EXPLANATORY STATEMENT
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1)
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 Determination 2006 (No. 1)
Section 10B of the Diplomatic Privileges and Immunities Act 1967 provides that the Minister may make Determinations to provide 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 Determination is to amend the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to create new and amend existing Indirect Tax Concession Scheme (ITCS) packages which provide tax concessions to diplomatic missions and accredited staff. The effect of the Determination is to update the schedule of countries by amending existing entries and adding new entries that detail the ITCS package available to particular countries.
Diplomatic missions and accredited staff are exempt from paying direct taxes under the Vienna Convention on Diplomatic Relations (Articles 23, 34 and 37). In line with international practice, tax concessions on indirect taxes are also extended to Diplomatic missions and accredited staff. In Australia, indirect tax concessions are provided 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 at which 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, where we can see there is a clear benefit to Australia. As these packages are usually agreed before they come into force under Australian legislation, they need to be made retrospective.
The amendments are beneficial to Australia. In determining the scope of the economic benefit to Australia, in 1999 the then Assistant Treasurer 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 amendments made under this amendment determination 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 Indirect Tax Concession Scheme has no impact on business operations. It does not provide for an exemption from indirect taxes and therefore does not pose any additional burden on retailers.
The Amendment Determination does not alter the way the Indirect Tax Concession Scheme works, but extends or retracts tax concessions to specific diplomatic missions. The Amendment Determination was therefore judged to be of a minor nature where consultation is unnecessary under the Legislative Instruments Act 2003.
The Productivity Commission agreed that the Amendment Determination was not likely to affect business or competition and advised there was no need to prepare Regulatory Impact Statements for the Amendment Determination.
Overview
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1), issued by the Minister for Foreign Affairs, aims to amend the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000. The 2006 Amendment Determination was enacted to update the schedule of countries by amending existing entries and adding new entries that detail the ITCS package available to particular countries. This amendment is intended to create new and amend existing Indirect Tax Concession Scheme (ITCS) packages, which provide tax concessions to diplomatic missions and accredited staff. The Diplomatic Privileges and Immunities Act 1967 establishes the framework within which this amendment operates, allowing the Minister to make determinations for the payment of indirect taxes to the heads of missions or other relevant persons.
The policy objective of the amendment is to align Australia's tax concessions for diplomatic missions and accredited staff with international practice, by extending indirect tax concessions in line with the Vienna Convention on Diplomatic Relations. This approach ensures consistency in the treatment of diplomatic missions and staff across different countries, fostering reciprocity and encouraging these entities to purchase goods and services within Australia. The economic benefits of such concessions are anticipated to be significant, supporting Australia's international relations and economic interests.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1) applies to diplomatic missions and accredited staff who are exempt from paying direct taxes under the Vienna Convention on Diplomatic Relations. This legislation amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to update the schedule of countries that are eligible for indirect tax concessions. These concessions are negotiated with each country and are generally based on reciprocity. The amendment is beneficial to Australia, as it encourages diplomatic missions and accredited staff to purchase goods within Australia rather than importing them directly, thereby supporting the Australian economy. The Indirect Tax Concession Scheme does not exempt entities from indirect taxes and thus does not impose any additional burden on retailers or businesses. The Amendment Determination is considered of minor nature and does not require consultation, as it merely extends or retracts tax concessions to specific diplomatic missions without altering the existing scheme's operation.
Key Provisions
The main operative sections of the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1) focus on updating and amending the Indirect Tax Concession Scheme (ITCS) packages for diplomatic missions and accredited staff. Section 10B of the Diplomatic Privileges and Immunities Act 1967 allows the Minister to make Determinations for the Commissioner of Taxation to compensate heads of missions or certain persons for indirect taxes payable on supplies. The Amendment Determination specifically aims to update the ITCS by amending existing entries and adding new ones, detailing the tax concessions available to particular countries. This is done to ensure alignment with international practices where diplomatic missions and accredited staff receive tax concessions on indirect taxes, similar to their exemptions on direct taxes under the Vienna Convention on Diplomatic Relations.
The Act imposes several obligations and requirements on the parties involved. The Minister for Foreign Affairs is responsible for making the Determinations that establish or modify the ITCS packages for diplomatic missions. These packages are negotiated on a reciprocal basis with each country, meaning the level of tax concessions provided is generally based on mutual agreements. The commencement dates of these packages are part of the negotiations and, in some instances, may allow for retrospective application to benefit purchases already made by diplomatic missions. The Treasury and the Productivity Commission have been consulted to ensure that the amendments have a negligible impact on revenue and do not adversely affect business operations or competition.
In terms of offences, penalties, or consequences for breach, the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2006 (No. 1) does not explicitly outline specific criminal or civil penalties for non-compliance with the Determination. However, failure to adhere to the provisions of the Determination could potentially lead to diplomatic tensions or the re-evaluation of tax concession agreements between Australia and the affected countries. The primary focus of the Determination is on administrative updates and adjustments to the tax concession schemes rather than punitive measures. The Treasury has advised that the amendments will have a negligible impact on revenue, indicating a careful approach to ensure minimal fiscal impact on the Australian economy.