House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

Excise Tariff Amendment Bill (No. 2) 2001 and Customs Tariff Amendment Bill (No. 3) 2001

The purpose of this legislation is to amend the indexation provisions of the Excise Tariff Act 1921 (Excise Tariff Act) to restrict the application of the provisions to all excisable goods other than petroleum fuels classified to items 11 and 12 of the Schedule to the Excise Tariff Act.

As a consequence of these amendments, the Customs Tariff Act 1995 is amended to remove certain excise equivalent imported petroleum fuels from the table of paired Customs subheadings and Excise Tariff items in subsection 19(1) that are subject to indexation.

Date of effect: The amendments will commence on Royal Assent.

Proposal announced: Abolition of excise and customs duty indexation for petroleum fuels was announced by the Prime Minister on 1 March 2001 as part of a package of cuts to fuel taxes.

Financial impact: The cost to the Budget of the abolition of petroleum fuels indexation is $150 million in 2001-2002, $425 million in 2002-2003, $785 million in 2003-2004 and $1,135 million in 2004-2005.

Compliance cost impact: Nil.

Summary of regulation impact statement

Regulation impact on business

Impact: The abolition of petroleum fuels indexation is expected to affect petroleum manufacturers, importers and licensed distributors, and business users of petroleum fuels.

Main points:

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There may be a minor reduction in ongoing compliance costs for petroleum manufacturers, importers and licensed distributors, as less frequent changes will be needed to their systems to cater for new duty rates.

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Industries that use duty-paid petroleum fuels as inputs to production, including the aviation and transportation industries, should benefit from lower costs. The extent of the impact across industry sectors and for individual operators will vary.

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Individual non-business consumers should benefit from lower retail prices for fuels, including petrol and home heating oil.