Briefed: Commercial Law Updates
Briefed: Commercial Law Updates
Taking Stock of Vanderstock: electric vehicles, duties of excise and the Constitution
What does the seminar cover?
In the decision of Vanderstock v Victoria [2023] HCA 30, the High Court held by a narrow 4:3 majority that a tax imposed by Victoria on the use of electrical and hybrid vehicles was invalid. The tax was held to be a “duty of excise” which, under s 90 of the Constitution, States cannot impose. Section 90 reserves to the Commonwealth Parliament the exclusive power to impose duties of excise.
The decision is significant because the majority reopened and overruled previous High Court authority to reach that conclusion. It is also significant because it may affect the validity of other state taxes.
This seminar will explore:
- the meaning of “duty of excise” in s 90 of the Constitution as established by previous decisions of the High Court;
- the decision in Vanderstock and the key reasons of the majority and the dissenting Justices; and
- the implications of Vanderstock for state taxes other than those concerning EVs.
Sarah and Michael authored an article of the same name in Proctor (Queensland Law Society) which provides a high-level summary of the topics that will be covered in this seminar.
Who should watch?
This session will interest advisory and litigation lawyers, especially those with tax practices.
PRESENTERS
Michael May (Barrister, Level Twenty Seven Chambers)
Michael has a broad commercial and administrative law practice, with a particular focus on competition, corporations, tax litigation, equity and trusts, insolvency, class actions, professional negligence, estates and real property. He is variously listed in Chambers & Partners, Doyle’s Guide, AFR’s Best Lawyers and Legal 500 for his expertise in commercial dispute resolution, competition law, tax law, and insolvency & reconstruction.
Sarah Spottiswood (Barrister, Level Twenty Seven Chambers)
Sarah practices commercial litigation and arbitration as well as constitutional and administrative law. Since coming to the Bar, she has appeared in several matters in the High Court of Australia, in State and Federal Courts and in various tribunals, mostly in Queensland but also in Victoria. These matters range from large and complex commercial and corporate disputes through to sensitive and high-profile public law litigation. She is listed as a leading junior for commercial disputes by Legal 500 Asia Pacific.
Sarah appeared for the Attorney-General of Queensland in Vanderstock v Victoria [2023] HCA 30.
Michael Maynard (Barrister, Level Twenty Seven Chambers)
Michael accepts briefs in all areas of law, with a particular focus on commercial and public law. Immediately prior to commencing at the Bar, he was Counsel Assisting the Solicitor-General of the Commonwealth. He was previously a Senior Lawyer and the Australian Government Solicitor (AGS), Counsel within the Office of General Counsel at AGS, and a solicitor King & Wood Mallesons.
Michael appeared for the Attorney-General of
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00:15
INTRODUCTION
Michael May (MM): Just over a month ago, the High Court gave its judgment in Vanderstock v Victoria. It was the first time in nearly a quarter of a century that disposed of s 90 of the Constitution.
00:29
[Slide 1] As the other Michael will explain shortly, s 90 is one of the basic building blocks of our federation, giving the Commonwealth the exclusive power of duty of excise which made a monetary exaction imposed by a state bound to be a duty of excise. It is a key boundary in division of fiscal power between the Commonwealth and the states. The problem is that the boundary is not precisely defined and judges of the High Court have been disagreeing about where the boundary is to be drawn for decades.
01:06
Vanderstock is a significant decision and its significance can perhaps be gauged by the public's reaction to it. I do not think I have ever seen a paragraph in a High Court judgment ever go viral before. But I think that paragraph, in Justice Edelman’s dissent, comes pretty close. We will have more of that later.
01:27
[Slide 2] Another way of gauging the significance of the decision is to look at history. The last time s 90 came before the High Court it was in a series of two cases which we will hear more about in a moment, Capital Duplicators and Ha. They were a series of two cases because Capital Duplicators effectively narrowed what had been thought to be the state's fiscal power in a significant way. Immediately afterwards, the states sought to have the High Court overturn itself in Ha which the High Court declined to do.
[Slide 3] It is no coincidence that shortly after the decision in Ha GST was introduced, imposing a broad based sales tax that is collected by the Commonwealth and distributed by it to the states by way of gradients.
02:18
Particularly given the recent change in the composition of the High Court, of the retirement of Chief Justice Kiefel, time will tell if the High Court overturns itself.
02:31
The judgment in Vanderstock is not exactly a light read. To understand the decision, it is necessary to see it in the course of the development of the High Court's jurisprudence on s 90 which is even less of a light read. To help us with all of this, we are very lucky to have two presenters tonight who were in the trenches of this constitutional battle, Sarah Spottiswood and the wonderfully named, almost, Michael Maynard.
03:01
Sarah was called to the Bar in 2021. Prior to coming to the Bar, she worked as a solicitor for both the Australian and UK Governments, working on public law, international arbitration and international matters. She was Justice Nettle’s Associate.
03:17
Michael was called to the Bar this year. Before that, he was Counsel Assisting the Solicitor General of the Commonwealth. He has also worked at AGS and King & Wood Mallesons and he was Chief Justice Kiefel’s Associate.
03:31
In addition to those sickeningly good resumes, Sarah and Michael both appeared in Vanderstock, Sarah for the unsuccessful Queensland and Michael from the victorious Commonwealth. Since it is well known that the juniors do all the work, that makes them particularly well placed to explain the background and its decision itself.
03:53
Broadly, the structure for the discussion tonight will be a sort of tag team approach, going through the following topics. Firstly, some historical context and the decisions in the Ha and Capital Duplicators. Then a cliff notes overview of the issues and the decision in Vanderstock itself. Then they will talk about two particular issues that arise when trying to identify whether something is a duty of excise. Firstly, what is a tax? Then what does it mean for a tax to be on goods? Which, as you will hear, is what Vanderstock tells us an excise is. There will be a brief discussion about the potential implications of Vanderstock for state taxes and practical considerations that arise when deciding how to do these kinds of things. Then, there will be some brief time for questions at the end.
04:57
With that, I will hand over to my namesake.
HISTORY OF DUTIES OF EXCISE IN AUSTRALIA
05:02
Michael Maynard (MM2): Thank you, Michael.
05:08
[Slide 4] S 90 of the Constitution makes it a power of the Federal Parliament to impose a duty of customs or excise exclusive. What this means is that if an impost is properly described as an excise it cannot be imposed by a state parliament.
05:25
S 90 is historically one of the most litigated provisions of the Constitution. Decisions have often been decided by narrow majorities. Why has it been so difficult? Well, Justice Dixon observed in 1938 that the word ‘excise’ has “never possessed, whether in popular, political or economic usage any certain connotation and has never received any exact application”.
05:50
The term excise was barely mentioned in the convention debates, with some confusion among the delegates what it meant. For that reason, in labour cases, the focus shifted to the purpose of s 90 and why it was included in the Constitution. So, I am going to discuss that briefly before we get to the decisions in the history of the jurisprudence provision.
06:15
[Slide 5] In 1900, prior to federation, the colonies were not especially sophisticated. The colonial governments needed very little revenue to function, not having sophisticated health or education systems. What little revenue they needed could be derived largely from imposing customs duties on imports from overseas or from the other Australian colonies, mostly on imported tobacco, liquor and beer. The colonies were mostly funded on the back of beer and cigarettes.
06:43
By agreeing to the Constitution, and by s 90, the colonies yielded up to the Commonwealth their principal sources of revenue. Why did they do that? Well, the answer that has been given in recent cases on s 90 and s 92 say that those provisions form part of a scheme [slide 6] that recognise that the creation and fostering of national markets would further the plan as the Constitution for the creation of a new federal nation and it would be expressive of national unity. In other words, the plan was to grant a Commonwealth economic union, not an association of states each with their own separate economy.
In practical terms, this was achieved by three broad features of the Constitution: s 92 prohibiting state laws from imposing discriminatory burdens of a protectionist kind, effectively on burdening interstate trade; s 90 prohibiting the states from imposing different taxes on goods to distort national markets, whether or not they had a discriminatory purpose; and then at the same time, other provisions of the Constitution which disabled the Commonwealth from discriminating between states or parts of states.
07:57
The overall plan was to create a free trade area within the geographic area of Australia in which there would effectively be one single market for goods. The former colonies could not legislate to prevent free trade or to fragment or distort that national market. S 90 plays a critical role in that scheme by avoiding distortions. As Mr. Reid put it in the convention debate, “The Federal Parliament takes away from each of the five colonies its almost sole source of revenue. This is all done because we cannot retain this source of taxation and have federal union.”
APPROACHES TO S 90 OF THE AUSTRALIAN CONSTITUTION
08:33
MM2: With that purpose in mind, I want to touch on the three important historical approaches to s 90 prior to Ha and Capital Duplicators. There are three famous judges I want to talk about and so you, the audience, should choose your fighter.
08:48
[Slide 7] The first, the parochial choice, is a great Queenslander, Sir Samuel Griffin. He considered that an excise was a duty imposed upon goods either in relation to quantity or value when produced and manufactured and not in any sense a direct or personal tax. That formulation was useful for the time but it was quickly found wanting when states tried to get around it.
Victoria imposed a tax on every acre of land that was planted with chicory. That tax was effectively a land tax. It just was imposed when land happened to be planted with chicory and so it had no necessary connection with quantity or value of chicory produced, the crops can fail or not been reaped in a particular year and the tax would still be payable. But its clear purpose was to derive revenue from chicory.
That brings us to our second fighter, a strict legalist and always a crowd favourite, Sir Owen Dixon. He says that if a test of excise is too narrow, it would expose s 90 “to evasion by easy subterfuges and the adoption of unreal distinctions”. He said that an excise is a tax if it bears a close relation to the production or manufacture, the sale or the consumption of goods which is of such a nature as to affect them as the subjects of manufacture or production or as articles of commerce. This is the foundation for the majority's test in Vanderstock, as we will come to see. The key difference is that, unlike in Chief Justice Griffith’s formulation, it was not necessary for the amount of the tax to directly correlate with the amount that the good produced. On that basis, the tax on the land planted with chicory was an exercise.
All of that was a bit wishy washy for our third fighter, unassuming quite achiever Sir Frank Kitto. He says that the criterion of the liability of the tax must be on the taking of a step or passing, on the taking a step in the process of producing goods into a consumable state or passing them down the line which reaches to the point of receipt by a consumer. That formulation is ultimately adopted by unanimous support, including Chief Justice Dixon, in Bolton v Madsen. This is quite similar to Dixon's formulation but it focuses attention on the step on which the tax is imposed. The question is really about the legal operation or the legal form of the of the tax.
11:28
[Slide 8] Then we come to Ha and Capital Duplicators. The Bolton v Madsen formulation, with its focus on legal form, would ultimately bear out Justice Dixon's warning about the evasion of this provision by the adoption of unreal distinctions. The states and territories had started imposing very substantial fees for licenses for the right to sell tobacco, alcohol and petrol. The amount of the license fee was calculated based on the value of sales by that business in the previous period. Effectively, it is clearly targeting the goods but the legal form of it is on the right to operate the business.
12:07
Relying on Bolton v Madsen. These license fees made up at the time of Ha 15% of New South Wales taxation revenue and 31% of the Northern Territory’s taxation revenue. So, we are talking about big money. The state had effectively sought to regain that revenue base that they had yielded up to the Commonwealth at federation.
12:30
In Capital Duplicators, a narrow 4:3 majority adopt the purpose of s 90 that I have described and strike down one of these license fees. In Ha, the states and territories sought to overrule that decision, arguing with the case that it caused considerable inconvenience by significantly narrowing their revenue base. Then a narrow 4:3 majority again upholds Capital Duplicators and strikes down the franchise fee.
12:59
In both cases, however, relevantly for today, the majority has effectively restated the Bolton v Madsen formulation but emphasise that it must be addressed as a matter of substance, not form. They expressly say that it was not necessary in that decision to consider the status of taxes imposed on step of consumption of the goods, which was left to another day. That day arose in February this year when the [High] Court heard oral argument in Vanderstock.
VANDERSTOCK V VICTORIA – A SUMMARY
13:38
Sarah Spottiswood (SS): [Slide 9] So now we come to Vanderstock. I am going to do a whistlestop tour through the 393 pages of Vanderstock in 10 minutes. It was a very eventful case. There were twenty-six counsel involved, every state and territory, as well as the Commonwealth intervened. Each side of the argument was applying to have at least one previous High Court decision reopened and overruled. The result was a narrow majority of four Justices to three who wrote five separate judgments with more paragraphs than the famously long constitutional decision of Work Choices and 1979 footnotes, which is a whole lot of footnotes, on s 90 of the Constitution.
So, what was it all about? Well, Victoria imposed a per kilometre charge on the use of electric and hybrid vehicles. Users would register their odometre readings with VICRoads and the tax would be calculated based on how many kilometres someone drove - the tax was around two cents per kilometre.
14:47
The purpose of the tax, from Victoria's perspective, was to replace the ever declining revenue from fuel excise as consumers started to drive more electric vehicles. It was projected that consumers would continue to cease driving fuel cars and switch to electric vehicles in the long term which would affect their revenue stream. Fuel excise was collected by the Commonwealth and distributed to the states to build and maintain roads. Effectively, the electrical vehicle charge was designed to ensure that all road users, not just fuel car drivers, paid for the cost of maintaining roads.
Mr Vanderstock owned an electric vehicle and decided to challenge the tax as invalid because it was a duty of excise imposed by Victoria rather than the Commonwealth. The important point to note, and a significant point in this case, was that Vicotria’s electric vehicle charge was imposed on the personal use of an electric vehicle after it had been purchased by a consumer. As you recall, Michael explained that until that Vanderstock it had been accepted in several High Court decisions that a duty of excise was a tax on goods before it reached the consumer. So, it was a tax on bringing a good to market and that notion was so well established that in 1989, in the decision of Philip Morris v The Commissioner of Business Franchises, Justice Brennan held that [slide 10] “If there be any rock in the sea of uncertain s 90 principle is that a tax on a step in the production or distribution of goods to the point of receipt by a consumer is a duty of excise.”
[Slide 11] But in Vanderstock, a majority of the High Court decided to dislodge that rock in the sea of uncertain principle. Chief Justice Gageler, as His Honour was then, and Justice Gleeson and then Justice Jagot, who wrote separately, expanded the concept of the duty of excise to include a tax that is imposed after it reaches the consumer. So, a tax on the use of an electric vehicle could be a duty for excise. To get there, Their Honours had to reopen and overrule the decision of Dickenson’s Arcade in which five out of six High Court Justices held that a tax on the consumption of tobacco after it was purchased by a consumer was not a duty of excise. That decision has stood since 1974.
17:34
[Slide 12] The majority instead restated a very broad purpose of s 90 that Michael has explained, which was to give the Commonwealth exclusive control over the taxation rules, so that whatever policy it chose to implement, through uniform laws of trade, commerce or taxation could not be founded or defeated by state taxation. They said that that purpose could not be achieved if a tax on the use of goods was excluded from the concept of a duty of excise.
It is important to remember that under our constitutional arrangements we have both Commonwealth governments and State governments. So, states can still have Commonwealth policies on goods in other ways. For instance, they can impose regulatory burdens on goods, they can impose taxes on services. But the purpose of s 90 was really only focused on goods to prevent Commonwealth policy being burdened by state taxation of goods.
18:36
Now, following Vanderstock, we must satisfy two criteria in order to establish whether a tax is a duty of excise. First, the tax must be in substance on the goods, it must have a close relation therefore to the production, manufacture, sale, distribution or consumption of goods - basically all stages of the lifecycle of the goods. The second criteria is it must have a general tendency to affect the goods as articles of commerce.
WHAT IS A GOOD? THE MAJORITY DECISION IN VANDERSTOCK
19:10
SS: What does it mean to be a good? Basically, the majority just said it has to be able to be sold at some stage in its life. So, pretty much all goods and having a tendency to affect the goods as articles of commerce, involves an assessment of a range of considerations, but most significantly, it involves looking at whether the tax has a tendency to depress demand for the goods by making their price or their ongoing costs more expensive. But as Michael is going to explain, the majority said that whether a tax has a general tendency to affect demand does not require economic evidence and we are going to explore what those two criteria to establish a tax on goods shortly.
19:57
But applying those criteria in relation to the electrical vehicle charge the majority held the tax was on goods because it was in substance and not the use of electric vehicles and it had a tendency to affect demand for goods by making the ongoing cost of running an electric vehicle more expensive which might reduce demand which might make it less attractive for a consumer to purchase an electric vehicle.
WHAT IS A GOOD? THE DISSENTS IN VANDERSTOCK
20:25
SS: [Slide 13] Now, onto the dissents. Justices Gordon, Edelman and Steward each provided strident dissents. Their Honours considered that a duty of excise had always been understood, including in a large number of previous authorities, to be a trading tax on commercial dealings before it reached the hands of the consumer. So, a tax on the supply side of the transaction rather than a text on the demand side. That is why, for example, Their Honours said that the case law had referred to things such as articles of commerce when dealing with commercial dealings.
21:07
Justice Gordon observed that the majority reasons were a departure from long established and fundamental principle and authority which she could not agree with legally, logically, or constitutionally.
Justice Edelman described the majority's reasons as innovative and the majority's innovative reasons involved a neglect of constitutional structure, constitutional text, contemporary understanding, history, political choice, economics, principal, precedent, authority and neglect of the future. [Slide 14] In His Honour’s now famous paragraph 651, His Honour highlighted in his view just how many Justices reasons were at odds with the majority's reasons.
21:59
Justice Steward approached the matter a little bit differently. His Honour thought that an electrical vehicle tax was not even a tax on goods at all. Rather, it was a tax on the activity of using an electric vehicle on specified roads. But in any event, he held that the majority reasoning distorted the relationship between the states and the territories and the Commonwealth in a way that was unintended by the founding fathers. It would render the states and territories the constitutionally visible minions [slide 15].
VANDERSTOCK - OBSERVATIONS
22:35
SS: [Slide 16] So those are the majority and the dissenting reasons. Just to conclude my whistlestop tour, I will just make three observations. First of all, the majority decision has expanded the concept of a duty of excise to essentially include any tax on goods. Second, the decision was decided by a narrow majority of four justices to three, and one of the justices that was within the majority, Chief Justice Kiefel, has now retired. It will be very interesting to see what the newest Chief Justice thinks about the meaning of a duty of excise. Thirdly, because it was a narrow majority, and because of the significance of this issue for the states and territories, it is likely that in the future there will be more proceedings concerning this issue. Michael is going to address that later. So that then is Vanderstock.
23:28
[Slide 17] Now we know a duty of excise is a tax on goods and that involves asking two questions. First, is it tax? And then, is the tax on goods? I am going to explain how you can work out whether a charge is a tax and then Michael will address how you can work out whether it is on goods.
WHAT IS A TAX?
23:51
SS: [Slide 18] So what is a tax?
23:53
Whether a charge is a tax was not actually really an issue in Vanderstock because all the parties accepted it was a tax. But it is going to be necessary to understand the difference if there any future proceedings that challenged a state charge.
24:09
The starting point is the decision of Chief Justice Latham in the decision of Matthews v Chicory Marketing Board which held that a tax is a compulsory exaction of money by public authority for public purposes enforceable by law and not by way of payment for services.
What is a compulsory exaction? That just involves that there is no practical alternative but to pay the tax. So either by compulsion, or by, for example, because there is a greater burden imposed if you do not pay. It has to be more than a mere request. It must be by a public authority. That is quite self-explanatory as well but the cases suggest that a public authority should be given a fairly broad interpretation and looks something like involving the exercise of public powers. Next, that charge must be for public purposes which is also a fairly broad criterion. The amount is used to raise public revenue.
25:19
One indicia, although it is not determinative, is the money is paid into the government's consolidated revenue fund. But I can give you an example of what is not public purposes. In one case, the Commonwealth enacted legislation that required parents to pay child support. A parent was required to pay child support to the Commonwealth, the money was put into the consolidated revenue fund. Then, out of a separate account, child support was paid to the child's carer. That amount was considered to be not for public purposes, it was for the private purposes of child support, so it was not a tax.
26:03
The final indicia is enforceable by law and that just means it needs to be in legislation.
26:10
There is also a distinction in the case law between a tax on the one hand and the fee for services or a fee for privilege. So, it is necessary to understand what is a fee for services and what is a fee for privilege so you can understand what is a tax.
What is a fee for service? Well, first of all, there must be a service provided to the person who is required to pay the charge. Secondly, there must be a close relationship between the cost or expense to the public authority of providing the service and the charge. It does not have to be a precise calculation about the cost to the authority but there must be some relationship. The further away the charge is from the cost to the public authority it starts to look more and more like a tax.
26:58
What is a fee for privilege? In other words, a fee for privilege can be described as a license fee. A fee for privilege must have the character of being exacted for the privilege of engaging in a business or activity. It will be irrelevant, for example, if the fee is only imposed once, so when you apply for a license, or when you seek to have the license renewed. Other typical features of license fees are that their size is usually small so they are clearly not a revenue raising tax. They are not imposed in respect of any particular act done in a business or activity but rather imposed for the overall privilege of carrying it on.
27:40
So that is a what is a tax. And we need to remember that it needs to be a tax in order to be a duty of excise within the meaning of s 90.
WORKING OUT WHETHER A TAX IS ON GOODS
28:00
MM2: [Slide 19] So if we are in the universe of taxes, we now need the tax to be a tax on goods. This is a question about the connection between the way the tax operates and goods.
28:13
What do we mean by goods in this context? Well, the majority refer, as Sarah said earlier, to items of tangible personal property, at least if they are saleable. It is clear that this definition is wide, although there are undoubtedly questions as to when property ceases to be saleable and what the impact of that might be. But the tax must also be on goods. The majority recognise this as a metaphor. Persons, not goods, pay taxes. What the expression means is that a person is taxed by reference to some activity or relationship they have with goods. The majority state these kinds of relationships extremely widely. They refer to owners, exporters, importers, manufacturers, producers, processes, sellers, purchasers, hirers, consumers of particular goods.
29:01
What we can take from this is that the precise dealing in goods is not material. What matters is the closeness of the connection between the tax and the goods. Existing cases, as I have said before, confirm that this is a question of substance and practical operation. That is a key theme of s 90 jurisprudence from the land planted with chicory, to the licensees in Ha, to Vanderstock. These are all cases in which in substance the target of the tax was the goods.
The question now is not identifying which step as a matter of formal legal substance, although that will still be relevant. The question is, what is the connection, as a matter of substance, between the tax and the goods?
The second element is that the tax must affect the goods as the subjects of manufacture or production law as articles of commerce. Now, this is the most contentious limb but effectively what it means is the nature and general tendency of the tax must have an impact on demand or price for goods. That is where we get the connection back to that national market idea that I spoke about earlier.
30:09
The courts will have regard in this sense to the indirectness of the tax the extent to which it might impact the cost of the goods, the proximity of the transaction it is taxing with the sale of the goods, and the form and content of the legislation. But the question really is whether the court can infer that there is a tendency to depress demand for the goods.
[Slide 20] How is the court to determine whether a tax has such a tendency? Should it receive expert evidence or assess the tendencies as best you can based on the information it has?
30:43
At a very high level, in constitutional litigation, it is often accepted that facts of this kind, tendencies of this kind, do not need to be found on the basis of ordinary rules of evidence. The court has more leeway to determine the facts as best it can.
30:59
The majority accepted that in Vanderstock that opinions of expert economists might assist in undertaking this task, including by considering a form of elasticities and cross elasticities of supply and demand. But the plaintiffs in the Commonwealth did not have any evidence at that kind in the present case. The majority accepted the submission that as the exercise is one of characterisation of the law undertaken at the level of maintaining a constitutional structure, it is not necessary to have expert evidence. The majority said the question requires both practical judgment which is the stuff of constitutional adjudication. In other words, that the court needs a broad axe, to quote Ha. The High Court and QCAT may have more in common than the former would care to admit.
31:49
The majority accepted that the general tendency of the tax in this case was to dampen demand. They inferred this based on the fact that it imposed a per kilometre fee, which applied to, in effect, all of the possible uses of the good over the entirety of its lifetime. It was a charge which travelled with the good whether it was sold or not and it was payable by the registered owner of the good no matter who was driving. So potential purchasers, deciding whether to buy an electric vehicle or not could be expected to factor it into their decision making and either not buy this car or pay a reduced price for it. Either way, the tax had the capacity to distort the national market in electric vehicles, which s 90 is designed to avoid.
The majority also identified some support for that in the explanatory memorandum of the second reading speeches which made reference to the potential impacts on uptake of electric vehicles. Very fortunately, the South Australian Parliament, the same week that Vanderstock was heard, repealed its own version of the legislation on the basis that it would reduce the uptake of electric vehicles.
In summary, how do you prove an impact on demand? Well, a broad axe may suffice for that stuff of constitutional adjudication. But if you are challenging a law in future, you might be well advised to consider leading expert evidence to establish an effect on demand or price with a more sure evidential footing. That would be consistent with the approach the court has from time to time required in s 92 cases in a similar context.
33:26
[Slide 21] What are the implications for other state taxes? I suppose this is the hot topic of the moment and more will no doubt be said about this by courts in the future. But in the aftermath of Vanderstock, New South Wales Premier Chris Minns stated levies and taxes worth billions were now at risk. That almost certainly overstates the position. But it is true that now the rock in the sea of uncertain principle has been dislodged future challenges might be likely.
33:56
The majority in Vanderstock make clear that the test is an evaluative one and it depends on the legal form and practical operation of the tax. The open text and evaluative nature of that test provides fertile ground for future constitutional challenges. But it also provides an elastic test which can meet the challenges in particular ways.
34:19
In the hearing, Victoria identified in very general terms some of the taxes which might be invalid if the plaintiffs were to succeed. It included most of those on the slide there but they are things like car registration fees, gaming machine levies, waste levies, stamp duty, selling second hand cars. We cannot of course consider all of these today. It would be impractical to do so because it requires a really close examination of the terms and practical effect of the legislation against the tests that we have described. But to consider these at a high level of generality might be useful in terms of illustrating the points that we have described.
Vehicle registration fees, for example, are part of a comprehensive regulatory scheme which establishes the identity of vehicles on roads for public safety. It seems to me, it is more likely that a court would view this as a fee for the privilege of driving where it is annexed to a comprehensive regulatory scheme of that kind and there are comments in the majority's decision which support that.
35:26
If waste disposal levees were calculated on the basis of the cost to the government of disposing of the waste, it is almost certain that they would be a fee for service. Justice Jagot noted, interestingly, that a version of this very same EV tax might be able to be introduced if there was a relationship between the cost of providing public roads and the charge in the issue. For example, if it applied to all road users rather than selectively targeting one type or a clear relationship, the cost of maintaining roads, for example, was based on calculus that took into account the various weights of different vehicles, it might be said to be a fee for the service providing public roads.
36:09
Conversely, one could very well imagine that the tax on gaming machines, if it imposed a tax on 10 cents for every dollar gambled by using the machine, might well be an excise if it applied to all of the possible uses of gambling machines.
Stamp duties on the on sale of second hand cars, which are calculated as a percentage of the sale price, might also be vulnerable to challenge.
36:36
I make those observations at a very high level and much will turn on the terms of the particular tax. It is not possible to draw any certain conclusions today. However, future constitutional litigation about these kinds of categories of tax is relatively likely.
PRACTICAL ISSUES CHALLENGING A DUTY OF EXCISE
37:01
SS: [Slide 22] Before we conclude, now you understand what is a duty of excise, I am going to break briefly outline some practical considerations that arise in cases such as these. First of all, how do these issues get to court? Generally, there are three possible avenues for arguing that a state charge is a duty of excise. First, it can be raised by a taxpayer as a defence in proceedings brought against them by a public authority who claims that a charge is on [in audible]. Second, a taxpayer can seek relief proactively in the Federal Court or the Supreme Court. Doing so allows for contested evidentiary issues to be resolved. But the downside is that there are costs and risks of multiple appeals before you get to the High Court. The third possible avenue is that a taxpayer can seek relief directly from the High Court in its original jurisdiction. If that avenue is pursued there are procedures which allow the parties to essentially agree facts so it overcomes the need to produce evidence in the way it would in a trial. It also avoids the risk of multiple appeals because the issue is decided once and for all. Depending on what the objective is, one of those three avenues can be pursued.
38:21
The second practical issue I want to mention involves the parties to these types of proceedings. Because the argument that a state tax is an invalid duty of excise raises the interpretation of the Constitution, the Attorneys-General, states, territories and the Commonwealth have a statutory right to intervene in the Judiciary Act. Cases that raise these issues do not just have a plaintiff, rather they have a whole host of intervenors as well. Attorney-Generals do not typically seek their costs, the intervention of Attorney-Generals can add cost benefit to proceedings because there are inevitably extra submissions to consider and extra and different arguments raised. Those are just two practical issues to consider when involved in any constitutional implication but particularly that concerning s 90.
I will now hand back to Michael May to conclude the session and invite questions.
CONCLUSION
39:28
MM: [Slide 23] When Vanderstock was handed down, I headed to Sarah’s room and joked that would herald a flourishing new practice in anti-excise litigation. Whether that will be the case or not remains to be seen, I suppose. But I guess the upshot is that the decision in Vanderstock means that there is greater scope to argue that the exactions by state governments are invalid as excise. There is this significant uncertainty as to firstly, the precise boundaries of the majority's approach and then potentially also on whether the majority's approach will be retained if challenged, a further decision.
40:22
But for now, these will be developing issues that have to be looked at when we have state exactions that involve the kinds of things that particularly Michael was talking about in further detail form.
QUESTIONS
40:38
MM: Are there any questions from the crowd? None from online, very good. Anyone in the audience? Yes?
Audience: Does s 90 appreciate the totality of the legislation or just its application to certain fact scenarios?
MM2: It is a very good question. There are cases on s 90 which hold that it can be selectively visible and so effectively that it would just invalidate the part of the tax that is an excise. But there is a really big question as to when, as to how that interacts with the process of characterisation because if you have a tax that applies to a wide range of things and some of its applications are on goods it may not be an excise at all. So, there is, I think, scope for the Court to consider how the principles of partial disapplication could apply to s 90. It is Fairly unsettled.
41:45
MM: Anyothers?
41:49
Thank you very much for attending and please help yourself refreshments at the back.
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