Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Estonia and Pakistan) 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 (Estonia and Pakistan) Determination 2017
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 this Amendment Determination is to amend the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to create a new Indirect Tax Concession Scheme (ITCS) package for Estonia and amend the existing package for Pakistan to provide tax concessions to their diplomatic missions and accredited staff. The effect of the Amendment Determination is to update the schedule of countries by amending an existing item and adding a new item to list 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, 36 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 for under the ITCS. Individual packages are negotiated with each country, and the level of concessions provided are 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 benefits in the relevant overseas country.
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 ITCS has no impact on business operations. It does not provide for a direct exemption from indirect taxes at the point of purchase and therefore does not pose any additional burden on Australian retailers.
The Amendment Determination does not alter the way the ITCS 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 Legislation 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 advised that the Amendment Determination is not likely have regulatory impacts on business, individuals or community organisations.
Overview
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Estonia and Pakistan) Determination 2017 was enacted to amend the existing indirect tax concession scheme for diplomatic missions and accredited staff in Australia. This amendment was introduced to update the schedule of countries that have access to the indirect tax concession scheme, by adding Estonia and amending the existing package for Pakistan. This was achieved by amending section 10B of the Diplomatic Privileges and Immunities Act 1967. The policy objective of this determination is to provide tax concessions to diplomatic missions and accredited staff of Estonia and Pakistan in line with international practice, based on reciprocity and negotiated on an individual basis. The amendments are expected to have a negligible impact on revenue, while providing economic benefits to Australia by encouraging diplomatic missions and accredited staff to purchase goods in Australia rather than directly importing them. The determination was deemed to be of a minor nature and therefore did not require consultation, as it does not alter the way the indirect tax concession scheme works but extends or retracts tax concessions to specific diplomatic missions.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Estonia and Pakistan) Determination 2017 applies to diplomatic missions and accredited staff from Estonia and Pakistan operating within Australia. This amendment updates the existing Indirect Tax Concession Scheme (ITCS) by extending tax concessions to these countries, aligning with international practices and reciprocity principles. The Act amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000, specifically updating the schedule of countries covered under the scheme by amending the existing package for Pakistan and adding Estonia to the list. This adjustment ensures that diplomatic missions and accredited personnel from these countries receive indirect tax concessions similar to those enjoyed by other nations, in line with the Vienna Convention on Diplomatic Relations. The application of this amendment is nationwide, operating under the authority of the Commonwealth of Australia and administered by the Minister for Foreign Affairs. It is important to note that the ITCS does not exempt diplomatic missions or accredited staff from all indirect taxes but rather provides a structured scheme for tax concessions on certain purchases, ensuring that the concessions are reciprocal and beneficial to both the diplomatic entities and the Australian economy.
Key Provisions
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Estonia and Pakistan) Determination 2017 amends the existing Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000. Specifically, section 10B of the Diplomatic Privileges and Immunities Act 1967 empowers the Minister to make Determinations, which permit 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 in respect of an acquisition. This Amendment Determination creates a new package for Estonia and amends the existing package for Pakistan, providing tax concessions on indirect taxes to their diplomatic missions and accredited staff. The determination updates the schedule of countries by amending an existing item and adding a new item to list the ITCS package available to these countries.
The obligations imposed by the Amendment Determination primarily concern the tax concessions extended to diplomatic missions and accredited staff from Estonia and Pakistan. These concessions are in line with international practice and are negotiated individually with each country, based on reciprocity. The packages are generally retrospective, extending benefits to missions and accredited staff from the date the mission opened or a date agreed upon during negotiations. This ensures reciprocity, meaning Australian missions and accredited staff will have access to the same benefits in the respective overseas countries.
The determination also clarifies that the ITCS does not provide a direct exemption from indirect taxes at the point of purchase, hence it does not impose any additional burden on Australian retailers. The package does not alter the operational aspects of the ITCS but rather modifies the concessions applicable to specific diplomatic missions. The determination was deemed minor in nature, thus consultation was not required under the Legislation Act 2003. Furthermore, the Office of Best Practice Regulation has indicated that this amendment is unlikely to have regulatory impacts on businesses, individuals, or community organisations. The determination is also compatible with human rights and freedoms as recognised or declared in international instruments.
In terms of consequences for breach, the explanatory statement does not detail specific offences, penalties, or consequences for non-compliance with the provisions of this Amendment Determination. However, the general legislative framework under which the Diplomatic Privileges and Immunities Act operates implies that any breach of its provisions could lead to legal actions, including civil or administrative penalties, depending on the nature and severity of the breach. The specific penalties would be determined by the courts or relevant authorities in accordance with applicable laws.