Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Background
This package of Bills provides for an increase in sales tax on alcoholic beverages to protect the revenue of States and Territories which may be lost as a result of the High Court's decision in Ha & Anor. v. State of New South Wales & Ors. and Walter Hammond & Associates Pty Limited v. State of New South Wales & Ors. In its decision of 5 August 1997, the High Court held that business franchise fees on tobacco in New South Wales were invalid under section 90 of the Constitution. The franchise fees were held to be duties of excise which can only be imposed by the Commonwealth. The decision also casts doubt on the Constitutional validity of State and Territory franchise fees on petroleum and liquor. At the request of the States and Territories, this package of Bills raises additional wholesale sales tax on alcoholic beverages to replace the liquor franchise fees which would have been collected after 5 August 1997. It is proposed that the additional revenue raised from this increase in sales tax will be passed on to the States and Territories. The package comprises:
- Sales Tax (Customs) (Alcoholic Beverages) Bill 1997
- Sales Tax (Excise) (Alcoholic Beverages) Bill 1997
- Sales Tax (General) (Alcoholic Beverages) Bill 1997
- Sales Tax Assessment Amendment Bill 1997
SALES TAX (CUSTOMS) (ALCOHOLIC BEVERAGES) BILL 1997
SALES TAX (EXCISE) (ALCOHOLIC BEVERAGES) BILL 1997
SALES TAX (GENERAL) (ALCOHOLIC BEVERAGES) BILL 1997
Increases the rate of sales tax on alcoholic beverages by 15 percentage points.
Date of effect: The increase in the rate of sales tax will apply to dealings on or after 3.30pm eastern standard time on 6 August 1997
Proposal announced: Announced by the Treasurer in a Press Release (No. 85) on 6August 1997.
Financial impact: $760 m. in 1997-98
Compliance cost impact: The impact on compliance costs should be minimal. At present the goods subject to the increased rate are already subject to sales tax. However, in order to be able to identify separately the additional revenue raised, taxpayers may need to lodge a separate sales tax return.
Taxpayers may also face an additional cost in financing the payment of the additional sales tax by the due date when it is not collected from customers by that time.
SALES TAX ASSESSMENT AMENDMENT BILL 1997
Makes consequential amendments to the Sales Tax Assessment Act 1992 to:
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- ensure the small business exemption and quarterly remitter provisions are not affected by the increase in the rate of sales tax on alcoholic beverages;
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- limit the credit available on these goods;
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- ensure the taxable value of goods is not reduced by any rebate, refund or similar amount received from a State or Territory;
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- provide for the exchange of information by the Commissioner of Taxation to the States and Territories to allow for the State and Territory rebate schemes.
Date of effect: 6 August 1997
Proposal announced: Not previously announced.
Financial impact: No significant impact on revenue.
Compliance cost impact: The measures will ensure that compliance costs for small businesses do not increase because of the temporary increase in the rate of sales tax on alcoholic beverages, by ensuring the small business exemption and quarterly remitter provisions are not affected by the changes.
The measures will not otherwise impact significantly on compliance costs.