Shayne Neumann (Blair, Australian Labor Party, Shadow Minister for Immigration and Border Protection) Share this | Hansard source

I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House notes that the Turnbull Government's return to surplus in 2019-20 is reliant on a one-off tobacco tax collection timing trick".

I rise to speak on the Customs Amendment (Illicit Tobacco Offences) Bill 2018. This piece of legislation, together with the Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018, provides a new framework for strengthening illicit tobacco offences by removing existing obstacles to prosecution. The Treasury Laws Amendment (Illicit Tobacco Offences) Bill 2018 is currently before the Senate, and Labor has agreed to support that bill, as I outlined in this place on the 28 February. Naturally Labor will support the bill currently before the House, because we believe in cracking down on illicit tobacco as well as eliminating smoking related illness and death. Illicit tobacco refers to tobacco sold to Australian consumers without the payment of relevant taxes. There are several types of illicit tobacco, including contraband, which is manufactured legally outside of Australia and smuggled into the country; counterfeit, which is manufactured illegally without permissions and smuggled into Australia; and unbranded tobacco, which usually comes in loose leaf and is known colloquially as chop-chop. I suppose the Australian public would know that one more than the others.

The report Illicit tobacco in Australia released on 20 April this year by KPMG states that Australian tobacco consumption for the 2017 calendar year was 15.6 million kilograms, and around 15 per cent of this, or 2.3 million kilograms, was illicit tobacco. According to the report, the illicit tobacco consumed would have had an estimated excise value of $1.91 billion if it had been consumed legally. There are, however, other estimates of this figure because measuring the illicit tobacco market is, naturally, inherently difficult. The Department of Home Affairs has estimated the excise value at between $0.5 billion and $2.3 billion, whilst others have estimated the cost to the Australian public purse to be up to $6 billion. Regardless of this figure, as illicit tobacco enters the market, lost excise normally charged as a tax or duty is not being collected by the Australian government to be spent on other services such as health, infrastructure, education et cetera for our society and our community.

Last week two students in Sydney's north were arrested after attempting to import 778 kilograms of loose-leaf tobacco sent as sea cargo from China, with the excise for this shipment alone estimated to be worth more than $780,000. I commend the Australian Border Force officers for intercepting this shipment in Adelaide last month and for the daily work they do in protecting our borders. Another such instance uncovered by Australian Border Force officials was an alleged Chinese syndicate smuggling into Australia tobacco and cigarettes hidden in children's toys. There are other instances I could outline to the House. For example, six tonnes of illegal tobacco leaves and vast fields of mature plants worth more than $13 million in excise were seized in a raid on a rural property in the Northern Territory in July. The media has reported these events on numerous occasions.

I have heard from my own constituents and from small business operators in my electorate of Blair in South-East Queensland stories about businesses being undercut by those purportedly selling illicit tobacco to sometimes unknowing customers who think they're just getting cheaper cigarettes and cheaper tobacco. In Queensland, as recently as Saturday, The Queensland Times reported that a local store in Ipswich in my electorate was selling 50 grams of loose-leaf tobacco for just $20, compared to $69 in the supermarket. Illicit tobacco may seem harmless, but purchasing it actually helps fund the criminal networks that run these operations. They use illicit tobacco as one of the many branches of their criminal operations, which include such things as human trafficking, people smuggling, illicit use of firearms and drug smuggling. People who innocently buy tobacco on the cheap from local shops may be surprised to find out they may be partaking of this illicit tobacco trade. They're actually funding these operations by buying chop-chop.

We must take every step possible to crack down on illicit tobacco and the people who run these illegal operations. Since 1 July 2015, over 114 people have been charged with tobacco related border offences. However, only 69 of those charged have been successfully prosecuted under the Customs Act. There are a number of limitations with the existing tobacco related revenue evasion offences in the Customs Act and the Excise Act because the offences are inconsistent. The Customs Act offences only apply when knowledge of defrauding or intention to defraud revenue can be proven. By comparison, the Excise Act offences are associated with relatively low penalties and do not provide a sufficient deterrent to those dealing in illicit tobacco. Events can only be successfully prosecuted if it can be proven whether tobacco was imported or produced domestically. Because of these inconsistencies, neither officers of customs, who administer the Customs Act, nor officers of the Australian Taxation Office, who administer the Excise Act, are currently able to target the full range of illicit tobacco offences.

The bill before the House amends the Customs Act 1901 to create two new offences in respect of importing illicit tobacco based on recklessness and ensures customs officers can investigate and enforce new illicit tobacco offences relating to the proof of origin in the Taxation Administration Act 1953. In addition to this, there are paragraphs that create new offences which lower the standard of proof from intention to defraud or knowledge of defrauding revenue to recklessness. Recklessness is a lower standard of culpability than intention or knowledge. With these amendments, customs officers will be able to target a wider range of participants in the illegal tobacco trade and strengthen the illicit tobacco enforcement regime in Australia. In turn, this will allow greater opportunities for successful prosecution of those involved in the illicit tobacco market.

The bill also proposes to extend the power to arrest without warrant under section 210 of the Customs Act if an officer of customs or police believes on reasonable grounds the person has committed or is committing an offence. Labor supports this. It should be noted, however, that the power of arrest without a warrant can only be exercised if an officer believes on reasonable grounds that proceedings by summons against a person would not achieve one or more of the several purposes set out in the Customs Act. It's appropriate for the power to arrest without warrant to be extended to prevent the continuation of illicit tobacco offences and to ensure that people appear before the court in relation to those offences.

Whilst we welcome the measure to combat illicit tobacco, we on this side of the House are always prepared to hold this out-of-touch Turnbull government to account. As I referred to in my second reading amendment, the Turnbull government is relying on a one-off tobacco tax collection timing trick to help them bring up a budget surplus. In the 2018-19 budget, the Turnbull government miraculously announced that they were going to achieve surplus in 2019-20, a year earlier than previously anticipated.

Currently, importers who import tobacco are required to pay duty when the tobacco leaves a warehouse. As a result of this, there have been instances of tobacco being removed from warehouses without duty being paid, resulting in the illicit tobacco entering the Australian supply chain. In an effort to combat this, from 1 July 2019 importers will be required to pay all duty and tax liability when tobacco enters the country rather than when it leaves a licensed warehouse and enters the domestic market.

As a result of this measure, the Turnbull government announced a transitional measure, with importers having 12 months to pay tax on tobacco stored in warehouses. This means that, instead of duty being collected in the latter years, when it leaves a warehouse the revenue of over $3 billion will be collected in the 2019-20 financial year—a timing trick perpetrated to achieve a budget surplus. The 2019-20 financial year is also the year in which the Turnbull government says it will reach a $2.2 billion surplus—a $2.2 billion surplus and a $3 billion timing trick to achieve it. The Turnbull government is using the risk of illicit tobacco entering the market to reach a surplus a year earlier than they previously anticipated or expected to announce it. It is clear that, without this one-off tobacco tax collection timing trick, the Turnbull government would not be able to achieve a surplus in 2019-20 as they claim they will. I note that this measure will require another piece of legislation, currently titled the Customs Amendment (Collecting Tobacco Duties at the Border) Bill in the legislation proposed to be introduced in the spring sittings, as circulated by the Department of the Prime Minister and Cabinet.

Labor is awaiting this legislation to be introduced in the House and the government's further admission that without this additional revenue they will not be able to achieve a surplus one year ahead of schedule. Of course Labor have supported measures before the House when we've seen better and more improved economic reforms to pay down Australia's debt and to ensure bigger surpluses and a fair and sustainable taxation system for all Australians. For example, this plan from our side of the chamber involves capital gains tax reforms and reforms in relation to excessive dividend imputation credits, which crack down on an unsustainable tax loophole that gives tax refunds to people who don't actually pay income tax.

Labor has made a strong commitment historically in relation to getting rid of the scourge of smoking. Smoking accounts for 15,000 deaths every year in this country. Policy reforms implemented by former Labor governments made significant advancements towards drastically reducing that number—for example, what Australia did under the last Labor government in becoming the first country in the world to introduce plain packaging for cigarettes. We also increased the excise rate applying to tobacco products by 25 per cent as part of our budget, and we commend the government for mimicking what we had to do. We invested money—for example, $61 million in a national tobacco campaign. We introduced legislation to bring restrictions on internet advertising of tobacco products into line with advertising on other media. We took a strong, principled stance.

Unfortunately, there are parties on the other side of the chamber who have been shamelessly accepting donations from big tobacco. The latest records from the Australian Electoral Commission show that the National Party accepted $15,700 in donations from the tobacco industry in the 2016-17 financial year. This is simply not good enough. It's not good enough to say one thing in this chamber, to say one thing about the tobacco scourge and reducing deaths and illness in relation to tobacco related illness in this country, but to do another thing in Canberra or organisationally in your party. We don't think that's good enough.

I think the Prime Minister should explain why it's acceptable for his coalition partners to fill their coffers with donations from the tobacco industry. On this side of the chamber we've consistently shown our commitment to policies to reduce the instances of tobacco related illness and disease in this country. We support the passage of this bill through the House to stop the scourge of illicit tobacco and ultimately improve health outcomes for all Australians. I commend the legislation and the amendment to the chamber.

See this speech in context