Other taxes may steal the headlines, but the Government’s tax discussion paper provides importers, brokers and others involved with international trade the opportunity to shape the future taxation of imports. Customs duty is included in the review aimed at developing a better tax system that delivers lower, simpler and fairer taxes. Importers, customs brokers and others involved in international trade have until 1 July 2015 to contribute to the discussion about how the customs duty system can be improved.
The discussion paper divides customs duty into a number of categories including:
- Customs duty on fuel
- Customs duty on alcohol
- Customs duty on tobaccoand
- Customs duties on all other imports.
Interestingly, it is reported that revenue from non-excise equivalent customs duties totals approximately $3 billion, yet the impact on Australian business via increased cost of imports and protected domestic industries is approximately $7 billion. This cost does not take into account the cost of Customs administering the system, or the cost of importers accessing and taking advantage of free trade agreements and tariff concession orders.
The discussion questions put forth by Treasury on indirect taxes, including customs duty, are:
- To what extent does Australia have the appropriate mix of taxes on specific goods and services? What changes, if any, could improve this mix? and
- To what extent are the tax settings (i.e. the rates and bases and the administration) for each of these indirect taxes appropriate? What changes, if any, could be made to these indirect tax settings to make a better tax system to deliver taxes that are lower, simpler, fairer?
Importers and advisors in the industry should now consider what changes would make the customs tariff system better and deliver duties that are lower, simpler and fairer. There is no shortage of issues that will be relevant to different interest groups. Some may include:
- The extent to which duties on passenger motor vehicles should be reduced to zero once local manufacturing ceases
- Whether the general rate of duty on certain classifications should be reduced to zero – this will be a particular issue where a tariff heading is already subject to a large number of TCOs; or most imports are from countries with whom we have entered into a free trade agreement
- Should the TCO system be reformed? – Specifically:
- Should the excluded goods schedule be removed?
- Should the definition of substitutable goods be amended to match commercial reality? or
- Even more radically, should the TCO system be repealed?
- What can be done to make the use of free trade agreements simpler for Australian importers? (such as waiving the need for certificates of origin)
- How can the system for refunds of customs duty be made simpler and fairer? (such as allowing bulk refunds)
- Should the GST/Duty low-value threshold be lowered?
Interested parties have until 1 July 2015 to lodge a submission. This is a rare opportunity to have an impact on the future of customs duties in Australia. We recommend that interested parties strongly consider making a submission.
While customs duty may be small relative to the revenue raised by other taxes, the small revenue impact of any proposed customs change may make it easier for the government to adopt that change. That is, changes to customs duty may have a better chance of success than more substantive taxation changes.