Explanatory Statement
Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (United Arab Emirates) Determination 2018
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 (United Arab Emirates) Determination 2018 (hereafter, the “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 amount of indirect tax payable (if any) in respect of the supply of an acquisition.
The purpose of the Amendment is to amend the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (the “Determination”) to create a new Indirect Tax Concession Scheme (ITCS) package for the United Arab Emirates by providing indirect tax concessions to its consular posts in Australia and staff accredited to those posts. The effect of the Amendment is to add a new item 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. 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, if there is a clear benefit to Australia, the commencement date allows access to concessions for purchases of goods and services already made. As these 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 of the date of effect means that Australian diplomatic missions and 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 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. The Treasury has advised 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.
This 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 (United Arab Emirates) Determination 2018 was enacted to extend indirect tax concessions to consular posts and accredited staff of the United Arab Emirates in Australia. This Amendment, issued by the Authority of the Minister for Foreign Affairs, modifies the existing Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 under the Consular Privileges and Immunities Act 1972. The policy objective is to align the level of tax concessions with international practices, thereby providing economic benefits to Australia by encouraging purchases within the country. This determination adds a new package for the United Arab Emirates to the existing list of tax concession packages available to consular posts, and is expected to have a negligible impact on revenue. The decision to enact this Amendment was based on reciprocity, ensuring that Australian diplomatic missions and consular posts overseas will also have access to similar benefits in the relevant overseas countries.
Scope and Application
The Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (United Arab Emirates) Determination 2018 applies to the consular posts of the United Arab Emirates in Australia and their accredited staff. This legislation amends the existing Indirect Tax Concession Scheme (ITCS) to provide indirect tax concessions to the United Arab Emirates' consular posts and staff, extending these concessions in alignment with international practices and reciprocity agreements. The ITCS packages are tailored for each country, and the level of tax concessions is generally based on reciprocal agreements. This Amendment adds the United Arab Emirates to Schedule 1 of the Determination, thereby extending the ITCS to include their consular posts in Australia. The concessions are provided retroactively from the date the post opened or a date agreed upon during negotiations, ensuring that no person or organisation is disadvantaged by this Amendment. The geographic reach of this Amendment is limited to Australia, specifically targeting the consular posts of the United Arab Emirates and their accredited staff within the Australian jurisdiction. The Treasury has assessed that this Amendment will have a negligible impact on revenue, and the Office of Best Practice Regulation has confirmed that it will not have regulatory impacts on businesses, individuals, or community organisations. Furthermore, this Amendment is considered to be of minor nature and compatible with human rights and freedoms as recognised in international instruments.
Key Provisions
The main sections of the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (United Arab Emirates) Determination 2018 (F2018L00074) pertain to the expansion of the Indirect Tax Concession Scheme (ITCS) to include consular posts and staff from the United Arab Emirates (UAE). Section 10A of the Consular Privileges and Immunities Act 1972 is central, as it empowers the Minister to make Determinations whereby the Commissioner of Taxation pays an amount equivalent to the indirect tax on supplies made to a consular post or to persons accredited to such posts. The Amendment, by adding the UAE to Schedule 1 of the Determination, creates a new ITCS package that provides indirect tax concessions to UAE consular posts in Australia and their accredited staff.
The Amendment imposes certain obligations on the parties involved. The primary obligation is on the Australian Government, specifically the Commissioner of Taxation, to make payments to UAE consular posts in Australia equivalent to the indirect tax payable on supplies, thereby extending the ITCS to them. This is in line with international practice and the Vienna Convention on Consular Relations, which exempts consular posts from direct taxes. Additionally, UAE consular posts and accredited staff are expected to comply with the terms of the ITCS, ensuring they benefit from the indirect tax concessions in accordance with the negotiated agreements.
Failure to comply with the provisions of the Amendment could lead to various consequences. However, the text does not specify particular offences or penalties for breach. Instead, it highlights that the Treasury has advised the Amendment will have a negligible impact on revenue, suggesting that any breach would likely involve financial implications for the Australian Government rather than penalties for the UAE consular posts or their staff. Given that the Amendment is designed to be of minor nature and compatible with human rights and freedoms, it is unlikely that severe penalties are intended.
The Amendment, while minor, is significant in extending tax concessions to UAE consular posts in Australia, thereby fostering economic relations and encouraging the purchase of Australian goods and services. The absence of regulatory impacts on business, individuals, or community organisations, as confirmed by the Office of Best Practice Regulation, indicates that the Amendment is intended to have a streamlined effect without significant disruptions.