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  • Tobacco Stakeholder Group minutes 25 November 2016

    Meeting details

    Venue: ATO Office, 747 Collins Street, Docklands

    Date: 25 November 2016

    Start: 10.00am Finish: 12.10pm

    Chair: Tom Wheeler

    Secretariat: Rowena Troth

    Attendees

    Tom Wheeler

    ATO

    Kent Perdrisat

    ATO

    Michael O'Rourke

    ATO

    Shane Strong

    ATO

    Andreas Gianello

    ATO

    Ciara Rumble

    ATO

    Brooke Dewar

    Department of Immigration and Border Protection (DIBP)

    Neville Matthew

    Australian Competition and Consumer Commission (ACCC)

    Gary Dickson

    Imperial Tobacco Australia

    Danni Bouris

    Imperial Tobacco Australia

    Saminda Fernando

    British American Tobacco Australia Ltd (BATA)

    Anita Lai

    British American Tobacco Australia Ltd (BATA)

    Barry Wilson

    British American Tobacco Australia Ltd (BATA)

    James Keulemans

    British American Tobacco Australia Ltd (BATA)

    Mark Powell

    Philip Morris Limited

    Michael Ritter-Leva

    Philip Morris Limited

    Kim Jessop

    Richland Express Pty Limited

    Pradeep Kumar

    Richland Express Pty Limited

    Rowena Troth

    ATO - Secretariat

    Apologies

    Michelle Worsley

    Imperial Tobacco Australia

    Sarah Casey

    Philip Morris Limited

    Sasha Billett

    Department of Immigration and Border Protection

    Discussion summary

    Disclaimer

    The Tobacco Stakeholder Group agendas, minutes and related papers are not binding on the ATO, DIBP or the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

    Agenda item 1 – Welcome

    Introductions, review of action items and previous minutes.

    Outcome: Tom Wheeler welcomed all to the meeting - and in particular, welcomed Kim Jessop and Pradeep Kumar of Richland Express Pty Limited as new members of the Tobacco Stakeholder Group.

    The minutes of the previous meeting of 28 April 2016 had been finalised and published on the TSG website. All action items have been finalised. The Chair called for any conflict of interest to be declared. No conflicts of interest were declared by members.

    Agenda item 2 – Agency updates – ATO and DIBP

    Australian Taxation Office (ATO) – outcomes

    Tax Gap Update - Kent Perdrisat 

    Members noted the update provided by Kent Perdrisat. The ATO have sponsored research into the measurement of metabolites in waste water by the University of Queensland. The waste water measurement needs to be further refined as it is currently impacted by various factors, for example the metabolites contained in some foods such as tomatoes. As such, the measurement will likely be used as a reference point rather than the primary gap estimate.

    The ATO, working with DIBP, has developed a methodology based on operational intelligence and data. For it to be a robust and credible tax gap estimate, further work is being conducted on improving the quality and expanding the quantity of available data. The independent Tax Gap Expert Panel agreed with the assessment that more work was required to produce a credible tax gap estimate.

    At this stage, there is no set timeline as the work is dependent on ensuring credibility of information, however the ATO would like to take further analysis back to the Expert Panel before the end of the 2016–17 financial year.

    Reinventing the ATO – Tom Wheeler 

    An infographic was provided to illustrate achievements made to improve excise payer's experience with the tax system up t and including 2015–16. Tom referred to several examples, including improvements in the excise licensing regime and support for new entrants. One of the major pieces of work is in response to irritants identified with the excise IT systems and functionality. The ATO has a public 'every year counts' commitment in 2016/17 to design a contemporary online excise system.

    The meeting discussed the recent communication campaign by the ATO on illicit stills and whether a similar campaign could be carried out in the tobacco space or providing information about where to go to report illicit activity. Industry referred to the Border Watch program as an example of where they have worked with DIBP to promote issues of concern. The ATO will consider this suggestion in planning its activities for 2017.

    Contemporary Excise Experience Design Project Update – Ciara Rumble 

    Michael O'Rourke advised members of the work that was progressing in this area in response to feedback by industry on key irritants and deregulation opportunities by the ATO and DIBP jointly. Ciara spoke about consultation that has taken place to date to inform the design of the proposed Contemporary Excise Solution. The scope was broadened beyond digital solutions, also including streamlining processing obligations to be more consistent with how businesses deal with other taxes. Input was sought from the committee members on the design project. Members agreed that they and their supply chain find the service provided by Relationship Managers very good, however the systems are not. Industry representatives noted any solution relating to tobacco is different to other products given the strong interconnection with DIBP with excise equivalent goods, therefore the ATO needs to work with DIBP to design and deliver an interface between the two agencies. Members were invited to view the design flow chart and provide any comments to Ciara Rumble.

    Tax Crime Update – Shane Strong 

    Shane provided an update of recent activities in illicit tobacco. He referred to warrants executed in April and May in NSW seizing 500 kgs of loose tobacco leaves and mature tobacco plants covering 2.5 acres respectively. In mid-November, the ATO executed warrants at a rural Victorian property, seizing and destroying 123,000 tobacco plants with an estimated excise value of $10m. There have been no prosecutions since April, however the ATO is working closely with the Australian Border Force (ABF) and State Police Forces and some proceedings are in progress.

    On 23 November 2016, Assistant Commissioner John Ford and Michael O'Rourke represented the ATO at the Parliamentary Joint Committee on Law Enforcement'sExternal Link inquiry into illicit tobacco. The Committee was informed that in 2016, the ATO destroyed six crops with an estimated excise value of $46.6m. Michael reported that the Committee focused on a number of issues including the recent ANAO Report into the Administration of Tobacco. This hearing was a follow up to an earlier hearing on 4 March 2016.

    Brooke Dewar reminded members that the ABF's Tobacco Strike Team is keen to hear of any cases of illicit activities in relation to tobacco. The DIBP are working on statistics across the four streams coming in to the border - air cargo, sea cargo, international mail and passengers. Industry also referred to intelligence on suspicious public bonds which they will pass on to the ATO.

    Department of Immigration and Border Protection (DIBP) – outcomes

    DIBP Licensing Review – Brooke Dewar 

    Brooke advised that a workshop is being held with industry on 25 November 2016 regarding import licensing to look for opportunities to make the process more consistent with the ATO. This will provide an industry perspective on the integrity of the system, which will be incorporated into the review. The review is looking at streamlining the whole licensing system, including excise equivalent goods - relating to depots, warehouses and customs brokers. At this stage, there is no set timeframe, but the review is expected to be finalised as soon as practicable.

    Tobacco Reform Programme update – Brooke Dewar 

    DIBP are working on the detail of legislative amendments and are working towards these being introduced in the Autumn 2017 sittings. Changes would potentially impact on the Excise Act, the Customs Act and the Tax Administration Act. It is hoped that further detail will be provided at the next DIBP Industry Advisory Group meeting as part of further consultation, prior to an Exposure Draft being finalised. Issues being included are increasing excise penalties, proof of origin and introducing additional tiers for penalties. Once legislation is in place, DIBP will then look to progress work with States and Territories.

    The reduction in duty free tobacco allowance was introduced into law and will be coming into effect on 1 July 2017, reducing the allowance of 50 cigarettes or equivalent, to 25 cigarettes or equivalent.

    Duty Drawback - Brooke advised that her team is currently working on this issue; however the outcome is also dependent on the final position of tobacco reform.

    Australian Trusted Trader (ATT) update – Brooke Dewar 

    There are currently seven accredited businesses in the ATT programme. Approximately 380 businesses have submitted Expressions of Interest, in addition to those involved in the pilot scheme. DIBP are also looking at mutual recognition arrangements, with New Zealand, Canada, China, Korea and Thailand all having Trusted Trader programmes.

    Action Item 25112016-2-1 – Brooke Dewar to provide advice as to the approximate timing of granting accreditation as an Australian Trusted Trader.

    Single Trade Window update – Brooke Dewar 

    The Single Trade Window was a Government commitment to assist in trade facilitation and trade competitiveness. Two feasibility studies are currently being carried out. The system is currently in place in Canada, New Zealand and Singapore. There are challenges in meeting Government regulatory requirements as the intent is not to make it too narrow, which would potentially reduce future capability. The work would coordinate a "single window" across Government, including both the ICT and non-ICT element. Workshops are currently taking place and the scope of the initiative will be published following initial consultation. The meeting discussed consideration of licensing in this work.

    Action Item 25112016-2-2 – Brooke Dewar to provide advice as to whether the Single Trade Window would include licensing in the scope of the initiative.

    Members agreed that there is currently a lot on the Government's law change agenda. Michael O'Rourke advised that the work on excise reform is with Treasury for consideration in high level design. He commented that tobacco and petroleum are more straightforward, however there are complexities when looking at alcohol, with maturation, manufacture and other issues to be considered.

    Agenda item 3 – Industry items

    Industry updates 

    James Keulemans informed the group of an Anti-Illicit Tobacco Retailers' Forum held in Melbourne on Wednesday 23 November. The forum discussed the impacts of illicit tobacco on revenue, operational risks, break-ins, etc. Tobacco industry representatives informed retailers of their view of the size and scope of the illicit tobacco issue and what is being done to combat the problem, including industry activities such as the recent application to the ACCC. The forum also provided an opportunity for retailers to discuss how they can further contribute to addressing the illicit tobacco problem. James reported that the forum went very well, with retailers keen to support government and to educate franchisees in the laws around tobacco. The ABF Tobacco Strike Team also presented at the forum. Another meeting will be held in early 2017.

    Illicit tobacco update – Gary Dickson 

    Gary took members through a presentation which is complementary to the annual KPMG Illicit Tobacco in Australia report. The presentation provided an update of the information that will be used in the KPMG full year report and, as such, was an overview summary without the additional analysis that will be provided by KPMG. Gary discussed the empty pack survey that was carried out, involving random collections from a predetermined route across 16 cities. The total sample is 12,000 packs and it was carried out from 1 May - 16 June, 2016. The committee did not endorse the report, but noted the presentation.

    Mechanisms for industry to provide information on Tax Evasion association with Illicit tobacco traders – Gary Dickson 

    Industry referred to the Application for Authorisation by industry to the ACCCExternal Link. It was noted that submissions have been made by various Government Departments and industry have prepared a response to those submissions. Industry advised that they are expecting a decision will be made in early to mid-February 2017 – Neville Matthew concurred that this assessment was reasonable. Tom Wheeler queried whether any modelling had been carried out in relation to the size and shape of retailers in a 12 month period in terms of impact. Industry advised that there has not been to date and that the size and shape would depend on the rigour put around the process. Discussion also took place regarding potential phoenixing arrangements by retailers.

    Agenda item 4 – Other business

    The meeting discussed potential intelligence provided by industry relating to identifying retailers that they believe to be displaying behaviour in illicit activities and whether the ATO could use that intelligence to look into those businesses with regard to tax obligations. Tom Wheeler advised that the ATO would welcome such intelligence as a means of identifying people potentially operating outside the system.

    Action Item 25112016-4-1 – Industry to further discuss out of session, the provision of industry intelligence regarding those businesses thought to be involved in illicit behaviour to the ATO for consideration of further investigation relating to tax compliance.

    ACCC - Neville Matthew advised members of the recent testing carried out on cigarettes to ensure they met the mandatory Reduced Fire Risk Safe Standard. This exercise will be repeated in the future, particularly with regard to the impact of bushfires.

    The media releaseExternal Link and Mandatory StandardExternal Link can be found on the ACCC website.

    The meeting concluded at 12.10pm.

      Last modified: 15 Sep 2017QC 53289