Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 2 - Movement of tobacco seed, plant and leaf
Outline of chapter
2.1 This chapter explains amendments to the Excise Act 1901 that include tobacco seed and plant in provisions requiring the Commissioner of Taxation's (Collector's) permission for movement of tobacco leaf; and provide for an offence and penalties where tobacco seed, plant and leaf, delivered for exportation, is not moved within a specified period in accordance with a permission.
Context of amendments
2.2 Tobacco manufactured as specified in the Excise Tariff Act 1921 is an excisable good and is dealt with in the excise legislation under the arrangements applying to excisable goods. However, the illicit trade in tobacco is a major revenue risk and, while unprocessed tobacco seed, plant and leaf are not excisable, the Excise Act 1901 provides considerable controls on their production, dealing and storage, which must be carried out under an excise licence. The Excise Act 1901 requires permissions for movement of tobacco leaf and applies substantial penalties, including imprisonment, for offences of unauthorised movement of tobacco leaf and unlawful buying, selling and possession of tobacco seed, plant and leaf.
2.3 There is considerable revenue risk around illegal dealings with tobacco seed, plant and leaf and there is an increased potential revenue loss around tobacco seed, plant and leaf delivered for exportation.
2.4 As a broad indication of the potential revenue loss, a tobacco plant can produce about two kilograms of cured tobacco leaf. About 30 grams of tobacco seed, which is similar to grains of fine pepper, may produce 50,000 to 100,000 plants. As excise duty on tobacco is currently $277.55 a kilogram, the potential revenue loss is considerable.
Summary of new law
2.5 The amendments insert tobacco seed and plant in the section 44 requirements that movement of tobacco leaf may only occur with the permission of the Collector. [Schedule 2, item 1]
2.6 Offence and penalty provisions are inserted for failure to return tobacco seed, plant and leaf, that has not been exported within a specified period, to an excise licensed place in accordance with a permission. [Schedule 2, item 4]
Comparison of key features of new law and current law
| New law | Current law |
|---|---|
| Movement of tobacco seed, plant and leaf must be with the permission of the Collector. | Movement of tobacco leaf must be with the permission of the Collector. |
| The penalty for contravening a requirement specified in a movement permission is two years imprisonment or 500 penalty units if the permission relates to tobacco seed or plant. | The penalty for contravening a requirement specified in a movement permission is two years imprisonment or the greater of 500 penalty units or five times the amount of duty payable had the leaf been manufactured into excisable goods. |
| If a person knowingly or recklessly contravenes a condition of a permission before the tobacco seed, plant or leaf was moved, the movement is taken to have been without permission. | No equivalent. |
| A person commits an offence if tobacco seed, plant or leaf has not been exported within 30 days or other period specified in a permission and the goods are not returned within five days to a place specified in a permission. | No equivalent. |
| Tobacco seed, plant or leaf, moved without permission, are forfeited goods. | Tobacco leaf moved without permission is a forfeited good. |
| Unlawful movement knowing, or being reckless as to whether, the material is tobacco seed, plant or leaf is an offence. If the material is tobacco seed or plant the penalty is two years imprisonment or 500 penalty units. | Unlawful movement knowing, or being reckless as to whether, the material is tobacco leaf is an offence. If the material is tobacco leaf, the penalty is two years imprisonment or the greater of 500 penalty units or five times the duty that would have been payable if the tobacco leaf had been manufactured into excisable goods. |
| Movement, without permission, of tobacco seed, plant or leaf from one place to another is a strict liability offence with a penalty of 100 penalty units. | Movement, without permission, of tobacco leaf from one place to another is a strict liability offence with a penalty of 100 penalty units. |
Detailed explanation of new law
2.7 The amendments include tobacco seed and plant in the subsection 44(1) provision that the movement of tobacco leaf may only occur with the permission of the Collector. The penalty provisions for unauthorised movement of tobacco leaf or contravention of permission conditions are amended to apply the appropriate part of the penalty - two years imprisonment or 500 penalty units - to tobacco seed and plant. [Schedule 2, items 1 and 3]
2.8 New subsection 44(8) adds a provision making it an offence where a person has permission to deliver tobacco seed, plant or leaf for export; and the tobacco seed, plant or leaf is not exported within 30 days (or other period specified in the permission) after the day of delivery; and the person fails to return the seed, plant or leaf to a place specified in a permission for its return within five days after the end of the 30 day or other specified period. [Schedule 2, item 4]
2.9 New subsection 44(9) specifies that this provision will not apply if the goods were destroyed before the end of the 30 days or other period specified in the permission. [Schedule 2, item 4]
2.10 For the offence in subsection 44(8), if the permission relates to tobacco seed or plant, the penalty is two years imprisonment or 500 penalty units; and if the permission relates to tobacco leaf - two years imprisonment or the greater of 500 penalty units and five times the amount of duty worked out under the Excise Regulations, being the duty that would be payable if the tobacco leaf had been manufactured into excisable goods and entered for home consumption on the penalty day. These penalties are consistent with existing penalties in the Excise Act 1901 for unlawful movement, possession, buying or selling of tobacco seed, plant or leaf. [Schedule 2, item 3]
2.11 Additional amendments to offence and forfeited goods provisions as a result of the inclusion of tobacco seed and plant:
- •
- include tobacco seed and plant under paragraph 116(1)(ba) that makes tobacco leaf that has been moved without permission under section 44 a forfeited good [Schedule 2, item 5] ;
- •
- add to section 44 a provision that if, before the tobacco seed, plant or leaf was moved, a person to whom permission has been given under this section intentionally acts or fails to act knowing, or being reckless as to whether, the act or omission contravenes a requirement specified in the permission, then, for the purposes of paragraph 116(1)(ba), the movement of the tobacco seed, plant or leaf is taken not to have been with permission [Schedule 2, item 4] ;
- •
- extend the current offence provisions for unlawful movement of tobacco leaf to include tobacco seed and plant (subsection 117D(1)) and apply in relation to tobacco seed and plant the penalty for unauthorised movement of tobacco leaf or contravention of permission conditions, two years imprisonment or 500 penalty units; and extend the strict liability provision in subsection 117D(2) for movement of tobacco leaf without permission to include tobacco seed and plant [Schedule 2, items 7 to 9] ; and
- •
- effect a minor amendment to limit the provisions in subsection 44(3) with respect to the labelling of bales to tobacco leaf [Schedule 2, item 2].
Application and transitional provisions
2.12 Schedule 2 commences on the day after this bill receives Royal Assent.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
