Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Fiji, Latvia, Nauru, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga and Vanuatu) Determination 2022
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 (Fiji, Latvia, Nauru, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga and Vanuatu) Determination 2022 (“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 to the head of a 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 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 upgrade Indirect Tax Concession Scheme (ITCS) packages for Fiji, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, and Tonga and create new ITCS packages for Latvia, Nauru and Vanuatu for the benefit of diplomatic missions and accredited staff. The effect of the Amendment is to amend 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. However, in this instance, for Pacific missions, the Minister has determined that reciprocity is not required, in keeping with Australia’s commitment to providing support to Pacific nations. Some Pacific countries may nevertheless extend similar concessions to Australia.
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, the commencement date allows access to concessions for purchases of goods and services already made, including by our overseas missions. 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.
The ITCS and its extension to new and existing 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, the Department of the Treasury confirmed 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 (Fiji, Latvia, Nauru, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga and Vanuatu) Determination 2022 was enacted to amend the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 and extend indirect tax concessions to specified diplomatic missions and their accredited staff in Australia. This Determination was issued by the Authority of the Minister for Foreign Affairs in accordance with Section 10B of the Diplomatic Privileges and Immunities Act 1967, which allows for the Minister to make Determinations for the Commissioner of Taxation to pay to the head of a mission an amount equal to the amount of indirect tax payable in respect of the supply of an acquisition covered by the Minister's Determination. The policy objective is to upgrade Indirect Tax Concession Scheme packages for certain Pacific nations and establish new packages for others, reflecting Australia's commitment to providing support to Pacific nations. This Amendment is expected to have a negligible impact on revenue while encouraging the purchase of goods within Australia and thereby supporting the economy.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Fiji, Latvia, Nauru, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga and Vanuatu) Determination 2022 amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to upgrade and create indirect tax concession packages for specified diplomatic missions and their accredited staff in Australia. This determination applies to the heads of diplomatic missions or individuals in classes determined by the Minister for Foreign Affairs, who are exempt from paying direct taxes under the Vienna Convention on Diplomatic Relations 1961. The determination extends indirect tax concessions to these missions and staff in alignment with international practice. The updated packages are negotiated with each country, and the concessions granted are generally based on reciprocity; however, for Pacific nations, reciprocity is not required, reflecting Australia’s commitment to supporting these countries. The commencement dates for these packages vary, reflecting the dates when agreements were reached or allowing access to concessions for past purchases. This Amendment does not impose any detriment to any person or organisation but instead extends the benefits to diplomatic missions and staff either from the date the mission opened or from an agreed date during negotiations. The amendment is minor in nature and does not require consultation under the Legislation Act 2003.
Key Provisions
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Fiji, Latvia, Nauru, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga and Vanuatu) Determination 2022 amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (the Determination) to extend indirect tax concessions to diplomatic missions and accredited staff of specified countries. Section 10B of the Diplomatic Privileges and Immunities Act 1967 empowers the Minister for Foreign Affairs to make such determinations, allowing the Commissioner of Taxation to pay the head of a mission or a person in a class determined by the Minister, an amount equivalent to the indirect tax payable on certain acquisitions. The Amendment specifically revises Schedule 1 of the Determination to upgrade tax concession packages for Fiji, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, and Tonga and introduces new packages for Latvia, Nauru, and Vanuatu. These changes are intended to align with Australia’s support for Pacific nations, reflecting a policy of non-reciprocity for certain missions.
The obligations imposed by the Amendment on the parties involved primarily revolve around compliance with the updated tax concession packages. Diplomatic missions and accredited staff of the specified countries must ensure that their acquisitions of goods and services in Australia are eligible for the tax concessions as outlined in the updated Schedule 1. The Minister for Foreign Affairs, through this Amendment, commits to facilitating the payment process by directing the Commissioner of Taxation to compensate the missions for the indirect taxes due on qualifying acquisitions. The Department of Foreign Affairs and Trade also plays a role in negotiating the commencement dates and scope of these concessions with the respective countries, ensuring that the benefits are effectively extended to the eligible missions.
Any breaches of the provisions set out in the Amendment could lead to significant consequences. The Act does not explicitly outline specific offences, penalties, or civil/criminal consequences for non-compliance in the provided explanatory statement. However, it is implicit that adherence to the updated tax concession packages is critical. Failure to comply with the terms could result in the diplomatic missions or accredited staff losing their eligibility for the tax concessions, which could, in turn, affect their operations and financial planning. Additionally, non-compliance might invite scrutiny from the Australian Taxation Office, potentially leading to audits or investigations to ensure adherence to the stipulated tax laws and concessions.