House of Representatives

Second Reading Speech

Mr Mccormack (Riverina-Minister for Small Business)

I move:

That this bill be now read a second time.

This bill will increase the excise imposed on roll-your-own tobacco to align it with the excise rate applied to cigarettes.

The bill will phase-in the rate adjustment over four years to match the timing of existing excise increases. The first adjustment to the roll-your-own tobacco excise rate will occur on 1 September 2017.

The rate adjustment will correct a disparity in the treatment of cigarettes and roll-your-own tobacco. This disparity exists because there are two excise rates that apply to tobacco, a stick rate which is applied to manufactured cigarettes with 0.8 grams or less of tobacco per cigarette and a per kilogram rate which is applied to all other tobacco products, including roll-your-own tobacco and most cigars.

The stick rate simplifies the taxation of cigarettes and reduces compliance costs. Consequently, cigarettes have excise imposed at the same rate regardless of their tobacco content, as though they contain 0.8 grams in tobacco.

However, the average cigarette contains less than 0.8 grams of tobacco, which means the government imposes excise on the average cigarette at a higher rate than roll-your-own tobacco.

To correct this disparity, this bill will adjust the per kilogram tobacco excise rate to reflect the new assumption that the average cigarette contains 0.7 grams of tobacco.

This adjustment, to be made over four years, will make sure the government taxes tobacco more equally, regardless of its form.

A cognate bill, the Customs Tariff Amendment (Tobacco Duty Harmonisation) Bill 2017, will increase the excise equivalent customs duty on roll-your-own tobacco.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.