House of Representatives

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)

General outline and financial impact

Tobacco duty increases: improving health outcomes

The Excise Tariff Amendment (Tobacco) Bill 2016 and the Customs Tariff Amendment (Tobacco) Bill 2016 amend the Excise Tariff Act 1921 and the Customs Tariff Act 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.

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.

Date of effect: The first annual increase applies from 1 September 2017.

Proposal announced: The measure was announced on 3 May 2016 in the 2016-17 Budget.

Financial impact: The measure is estimated to result in a gain in receipts over the forward estimates period of $4,590 million. Goods and services tax receipts are estimated to increase by $430 million over the same period.

- Nil

- Nil

Human rights implications: These Bills are compatible with human rights. See Statement of Compatibility with Human Rights, paragraphs 1.14 to 1.25.

Compliance cost impact: The annual increases in duty are scheduled to apply from the same date in September when the rate of duty is increased due to indexation for movements in average weekly ordinary time earnings. Accordingly, there is no significant additional compliance burden above existing requirements to periodically revise tobacco product prices.

Summary of regulation impact statement

Regulation impact on business

Impact: Low

Main points:

•

There will be no direct regulatory impact on tobacco companies from the staged excise and excise-equivalent customs duty increases as these will occur on the same day as the usual indexation changes.

•

Tobacco companies will experience minor transitional compliance costs as a result of the quotas expected to be implemented prior to each of the staged increases.

•

While increases to the excise and excise-equivalent customs duty rates have the potential to increase the illicit trade in tobacco the Government has announced it will take measures to strengthen the regulatory and enforcement response to illicit tobacco offences.