Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Belarus, Cuba, Ethiopia, Mauritius and Zambia) Determination 2017
Issued by the Authority of the Minister for Foreign Affairs
Subject: Diplomatic Privileges and Immunities Act 1967
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Belarus, Cuba, Ethiopia, Mauritius and Zambia) Determination 2017 (hereafter, the “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 the mission (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 Amendment is to amend the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (the “Determination”) to create new Indirect Tax Concession Scheme (ITCS) packages for Belarus, Cuba, Ethiopia and Zambia, and to amend the existing package for Mauritius, to provide indirect tax concessions to their diplomatic missions and accredited staff. The effect of the Amendment is to add new items to, and amend an existing item in, 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 (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, if there is a clear benefit to Australia, the commencement date allows access to concessions for purchases of goods and services already made, including by our overseas missions. 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 missions and accredited staff from either the date the mission opened or a date agreed during negotiations. Reciprocity of the date of effect means that Australian missions and accredited staff will have access to the same or similar benefits in the relevant overseas country.
The ITCS, and its extension to new 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 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 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 (Belarus, Cuba, Ethiopia, Mauritius and Zambia) Determination 2017, issued by the Authority of the Minister for Foreign Affairs, amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to create new indirect tax concession packages for the diplomatic missions and accredited staff of Belarus, Cuba, Ethiopia and Zambia, and to amend the existing package for Mauritius. The purpose of this Amendment is to provide indirect tax concessions to these countries' diplomatic missions and accredited staff in line with international practice and reciprocity. The Diplomatic Privileges and Immunities Act 1967 enables the Minister to make such Determinations to facilitate these tax concessions, and the Amendment does not alter the operation of the scheme. It was determined to be of a minor nature, exempt from consultation requirements under the Legislation Act 2003, and is compatible with human rights as recognised in the international instruments listed in the Human Rights (Parliamentary Scrutiny) Act 2011.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Belarus, Cuba, Ethiopia, Mauritius and Zambia) Determination 2017 amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to provide indirect tax concessions to the diplomatic missions of Belarus, Cuba, Ethiopia, Mauritius and Zambia, and their accredited staff in Australia. This Amendment applies to the diplomatic missions and accredited staff of these countries who are exempt from direct taxes under the Vienna Convention on Diplomatic Relations, and it extends indirect tax concessions in line with international practice. The Amendment modifies the existing Indirect Tax Concession Scheme by adding new packages for Belarus, Cuba, Ethiopia and Zambia, and amending the package for Mauritius, as listed in Schedule 1 of the Determination. The commencement dates for these packages vary and are part of the negotiation process, with some being retrospective to the date the mission opened or an agreed date, ensuring reciprocity for Australian missions and accredited staff in the relevant overseas countries. This Amendment is designed to have negligible impact on revenue and is considered beneficial to Australia by encouraging diplomatic missions and accredited staff to purchase goods in Australia rather than importing them directly.
Key Provisions
The main operative sections of the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Belarus, Cuba, Ethiopia, Mauritius and Zambia) Determination 2017 (the “Amendment”) involve the creation and amendment of indirect tax concession packages for diplomatic missions of Belarus, Cuba, Ethiopia, Mauritius, and Zambia in Australia. Section 10B of the Diplomatic Privileges and Immunities Act 1967 allows the Minister for Foreign Affairs to make determinations for the Commissioner of Taxation to compensate heads of missions or designated individuals for indirect taxes paid on acquisitions. The Amendment updates the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 by adding new packages for Belarus, Cuba, Ethiopia, and Zambia and amending the existing package for Mauritius, thereby extending indirect tax concessions to their diplomatic missions and accredited staff.
The obligations imposed by the Amendment on the parties it governs are primarily centred around the provision and administration of indirect tax concessions. The Australian government, through the Commissioner of Taxation, is required to compensate the heads of the specified diplomatic missions for the indirect taxes incurred on their acquisitions of goods and services. This obligation is to ensure that these missions and their staff benefit from the indirect tax concessions in line with international practices and reciprocal agreements. The Amendment also ensures that these concessions are provided retrospectively, starting from either the date the missions were established or a date agreed upon during negotiations, without causing any detriment to other parties.
The Amendment introduces no new offences or penalties; it merely modifies existing provisions to extend tax concessions. However, any failure to comply with the requirements of the Amendment could potentially result in legal challenges from the affected diplomatic missions. This could lead to disputes over the compensation amounts or the interpretation of the concession packages. Additionally, if the Australian government does not properly administer the concessions as determined, it could face administrative or procedural challenges. The maximum penalties or civil consequences for non-compliance are not explicitly stated in the text, but any breaches of the Determination could lead to legal scrutiny or financial disputes.
The diplomatic missions and accredited staff of the specified countries benefit from the indirect tax concessions by avoiding the payment of indirect taxes on their acquisitions, aligning with the global practice of providing such benefits to diplomatic entities. The Australian economy potentially gains from increased local purchases by these missions, fostering economic interactions and possibly leading to increased trade. However, the Treasury has indicated that the financial impact on the Australian government is negligible, suggesting that the economic benefit to Australia is primarily indirect and related to diplomatic relations and reciprocity.