Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Albania and Lithuania) Determination 2022
Issued by the Authority of the Minister for Foreign Affairs (the Minister)
Subject: Diplomatic Privileges and Immunities Act 1967
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Albania and Lithuania) Determination 2022 (“Amendment”).
Section 10B of the Diplomatic Privileges and Immunities Act 1967 provides that the Minister may make Determinations for the Commissioner of Taxation to pay the head of a mission (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 Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (“Determination”) to create a new Indirect Tax Concession Scheme (ITCS) package for Albania and Lithuania for the benefit of diplomatic missions and accredited staff. The effect of the Amendment is to add items to Schedule 1 of the Determination, which lists the ITCS packages available to particular diplomatic missions.
Diplomatic missions and accredited staff are exempt from paying direct taxes under the Vienna Convention on Diplomatic Relations 1961 (Articles 23, 34, 36 and 37). In line with international practice, indirect tax concessions are also extended to diplomatic missions 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. 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 missions and accredited staff from either the date the mission opened or a date agreed during negotiations. Reciprocity in terms of the date of effect means that relevant Australian diplomatic missions overseas will also have access to the same or similar benefits in the relevant overseas country.
The ITCS and its extension to new and existing diplomatic missions 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 covering 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. 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 diplomatic missions 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 likely 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 diplomatic missions. 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 Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Albania and Lithuania) Determination 2022, issued by the Minister for Foreign Affairs under the Diplomatic Privileges and Immunities Act 1967, aims to extend indirect tax concessions to diplomatic missions and accredited staff from Albania and Lithuania. This amendment creates new packages within the Indirect Tax Concession Scheme (ITCS) for these countries, reflecting a reciprocal approach to international tax agreements. By adding these items to Schedule 1 of the Determination, the amendment aligns with international practice by granting diplomatic missions and accredited staff exemptions from indirect taxes, similar to their exemptions from direct taxes under the Vienna Convention on Diplomatic Relations 1961. The policy objective is to foster economic benefits for Australia by encouraging diplomatic missions to purchase goods and services domestically rather than through direct imports, thereby supporting the Australian economy. Treasury has assessed that the financial impact of these concessions will be negligible, and the Office of Best Practice Regulation has determined that the amendments do not warrant a Regulation Impact Statement.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Albania and Lithuania) Determination 2022 applies to diplomatic missions and accredited staff of Albania and Lithuania in Australia, extending indirect tax concessions to these entities as part of the broader Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) under the Diplomatic Privileges and Immunities Act 1967. The Amendment, issued under the authority of the Minister for Foreign Affairs, modifies the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 by adding Albania and Lithuania to Schedule 1, which lists the tax concession packages available to particular diplomatic missions. This Amendment is designed to align with international practice and reciprocity principles, ensuring that diplomatic missions and accredited staff of these countries benefit from indirect tax concessions similar to those enjoyed by other diplomatic entities in Australia. The scope of the Amendment is limited to the indirect tax concessions for the specified diplomatic missions and does not alter the fundamental operation of the ITCS. Given the minor nature of the amendment, it was determined that consultation was unnecessary under the Legislation Act 2003. Furthermore, the Amendment is consistent with the human rights and freedoms recognised in relevant international instruments.
Key Provisions
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Albania and Lithuania) Determination 2022 (the Amendment) primarily amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (the Determination) to establish new indirect tax concession packages for diplomatic missions from Albania and Lithuania. This Amendment, pursuant to section 10B of the Diplomatic Privileges and Immunities Act 1967, adds items to Schedule 1 of the Determination, which enumerates the indirect tax concession schemes available to specific diplomatic missions. By doing so, it extends indirect tax exemptions, which are already in place for direct taxes under the Vienna Convention on Diplomatic Relations 1961, to indirect taxes as well.
The Amendment imposes obligations on the Minister for Foreign Affairs, who is authorised under section 10B of the Diplomatic Privileges and Immunities Act 1967 to make determinations that facilitate the payment of indirect taxes by the Commissioner of Taxation to heads of missions or their designated representatives. The Minister must ensure that the terms of the Amendment are adhered to, and that the indirect tax concessions are appropriately applied to the specified diplomatic missions from Albania and Lithuania. Additionally, the indirect tax concession scheme remains in line with the principle of reciprocity, ensuring that the benefits provided to Australian diplomatic missions in foreign countries are mirrored in Australia.
In terms of potential breaches and penalties, the Diplomatic Privileges and Immunities Act 1967 does not explicitly detail specific offences, penalties, or consequences for non-compliance with the Amendment. However, any breach of the terms set out in the Determination could potentially lead to legal action, either civil or criminal, depending on the nature and severity of the breach. The Act generally provides for the enforcement of its provisions through the courts, and any penalties would be determined in accordance with the general principles of administrative and public law, which could include fines, restitution, or other appropriate remedies.