Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Background
This package of Bills provides for the imposition of a franchise fee windfall tax to protect revenue collected prior to 5 August 1997 by the States and Territories which may be lost as a result of the High Court's decision in Ha & Anor. v. State of New South Wales & Ors. and Walter Hammond & Associates Pty Limited v. State of New South Wales & Ors. In its decision of 5 August 1997, the High Court held that business franchise fees on tobacco in New South Wales were invalid under section 90 of the Constitution. The franchise fees were held to be duties of excise which can only be imposed by the Commonwealth. The decision also cast doubt on the Constitutional validity of State and Territory franchise fees on petroleum and liquor.
At the request of the States and Territories, this package of Bills aims to protect revenue collected by the State and Territory franchise fees on tobacco, petroleum and liquor. The Bills only apply to revenue collected prior to 5 August 1997.
The package comprises:
- Franchise Fees Windfall Tax (Collection) Bill 1997
- Franchise Fees Windfall Tax (Imposition) Bill 1997
- Franchise Fees Windfall Tax (Consequential Amendments) Bill 1997
FRANCHISE FEES WINDFALL TAX (COLLECTION) BILL 1997
Provides for the determination, collection, and administration of the franchise fees windfall tax which applies to claims for refunds of business franchise fees paid before 5 August 1997.
Date of effect: The Bill will apply from 5 August 1997.
Proposal announced: Announced by the Treasurer in a Press Release (No. 85) on 6August1997.
Financial impact: The measures will protect revenue already collected by the States and Territories. The revenue from the windfall tax depends on the number of claims for refunds which is unknown.
Compliance cost impact: The proposed windfall tax should not increase compliance costs. However, there may be increased administration costs for States and Territories in collecting the tax.
FRANCHISE FEES WINDFALL TAX (IMPOSITION) BILL 1997
Imposes the franchise fees windfall tax at a rate of 100%.
Date of effect: The Bill will apply from 5 August 1997.
Proposal announced: Announced by the Treasurer in a Press Release (No. 85) on 6August1997.
Financial impact: The measures will protect revenue already collected by the States and Territories. The revenue from the windfall tax depends on the number of claims for refunds which is unknown.
Compliance cost impact: The proposed windfall tax should not increase compliance costs.
FRANCHISE FEES WINDFALL TAX (CONSEQUENTIAL AMENDMENTS) BILL 1997
Makes consequential amendments to the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 to exempt from income tax refunded business franchise fees subject to the windfall tax. The Bill also denies an income tax deduction for the windfall tax.
Date of effect: The amendments will apply from the date of Royal Assent.
Proposal announced: Not previously announced.
Financial impact: No significant impact on revenue.
Compliance cost impact: The amendments will have no effect on compliance costs.