Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (India, Malaysia and the United Kingdom) 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 (India, Malaysia and the United Kingdom) 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 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 upgrade the Indirect Tax Concession Scheme (ITCS) packages for India, Malaysia and the United Kingdom for the benefit of diplomatic missions and accredited staff. The effect of the Amendment is to update items in 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. 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. 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 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 (India, Malaysia and the United Kingdom) Determination 2022 was enacted to amend the existing Indirect Tax Concession Scheme (ITCS) packages for the diplomatic missions of India, Malaysia, and the United Kingdom in Australia. This Amendment aims to update the ITCS packages to better reflect the economic and diplomatic relations between Australia and these countries, in line with international practice. The determination is made under the authority of the Minister for Foreign Affairs and is designed to align Australia's tax concessions with those extended by the respective countries to Australian diplomatic missions. This change ensures that diplomatic missions and their accredited staff benefit from reciprocal indirect tax concessions, promoting a fairer and more balanced diplomatic environment. The policy objective is to enhance the economic relationship between Australia and these countries by encouraging the purchase of goods and services within Australia, thus benefiting the local economy while maintaining the spirit of reciprocity.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (India, Malaysia and the United Kingdom) Determination 2022 amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 to update the indirect tax concession packages for the diplomatic missions and accredited staff of India, Malaysia and the United Kingdom. This Amendment applies to diplomatic missions and their accredited staff in Australia, and extends to transactions involving the acquisition of goods and services by these missions and staff, ensuring that they benefit from indirect tax concessions in line with international practice. The Amendment is a Commonwealth initiative and operates within the framework of the Diplomatic Privileges and Immunities Act 1967, specifically under Section 10B, which allows the Minister for Foreign Affairs to make Determinations for the Commissioner of Taxation to compensate the head of a mission for indirect tax liabilities. The Amendment updates the concession packages in Schedule 1 of the Determination, reflecting negotiated agreements between Australia and the respective countries. The scope of this Amendment is limited to indirect tax concessions and does not affect the direct tax exemptions already in place under the Vienna Convention on Diplomatic Relations 1961. The Amendment does not introduce new principles but rather updates existing concessions to maintain reciprocity and encourage economic engagement with Australian goods and services.
Key Provisions
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (India, Malaysia and the United Kingdom) Determination 2022 (the Amendment) amends the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 (the Determination) by updating the indirect tax concession packages for diplomatic missions and accredited staff from India, Malaysia, and the United Kingdom. This Amendment (F2022L00365) is pursuant to section 10B of the Diplomatic Privileges and Immunities Act 1967, which empowers 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 on an acquisition. The changes involve modifications to Schedule 1 of the Determination, which lists the indirect tax concession packages available to specific diplomatic missions.
The primary obligation under the Amendment is to extend indirect tax concessions to diplomatic missions and accredited staff from India, Malaysia, and the United Kingdom, aligning with international practice. These concessions are part of the Indirect Tax Concession Scheme (ITCS), which provides exemptions from indirect taxes for goods and services purchased by diplomatic missions and their accredited staff. This scheme is reciprocal, meaning that Australian diplomatic missions in these countries will also receive similar benefits. The Minister for Foreign Affairs negotiates individual packages with each country, and the concessions are based on reciprocity and the date of effect agreed upon during negotiations.
The Amendment does not introduce new obligations but updates existing concessions, ensuring they remain current and effective. The process of amending the Determination to include these updated packages does not require extensive consultation or regulatory impact assessments, as the changes are minor and do not affect the broader operation of the ITCS. The Office of Best Practice Regulation has confirmed that these amendments are unlikely to have significant regulatory impacts on business, individuals, or community organisations.
There are no specific offences or penalties outlined in the Amendment itself, but breaches of the Diplomatic Privileges and Immunities Act 1967 or the ITCS could result in civil or criminal consequences. For example, misuse of diplomatic privileges or failure to comply with the tax obligations under the ITCS could lead to legal action. The penalties for such breaches would depend on the specific nature of the offence and could include fines or other sanctions. The Amendment ensures that diplomatic missions and accredited staff continue to benefit from indirect tax concessions, promoting economic relations and diplomatic cooperation.