Bath v Alston Holdings Pty Ltd

Bath v Alston Holdings Pty Ltd - [1988] HCA 27 - HCA 1988 case summary — Zoe

[36]

The requirement of the Act that a Victorian retailer of tobacco products be licensed applies indifferently to retailers of both local and interstate products. Of itself, the requirement does not contravene s. 92 of the Constitution. If the Act imposed the ad valorem licence fee by reference to the value of all tobacco products sold by a retailer in the relevant period, the imposition of the fee would not contravene s. 92 since it would not differentiate between tobacco purchased in Victoria and tobacco purchased outside Victoria; a fortiori it would not discriminate in a protectionist sense against the purchase of tobacco outside Victoria. The exclusion of tobacco purchased in Victoria from a licensed wholesaler from the total sale value of tobacco used as the basis of the calculation of the ad valorem licence fee does, however, involve an element of differentiation and at least prima facie discrimination. Since the effect of the Act is to require all Victorian wholesalers selling tobacco products in Victoria to be licensed, the tobacco products purchased by the ordinary Victorian retailer from a local wholesaler will, for practical purposes, be all purchased from the holder of a wholesaler's licence under the Act. That being so, the exclusion of tobacco purchased in Victoria from the holder of a wholesaler's licence from the value of tobacco sold in the relevant preceding period has the effect that, for practical purposes, the licence fee paid by a Victorian retailer will ordinarily consist of the flat fee of $50 (for an indefinite licence: s. 10(1)(c)) or $10 (for a monthly licence: s. 10(1)(d)) together with an amount equal to 25 per cent of the value of any tobacco purchased from an interstate wholesaler. In other words, the retailer who sells only tobacco products purchased by him from a Victorian wholesaler will pay the appropriate flat fee for his licence, while a retailer who sells only tobacco products purchased from an interstate wholesaler will pay that flat fee plus 25 per cent of the value of tobacco sold in the preceding relevant period. It follows that, if they be viewed in isolation, the provisions of the Act imposing the obligation to pay a retail tobacconist's licence fee of $50 or $10 plus an amount calculated by reference to the value of tobacco sold which has not been purchased in Victoria from a licensed wholesaler, discriminate against interstate purchases of tobacco in favour of purchases in Victoria. If it be viewed in isolation, that discrimination is undeniably protectionist both in form and substance. In form, the provisions of s. 10(1)(c) and (d) select the fact that tobacco was "purchased in Victoria" from a licensed wholesaler as the qualifying condition for exemption from inclusion in the products by reference to which liability to ad valorem tax is calculated. In substance, those provisions protect local wholesalers and the tobacco products they sell from the competition of an out of State wholesaler whose products might be cheaper in some other Australian market place for a variety of possible reasons, e.g., that the laws of the State in which he carries on his business as a wholesaler either do not require that he hold a licence at all or exact a licence fee comparatively lower than the fee exacted from a Victorian wholesaler.

[37]

Even when the provisions of the Act imposing the liability to pay the retail tobacconist's licence fee are read in the context of the Act as a whole, they retain their discriminatory and protectionist character. Such a reading reveals the explanation for the exclusion from the basis of calculation of the retailer's licence fee of tobacco products purchased within Victoria from a licensed wholesaler. That explanation is that the licence fee which the Act requires Victorian wholesalers to pay to the Victorian Government will not have been paid to the Victorian Government by an out of State wholesaler who does not carry on business in Victoria and therefore does not require a licence in that State. The explanation tends, however, to underline, rather than remove, the protectionist character of the discrimination at the retail level effected by the provisions imposing the tax. If wholesalers of tobacco products in another State already pay taxes and bear other costs which are reflected in wholesale prices equal to or higher than those charged by Victorian wholesalers, the practical effects of the discrimination involved in the calculation of the retailer's licence fee would be likely to be that the out of State wholesalers would be excluded from selling into Victoria and that the products which they would otherwise sell in interstate trade would be effectively excluded from the Victorian market. On the other hand, if out of State wholesalers pay less taxes and other costs than their Victorian counterparts, and in particular if they pay no (or a lower) wholesale licence fee, the effect of the discriminatory tax upon retailers will be to protect the Victorian wholesalers and the Victorian products from the competition of the wholesalers operating in the State with the lower cost structure. Either way, the operation and effect of the provisions of the Act imposing the retail tobacconist's licence fee are discriminatory against interstate trade in a protectionist sense. For practical purposes, their operation is to impose on Victorian retailers who, during the relevant earlier period, purchased tobacco products both locally and in the markets of another State, an obligation to pay to Victorian consolidated revenue an ad valorem tax calculated by reference to the sale value of so much of those products as came from interstate. Ignoring the flat fee of $50 or $10, the effect of s. 10(1)(c) and (d) is to discriminate against tobacco products sold by wholesalers in the markets of another State and to protect both Victorian wholesalers and the products which they sell from the competition of out of State wholesalers and their products. The wholesaler's licence fee, imposed on local wholesalers by reference to all their local sales, does not infringe s. 92 in that it does not discriminate against goods coming from another State. The ad valorem content of the retailer's licence fee does infringe s. 92 in that it discriminates against interstate trade and commerce in a protectionist sense by taxing a retailer only because of, and by reference to the value of, his actual or imputed purchases of products in any State other than Victoria.

[38]

It may be suggested that the effect of our conclusion that the method of calculation of the retailer's licence fee infringes s. 92 of the Constitution is to divert s. 92 from its intended function as a guarantee of the freedom of interstate trade and commerce from the barriers and burdens of protectionist laws and to permit the section to emerge again as a cause of senseless business or administrative artificiality and inefficiency and as a source of preference of interstate trade and commerce. Such a suggestion would be ill-founded. The out of State wholesaler is liable to taxes imposed by the State in which he carried on business in the same way as the Victorian wholesaler is subject to the taxes imposed by Victoria. The taxes imposed by the Act escape invalidity as excise duties only by reason of acceptance of their character as a licence fee as distinct from a tax on goods. Seen as a licence fee, the taxes imposed upon wholesalers are part of the costs of a Victorian wholesaler in carrying on his business. He will enjoy a competitive advantage or disadvantage in relation to an out of State wholesaler according to the comparative level of taxes and other costs which he must bear in carrying on his business. The fact that taxes paid by a wholesaler in one State are higher than the taxes paid by a wholesaler in a second State may provide an inducement for the first State to protect local goods and local wholesalers by the imposition of an "equalizing" tax upon its retailers in respect of their purchases of products from that other State. The most that such notions of economic equalization can do, however, is to provide some local justification for the imposition of a protectionist tax in respect of interstate goods at the later retail stage of distribution. They do not alter the character of the tax as such or remove it from the ambit of s. 92. Indeed, to hold that a law which protects local goods by imposing a discriminatory tax on interstate goods at the retail level is consistent with s. 92 because the law equalizes in favour of the local goods an advantage which the interstate goods enjoy in their State of origin in the course of manufacture or distribution would be to disregard the critical constitutional purpose which the section is designed to serve.

[39]

Nor is the protectionist character of the ad valorem tax on retailers calculated by reference to their interstate purchases removed by treating it as "equivalent" to the ad valorem tax imposed upon wholesalers in respect of their sales of local goods or by saying that both taxes are properly to be seen as being, "in substance", taxes on goods. The term "tax on goods" is a generic one which is used to describe a wide variety of different taxes imposed on a person by reference to some activity or relationship involving "goods". The term is used metaphorically. A tax cannot literally be imposed on goods: persons not goods pay taxes. A common characteristic of a tax on goods is that it is likely to be regarded as a cost of some step in the manufacture, production or distribution of goods with the result that it is absorbed in their subsequent price. Excise duties, such as a manufacturing impost or a sales tax, and import or border duties are the obvious examples of such a tax. As a descriptive term, the phrase "tax on goods" may be helpful to explain, in the context of notions of economic equivalence, the local reasons for the imposition of a protectionist tax such as an ad valorem border duty or a discriminatory ad valorem tax on the retail sale of imported goods. Thus, a possible local rationalisation of the imposition of particular intercolonial ad valorem border duties in pre-federation days might have been that the particular duties did no more than place intercolonial goods on an equivalent footing, in so far as local taxes were concerned, with local goods by subjecting the intercolonial goods to a border impost equal to some other tax on goods to which local goods of that kind were subjected at an earlier stage of manufacture, production or distribution than that at which the intercolonial goods first entered the local chain of distribution. Such an explanation or attempted justification would not, however, have deprived a border duty of its protectionist character. To the contrary, it would have emphasized the fact that such a duty was protectionist by explaining the rationale of the protection. Plainly enough, in the application of s. 92, the description "tax on goods" can be a cause of obscurity rather than of clarification if it covers a failure to identify the precise character of the impugned tax.

At a glance

Court

Decision date

Before

Source

Judgment (55 paragraphs)

Parties

Cited By (3)