House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 4 - Product Stewardship (Oil)

Excise tariff amendment bill (No. 1) 2001

Outline of chapter

4.1 This chapter outlines amendments to the Excise Tariff Act which alter the way the rate of excise for item 15 product is expressed and provide for set-offs of customs duty as excise liability for petroleum products in certain instances.

4.2 Schedule 1, items 8 to 12 substitute an excise duty rate expressed to 2 decimal places with a rate expressed to 5 decimal places and introduces changes to section 6G provisions.

Context of reform

Indexation

4.3 On 1 January 2001, goods classifiable to item 15 of the Schedule to the Excise Tariff Act, namely petroleum based oils and lubricants and their synthetic equivalents, became excisable. These goods are those dutiable under the Product Stewardship (Oil) arrangements. Excise equivalent imported products are also dutiable at the same rate.

4.4 The rate of excise applicable to item 15 product is set out in the legislation to 2 decimal places, that is, $0.05 per litre or kilogram. Other rates of excise for excisable products are set out to 5 decimal places, for example, $0.38143 per litre for unleaded petrol.

4.5 The number of decimal places in an excise rate is set in legislation, and unless all like products have a rate expressed to the same number of decimal points, indexation provisions may not apply correctly owing to the effects of rounding.

Set-off of customs duty

4.6 At present there is a provision in the excise legislation for previously paid excise duties on input petroleum product to be set-off against the final amount of excise payable on a manufactured excisable petroleum product. A similar provision does not exist for previously paid excise equivalent customs duties on input product to be set-off against the excise payable on a manufactured excisable product.

4.7 That is, should an importer choose to pay the customs duty at the border on an input petroleum product, as the legislation now stands there is no mechanism to avoid duty being paid again on the final product.

Summary of new law

4.8 The amount $0.05 for the rate of excise duty for subitems 15(A) to 15(D) of the Schedule to the Excise Tariff Act is repealed and substituted with $0.05000.

4.9 Section 6G of the Excise Tariff Act is altered to provide for previously paid excise equivalent customs duties on input product to be set-off against the excise payable on a manufactured excisable product.

There are no references to customs duty paid when referring to previously paid duties.

Detailed explanation of new law

4.10 The amount $0.05 for the rate of excise duty for subitems 15(A) to 15(D) of the Schedule to the Excise Tariff Act are repealed and substituted with $0.05000.

4.11 Section 6G of the Excise Tariff Act is amended to allow set-offs of customs duty when calculating excise liability for petroleum products. The amendments are as follows:

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in paragraph 6G(1)(b), the definition of blending rate is altered by adding reference to the rate applicable to item 15 goods or imported equivalent goods;

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a definition of excise equivalent rate is inserted at subsection 6G(1);

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the definition at subsection 6G(1) of previously paid duties is amended to include any customs duties paid on imported goods that are to be used in an excisable blended product; and

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subsection 6G(4) is repealed and substituted to allow customs duty paid on imported goods to be taken into account in the working out of previously paid duties.