Explanatory Statement
Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Panama and Portugal) Determination 2020
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 (Panama and Portugal) Determination 2020 (“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 create a new Indirect Tax Concession Scheme (ITCS) package for Panama and an upgraded ITCS package for Portugal for the benefit of diplomatic missions and accredited staff. The effect of the Amendment is to add and update items to 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, in 1999 the then Assistant Treasurer, Mr Rod Kemp, advised 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 (Panama and Portugal) Determination 2020 was issued by the Minister for Foreign Affairs under the authority granted by the Diplomatic Privileges and Immunities Act 1967. This amendment was introduced to update the existing indirect tax concession scheme, extending and creating new packages for Panama and Portugal respectively, to provide diplomatic missions and accredited staff with certain tax benefits. The Diplomatic Privileges and Immunities Act 1967 empowers the Minister to make such determinations, and the policy objective is to align Australia's tax concessions for diplomatic missions with international practices, thereby promoting reciprocity and encouraging economic interactions within the country. The amendment does not alter the fundamental operation of the indirect tax concession scheme but serves to extend the benefits to the diplomatic missions of Panama and Portugal, ensuring that they receive the same or similar tax concessions as Australian missions receive overseas.
Scope and Application
The Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Panama and Portugal) Determination 2020 pertains to the Diplomatic Privileges and Immunities Act 1967 and extends its application to the Commissioner of Taxation in relation to indirect tax concessions for diplomatic missions and accredited staff. Specifically, the Amendment introduces a new Indirect Tax Concession Scheme package for Panama and an upgraded package for Portugal, which is achieved by amending Schedule 1 of the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000. This Amendment is applicable to the heads of diplomatic missions or specified personnel of the mentioned countries, and it applies to goods and services acquired in Australia. The concessions are based on reciprocity and are effective from dates agreed upon during negotiations, potentially extending back to the opening of the missions. This legislative change does not alter the existing framework of the Indirect Tax Concession Scheme but rather expands it to include the diplomatic missions of Panama and Portugal, thus ensuring alignment with international practices and reciprocal agreements. The Amendment has been assessed to have a negligible impact on revenue and is deemed to be of minor nature, not requiring consultation under the Legislation Act 2003, and it is consistent with human rights obligations.
Key Provisions
The key operative sections of the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Amendment (Panama and Portugal) Determination 2020 (F2021L00554) include Section 10B of the Diplomatic Privileges and Immunities Act 1967, which empowers the Minister for Foreign Affairs to create Determinations for the Commissioner of Taxation to compensate the head of a mission or a designated class of persons for indirect taxes on acquisitions covered by the Determination. This Amendment specifically targets the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000, updating Schedule 1 to introduce new and enhanced tax concession packages for Panama and Portugal. The changes reflect a commitment to reciprocity, ensuring that Australian diplomatic missions abroad benefit similarly from indirect tax concessions in their host countries.
The obligations imposed by this Amendment primarily involve the Commissioner of Taxation, who is required to compensate eligible diplomatic missions and their accredited staff for indirect taxes on specified acquisitions. This compensation mechanism ensures that diplomatic missions can operate more efficiently and that their staff are not burdened by additional tax liabilities. Additionally, the Diplomatic Privileges and Immunities Act 1967 itself imposes obligations on diplomatic missions to respect Australian laws and regulations while maintaining their status as diplomatic entities.
In terms of enforcement and consequences, the Determination does not explicitly list offences, penalties, or specific civil or criminal consequences for non-compliance within the Amendment itself. However, the underlying legislation, the Diplomatic Privileges and Immunities Act 1967, provides a framework within which breaches of diplomatic privileges and immunities can be addressed. Failure to comply with the Act's provisions could potentially lead to diplomatic disputes or legal actions, although specific penalties would be determined in the context of broader diplomatic and international law principles. The overall impact on revenue, as advised by Treasury, is expected to be negligible, and the broader economic benefit to Australia is seen in the encouragement of local purchases by diplomatic missions.