House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Law Enforcement and Cybersecurity, the Hon Angus Taylor MP)

Outline

The 2016-17 Budget measure, 'Tobacco Excise - measures to improve health outcomes and combat illicit tobacco' proposed legislative amendments to strengthen illicit tobacco offences by:

•

removing the need to prove that illicit tobacco is imported or domestically produced (the proof of origin requirement);

•

ensuring consistency of penalties between domestic and border-related illicit tobacco offences; and

•

including new offences for tobacco smuggling at the border based on recklessness.

The Customs Amendment (Illicit Tobacco Offences) Bill 2018 (the Bill) would amend the Customs Act 1901 (the Customs Act) to:

•

create two new offences in respect of imported illicit tobacco based on recklessness; and

•

allow officers of Customs to investigate certain new illicit tobacco offences that are proposed to be contained in the Taxation Administration Act 1953 (the TAA).

The new illicit tobacco offences to be included in the TAA would not require the origin of the tobacco to be proven where it is reasonably suspected that the excise or excise equivalent customs duty has not been paid (the reasonable suspicion offences). That is, it would not be necessary to prove whether the tobacco was illegally imported or illegally produced or manufactured domestically.

Offences are also proposed for inclusion in the TAA to replace the current illicit tobacco offences in the Excise Act 1901 (the Excise Act) specifically, the offences in sections 117C - 117H (various offences in relation to tobacco seed, tobacco plant and tobacco leaf). These amendments are set out in the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018.

Section 233BABAD of the Customs Act contains criminal offences for importing goods which are tobacco products with the intention of defrauding the revenue, and conveying and possessing tobacco products that the person knows were imported with intent to defraud the revenue. However, as it is often difficult to prove intention or knowledge beyond reasonable doubt for an offence against section 233BABAD, new offences are proposed to be inserted into this section based on recklessness, rather than intent.

To enable officers of Customs to investigate and enforce the proposed new illicit tobacco offences (that do not require proof of origin in the TAA), it is proposed to amend the Customs Act to extend relevant powers of officers in Division 1 of Part XII of the Customs Act to offences in the TAA.

Financial Impact Statement

The financial impact is an unquantifiable increase to revenue over the forward estimates period.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Customs Amendment (Illicit Tobacco Offences) Bill 2018

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Bill

The Customs Amendment (Illicit Tobacco Offences) Bill 2018 (the Bill), together with the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018, provides for a new framework for strengthening illicit tobacco offences by resolving existing obstacles to successful prosecution.

The 2016-17 Budget measure, 'Tobacco Excise - measures to improve health outcomes and combat illicit tobacco' proposed legislative amendments to strengthen illicit tobacco offences by:

•

removing the need to prove that illicit tobacco is imported or domestically produced (the proof of origin requirement);

•

ensuring consistency of penalties between domestic and border-related illicit tobacco offences; and

•

including new offences for tobacco smuggling at the border based on recklessness.

The Customs Amendment (Illicit Tobacco Offences) Bill 2018 (the Bill) would amend the Customs Act 1901 (the Customs Act) to:

•

create two new offences in respect of imported illicit tobacco based on recklessness; and

•

allow officers of Customs to investigate certain new illicit tobacco offences that are proposed to be contained in the Taxation Administration Act 1953 (the TAA).

The new illicit tobacco offences to be included in the TAA would not require the origin of the tobacco to be proven where it is reasonably suspected that the excise or excise equivalent customs duty has not been paid (the reasonable suspicion offences). That is, it would not be necessary to prove whether the tobacco was illegally imported or illegally produced or manufactured domestically.

Offences are also proposed for inclusion in the TAA to replace the current illicit tobacco offences in the Excise Act 1901 (the Excise Act) specifically, the offences in sections 117C - 117H (various offences in relation to tobacco seed, tobacco plant and tobacco leaf). These amendments are set out in the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018.

Section 233BABAD of the Customs Act contains criminal offences for importing goods which are tobacco products with the intention of defrauding the revenue, and conveying and possessing tobacco products that the person knows were imported with intent to defraud the revenue. However, as it is often difficult to prove intention or knowledge beyond reasonable doubt for an offence against section 233BABAD, new offences are proposed to be inserted into this section based on recklessness, rather than intent.

To enable officers of Customs to investigate and enforce the proposed new illicit tobacco offences (that do not require proof of origin in the TAA), it is proposed to amend the Customs Act to extend relevant powers of officers in Division 1 of Part XII of the Customs Act to offences in the TAA.

Background

The Government is committed to tackling the illicit tobacco market and implementing new and strengthened enforcement measures to deter those looking to profit through the trade in illicit tobacco. In the 2016-17 Budget, the Government announced a suite of measures to address the growing illicit tobacco trade and improve health outcomes in Australia.

The excise and excise equivalent customs duty increases on tobacco (announced at the 2016-17 Budget), along with the formation of the Tobacco Strike Team (TST) have helped to tackle the deliberate and highly calculated defrauding of the Australian public by criminal organisations smuggling illicit tobacco into the Australian market.

Since the TST began its operations in October 2015, and as at 31 January 2018, it has seized in excess of 104 tonnes of smuggled tobacco and 233 million smuggled cigarettes. This is approximately AUD 232 million in evaded revenue.

Trade in illicit tobacco is extremely profitable, particularly as a result of the ongoing excise and excise equivalent customs duty increases. Once illicit tobacco has entered the domestic supply chain, there are few disincentives or risks for those who engage in this trade. Organised crime groups are heavily involved in the illicit tobacco trade. For example, the then Australian Crime Commission's Organised Crime in Australia 2015 report states that:

Organised crime remains entrenched within the illegal tobacco market in Australia. It continues to perceive involvement in this market as a low risk, high profit enterprise.

Currently, officers of Customs can only prosecute tobacco smuggling offences under the Customs Act if knowledge or intention to defraud the revenue can be established. While the penalty is high, the standard of proof has created a barrier for effective enforcement and prosecution and is no longer an effective deterrent to those who engage in tobacco smuggling.

There are a number of limitations with existing tobacco-related revenue evasion offences in the Customs Act and the Excise Act:

•

The offences are inconsistent;

o

the Customs Act offences can only apply where knowledge or intention to defraud revenue can be proven, and

o

the Excise Act offences are associated with relatively low penalties and do not provide a sufficient deterrent to those dealing in illicit tobacco; and

•

An offence can only be successfully prosecuted if it can be proven whether the tobacco was imported or produced domestically (proof of origin).

As a result, neither officers of Customs who administer the Customs Act, nor officers of the Australian Taxation Office (ATO) who administer the Excise Act, are able to target the full range of illicit tobacco offences.

Since 1 July 2015, over 114 people have been charged with tobacco related border offences with only 69 of those being successfully prosecuted under the Customs Act.

This Bill would ensure officers of Customs can investigate and enforce new illicit tobacco offences relating to proof of origin in the TAA (the reasonable suspicion offences) allowing greater opportunities for successful prosecution of those involved in the illicit tobacco market.

The amendments would also create new offences which lower the standard of proof from 'intention' or 'knowledge' in defrauding the revenue to 'recklessness'. 'Recklessness' entails a lower level of culpability than 'intention' or 'knowledge', alleviating barriers to enforcement or successful prosecution of existing criminal offences. Introducing offences based on recklessness will allow officers of Customs to target a wider range of participants in the illicit tobacco trade and strengthen the illicit tobacco enforcement regime.

Human rights implications

This Bill supports the Government's commitment to improve health outcomes for Australians and combat illicit tobacco. It is consistent with the Tobacco Strategy 2012-2018 (endorsed by all Australian Health Ministers) to reduce the affordability of tobacco products, and with the World Health Organisation's Framework Convention on Tobacco Control which commits nations to implement policies for tobacco tax increases.

This Bill engages the following human rights:

•

the right to liberty and security of the person and freedom from arbitrary arrest or detention;

•

minimum guarantees in criminal proceedings; and

•

the prohibition on arbitrary or unlawful interference with privacy.

The right to liberty and security of the person and freedom from arbitrary arrest or detention

Article 9 of the International Covenant on Civil and Political Rights (ICCPR) states:

(1)

Everyone has the right to liberty and security of person. No one shall be subjected to arbitrary arrest or detention. No one shall be deprived of his liberty except on such grounds and in accordance with such procedure as are established by law.

(2)

Anyone who is arrested shall be informed, at the time of arrest, of the reasons for his arrest and shall be promptly informed of any charges against him.

(3)

Anyone arrested or detained on a criminal charge shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release. It shall not be the general rule that persons awaiting trial shall be detained in custody, but release may be subject to guarantees to appear for trial, at any other stage of the judicial proceedings, and, should occasion arise, for execution of the judgment.

(4)

Anyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings before a court, in order that that court may decide without delay on the lawfulness of his detention and order his release if the detention is not lawful.

(5)

Anyone who has been the victim of unlawful arrest or detention shall have an enforceable right to compensation.

This Bill introduces new measures that will serve as an effective deterrent against the increasing illicit tobacco market. Trade in illicit tobacco is extremely profitable, particularly as a result of the ongoing excise increases (discussed above). Once illicit tobacco has entered the domestic supply chain, there are few disincentives for those who engage in the illicit tobacco trade due to the difficulties in proving that an offence has been committed under current laws.

Illicit tobacco is a significant problem and this is evident in the work of the TST over the last two years. While an increase in the price of cigarettes has contributed to the wellbeing of the Australian community, it has also inadvertently created a profit motive for those involved in importing illicit tobacco due to the perceived "low risk high return" view of criminal groups.

There are social and systemic harms associated with illicit tobacco. Existing laws under the Customs Act that deal with these offences are difficult to apply due to the level of culpability required, that is, knowledge or intent, to successfully prosecute the offence. This restricts officers of Customs in targeting the full range of offenders, particularly those involved in the supply chain who can deny that they knew the tobacco was being imported with an intention of defrauding the revenue.

Since 1 July 2015 over 114 people have been charged with tobacco related border offences with only 69 of those being successfully prosecuted under the Customs Act.

The right to liberty and security of the person and freedom from arbitrary detention is engaged by the application of prison sentences that may be imposed by a court in relation to the proposed new recklessness offences. The penalties proposed by this Bill, and determined by a court, can include prison sentences, fines or both. This promotes freedom from arbitrary detention through encouraging proportionate sentencing by preserving judicial discretion in sentencing to take into account the offenders' particular circumstances. In this way, the risk that sentencing of lower culpability offenders could amount to arbitrary detention is removed.

Prison sentences currently exist and are applicable to a person who has committed an offence under subsections 233BABAD(1) or (2), which concerns the smuggling of tobacco products with intent to defraud the revenue, and the conveyance or possession of tobacco that the person knows was imported with intent to defraud the revenue. The penalty is a period of imprisonment for not more than 5 years, a fine determined according to law, or both.

Proposed penalties do not impose a minimum non-parole period on offenders. This will preserve the court's discretion in sentencing and will help ensure custodial sentences imposed by the court are proportionate and consider the particular circumstances of the offence and offender.

The inclusion of prison sentences is a reasonable measure to deter individuals from engaging in the illicit tobacco trade. It is aimed at the legitimate objective of ensuring offenders receive penalties that reflect the seriousness of their offending.

The current penalty for the existing intention-based tobacco smuggling offences is a period of imprisonment of not more than 10 years, a fine determined according to law, or both. The current term of imprisonment is double what is proposed for the new tobacco offences based on recklessness. This reflects the lower level of culpability engaged by the new tobacco offences.

The Bill also proposes to extend the power to arrest a person without a warrant under section 210 of the Customs Act if an officer of Customs or police believes on reasonable grounds that the person has committed or is committing an offence.

The power to arrest without a warrant currently applies to existing offences for the smuggling of tobacco products with the intent to defraud the revenue, or the conveyance or possession of tobacco that the person knows was imported with intent to defraud the revenue.

The power of arrest without a warrant can only be exercised if an officer believes, on reasonable grounds, that proceedings by summons against the person would not achieve one or more of several purposes which are set out in the Customs Act. These purposes are:

•

ensuring the appearance of the person before a court in respect of the offence;

•

preventing a repetition or continuation of the offence or the commission of another offence;

•

preventing the concealment, loss or destruction of evidence relating to the offence;

•

preventing harassment of, or interference with, a person who may be required to give evidence in proceedings in respect of the offence;

•

preventing the fabrication of evidence in respect of the offence; and/or preserving the safety or welfare of the person.

It is appropriate for the power of arrest without warrant to be extended to the proposed offences based on recklessness and to the proposed new illicit tobacco offences, where the proof of origin is not a requirement in the TAA, to prevent the continuation of the offence and to ensure the person appears before a court in respect of that offence.

Similarly, it is appropriate for the power of arrest without warrant in section 210 to be extended to the new reasonable suspicion offences in Subdivision 308A of Schedule 1 to the TAA, given that reasonable suspicion is based on whether tobacco customs duty has been paid.

The safeguards in Subdivision H of Part XII of the Act will continue to apply, largely replicating those in Division 4 of Part 1AA of the Crimes Act 1914. For example:

•

section 210A of the Customs Act provides that an officer of Customs must not, in the course of arresting a person under section 210, use more force, or subject the person to greater indignity, than is necessary and reasonable to make the arrest or to prevent the escape of the person after the arrest;

•

under subsection 210A(2), an officer of Customs must not, in the course of arresting a person under section 210, do anything that is likely to cause the death of, or grievous bodily harm to, a person unless the circumstances in paragraph 210A(2)(a) or (b) apply;

•

section 201B requires an officer of Customs or police to inform the person of the offence for which the person is being arrested at the time of the arrest;

•

Section 212 requires an officer of Customs who arrests a person under section 210 to ensure the person is either delivered into the custody of a police officer or taken before a magistrate or bail justice as soon as practicable to be dealt with according to law.

Accordingly, any limitation on the right to liberty and security of the person and freedom from arbitrary arrest under Article 9 of the ICCPR, imposed by extending the power of arrest without a warrant, is reasonable, necessary and proportionate.

Minimum guarantees in criminal proceedings

Article 14(2) and (7) of the ICCPR establishes a series of minimum guarantees, including:

•

the right to be presumed innocent until proven guilty according to law;

•

that a person is informed promptly of the charge;

•

has adequate time and facilities to prepare a defence and communicate with counsel;

•

be tried without undue delay;

•

be tried in person;

•

receives legal assistance;

•

is able to cross-examine witnesses and have the assistance of an interpreter; and

•

is able to have a conviction and sentence reviewed by a higher court.

Although new criminal offences will be created, the Bill does not affect or limit any of the existing human rights protections, including the minimum guarantees in criminal proceedings contained in Australian law (Article 14 of the ICCPR).

The new offences proposed by the Bill are subject to double jeopardy safeguards as required by Article 14(7) of the ICCPR. This ensures that the proposed new offences will not apply to conduct occurring prior to the commencement date of this Bill. This Bill also ensures that should a person be convicted or acquitted under the proposed tobacco offences based on recklessness, that person is not liable to proceedings in respect of that conduct under any other relevant section in the Customs Act.

The prohibition on arbitrary or unlawful interference with privacy.

Article 17 to the ICCPR states:

(1)

No one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation.

(2)

Everyone has the right to the protection of the law against such interference or attacks.

Article 17 of the ICCPR accords everyone the right to protection against arbitrary or unlawful interference with their privacy. Lawful interferences with the right to privacy will be permitted, provided they are reasonable in the particular circumstances.

This Bill engages the right to privacy by extending existing powers of officers of Customs to apply to a judicial officer for a search and seizure warrant to investigate and enforce the proposed new illicit tobacco offences in the TAA. As mentioned above, these offences would not require the origin of the tobacco to be proven where it is reasonably suspected that tobacco customs duty has not been paid. Given reasonable suspicion is based on whether tobacco customs duty may not have been paid, it is considered appropriate that the investigation power in the Customs Act be extended to these offences.

The amendments in this Bill would enable officers of Customs to apply for a search warrant under section 198 of the Customs Act to search premises for evidential material in relation to offences proposed for inclusion in Subdivision 308-A of Schedule 1 to the TAA. Section 199 provides for the things that are authorised by a search warrant issued for illicit tobacco. This includes entering the warrant premises, searching for evidential material described in the warrant and seizing the material described in the warrant.

The amendments in this Bill provide that officers of Customs may apply to a judicial officer for a seizure warrant under section 203 of the Act, in respect of illicit tobacco on particular premises. Section 203A provides for the things that are authorised by a seizure warrants for illicit tobacco. This includes entering the warrant premises, searching for goods and seizing the goods as described in the warrant.

The amendments in this Bill do not change the nature of the officers of Custom's existing powers, to apply to a judicial officer for a search and seizure warrant. This Bill simply extends the range of offences to which this power can be exercised. These powers are provided by law, the grounds of their exercise are accompanied by safeguards to ensure they are not arbitrarily exercised. The decision to issue the search warrant and seizure warrant are for a judicial officer to make. Such a decision is discretionary and subject to whether the judicial officer is satisfied that certain conditions as outlined under sections 198 and 203 of the Customs Act are met.

The expansion of the officers of Customs existing powers to apply for search and seizure warrants is necessary and reasonable to achieve the legitimate aims of protecting the public health and prohibiting the importation of illicit tobacco into Australia.

Accordingly, any potential limitation on the prohibition on arbitrary or unlawful interference with privacy under Article 17 of the ICCPR imposed as a result of extending the power to apply for search and seizure warrants is reasonable, necessary and proportionate.

Conclusion

The Bill is compatible with applicable rights and freedoms recognised or declared in the international instruments listed in the definition of human rights in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. To the extent that these measures may limit those rights and freedoms, such limitations are reasonable, necessary and proportionate to improve the operability of the illicit tobacco offences.

Notes on Clauses

Clause 1 - Short title

1. Clause 1 provides that this Act is the Customs Amendment (Illicit Tobacco Offences) Act 2018.

Clause 2 - Commencement

2. Subclause 2(1) provides that each provision of this Act specified in Column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

3. Table item 1 provides that sections 1 to 3 (and anything else not covered by the table) commences the day this Act receives the Royal Assent.

4. Table item 2 provides that Schedule 1 commences on the day after this Act receives the Royal Assent. Schedule 1 inserts new offences relating to imported tobacco, and extends the power of arrest in section 210 of the Customs Act to these new offences.

5. Table item 3 provides that Schedule 2 commences on the later of:

a)

the start of the day after this Act receives the Royal Assent; and

b)

immediately after the commencement of Schedule 1 to the Treasury Laws Amendment (Illicit Tobacco Offences) Act 2018.

However, the provisions do not commence at all if the event mentioned in paragraph (b) does not occur.

6. Schedule 2 sets out the amendments to the Customs Act to enable the investigation and enforcement of new offences in the Taxation Administration Act 1953 (the TAA) which are being inserted by the Treasury Laws Amendment (Illicit Tobacco Offences) Act 2018. Therefore, those amendments cannot commence until either that Amendment Act commences, or if that Act commences before this Act commences, until this Act receives the Royal Assent. If that Amendment Act does not commence at all, the amendments in Schedule 2 will not commence.

7. Subclause 2(2) provides that any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

Clause 3 - Schedules

8. This clause is the formal enabling provision for the Schedules to the Bill, providing that each Act specified in a Schedule is amended or repealed as set out in the applicable items of the Schedule. This Bill amends the Customs Act.

9. This clause also provides that other items of a Schedule have effect according to their terms. This is a standard enabling clause for transitional, savings and application items in amending legislation.

Schedule 1 - Offences

Part 1 - Main amendments

Customs Act 1901

The purpose of Schedule 1 to the Bill is to insert new offences for imported tobacco products into section 233BABAD of the Customs Act, and to extend the power of arrest in the Customs Act to these new offences.

Background

The Government is committed to tackling the illicit tobacco market and implementing new and strengthened enforcement measures to deter those looking to profit through the trade in illicit tobacco. In the 2016-17 Budget, the Government announced a suite of measures to address the growing illicit tobacco trade and improve health outcomes in Australia.

The excise and excise equivalent customs duty increases on tobacco (announced at the 2016-17 Budget), along with the formation of the Tobacco Strike Team (TST) have helped to tackle the deliberate and highly calculated defrauding of the Australian public by criminal organisations smuggling illicit tobacco into the Australian market.

Since the TST began its operations in October 2015, and as at 31 January 2018, it has seized in excess of 104 tonnes of smuggled tobacco and 233 million smuggled cigarettes. This is approximately AUD 232 million in evaded revenue.

Trade in illicit tobacco is extremely profitable, particularly as a result of the ongoing excise and excise equivalent customs duty increases. Once illicit tobacco has entered the domestic supply chain, there are few disincentives or risks for those who engage in this trade. Organised crime groups are heavily involved in the illicit tobacco trade. For example, the then Australian Crime Commission's Organised Crime in Australia 2015 report states that:

Organised crime remains entrenched within the illegal tobacco market in Australia. It continues to perceive involvement in this market as a low risk, high profit enterprise.

Currently, officers of Customs can only prosecute tobacco smuggling offences under the Customs Act if knowledge or intention to defraud the revenue can be established. While the penalty is high, the standard of proof has created a barrier for effective enforcement and prosecution and is no longer an effective deterrent to those who engage in tobacco smuggling.

There are a number of limitations with existing tobacco-related revenue evasion offences in the Customs Act and the Excise Act:

•

The offences are inconsistent;

o

the Customs Act offences can only apply where knowledge or intention to defraud revenue can be proven, and

o

the Excise Act offences are associated with relatively low penalties and do not provide a sufficient deterrent to those dealing in illicit tobacco; and

•

An offence can only be successfully prosecuted if it can be proven whether the tobacco was imported or produced domestically (proof of origin).

As a result, neither officers of Customs who administer the Customs Act, nor officers of the Australian Taxation Office (ATO) who administer the Excise Act, are able to target the full range of illicit tobacco offences.

Since 1 July 2015, over 114 people have been charged with tobacco related border offences with only 69 of those being successfully prosecuted under the Customs Act.

This Bill would ensure officers of Customs can investigate and enforce new illicit tobacco offences relating to proof of origin in the TAA (the reasonable suspicion offences) allowing greater opportunities for successful prosecution of those involved in the illicit tobacco market.

The amendments would also create new offences which lower the standard of proof from 'intention' or 'knowledge' in defrauding the revenue to 'recklessness'. 'Recklessness' entails a lower level of culpability than 'intention' or 'knowledge', alleviating barriers to enforcement or successful prosecution of existing criminal offences. Introducing offences based on recklessness will allow officers of Customs to target a wider range of participants in the illicit tobacco trade and strengthen the illicit tobacco enforcement regime.

Item 1 Section 233BABAD (heading)

10. This item repeals and substitutes the heading to section 233BABAD of the Act. The language of the new heading "Offences involving tobacco products" reflects modern drafting practice.

Item 2 After subsection 233BABAD(2)

11. The Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018 proposes to amend the TAA to insert new offences that obviate the need to determine whether tobacco is imported or domestically produced or manufactured. Currently, the origin of tobacco (that is, whether it had been produced or manufactured domestically or imported) is required to determine whether the Excise Act or the Customs Act applies to the goods and to successfully prosecute offenders. This can be difficult to prove in cases where illicit tobacco is identified at a later stage in the supply chain by which point it is not clear if the tobacco had originated domestically (that is, production or manufacture occurred in Australia) or had been imported or a combination of both.

12. The new offences in the TAA are based on whether there is a reasonable suspicion that either excise or excise equivalent customs duty has not been paid on the tobacco. These offences will be contained in Subdivision 308-A of Schedule 1 to the TAA.

13. This item inserts two new tobacco smuggling offences into the Customs Act where the fault element is recklessness.

14. Under new subsection 233BABAD(2A), a person commits an offence if:

•

the person imports goods; and

•

the goods are tobacco products; and

•

the person imports the goods reckless as to whether there would be defrauding of the revenue.

15. Under new subsection 233BABAD(2B), a person commits an offence if:

•

the person conveys, or has in the person's possession, goods; and

•

the goods are tobacco products; and

•

the person is reckless as to whether the goods were imported with intent to defraud the revenue.

16. These new offences are proposed as there is often some evidence of tobacco smuggling activity, but insufficient evidence of the person's intention or knowledge to secure a conviction in respect of the person under subsection 233BABAD(1) or (2). For example, a person could be carrying tobacco into Australia at the request of another person under instructions to conceal that tobacco, and without questioning what they have been asked to do or whether duty has been paid in respect of that tobacco. While this circumstance would not necessarily result in a person being liable under current subsection 233BABAD(2), such a person could be caught by the offence in new subsection 233BABAD(2B).

17. The application of the fault element of recklessness in these new offences is in accordance with the default fault elements under the Criminal Code Act 1995. In these circumstances, the prosecution would have to prove beyond reasonable doubt that a person is aware of a substantial risk that the circumstance exists or will exist, and having regard to circumstances known to them, it is unjustifiable to take the risk. This is not as high a threshold as having to prove beyond reasonable doubt knowledge or intention. These offences are also consistent with those proposed in the TAA to replace the current illicit tobacco offences in the Excise Act. Those new offences also apply to the default fault element of recklessness.

Item 3 Subsection 233BABAD(3)

18. The amendment in this item provides that in a prosecution for an offence against new subsection 233BABAD(2B), it is not necessary to prove the identity of the person who imported the goods. This is consistent with current subsection 233BABAD(3), which provides that for the purposes of an offence against subsection 233BABAD(2), it is not necessary to prove the identity of the person who imported the goods. These two offences are concerned with the possession or conveyance of illicit imported tobacco products.

Items 4 and 5 After subsection 233BABAD(4) and after subsection 233BABAD(5)

19. Item 4 inserts the penalty for the new tobacco smuggling offences based on recklessness in subsections 233BABAD(2A) and (2B). The penalty is a period of imprisonment for not more than 5 years, a fine not exceeding the amount worked out under new subsection 233BABAD(5A), or both.

20. Item 5 provides that the monetary penalty in subsection 233BABAD(5A) is 3 times the amount of the duty that would have been payable if the goods had been entered for home consumption on the day on which the offence was committed (if known to the court) or otherwise, the day on which the prosecution for the offence was instituted. Otherwise, the monetary penalty is 500 penalty units.

21. This penalty is appropriate for the new tobacco smuggling offences based on recklessness. The term of imprisonment is half of that imposed as a maximum term for conviction of the tobacco smuggling offences based on intention or knowledge in subsections 233BABAD(1) and (2) respectively. The monetary penalty is also considerably lower than that imposed for conviction of the intention-based tobacco smuggling offences.

22. The penalties are also consistent with the Commonwealth's A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.

Item 6 Subsection 233BABAD(6)

23. Subsection 233BABAD(6) provides that a person who is convicted or acquitted of an offence against subsection 233BABAD(1) or (2) in respect of particular conduct is not liable to proceedings under section 233 in respect of that conduct. Section 233 contains the general offences for smuggling of goods, as well as other offences.

24. This item ensures that a person who is convicted or acquitted of an offence against subsection 233BABAD(2A) or (2B) is also not liable to be prosecuted under section 233 in respect of the same conduct. It would not be appropriate for a person who has been convicted of an offence against section 233BABAD to be liable for prosecution under section 233.

Item 7 Application provision

25. The effect of this item is that a person can only be prosecuted under the new offences in subsections 233BABAD(2A) and (2B) in respect of goods imported on or after commencement of this item (that is, the day after the Act receives the Royal Assent).

Part 2 - Consequential amendments

Customs Act 1901

Item 8 Subparagraph 210(1)(a)(iii)

26. This item amends subparagraph 210(1)(a)(iii) of the Customs Act to allow an officer of Customs or police the power to arrest a person without warrant if the officer believes on reasonable grounds that the person has committed or is committing an offence against subsection 233BABAD(1), (2), (2A) or (2B) of the Customs Act. New subsections 233BABAD(2A) and (2B) are the new tobacco smuggling offences based on recklessness, and are inserted by item 2 above.

27. The power of arrest without warrant in section 210 of the Customs Act can only be exercised if an officer believes on reasonable grounds that proceedings by summons against the person would not achieve one or more of several purposes, including ensuring the appearance of the person before a court in respect of the offence. The arrest power currently applies to the offences under subsection 233BABAD(1) and (2). These offences concern the smuggling of tobacco products with intent to defraud the revenue, or the conveyance or possession of tobacco that the person knows was imported with intent to defraud the revenue.

28. It is appropriate for the power of arrest without warrant to be extended to the new recklessness offences in subsections 233BABAD(2A) and (2B).

29. The safeguards in Subdivision H of Part XII of the Customs Act will apply to a person who an officer of Customs or a police officer reasonably suspects of committing an offence against subsection 233BABAD(2A) or (2B) or Division 308-A of Schedule 1 to the TAA. These safeguards largely replicate those in Division 4 of Part 1AA of the Crimes Act 1914. For example:

•

section 210A provides that an officer of Customs must not, in the course of arresting a person under section 210, use more force, or subject the person to greater indignity, than is necessary and reasonable to make the arrest or to prevent the escape of the person after the arrest;

•

under subsection 210A(2), an officer of Customs must not, in the course of arresting a person under section 210, do anything that is likely to cause the death of, or grievous bodily harm to, a person unless the circumstances in paragraph 210A(2)(a) or (b) apply;

•

section 201B requires an officer of Customs or police to inform the person of the offence for which the person is being arrested at the time of the arrest;

•

section 212 requires an officer of Customs who arrests a person under section 210 to ensure the person is either delivered into the custody of a police officer or taken before a magistrate or bail justice as soon as practicable to be dealt with according to law.

Schedule 2-Powers of officers

Customs Act 1901

30. The amendments made by this Schedule enable officers of Customs to investigate and enforce the new illicit tobacco offences to be contained in Subdivision 308-A of Schedule 1 to the TAA that do not require the origin of the tobacco to be proved. As mentioned above, given that reasonable suspicion is based on whether excise equivalent customs duty may not have been paid on the tobacco, it is considered appropriate that the investigation powers in the Customs Act be extended to these offences.

Items 1 and 2 Subsection 183UA(1) (paragraphs (b) and (c) of the definition of authorised person )

31. These items amend the definition of authorised person in order to allow an officer of Customs to apply for a seizure warrant in respect of the new category of forfeited goods (see next item), and make a technical amendment to this definition.

Item 3 Subsection 183UA(1) (definition of forfeited goods )

32. Section 116 of the Excise Act is proposed to be amended by the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018. New paragraph 116(1)(aa) provides that all tobacco in respect of which a person commits an offence against the Excise Act or an offence against a provision in Division 308 in Schedule 1 to the TAA is forfeited to the Crown.

33. This item amends the definition of forfeited goods in section 183UA of the Customs Act to include goods forfeited to the Crown under paragraph 116(1)(aa) of the Excise Act because of an offence committed against a provision in Subdivision 308-A in Schedule 1 to the TAA.

34. The amendments will mean that officers of Customs may apply to a judicial officer for a seizure warrant under section 203 of the Customs Act in respect of illicit tobacco on particular premises. Section 203A will also apply to authorise the things in that section to be done by seizure warrants for illicit tobacco. Those things include entering the warrant premises, searching for goods described in the warrant and seizing the goods described in the warrant.

35. These amendments are necessary to enable officers of Customs to enforce the new illicit tobacco offences in Subdivision 308-A in Schedule 1 to the TAA.

Item 4 Subsection 183UA(1) (at the end of the definition of offence )

36. This item amends the definition of offence in subsection 183UA(1) of the Customs Act to include the following provisions in Subdivision 308-A in Schedule 1 to the TAA:

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Section 308-10 - Possession of tobacco (500Kg or above) - reasonable suspicion offence relating to tobacco

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Section 308-15 - Possession of tobacco (100kg or above) - reasonable suspicion offence

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Section 308-20 - Possession of tobacco (5kg or above) - reasonable suspicion offence

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Section 308-25 - Sale of tobacco (500kg or above) - reasonable suspicion offence

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Section 308-30 - Sale of tobacco (100kg or above) - reasonable suspicion offence

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Section 308-35 - Sale of tobacco (5kg or above) - reasonable suspicion offence

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Section 308-40 - Buying of tobacco (500kg or above) - reasonable suspicion offence

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Section 308-45 - Buying of tobacco (100kg or above) - reasonable suspicion offence

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Section 308-50 - Buying of tobacco (5kg or above) - reasonable suspicion offence

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Section 308-55 - Matters taken to satisfy "reasonable to suspect" requirement.

37. The amendments made by this item would enable officers of Customs to apply for a search warrant under section 198 of the Customs Act to search premises for evidential material in relation to the commission of any of these offences. 'Evidential material' is defined in subsection 183UA(1) of the Customs Act as a thing relevant to the offence, including such a thing in electronic form. Section 199 will also apply to authorise the things in that section to be done by search warrants for illicit tobacco. Those things include entering the warrant premises, searching for evidential material described in the warrant and seizing the material described in the warrant.

Items 5 and 6 Subparagraph 210(1)(a)(vi) and at the end of paragraph 210(1)(a)

38. The amendments made by these items amend section 210 of the Customs Act to allow an officer of Customs or police the power to arrest a person without warrant if the officer believes on reasonable grounds that the person has committed or is committing an offence against a provision in new Subdivision 308-A in Schedule 1 to the TAA.

39. It is appropriate for the power of arrest without warrant in section 210 to be extended to the new reasonable suspicion offences in Subdivision 308-A of Schedule 1 to the TAA, given that reasonable suspicion is based on whether excise equivalent customs duty may not have been paid on the tobacco

Item 7 Application provision

40. The effect of this item is to extend the investigation and enforcement powers in the Customs Act to the new offences in Subdivision 308-A of the TAA that are committed on or after the commencement of this item (see item 3 of the Commencement table to the Act).