Explanatory Statement
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Costa Rica, Guatemala and Kazakhstan) Determination 2018
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 (Costa Rica, Guatemala and Kazakhstan) Determination 2018 (“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 new Indirect Tax Concession Scheme (ITCS) packages for Costa Rica and Kazakhstan 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 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. 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. 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, in 1999 the then Assistant Treasurer, Mr Rod Kemp, advised 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 (Costa Rica, Guatemala and Kazakhstan) Determination 2018 was introduced to address the need for extending indirect tax concessions to the consular posts of Costa Rica, Guatemala, and Kazakhstan in Australia, thereby aligning with international practices. Enacted by the Minister for Foreign Affairs under the authority granted by the Consular Privileges and Immunities Act 1972, this Amendment seeks to create new Indirect Tax Concession Scheme packages that offer indirect tax relief to these countries’ consular posts and their accredited staff. This move is intended to foster reciprocal benefits, encouraging the purchase of goods within Australia, which is anticipated to provide economic advantages to the nation. Furthermore, the determination is made under the understanding that such tax concessions have a negligible impact on revenue and do not necessitate extensive consultation or regulatory scrutiny, thereby ensuring its compatibility with human rights and international obligations.
Scope and Application
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Costa Rica, Guatemala and Kazakhstan) Determination 2018 pertains to the application of the Consular Privileges and Immunities Act 1972, specifically under Section 10A, which empowers the Minister for Foreign Affairs to make Determinations allowing the Commissioner of Taxation to provide indirect tax concessions to the heads of consular posts or their staff in Australia. This Amendment extends the Indirect Tax Concession Scheme to include consular posts from Costa Rica, Guatemala, and Kazakhstan, thereby granting them exemptions from indirect taxes on acquisitions made in Australia. This legislative action aligns with international practices of extending indirect tax concessions to consular posts, which are already exempt from direct taxes under the Vienna Convention on Consular Relations 1963. The concessions are based on negotiated packages that reflect reciprocity, meaning that Australian consular posts in these countries will also enjoy similar benefits. The Amendment, which is retrospective, ensures that the concessions apply from the date the consular posts were established or as agreed upon during negotiations, without causing any detriment to any person or organisation.
Key Provisions
The main operative sections of the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Costa Rica, Guatemala and Kazakhstan) Determination 2018 (Cth) are found in Section 10A of the Consular Privileges and Immunities Act 1972 (Cth), which allows 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 (if any) in respect of an acquisition covered by the Minister’s Determination. This Amendment to the Determination adds new items to Schedule 1, which lists the Indirect Tax Concession Scheme (ITCS) packages available to particular consular posts. Specifically, it creates new ITCS packages for Costa Rica and Kazakhstan, extending indirect tax concessions to their respective consular posts in Australia and staff accredited to those posts (Section 3).
The Amendment imposes certain obligations and requirements on the parties involved. The Minister for Foreign Affairs, under Section 10A of the Consular Privileges and Immunities Act 1972 (Cth), is required to negotiate and determine the indirect tax concession packages for specific consular posts. These packages must be based on reciprocity and agreed upon before they are implemented under Australian legislation, which often necessitates retrospective application. This means that the concessions will apply from either the date the post opened or a date agreed upon during the negotiations, without any detriment to any person or organisation. Furthermore, the Amendment requires that Australian consular posts overseas should also have access to the same or similar benefits in the respective overseas countries, ensuring reciprocity in terms of the date of effect.
There are no specific offences, penalties, or civil/criminal consequences for breach outlined in the Amendment itself. However, any failure to comply with the provisions of the Consular Privileges and Immunities Act 1972 (Cth) or the ITCS could potentially lead to legal consequences under that Act. The indirect tax concessions provided by the Amendment are intended to be beneficial to Australia by encouraging consular posts and accredited staff to purchase goods in Australia rather than importing them directly. This not only extends tax concessions but also assists the Australian economy. The Office of Best Practice Regulation has confirmed that amendments to Schedule 1 of the Determination do not require the preparation of a Regulation Impact Statement and are not expected to have regulatory impacts on business, individuals, or community organisations.