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Wednesday, 9 November 1983
Page: 2465

Mr JOHN BROWN (Minister for Sport, Recreation and Tourism, Minister for Administrative Services and Minister Assisting the Minister for Industry and Commerce)(11.04) —I move:

That the Bill be now read a second time.

The main purpose of this Bill is to amend the Excise Tariff Act 1921 to introduce new provisions into that Act which will have the effect of automatically indexing certain traditional excise duty rates at six monthly intervals. The introduction of this procedure was announced by the Treasurer (Mr Keating) in his Budget Speech on 23 August 1983. The first of the increases took effect from 8 p.m. eastern standard time on that night and reflected the 4.3 per cent increase in the consumer price index during the March and June quarters of this year. This increase was effected by the introduction of Excise Tariff Proposals No. 3 and Customs Tariff Proposals No. 10 tabled on Budget night. The opportunity has been taken to incorporate Excise Tariff Proposals No. 3 in this Bill and thus avoid the need for additional amending legislation. I will briefly outline the details of these and other proposals in a few moments.

The indexation provisions in this Bill will provide that from now on. The six monthly indexation increases will occur automatically in February and August of each financial year. The Treasurer mentioned in his Budget Speech that past increases in nominal rates of excises have not been sufficiently frequent or, in aggregate, large enough to counteract the eroding effects of inflation on real rates of excise. Between 1973-74 and 1982-83, annual revenue from the traditional excises, measured in constant 1982-83 dollar terms, fell from $4.3 billion to $3.3 billion. Over the same period, the share of traditional excise collections in total Budget receipts fell from 13 per cent to a little over 7 per cent. Mr Speaker, despite this trend, some of the past discretionary increases have occasionally proved disruptive, destabilising the sales patterns of the industries concerned and imposing sudden and large price increases on consumers.

The indexation arrangements contained in this Bill are designed to eliminate effectively these problems and will maintain the real value of excise collections. The Government considers that this new system will afford a greater degree of stability for consumers and industry alike. The excises will rise gradually in line with inflation as wages and other incomes increase. The Treasurer also mentioned that the new arrangements will effectively place excisable products on much the same basis as products subject to sales tax.

In Budget Statement No. 4 of Budget Paper No. 1 it was estimated that the indexation of excise rates, including the new rates achieved by discretionary rate increases with effect from Budget night, will raise about $236m in 1983-84. Indexation of the excise equivalent component of like Customs duties is estimated to raise a further $13m in 1983-84. Full year revenue gains will be similar in magnitude to the 1983-84 gain. Gains in future years will be heavily influenced by future inflation rates. The indexation arrangements are considered to be straightforward and will not involve any additional staffing or administrative costs, nor are they expected to generate any significant compliance or administrative costs for the excise-paying business community.

Mr Speaker, I now turn to the other provisions in this Bill. Clause 4 of the Bill proposes to introduce a revised excise system for crude oil produced from fields discovered before 18 Septembr 1975. Prior to July 1983 the crude oil excise system contained a number of serious anomalies. In particular, returns to producers in some circumstances decreased as production increased, whereas in other circumstances these returns increased while the import parity price fell. When the Government came to office it saw a need to remove these anomalies with the aim of achieving a more rational excise scale, one that did not contain disincentives to producers and that protected the return to the community through a more predictable and stable pattern of crude oil excise revenues.

It is the Government's intention that these anomalies and other problems be eventually tackled through the introduction of a resource rent tax but that approach will take some time to implement. In the meantime the Government considers that there is an urgent need to revise the crude oil excise system. The proposed revised system is effective from 1 July 1983 and provides for increases in excise rates as the annual production from a field increases. It has been operating on a provisional basis since 1 July 1983 under the established scheme of rebates provided for by section 77 of the Excise Act 1901. The continued use of rebates is, however, unsatisfactory in a number of respects . One important fact is that their use will become impractical should there be a change in the import parity price before the end of 1983-84.

The revised excise scheme, which has been the subject of extensive consultation with producers, will ensure the systematic collection of excise duty during a financial year, analogous to the pay as you earn provisions in the income tax legislation, and will minimise fluctuations in receipts of excise. It caters for import parity price change in a financial year and for fields which commence production in a financial year. An additional feature, consistent with the proposed automatic excise indexation scheme, is that provision has been made for the excise duty rates in respect of crude oil to adjust automatically in accordance with movements in the import parity price of Bass Strait crude. It will also have a minimal impact on Government revenues. Revenues in 1983-84 under the new scheme will approximate those under the previous scheme-that is about $3,400m in 1983-84. Additional revenues may accrue, however, to the producers and to the community from any increased crude oil production that may result from the removal of the anomalies.

I mentioned earlier that the opportunity has been taken to incorporate outstanding excise tariff proposals in this Bill. The proposals so incorporated are numbered 1 to 8 and are proposed to be enacted by clauses 5, 6 and 7 of the Bill. Clause 5 of the Bill, effective from 1 July 1983, increases the rate of excise duty on avgas and avtur by 2c per litre and is expected to yield about $ 18m in 1983-84. This increase was announced by the Treasurer in his economic statement to the House on 19 May 1983 and was made instead of an increase in air navigation charges. Alterations from that date also increase the excise duty on motor spirit and diesel fuel by one cent per litre for the purpose of financing the Australian bicentennial road development program. The excise component of this program is now 2c and the estimated net gain to revenue for the program for 1983-84 is $410m. Paragraph (a) of the clause alters the concessional excise tariff treatment available to goods for international organisations. This is a technical amendment involving no loss of concessions to the organisations.

Clause 6 of the Bill contains the alterations to the excise tariff to give effect to the excise measures outlined by the Treasurer in his Budget Speech on 23 August 1983. Briefly, the alterations, which operate from 8.00 p.m. on Budget night, increase the duty on beer, spirits, manufactured tobacco products and certain refined petroleum products. They also extend the excise base to include fortifying spirit, fuel oil, heating oil and power and lighting kerosenes and remove the duty on amylic alcohol and fusel oil, playing cards, cigarette tubes, paper and papers and matches. The tariff on tobacco products is also restructured. I draw honourable members' attention to the fact that the rates, shown in clause 6 of the Bill, reflect the alterations made to the Budget excise rates in respect of fortifying spirit-a decrease from $2.61 per litre of alcohol to $1.50 per litre of alcohol-and fuel oil, heating oil and power and lighting kerosene-a decrease from $0.09027 per litre to $0.01872 per litre. These reductions were made following representations received by the Government that the Budget increases would impose severe hardship upon industry and households. The revised excise revenue gain on the petroleum products is now estimated at $ 47m in 1983-84 some $69m less than that contained in the Budget estimate. It is estimated that the taxation revenue from the lower excise on fortifying spirit may not be significantly different from the original $13m estimate contained in the Budget. This is for the reason that the effect upon the industry is now expected to be considerably less than under the excise imposed at Budget time.

Finally, clause 7 of the Bill abolishes with effect from 9 September 1983, the concessional excise tariff treatment available to goods for non-diplomatic trade commissioners following a review of these arrangements. The concessions are not required by any international agreement. I commend the Bill to the House.

Debate (on motion by Mr McVeigh) adjourned.