Customs and Excise Bill

Members, it is my view that it is now reasonable to move on to the next theme, which is the debate on revenue and trade, comprising Part 2 and schedule 3; Part 3, Subparts 3, 5, 6, 7, and 7A, and schedule 4; and Part 5, Subparts 2, 3, 8, and 9, and schedules 6 and 7.

Thank you. I’m pleased to make a contribution under this new theme. We’re talking about revenue, and obviously, a major part of customs is the collection of duty and excise through the importation of goods into New Zealand across our borders, and also from the manufacture of cigarettes, tobacco, and the like, which is collected by customs as well.

I guess in terms of the forgone revenue from excise, I wish to talk to the provisions around the exemptions that are granted for the manufacturing of beer for personal use. Now I include it in this theme because it’s about the exemption from having to actually have a customs-controlled area in which beer is manufactured and from which revenue excise is derived. So I want to talk to this, because there are a lot of home brewers, craft brewers, around the country who enjoy their creations and who enjoy being able to enjoy their beer for personal use.

I wanted to just delve into the provision of clause 67(4)(b), which concerns the manufacture of beer, wine, or spirits in a private dwelling. If the individual manufactures that “exclusively for [their] personal use and not for sale or … disposition to any other person;”, they are, effectively, granted that exemption from having to fall within the Customs and Excise Act and be liable for excise, and, therefore, the forgone revenue would be owing to the Crown. My question really relates to the situation where it’s very common for home brewers to share and compare their creations with others in a non-commercial setting. It’s all part of the enjoyment, I guess, of the creation of—whether it’s a home brew or a wine, or any other beverage.

So my reading of clause 67(4)(b) is that it is very narrow in terms of it being only for that individual’s personal use and not for sale or disposition to any other person. In my mind, it’s arguable whether the ability to share and compare your creations with other brewers—other like-minded people—would be actually covered by that exemption, because it seems very narrow: to the individual concerned and to their dwelling, in which they manufactured the beverage. So I’d just like to seek clarification from the Minister of Customs, if she could explain how that scenario whereby the sharing and comparing of a personal home brew—which has no economic or commercial payment attached to it—falls within that exemption, because to me, it seems like this is very narrowly drafted, and if customs has to apply some sort of licence to sort of stretch the provision to suit a particular fact scenario, I guess it doesn’t make for good lawmaking.

I’m just hopeful we can get some guidance from the Minister on this particular point, because I’m sure it’s of great interest to the very many hundreds of home brewers and other people that are in their private dwellings—in their man caves or sheds, or whatever it is—making their particular home brew creations. So I’d appreciate some clarification from the Minister on that particular point. Thank you.

Madam Chair—

💬 Kieran McAnulty: Here we go.

Oh, thank you, Kieran. I’m just pleased to talk on this theme. I was taking a look at the bill and it leads me to understand that it continues to uphold the provisions contained in the current Act and, obviously, at the same time modernising the language.

One of the things that stands out in terms of this part is that business, particularly, is supporting the bill and its new provisions because it provides greater flexibility and certainty, and that’s important, I think, for all businesses that are involved in the import industry. What’s great about it also is that the importers will be able to declare provisional values if the value cannot be known at the time of import.

Furthermore, the importers will be able to, under this bill, seek binding valuation rulings to get certainty about their duty liability before deciding to import. Keeping abreast of the technology available today, traders will be able to share business records in the cloud as well as offshore, enabling them to add greater efficiency in terms of cost and time to their business. Continuing with the efficiency trend, traders can opt for a simple and cheap internal process to review duty assessments.

I think one of the other good things about this bill is the fact that customs are required to report annually on initiatives to reduce compliance costs—in particular, for highly compliant traders. Just looking at the Act, under the current Act there’s an unduly punitive additional duty regime that I think is unnecessary. I will be looking for some clarification from the Minister, particularly in this area, about this punitive side because it probably goes too far, and under the new provisions that have been proposed I wouldn’t mind some clarification around that. Are they going to be replaced with fairer, more proportionate compensatory interests and a late penalty regime? I think that this is an area, a crucial part, for myself.

In terms of the clauses, it is important to acknowledge, I think, the work of the select committee with regard to the clauses they’ve recommended, which clarify and strengthened the bill. In terms of clause 11, this looks like an amended clause that introduces and provides us a guide to schedule 3 of the bill, which levies excise and excise equivalent in respect of alcohol, tobacco, and fuel that is manufactured in or imported into New Zealand. It provides that excise and excise equivalent are levied when goods are manufactured or imported. I think the select committee, you can see, amended subclause (1) to clarify that excise duty and excise-equivalent duty are levied “when goods are manufactured or imported”.

Schedule 3, clause 10, is another new clause and I can see that it restricts the discretion of the chief executive to allow dutiable motor spirits to be removed from a customs-controlled area without being removed for home consumption. The clause also preserves the existing excise point when fuel leaves the refinery and creates a new excise point at the tank farms. Regulations may be made to set a formula to determine the additional volume from blending at tank farms. It sets out rules relating to the removal of motor spirits from customs-controlled areas, and blending, making their purpose and operation clearer.

Finally, the clause by clause detail paid to the raft of provisions related to the bill is detailed and thorough, and I wish to commend the Minister of Customs, but particularly the Foreign Affairs, Defence and Trade Committee which has worked on this. In doing so, the bill and its provisions are well-thought-out and, of course, I have no hesitation in commending this to the committee.

Just to put on record, this particular theme—revenue and trade—continues the provisions in the current Act, which were working really well. Just to remind members that customs collects duty on imports and excise on locally manufactured fuel, alcohol, and tobacco, and in 2016-17, customs collected $13.3 billion in Crown revenue.

This particular theme is where businesses came together with customs and ensured that we had a set of very flexible, business-orientated provisions. So I just want to acknowledge the many submitters that did this.

This bill supports business by creating greater flexibility and certainty. Importers, for example, will be able to declare provisional values if the value cannot be known at the time of import. Importers will be able to seek binding valuation rulings to get certainty about their duty liability before deciding to import. Traders will be able to store business records in the cloud and offshore, and traders can opt for a simpler, cheaper internal process to review duty assessments.

Customs must also report annually on initiatives to reduce compliance costs for highly compliant traders. The current, unduly punitive, additional duty regime will be replaced with a fairer, more proportionate compensatory interest and late payment regime. Administrator penalties have been extended to all exports, and accurate export information gives assurances to our trade partners and meets international obligations.

Excise taxes imposed on tobacco, fuel, and alcohol—the excise system is robust, but greater certainty will help business, avoiding litigation and protecting Crown revenue. The bill creates a new collection point at tank farm gantries to collect excise on the increased volume of motor spirits created by blending.

Mechanics and Miscellaneous