Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Costa Rica, Guatemala and Cote d’Ivoire) Determination 2018
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 (Costa Rica, Guatemala and Cote d’Ivoire) Determination 2018 (“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 new Indirect Tax Concession Scheme (ITCS) packages for Costa Rica, Guatemala and Cote d’Ivoire for the benefit of diplomatic missions and accredited staff. The effect of the Amendment is to add new 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. 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 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 (Costa Rica, Guatemala and Cote d’Ivoire) Determination 2018 was enacted to address the need for extending indirect tax concessions to the diplomatic missions and accredited staff of Costa Rica, Guatemala, and Cote d’Ivoire operating in Australia. This amendment is an extension of the Diplomatic Privileges and Immunities Act 1967, which allows the Minister for Foreign Affairs to make determinations for the Commissioner of Taxation to pay the head of a mission an amount equal to the indirect tax payable in respect of certain acquisitions. The policy objective of this Amendment is to align Australia’s tax practices with international conventions by extending indirect tax concessions to diplomatic missions and accredited staff, thereby fostering better diplomatic relations and economic benefits. This determination was made under the authority of the Minister for Foreign Affairs and does not require consultation under the Legislation Act 2003 as it is deemed minor in nature.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Costa Rica, Guatemala and Cote d’Ivoire) Determination 2018 amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to extend indirect tax concessions to diplomatic missions and accredited staff from Costa Rica, Guatemala and Cote d’Ivoire. This Amendment is made under section 10B of the Diplomatic Privileges and Immunities Act 1967, which allows the Minister for Foreign Affairs to determine that the Commissioner of Taxation will pay the head of a mission or a class of persons an amount equal to the indirect tax payable in respect of an acquisition. The Amendment adds new items to Schedule 1 of the Determination, which lists the packages of tax concessions available to particular diplomatic missions, reflecting the negotiated terms of the concessions with these countries. These amendments are effective from the dates agreed upon during the negotiations, and they are retroactive without causing any detriment to individuals or entities. The extension of these concessions is aligned with international practice and aims to provide reciprocal benefits to Australian diplomatic missions in the respective countries. This legislative change does not alter the operational framework of the Indirect Tax Concession Scheme but rather expands it to include the specified diplomatic missions, thus encouraging economic engagement and reciprocity between Australia and these countries.
Key Provisions
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Costa Rica, Guatemala and Cote d’Ivoire) Determination 2018, under section 10B of the Diplomatic Privileges and Immunities Act 1967, extends indirect tax concessions to diplomatic missions and accredited staff from Costa Rica, Guatemala and Cote d’Ivoire. This Amendment adds new items to Schedule 1 of the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000, thereby creating new tax concession packages for these countries. These packages are intended to align with international practice, where diplomatic missions and accredited staff are exempt from direct taxes under the Vienna Convention on Diplomatic Relations 1961, and also benefit from indirect tax concessions.
The obligations imposed by this Amendment require the Commissioner of Taxation to compensate the heads of missions or designated persons for any indirect tax payable in respect of acquisitions covered by the Minister’s Determination. This compensation mechanism is designed to ensure that diplomatic missions and accredited staff do not face financial burdens due to indirect taxes on their acquisitions, thereby maintaining the integrity of international diplomatic relations. The scheme operates under the broader framework of the Indirect Tax Concession Scheme (ITCS), which is negotiated on a reciprocal basis with each country to ensure fairness and mutual benefit.
Breaches of the obligations set out in the Amendment could potentially lead to administrative or financial consequences for the parties involved. Although the explanatory statement does not explicitly detail criminal or civil penalties for non-compliance, it is implicit that failure to adhere to the provisions could result in the diplomatic missions or accredited staff being liable for the indirect taxes that were supposed to be covered by the concessions. Additionally, any adverse impact on the Australian economy due to non-compliance might also have broader repercussions, though these are not specified within the provided text.