Explanatory Statement
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (India, Indonesia, Malaysia and the United Kingdom) 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 (India, Indonesia, Malaysia and the United Kingdom) 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 upgrade the Indirect Tax Concession Scheme (ITCS) package for India, Indonesia, Malaysia and the United Kingdom by providing indirect tax concessions to their consular posts in Australia and staff accredited to those posts. The effect of the Amendment is to update items in 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 the 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 (India, Indonesia, Malaysia and the United Kingdom) Determination 2022, issued by the Authority of the Minister for Foreign Affairs, amends the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000. This Amendment updates the Indirect Tax Concession Scheme (ITCS) package for the consular posts of India, Indonesia, Malaysia and the United Kingdom by providing indirect tax concessions to their consular posts in Australia and staff accredited to those posts. The purpose of this Amendment is to align the ITCS with international practice and ensure reciprocal tax benefits for Australian consular posts overseas, thereby encouraging local procurement and benefiting the Australian economy. The Amendment is compatible with human rights and does not require extensive consultation due to its minor nature.
Scope and Application
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (India, Indonesia, Malaysia and the United Kingdom) Determination 2022 pertains to the modification of the existing Indirect Tax Concession Scheme (ITCS) package for India, Indonesia, Malaysia, and the United Kingdom. This amendment serves to extend indirect tax concessions to their consular posts in Australia and their accredited staff. The determination is made under the Consular Privileges and Immunities Act 1972, specifically Section 10A, which empowers the Minister to facilitate payments to consular posts or accredited personnel for indirect taxes incurred on acquisitions covered by the Minister’s determination. The primary aim of the Amendment is to update the ITCS packages for these countries, ensuring alignment with reciprocal agreements that benefit both Australian and foreign consular operations. These amendments extend to specific consular posts and accredited staff, which are exempt from direct taxes under the Vienna Convention on Consular Relations 1963, thereby reflecting a broader international practice of extending indirect tax concessions. The effect of this Amendment is to revise Schedule 1 of the Determination, detailing the updated ITCS packages available to the specified consular posts. The Amendment is considered minor, with negligible impacts on revenue, and does not require consultation or preparation of a Regulation Impact Statement, aligning with the standards set out in the Legislation Act 2003 and the Human Rights (Parliamentary Scrutiny) Act 2011.
Key Provisions
The main operative sections of the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (India, Indonesia, Malaysia and the United Kingdom) Determination 2022 (the Amendment) concern the modification of existing provisions in the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (the Determination). Section 10A of the Consular Privileges and Immunities Act 1972 allows the Minister to make Determinations for the Commissioner of Taxation to compensate the head of a consular post or accredited staff for indirect taxes on certain acquisitions. The Amendment, pursuant to this section, amends Schedule 1 of the Determination to upgrade the indirect tax concession packages for India, Indonesia, Malaysia, and the United Kingdom, providing them with tax exemptions on goods and services procured in Australia.
The Amendment imposes specific obligations on the parties involved. For the Australian government, this includes the financial responsibility borne by the Commissioner of Taxation to compensate the heads of designated consular posts and their accredited staff for indirect taxes on specified acquisitions. For the affected consular posts and their accredited staff, the Amendment provides them with the benefit of indirect tax concessions on their acquisitions in Australia. These concessions are contingent upon the reciprocal arrangements that each country has with Australia under the Indirect Tax Concession Scheme (ITCS).
The Amendment does not introduce any new offences or penalties but rather extends existing indirect tax concessions. Breach of the conditions outlined in the Determination could potentially lead to the revocation of the concessions provided. The indirect tax concessions provided under the ITCS are designed to be reciprocal, meaning that Australia's consular posts in the respective countries would also benefit from similar concessions. The financial implications of these concessions have been assessed by the Department of the Treasury, which confirmed that the net benefit to Australia would be minimal. The provision of these tax concessions is intended to encourage the purchase of goods and services within Australia, thereby supporting the local economy.
Given the nature of the Amendment, no new regulatory impacts are expected on businesses, individuals, or community organisations. The Office of Best Practice Regulation has confirmed that these changes do not necessitate the preparation of a Regulation Impact Statement. Furthermore, the Amendment is consistent with Australia's international obligations and human rights commitments, as it does not contravene the human rights and freedoms recognised in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.