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This Digest was prepared for debate. It reflects the legislation as introduced
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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Excise Laws Amendment Bill (No. 1) 2002
Date Introduced: 26 September 2002
House: House of Representatives
Commencement: The measures in Schedule 1 commence on 14 May 2002 at 7:30 pm in the Australian Capital Territory. The other sections commence on the day when the Act receives the Royal Assent.
The main purpose is to levy excise on the higher of the actual alcohol content or the labelled content of alcoholic beverages. Several other purposes are described below.
See also the Bills Digest for the Excise Tariff Amendment Bill (No. 2) 2002.
On 14 May 2002, the Minister for Revenue and Assistant Treasurer, Senator the Hon. Helen Coonan, announced that through the 2002–03 Budget, the Government would amend the Excise Act 1901 (Excise Act) to impose excise duty on the higher of the actual alcoholic strength or the labelled strength of beverages subject to excise. This measure would take effect from 7.30 pm Eastern Standard Time on 14 May 2002.(1)
Under existing legislation, excise on Australian-made alcoholic beverages is levied on actual alcohol content. Customs duty on imports, on the other hand, is levied on the higher of labelled or actual alcohol content. The Bill would bring the basis on which excise is levied into line with the method used to calculate customs duty.
Levying customs duty and excise on the same basis would prevent manufacturers from taking advantage of the Australian and New Zealand Food Standards Code (the Code). According to the Minister's second reading speech and the Explanatory Memorandum (EM), some manufacturers are taking advantage of the Code to gain a market advantage. The Code allows for variations between labelled strength and actual strength for alcoholic drinks. Some manufactures are labelling their products as having a higher alcohol content than they actually have, giving rise to a market advantage. Presumably, buyers are attracted to such drinks because they seem to offer more 'bang for buck' than competing drinks.
The Excise Act does not specify how the volume of alcohol in a beverage is to be ascertained. The Bill would also allow the Commission of Taxation to establish rules for ascertaining the volume of alcohol.
A general principle underlying customs and excise legislation is that customs duty and excise should be levied on the same basis. In that way, importers and domestic producers face a 'level playing field'. Different bases for levying customs duty and excise could give rise to unintended protection for or disadvantaging of domestic production compared to imports. A positive feature of the Bill is that customs duty and excise would be levied on the same basis. The Bill would also prevent manufacturers from taking advantage of the tolerance between actual and labelled alcohol levels in the Code.
The Bill would amend three Acts:
The main provisions relate to the Excise Act. The provisions in the other two Acts complement the amendments to the Excise Act.
The Schedule to the Excise Tariff Act 1921 lists various goods and the rates of excise that apply to them under various 'item' headings. To define 'alcoholic beverages' to which rules will apply, item 5 would insert a new section in the Excise Act, proposed section 77A, which refers to certain items in the Schedule as alcoholic beverages.
Item 6 would insert proposed sections 77FA and 77FB:
Items 1 and 7 insert identical wording into the Distillation Act and the Spirits Act respectively. Item 1 inserts two proposed subsections:
With the adoption of rules for ascertaining alcohol content, the existing provision (section 46) of the Distillation Act for determining the strength of spirits becomes redundant. Item 2 repeals section 46.
The amount of alcohol in distilled products is sometimes difficult to determine. Section 47 of the Excise Act uses the word 'obscuration' to refer to this problem and sets out how to deal with it. Item 3 repeals section 47 and replaces it with a proposed section 47. The latter provides that when alcoholic strength cannot be ascertained by application of rules, the strength may be ascertained 'after distillation or in any prescribed manner'.
The practice of labelling drinks as having a higher alcohol content than they actually have would seem at least to violate business ethics if not the Trade Practices Act 1974.
Paragraph 1.5 of the EM states that levying excise on the actual content—rather than the (higher) labelled content—could result in a loss of revenue. This assumes that excise should be levied on the same basis as customs duty, which is levied on the higher of the labelled or actual content. But since excise is currently levied on actual content, there is, under existing excise legislation, no loss of revenue. Indeed, as the EM confirms, a small revenue gain is likely.
This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.
ISSN 1328-8091
© Commonwealth of Australia 2002
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Published by the Department of the Parliamentary Library, 2002.