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2.2A s90 Detailed Notes.doc

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Law
Course
JSB171
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All Professors
Semester
Spring

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Section 90: Duties of Customs and Excise The power of the Parliament to impose duties of customs and of excise, and to grant bounties on the production or export of goods, shall become exclusive. 1075 Duty of excise: tax on goods, not on services Duty of custom: tax on goods, not on services; at point of import Summary 1904: Peterswald v Bartley [i] either in relation to quantity or value [ii] when produced or manufactured • States can impose restrictions on industries but not tax goods directly • Reference to PC → Canada → Stuart Mill → Direct | Indirect 1934: A-G for British Columbia v Kingcome Navigation Co [i] → more concerned with the commodity than the person = relaxation of relationship to quantity or value? Direct | Indirect dichotomy? 1938: Matthews v Chicory Marketing Board [i] → expressly widened → substantial effect to impose levy on goods 1949: Parton v Milk Board (Vic) [ii] → expressly widened → anyone in the chain, not just manufacturers 1960: Dennis Hotels Pty Ltd v Victoria (1960) Dixon CJ, McTiernan, Windeyer JJ: [i] → further expanded → includes wherever the practical effect is to impose tax on goods, eventually raising price to consumer (timing not relevant • Consideration: tax on liquor at any stage = states interfering with Cth tax policy Fullager [i] → Must be tax on precise goods ← Return to Peterswald v Bartley Kitto & Taylor JJ indirect taxes (recuperated from consumers) | direct taxes → charges in respect of previous goods not excise Menzies J Key point: whether tax is on goods sold | tax calculated on other goods, eg previously sold • Accepts but does not extend Matthews and Parton 1963: Bolton v Madsen (1963) 110 CLR 264 “Criterion of Liability” approach adopted (Kitto J, Dennis Hotels) by unanimous court 1964: Anderson’s Pty Ltd v Victoria (1964) 111 CLR 353 Immediately rejected Andrew Trotter Constitutional Law 2009-1 • Background to the framing of the Constitution suggests a narrow interpretation of excise—to stop states undermining Commonwealth absolute control over tariff policy: Hanks at 628 o Importance of free trade/protection debate leading up to federation 1 2  Decided in the end to leave it up to the parliament  Embodied in s88: Cth to impose uniform duties of customs  But states still not to interfere: s90  … but surely this is only the ‘customs’ bit? • Extended to ‘excise’ with reference to s93 “excise on goods manufactured in a state and then passing into another state for consumption”—see early decisions • Competing policies—perhaps it is the latter that is justified these days: hanks 629- 30 J Quick & R Garran, The Annotated Constitution of the Australian Commonwealth (Angus & Robertson, 1901, repr Legal Books, 1995) Excise = “[837] tax on articles produced or manufactured in a country” That is, customs = imported; excise = locally produced Drawing meaning of excise through comparison • Intention of prohibition = to prevent States from interfering with Cth tariff policies ← taxes discriminating between imported & local goods o Cf. wide view → intention = to make sure federal policy of taxation on commodities not interfered with by States ← sustain national economy Parton v Milk Board (Vic) (1949) 20 CLR 229 Dixon J [260] Peterswald v Bartley (1904) 1 CLR 497 “Excise” does not include brewer’s licence fee • Related to production or manufacture of goods • BUT not linked to the amount produced—not a tax on goods • Adjunct to genuine licence system, not a device for collecting a tax Excise = “a duty analogous to a customs duty imposed upon goods [i] either in relation to quantity or value [ii] when produced or manufactured”: Griffith CJ (for the court), [509] • States can forbid industries that exist only by its permission o →can impose restrictions o →can impose taxes (not a tax on goods, but a restriction on the industry): [510] • The states [NSW] “can regulate the manufacture of an article, though it has no power to impose a tax upon the thing itself”: [511] o Other conditions in addition to fee—inspection of beer, etc Policy • Reserved powers doctrine Reasoning 1 McMinn, A Constitutional History of Australia, Oxford University Press, Melbourne (1979) pp98-9; Cole v 2hitfield (1988) 165 CLR 360 at 385-92 La Nauze (1972) The Making of the Australian Constitution, Melbourne University Press, Melbourne, 1972 at p39, 41 Andrew Trotter Constitutional Law 2009-1 • Reference to PC decision on appeal from Canada (undesirable) o Canada has different constitutional provisions that imply that direct taxation is not an excise: 92 Can Const. o PC decisions relied on John Stuart Mill --classed taxes as direct / indirect— excise = indirect ← employer taxed | recovers from consumers by raising prices  Distinction not helpful: nature of an excise is that it is a tax on goods paid for by consumers o → licence fee = not linked to quantity = direct tax on producer = not a tax on consumers = not an indirect tax = not a duty of excise NB [i] A Tax directly on goods | B tax on goods in substance || C fee regulating industry Did not need to make the distinction between A & B—straight to narrow definition [ii] X Tax on manufacturer | Y Tax on someone in process || Z Tax on consumer Did not need to make distinction between X & Y—straight to narrow definition ↑ Commonwealth v South Australia (the Petrol case) (1926) 38 CLR 408 “a licence or tax on the sale appears to me to fall into a classification of governmental power outside the true context of the words “excise duties”: at 426 ↑ A-G for British Columbia v Kingcome Navigation Co [1934] AC 45 “Excise” = a “trading tax, … more concerned with the commodity in respect of which the taxation is imposed than with the particular person from whom the tax is exacted: at 59 ←Vague expansion of [i] tax on goods…? 4 Matthews v Chicory Marketing Board (1938) 60 CLR 263 “Excise” does include levy paid by producers per half acre (or part thereof) 5 • Calculated on what planted, not on final production: 303 o Theoretical possibility that no link at all (eg crop failure) o But does not make it “any less a tax upon production”—link between area planted and amount produced natural and controlling “Excise” = “a tax directly affecting commodities” [303] Dixon J • Not confined to taxes based on quantity or value → can’t just calculate in some tricky (eg. area of production, weight of raw material, quantity treated or gross returns: 303): [i] strongly rejected o “if the substantial effect is to impose a levy in respect of the commodity, the fact that the basis of assessment is not strictly that of quantity or value will not prevent the tax falling within the description, duties of excise”: 304 o “[T]here is no ground for restricting the application of the word [excise] to duties calculated directly on the quantity or value of the goods.”: [302-3] ↔ [i] 3Principles of Political Economy (1848; Longmans Green & Co, 1936) Book V, Ch 3 at [371] 4Dixon J supported by Rich & Starke JJ; Latham CJ & McTiernan J dissenting 5Marketing of Primary Products Act 1935 (Vic) Andrew Trotter Constitutional Law 2009-1 o “A definition which makes quantity and value the only basis of taxation which would satisfy the notion of “excise” has no foundation either in history, economic or fiscal principle”: [303] • Not confined to domestic goods: [299] NB [i] A Tax directly on goods | B tax on goods in substance || C fee regulating industry [ii] X Tax on manufacturer | Y Tax on someone in process || Z Tax on consumer Parton v Milk Board (Vic) (1949) 80 CLR 229 6 7 “Excise” includes levy paid per gallon of milk sold or distributed. • Tax, not fee for services ← compulsory exaction for expenditure of government agency: 258 • [i] Clearly tax on goods: would have been an ‘indirect tax’ = excise even under old Peterswald definition; or in substance (even directly) on goods = excise in Matthews o Cited pre-Matthews decision of Kingcome for basis that this is an excise— direct, no need even to satisfy ‘in substance’ test [259] o ‘Indirect’ tax—satisfies Peterswald : [259] “Excise” = “tax upon a commodity at any point in the course of distribution before it reaches the consumer”: [260] • Not limited to taxes “levied on the manufacturer, that is … while they are still in his hands: [259-60] → [ii] rejected • Does not include consumption tax: must be a tax levied on someone, recuperated 8 from others down the chain → consumers by raising prices: at 261 Reasoning • Reason for provision = give Cth real control of tax policy and prevent states from interfering with objectives • Tax has same economic effect whether imposed at manufacture or at later stage in the process • → cannot be just taxes imposed on manufacturer ← would defeat purpose o But note does not include taxes on consumption  This exclusion was based on ‘Privy Council decision of dubious relevance’ 9 NB [i] A Tax directly on goods | B tax on goods in substance || C fee regulating industry [ii] X Tax on manufacturer | Y Tax on someone in process || Z Tax on consumer 6Dixon J supported by Rich & Williams JJ; Latham CJ & McTiernan J dissenting 7To finance the milk board: s30(1)(a) Milk Board Act 1933 (Vic) 8Citing Atlantic Smoke Shops, Ltd v Conlon [1943] AC 550 9Hanks at 632, Atlantic Smoke Shops v Conlon [1943] AC 550 Andrew Trotter Constitutional Law 2009-1 The States learn a new trick: Taxing through licence fees • Note that they never really took advantage of the other exception created: that it didn’t include consumption tax (‘largely because of the difficulty of devising cost- effective systems for collecting consumption taxes’: hanks at 633, see Dickenson’s) Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529 10 (1) Victualler’s licence = 6% of liquor purchased during previous financial year • Previous liquor, not to be sold under the licence → “Not an excise” per Menzies, Fullager, Kitto & Taylor JJ (cf. Dixon CJ, McTiernan, Windeyer JJ) 11 (2) Temporary licence = £1/day + 6% of liquor purchased for sale under licence • Liquor to be sold under the licence → “Excise” per Menzies, Dixon CJ, McTiernan, Windeyer JJ (cf. Fullager, Kitto & Taylor JJ) Dixon CJ, McTiernan, Windeyer JJ—both licences (2) Excise—based on goods in substance + on vendor, recuperated from consumers (1) In contention—on vendor, recuperated from consumers BUT based on goods? 12 • Previous opinion that back-dating licence fees were not excises overturned. “tax imposed on liquor on its way to the consumer by whatever channel it may proceed” = excise: 547-548 • [i] tax on goods, [ii] recovered by person paying it from consumers: 539-40 • Brings about situation where vendor will at some point be liable to pay tax on liquor bought (and then sold)—timing not relevant: 539 • Distinction (excuse) disapproved—taxes on goods | fees to restrict or regulate industry (Peterswald) o Regulation of industry not an excuse to tax—if it is not a tax on goods (in substance), then it is not an excise anyway, ‘regulation of industry’ irrelevant o “The fact that the licensing … forms part of the method of controlling the sale of liquor … appears to me quite immaterial”: at 547 per Dixon CJ Considerations • Preventing interference of states with policy of Cth on taxes on commodities • → tax on liquor interferes (has same effect) even though paid retrospectively • → such a tax must be prohibited = excise Fullager, Kitto & Taylor JJ—none of them are excises Return to Peterswald v Bartley • But not basing on reserved state powers doctrine 10For hotel: s19(1)(a) Licensing Act 1928 (Vic) 11For booths & bars at sporting fixtures & shows, etc: s19(1)(b) Licensing Act 1928 (Vic) 12Dixon CJ Parton v Milk Board (Vic) (1949) 80 CLR 229 at 263, talking about licence fee calculated on past business done in Hartley v Walsh (1937) 57 CLR 372 Andrew Trotter Constitutional Law 2009-1 • Not based on Canadian precedents—distinction between direct & indirect tax rejected: 553 o Suggested that Griffith CJ in Peterswald only meant as an example, not to add to definition o Constitutional provisions different → cannot be used: 554 [i] tax upon goods Where “the person upon whom it is imposed is charged by reason of and by reference to the fact that he is the owner, importer, exporter, manufacturer, producer, processor, seller, purchaser, hirer or consumer of particular goods” (list not exhaustive): 554 [ii] tax imposed upon production or manufacture → neither tax is upon the precise goods being sold → neither tax is imposed upon production or manufacture (later in the chain) → therefore, neither tax an excise Fullager, Kitto & Taylor JJ—none of them are excises “Excise” = “tax upon the taking of a step in the process of producing or distributing the goods”: Kitto J at 559 • Distinction—indirect taxes (recuperated from consumers) | direct taxes (John Stuart Mill → PC / Canadian Precedents → Peterswald) o Doesn’t matter if the charge is not in fact passed to the consumer (e.g. if goods not sold) → here charges in respect of previous goods → not forwarded to consumers, since they have already been sold → rather, a direct charge on producers → not excises Menzies J—“Temporary License” = excise | “Victualler’s License = not excise [ii] “at any point before sale for consumption”: 590 • Distinction rejected—indirect taxes (recuperated from consumers) | direct taxes (John Stuart Mill → PC / Canadian Precedents → Peterswald) o One of “convenience rather than logic”: 590 --not a distinction used in determining whether or not it is an excise • Key point: whether tax is on goods sold | tax calculated on other goods, eg previously sold o Accepts Matthews and Parton—excise in substance taxing goods | but would not extend it to all cases where the tax was related to the goods o Rejected by other judges:  Distinction “artificial” | Both situations “are similar in their general economic consequences”: 595 per Windeyer J Victualler’s licence • Indirect tax ← “customers [are] likely to pay more for liquor” under it: 591 o Not the deciding factor • BUT a direct link needed between tax & sales 13 Citing Browns Transport Pty Ltd v Kropp (1958) 100 CLR 117 at 129: not an ‘essential element’ but duties of excise will generally be indirect Andrew Trotter Constitutional Law 2009-1 o “not upon the liquor already purchased for sale … it is a tax upon persons”: 591 → does not have the effect of taxing the specific goods at issue as in Parton and Matthews Temporary Licence • Direct link established—“every purchase of liquor for sale … attract[s] tax”: 591 → does have the substantial effect of taxing the goods for sale NB—proposition which Dennis Hotels stands for is thus supported only by 1 of 7 judges Bolton v Madsen (1963) 110 CLR 264 “Criterion of Liability” approach adopted (Kitto J, Dennis Hotels): Unanimous High Court Dixon CJ, Kitto, Taylor, Menzies, Windeyer and Owen JJ Anderson’s Pty Ltd v Victoria (1964) 111 CLR 353 Immediately rejected—focus on “direct legal effect” of tax too formalistic. Western Australia v Hamersley Iron Pty Ltd (No 1) (1969) 120 CLR 42 & Western Australia v Chamerbain Industries Pty Ltd (1970) 121 CLR 1 Stamp duty on sale of goods receipts = excise ← receipts reflect payment for sale of goods → tax is effectively in relation to goods • Link in Matthews and Parton extended a little further Dickenson’s Arcade Pty Ltd v Tasmania • Dennis Hotels view on licence fees begrudgingly maintained • Attempt to disguise tax as consumption tax was invalid (1) Licence fee for tobacco sale as in Dennis Hotels → 12 month period ending 6 months before licence. 14 → Provisions a little more vague still than in Dennis —draftsman aiming to not be specific and stay on the ‘right’ side of the Dennis Hotels line—trying not to associate directly with goods: Barwick CJ [189] 15 • Held to be valid—although no concession in the definition ; in fact, Mason J narrowed the view further of when the states could get away with licence fees. o Barwi
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