Yesterday’s gathering of angry redneck opponents of the Gillard carbon tax on the lawns of Parliament House scored the sort of blanket MSM coverage its organisers wanted. Actual political significance appears to have little connection with electronic media decisions on what stories to feature. Colour and movement are all that’s needed, as demonstrated by Tony Abbott’s almost daily visits to assorted factories whose owners profess deep concern at the imagined threat to their business posed by a carbon tax which will add about 1% to prices overall, for which most Australians will receive compensation anyway, and whose modest cost impact the business owner can readily pass on to his already compensated customers.
However, amidst this mindless media coverage of meaningless colour and movement, there are much more important questions from a constitutional viewpoint. Will the carbon pricing regime, particularly the post-2015 emissions trading scheme, be held valid by the High Court? This rather vital question arises from the constitutional issue of whether the 2012-2015 fixed price “carbon units” amount to the imposition of a tax within the meaning of the Commonwealth Constitution. The drafters of the Clean Energy Legislative Package are clearly generally aware of the issue, because they included the following subsections in section 100 of the central Clean Energy Bill 2011:
(10) If a carbon unit is issued to a person in accordance with this section, the person is liable to pay a charge for the issue of the unit.
(11) Subsection (10) has effect only so far as it is not a law imposing taxation within the meaning of section 55 of the Constitution.
Section 55 in turn relevantly reads:
Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.
Now it needs to be understood that the word “charge” in subsection (10) does not refer to the fixed price of the carbon units themselves ($23 per unit/tonne of emissions in 2012-13) but rather to an associated administrative charge for issue of the units, which is to be imposed by separate legislation, namely the Clean Energy (Unit Issue Charge—General) Act 2011.
However, as I and numerous others have argued previously, there’s a more than plausible argument that the actual fixed price for the 2012-2015 fixed price carbon units regime (i.e. the $23 etc per unit/tonne of emissions) does amount to the imposition of a tax within the meaning of s 55,whereas the post-2015 tradeable carbon units don’t amount to a tax at all. The fixed price carbon units are merely the indicia of a compulsory government impost (i.e. a tax) whereas the post-2015 carbon units are tradeable instruments purchased at government auction or on the open market at variable prices determined by the market (albeit instruments that affected emitters have no choice but to buy). And if the fixed price units are a tax but the post-2015 tradeable units are not, then s 55 is clearly breached because the legislative regimes creating both types of carbon units are contained within the same piece of legislation, namely the Clean Energy Bill 2011. The result would appear to be that, while the fixed price carbon tax regime would be valid and enforceable, the entire post-2015 emissions trading scheme would be invalid.
In one sense that wouldn’t be a complete disaster because it would be a relatively easy legislative drafting task to separate the pre- and post-2015 regimes into two separate pieces of legislation and re-enact them if the High Court holds that s 55 has been breached (assuming Gillard can still cobble together a Reps majority in the wake of such a fiasco). But I can’t help wondering why they aren’t simply doing that in the first place given that the drafters are clearly aware at least in general terms that s 55 poses a potential danger? A conspiracy theorist might speculate that Climate Change Minister Greg Combet, arguably the prime candidate for ALP leadership if Gillard falls, has planted a constitutional time-bomb set to detonate when the High Court hands down a decision on the inevitable constitutional challenge just before the next election, reinforcing existing perceptions of an inept government and driving the last nail into a moribund Gillard’s coffin (assuming it’s metaphorically viable to drive a nail into a coffin using a time-bomb). However that seems an unlikely scenario in the real world, because Combet as the responsible Minister would be primarily blamed for the fiasco. Can anyone else come up with a plausible explanation? I suppose the obvious one is carelessness and insufficient attention to crucial detail.
Endnote – There are vaguely plausible arguments that the fixed price carbon units regime is not a tax for constitutional purposes. The classic constitutional definition of a tax was propounded in Matthews v The Chicory Marketing Board (Victoria) (1938) 60 CLR 263: “a compulsory exaction of money by a public authority for public purposes, enforceable by law, and not a payment for services rendered”. The fixed price carbon units clearly satisfy each element of the Matthews definition, and it isn’t immediately evident that the Commonwealth will provide any services in exchange for the impost. However the Commonwealth will presumably argue that the fixed price units regime is an inextricably interwoven initial transitional element of an overall carbon emissions reduction scheme (namely an emissions trading scheme) that isn’t a tax. That argument might conceivably succeed, although the problem with it is that at least in a functional/machinery sense the fixed price units regime is entirely separate from and independent of the post-2015 tradeable units regime (although some fixed price units will continue to be issued after 2015 to create an emissions capping regime).
Alternatively the Commonwealth might argue that the post-2015 tradeable carbon units also satisfy the Matthews test and are therefore also a tax. That would mean s 55 would not be a problem, because the Commonwealth would not be “tacking” tax and non-tax measures into the same piece of legislation. However, a tax where the tax rate is determined by the price the taxpayer bids at auction for the instrument imposing the taxation is a very strange sort of tax indeed.
The Commonwealth might also seek to argue that the fixed price carbon units represent a licence to emit atmospheric carbon, and that the unit price is the licence fee. However, even accepting that it’s a licence doesn’t preclude the possibility that it’s also a tax. As Mason J observed in the Pipelines Case in 1983:
There are many illustrations, notably in England, of fees charged for licences to carry on an occupation which have been regarded as an excise (W. Harrison Moore, The Constitution of the Commonwealth of Australia, 2nd ed. (1910), p. 515). This is because the fee was not merely a fee for the privilege of carrying on a business or activity; it was also a tax upon goods. Where the fee for a licence to sell a commodity is a lump sum that is small or relatively small in amount it is easier to conclude that it is a fee for a privilege or that, if it be a tax, it is not a tax on the commodity. Where, however, though the fee is expressed to be for a licence to produce or manufacture, the terms and practical operation of the law show that it is exacted in virtue of the quantity or value of units produced or manufactured, it is a tax upon goods. (at p634)
All very interesting for academic constitutional lawyers. But why not avoid the whole problem in the first place by separating the two regimes into separate Acts?