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Coal Tariff Legislation Amendment Bill 1992



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House: House of Representatives Portfolio: Industry, Technology and Commerce

Purpose To remove the coal export duty and provide for the removal of the research and development and long service leave components of the excise duty on coal.

Background The amendments proposed by this Bill form part of a coal industry reform package announced by the Government on 2 December 1991. 1 The announced reforms that this Bill relates to are the removal of the coal export duty, introduction of industry managed research and development arrangements and establishment of a coal mining industry long service leave scheme.

Coal Export Duty: High quality coking coal exports are subject to a coal export duty, levied under the Customs Tariff (Coal Export Duty) Act 1975. The rate of duty is $3.50 per tonne on all exports of coal of 85% or more carbon content from open cut mines of less than 60 metres depth opened before 1 July 1980. Currently, the duty applies to six mines (Peak Downs, Saraji, Norwich Park, Blackwater, Goonyella and Gregory) owned by BHP Australia Coal Limited. The Commonwealth received $47 million in 1990- 91 from the duty and receipts are forecast to total $49 million in 1991- 92. 2

The stated rationale for the imposition of the duty was to ensure that the "very large windfall profits ... being earned by the export sector of the coal industry should be channelled to the community". 3

The duty has been subject to recent examination by the Industry Commission (the Commission). The Commission's conclusions included: * that the current duty is altering production decisions in the coal industry, thus affecting the allocation of resources; and * the unpredictable nature of the duty may hinder long- term investment in the industry. 4

The Commission recommended that the duty be abolished. 5

As a result of negotiations leading to the removal of the duty, BHP Australia Coal Limited gave a non- binding commitment to the Government that it would spend: $122.5 million in new capacity expansion of its coal mining operations, involving the creation of 120 jobs; $65 million in research and development expenditure over the next three years; $50 million on accelerated mine site rehabilitation over the next three years, if practicable, and certainly within the next five years; $8 million on a feasibility study of further mine development opportunities which if found feasible, would lead to investment of approximately $200 million and creation of approximately 200 new jobs; and $3 million on a feasibility study for coal seam gas extraction and utilisation with potential for a $30 million operation phase, if successful. 6

Coal Mining Industry Long Service Leave Fund: The Coal Mining Industry Long Service Leave Fund, which was established under the States Grants (Coal Mining Industry Long Service Leave) Act 1949, provides for the portability of long service leave within the coal mining industry. There is complementary legislation in New South Wales, Queensland, Western Australia and Tasmania. In 1990- 91, the fund balance increased from $41 790 015 to $57 871 744. 7 The long service leave arrangements operate through an excise duty, imposed by the Excise Tariff Act 1921, on all black coal sold, which is collected by the Australian Customs Service. An amount equivalent to the long service leave component of the excise duty ($0.20 per tonne on all black coal sold) is transferred by a special

appropriation to the Coal Mining Industry Long Service Leave Fund on the basis of daily advice of excise receipts from the Australian Customs Service. 8 The Coal Mining Long Service Leave Fund is administered by the Department of Industrial Relations. Collectively, this Bill, the Coal Mining Industry (Long Service Leave Funding) Bill 1992, Coal Mining Industry (Long Service Leave) Payroll Levy Bill 1992, Coal Mining Industry (Long Service Leave) Payroll Levy Collection Bill 1992 and the States Grants (Coal Mining Industry Long Service Leave) Amendment Bill 1992 provide for the establishment of a new coal industry long service leave scheme.

Brief outline of Bills that collectively provide for the establishment of a new coal mining industry long service leave scheme. * Coal Mining Industry (Long Service Leave Funding) Bill 1992: Provides for the establishment of the Coal Mining Industry (Long Service Leave Funding) Corporation that will manage the Coal Mining Industry Long Service Leave Trust Fund, reimburse employers for payments to eligible employees of long service leave entitlements and advise the Minister as to the rates of levy that should be imposed on employers. * Coal Mining Industry (Long Service Leave) Payroll Levy Bill 1992: Imposes a levy on wages paid to eligible employees in the black coal mining industry to fund long service leave payments. * Coal Mining Industry (Long Service Leave) Payroll Levy Collection Bill 1992: Provides the machinery for the collection of the levy imposed by the Coal Mining Industry (Long Service Leave) Payroll Levy Bill 1992. * Coal Tariff Legislation Amendment Bill 1992: Provides for the removal of the long service leave component of the excise duty on coal. * States Grants (Coal Mining Industry Long Service Leave) Amendment Bill 1992: Provides for all amounts raised by the coal mining industry long service leave component of the excise duty on coal to be paid to the Coal Mining Industry Long Service Leave Fund.

Coal Industry Research and Development: Coal industry research and development is principally funded by an excise duty, imposed by the Excise Tariff Act 1921, on all black coal sold. Revenue raised by the research and development component of the excise duty ($0.05 per tonne on all coal sold) funds the Coal Research Trust Account (CRTA), which was established by the Commonwealth in 1978. In 1990- 91, industry contributions/excise duty to the CRTA totalled $8 205 760. 9 The Commonwealth's intention in imposing the excise duty was to boost Australia's energy research effort by supplementing and co- ordinating existing research with the specific objective of developing the technological capacity to make the best economic use of Australia's coal reserves in meeting future requirements. 10 The National Energy Research, Development and Demonstration Council (NERDDC) administers the CRTA and the funds appropriated through the Energy Research Trust Account. In 1989- 90, 45 coal- related research and development projects costing approximately $11.5 million were approved by the by NERDDC. 11

Collectively, this Bill and the Coal Research Assistance Bill 1991 will give effect to that part of the Government's coal industry reform package relating to coal industry research and development announced on 2 December 1991. It was announced on 2 December 1991 that the coal industry would be taking responsibility for its own research effort. The stated objective of giving the coal industry responsibility for its own research efforts is to "... provide sharper focus to coal research efforts ...". 12

Also refer to the Digest for the Coal Industry Amendment Bill 1992.

Main Provisions Repeal of the Customs Tariff (Coal Export Duty) Act 1975 The Customs Tariff (Coal Export Duty) Act 1975 will be repealed by clause 3. The repeal will have effect from 1 July 1992 (clause 2). The duty will continue to apply to coal loaded onto a ship before 1 July 1992 for export, or loaded after 1 July 1992 for export as part of a consignment the loading of which started before 1 July 1992 (subclause 3(1)).

Amendments to the Excise Tariff Act 1921 Clause 4 will amend section 5 of the Excise Tariff Act 1921 to provide that the rate of duty on coal will be reduced to $0.20 per tonne and then to $0.00. Under clause 2 of this Bill, these amendments will have effect from the days fixed by proclamation, or, if this has not been done within 12 months, at the end of 12 months after the commencement of this Bill. This will allow the reduction to $0.20, which reflects the removal of the research and development component of the duty, to have effect before

the rate is reduced to $0.00. According to the Second Reading Speech to this Bill, the reduction to $0.00, which will reflect the removal of the long service leave component of the duty, will have effect when alternative pay- roll tax arrangements are introduced by the States.

References 1. Minister for Primary Industries and Energy, Treasurer, Minister for Industry, Technology and Commerce and Minister for Industrial Relations, Joint Statement, 2 December 1991. 2. Budget Statements 1991- 92, Budget Paper No. 1, p. 4.27. 3. Industry Commission, Mining and Minerals Processing in Australia, Vol. 3, 27 February 1991, p. 283. 4. ibid., p. 285. 5. ibid. 6. Minister for Primary Industries and Energy, Treasurer, Minister for Industry, Technology and Commerce and Minister for Industrial Relations, op. cit. 7. Department of Industrial Relations, Annual Report 1990- 91, p. 45. 8. Department of Industrial Relations, Annual Report 1989- 90, p. 31. 9. Department of Primary Industries and Energy, Annual Report 1990- 91, p. 329. 10. Industry Commission, op. cit., p. 533. 11. ibid. 12. Minister for Primary Industries and Energy, Treasurer, Minister for Industry, Technology and Commerce and Minister for Industrial Relations, op. cit.

Bills Digest Service 6 May 1992 Parliamentary Research Service

For further information, if required, contact the Economics and Commerce Group on 06 2772460.

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 1992.

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Published by the Department of the Parliamentary Library, 1992.