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

I rise to speak on the Customs Amendment (Collecting Tobacco Duties at the Border) Bill 2018. This piece of legislation is part of a range of measures to crack down on the proliferation of illicit tobacco in Australia. This bill, along with two others debated this week, implements measures announced in the 2018-19 budget under the banner of the black economy package.

Labor is supporting the passage of this bill through the House to stop illicit tobacco and, ultimately, improve health outcomes for all Australians. Our commitment on this side of the House to stop the scourge of tobacco speaks for itself. Smoking is the single most important preventable cause of ill health and death in Australia, accounting for more than 15,000 deaths each year. Labor governments have led the way and made significant advancements towards drastically reducing that number. It was Labor who introduced and fought for world-leading plain-packaging legislation which, complemented with other policies, has seen adolescent smoking rates drop to a record low. A strong, principled stance on reducing society's exposure to tobacco products has significantly improved the overall health of all Australians.

The Customs Amendment (Collecting Tobacco Duties at the Border) Bill 2018 amends the Customs Act 1901. It will require tobacco importers to pay import duty on tobacco products on importation into Australia from 1 July 2019. So, duty will be paid on tobacco products upon importation into Australia. This removes the option of imported tobacco products entering Australia in a licenced warehouse without the payment of import duties. That's really critical: there will be payment at the point of it being imported. From 1 July 2019, it will no longer be possible for duty to be paid on tobacco products on a weekly or monthly basis in accordance with permissions granted under section 69 of the Customs Act. Movement permissions to allow the movement of tobacco products to or from warehouses will cease on the same day.

The bill also includes transitional arrangements for the treatment of tobacco products that are still in warehouses on 1 July 2019. Owners of these tobacco products will be required to pay outstanding duties, unless they enter into an arrangement to pay the outstanding duty over the following 12 months and provide security for doing so. Owners of tobacco products who do neither of these things may have their tobacco products sold, or otherwise disposed of, by the government.

Labor supports these measures to tackle the black economy and stop illicit tobacco entering the supply chain. 'Illicit tobacco' refers to tobacco sold to Australian consumers without payment of relevant taxes. I think there wouldn't be a person in this chamber who hasn't had complaints by legitimate and lawful sellers of tobacco concerning illicit operations in their electorates.

Contraband tobacco is manufactured legally outside Australia and then smuggled into our country or into the supply chain without paying relevant taxes. When illicit tobacco enters the market without paying excise, it means that tax or duties aren't being collected by the government to pay for the services that we expect in our society, such as health, education or indeed infrastructure. It's reported that close to a quarter of the illegal tobacco sold in Australia is 'leakage' from licensed warehouses. By applying duties at the border rather than when the tobacco leaves warehouses, we're closing this loophole and the potential for illicit tobacco to be spread in Australia.

Illicit tobacco is one of the many branches that criminal networks use to fund their nefarious operations. Profits from illicit tobacco help fund other branches of criminal activity, including human trafficking, people smuggling, illegal firearms and drug smuggling. This is one of the many reasons we must take every step possible to crack down on illicit tobacco and the people who run these illegal operations.

The change in timing of when tobacco is charged is an important measure to reduce the importation of illicit tobacco. However, the sneakiest thing about this measure is that it sees the budget, on the budget papers, return to surplus a year ahead of time. This measure alone will boost tax receipts once and once only by $3.27 billion in the 2019-20 financial year. So the Liberal government are relying on a one-off tobacco-taxation-collection-timing trick to help them reach a budget surplus.

In the 2018-19 budget, the government miraculously announced that they were going to reach a surplus in the 2019-20 financial year, a year earlier than previously anticipated. This measure means that, instead of duty being collected in later years, when it leaves a warehouse, the revenue—as I say, over $3 billion—will be collected once, in the 2019-20 financial year. And 2019-20 just happens to be the year that the government, on the budget papers, will reach a surplus. How surprising! What a miracle! The Red Sea has parted. The water has turned into wine, and all of a sudden a surplus is created by the government by a tax-timing trick.

The government are using the risk of illegal tobacco entering the market to reach a surplus a year ahead of when they would expect to achieve it. It's clear that, without this one-off tobacco-tax-collection-timing trick, the very much out-of-touch government would not be achieving the surplus in the year they say, on their own budget papers. Without this timing trick, the return to surplus would be pushed back another year—and all this from a government which have doubled the debt on their watch.

Labor have consistently shown our commitment to policies which reduce the scourge of illegal tobacco in Australia as well as tobacco related illness and disease in Australia. That's why Labor supports the proposed measures in the bill today and the other measures to tackle the black economy. It's just important that the government's trick be called out in speeches that we make.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise to speak on the Customs Amendment (Collecting Tobacco Duties at the Border) Bill 2018. It was very interesting to hear the member for Blair giving us a lecture about budget surpluses, especially when we are coming up to the 30th anniversary of when Labor last delivered a budget surplus. We have to go back all the way to 1989—

Mr Tim Wilson interjecting—

That's right. The good member for Goldstein, in front of me here, wasn't born.

Mr Tim Wilson interjecting—

Well, he was probably still in primary school. The Minister for Defence Industry, at the dispatch box, may have been also in primary school back then, 30 years ago. Is that correct?

Dr Leigh interjecting—

The member for Fenner over there was obviously giving these lectures back then, 30 years ago, telling us how wonderful the free market is, before he decided to get his insights into the Labor Party and realised that those ideas that he wrote so well about in so many of those publications no longer fit into the modern Labor Party and that if he wanted to sit over there he had to disown all those rules.

Then, of course, we have to remember that they did get close. The member for Blair was right: they did get close. I can remember sitting in this chamber and having the then Treasurer, the now member for Lilley, stand up and say, 'Those four budget surpluses that we're announcing tonight—' It was completely mythical. Yet we have Labor members coming into the chamber trying to lecture this coalition on budget surplus. We have done the hard work. The budget surplus is within months of being achieved. Then we have the long, hard haul back to try to pay down that debt that has been run up over recent years and which first started with that unfortunate decision of the Australian public to elect the Rudd government, when everything started to go pear-shaped.

Back to the specifics of the bill: years ago, when we had much higher levels of import duty in this country, licensed bond stores were very common across a wide range of goods. That was where an importer, when the goods entered the country, rather than paying the duty at whatever the rate was on that particular commodity, rather than paying that duty up-front to the Australian customs agency on the importation of goods, would place those goods in a licensed bond store. They would defer the payment of the duty until they took the goods out of the bond store.

Over the years, as duties have come down across the economy, those bond stores are no longer as prevalent as they were in the past. One area where they are still prevalent is tobacco. If a tobacco importer were to import those goods, rather than paying the excise duty at the time of the importation, they would go into a licensed bond store. That licensed bond store has to have additional security. There are additional costs and paperwork. Setting aside the additional capital required to pay that money out and the cost of the interest, it is far more efficient for that duty to be paid upon importation. As the Black Economy Taskforce pointed out, there is also the risk of goods disappearing from that bond store and entering the market without that duty being paid. Therefore I agree with this recommendation of the Black Economy Taskforce that we close that possibility and ensure that when tobacco goods are imported into this country the duty is paid at the time of importation.

But in doing that we are adding to the cost—we need to be up-front about this—of the companies that lawfully import tobacco products. The problem we have created by attempts to decrease the rate of smoking—which I fully agree with—is that as we've increased the price of cigarettes we have gone down a route of de facto prohibition by price. It's a problem we have. You can buy a packet of cigarettes overseas in many markets in South-East Asia for around a dollar a packet. They are lawfully made. I can remember about 12 months ago I was going through the duty-free airport at Dubai and having a look out of interest—I'm not a smoker and I don't buy cigarettes—just to see what the price was. I could buy a packet of Benson & Hedges, with about 30 in the packet, for the equivalent of $1.60 a packet, lawfully, from a retail establishment. We know the wholesale price is a dollar.

We've created this huge opportunity for black market operators in the space of illegal tobacco importation. So, every time this parliament puts legislation in to increase the costs of lawfully sold tobacco, we have to admit that we are creating more opportunities and incentives in the black market. We need to ensure that we are adequately financing our law enforcement officials and border protection agencies to crack down on illegal tobacco imports; because, as has been proven many times throughout history, when you go down the track of prohibition, the unintended consequences cause more problems than what you're trying to solve.

I will leave my remarks there, today, on the issue of illicit tobacco. I would like to note that I am a fervent antismoker. I'd like to see cigarettes completely abolished from the Australian landscape. But I understand you need to be very careful when you try to do that by prohibition. We've got to continue to work on education programs, because, ultimately, that is the only way to change habits. And we've got to continue to ensure that we give the resources to our law enforcement officials to crack down on illicit and illegal tobacco being sold, as it is being sold across our nation in almost plague proportions. I thank the House.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

I want to begin by following up exactly where the previous speaker spoke, in regard to a willingness, a wish and an aspiration that people be free to choose to consume, and choose not to consume, tobacco based products, that people will make informed decisions about their health and welfare, that they will be in a position to make informed judgements and that they will choose to put their health at the fore. It's a pretty simple principle at the heart of a liberal democracy. More critically, in a society that has to deal with the complex nature of health needs, it's a wish that people will make the right choices.

The task before this parliament is always in knowing how to get those laws right and in making sure that people are free to do so. There are complications, always, in making sure that we preserve people's freedom to choose and in achieving the ambitions, shall we say, or the collective interests of the whole of the nation. That's why I'm supporting this amendment today, the Customs Amendment (Collecting Tobacco Duties at the Border) Bill 2018. It's pretty prescriptive in its title about what its objective and purpose is. It's a relatively straightforward exercise in making sure that duties for tobacco are paid at the border, so the government gets the revenue. It simplifies the process and, hopefully, reduces costs. Ultimately, it guarantees the revenue supply for the government to offset the consequences of people who consume tobacco based products, including funding the health and welfare system to support those consequences, which is fundamentally a good thing.

Like the previous speaker, I have concerns about how we find this right balance in law. One of the concerns I've had, and I've spoken about it in this place before, is some of the consequences of past policies. The great Milton Friedman always argued that we should judge a policy by its consequences not merely its intentions. We've seen policies that have made tobacco based products interchangeable. That's called plain packaging. They all look the same. They're all treated the same. It's very hard to distinguish between products anymore. We've also had more tax increases on the products. Unsurprisingly, as soon as you increase the cost of the products, the gap between production and consumption—price—is considerable. We know what happens when you do that. It's not just in tobacco products. The attractiveness for illegal activity increases as well, because people can make nefarious profits easily by providing counterfeit goods. We say this against a backdrop where reduction in tobacco consumption is not going down, in historical trends, in Australia. What we know is that more and more people, because of that gap between production and consumption, are looking for alternative avenues. Because we have an interchangeable product now, they find it easy to do so—as do those who would seek to take advantage of that environment by providing products that are counterfeit.

We always have to factor in the consequences of going down this path: in the end, the government loses because we don't collect the tax revenue when people sell counterfeit products, but we carry all of the costs and the consequences. But, of course, we also face a problem where people have alternative options and turn to essentially criminal behaviour because of the consequences of the decisions the government has made. I have to say I have a real problem with that—when the government seeks to actively promote an environment where people want to flout the law. I don't want people flouting the law; I want people complying with the law. I want people to think that they should be doing the right thing by this community and their country, as well as, of course, choosing to do the right thing for their own health.

That's been one of the critical problems we've had in much of this space, particularly when people are also denied pathways to end their addiction to combustible tobacco products, because we make it illegal to access nicotine tablets and electronic vaping. It's on the public record that I believe that, while I don't think it is a perfect solution and I fully accept there may be health consequences associated with it, when you have a product which actually directly reduces harm and people wish to reduce their harm. then a legal pathway for people to do so is a sensible course of action. We see this in other areas where we regularly talk about harm reduction, because we put people's health and welfare first, ahead of the ideological objectives of others.

I will continue to be guided by that, because when I have gone to the United States or Europe, where they now have vaping fully legally available, one of the things I see is how many people who used to smoke cigarettes have switched. It's not perfect. There are people who shouldn't have ever taken up vaping who have—of course, some of those people may very well have taken up tobacco consumption had they not had that pathway. But the number of dogged serial smokers who were given a choice and chose the path of least harm is quite considerable. You see it in the streets. It's not like it's something that happens in marginal communities away from the prying eyes of the public. It's naked. It's obvious—so much so that you have the National Health Service in the United Kingdom recommending people take it as a pathway because of the potential reduction in harm. It's not just harm reduction in terms of people's immediate health consequences, though there are those; there is potential reduction in harm which then obviously has to be addressed through the health system. I would rather see fewer people with emphysema and fewer people dealing with the health consequences and going through our hospital systems, so that those services can be reprioritised towards helping other people. I make no apology about that; I think it's a fundamental good.

When we are looking at policies in this space, whether it's about how we collect the tax or whether it's about how we design logos, branding, advertising and compulsory labelling, when it comes down to the tax regimes that are applied and the incentives that drive them, the one thing we should always look at is: what is the actual consequence of what we're doing? It's not the intent and it's not whether we're going to get the applause of the health sociology community and their agendas, because they're fighting wars from years past and are looking constantly for new ways to seek grants to continue their research and work. What's the actual consequence for Australians? They should be at the forefront of our minds. They're the people that I represent and that everybody else in this place represents. They're the people that I would have thought the Australian people want us to be thinking about—not ourselves, not the government and government first, and not the objectives of bureaucratically-designed health systems. It's them: the Australian people. It's whether we are going to put their health and welfare first, or whether we're going to create incentives for them to do the wrong thing, and, more critically, incentives for those who don't wish any of us well and actually have the nefarious intent to take advantage of the decisions that are made in this place.

Steven Ciobo (Moncrieff, Liberal Party, Minister for Defence Industry) Share this | Link to this | Hansard source

I would like to thank members for their contributions to the debate on the Customs Amendment (Collecting Tobacco Duties at the Border) Bill 2018. From 1 July 2019, the measures in this bill will establish a framework that requires importers to pay all import duties on tobacco when it enters the country, thereby denying criminal groups the opportunity to obtain tobacco on which duty has not been paid. The bill is complemented by the Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018 and the Excise Tariff Amendment (Collecting Tobacco Duties at Manufacture) Bill 2018. They provide a framework to make excise duty on tobacco due at the time of domestic manufacture. Full details of the measure are contained in the explanatory memorandum. I commend the bill to the House.

Question agreed to.

Bill read a second time.