FOR A NARROW INTERPRETATION OF SECTION 90 OF THE
AUSTRALIAN CONSTITUTION: THE EXCISE DUTY SYSTEM
AS A GUARANTEE OF FREE TRADE IN AN INTERNAL
MARKET
GONZALO VILLALTA PUIG* AND ROSHAN CHAILE**
Section 90 of the Australian Constitution provides the Commonwealth of
Australia with the exclusive power to levy excise duties. However, the operation of the
section has been problematic. Its terse and protean language has caused the High Court
of Australia endless problems in its interpretation. As a result, the High Court has
defaulted to a broad interpretation of the Commonwealth power to levy excise duties
under that section. That broad interpretation is inconsistent with the federal purpose of
section 90 and, despite claims to the contrary, does nothing to provide certainty,
stability and clarity to the meaning of that section. This article critiques the current
interpretative orthodoxy and argues for a narrow interpretation of section 90, one that
would limit an excise duty to a tax imposed solely on the production or manufacture of
a good.
I INTRODUCTION
This article argues for the adoption of a narrow interpretation of section 90 of the
Australian Constitution, which would limit an excise duty to a tax imposed solely on
the production or manufacture of a good. The article recognises the inadequate
interpretation and the problems that have beset the operation of the excise duty system
under section 90. Thus, it critiques the inadequate interpretation of section 90 and
attempts to solve the problems that have beset its operation. To do so, the article
examines the history of section 90 and the interpretation by the High Court of Australia
(the ‘High Court’) of the terse and protean language of that section. As such, it
discusses the judicial expansion of the scope of the Commonwealth’s power to levy
excise duties and the consequent prohibition on States to levy any taxes on goods.
This broad interpretation of the Commonwealth’s power to levy excise duties has
caused legal problems and economic problems. From a legal perspective, the terse
language of section 90 results in a lack of judicial consensus in relation to the
interpretation of that section. Accordingly, the interpretation of section 90 and the tests
to give effect to the words of that section are often unstable and unhelpful. As a
solution to this problem, the High Court has settled on a broad interpretation of the
section which, while it ensures some degree of certainty and consistency, ignores the
federal purpose of that section. From an economic perspective, this broad interpretation
of section 90 has been a partial cause of the vertical fiscal imbalance between the
Commonwealth and its States, whereby the States lack the ability to raise the revenue
necessary to meet their expenditure responsibilities. The article argues that the
adoption of a narrow interpretation of section 90 could solve the problems that
*
Gonzalo Villalta Puig, BA LLB(Hons) GradDipLegPrac(Merit) ANU, LLM Canberra,
GradCertHigherEd LLM(GBL) SJD La Trobe, LLD Navarra; FHEA; Professor of Law, The
Chinese University of Hong Kong; Barrister and Solicitor of the High Court of Australia;
Barrister and Solicitor of the High Court of New Zealand; Solicitor of the Supreme Court of
England and Wales.
** Roshan Chaile, BIR LLB(Hons) La Trobe; Lawyer, Clayton Utz.
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2010
inevitably arise from the current but broad interpretation of the section. A narrow
interpretation of section 90 would limit an excise duty to a tax imposed solely on the
production or manufacture of a good.
II A CRITIQUE OF SECTION 90 OF THE AUSTRALIAN CONSTITUTION
Part II introduces and critiques section 90, which grants to the Commonwealth the
exclusive power to raise revenue through the imposition of excise duties. The operation
of section 90 has been problematic not only for the High Court but also for the
Commonwealth polity. Part II explains and then, as a solution to the problems that
have marked the operation of section 90, advocates for a shift in the interpretative
approach to that section.
The power of the Commonwealth to levy excise duties arises from the
combination of a number of provisions in the Australian Constitution. Section 51(ii)
gives the Commonwealth the power to make laws with respect to taxation, and section
86 transfers the power of the States to levy excise duties to the Commonwealth.
Section 90 makes this power exclusive. It provides that:
[o]n the imposition of uniform duties of customs the power of the [Federal] Parliament
to impose duties of customs and of excise, and to grant bounties on the production or
export of goods, shall become exclusive. [emphasis added]
Section 90 has had a colourful history of interpretation in the High Court. The
generality of the language of section 90 provides little, if any, guidance as to the
meaning of the phrase ‘duties of excise’. The difficulty lies in the fact that an excise
duty is an ambiguous concept, which means that there are no precise rules to guide the
High Court when it determines whether a tax is, or is not, an excise duty.1 Accordingly,
despite much judicial exegesis, the High Court has struggled to interpret section 90,
and many of its justices have often disagreed as to the meaning of ‘duties of excise’.2
The interpretation of section 90 endures as one of the most elusive in Australian
constitutional interpretation.3 The lack of judicial consensus as to the interpretation of
section 90 has often led to anomalous judgments, which has damaged the principled
development of precedent on which the Australian common law legal order rests.4
Few things are clear about section 90, but the following propositions appear to be,
more or less, settled: an excise duty is a tax5 upon goods;6 it may be imposed on a good
1
2
3
4
5
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 425
(Mason CJ and Deane J).
Parton v Milk Board (Victoria) (1949) 80 CLR 229, 244 (Latham CJ), 251 (Rich and
Williams JJ); Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167
CLR 399, 425 (Mason CJ and Deane J), 465 (Dawson J), 488 (McHugh J); Capital
Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 606
(Dawson J); Matthews v Chicory Marketing Board (Victoria) (1938) 60 CLR 263, 291
(Dixon J); Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 616 (Gibbs CJ);
Michael Coper, ‘The High Court and section 90 of the Constitution’ (1976) 7 Federal Law
Review 1, 1.
Peter Hanks, Patrick Keyzer and Jennifer Clarke, Australian Constitutional Law:
Commentary and Materials (7th ed, 2004) 695.
The Rt Hon Sir Harry Gibbs, ‘A Hateful Tax’? Section 90 of the Constitution, Sir Samuel
Griffith Society, <http://www.samuelgriffith.org.au/papers/html/volume5/v5chap6.htm> at 1
November 2010.
That is, ‘a compulsory exaction of money by a public authority for public purposes,
enforceable by law, and is not a payment for services rendered’: Matthews v Chicory
Marketing Board (Victoria) (1938) 60 CLR 263, 270 (Latham CJ); Air Caledonie
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before that good comes into existence;7 it may be imposed on the initial production8 or
manufacture9 of a good and it may be imposed on the first sale of a good after its
production10 or on any sale in the course of its distribution,11 but not on its sale to the
consumer.12 A tax imposed on a taxpayer because of their relationship with a good13 or
a tax imposed on a taxpayer for the entitlement to produce or manufacture a good is
not an excise duty.14 However, since the High Court has oscillated between competing
interpretations of section 90, it would be dangerous to regard any of these propositions
as permanently settled.
A fact that complicates the interpretation of section 90 is the similar support that
the High Court has historically shown for the two competing interpretations of that
section — a narrow interpretation and a broad interpretation. In its first decision on
section 90 by justices who themselves were involved in the drafting of the Australian
Constitution, Peterswald v Bartley (‘Peterswald’),15 the High Court settled on a narrow
interpretation of the phrase ‘duties of excise’ and held that an excise duty is a tax
‘imposed upon goods in relation to quantity or value when produced or manufactured,
and not in the sense of a direct tax or personal tax’.16 However, partly in response to
the ambiguity of the phrase ‘duties of excise’, subsequent justices of the High Court
have shifted away from the narrow interpretation of that section and expressed their
support for a broader interpretation of excise duties. The last High Court decision on
section 90, Ha v New South Wales17 (‘Ha’), held an excise duty to be a tax ‘on the
production, manufacture, sale or distribution of goods, whether of foreign or domestic
origin’.18 Ha, like several other cases on section 90, involved a 4:3 split of the High
Court bench. This division demonstrates the lack of judicial unanimity that often
pervades High Court decisions on section 90.
Of these two alternative interpretations of section 90, the narrow one (that an
excise duty is a tax on the production of a good) is more suitable than the wide one
6
7
8
9
10
11
12
13
14
15
16
17
18
International v Commonwealth (1988) 165 CLR 462; Airservices Australia v Canadian
Airlines International (1999) 167 ALR 392.
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 429
(Mason CJ and Deane J); Parton v Milk Board (Victoria) (1949) 80 CLR 229, 259 (Dixon J);
See, generally, Browns Transport Pty Ltd v Kropp (1958) 100 CLR 11; Peterswald v Bartley
(1904) 1 CLR 497.
Matthews v Chicory Marketing Board (Victoria) (1938) 60 CLR 263.
Parton v Milk Board (Victoria) (1949) 80 CLR 229; Matthews v Chicory Marketing Board
(Victoria) (1938) 60 CLR 263; MG Kailis v Western Australia (1974) 130 CLR 245.
Attorney-General v Homebush Flour Mills Ltd (1937) 56 CLR 390; Swift Australian Co Ltd v
Boyd Parkinson (1962) 108 CLR 189; John Fairfax & Sons Ltd v New South Wales (1907)
39 CLR 139.
John Fairfax & Sons Ltd v New South Wales (1907) 39 CLR 139; The Commonwealth and
Commonwealth Oil Refineries Ltd v South Australia (1926) 38 CLR 408.
Parton v Milk Board (Victoria) (1949) 80 CLR 229; Victoria v IAC (Wholesale) Pty Ltd
(1970) 121 CLR 42; Ha v New South Wales (1997) 189 CLR 465.
Dickensons Arcade Pty Ltd v Tasmania (1974) 130 CLR 177; Parton v Milk Board (Victoria)
(1949) 80 CLR 229, 261 (Dixon J); Neil McLeod, ‘State Taxation: Unrequited Revenue and
the Shadow of section 90’ (1994) 22 Federal Law Review 476, 484. Cf Matthews v Chicory
Marketing Board (Victoria) (1938) 60 CLR 263, 304 (Dixon J).
Browns Transport Pty Ltd v Kropp (1958) 100 CLR 11; Bolton v Madsen (1963) 110 CLR
264; HC Sleigh Ltd v South Australia (1977) 136 CLR 475.
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 482
(Gaudron and Toohey JJ).
Peterswald v Bartley (1904) 1 CLR 497.
Peterswald v Bartley (1904) 1 CLR 497, 509 (Griffith CJ).
Ha v New South Wales (1997) 189 CLR 465.
Ha v New South Wales (1997) 189 CLR 465, 499 (Brennan CJ, McHugh, Gummow and
Kirby JJ).
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(that an excise duty is a tax on the production or distribution of a good) to the
Australian constitutional system and which the section below discusses.
Indeed, the expansion of the meaning of ‘duties of excise’ in section 90 to include
a tax on the production or distribution of a good until it reaches the consumer is
unfortunate. It brings with it legal problems and economic problems.19 From a legal
perspective, the broad interpretation of section 90 is, arguably, incorrect because it
tends to subsume almost all taxes on goods into the definition of ‘duties of excise’ in
section 90, including taxes that are not commonly perceived as excise duties. This
approach is inconsistent with the purpose of section 90 and the widely accepted notion
of excise duties as a limited category of taxes on goods. 20 From an economic
perspective, the broad interpretation of section 90 contributes to a vertical fiscal
imbalance between the Commonwealth and the States, whereby the States are unable
independently to raise the revenue that they require to meet their expenditure
responsibilities.
This Part of the article critiques the interpretation by the High Court of section 90
and argues that limiting excise duties to taxes imposed solely upon the production or
manufacture of a good would solve the legal and economic problems that have resulted
from the broad interpretation of the section. 21 Section A analyses how the broad
interpretation of section 90 has been a partial cause of the vertical fiscal imbalance
between the Commonwealth and the States. Section B argues that the High Court’s
expansion of section 90 is based on unsound economic reasoning and, for that reason,
should be repudiated.
A The Vertical Fiscal Imbalance in Australia’s Federal System
‘Vertical fiscal balance’ describes:
a situation in which governments at each level [in a federation] can command the
financial resources necessary for them to carry out their expenditure responsibilities
and be held accountable for both spending and taxing decisions.22
Accordingly, a vertical fiscal imbalance arises where one level of government is
unable to raise the revenue required to meet its expenditure responsibilities. In
Australia, the Commonwealth’s superior taxing power, aided in part by the broad
interpretation of section 90, means that the States are unable independently to raise the
revenue that they require to meet their expenditure responsibilities and must instead
rely on financial grants from the Commonwealth.
The broad interpretation of section 90 has contributed to the vertical fiscal
imbalance between the Commonwealth and the States because, by the principle that a
tax on a good in the course of its production or distribution to the consumer is an
excise duty, the High Court has effectively shut the States out from the field of taxation
on goods.23 This wide interpretation of the phrase ‘duties of excise’ means that section
19
20
21
22
23
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 468
(Dawson J).
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 465,
474 (Dawson J).
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 473
(Dawson J).
Rowan McMonnies, ‘Ngo Ngo Ha and the High Court v New South Wales: Historical
Purpose in History and Law’ (1999) 27 Federal Law Review 471, 494.
Peter Hanks, Constitutional Law in Australia (1st ed, 1991) 260-1; Chris Caleo, ‘Section 90
and Excise Duties: A Crisis of Interpretation’ (1987) 16 Melbourne University Law Review
296, 296.
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90 now covers a large group of taxes on goods, including taxes that the States might
have otherwise expected to be able to levy. As a result, the States are unable to access a
potentially large base of taxing revenue and, thereby, to raise the revenue that they
require to meet their expenditure responsibilities.24 For example, the decisions of the
High Court in Western Australia v Hamersley Iron Pty Ltd [No 1] 25 and Western
Australia v Chamberlain Industries Pty Ltd,26 which held that section 90 prohibited the
States from the imposition of certain receipt duties, deprived the States of,
approximately, $88.4 million in tax revenue for the 1971 financial year.27
As a response to their diminishing ability to tax goods, the States have had to
devise creative forms of taxation that are inefficient, inequitable, and economically
undesirable.28 The broad interpretation of section 90 by the High Court has severely
impaired the fiscal freedom of the States.29 The High Court even acknowledged that its
judgment in Ha would have the ‘most serious implications for the revenues of the
States’. 30 In the aftermath of Ha, the Commonwealth announced that it would
introduce measures to protect the revenues of the States.31 Nonetheless, the States are
at the financial mercy of the Commonwealth,32 and the broad interpretation of section
90 has been the subject of critique as ‘one of the greatest impediments preventing
achievement of a rational and lasting division of financial powers in the Australian
federal system’.33
Now that Section A has analysed the contribution of the broad interpretation of
section 90 to the vertical fiscal imbalance between the Commonwealth and the States,
Section B will explain why narrowing the meaning of ‘excise duties’ to taxes solely
upon the production or manufacture of a good would solve the legal and economic
problems that have resulted from the broad interpretation of that section.
24
25
26
27
28
29
30
31
32
33
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 489
(McHugh J); Nicolee Dixon, ‘Section 90 – Ninety Years On’ (1993) 21 Federal Law Review
228, 228; Neil Halliday, ‘Notes: Ha & Anor v State of New South Wales & Ors; Walter
Hammond & Associates v State of New South Wales & Ors’ (1998) 20 Sydney Law Review
158, 158.
Western Australia v Hamersley Iron Pty Ltd [No 1] (1969) 120 CLR 42.
Western Australia v Chamberlain Industries Pty Ltd (1971) 121 CLR 1.
Caleo, see above n 23, 316.
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 614
(Dawson J); Logan Downs Pty. Ltd v Queensland (1977) 137 CLR 59, 85 (Murphy J); Peter
Hanks, ‘Section 90 of the Commonwealth Constitution: Fiscal Federalism or Economic
Unity?’ (1986) 10 Adelaide Law Review 365, 368, 380; Rodney Fisher and Jacqueline
McManus, ‘The Long and Winding Road: A Century of Centralisation in Australian Tax’
(Discussion Paper Series No 8, Australian Taxation Studies Program, 2002) 16-7; Caleo, see
above n 23, 296.
Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 618 (Gibbs CJ); Brian Opeskin,
‘Section 90 of the Constitution and the Problem of Precedent’ (1986) 16 Federal Law Review
170, 176-7.
Ha v New South Wales (1997) 189 CLR 465, 503 (Brennan CJ, McHugh, Gummow and
Kirby JJ).
Hanks et al, see above n 3, 756.
Fisher and McManus, see above n 28, 21; Alfred Deakin, Federated Australia: Selections
From Letters to the Morning Post 1900-1910 (1968) 97.
R L Mathews and W R C Jay, Federal Finance (1st ed, 1972) 318. Cited with approval in
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 606
(Dawson J) and Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 617 (Gibbs CJ).
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B The Argument for Excise Duties as a Tax Solely on the Production or Manufacture
of a Good
In its first decision on section 90, Peterswald,34 the High Court defined an excise
duty as a tax solely on the production or manufacture of a good.35 But this statement of
narrow principle, by justices who themselves were involved in the drafting of the
Australian Constitution has, over time, been expanded to include taxes imposed at any
point in the production or distribution of a good before it reaches the consumer.36
This Section argues that it was an error for the High Court to depart from the
narrow interpretation of section 90 in Peterswald. It reviews the economic arguments
that the High Court has made to justify its broad interpretation of section 90 and
concludes that the expansion of section 90 to include taxes imposed at any point in the
production or distribution of a good before it reaches the consumer relies on a poor
economic rationale. It then explains that, while a broad approach may guarantee
certainty and clarity in the interpretation of section 90 by subsuming almost all taxes
on goods, it is inconsistent with the federal purpose of section 90 and the fundamental
proposition that an excise duty is a unique tax on goods.37
In summary, a narrow interpretation of section 90 would ensure not only
coherence with its federal purpose and the notion of excise duties as a limited category
of taxes on goods but also greater certainty and clarity in the interpretation of that
section. These last two considerations are now and in that order the subject of study.
1 The unsound economics of the broad interpretation of section 90
An economic argument made by the High Court to justify its broad interpretation
of section 90 is that a tax on a good at any point in the course of its distribution to the
consumer has the same effect as a tax on the production or a manufacture of a good,
and, for that reason, the two taxes should be grouped together as excise duties.38 That
effect is the ability of both taxes to enter into the cost of a good and affect the retail
price payable by the consumer.39 Geoffrey Sawer, a doyen of Australian constitutional
law, has rejected this economic argument of the High Court as one based on
unresearched economic theory.40
Apart from the damning critique of Sawer, there are two major reasons why this
economic argument by the High Court should not be accepted. The first reason is that,
while in some cases a tax on a good at any point in the course of its distribution to the
34
35
36
37
38
39
40
Peterswald v Bartley (1904) 1 CLR 497.
Peterswald v Bartley (1904) 1 CLR 497.
The Commonwealth and Commonwealth Oil Refineries Ltd v South Australia (1926) 38 CLR
408, 426 (Isaacs J); Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989)
167 CLR 399, 467-8 (Dawson J); Philip Morris Ltd. v Commissioner of Business Franchises
(Vic) (1989) 167 CLR 399, 445 (Brennan J); Ha v New South Wales (1997) 189 CLR 465,
499 (Brennan CJ, McHugh, Gummow and Kirby JJ); Caleo, see above n 23, 301.
The mere fact that excise duties may have social purposes, like the discouragement of
particular forms of conduct (for example, binge drinking), and that they are not a mere
revenue raising tool suggests that excise duties are a special creature of taxation and should
not be treated as arbitrarily including all taxes on goods.
Parton v Milk Board (Victoria) (1949) 80 CLR 229, 260 (Dixon J); Hematite Petroleum Pty
Ltd v Victoria (1983) 151 CLR 599, 661 (Mason J).
Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 661 (Mason J); Caleo, see
above n 23, 303; Opeskin, see above n 29, 174.
G Sawer ‘The Future of State Taxes: Constitutional Issues’ in Mathews, R L (ed), Fiscal
Federalism: Retrospect and Prospect (1974); Sir Harry Gibbs, a former chief justice of the
High Court, has similarly remarked that the economic rationale of the High Court in relation
to section 90 is open to critique: Gibbs, see above n 4.
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consumer may have the same effect as a tax on the production or a manufacture of a
good, it is a mistake to assume that the effect of the two taxes will always be the same.
The second reason is that this economic theory rests on the idea of an excise duty as an
indirect tax, which has long been discredited by both the High Court and economists
alike as an inadequate criterion of an excise duty. Since there are a number of taxes that
add indirectly to the cost of a good and affect the retail price payable by the consumer,
the problem that results from the acceptance by the High Court of this poor economic
argument is that section 90 now applies to a large group of taxes, including those taxes
that were never intended to be excise duties.41 The concept of indirect taxation makes it
impossible to differentiate between excise duties and other forms of taxation,42 which
is of concern because the phrase ‘duties of excise’ in section 90 was not intended as an
umbrella term to cover all taxes on goods. For that reason, acceptance of this poor
economic argument has contributed to the vertical fiscal imbalance between the
Commonwealth and the States because it impairs the ability of the States to tax goods.
A tax on a good at any point in its distribution to the consumer may have the
same effect as a tax on the production or manufacture of that good. That claim is
uncontroversial. However, it is a mistake to assume that a tax on a good at any point in
its distribution will always have the same effect as a tax on the production or
manufacture of that good. A tax on the production or manufacture of a good may have
a significantly different effect than a tax on its distribution because a tax on the
production or manufacture of a good affects its relative price; a tax on the distribution
of local and imported goods does not.43
A complementary argument made by the High Court is that, because the two
taxes supposedly have the same effect, a tax on the distribution of a good is, in effect, a
tax on its production or manufacture. Yet this argument ignores the fact that, while a
tax on the distribution of a good will always affect the retail price of that good, a tax on
the production or a manufacture of a good does not always have a direct connection
with the retail price of that good — that is, market forces will determine the impact, if
any, that the tax on the production or manufacture will have on the retail price of the
good.44 It is for this reason that the minority of Dawson, Gaudron and Toohey JJ in Ha
pointed out that:
it is not possible to discern any direct and necessary connection between the ultimate
price of goods and their cost of production and manufacture … market forces will
determine the price upon demand and hence upon production or manufacture. For that
reason it is not possible to say that a tax upon a step in the distribution of goods is in
effect a tax upon their production or manufacture.45
41
42
43
44
45
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 610
(Dawson J); The Australian concept of excise duties was always intended to be limited to
distinct and identifiable taxes on goods. During the convention debates leading to federation,
it was argued that excise ‘would be covered by the definition [of] … a duty chargeable on the
manufacture and production of commodities’. And, moreover, the drafters of the Constitution
‘should give attention to this matter so as not to be carried further than [the founding fathers]
intend to go. In modern times, excise is used as a very wide term.’: Official Record of the
Debates of the Australasian Federal Convention, Second Session (Sydney, 2 September
1897 – 24 September 1897) 1065.
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 610
(Dawson J).
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 601
(Dawson J); Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178
CLR 561, 627 (Gaudron and Toohey JJ).
Ha v New South Wales (1997) 189 CLR 465, 509 (Dawson, Toohey and Gaudron JJ).
Ha v New South Wales (1997) 189 CLR 465, 509 (Dawson, Toohey and Gaudron JJ).
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Therefore, it is a mistake to assume that a tax imposed on a good at any point in
its distribution to the consumer will always have the same effect as a tax on its
production or manufacture. It is an even greater mistake to assume, on the basis of that
economic argument, that the two taxes are synonymous and, thus, a tax imposed on a
good at any point in the course of its distribution to the consumer is an excise duty or
that a tax imposed on a good at any point in the course of its distribution to the
consumer is, in effect, a tax on its production or manufacture. A tax on the production
or manufacture of a good may have the same effect as a tax imposed on that good at
any point in the course of its distribution, but it may also have a completely different
effect.46
Another factor that indicates the weakness of the High Court’s economic
argument is the fact that it is based on the concept of indirect taxation.47 An indirect tax
is a tax the economic burden of which may be passed on by the taxpayer to the
consumer.48 A tax on the production, manufacture or distribution of a good may be
perceived to be indirect because the taxpayer is able to add the cost of the tax to the
price of the good and pass on the economic burden of the tax to the consumer.49 The
economic argument of the High Court posits that, because the economic burden of a
tax on the production or manufacture of a good and a tax imposed at any point in the
course of the distribution of a good can both be passed on to the consumer, they are, in
effect, the same.50 However, both economists and the High Court have discredited the
relationship between indirect taxation and excise duties. 51 In fact, Fullagar J once
remarked that it was a pity that the distinction between direct taxation and indirect
taxation was ever mentioned in relation to section 90. 52 The concept of indirect
taxation does not shed any light on the interpretation of section 9053 and, accordingly,
the High Court’s economic argument for the expansion of section 90 should be
regarded as unsound.
The problem with this economic argument is that, because every tax imposed on a
producer, manufacturer, or distributor is likely to enter into the cost of a good and
affect its retail price,54 section 90 now applies to a significantly large group of taxes.
The decisions of the High Court in Western Australia v Chamberlain Industries Pty
Ltd55 and Logan Downs Pty Ltd v Queensland56 suggest that any tax, no matter how
broad and general its legal incidence, will be considered an excise duty if it falls on the
production, manufacture, or distribution of a good and it affects the retail price payable
by the consumer.57 This suggestion is at odds with the fact that, in Australia, excise
46
47
48
49
50
51
52
53
54
55
56
57
Sawer, see above n 40, 203-4; See also Caleo, see above n 23, 317.
Ha v New South Wales (1997) 189 CLR 465, 509 (Dawson, Toohey and Gaudron JJ); Caleo
ibid.
J Stuart Mill, Principles of Political Economy (1848); See also. Bank of Toronto v Lambe
(1887) 12 App Cas 575; R v Caledonian Collieries [1928] AC 358; Atlantic Smoke Shops Ltd
v Conlon [1943] AC 550.
Hanks, see above n 23, 249.
Caleo, see above n 23, 303.
Ha v New South Wales (1997) 189 CLR 465, 509 (Dawson, Toohey and Gaudron JJ);
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 602
(Dawson J); Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529, 553 (Fullagar J); H W
Arndt, ‘Judicial Review under s 90 of the Constitution – An Economist’s View – Part 1’
(1952) 25 Australian Law Journal 667, 674; Caleo, ibid.
Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529, 553 (Fullagar J).
Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529.
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 610
(Dawson J).
Western Australia v Chamberlain Industries Pty Ltd (1971) 121 CLR 1.
Logan Downs Pty Ltd v Queensland (1977) 137 CLR 59.
Caleo, see above n 23, 300.
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duties were only intended to form a limited category of taxes, distinguishable from
other taxes on goods.58 Indeed, the drafters of the Australian Constitution were careful
to distinguish the phrase ‘duties of excise’ as it was employed in section 90 from excise
duties in the United Kingdom, where that phrase referred to a mass of heterogeneous
taxes that could not be collected through HM Revenue & Customs. 59 It is the
illogicality of this economic argument that prompted Murphy J to ask:
If taxes are to be treated as duties of excise because they indirectly add to costs of
production or manufacture of goods, are taxes on industrial land and payroll taxes to
be treated as duties of excise?60
Other High Court justices have likewise pointed out that this economic argument
could extend section 90 to include taxes that are not excise duties but, nonetheless,
affect the retail price of a good, like land tax, payroll tax, and municipal rates levied on
producers, manufacturers, or distributors.61
The expansion of section 90 was influenced, in part, by unsound economic
arguments, which is understandable given that High Court justices are not economists.
Nevertheless, the broad interpretation should be rejected. It rests on the erroneous
assumption that a tax imposed on a good at any point in its distribution to the consumer
has the same effect as a tax on its production or manufacture and, for that reason, the
two taxes should be considered to be excise duties. As a matter of economics, the
narrow interpretation of section 90 is more defensible and, for that reason, should be
accepted.
2 The certainty, clarity and coherence of the narrow interpretation of section 90
The most basic reason given by the High Court for its broad interpretation of
section 90 is that it was necessary to achieve the federal purpose of that section, which,
in its opinion, was to give the Commonwealth ‘real control [over] the taxation of
commodities (emphasis added)’. 62 The influence of this judicial belief on the
interpretation of section 90 is significant. For the High Court justices who give broad
interpretation to the Commonwealth’s power to tax commodities under section 90, it
provides incontrovertible vindication and, more importantly, gives rise to two primary
objections against the narrow interpretation of section 90.
The first objection against the narrow interpretation of section 90 is that it allows
the States the ability to levy taxes on the distribution and sale of goods, which
undermines the Commonwealth’s absolute control over the taxation of commodities.
The second objection against the narrow interpretation is that it requires a strict
58
59
60
61
62
Ha v New South Wales (1997) 189 CLR 465, 505 (Dawson, Toohey and Gaudron JJ);
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 610,
612 (Dawson J); Parton v Milk Board (Victoria) (1949) 80 CLR 229, 245 (Latham CJ);
Hanks, see above n 23, 242.
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 606
(Dawson J); HC Sleigh Ltd v South Australia (1977) 136 CLR 475, 515 (Jacobs J);
Peterswald v Bartley (1904) 1 CLR 497, 508-9 (Griffith CJ).
Logan Downs Pty. Ltd v Queensland (1977) 137 CLR 59, 84 (Murphy J).
Gosford Meats v New South Wales (1985) 155 CLR 368, 416 (Dawson J); Hematite
Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 617 (Gibbs CJ).
Parton v Milk Board (Victoria) (1949) 80 CLR 229, 260 (Dixon J); Philip Morris Ltd. v
Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 429 (Mason CJ and Deane
J); Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561,
585-6 (Mason CJ, Brennan, Deane and McHugh JJ); Hematite Petroleum Pty Ltd v Victoria
(1983) 151 CLR 599, 632 (Mason J); Western Australia v Chamberlain Industries Pty Ltd
1971) 121 CLR 1, 17 (Barwick CJ).
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relationship between the tax that is being imposed and the act of producing or
manufacturing a good. That requirement, purportedly, leads to the triumph of form
over substance. 63 Forceful as these objections are, however, they are themselves
subject to critique.
It is unlikely that the federal purpose of section 90 was to give the
Commonwealth real control over the taxation of commodities. The weight of historical
evidence,64 and the words of the Constitution itself,65 point to the federal purpose of
section 90 as the creation and preservation of a customs union.66 Section 90 was central
to the establishment of a Commonwealth economic union; otherwise, Australia would
be no more than ‘an association of States each with its own separate economy’.67
At the time of Federation, the colonies imposed rates of excise duty in accordance
with their own trade interests, which significantly hampered free trade among them.68
Upon reflection, the colonies realised that the lack of free trade among them had
actually damaged their interests, and would only continue to cause further damage
while they imposed competing rates of excise duty.69 Federation, thus, presented an
opportunity for the colonies to ‘immensely economise their strength and their resources
… and waste no more time in barren rivalry’.70 One of the fundamental purposes of
Federation then became the achievement of ‘inter-colonial free trade on the basis of a
uniform tariff’.71
To achieve this aim, the drafters of the Constitution fashioned two concomitant
provisions — section 90 and section 92. Section 92 provides for the absolute freedom
of trade, commerce and intercourse among the States. 72 From its contextual and
historical investigations, the High Court concluded in Cole v Whitfield73 that, at least in
respect of trade and commerce, a free trade interpretation of s 92 was both legitimate
and necessary:
The purpose of the section is clear enough: to create a free trade area throughout the
Commonwealth and to deny to Commonwealth and States alike a power to prevent or
obstruct the free movement of people, goods and communications across State
boundaries.74
An essential feature of any guarantee of free trade among the States is that the
Commonwealth must have absolute control over trade policies and the imposition of
tariffs and customs duties. That absolute control would be neutered if the States were
able to impose competing rates of excise duty. The imposition of different rates of
63
64
65
66
67
68
69
70
71
72
73
74
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 473
(Dawson J); Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178
CLR 561, 601 (Dawson J); Opeskin, see above n 29, 191.
Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 616 (Gibbs CJ); McLeod, see
above n 12, 484; Coper, see above n 2, 39.
Ha v New South Wales (1997) 189 CLR 465, 508 (Dawson, Toohey and Gaudron JJ).
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 611
(Dawson J); Ha v New South Wales (1997) 189 CLR 465, 508 (Dawson, Toohey and
Gaudron JJ): McLeod, see above n 12, 484.
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 585
(Mason CJ, Brennan, Deane and McHugh JJ).
Opeskin, see above n 29, 171; McMonnies, see above n 22, 474.
Opeskin, ibid.
W Harrison Moore, The Constitution of the Commonwealth of Australia (2nd ed, 1910) 22-23.
Cole v Whitfield (1988) 165 CLR 360, 386.
G Villalta Puig, The High Court of Australia and Section 92 of the Australian Constitution
(2008).
Cole v Whitfield (1988) 165 CLR 360.
Cole v Whitfield (1988) 165 CLR 360, 391
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329
excise duty would cause distortions in the market,75 which would severely limit free
trade among the States 76 and defeat the Commonwealth’s control over its trade
policies. Indeed, the main federal purpose of section 90 is to protect free trade. If the
Commonwealth lacked power over excise duties, its power to impose uniform customs
duties,77 ensure free trade,78 and stimulate local production and manufacture79 would be
compromised. Otherwise, differential rates of taxation could distort local markets
within the Commonwealth.80 As an example, the stimulus of a Commonwealth customs
duty on motor vehicle imports could be negated if a State were able to impose an
excise duty on motor vehicles produced in that State. Any competitive benefit that
locally produced motor vehicles would have enjoyed from the customs duty on
overseas motor vehicles would be cancelled by the imposition of a countervailing
excise duty. That is, the Commonwealth would not have absolute control over its trade
and tariff policies.
The drafters of the Constitution recognised that the Commonwealth needed to
have absolute control over excise duties in order to prevent any misuse by the States of
such duties in order to sabotage Commonwealth policies to maintain free trade among
the States. Section 90 was thus conceived as an appurtenant provision to section 92,
designed to protect the integrity of that section by safeguarding the Commonwealth’s
absolute control over its tariff policies and the imposition of customs duties.81 In the
words of Deane J:
[Section 90 was a] necessary ingredient of any acceptable scheme for achieving the
abolition of internal customs barriers which was the essential objective of Federation
and for ensuring that the people of the Commonwealth were guaranteed equality as
regards the customs and excise duties which they were required to bear and the
bounties which they were entitled to receive.82
75
76
77
78
79
80
81
82
Ha v New South Wales (1997) 189 CLR 465, 495 (Brennan CJ, McHugh, Gummow and
Kirby JJ). Coper, see above n 2, 21; Caleo, see above n 23, 306.
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 585
(Mason CJ, Brennan, Deane and McHugh JJ).
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 466
(Dawson J).
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 609
(Dawson J); Ha v New South Wales (1997) 189 CLR 465, 497 (Brennan CJ, McHugh,
Gummow and Kirby JJ).
Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 631 (Mason J).
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 585
(Mason CJ, Brennan, Deane and McHugh JJ).
See Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 616 (Gibbs CJ); Philip Morris
Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 426 (Mason CJ and
Deane J), 465-66 (Dawson J), 479 (Gaudron and Toohey JJ); Ha v New South Wales (1997) 189
CLR 465, 511-2 (Dawson, Toohey and Gaudron JJ); Capital Duplicators Pty Ltd v Australian
Capital Territory [No 2] (1993) 178 CLR 561, 586 (Mason CJ, Brennan, Deane and McHugh
JJ); Ha v New South Wales (1997) 189 CLR 465, 506 (Toohey, Gaudron and Dawson JJ);
Hanks et al, see above n 3, 755; Dixon, see above n 24, 235, 242; Coper, see above n 2, 39;
Hanks, see above n 23, 242.
Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 685 (Deane J).
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More recently, in Betfair Pty Ltd v Western Australia,83 the High Court merged
the federal purpose of section 90 and section 92 in the following terms:
[T]here have been significant developments in the last 20 years in the Australian legal
and economic milieu in which s 92 operates. The first of these concerns an
interpretation given to Ch IV of the Constitution by this Court in 1997. In Ha v New
South Wales the Court recognised … at a more general level, the place occupied by
both s 90 and s 92 in Ch IV of the Constitution. The creation and fostering of national
markets would further the plan of the Constitution for the creation of a new federal
nation and would be expressive of national unity.84
The High Court concluded that ‘the trade and commerce of which s 92 speaks is
not limited to dealings in goods and this indicates that Ch IV implemented a broader
scheme of political economy’.85
In sum, section 90 was central to Australia’s federation debates. The distinction
between protectionists and free traders informed Australian colonial politics. Moreover,
customs duties were a major source of revenue for the colonial governments. Section
90 was, therefore, of symbolic importance as well as practical importance. Moreover, it
was to be understood as part of a package that transformed a bundle of colonies into a
federation with a central government armed with all the accoutrements of a modern
state.
Accordingly, the federal purpose of section 90 is quite limited. It was designed to
effectuate a customs union and not to confer upon the Commonwealth absolute power
over the taxation of commodities.
The strongest objection against the narrow interpretation of section 90 is that, if
adopted, it would attach only a ‘formal significance’ to that section 86 and it would
expose the Commonwealth’s power over excise duties to ‘evasion and subterfuge’.87
That argument is based on the belief that the narrow interpretation of section 90
requires evidence of the existence of a strict relationship between a State tax and the
act of production or manufacture of a good before the High Court can hold that tax to
be in contravention of section 90. Therefore, even if a State tax indirectly burdens the
production or manufacture of a good, the States may be able to circumvent section 90
by legislation that does not, on its face, evince a strict relationship between the State
83
84
85
86
87
Betfair Pty Ltd v Western Australia (2008) 234 CLR 418. On Betfair Pty Ltd v Western
Australia, see generally A Simpson, ‘Betfair Pty Ltd v Western Australia’ (2008) 19 Public
Law Review 191; E Ball, ‘Section 92 and the Regulation of E-Commerce: A Casenote on
Betfair Pty Ltd v Western Australia’ (2008) 36 Federal Law Review 265; B Brown, ‘Bet Fair
and Bet Far: A New Frontier in Freedom of Interstate Trade and Commerce’ (2008) 82 Law
Institute Journal 36; A Buckland and S Thornton, ‘Freedom of Interstate Betting’ (2008) 16
Litigation Notes 13; G Wright, ‘Recent Developments: Betfair Limited v Western Australia
(2008) 82 ALJR 600; [2008] HCA 11’ (2008) Bar News: Journal of the NSW Bar
Association 12;W Pengilley, ‘Constitutional Freedom of Trade and Competition Principles’
(2008) 24 Australian and New Zealand Trade Practices Law Bulletin 25: N Oreb. ‘Betting
Across Borders: Betfair Pty Limited v Western Australia’ (2009) 31 Sydney Law Review 607.
See particularly G Villalta Puig, ‘Section 92 since Betfair Pty Ltd v Western Australia’
(2009) 11(4) Constitutional Law and Policy Review 152.
Betfair Pty Ltd v Western Australia (2008) 234 CLR 418; [2008] HCA 11 at [12],
Betfair Pty Ltd v Western Australia (2008) 234 CLR 418; [2008] HCA 11 at [22].
Matthews v Chicory Marketing Board (Victoria) (1938) 60 CLR 263, 304 (Dixon J); Capital
Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 586 (Mason
CJ, Brennan, Deane and McHugh JJ).
Matthews v Chicory Marketing Board (Victoria) (1938) 60 CLR 263, 304 (Dixon J); See
also, Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 633 (Mason J).
Vol 29(2) Excise Duty System as Guarantee of Free Trade in Internal Market
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tax and the act of production or manufacture.88 The High Court would then simply
judge the form rather than the substance of the legislation imposing the State tax.
However, that claim is a legal fiction. The narrow interpretation of section 90 can
give rise to a legal test of substance that is capable of consistent and predictable
application to State legislation. 89 Further, it is also coherent with the actual federal
purpose of section 90, namely, the creation of a customs union.
A number of justices90 have argued that the narrow interpretation of section 90
can indeed be a matter of substance. In this respect, the reference is the judgment of
Fullagar J in Dennis Hotels Pty Ltd v Victoria.91 In that case, Fullagar J argued that the
idea of an excise duty as a tax upon a good was descriptive of a special relationship
between a good and the person who is liable to pay the tax on that good. To that end,
Fullagar J explained that:
the necessary relation is to be found in the manufacture or production of goods — that
what characterises a duty of excise is that the taxpayer is taxed by reason of, and by
reference to, his production or manufacture of goods. The relation is treated as implicit
in the term itself.92
Thus, the debate over whether it is possible to state with certainty and clarity what
is meant by the idea of excise duties as taxes solely on the production or manufacture
of goods largely ends – only to be replaced by the question of how the High Court may
enter into such an inquiry by assessing the substance, rather than the form, of State
legislation. The answer to that question is in the judgment of Walsh J in Western
Australia v Chamberlain Industries Pty Ltd.93 His Honour stated:
[W]hen it has been said that the character of a duty depends upon the operation and
effect rather than upon the form of the Act by which it is imposed, I think that what
has been meant is that an examination must be made of the provisions of the Act to
determine its legal effect, according to the proper construction of its operative
provisions, whatever their form may be and whatever label may be attached by the Act
to the duty which is imposed by it.94
All that the High Court needs to do is to look beyond the words of a statute and,
instead, analyse the effect of those words and so decide whether the State tax that is
being imposed on the taxpayer is by reason of, or by reference to, the taxpayer’s
production or manufacture of a good. This relationship may be direct or indirect. If a
relationship does not arise, then the State tax is valid and does not contravene section
90. If, however, a relationship does arise, then the State tax is an excise duty and is
invalid for contravention of section 90.
The consistency of this narrow interpretation of section 90 with the federal
purpose of the section only adds to its appeal. It gives the Commonwealth the power to
88
89
90
91
92
93
94
See Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599 (Mason J); Dixon, see above
n 24, 233.
Philip Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 473
(Dawson J); Peterswald v Bartley (1904) 1 CLR 497, 511 (Griffith CJ).
See Hematite Petroleum Pty Ltd v Victoria (1983) 151 CLR 599, 617-9 (Gibbs CJ); Logan
Downs Pty. Ltd v Queensland (1977) 137 CLR 59, 65 (Gibbs CJ); Western Australia v
Chamberlain Industries Pty Ltd 1971) 121 CLR 1, 23 (Kitto J); Philip Morris Ltd. v
Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 473 (Dawson J); Caleo,
see above n 23, 312.
Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529.
Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529, 555 (Fullagar J).
Western Australia v Chamberlain Industries Pty Ltd (1971) 121 CLR 1.
Western Australia v Chamberlain Industries Pty Ltd 1971) 121 CLR 1, 37 (Walsh J).
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levy excise duties only to the extent that it is necessary in order to ensure the retention
of Commonwealth control over its tariff policies and the imposition of customs duties.
Thus, the narrow interpretation preserves the integrity of the customs union and
protects free trade among the States. The reason is that a tax imposed on a good at any
point after its production or manufacture will not impair any trade policy.95 Because
goods from interstate or overseas will enter into circulation in the State in which they
are to be sold, a tax on the distribution or sale of a good will apply to both local and
imported goods. If the tax applies indiscriminately to both local and imported goods,
then it will not impair any trade policy because both goods will be subject to the same
fiscal burden. 96 If a tax discriminates between a local good and an imported good,
either directly or indirectly, then it is susceptible to challenge for contravention of
section 92 because such a tax would, inevitably, impede the absolute freedom of
interstate trade. Yet a tax that is imposed solely on the production or manufacture of a
good is only capable of having an effect on those goods that are locally produced or
manufactured. The inherent tendency of that tax is to discriminate.97 For that reason,
the Commonwealth need only have control over taxes on the production or
manufacture of goods to ensure that it retains control over its tariff policies and the
imposition of customs duties. A tax on the distribution or sale of a good is unlikely to
hinder free trade among the States.
The narrow interpretation of section 90 also allows the High Court, if it so
chooses, to incorporate another helpful criterion to determine if a State tax is an excise
duty — the concept of discrimination. While the current jurisprudence rejects the
proposition that a tax must discriminate between goods in order to be an excise duty,98
the idea that a tax must impose a discriminatory burden on a good of local production
or manufacture was always sure of the support of justices of the High Court.99 As the
article explained in the paragraph above, a tax that does not impose a discriminatory
burden on a good does not affect the federal purpose of section 90. It does not impair
any trade or tariff policy, and does not give rise to any obstacles to free trade. As
Murphy J explains:
A tax imposed (invalidly because of s. 90) by a State on production or manufacture of
goods, must be one on production or manufacture within the State (because of the
combined effect of s. 92 and the territorial limitations on the competence of the State)
and must discriminate against such local production or manufacture. A nondiscriminatory tax on sales or distribution or consumption is neither a duty of customs
95
96
97
98
99
Ha v New South Wales (1997) 189 CLR 465, 507 (Toohey, Gaudron and Dawson JJ).
Parton v Milk Board (Victoria) (1949) 80 CLR 229, 264-7 (McTiernan J); Ha v New South
Wales (1997) 189 CLR 465, 514 (Toohey, Gaudron and Dawson JJ); Dixon, see above n 24,
229, 247, 252; Coper, see above n 2, 31; Opeskin, see above n 29, 173; Hanks, see above n
23, 242, 262; Hanks, see above n 28, 376, 381; Hanks et al, see above n 3, 728, 755;
Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561, 603
(Dawson J); Logan Downs Pty. Ltd v Queensland (1977) 137 CLR 59, 84 (Murphy J).
Ha v New South Wales (1997) 189 CLR 465, 487-9 (Brennan CJ, McHugh, Gummow and
Kirby JJ).
Dennis Hotels Pty Ltd v Victoria (1960) 104 CLR 529 (Menzies J), (Fullagar J); Philip
Morris Ltd. v Commissioner of Business Franchises (Vic) (1989) 167 CLR 399, 478
(Gaudron and Toohey JJ), 488-9 (McHugh J); Ha v New South Wales (1997) 189 CLR 465
(Toohey, Gaudron and Dawson JJ); Capital Duplicators Pty Ltd v Australian Capital
Territory [No 2] (1993) 178 CLR 561, 603 (Dawson J); Hematite Petroleum Pty Ltd v
Victoria (1983) 151 CLR 599, 688 (Deane J); Parton v Milk Board (Victoria) (1949) 80 CLR
229, 264-7 (McTiernan J); The Commonwealth and Commonwealth Oil Refineries Ltd v
South Australia (1926) 38 CLR 408 (Isaacs J); HC Sleigh Ltd v South Australia (1977) 136
CLR 475, 527 (Murphy J); Logan Downs Pty. Ltd v Queensland (1977) 137 CLR 59
(Murphy J).
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333
nor of excise…if these do not discriminate between those produced or manufactured
inside and outside the State, neither s. 90 nor s. 92 is infringed.100
By limiting excise duties to taxes imposed solely on the production or
manufacture of a good, and being sensitive to the concept of discrimination, the High
Court stands a greater chance of being correct when it invalidates a tax as being an
excise duty in contravention of section 90.
III CONCLUSION
The High Court’s broad interpretation of section 90 of the Australian Constitution
and, in turn, the judicial expansion of the scope of the Commonwealth’s power to levy
excise duties together with the consequent prohibition on States to levy any taxes on
goods lead to legal and economic problems. From a legal perspective, the broad
interpretation of section 90 ignores the federal purpose of that section. From an
economic perspective, this broad interpretation of section 90 has been a partial cause of
the vertical fiscal imbalance between the Commonwealth and its States.
The legal and economic problems that result from the broad interpretation of
section 90 can be avoided if the High Court gives the section a narrow interpretation.
That narrow interpretation defines an excise duty as a tax imposed solely on the
production or manufacture of a good. It is an economically sound principle and has the
benefit of a legal test of substance that is capable of consistent and predictable
application to legislation. It is also consistent with the popular perception of excise
duties as a limited category of taxes on goods.
.
100
HC Sleigh Ltd v South Australia (1977) 136 CLR 475, 527 (Murphy J).