Ian Causley (Page, Deputy-Speaker) Share this | Hansard source

I am pleased to speak on the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 and cognate bills today. This is a very interesting bill. It covers a number of areas of taxation and focuses on streamlining current excise arrangements across a range of sectors. These matters are of great interest to the National Party—in particular my colleague the member for Hinkler, who is on sick leave today in Brisbane and cannot participate in this debate. It will reduce compliance costs for excise manufacturers, importers and their administering authorities, and in this regard I would like to discuss one aspect of the accompanying bill—the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006before I move into the body of my speech.

I note that the explanatory memorandum for the accompanying bill discusses the compliance costs for businesses using the fuel grants scheme. Changes to that scheme mean that the users will have to claim back fuel excise via their quarterly business activity statement. The explanatory memorandum suggests that the bill will have some compliance costs for end users of the scheme and says that end users will face rebalancing of their compliance costs, that they will have some transitional compliance costs and that they will have to modify their accounting system.

It all sounds rather benign, but I will put forward the case of commercial fishermen, who will remain eligible for the rebate but stand to be thousands of dollars out of pocket for months until they can claim their pay-back through the BAS. I and my east coast National colleagues believe that the fishing industry should be exempt and be allowed to retain its current arrangements, where the excise is rebated immediately on purchase through the fishing cooperative or the fuel supplier.

We need to recognise that fuel represents more than 30 per cent of the cost of fishing. This is bad enough, but now consider the state and federal closures along the east coast which are forcing fishermen well outside their traditional grounds to get a catch—it is a triple whammy. Even at this late stage I would urge the Minister for Revenue and Assistant Treasurer to remove the cash flow problem that this measure will create and not subject a struggling industry to even more pain.

Turning to the liquor aspects of the bill at hand, I would like to discuss the administration and taxation arrangements for alcohol, particularly in relation to the tax treatment of alcoholic beverages that have a volume of alcohol below 10 per cent. There is no doubt this government has taken some important steps in recent years in improving tax treatment of alcohol products, and in this bill the government proposes to make significant changes to spirits legislation.

We need to recognise that many sectors of the liquor industry depend on sugar, particularly so in the case of rum. Rum is one of the primary tertiary by-products of the sugar industry, and it is of great concern to me and my National colleagues—especially the member for Hinkler, in whose electorate Bundaberg Rum is located. We have proposed these changes after extensive and detailed consultation with industry, which applauds our commitment to getting rid of unnecessary red tape.

The bill repeals the Distillation Act 1901 and the Spirits Act 1906, both of which contain provisions relating to the manufacture of spirits. These provisions are already adequately covered in the Excise Act but, hand-in-hand with repealing these acts, the government is inserting new provisions to the Excise Act 1901 to protect ongoing revenue interests and to ensure high standards of distilled alcoholic products, including provisions for the maturation of brandy, whisky and rum.

Maturation is a key step in the production process because storage in wood improves the quality of spirits and provides their unique characteristics. If the government had not inserted these new provisions, we would in effect have removed the requirement that brandy, whisky or rum be matured for at least two years. The maturation process is in keeping with standards applied around the world, and the matter of repealing the maturation provisions has been rejected by this parliament on a number of occasions. In 1979 the Fraser government rejected any move to repeal the maturation requirement and in 1986 a Hawke government proposal to remove the rules was defeated in the Senate. This is because the coalition understands that without the maturation requirement there would be nothing to stop cane spirit—which, in effect, is raw ethanol—flooding into Australia.

Once it was allowed in, it could be mixed with artificial colouring and flavouring and sold to Australian consumers as rum. We do not want to see people being conned into buying ‘dressed-up’ ethanol and thinking it is rum when it could be anything from distilled potatoes to distilled grain, and certainly not when we have such a renowned and robust distilled spirit industry of our own.

My colleague Senator Ron Boswell and the former National Party member for Hinkler Bryan Conquest made another point when they spoke in defence of our maturation rules in 1986. They noted that such inferior products have much lower production costs, and manufacturers would therefore be able to incorporate the cost of aggressive advertising blitzes into the final retail price and still be able to get a competitively-priced product onto Australian shelves.

So this bill maintains the requirement that distilled alcohol products cannot be delivered from the Commissioner of Taxation’s control unless they continue to abide by the current maturation requirements. These requirements are also a nod to the fact that Australia has a very fine distilling sector, including the Bundaberg Distilling Company, and it ensures that the ongoing production of quality Australian products such as Bundaberg Rum is not jeopardised.

As members would be well aware, the member for Hinkler comes from the city of Bundaberg, and Bundaberg Rum is a very important part of the local economy. Bundaberg Rum is Australia’s highest selling rum, with around 330 million Bundaberg Rums drunk in Australia each year, and up until recently it was the highest selling spirit brand in Australia. But aside from its national popularity as a drink, Bundaberg Rum has a far more profound presence in Bundaberg itself. The Bundaberg Rum Distillery employs 56 locals and is actually the No. 1 tourist attraction in Bundaberg, with 69,000 visitors to the distillery in 2004-05.

A couple of years ago, Bundaberg Rum announced a $24 million expansion plan to help meet the demand for its products, including the installation of new maturation tanks, new timber storage vats and the upgrade of visitor facilities at the distillery. Work is already under way on a new $2.7 million visitors centre which will offer tourists an interactive experience where they can touch, taste and smell the ingredients used in the rum-making process. I and my colleagues commend the company on its commitment to the Bundaberg region and want to underline just how significant it is. On the face of it, any company investing $24 million in a regional economy deserves plaudits, but the extrapolation of these funds holds even greater significance for the local economy and the national economy.

Earlier this year, the member for Hinkler commissioned Bundaberg Rum’s new bond store, which cost $4.6 million to build. The bond store will ultimately hold 90 extra vats of rum, worth approximately $450 million—almost half a billion dollars worth of product, or nearly 10 times the value of the initial investment and all of it attracting excise revenue for the government.

This leads me to another point on the matter of our excise regime for spirits. If we want to foster further investment such as this, while encouraging increased production of lower alcohol products—and, by association, promote safe drinking practices by consumers—I think we should consider an alteration to the taxation arrangements for low- and mid-strength ready to drink spirits. There is an existing discrepancy between the taxation arrangement for low- and mid-strength ready to drink products and beer products of a similar strength.

With respect to beer, excise is levied on the basis of alcohol content, with a 1.15 per cent alcohol by volume duty-free exemption. This means that for all packaged and draught beer there is no excise for the first 1.15 per cent of alcohol by volume—a concession not given to alcohol beverages that have the same alcohol by volume, that is the ready to drink products. This arrangement was introduced by the Labor government in the 1988 budget and has been in place since 1989. An examination of the debates indicates that the rationale for its introduction was to encourage the consumption of low-alcohol beer. Significantly, the net revenue effect of the regime was a $400 million loss to revenue.

Remember that figure, because I believe that this is an ideal opportunity to consider applying the same taxation arrangement to low- and mid-alcohol packaged ‘ready to drinks’. As it stands, packaged ready to drinks are subject to a flat excise rate equal to that of full-strength packaged beer. At the current excise rates, this means 49c in excise for a can of mid-strength ready to drink, compared with 33c for a can of mid-strength packaged beer. Similarly, there is 37c in excise for a can of low-strength ready to drink and 18c for a can of low-strength packaged beer.

There is no sound policy reason for this anomaly. I believe that the Commonwealth should consider giving ready to drinks access to the 1.15 per cent excise-free threshold which applies to all beer products, as well as the reduced excise rates that apply to packaged and draught low- and mid-strength beer. Such a proposal is consistent with encouraging the consumption of lower alcohol content beverages and could well improve drinking behaviours within the community. Producers of ready to drinks would also be encouraged to produce lower alcohol products due to the associated reduction in tax costs. As I have outlined, this could bring substantial benefits to both the national and local economies.

Interestingly, the National Alcohol Strategy 2006-09, which was recently endorsed by the Ministerial Council on Drug Strategy, highlights the need to focus on price related mechanisms to reduce consumption of alcohol at harmful levels. It sees that as a key strategy in generating a more responsible drinking culture in Australia. Tax equivalence between low- and mid-strength ready to drinks and packaged beer would undoubtedly help achieve this goal.

In concluding, let me answer a couple of questions posed by the member for Hunter. He berated members who represent rural electorates about the fact that we were saying very little about the fuel sales exemption scheme which operated in isolated areas and, I think, had a subsidy of between 1c and 3c, depending on the area and the price of petrol. I think the member for Hunter was forgetting that in the budget we doubled the amount of money that we are putting into roads in the country. We are very happy about that. If you have a close look at the money for roads, especially through AusLink, you will see that many millions of dollars have been put into the national road system, something which I think motorists right across Australia will benefit from.

As far as the trivial comment about four-tonne to five-tonne trucks is concerned, I just say to the member for Hunter that he should visit some of our wheat farms at the time of harvest. Farmers are not all that flush with cash. There are a lot of old trucks out there that still haul grain to the silos. Many of those trucks, including the Internationals and Dodges of the 1960s and 1970s, ran on petrol. I dare say one of the reasons that much of our equipment and many of our trucks converted to diesel was that, in earlier days, diesel fuel was much cheaper than petrol. The reason given by the fuel companies at the time was that it was a product that was not used as extensively as petrol and therefore it was sold at a lower rate. Unfortunately, everyone has converted to diesel, and diesel is now dearer than petrol. I do not rule out the fact that some of these vehicle operators might be starting to look at other fuels, including petrol, in the future. I would not treat that matter as being quite so trivial.

It has been a pleasure to speak on this bill. I commend the bill to the House.

See this speech in context