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EXCISE AMENDMENT REGULATIONS 1999 (NO. 1) 1999 NO. 213
EXPLANATORY STATEMENTSTATUTORY RULES 1999 NO. 213
Issued by the Authority of the Assistant Treasurer
Excise Act 1901
Excise Amendment Regulations 1999 (No. 1)
Section 164 of the Excise Act 1901 ("the Act") provides that the Governor-General may make regulations prescribing matters required to give effect to the Act or for the conduct of any business relating to the Excise.
Section 78 of the Act provides that remissions, rebates and refunds of excise duty may be allowed in respect of excisable goods in such circumstances and subject to such conditions and restrictions as are prescribed. Regulation 50 of the Excise Regulations 1925 ("the Excise Regulations") prescribes the circumstances in which remissions, rebates and refunds of excise duty may be allowed for the purposes of section 78.
Purpose of the Regulations
The purpose of the Regulations is to amend the Excise Regulations by:
a) inserting two new refund circumstances to allow for the partial refund of excise duty paid on aviation gasoline ("Avgas") that was sold for use as fuel in aircraft in circumstances where excise duty had been paid on the Avgas at a higher rate, but when it was sold after a relevant excise duty reduction had taken effect, the applicable reduction in price was passed on to consumers (item 2 of Schedule 1 and
b) inserting a new regulation that prescribes the amount of the partial refund payable under the new refund circumstances. The amount is to equal the applicable reduction in excise duty that was passed on to consumers (item 3 of Schedule 1
Background
The excise duty paid on Avgas has been used to recover the costs of terminal navigation and en route services provided by Airservices Australia and aviation safety regulation by the Civil Aviation Safety Authority.
As a result of the Government's commitment to implementing a fair and equitable system for recovering the costs of providing air traffic services to the industry, Airservices Australia has introduced certain pricing reforms.
These commenced in 1997, with the introduction of location specific charges for rescue and fire fighting services. Two reductions in the rate of excise duty payable under the Excise Tariff Act 1921 ("the Excise Tariff') on Avgas took effect in 1998.
The first took effect from 25 May 1998. It reduced the excise payable on Avgas by 2.6 cents per litre, which removed the component of duty relating to the provision of en route services.
The second took effect from 1 July 1998. It reduced the excise payable on Avgas by 13.092 cents per litre to 1.711 cents per litre, which removed the component of duty relating to the provision of terminal navigation services, in conjunction with the introduction of location specific pricing for terminal navigation services.
On 1 August 1998, the remaining 1.711 cents per litre rate of duty was subject to a small indexation increase in accordance with section 6A of the Excise Tariff. The rate became 1.721 cents per litre and this has been taken into account in determining the amounts of refund payable.
The object of these refund circumstances is to compensate those Avgas distributors and retailers who held stock on which excise duty had been paid at a higher rate, but who elected to pass on price reductions to consumers, when sales occurred after a relevant excise duty reduction took effect.
The action taken by distributors and retailers to pass on the reductions avoided the pricing and supply problems in the marketplace that could otherwise have occurred. This is due to the fact that duty is paid by the fuel producers before delivery to distributors and retailers and there is always an expectation from consumers that reductions in duty will be passed on immediately through an equivalent fall in the price of fuel at the pump or hydrant. Therefore, if reductions are announced ahead of time, distributors and retailers will tend to run stocks low to protect against holding large volumes delivered at a higher pre-duty reduction price. Such a practice can potentially lead to supply difficulties. On the other hand, if there is no prior announcement of the timing of the reduction, distributors and retailers can be caught holding large fuel stocks purchased at a higher price. Distributors and retailers in this situation are then faced with the problem of trying to sell the fuel at a higher price than competitors or bearing the cost of the extra duty themselves.
The amount of the refund is to equal the applicable reduction in excise duty that was passed on.
The Regulations are explained in greater detail in Attachment 1.
The Regulation Impact Statement is set out in Attachment 2.
The Regulations commenced on gazettal.
ATTACHMENT 1
Regulation 1 - Name of regulations
This regulation provides for these regulations to be named the Excise Amendment Regulations 1999.
Regulation 2 - Commencement
This regulation provides that these regulations commenced on gazettal.
Regulation 3 - Amendment
This regulation provides that the Excise Regulations 1925 are amended as set out in the Schedule 1 to these regulations.
Schedule 1 - Amendment of the Excise Regulations 1925
Item 1 of Schedule 1 amends subparagraph 50(1)(zo)(iv) by making a technical amendment to accommodate the insertion of new paragraphs in regulation 50.
Item 2 of Schedule 1 amends regulation 50 by inserting two new paragraphs, 50(1)(zp) and 50(1)(zq).
New paragraph 50(1)(zp) inserts a new circumstance in which a refund of excise duty paid on Avgas may be paid. It will occur where:
a) fuel has been entered for home consumption, and excise duty paid, under
subparagraph 11(A)(3)(a) of the Schedule to the Excise Tariff before
31 January 1998 or, subparagraph 11(H)(1)(a) or (2)(a) of the Schedule between
31 January 1998 and 24 May 1998 (inclusive) (these classifications relate to
aviation gasoline); and
b) the fuel was sold for use as fuel in aircraft:
* between 25 May 1998 and 30 June 1998 (inclusive) (subparagraph (zp)(i) or
* between 1 July 1998 and 31 July 1998 (inclusive) (subparagraph (zp)(ii)) or
* on or after 1 August 1998 (subparagraph (zp)(iii)).
These deal with the three changes in duty that occurred during the period 25 May 1998 to 1 August 1998, discussed earlier; and
c) for a price no greater than the price of the last sale by the seller before 25 May 1998, less:
* 2.6 cents per litre, in the case of subparagraph (zp)(i). This amount per litre
equals the reduction in duty that took effect from 25 May 1998;
* 15.692 cents per litre, in the case of subparagraph (zp)(ii). This amount per
litre equals the sum of the reduction in duty that took effect from
25 May 1998 and that made with effect from 1 July 1998; or
* 15.682 cents per litre, in the case of subparagraph (zp)(iii). This amount per
litre equals the sum of the reduction in duty that took effect from
25 May 1998 and that made with effect from 1 July 1998 less the amount
per litre of the indexation increase that took effect on 1 August 1998.
The intention of this new refund circumstance is to ensure that it is only fuel sold by fuel distributors and retailers at the reduced price that may be the subject of the partial refund.
New paragraph 50(1)(zq) inserts a new circumstance in which a refund of excise duty paid on Avgas may be paid. It will occur where:
a) fuel has been entered for home consumption, and excise duty paid, under
subparagraph 11(H)(1)(a) or (2)(a) of the Schedule to the Excise Tariff between
25 May 1998 and 30 June 1998 (inclusive); and
b) the fuel was sold for use as fuel in aircraft:
* between 1 July 1998 and 31 July 1998 (inclusive) (subparagraph (zq)(i)), or
* on or after 1 August 1998 (subparagraph (zq)(ii)).
These deal with the two changes in duty that occurred during the period
1 July 1998 to 1 August 1998, discussed earlier; and
c) for a price no greater than the price of the last sale by the seller before 1 July 1998,
less:
* 13.092 cents per litre, in the case of subparagraph (zq)(i). This amount per litre equals the reduction in duty that took effect from 1 July 1998; or
* 13.082 cents per litre, in the case of subparagraph (zq)(ii). This amount per litre equals the reduction in duty that took effect from 1 July 1998 less the amount per litre of the indexation increase that took effect on 1 August 1998.
Again, the intention of this new refund circumstance is to ensure that it is only fuel sold by fuel distributors and retailers at the reduced price that may be the subject of the partial refund.
Item 3 of Schedule 1 inserts a new regulation 52H into the regulations. This regulation provides for the amount of refund of excise duty payable under the new refund circumstances in paragraphs 50(1)(zp) and 50(1)(zq), discussed in item 2 above.
New subregulation 52H(1) provides that for subparagraph 50(1)(zp)(i) the amount is 2.6 cents per litre. This is equal to the reduction in excise duty payable on aviation gasoline which took effect from 25 May 1998.
New subregulation 52H(2) provides that for subparagraph 50(1)(zp)(ii) or (iii), except where new subregulation 52H(6) applies (discussed further below), the amount is 15.692 cents per litre. This is equal to the reduction made by adding the amount of the reduction made with effect from 25 May 1998 (2.6 cents per litre) and that made with effect from 1 July 1998 (13.092 cents per litre).
New subregulation 52H(3) provides that for subparagraph 50(1)(zq) the amount is 13.092 cents per litre. This is equal to the reduction in excise duty payable on aviation gasoline made with effect from 1 July 1998.
New subregulation 52H(4) provides that a refund of excise duty under paragraph 50(1)(zp) or (zq) is payable to the person who first sells the fuel for a "reduced price" (a term defined in new subregulation 52H(5), discussed further below). The purpose of this subregulation is to ensure that a person who has purchased the fuel at the reduced rate will not also be able to claim the refund.
New subregulation 52H(5) provides a definition of the term "reduced price", which is used in subregulation 52H(4), as follows: "reduced price, for a sale, means a price no greater than the price mentioned in the subparagraph in subregulation 50(1) that applies to the sale". This is to ensure that only those fuel distributors and retailers who actually passed on price reductions to consumers can claim the refund.
New subregulation 52H(6) modifies the operation of new subregulation 52H(2) to cover those situations where fuel has been sold in the period between 25 May 1998 and 30 June 1998, and again in the period either between 1 July 1998 and 31 July 1998, or on or after 1 August 1998. It provides for the appropriate refund to be available to the person who first sold the fuel at a relevant reduced price. For instance, this means that a person who sold the fuel in the period between 25 May 1998 and 30 June 1998 (inclusive) is eligible for a refund of 2.6 cents per litre. Where that fuel was further sold in the period between 1 July 1998 and 31 July 1998 (inclusive) or on or after 1 August 1998, the person making that further sale is only eligible for a refund of either 13.092 or 13.082 cents per litre, respectively, as the 2.6 cents per litre is payable to the person who made the first sale.
ATTACHMENT 2
REGULATION IMPACT STATEMENT
Excise Amendment Regulations - Partial Refund of Duty for Aviation Gasoline (Avgas)
Purpose of the Proposed Regulations
To compensate those Avgas distributors and retailers who held stock on which excise duty had been paid at a higher rate, but who elected to pass on price reductions to consumers, when sales occurred after a relevant excise duty reduction took effect (May and July 1998). The amount of the proposed refund is to equal the applicable reduction in excise duty that was passed on.
1. Policy Objective
The proposed refund circumstances are designed to make the original policy intent of the changes to the rate of excise duty on Avgas made in May and July 1998 work effectively with minimum disruption to stakeholders.
2. Impact of Proposed Regulations
Avgas suppliers had requested refund arrangements be put in place for duty paid stocks in home consumption at distributors' premises at the time of the duty reductions. This was to allow the reductions to be passed on to consumers without penalty to the oil companies or distributors.
The action taken by distributors and retailers to pass on the reductions avoided the pricing and supply problems in the marketplace that could otherwise have occurred. This is due to the fact that duty is paid by the fuel producers before delivery to distributors and retailers and there is always an expectation from consumers that reductions in duty will be passed on immediately through an equivalent fall in the price of fuel at the pump or hydrant. Therefore, if reductions are announced ahead of time, distributors and-retailers will tend to run stocks low to protect against holding large volumes delivered at a higher pre-duty reduction price. Such a practice can potentially lead to supply difficulties. On the other hand, if there is no prior announcement of the timing of the reduction, distributors and retailers can be caught holding large fuel stocks purchased at a higher price. Distributors and retailers in this situation are then faced with the problem of trying to sell the fuel at a higher price than competitors or bearing the cost of the extra duty themselves.
The proposed refunds do not apply to all stocks in home consumption. They are effectively limited to bulk stocks held by distributors by the requirement that the refund is available only to those who sell the fuel for a reduced price. This means refunds would not be available for persons with one or two drums for their own use, for example.
3. Costs & Benefits
Limiting the concession to distributors will limit the number of claims and reduce the resources necessary for their processing and auditing.
To guard against windfall gains by recipients of the refunds, evidence will be required to demonstrate that the duty reduction had been passed on to Avgas purchasers. Current Excise Regulation 52(2) provides for the production of records or provision of further information to verify refund claims, where necessary. Avgas distributors and retailers were advised of recordkeeping requirements to substantiate claims at the time that refund arrangements were first being considered.
As there is no charge for lodging refund applications, compliance costs to claimants are limited to the administrative cost of preparing claims.
The amount of the proposed refund is to equal the applicable reduction in excise duty that was passed on.
Within these restricted circumstances, it is estimated that three large claims may be made by the three major (supplier) oil companies. These will cover the majority of the refunds sought, with the potential for a limited number (probably fewer than 20 claims) coming from independent distributors and retailers.
Total cost of refunds is estimated to be less than $800,000.