, as rates of duty for other excisable and excise equivalent imported goods, such as alcohol and tobacco products, will continue to be subject to the automatic indexation provisions.

Financial impact

2.8         The cost to the Budget of the abolition of excise and customs duty indexation for petroleum fuels is $150 million in 2001-2002, $425 million in 2002-2003, $785 million in 2003-2004 and $1,135 million in 2004-2005.

Economic costs

2.9         Retail prices of fuels used by individual non-business consumers, for example, petrol and home heating oil, should in the future be lower than they otherwise would be, had indexation not been abolished. This could affect consumption patterns.

2.10       Industries that use duty-paid petroleum fuels as inputs to production, including the aviation and transportation industries, should benefit from lower costs than would otherwise be the case. The extent of the impact across industry sectors and for individual operators will vary. Lower input costs could result in lower retail prices for products and could affect consumption patterns.

2.11       As the price of petroleum products is a factor in determining the consumer price index, there could be an effect on inflation rates.

Consultation

2.12       Prior public consultation was not appropriate on this matter as advance release of details of the proposed change would likely have compromised the Prime Minister’s announcement.

Conclusion and recommended option

2.13       The abolition of indexation of excise and customs duty for petroleum fuels is one of a package of Government measures announced on 1 March 2001 to cut petrol and diesel fuel excise. As indexation of duty rates is a legislated mechanism, only amendments to Excise and Customs legislation can give effect to the Government’s decision.