Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Per stick tobacco excise
This Bill ratifies an Excise Tariff Proposal which altered the Excise Tariff Act 1921 (Tariff Act) to:
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- define tobacco; and
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- apply a per stick rate of excise on tobacco products in stick form where the actual tobacco content is less than 0.8 grams in weight.
Date of effect: Excise Tariff Proposal No. 2 (1999) was tabled in Parliament on 21 October 1999 and took effect on 1 November 1999.
Proposal announced: The Government foreshadowed the introduction of the per stick arrangements for tobacco in the policy document entitled Tax Reform: not a new tax, a new tax system in August 1998.
Financial impact: The partial year impact of the per stick excise is estimated to provide additional revenue of around $300 million in the 1999-2000 financial year. In subsequent years the full year impact is expected to be additional revenue of around $440 million.
Compliance cost impact: The initial cost of compliance in changing the tobacco tax base from volume to per stick is estimated to be less than $1million. The initial compliance costs would primarily result from the few licensed manufacturers familiarising themselves with the new legislation and adjusting computer programs for the rate changes.
The recurring compliance costs are estimated to be negligible.
Summary of Regulation impact statement
Impact: The measures contained in this Bill are part of the Governments broad-ranging reforms contained in Tax Reform: not a new tax, a new tax system , released in August 1998.
The change will result in an increase in the excise duty for certain tobacco products, particularly light tobacco cigarettes. It is intended that this will decrease consumer demand for cigarettes and particularly for lighter cigarettes. Tobacco manufacturers are likely to realign their product lines following the removal of the taxation advantage previously available for light weight tobacco products.
Main point: The new excise rates for tobacco have been formulated based on health experts advice and best practice experiences from other countries. This new approach will address community health concerns and further streamline the current administration and collection mechanisms.
Petroleum products excise
This Bill ratifies an Excise Tariff Proposal which altered the TariffActto better deliver the Governments commitment to addressing fuel substitution activities.
Date of effect: Excise Tariff Proposal No. 3 (1999) was gazetted on 10November 1999 and took effect on 15 November 1999. The Proposal was tabled in Parliament on 24 November 1999.
Proposal announced: The changes to the petroleum tariffs were the subject of consultation with industry as part of a broader review to address fuel substitution minimisation. The changes were foreshadowed by the Assistant Treasurers Press Release No. 48 of 18 October 1999.
Financial impact: The revenue at risk, if the excise tariff changes were not introduced, is estimated to be up to $100 million per annum in excise duties.
Compliance cost impact: Negligible.
Summary of Regulation impact statement
Impact: The measures relating to petroleum, while technically complex, will have only a minimal effect on legitimate business. The Office of Regulation Review has advised that a Regulation impact statement is not required in respect of these measures.