EXPLANATORY STATEMENT
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1)
Issued by the Authority of the Minister for Foreign Affairs
Subject: Consular Privileges and Immunities Act 1972
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1)
Section 10A of the Consular Privileges and Immunities Act 1972 provides that the Minister may make Determinations to provide the Commissioner of Taxation to pay the head of the consular post (or a person in a class of persons determined by the Minister) an amount equal to the amount of indirect tax payable (if any) in respect of the supply of that acquisition.
The purpose of the Determination is to amend the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to create new and amend existing Indirect Tax Concession Scheme (ITCS) packages which provide tax concessions to consular posts and accredited staff. The effect of the Determination is to update the schedule of countries by amending existing entries and adding new entries that detail the ITCS package available to particular countries.
Consular Posts and accredited staff are exempt from paying direct taxes under the Vienna Convention on Consular Relations (Articles 32 and 49). In line with international practice, tax concessions on indirect taxes are also extended to consular posts and accredited staff. In Australia, indirect tax concessions are provided 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 at which 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, where we can see there is a clear benefit to Australia. As these packages are usually agreed before they come into force under Australian legislation, they need to be made retrospective.
The amendments are beneficial to Australia. In determining the scope of the economic benefit to Australia, in 1999 the then Assistant Treasurer Rod Kemp advised that the estimated net benefit to Australia in pursuing reciprocal agreements under the GST 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. The Treasury has advised the amendments made under this amendment determination 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 Indirect Tax Concession Scheme has no impact on business operations. It does not provide for an exemption from indirect taxes and therefore does not pose any additional burden on retailers.
The Amendment Determination does not alter the way the Indirect Tax Concession Scheme works, but extends or retracts tax concessions to specific consular missions. The Amendment Determination was therefore judged to be of a minor nature where consultation is unnecessary under the Legislative Instruments Act 2003.
The Productivity Commission agreed that the Amendment Determination was not likely to affect business or competition and advised there was no need to prepare Regulatory Impact Statements for the Amendment Determination.
Overview
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1) was issued by the Authority of the Minister for Foreign Affairs and concerns amendments to the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000. This Determination was enacted to address the need to update and revise the tax concession packages available to consular posts and accredited staff, aligning them with current international practices and reciprocal agreements. The primary policy objective is to provide tax concessions on indirect taxes to consular posts and accredited staff in Australia, facilitating economic benefits and encouraging the purchase of goods and services within Australia rather than direct imports. This approach maintains the balance between international obligations under the Vienna Convention on Consular Relations and domestic tax policies, while ensuring minimal impact on revenue and business operations.
Scope and Application
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1) amends the existing Indirect Tax Concession Scheme (ITCS) under the Consular Privileges and Immunities Act 1972. The Act applies to the Minister for Foreign Affairs, who has the authority to make determinations regarding indirect tax concessions for consular posts and accredited staff. These tax concessions are in line with international practice and extend to consular posts and accredited staff, who are exempt from paying direct taxes under the Vienna Convention on Consular Relations. The amendment pertains to the packages of indirect tax concessions available to specific countries, with individual packages being negotiated and generally based on reciprocity. The amendment determination updates the schedule of countries by amending existing entries and adding new ones that detail the ITCS package available to particular countries. The commencement dates for these packages are part of the negotiations for tax concessions and can be retrospective to reflect the date at which the agreement was reached. The amendments are intended to provide economic benefits to Australia, including potential revenue benefits and encouragement for consular posts and accredited staff to purchase goods within Australia.
The scope of the amendment determination is limited to the extension or retraction of tax concessions to specific consular missions and does not alter the fundamental operation of the ITCS. This amendment was deemed minor under the Legislative Instruments Act 2003, and no consultation was required. The Productivity Commission also advised that the amendment is unlikely to affect business or competition, thus negating the need for a Regulatory Impact Statement.
Key Provisions
The main operative sections of the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1) (the "Determination") involve amendments to Section 10A of the Consular Privileges and Immunities Act 1972 (the "Act"). Specifically, Section 10A is amended to allow 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 amount of indirect tax payable in respect of the supply of an acquisition. This section also updates the schedule of countries by amending existing entries and adding new entries that detail the Indirect Tax Concession Scheme (ITCS) package available to particular countries.
The Determination imposes several obligations and requirements on the parties it governs. Firstly, it requires the Minister for Foreign Affairs to make Determinations in accordance with Section 10A of the Act, ensuring that the appropriate tax concessions are applied to the specified consular posts and accredited staff. Secondly, it necessitates the negotiation of individual packages with each country, which will determine the level of tax concessions provided based on reciprocity. Finally, it mandates that the commencement dates for individual packages be part of the negotiations and, in some cases, allow for retrospective application to purchases of goods and services already made.
Breach of the requirements stipulated in the Determination may result in various consequences. The specific offences and penalties for non-compliance are not explicitly stated in the Determination, but generally, failure to adhere to the tax provisions under the Act could lead to civil or criminal consequences, depending on the nature and severity of the breach. The maximum penalties for such breaches could include fines and, in more severe cases, imprisonment, depending on the specific provisions of the Act and other relevant laws. It is also possible that breaches could result in financial penalties, such as the payment of outstanding taxes, interest, and additional charges.