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John Passant

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April 2009



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The Tax Office, alcopops and democracy

This article is now redundant given the Liberals’ recent indication they will now the pass the alcopops. While the principles remain the same they are academic considerations now.

The Government is going to re-introduce its recently rejected alcopops tax. If it is rejected again the argument is that this gives the Labor Party a double dissolution trigger.

It appears the Government will divide up the previously rejected Bill. The Liberals will support ratifying the tax already collected and to be collected for the year ending on midnight 13 May. (I’ll explain the timing in a minute).

The second part will attempt to impose a new prospective tax and the Liberals will vote against this.

I doubt these are the same Bill either in words or effect and so would not, arguably, be a constitutional trigger.

But I don’t think a double dissolution is the main game at all. The Government may be using the Excise law process to thwart the will of the Parliament. 

Here is my scenario.  It is speculation, and may be completely wrong, especially the legal analysis since I am not a lawyer  and I didn’t have a lot of time to check out the law in detail.

It came out of a conversation with John about the politics of the alcopops and was a throw away line of his which I have begun thinking and speculating about.

The Excise Act says that the Commissioner of Taxation can increase the rate of excise on alcopops by publishing a by-law in the Gazette to that effect provided there will be a Bill introduced within seven sitting days into the Parliament.  So even though the law hasn’t been introduced, let alone passed, the Commissioner can increase the rate administratively.

That is what he did for the previous rate increase. He gazetted that proposed increase to come into effect from 27 April 2008.

 The Government introduced the Bill into the Parliament on 13 May 2008, and according to the Senate Inquiry in Alcopops: 

The increases have been operative since 27 April 2008 and must be retrospectively validated by legislation within 12 months. This is the usual procedure for excise and customs tariff amendments, as it ensures that ‘windfall profits may not be made between the time of the announcement and the enactment of legislation to levy the duties’.

The 12 months evidently runs from the date of introduction of the Bill into Parliament (ie from 13 May 2008 to 13 May 2009.)

The Senate rejected the legislation containing the increase last month. So under the Excise law and/or convention, the Commissioner is on the surface entitled to continue to collect the tax increase until 13 May. 

I have doubts about the constitutionality or legality of collecting a tax which has no specific legislative basis, or which has as its legislative basis not the will of the Parliament but the whim of the Commissioner.

And how can parliamentary practice underpin tax collection, in this case of a tax rejected by the Parliament?


Unless there is something more substantial than parliamentary practice I would think collecting a tax after the Senate rejects it has little legal support. (Any tax lawyers or officers care to enlighten us?) 

So what happens if the Government re-introduces the same alcopops tax in the coming weeks?

Here is what Wayne Swan and Nicola Roxon, the Treasurer and Health ministers respectively, said on 15 April this year:

When Parliament sits again in May, the Government will:

  • Introduce a new tariff proposal with effect from 14 May 2009, ensuring the alcopops measure remains in place into the future. The Government will then introduce legislation to confirm the measure in the same session of Parliament; and
  • Introduce legislation to validate the revenue collected between 27 April 2008 and 13 May 2009.

As the Government has previously made clear, a measure that is good for twelve months is a measure that is good into the future.

As part of this political strategy, the Government appears to be telling the Commissioner to gazette the new increase (ie the one in the re-presented Bill) with effect from 14 May this year.

This will be one way for the Government to gets its alcopops revenue on a year by year recurring basis even though the Parliament rejected the increase last month and presumably will do so when it next considers the same increase in the near future. 

It is also a  convenient way to grind down Opposition to the Bill.  ‘We’ll keep on introducing it year after year and collecting the tax year by year until you lot pass it in full.’

This may backfire. It could just toughen up the Liberals to reject the legislation validating the present tax already collected or to be collected (i.e. between 27 April 2008 and 13 may 2009)..

This would be an administrative nightmare for the Commissioner and give windfall gains to the liquor industry at the expense of the consumers who in fact paid the extra money to cover the failed tax. 

Rejecting the validating law might also present political obstacles for the Government, enabling the Opposition to paint Rudd Labor as abusing the system and robbing money from consumers but giving it back to the big distillers.  (That is more likely to be an argument the Greens would raise if they had opposed the tax.)

The Excise law says the Commissioner may gazette an increase flowing from proposed laws. I stress the word may.

This puts the Commissioner in an unenviable position.

Does he follow the will of Parliament in recently rejecting the alcopop tax, or the will of a previous Parliament in setting up the Excise law to enable him to increase the rate in anticipation of the passage of the new Bill?  Following the second course of action also allows the democratically elected government, expressing the will of the people, to get its way.

The Commissioner may have  an interesting choice to make. I wonder what his advisers are arguing about this, because the Government clearly wants him to gazette the new increase with effect from 14 May 2009.

Yet it is his decision, not the Government’s.  He cannot let political factors impinge of whether he does gazette another yearly increase.  After all, the Public Service Act specifically mandates that the public service be apolitical and impartial.

And if he does gazette the proposed increase, and in the Budget or other funding arrangements the ATO is treated favourably compared to other public service agencies, some opportunists might take the opportunity to link the two.

I want to make it clear that I am not suggesting the Commissioner would in any way link the two.  He is an honourable man in an incredibly difficult job.

It may well be that the Government will not treat the ATO favourably, given the Tax Office’s seeming inability to adequately manage its present finances. It is over Budget by about $130 million.

 I am just forewarning the Commissioner about possible political fallout.

Presumably the Commissioner has been in negotiations with Finance and/or the Treasury and the relevant Ministers about funding.

Certainly his hard line stance (and a very unpopular one among staff) in collective agreement negotiations – he wants  a real wage cut and a further deterioration of conditions – indicates the Government may have told him to fix up his own cost base before he can expect any extra money from them.

Back to alcopops and gazetting the increase. What will the Commissioner do? 

Let me give him some free advice.  Don’t gazette the proposed increase.  Follow the will of the current Parliament which rejected the alcopops tax.



Pingback from Topics about Last-words | The Tax Office, alcopops and democracy
Time April 20, 2009 at 11:23 pm

[…] familyjamesfive added an interesting post on The Tax Office, alcopops and democracyHere’s a small excerptThe Government is going to re-introduce its recently rejected alcopops tax. If it is rejected again the argument is that this gives the Labor Party a double dissolution trigger. It appears the Government will divide up the previously rejected Bill. The Liberals will support ratifying the tax… […]

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