Northern Territory Second Reading Speeches

[Index] [Search] [Bill] [Help]

BUSINESS FRANCHISE ACT (SUSPENSION OF OPERATION) BILL 1998

Bills presented and read a first time.

Mr REED (Treasurer): Madam Speaker, I move that the Bills be now read for second time.

These Bills are necessary to complete the legislative requirements arising in the Northern Territory from the 1997 High Court decision affecting State and Territory business franchise fees. Members will recall that on 5 August, 1997 the High Court ruled that franchise fees on tobacco in New South Wales were unconstitutional on grounds that they were an excise. Under section 90 of the Australian Constitution, only the federal government can impose an excise. The Solicitor for the Northern Territory subsequently advised the Territory’s business franchise fee on tobacco was invalid and that the fees on petroleum and liquor were of doubtful constitutional validity. Other states face similar difficulties. This gave the states and territories little choice but to stop collecting those fees. Accordingly, I announced on 5 August 1997 that with immediate effect the Territory would cease collected the ad valorem fees on tobacco, liquor and petroleum.

The first of the bills, the Business Franchise Act (Suspension of Operation)Bill will suspend the operation of the Business Franchise Act and thus remove the potential for unconstitutionality. A requirement to pay ad valorem fees is suspended with effect from 6 August 1997. Other requirements of the Business Franchise Act will be suspended from the date of assent. The revenues derived from franchise fees were significant for all states and territories. As the loss of these revenues would have very serious budgetary implications for the states and territories the Commonwealth government agreed to a unanimous proposal by all states and territories to put in place safety net arrangements. Under these arrangements, the Commonwealth increased its excise rates on tobacco and fuel, and its sales tax on liquor, to raise replacement revenues for the states on these products.

The additional revenues raised by the Commonwealth are shared between the states on an agreed basis, calculated by the Commonwealth Grants Commission, in the form of revenue replacement grants.

In setting the surcharge rates, the Commonwealth is constitutionally bound to keep its tax rates uniform in all jurisdictions.

In the case of fuel an excise surcharge of 8.1¢ per litre was imposed to replace the franchise fee on petrol and diesel. Under the Commonwealth excise regime, this rate is indexed at regular intervals for CPI increases. The surcharge exceeds the Northern Territory’s previous franchise fee rates of 7¢ per litre on fuel.

Furthermore, persons using diesel fuel for purposes other than in road vehicles were eligible for a rebate of 2¢ per litre where the Territory Business Franchise fee had been imposed. In order to minimise any impact on prices the Territory implemented a subsidy scheme to return the difference to industry and relevant consumers. To date, the subsidies have been paid under administrative arrangements.

The second of the 2 bills being introduced today, the Fuel Subsidies Bill will provide legislative framework for the payment of these subsidies. Such a legislative framework provides certainty for the industry, consumers and administrators.

The scheme involves 3 categories of fuel subsidy paid by Northern Territory. Firstly, a general subsidy of 1.1¢ per litre is paid to the fuel companies in respect of fuel supplied in the Territory; secondly, off-road users of diesel fuel in the Territory can claim a subsidy of 2¢ per litre; and, thirdly, certain consumers can claim a special subsidy equivalent to the excise surcharge component. This subsidy restores the exempt status which certain consumers were entitled to under the former business franchise fee arrangements. For example, mother ship operators selling fuel to fishing vessels in Australian waters and fuel used on the McArthur River mining project will qualify for the special subsidy.

The bill provides that all applications for subsidies are to be made through the Commissioner of Taxes. The subsidy payments are estimated to total approximately $11.3m annually in 1998-99 terms. These payments will be funded from the revenue replacement grants received from the Commonwealth.

The bill is designed to recognise established industry practices and to ensure that the transition from the franchise fee scheme to the new subsidy arrangements is as seamless as possible.

This bill also reconstitutes a licensing regime for fuel suppliers. A cost recovery-based administrative fee replaces the previous fixed licence fee applicable to fuel suppliers under the Business Franchise Act. The licensing scheme requires all suppliers who first supply petroleum products in the Northern Territory to be licensed, so that they are able to receive a subsidy for the supply of fuel. ‘First supply’ is supply that is entered or delivered for home consumption under the Customs Act or Excise Act, and either the fuel is supplied to another person in the Northern Territory or the supplier consumes the fuel in the Northern Territory for that person’s own purposes.

Claimants of the off-road diesel subsidy are required to use all of the diesel fuel in the Northern Territory or Australian territorial waters for purposes other than propelling a road vehicle. The regulations will prescribe conditions under which prescribed consumers can obtain the special subsidy. Interjurisdictional arrangements have been included to ensure that subsidies cannot be claimed in different jurisdictions in respect to the same supply of diesel.

Licence holders, off-road diesel users and special subsidy claimants are able to amend claims within 30 days where either supply, a claim for compensation or usage is outside the conditions stipulated. Examples include where a licensed supplier has submitted an overstated application for general subsidy due to an administrative error, and where an off-road user has used diesel to propel a road vehicle and claimed an off-road diesel subsidy on such fuel.

Where a licence holder, off-road diesel user or special subsidy claimant does not make a correction, the commissioner can impose a penalty amount at double the subsidy rate. However, the commissioner may reduce the penalty by half. The commissioner may also impose conditions on or cancel licences as required. A decision by the commissioner on this matters is able to be reviewed by the minister within 60 days. Furthermore, the bill empowers the commissioner to carry out investigations to ensure subsidy claimants comply with the legislation.

In the event that the Commonwealth safety net arrangements are dissolved, the minister may order all subsidy payments to cease.

The bill will come into operation on the date fixed by the Administrator by notice in the Gazette.

I commend the bill to honourable members.

Debate adjourned.

 

[Index] [Search] [Bill] [Help]