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Portfolio: Industry, Technology and Regional Development
Purpose
To increase the duty payable on imported tobacco and tobacco products and certain petroleum products.
Background
The stated reason for the increases in duty proposed by this Bill are twofold. First, to increase revenue to assist in reducing the deficit. The estimated Budget deficit for 1993- 94 is $16008 million, compared with a deficit of $14571 million in 1992- 93. Secondly, to address the Government's concerns about the social costs of smoking and lead in petrol. 1
(a) Petrol: Exposure to high lead levels is said to result in a number of negative health effects, including decrease in cognitive skills; increase in blood pressure; premature birth and foetal growth; cancer; and anaemia. 2 High lead levels in air is said to be a concern because it is a direct (i.e. in the form of particles or aerosols which can be inhaled) and indirect (i.e. deposited on soils, dusts, or plants, or inhaled by animals, all of which can be ingested by people) source of exposure. The main source of lead emissions to air in Australia is from lead in petrol which makes up approximately 90% of lead emissions in urban areas. 3 Tetraethyl lead and tetramethyl lead are used as petrol additives to increase the octane level of fuel and prevent premature detonation in engines. Such lead is also used as a lubricant to reduce wear on engine valve seats. Australian leaded petrol contains between 0.30 and 0.84 g/L; over 60% of cars in Australia run on leaded fuel; and one third of the 10 million cars registered in Australia are over ten years old. 4 In 1991, Australia used more than 10 billion litres of leaded petrol, containing more than 4800 tonnes of lead, and 6.7 billion litres of unleaded petrol. It has been stated that this total `... works out to over 1000 litres of petrol for every person in Australia, exceeded only by the United States and Canada. Australia therefore appears to have the highest per capita emissions of lead from cars in the world. 5 While available Australian scientific data does not conclusively prove a correlation between the level of lead in petrol and the amount of lead in blood levels, international evidence does point to such a correlation. Other governments acted on these findings with leaded petrol being phased out in the United States and Canada. 6
The increase in the customs and excise duty payable on certain petroleum products proposed by this Bill and the Excise Tariff (Deficit Reduction) Bill 1993 have not been well received. For example, the President of the National Farmers Federation, in a Media Release of 17 August 1993 said `... the across the board rise in petroleum excise would result in a $580 million tax on business. ... If a five cents a litre levy is needed to induce a change to unleaded petrol, then a staged introduction is simply sacrificing our health for political gain. ... As a result of the levy on leaded petrol, regional Australia will pay a $108 million tax, of which farm families will contribute $20 million.'. The Shadow Minister for the Environment, in a Press Release of 17 August 1993, said `The 5 cent tax a litre differential is not a sufficient incentive for lower income earners to buy a new car, especially after they find out they are paying an average of $180 more sales tax on a new car. ... The Government has not looked at the alternative solutions to the lead problem, instead it has gone for the revenue raising, socially unjust path of taxing people with older cars who tend to be people on lower incomes. If the Government's real concerns were to eradicate the problem of lead in the blood levels of children then the money raised by the taxes should go to the real solutions that will lower those levels such as removing older cars from our roads. Instead the money is going where the Government's real interests lie namely Consolidated Revenue.'. The Leader of the Australian Democrats in her 19 August 1993 `Budget 1993 - Address in Reply', said `How are we going to lower lead levels if we make it impossible for those who drive cars which run on leaded petrol to change over to unleaded vehicles? The combination of the halving of leaded petrol car values and 10 cents a litre on super fuel in 18 months, without any adequate compensatory measures is just counter- productive.'.
(b) Tobacco: Tobacco is the major cause of drug related death in Australia with approximately 18000 deaths or 71% of all drug related deaths being attributable to tobacco use in 1990. In the adult population, the proportion of those who smoke has decreased in males from 72% in 1945 to 30% in 1989. In females, the proportion has increased from 26% in 1945 to 31% in 1980 and subsequently decreased to 27% in 1989. The cost of tobacco abuse to the Australian community has been estimated to be approximately $6.8 billion. In 1989- 90 Australians spent on average $235 each on cigarettes and tobacco. Total government revenue from tobacco as a proportion of total government revenue decreased from 1.8% to 1.4% (or $1.8 billion) in 1988- 89. However, as a result of an increase in tobacco franchise taxes from 1988- 89 to 1989- 90, this proportion increased to 1.6% (or $2.1 billion) in the latter year. 7
(c) Date of Operation: The question has been raised as to the source of the authority for the imposition of the increase in customs duty prior to passage of the legislation. In other words, how is it that the price of petrol and tobacco has increased before the legislation imposing the increases has been approved by Parliament? There appears to be no express authority in the relevant legislation for the duty to be collected prior to the formal passage of the legislation. However, it may be argued that the requisite authority can be derived from sections 226 and 273EA of the Customs Act 1901 and sections 114 and 160B of the Excise Act 1901 by necessary implication. Further, it may be argued that the collection of the duty as from 18 August 1993 has a practical consequence, in view of the fact that the Bills, when passed, have effect from 18 August 1993 and the duty is then due and owing from that date. 8
(d) Financial Impact: The increases in the duty on tobacco and tobacco products and certain petroleum products proposed by this Bill, are estimated in the Explanatory Memorandum to this Bill to result in increased duty collections (including excise duty) of $835 million in 1993- 94 and $1.5 billion in 1994- 5.
Main Provisions
The principal effects of the amendments to the Customs Tariff Act 1987 contained in the Schedule to this Bill will be to:
* increase by 3%, effective from 18 August 1993 (clause 2), the duty payable on imports of tobacco and tobacco products;
* provide for additional increases of 3% in February and August 1994 and February and August 1995, in the duty payable on imports of tobacco and tobacco products;
* increase by $0.03 per litre, effective from 18 August 1993 (clause 2), the duty payable on imports of petroleum products, other than aviation turbine fuel and aviation gasoline;
* provide for additional increases of $0.02, $0.02 and $0.03 per litre in February and August 1994 and February 1995 in the duty payable on imports petroleum products, other than aviation turbine fuel and aviation gasoline, with a lead content above 13 milligrams per litre; and
* provide for additional increases of $0.01 and $0.01 per litre in February and August 1994 in the duty payable on imports of petroleum products, other than aviation turbine fuel and aviation gasoline, with a lead content at or below 13 milligrams per litre.
Endnotes
1. Second Reading Speech (H of R), Excise Tariff (Deficit Reduction) Bill 1993, p. 1.
2. Berry, M., Garrard, J., Greene, D., Revising Australian Guidelines for Lead, May 1993, pp. 7 and 8.
3. Ibid., at p. 53.
4. Edwards- Bert, P., Calder, I., Maynard, E., National Review of Public Exposure to Lead in Australia, South Australian Health Commission, 1993, p. 15.
5. Berry, M., Garrard, J., Greene, D., Revising Australian Guidelines for Lead, May 1993, pp. 55 and 56.
6. New Scientist, 27 May 1982, p. 570.
7. Department of Health, Housing and Community Services, Statistics on Drug Abuse, 1992, p. 21.
8. See Y. Marsh, `Petrol Prices Beat the Budget', Parliamentary Research Service, August 1993.
Bills Digest Service 24 August 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.
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Published by the Department of the Parliamentary Library, 1993.