Explanatory Statement
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Bhutan) Determination 2022
Issued by the Authority of the Minister for Foreign Affairs (the Minister)
Subject: Consular Privileges and Immunities Act 1972
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Bhutan) Determination 2022 (“Amendment”).
Section 10A of the Consular Privileges and Immunities Act 1972 provides that the Minister may make Determinations for the Commissioner of Taxation to pay the head of a consular post (or a person in a class of persons determined by the Minister) an amount equal to the indirect tax payable (if any) in respect of an acquisition covered by the Minister’s Determination.
The purpose of the Amendment is to amend the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (“Determination”) to create a new Indirect Tax Concession Scheme (ITCS) package for Bhutan by providing indirect tax concessions to their respective consular posts in Australia and staff accredited to those posts. The effect of the Amendment is to add new and updated items to Schedule 1 of the Determination, which lists the ITCS packages available to particular consular posts.
Consular posts and accredited staff are exempt from paying direct taxes under the Vienna Convention on Consular Relations 1963 (Articles 32, 49, 60 and 66). In line with international practice, indirect tax concessions are also extended to consular posts and accredited staff. In Australia, indirect tax concessions are provided for under the ITCS. Individual packages are negotiated with each country, and the level of concessions provided is broadly based on reciprocity.
Commencement dates for individual packages form part of the negotiations for tax concessions. In some cases, the commencement date reflects the date when the agreement was reached. In other cases, the commencement date allows access to concessions for purchases of goods and services already made, including by our overseas missions and posts. As concession packages are usually agreed before they come into force under Australian legislation, they need to be made retrospective. This retrospectivity is not to the detriment of any person or organisation; rather it extends concessions to posts and accredited staff from either the date the post opened or a date agreed during negotiations. Reciprocity in terms of the date of effect means that relevant Australian consular posts overseas will also have access to the same or similar benefits in the relevant overseas country.
The ITCS, and its extension to new or existing consular posts in Australia by way of periodic amendments to Schedule 1 of the Determination (such as this Amendment), are beneficial to Australia. In determining the scope of the economic benefit to Australia, the Department of Treasury confirmed that the estimated net benefit to Australia in pursuing reciprocal agreements under the ITCS would be several million dollars, and that the most practical means of assessing the financial benefit to Australia would be to take a global approach, rather than an approach based on individual agreements. In the current instance, Treasury has advised the concessions covered by the Amendment will have a negligible impact on revenue. In addition, the provision of tax concessions encourages consular posts and accredited staff to purchase goods in Australia rather than directly importing them, which further assists the Australian economy.
The Office of Best Practice Regulation has confirmed that amendments to Schedule 1 of the Determination are not expected to have regulatory impacts on business, individuals or community organisations, and do not require the preparation of a Regulation Impact Statement.
The Amendment does not alter the way the ITCS works, but extends tax concessions to specific consular posts. The Amendment was therefore judged to be of a minor nature where consultation is unnecessary under the Legislation Act 2003.
The Amendment is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Bhutan) Determination 2022, issued under the authority of the Minister for Foreign Affairs, aims to update the existing Indirect Tax Concession Scheme (ITCS) to include Bhutan. Enacted by the Parliament of Australia, the Consular Privileges and Immunities Act 1972 established the framework for providing tax concessions to consular posts and their accredited staff in Australia. The Amendment seeks to fill a gap by creating a new package of indirect tax concessions specifically tailored for Bhutanese consular posts and their staff, in line with international practices and reciprocity principles. This update aligns with the policy objective of enhancing economic benefits and promoting reciprocal agreements that encourage the purchase of goods within Australia, thereby supporting the national economy.
Scope and Application
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Bhutan) Determination 2022 amends the existing Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to create a new indirect tax concession package for Bhutan. This amendment is made under the authority of the Minister for Foreign Affairs and is intended to extend indirect tax concessions to Bhutanese consular posts in Australia and their accredited staff. This scheme is in line with international practice, extending the indirect tax exemptions that are already provided under the Vienna Convention on Consular Relations 1963 to include indirect taxes. The determination affects specific entities, namely Bhutanese consular posts and accredited staff operating in Australia, who are granted exemptions from indirect taxes as part of this package. The scope of the Amendment is national, applying specifically to the Australian jurisdiction. The Amendment extends the Indirect Tax Concession Scheme to Bhutan and does not specify any exclusions or thresholds other than those inherent in the existing scheme. The operation of the scheme and its amendments, such as the current Amendment, can be further defined through subordinate instruments, although the current Amendment itself does not introduce new mechanisms or processes. The Amendment is considered minor in nature, and as such, it does not require consultation or a Regulation Impact Statement, as per the Legislation Act 2003.
Key Provisions
The main operative sections of the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Bhutan) Determination 2022 (the Amendment) are centred around section 10A of the Consular Privileges and Immunities Act 1972, which empowers the Minister for Foreign Affairs to make Determinations for the Commissioner of Taxation to pay the head of a consular post, or a person in a class of persons determined by the Minister, an amount equal to the indirect tax payable in respect of an acquisition covered by the Minister's Determination. This Amendment modifies the existing Indirect Tax Concession Scheme (ITCS) to introduce new tax concession packages for Bhutan, which are detailed in Schedule 1 of the Determination. These packages provide indirect tax exemptions to Bhutanese consular posts in Australia and their accredited staff, aligning with international practices and the Vienna Convention on Consular Relations 1963, which exempts consular posts and accredited staff from direct taxes.
The Amendment imposes specific obligations on the relevant parties, particularly the Minister for Foreign Affairs and the Commissioner of Taxation. The Minister is required to make the Determination under section 10A of the Consular Privileges and Immunities Act 1972, which involves negotiating and agreeing on the terms of indirect tax concessions with Bhutan. The Commissioner of Taxation is then obligated to pay the specified indirect tax amount to the heads of consular posts or their accredited staff, as outlined in the Determination. The Amendment also necessitates the updating of Schedule 1 of the Determination to reflect the new tax concession package for Bhutan, ensuring that all relevant information is current and accurately documented.
There are no explicit offences, penalties, or civil/criminal consequences outlined in the Amendment itself. However, the underlying legislation, the Consular Privileges and Immunities Act 1972, may have provisions that address non-compliance or misuse of the tax concession scheme. Typically, breaches of such legislation could result in penalties, including fines or other sanctions, as determined by the relevant authorities. The Department of Treasury has confirmed that the financial impact of the concessions provided by the Amendment will be negligible, and the Office of Best Practice Regulation has stated that the amendments are not expected to have regulatory impacts on business, individuals, or community organisations.