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Thursday, 11 October 1984
Page: 2226

(Question No. 1791)

Mr Andrew asked the Treasurer, upon notice, on 12 September 1984:

(1) Why has the sales tax rate on imported alcoholic cider been reduced to 10 per cent by the 1984-85 Budget while the tax on imported non-alcoholic cider remained unchanged at 20 per cent.

(2) Does the rationale for the change to sales tax on cider also apply to coffee, tea and cocoa; if not, why not.

Mr Keating —The answer the honourable member's question is as follows

(1) Prior to the 1984-85 Budget, a 20 per cent sales tax applies to imported alcoholic cider, while domestic alcoholic cider was exempt from sales tax. Under the 'grandfather' provisions of the General Agreement on Tariffs and Trade (GATT ), such discrimination against imports may be maintained provided that the legislative provisions pre-date Australia's accession to the GATT and the basic character of the arrangements has not subsequently been changed. These ' grandfather' arrangements were, however, disturbed by the introduction, in this year's Budget, of a 10 per cent sales tax on alcoholic cider; in these circumstances our GATT obligations required that imported alcoholic cider no longer be taxed at a higher rate than domestic alcoholic cider. As a result, the sales tax on imported alcoholic cider was lowered to 10 per cent (the rate which applies to domestic alcoholic cider). Because cider is not subject to a GATT binding on the level of Customs duty, it was possible for the pre-existing discriminatory 20 per cent sales tax on imported alcoholic cider to be replaced by an additional ad valorem Customs duty of 23 per cent which is equivalent, in protective effect, to the pre-existing discriminatory sales tax. As a result, the level of protection afforded the domestic alcoholic cider industry is unchanged by the measures announced in the 1984-85 Budget.

(2) Changes in the sales tax apply only to alcoholic cider. Domestic non- alcoholic cider remains exempt from sales tax (and, to maintain the existing protective margin, imported non-alcoholic cider remains taxable at the general rate of sales tax). The Government considers that the costs to society associated with the consumption of alcohol justify the differential tax treatment of alcoholic cider (and alcoholic wine) vis-a-vis non-alcoholic cider, non-alcoholic wine and other non-alcoholic beverages such as coffee, tea and cocoa (all of which are exempt from sales tax).