EU Excise Duties and Section 90 of the Australian Constitution

• Author: Roshan Chaile,Gonzalo Villalta Puig
• Published date: 01 September 2010
• Date: 01 September 2010
• DOI: http://doi.org/10.1111/j.1468-0386.2010.00527.x

eulj_527658..684

EU Excise Duties and Section 90 of the

Australian Constitution

Gonzalo Villalta Puig* and Roshan Chaile**

Abstract: The constitutionalisation of the EU has been not without its challenges.

However, putting aside the apparent political difficulties of the constitutional process, this

article argues that, because the further constitutionalisation of the EU depends on its

ability to assimilate some features of a federal state, there are, at least, two reasons why

the EU is not yet ready for its constitutionalisation. The first reason is that its excise duty

system, which permits discriminatory and protectionist behaviour by Member States,

prevents the EU from achieving its fundamental objective of an internal market. The

second reason is the EU’s budget, which is so small that it is doubtful whether the EU will

survive its continuing enlargement. As a solution to this problem, this article introduces

section 90 of the Australian Constitution, which provides the Commonwealth of Australia

with the exclusive power to levy excise duties. The article argues that the adoption, by the

EU, of a similar fiscal arrangement would remove the discriminatory and protectionist

operation of its excise duty system and help enlarge the size of the EU’s budget by

providing it with a self- financing mechanism.

I Introduction

When speaking of a federal Europe, Jean Monnet, one of the champions of European

integration, warned that ‘[t]here will be no peace in Europe, if the states are reconsti-

tuted on the basis of national sovereignty...Thecountries of Europe are too small to

guarantee their peoples the necessary prosperity and social development. The Euro-

pean states must constitute themselves into a federation’.1In the years since this plea,

Europe, while not yet a federation, has moved towards absolute political, economic

and legal unity. Beyond the establishment of ad-hoc communities, like the European

Coal and Steel Community, Europe is now an official Union, with many of the features

of a modern nation state (the ‘EU’).2The latest stage in the movement towards

* BA LLB (Hons) GradDipLegPrac (Merit) ANU, LLM Canberra, GradCertHigherEd LLM (GBL) SJD

La Trobe, LLD Navarra; Senior Lecturer, Law School, University of Hull; 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.

** BIR LLB (Hons) La Trobe; Lawyer, Clayton Utz.

1Jean Monnet, National Liberation Committee (Algiers), 5 August 1943.

2See G. Villalta Puig, The European Constitution: Past and Future, Working Paper No 115 (Centre for

European Studies—The Australian National University, 2003).

European Law Journal, Vol. 16, No. 5, September 2010, pp. 658–684.

© 2010 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK

and 350 Main Street, Malden, MA 02148, USA

European integration is the constitutionalisation of the EU.3However, it is evident that

the further constitutionalisation of the EU relies on its capacity to assimilate the

features of a federal state. While some features of the EU are capable of federal

assimilation, there are, at least, two features that are not (yet).

One feature is economic and monetary union (the ‘internal market’). The creation

and preservation of an internal market was the objective that informed the establish-

ment of the EU. However, despite its fundamental importance to the success of the

European integration project, the EU does not yet have a genuine internal market. An

obstacle to the achievement of a genuine internal market is its excise duty system, which

allows Member States to set differential rates of excise duty and, as a result, sanctions

protectionist and discriminatory behaviour by Member States. Protectionism and dis-

crimination hinders free trade among Member States and, thereby, impedes the cre-

ation and preservation of a genuine internal market.

Another feature is government revenue. The EU’s budget does not allow the Euro-

pean Commission sufficient revenue to finance the enlargement of the EU.

While these features remain incapable of federal assimilation, it is questionable

whether the EU can further constitutionalise. This article argues that these two features

are capable of federal assimilation if the EU reforms its excise duty system and adopts

the excise duty system of that great southern federation: the Commonwealth of Aus-

tralia (the Commonwealth). The Commonwealth, by virtue of section 90 of the Aus-

tralian Constitution (the Constitution), has the exclusive power to impose excise duties.

Under a similar conferral of power, the EU would have the competence to raise

government revenue through the imposition of excise duties.

This new excise duty system would remove the obstacles to free trade that the current

excise duty system presents and, thereby, it would bring the EU closer towards a

genuine internal market. Further, this new excise duty system would establish an

additional revenue stream for the EU and, thereby, it would confer greater fiscal

autonomy on the EU as well as help it finance the costs of enlargement.

This article is, therefore, a comparative study of the excise duty system of the EU and

the excise duty system of the Commonwealth. A comparative study of the law of

different legal systems serves two valuable purposes. First, it identifies the values and

principles that inform the laws of a particular legal system and, second, it assists that

legal system to correct the defects in its laws by reference to the values and principles of

the other legal system.4Through its analysis and critique of section 90, this article

identifies the benefits of a similar conferral of power on the EU and extracts the kind

of considerations that the EU should take into account when it reforms its excise duty

system.

There are apparent similarities between the EU and the Commonwealth that make a

comparison of their respective legal systems appropriate. The relationship between the

two jurisdictions dates back to 1982: ‘On 26 February 1982, the Government of the

Commonwealth of Australia formally recognised the European Communities (EC) as

3The entry into force on 1 December 2009 of the Treaty of Lisbon 2007 has collapsed the three pillars and

unified the EU into a single entity with legal personality.

4S. Kiefel, ‘English, European and Australian Law: Convergence or Divergence?’, (2005) 79 Australian

Law Journal 220, at 227. See also G. Villalta Puig, ‘Free Movement of Goods: The European Experience

in the Australian Context’, (2001) 75 Australian Law Journal 639, at 640; G. Villalta Puig, ‘A European

Saving Test for Section 92 of the Australian Constitution’, (2008) 13(1) Deakin Law Review 99; K.

Zweigert and H. Kötz, An Introduction to Comparative Law (Oxford University Press, 3rd edn, 1998), at

3–4.

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