Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Overview
This Bill contains a number of technical amendments to improve the Government's ability to address excise evasion through fuel substitution activities.
The amendments:
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- replace references in the legislation to specific excise tariff items with generic descriptions. This will allow the Government to quickly amend the excise tariff in accordance with the special provisions of the Excise Act 1901 that allow the tariff to be changed by simply gazetting or tabling a new tariff proposal;
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- change the Fuel (Penalty Surcharges) Administration Act 1997 to facilitate prosecutions for fuel substitution offences by removing technical difficulties with the definition of 'fuel' and allowing the use of evidentiary certificates in prosecutions; and
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- change the Fuel (Penalty Surcharges) Administration Act 1997 to cover a broader range of imported products that can be used in fuel substitution activities (e.g. chemical grade toluene) and require persons dealing in these products to meet the record keeping provisions of the Act.
Date of effect : The measures will commence on the date of Royal Assent.
Proposal announced : The Government foreshadowed a review of the arrangements relating to fuel substitution activities in the policy document entitled Tax Reform: not a new tax: a new tax system.
Financial impact : Negligible.
Compliance cost impact : Compliance costs will remain the same.
Chapter 1 - Amendment of the Aviation Fuel Revenues (Special Appropriation) Act 1988
Outline of Chapter
1.1 This Chapter explains technical amendments to the Aviation Fuel Revenues (Special Appropriation) Act 1988 that replace references to specific excise tariff items with generic descriptions.
Background to the legislation
1.2 In January 1998 the legislation commenced to deter and detect fuel substitution activities. The Government then foreshadowed a review of the arrangements relating to fuel substitution activities in the policy document entitled Tax Reform: not a new tax: a new tax system.
1.3 Special provisions in the Excise Act 1901 allow changes to the excise tariff to be made by gazetting a proposal or tabling a proposal in Parliament.
1.4 The Aviation Fuel Revenues (Special Appropriation) Act 1988 currently contains references to specific tariff items. These references restrict the Government's ability to quickly amend the tariff by gazettal or proposal to address fuel substitution activities.
Summary of new law
1.5 Specific tariff items are removed and replaced with generic descriptions.
Explanation of amendments
1.6 Schedule 1 to this Bill removes 2 references to specific tariff items from the Aviation Fuel Revenues (Special Appropriation) Act 1988. They are replaced with the generic descriptions 'gasoline classified to item 11 of the Schedule of the Excise Tariff Act 1921 as gasoline for use as fuel in aircraft' and 'kerosene classified to item 11 of the Schedule of the Excise Tariff Act 1921 as kerosene for use as fuel in aircraft'.
Chapter 2 - Amendment of the Excise Act 1901
Outline of Chapter
2.1 This Chapter explains technical amendments to the Excise Act 1901 that replace references to specific excise tariff items with generic descriptions.
Background to the legislation
2.2 In January 1998 the legislation commenced to deter and detect fuel substitution activities. The Government then foreshadowed a review of the arrangements relating to fuel substitution activities in the policy document entitled Tax Reform: not a new tax: a new tax system.
2.3 Special provisions in the Excise Act 1901 allow changes to the excise tariff to be made by gazetting a proposal or tabling a proposal in Parliament.
2.4 The Excise Act 1901 currently contains references to specific tariff items. These references restrict the Government's ability to quickly amend the tariff by gazettal or proposal to address fuel substitution activities.
Summary of new law
2.5 Specific tariff items are removed from the Excise Act 1901 and replaced with generic descriptions.
Explanation of amendments
2.6 Schedule 2 to this Bill removes specific references from several sections of the Excise Act 1901 and replaces them with generic descriptions.
2.7 These changes do not affect the way excise is levied or level of excise duty payable on petroleum products.
2.8 Schedule 2 to this Bill also introduces a new definition, 'maximum diesel rate'. This definition is a consequential amendment inserted to simplify the reading of the offences in section 120 of the Excise Act 1901 following the move to generic descriptions. It does not affect the way penalties under sections 120(4), 120(5), 120(6), 120(7) are calculated.
Chapter 3 - Amendment of the Excise Tariff Act 1921
Outline of Chapter
3.1 This Chapter explains technical amendments to the Excise Tariff Act 1921 that replace specific references to excise tariff items with generic descriptions.
Background to the legislation
3.2 In January 1998 the legislation commenced to deter and detect fuel substitution activities. The Government then foreshadowed a review of the arrangements relating to fuel substitution activities in the policy document entitled Tax Reform: not a new tax: a new tax system.
3.3 Special provisions in the Excise Tariff Act 1921 allow changes to the excise tariff to be made by gazetting a proposal or tabling a proposal in Parliament.
3.4 The Excise Tariff Act 1921 currently contains references to specific tariff items. These references restrict the Government's ability to quickly amend the tariff by gazettal or proposal to address fuel substitution activities.
Summary of new law
3.5 Specific tariff items are removed and replaced with generic descriptions.
Explanation of amendments
3.6 Schedule 3 to this Bill removes specific references from 2 sections of the Excise Tariff Act 1921 and replaces them with generic descriptions.
3.7 These changes do not affect the way excise is levied or the level of excise duty payable on petroleum products.
3.8 Schedule 3 to this Bill also inserts a new definition in the Excise Tariff Act 1921, 'maximum diesel rate'. This definition is a consequential amendment inserted to simplify the reading of section 6G of the Excise Tariff Act 1921 which relates to the manner of determining duty payable on excisable blended petroleum following the move to generic descriptions. It does not affect the way the blending rate is calculated.
Chapter 4 - Fuel substitution legislation
Outline of Chapter
4.1 This Chapter explains technical amendments to the Fuel Blending (Penalty Surcharge) Act 1997, the Fuel Misuse (Penalty Surcharge) Act 1997, the Fuel (Penalty Surcharges) Administration Act 1997 and the Fuel Sale (Penalty Surcharge) Act 1997 (the Fuel Penalty Surcharge legislation).
4.2 The amendments to the Fuel Penalty Surcharge legislation replace specific excise tariff items with general descriptions.
4.3 The Fuel (Penalty Surcharges) Administration Act 1997 is amended to:
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- facilitate prosecutions for fuel substitution offences by removing technical difficulties with the definition of 'fuel' and allowing the use of evidentiary certificates in prosecutions; and
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- cover a broader range of imported products that can be used in fuel substitution activities (e.g. chemical grade toluene) and require persons dealing in these products meet the record keeping provisions of the Fuel (Penalty Surcharges) Administration Act 1997.
Background to the legislation
4.4 In January 1998 the legislation commenced to deter and detect fuel substitution activities. The Government then foreshadowed a review of the arrangements relating to fuel substitution activities in the policy document entitled Tax Reform: not a new tax: a new tax system.
4.5 Some instances of excise evasion through fuel substitution occur when parties systematically exploit weaknesses in the excise tariff structure.
4.6 Special provisions in the Excise Act 1901 allow changes to the excise tariff to be made by gazetting a proposal or tabling a proposal in Parliament.
4.7 The Fuel Penalty Surcharge legislation currently contains references to specific tariff items. These references restrict the Government's ability to quickly amend the tariff by gazettal or proposal to address fuel substitution offences.
4.8 The Fuel Penalty Surcharge legislation underpins the Government's response to fuel substitution activities. Technical problems with this Act have made prosecutions difficult. In addition some imported products (e.g. chemical grade toluene) that can be used in fuel substitution activities are not covered by this legislation.
Summary of new law
4.9 Specific tariff items are removed from the Fuel Penalty Surcharge legislation and replaced with generic descriptions.
4.10 The definition of 'fuel' in the Fuel (Penalty Surcharges) Administration Act 1997 is amended to facilitate prosecutions and to cover a broader range of imported products that can be used in fuel substitution activities.
4.11 The prosecution of fuel substitution offences is also facilitated by allowing the prosecution to use evidentiary certificates as prima facie evidence in certain circumstances, rather than having to rely on calling a number of witnesses.
| New Law | Current Law |
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| The penalty provisions in the Fuel Penalty Surcharge legislation now calculate the level of penalty by the generic description, the 'maximum diesel rate'. A definition of the 'maximum diesel rate' is also inserted in the legislation. | The penalty provisions in the Fuel Penalty Surcharge legislation included references to tariff item 11(C)(2)(a) when calculating the level of penalty applicable. Item 11(C)(2)(a) currently covers diesel for use as a fuel in an internal combustion engine and attracts the maximum rate of excise for diesel. |
| Amends the definition of fuel so that it is not necessary to prove that the fuel had been entered into home consumption in order to proceed with a prosecution for misuse of marked fuel (e.g. using fuel on which little or no excise has been paid as fuel in an internal combustion engine, which attracts the highest rate of excise). | Required any prosecution for misuse of marked fuel (e.g. using fuel on which little or no excise has been paid as fuel in an internal combustion engine, which attracts the highest rate of excise) to prove that the fuel had been entered into home consumption. |
| Allows, under certain circumstances, evidentiary certificates to be used as prima facie evidence that certain parts of the definition of fuel have been met. | Would require witnesses to be called to demonstrate that all the parts of the definition of 'fuel' had been met. |
Explanation of amendments
4.12 Schedule 4 to this Bill removes references to specific tariff items from the penalty provisions of the Fuel Penalty Surcharge legislation and replaces them with generic descriptions.
4.13 These changes do not affect the way a penalty under the Fuel Penalty Surcharge legislation is calculated.
4.14 Schedule 4 to this Bill also amends the Fuel (Penalty Surcharges) Administration Act 1997 to include a new definition, 'maximum diesel rate'. This definition is picked up by the other Fuel Penalty Surcharge legislation and has been inserted to simplify the reading of the penalty sections of the Fuel Penalty Surcharge legislation following the move to generic descriptions. It does not affect the way penalties are calculated.
4.15 Schedule 4 to this Bill also amends the definition of 'fuel' in the Fuel (Penalty Surcharges) Administration Act 1997. The change:
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- ensures that a broader range of imported products that can be used in fuel substitution activities are covered by the Fuel Penalty Surcharge legislation;
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- extends the record keeping requirements of the Fuel (Penalty Surcharges) Administration Act 1997 to certain imported products that are not currently covered; and
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- removes the requirement for the Australian Taxation Office to demonstrate that fuel has been entered into home consumption as part of legal action taken under the legislation, removing a major impediment to prosecution activity.
4.16 As a consequence of changing the definition of fuel, definitions of a 'customs place' and an 'excise place' have been inserted. These definitions help ensure that product still under excise control is not inadvertently picked up by the new definition of fuel.
4.17 Two further consequential amendments are made to sections 10 and 11 of the Fuel (Penalty Surcharges) Administration Act 1997 so the enforcement of the record keeping provisions does not continue to be restricted by the requirement that the fuel has been entered into home consumption.
4.18 To assist in facilitating prosecutions following the amendment of the definition of fuel, Schedule 4 introduces new clauses into the Fuel (Penalty Surcharges) Administration Act 1997 allowing evidentiary certificates to be used as prima facie evidence that certain elements of the definition of fuel are met. In particular:
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- that a place was not a customs or excise place;
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- that any goods being transported were not in transit in accordance with a written permission or authority under the Customs Act 1985 or the Excise Act 1901;
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- that particular goods have not been entered for home consumption; and
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- that the substance is considered to be product of a particular type.
4.19 Certificates which specify that a place was not a customs or excise place, that goods were not being transported in accordance with a written permission or authority under the Customs Act 1985 or the Excise Act 1901, or that particular goods have not been entered for home consumption must be made by an officer of Customs. Certificates that the substance is considered to be product of a particular type must be made by a person appointed by the Chief Executive Officer (CEO) of Customs to be an analyst. The analyst may or may not be an officer of Customs.
4.20 Schedule 4 also inserts new clauses governing the use of evidentiary certificates being:
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- any document purporting to be an evidentiary certificate is taken to be such a certificate unless the contrary intention is established;
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- the prosecution must give the defendant (or their solicitor) a copy of the certificate 14 days before they seek to admit the certificate;
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- the person providing the certificate may also be called as a witness and cross examined where a court order allows the person charged to require the person giving the certificate to be called, or, if the certificate was provided by an analyst, the prosecutor is given 4 days notice of the intention to call the person as a witness;
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- evidence can be given in support or rebuttal of a certificate and any such evidence must be considered on its merits.
4.21 To support the use of evidentiary certificates, Schedule 4 also establishes rules regarding the taking of fuel samples. These rules require the person taking the sample to divide the sample into 3 equal parts, label and securely seal each part and hand one part over to the owner in the presence of the person from whom the sample is taken. One part must be delivered to an analyst appointed by the CEO of Customs and the last part retained for further examination if necessary.