Page 4133 - Week 13 - Thursday, 25 November 1993
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problem in Federal-State relations. One important source of revenue for the States has been franchise fees for petroleum, tobacco and alcohol, and a similar form of franchise fee was adopted by the Alliance Government in relation to X videos. That law was challenged. It was supposed originally that the prohibition on levying an excise in section 90 of the Constitution did not apply to the Territory. The High Court has found that it does apply to the Territory, and the question of whether the X video fee is an excise is now before the court.
The court, I suppose, could do three things. It could make a decision on whether the X-rated video tax is an excise or not, and do no more, which would be a very simple outcome but highly unlikely, it seems. The court could adopt the view that Justice Murphy and Justice Fullagar have expressed in the past in dissent and say that "excise" should be given its narrow meaning, that is, a tax on production, and that taxes on sales levied by a State are not excises. In that case, all of this debate would be quite pointless because all of those franchise fees would be valid. Indeed, a whole new field of taxation would be opened to State and Territory governments. Or the court could say that a tax on a commodity at any stage from production to final consumption is an excise and is invalid and that the convoluted legal reasoning that has resulted in a restricted ability of the States to levy production franchise fees is no longer valid. That is the outcome that the States and Territories fear. As the Chief Minister indicated, it is about $60m a year for the ACT; it is about $1.6 billion, I understand, for New South Wales. The sums of money involved are quite extraordinary.
The States and Territories have got together. The States' Solicitors-General and Mr Peedom, the head of the Government Law Office, have met and have come up with an agreed strategy in seeking to deal with this. The limitation provision was the first agreed strategy. Mr Humphries raises the question of whether this could be seen to be retrospective. It is a legitimate question for the committee to ask. The Government's response would be that formally it is not retrospective, in that it will be enacted before any change in the law and it simply affects limitation periods for bringing an action. But I concede that you could well argue that there is an element of retrospectivity there. That is regrettable, but it is an extraordinary measure to deal with an extraordinary threat to State revenue.
The other provision that Mr Humphries quite rightly said caused him great concern - the provision that, in effect, says that you cannot recover if there has been a change in the law as a result of a court interpretation - is an extraordinary provision. It is a provision that, essentially, was adopted on the suggestion of the Solicitor-General of New South Wales, Keith Mason, QC. Mr Humphries said, "We have our doubts as to its validity, and it will not be resolved in this place". I could not agree more. The validity of that provision will indeed be resolved across the lake.
Should the Capital Duplicators case go against the States, the States, led by New South Wales, will argue a case in relation to that provision, which says, "Despite a change in the court's interpretation of section 90, you cannot recover". They will go before the High Court and effectively ask the High Court of Australia to adopt the American doctrine of prospective overruling, in effect inviting the court to say, "When we change our mind in respect of such a fundamental issue of State financial viability, we change our mind for the future, onwards, and we do not expect our decision to have retrospective effect and require the States to pay back taxes". It is a novel approach. It is one that Mr Humphries expects me to guarantee will be held valid. I would have to say,
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