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3.1 [s51(ii)] Taxation.doc

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Queensland University of Technology

Taxation Power—s51(ii) The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Cth with respect to: (ii) taxation; but so as not to discriminate between States or parts of States; SUMMARY Cth • Is it a tax? • → NO = Invalid unless under another power • → YES → other requirements o s 55: must be only a taxation bill o s 53: must not originate in the Senate o s 99 & 51(ii): must not discriminate or give preference o s 114: must not tax State property State • Is it a tax? • → YES → o s 90: must not be an excise duty o s 114: must not tax Cth property • → NO = no danger of contravening s90 Is the charge a tax? Elements: Matthews v Chicory Marketing Board (1938) (Levy on chicory producers —money used to meet industry needs (payment of insurance, repayment of borrowings, pay expenses, improving quality of chicory)  was a tax) Positive Elements • a compulsory exaction (legally or practically) o of money • by a public authority • for public purposes Negative Elements • not a fee for services • not a license fee • not an arbitrary exaction (= there is some reasonable method of calculating the tax / determining liability) • penalty This is not an exhaustive definition: Air Caledonie (immigration clearance fee = a tax, not a fee for services ← compulsory so had to pay / homecoming Australians had the right to enter anyway) 1. Compulsory Exaction • Compulsory = has no choice but to pay → tax: Victoria v The Commonwealth • Will generally be of money, but does not necessarily have to be: Air Caledonie Andrew Trotter LWB242 2009-1 • Practical compulsion to pay tax imposed on another will suffice: MacCormick v Federal Commissioner of Taxation (tax on vendors of shares—amount calculated on unpaid company tax  still a tax (although struck down for being an arbitrary exaction—not subject to judicial review)) • Substance rather than form—Effect of law will suffice, even if not necessarily compulsory in its terms (if there is an unattractive option to not paying: AG v Homebush Flour Mills (compulsion to sell flour to government and buy back at higher price = tax ← flour vendors would go out of business if they don’t buy back their flour) o = Not relevant that there is no legal obligation to pay—no civil or criminal penalty for not paying—if the arrangement would subject the person to worse burdens or consequences which he will naturally seek to avoid in lieu of payment • Includes compulsion to spend a certain amount of money on something—or pay shortfall to government: Nth Suburbs Cemetery Reserve v Cth (Employers required to spend a given amount on training OR pay shortfall to government— money collected to be expended on training  tax (not a fee for services—no link between amount paid and cost of services)) 2. Public Authority • Public body formed under statute (incl statutory board): Matthews v Chicory Marketing Board • Includes anyone who is undertaking a public task can in effect be considered a public authority eg— o the customs/immigration company in Air Caledonie and o the collecting society in Australian Tape Manufacturers (royalties collected by private enterprise ATM—directed to collecting society (not executive)—for distribution to copyright owners & agents) • The minimal requirement is that there must be a definite body authorised by law to receive the exaction: Vacuum Oil Case • The statutory body need not be a federal body, but can be an accommodating State body that levies on behalf of the Federal Govt. 3. For a Public Purpose • If funds go into Consolidated Revenue Fund: 1 Uniform Tax Case; Logan Downs v Commissioner of Taxation (Levy on wool growers—appropriated for use by Wool Board  Tax for a public purpose) o Nb—not all compulsions to pay money to the consolidated revenue fund are taxes—if don’t raise money for government: Luton v Lessels (Child Support regulation—obligation to pay for child, not to raise public monies) • Act which does not have the purpose of raising revenue → not fatal but will be significant: Airservices Australia v Canadian Airlines International (law imposing lien over aircraft of company in liquidation who hadn’t paid all charges  no purpose of raising revenue → not a tax—simply a penalty (law challenged by CAI who were leasing one of insolvent company’s planes)) • If the matter is something that can be considered of public importance or exists for the purpose of raising revenue → public purpose: Australian Tape Manufacturers (4:3) (raised royalties for private parties but to serve a public purpose—cf minority: tax must raise public revenue) Andrew Trotter LWB242 2009-1 Negative Elements 4. Not a fee for services • Fees for services rendered are not taxes: Harper v Victoria; (Levy on egg producers—Vic Egg Board—amount decided based on cost of services—services incl grading, testing, marking, stamping eggs to ensure satisfactory quality— payment was compulsory  fee for services → not a tax) Parton v Milk Board (levy 1/10 of price of milk delivered  not a fee for services → tax) • Fees only cease to be taxes if they are “exacted for particular identified services provided individually to the particular person required to make the payment”: Air Caledonie o Services provided individually to the payer o Services at request or direction of payer o NOT—if payers were entitled to service in any case • Fee for services not necessarily a tax even if compulsory: Harper v Victoria • “Discernable relationship” between cost of services & amt of levy → fee for services: Harper v Victoria (levy calculated on costs of services → fee for services); cf. Parton v Milk Board; Cemetery Reserve Trust (Training Levy Case) (levy calculated on amount of milk delivered → tax) o Compulsion to spend—or pay shortfall for government to spend in same area—not a fee for services if not linked to cost of services: Nth Suburbs Cemetery Reserve v Cth (Employers required to spend a given amount on training OR pay shortfall to government—money collected to be expended on training  tax (not a fee for services—no link between amount paid and cost of services)) 5. Not a fee for a licence • License fees are not regarded as taxes as long as the fee is “reasonably related” to the value of the privilege provided or the cost of providing the privilege: Harper v Minister for Fisheries (abalone fishing license in Tas waters—no discernable relationship to value of what is being acquired, but rather to give right to acquire property—limited natural resource) • Particularly relevant where it involves a natural resource—license to prevent against uncontrolled exploitation & exhaustion: Harper v Minister for Fisheries • BUT if effectively a means of taxation of value of goods—tax: Ha v NSW 6. Not an arbitrary extraction • Where there are no criteria for the charge—ordered arbitrarily with no opportunity for judicial review → arbitrary exaction → not a tax: MacCormick v FCT (1984) (Certificate could be issued by Commissioner of Taxation when company tax not paid—‘conclusive evidence of the matter stated in the certificate’—assets stripped & shares sold from company  no opportunity to challenge → arbitrary exaction → not a tax → invalid) 7. Not a fine or penalty • Penalties operate upon a “failure to discharge antecedent obligations on the part of the person on whom the exaction falls”: MacCormick v Federal Commissioner of Taxation Andrew Trotter LWB242 2009-1 • Sanctions only indirectly to raise revenue are penalties not taxes: Re Dymond (Punitive sanc
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