Opinion Number. 1895

Subject

COAL INDUSTRYTAXATION: WHETHER JOINT COAL BOARD HAS, OR MAY BE GIVEN, POWER TO REQUIRE PAYMENT TO IT OF SHARE OF PRICE OF COAL SOLD FOR OVERSEAS SHIPS’ BUNKERS OR FOR EXPORT: WHETHER REQUIREMENT CONSTITUTES THE IMPOSITION OF A TAX: WHETHER MONEY PAID TO JOINT COAL BOARD IS RECOVERABLE: FUNCTIONS AND POWERS OF JOINT COAL BOARD: WHETHER JOINT COAL BOARD MAY BE GIVEN POWER TO COLLECT A TAX TO BE IMPOSED ON COAL EXPORTERS: REQUIREMENT THAT TAX LAWS NOT DISCRIMINATE BETWEEN STATES OR PARTS OF STATES

Key Legislation

CONSTITUTION s 51(ii): COAL INDUSTRY ACT 1946 ss 14, 21(7), 25

Date
Client
The Secretary, Department of the Treasury

The Secretary to the Treasury has sought my opinion on questions raised by the Commonwealth Audit Office as to the legality of a practice of the Joint Coal Board of demanding a share of the price of coal sold for overseas ships’ bunkers or for export. The Treasury memorandum is in the following terms:

Some months ago the Commonwealth Audit Office raised with Treasury the matter of the price authorised to exporters by the Joint Coal Board to be charged for coal exported or sold for overseas ships’ bunkers. In this connection the Board requires the exporters to pay to the Board specified proportions of the export price. For example, as from 15th March, 1948, J. & A. Brown and Abermain Seaham Collieries Ltd. were authorised by the Board to charge for overseas bunkers at the rate of 50/- per ton f.o.b. Newcastle and the Board minute shows that, in fixing the price, the Board had regard to prices charged in other countries. Of the amount of 50/- per ton it was decided that 12/- should be paid to the Board, approximately 2/6 paid to the Company’s London agents and the balance of 35/6 retained by the Company.

2.  In conjunction with the decision given in the above example the Board decided upon a price of 35/- per ton f.o.b. Newcastle as a standard price for the Company’s coal—33/- per ton to be charged to the consumers and 2/- per ton to be paid to the Company as a price stabilisation subsidy. This subsidy based on total coal produced including exports, was paid until 31st July, 1948 (when it was discontinued in consequence of a change in general governmental policy on subsidies). The cost of the subsidy was met by the Commonwealth out of its price stabilisation vote and not by the Board out of moneys provided it under the authority of the Coal Industry Act 1946.

3.  The payments under reference, when received from exporters by the Board, are credited to the Board’s revenue (Coal Industry Fund—Commercial Account) through an account styled ‘Overseas Bunker Coal Income’, and to 31st December, 1948, had amounted to 246,111.8.10.

4.  The Audit Office pointed out that, while it is recognised that the Joint Coal Board has wide powers in relation to prices, values and profits in the Coal Industry under Section 14(2)(g) of the Coal Industry Act 1946, it is not evident that the Board is authorised by the Act to derive revenue of the above nature from the implementation of its authority in those respects.

5.  In reply to a query in this regard from the Audit Office the Joint Coal Board referred to Section 14(3)(e) of the Coal Industry Act which authorises the Board ‘to impose conditions under which any other person or authority may acquire, purchase, sell or dispose of, coal and enter into arrangements and agreements with other persons and authorities as to the sale or disposition of coal.’

6.  The Board further advanced the claim that, apart from its power under Section 14(3)(e), in each case where an exporter of coal remits to the Board part of the proceeds of the sale of coal, the exporter has concluded with the Board a separate agreement to do so and the remittance is therefore not under any requirement of the Board. In this respect it was pointed out to Treasury by Audit that the remittances were made at the direct request of the Board and in one case objection was actually raised but not sustained by the exporter.

7.  Regarding the crediting of these moneys to the Board’s revenue it was intimated that the Board relies on Section 21(7) of the Coal Industry Act which provides that there shall be credited to the Coal Industry Fund all moneys becoming payable to the Board other than moneys payable to Funds specified in sub-sections (2), (4) and (5) of that Section. Reference was also made to section 25 of the Act as to the Board’s powers to allocate net profits from the exercise of any of its powers and functions.

8.  Audit queried whether the moneys concerned are legally payable to the Board.

9.  As certain constitutional issues are bound up with this problem I would be glad if you would examine the question so that, if necessary, steps might be taken to remedy the position.

(2)  The questions involved appear to be the following and, for the sake of convenience, I state briefly the answers which, in my opinion, should be given:

1.  Has the Joint Coal Board power to require payment to it of a share of the price of coal sold by companies for overseas ships’ bunkers, where that price is higher than the domestic price of coal?

Answer: No.

2.  If it is not, can it be given power?

Answer: Yes.

3.  With regard to past payments (246,111/8/10 up to 31/12/48), have the companies a right of recovery back?

Answer: Probably; but each case would have to be considered.

4.  If they have, can this be defeated by legislation to be passed now?

Answer: Yes.

(3)  The powers of the Joint Coal Board under the Coal Industry Act 1946 include a power to regulate prices for the sale, purchase or re-sale of coal and a power to acquire any coal, sell any coal acquired by or vested in it, impose conditions under which any other person or authority may acquire, purchase, sell or dispose of coal, and enter into arrangements and agreements with other persons and authorities as to the sale or disposition of coal (s. 14(3.)(e)).

(4)  As well as relying on the above powers, the Board relies on agreement with the companies as giving it the right to receive and retain the moneys.

(5)  In my opinion, the Board is not entitled to receive the moneys on either of these grounds. The requirement that they be paid is in effect the imposition of a tax (Commonwealth v. Colonial Spinning Co., 31 C.L.R. 421; Attorney-General v. Wilts United Dairies 1922 L.J.K.B. 897). A tax may not be imposed except by or under an Act of the Parliament and section 14 of the Coal Industry Act should not, I think, be construed, in the absence of express words, as authorising the Board to impose a money charge. The two cases referred to are also authority for the proposition that an agreement to pay the money will not avail the Board where the money is demanded as a condition of the exercise of a statutory power or discretion.

(6)  Although the Board was not entitled to demand the moneys, it could be authorised by Act of Parliament to demand such moneys in the future, that is to say, it could be given express power to collect a levy or a tax imposed on coal exporters. A point requiring special attention in any such plan is the Board’s desire that different amounts should be paid per ton in different ports of the Commonwealth. A taxation law must not discriminate between States or parts of States (Constitution s. 51(ii)). It should, however, be possible to avoid discrimination, for example, by planning the tax as an excess profit tax. Where the domestic price of coal varied in different ports, the excess profit would vary, but the same rate of tax could be applied, and in practice the Board should be able to obtain the differing payments it desires. The exact method could usefully be discussed further as required.

(7)  The Board’s right to retain the payments it has already received is doubtful. I am unable to advise with more certainty at the moment, because each case would need individual consideration on its own facts. Money paid voluntarily under mistake of law is ordinarily not recoverable. It might be difficult to show that these cases fall within the rule. It would be necessary to know by what means the companies were induced to make the payments. Until, however, action is brought by the companies for recovery of the moneys paid, I think further consideration of the Board’s position could be deferred, particularly if it is proposed to introduce retrospective legislation validating the receipt of the moneys.

(8)  Whether or not validating legislation should be introduced is, of course, a question of policy. It might be thought undesirable to impose a tax retrospectively, but if this course be decided on, I think valid legislation could be prepared. The precise form of any such legislation is a matter for discussion with the Parliamentary Draftsman.

[Vol. 39, p. 258]