House of Representatives

Customs Tariff Amendment (Tobacco) Bill 2016

Customs Tariff Amendment (Tobacco) Act 2016

Excise Tariff Amendment (Tobacco) Bill 2016

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP and the Assistant Minister for Immigration and Border Protection, the Hon Alex Hawke MP)

Chapter 1 - Tobacco duty increases: improving health outcomes

Outline of chapter

1.1 The Excise Tariff Amendment (Tobacco) Bill 2016 (ETA Bill 2016) and the Customs Tariff Amendment (Tobacco) Bill 2016 (CTA Bill 2016) amend the Excise Tariff Act 1921 (ETA 1921) and the Customs Tariff Act 1995 (CTA 1995) to increase the rates of excise and excise-equivalent customs duty on tobacco. There are four annual increases in duty of 12.5 per cent each, commencing on 1 September 2017.

1.2 The objective of these Bills is to improve the health of Australians by reducing their exposure to tobacco products. The increases ensure that average cigarette prices are more closely aligned with the World Health Organisation recommendation concerning the proportion that excise and excise-equivalent customs duty should comprise of the price of a cigarette.

Context of amendments

1.3 Excise is a tax on certain goods produced in Australia, including tobacco products. Imported goods comparable to those subject to excise, known as excise-equivalent goods, attract customs duty that includes a component imposed at the same rate as the excise applied to locally-produced goods. This component is commonly referred to as excise-equivalent customs duty. As a result, locally-produced goods subject to excise are taxed in an equivalent fashion to comparable imported goods.

1.4 Despite reductions in tobacco consumption within the general Australian population, tobacco continues to be a major cause of death and disability, with approximately 2.6 million Australians still smoking daily (ABS, 2015) [1] . Research shows that up to 1.8 million people, about two thirds of Australia's smokers, will die from smoking related causes if they continue to smoke (Banks et al. 2015) [2] .

1.5 These amendments seek to reduce premature death and disease caused by smoking by increasing the rates of duty on tobacco so that excise and excise-equivalent customs duty on tobacco is close to the World Health Organisation recommendation that they should comprise 70 per cent of the price of a cigarette.

Summary of new law

1.6 These amendments introduce a series of four increases of 12.5 per cent each to the rates of excise and excise-equivalent customs duty on tobacco, starting on 1 September 2017.

1.7 These increases coincide with the indexation adjustments scheduled for these dates. This reduces compliance cost impacts arising from price changes resulting from the duty increases.

Comparison of key features of new law and current law

New law Current law
Four further annual 12.5% increases in the rates of excise and excise-equivalent customs duty on tobacco and tobacco products occur on 1 September 2017, 1 September 2018, 1 September 2019 and 1 September 2020. Annual increases in the rate of excise and excise-equivalent customs duty of 12.5% apply with the final increase applying on 1 September 2016.

Detailed explanation of new law

1.8 The annual increases apply to the rates of duty for tobacco products in stick form and other tobacco products including cigars, cigarettes, loose leaf tobacco and snuff.

1.9 The series of four 12.5 per cent annual increases in the rates of duty occur on 1 September 2017, 1 September 2018, 1 September 2019 and 1 September 2020. These increases are scheduled to occur on the same day as biannual indexation of the tobacco duty rate to average weekly ordinary time earnings (AWOTE) to minimise impacts on the business systems of affected businesses. [Schedule 1, item 2, paragraph 6AA(6)(a) of the ETA Bill 2016; Schedule 1, item 2, paragraph 19AB(6)(a) of the CTA Bill 2016]

1.10 The amendments treat the indexation factor for tobacco duty (based on AWOTE) that applies on 1 September 2017, 1 September 2018, 1 September 2019 and 1 September 2020 as equal to one if it would otherwise be less than one. This ensures that the full 12.5 per cent annual increase in duty rate applies despite any decline in AWOTE. [Schedule 1, item 1, subsection 6AA(5) of the ETA Bill 2016; Schedule 1, item 1, subsection 19AB(5) of the CTA Bill 2016]

1.11 If there is a delay in the publication of the AWOTE index by the Australian Bureau of Statistics then the biannual indexation of tobacco duty is deferred until the fifth day after the day of publication of the index. In these circumstances the annual increases in duty are also delayed by the operation of existing subsections 6AA(7) of the ETA 1921 and 19AB(7) of the CTA 1995 to coincide with the day that indexation to AWOTE applies. This ensures that a delay in publication does not result in the annual increases in duty and the indexation of duty to the AWOTE index occurring several days apart and therefore increasing compliance costs for affected businesses.

Application and transitional provisions

1.12 The Bills commence on Royal Assent and apply from 1 September 2017. [Clause 2 of the ETA Bill 2016; Clause 2 of the CTA Bill 2016].

1.13 As a result of amendments to specify additional factors for indexation days on 1 September 2017, 1 September 2018, 1 September 2019 and 1 September 2020, where a rate of duty is adjusted under these amendments, the adjusted rate applies to goods:

entered for home consumption on or after the day the adjustment is made (for goods subject to excise duty); and
imported on or after the day the adjustment is made, and to goods imported before that time where the time for working out the rate of excise-equivalent customs duty on the goods has not yet occurred (for goods subject to excise-equivalent customs duty).

[Schedule 1, item 2, paragraph 6AA(6)(a) of the ETA Bill 2016; Schedule 1, item 2, paragraph 19AB(6)(a) of the CTA Bill 2016]

STATEMENT OF COMPATABILITY WITH HUMAN RIGHTS

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

Tobacco duty increases: improving health outcomes

Excise Tariff Amendment (Tobacco) Bill 2016

1.14 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

1.15 The Bill increases excise duty on tobacco by imposing a series of four annual increases of 12.5 per cent each, commencing on 1 September 2017.

Human rights implications

1.16 This Bill engages the right to health.

Right to health

1.17 This Bill engages the right to health in Article 12 of the International Covenant on Economic, Social and Cultural Rights. The right to health includes, in Article 12(2)(c), the right to the prevention, treatment and control of diseases.

1.18 This Bill promotes the right to health by contributing to policy initiatives to reduce smoking rates and therefore reduce the significant adverse health and economic effects caused by the use of tobacco.

Conclusion

1.19 This Bill is compatible with human rights as it promotes the right to health.

Tobacco duty increase: improving health outcomes

Customs Tariff Amendment (Tobacco) Bill 2016

1.20 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

1.21 The Bill increases excise-equivalent customs duty on tobacco by imposing a series of four annual increases of 12.5 per cent each, commencing on 1 September 2017.

Human rights implications

1.22 This Bill engages the right to health.

Right to health

1.23 This Bill engages the right to health in Article 12 of the International Covenant on Economic, Social and Cultural Rights. The right to health includes, in Article 12(2)(c), the right to the prevention, treatment and control of diseases.

1.24 This Bill promotes the right to health by contributing to policy initiatives to reduce smoking rates and therefore reduce the significant adverse health and economic effects caused by the use of tobacco.

Conclusion

1.25 This Bill is compatible with human rights as it promotes the right to health.


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