EXPLANATORY STATEMENT
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2009 (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 2009 (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 Assistant Treasurer has agreed, in advice dated 29 August 2008 to the Minister for Foreign Affairs, that the amendments made under this 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, because the Scheme provides for missions and individuals to claim refunds on eligible purchases directly from the Australian Tax Office The Scheme 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 Office of Best Practice Regulation agreed that the Amendment Determination was not likely to affect business or competition and advised there was no need to prepare a Regulation Impact Statement for the Amendment Determination.
Overview
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2009 (No. 1) was introduced by the Minister for Foreign Affairs to amend the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000. This legislation aims to create new and amend existing Indirect Tax Concession Scheme (ITCS) packages that provide tax concessions to consular posts and accredited staff. The amendment updates the schedule of countries by modifying existing entries and adding new ones that detail the ITCS package available to specific countries. In line with international practice and the Vienna Convention on Consular Relations, the scheme extends tax concessions on indirect taxes to consular posts and accredited staff in Australia. The amendments are considered beneficial to Australia as they encourage the purchase of goods within Australia rather than direct imports, thus supporting the economy. Additionally, the Indirect Tax Concession Scheme does not exempt missions and individuals from indirect taxes but allows them to claim refunds directly from the Australian Tax Office, thereby avoiding additional burdens on retailers and having no impact on business operations.
Scope and Application
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2009 (No. 1) amends the existing scheme under the Consular Privileges and Immunities Act 1972 to update the schedule of countries eligible for indirect tax concessions, reflecting the current diplomatic landscape and the level of reciprocal agreements. This Determination applies to consular posts and accredited staff, who are exempt from direct taxes under the Vienna Convention on Consular Relations, and extends to them indirect tax concessions in line with international practices. The amendments made by this Determination are retrospective in some cases, allowing for tax concessions on purchases of goods and services already made, provided there is a clear benefit to Australia. The scope of this Amendment Determination is specific to the tax concessions provided to certain consular missions, and it does not alter the fundamental workings of the Indirect Tax Concession Scheme, which remains operational as before, with missions and individuals able to claim refunds on eligible purchases directly from the Australian Tax Office. This Determination, deemed to be of minor nature under the Legislative Instruments Act 2003, does not require consultation and has been deemed unlikely to affect business or competition, as confirmed by the Office of Best Practice Regulation.
Key Provisions
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2009 (No. 1) primarily updates and amends the schedule of countries under Section 10A of the Consular Privileges and Immunities Act 1972. This section allows the Minister to determine how the Commissioner of Taxation will compensate the head of a consular post, or a person in a class of persons determined by the Minister, for any indirect taxes payable on supplies made to the consular post. The Amendment Determination introduces new and modified packages of indirect tax concessions for consular posts and accredited staff, aligning them with international practices and reciprocity principles.
Under the amended legislation, specific consular posts and accredited staff are exempted from paying certain indirect taxes. This exemption is designed to ensure consistency with the Vienna Convention on Consular Relations, which already exempts these individuals from direct taxes. By providing indirect tax concessions, Australia aims to encourage consular missions to purchase goods and services within the country, thereby benefiting the domestic economy. These tax concessions are reciprocally negotiated with individual countries, and their commencement dates are part of the negotiation process. The Amendment Determination itself does not change the operational aspects of the Indirect Tax Concession Scheme (ITCS), but it modifies the scope of the concessions available to specific consular missions.
Parties governed by this Act, such as the Commissioner of Taxation and the heads of consular posts, must adhere to the provisions outlined in the Amendment Determination. The Commissioner of Taxation is required to compensate consular posts for indirect taxes, as per the Minister's determination. Conversely, the heads of consular posts must ensure compliance with the updated tax concession packages, particularly regarding the eligibility for tax refunds on eligible purchases. Accredited staff must also adhere to the tax concession rules applicable to their respective missions.
Breach of the provisions within the Consular Privileges and Immunities Act 1972 and the Amendment Determination could result in various legal consequences. While the specific offences and penalties are not detailed within the Amendment Determination itself, the underlying Act and related regulations would apply. Generally, failure to comply with tax laws in Australia can result in penalties including fines, imprisonment, or both, depending on the severity and nature of the breach. The precise penalties would be determined by the applicable tax laws and the discretion of the courts. The overarching aim of the legislation is to ensure that tax concessions are correctly administered and that there is minimal economic burden on the Australian government while maintaining international diplomatic relations.