Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2014 (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 2014 (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 consular posts 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 consular posts and accredited staff are exempt from paying direct taxes under the Vienna Convention on Diplomatic Relations (Articles 23, 34 and 37) or the Vienna Convention on Consular Relations (Articles 32 and 49). In line with international practice, tax concessions on indirect taxes are also extended to Diplomatic missions and consular posts 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. This retrospectivity is not to the detriment of any person or organisation; rather it extends concessions to missions or posts and privileged officers from either the date the mission or post opened or a date agreed during negotiations. Reciprocity of the date of effect means that Australia missions or posts and privileged officers will have access to the same benefits.
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.
This Amendment Determination 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.
The Office of Best Practice Regulation has agreed previously that such Amendment Determinations were 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 2014 (No. 1) was enacted by the Minister for Foreign Affairs under the Diplomatic Privileges and Immunities Act 1967. This legislation aims to update and adjust the Indirect Tax Concession Scheme (ITCS) packages provided to diplomatic missions and consular posts and their accredited staff. The primary policy objective is to maintain reciprocity in tax concessions granted to foreign diplomatic entities in Australia, ensuring that the economic benefits are mutual. This is achieved by amending the existing ITCS to create new and revise existing packages that offer tax concessions based on negotiated agreements with individual countries. The amendments serve to enhance the attractiveness of purchasing goods and services within Australia for diplomatic missions and their staff, thereby contributing to Australia's economy.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2014 (No. 1) amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to provide tax concessions on indirect taxes for diplomatic missions, consular posts, and accredited staff. These tax concessions, which are negotiated with each country and based on reciprocity, are intended to align with international practices and ensure that Australian diplomatic missions receive the same benefits abroad as Australian missions receive in other countries. The amendment determination updates the schedule of countries by amending existing entries and adding new entries that detail the indirect tax concession packages available to specific countries, with the aim of enhancing the economic benefits to Australia. This determination applies to diplomatic missions, consular posts, and accredited staff who are exempt from paying direct taxes under the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations. The amendment is retrospective in nature, allowing concessions to be applied from the date the mission or post opened or from a date agreed upon during negotiations, without negatively impacting any person or organisation. The changes made by this determination are considered minor and do not alter the operation of the Indirect Tax Concession Scheme, which does not provide exemptions from indirect taxes and thus does not impose additional burdens on retailers or businesses.
Key Provisions
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment Determination 2014 (No. 1) amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000, primarily by updating the schedule of countries to reflect new and amended indirect tax concession (ITC) packages for diplomatic missions and consular posts and their accredited staff (s. 3). These packages detail the tax concessions available to specific countries, in line with the reciprocal agreements underpinning the scheme.
The obligations imposed by this Determination are primarily on the Minister for Foreign Affairs, who is empowered under section 10B of the Diplomatic Privileges and Immunities Act 1967 to make such amendments. The Minister's role involves negotiating and finalising these packages with the respective countries, ensuring they are based on reciprocity and aligned with international practices. Once agreed upon, the Minister is responsible for implementing these amendments through legislative instruments, thereby updating the indirect tax concession packages available to diplomatic and consular missions and their staff.
While the Determination itself does not create new offences or penalties, it does stipulate that breaches of the amended indirect tax concession packages could lead to legal consequences under the broader framework of the Diplomatic Privileges and Immunities Act 1967 and the Taxation Administration Act 1953. The penalties for non-compliance with these Acts can include fines and other civil or criminal sanctions, depending on the nature and severity of the breach. The specific penalties are not detailed within the Amendment Determination but would be governed by the general provisions of the aforementioned Acts.
The Treasury has indicated that the financial impact of these amendments is expected to be negligible, and the scheme is designed to encourage diplomatic missions and their staff to purchase goods and services within Australia, thereby benefiting the Australian economy. The Indirect Tax Concession Scheme does not exempt any party from indirect taxes, nor does it place additional burdens on retailers, ensuring the scheme operates without negatively impacting business operations. The Determination was deemed minor in nature, exempting it from the need for extensive consultation under the Legislative Instruments Act 2003. Furthermore, it has been confirmed that the amendments do not affect human rights and freedoms as recognised in international instruments, aligning with the scrutiny requirements of the Human Rights (Parliamentary Scrutiny) Act 2011.