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High Court Ruling on Victoria's ZLEV Charge Act Sets Constitutional Precedent

Vanderstock v Victoria [2023] HCA 30 (18 October 2023)

Introduction: In a landmark decision, the High Court of Australia recently rendered judgment on Vanderstock v Victoria [2023] HCA 30, a case challenging the validity of Victoria's Zero and Low Emission Vehicle Distance-based Charge Act 2021. This case delved into the intricate interplay between sections 51(ii) and 90 of the Australian Constitution, shedding light on the taxation powers of both the Commonwealth and State governments. The Court's ruling, which declared a section of the Victorian Act invalid, has significant implications for fiscal federalism and the balance of power between states and the federal government in Australia. We explore the key issues, the ruling's implications, and the lessons learned from this precedent-setting case.


Facts:

The case in question is Vanderstock v Victoria [2023] HCA 30, heard by the High Court of Australia. The plaintiffs, Christopher Vanderstock and another party, challenged the validity of section 7(1) of the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) ("ZLEV Charge Act"). This provision purports to obligate the registered operator of a zero or low emissions vehicle ("ZLEV") to pay a charge for using the ZLEV on "specified roads", which include all roads in Victoria and elsewhere in Australia over which the public has a right to pass. The charge is determined annually at a prescribed rate for each kilometre travelled by the ZLEV on specified roads in a financial year. The plaintiffs argued that this provision is invalid because it imposes a duty of excise within the meaning of section 90 of the Constitution.

The defendant in this case was the State of Victoria, represented by R J Orr KC, Solicitor-General for the State of Victoria, with S Zeleznikow and M R Salinger. Various Attorneys-General from different states intervened in support of Victoria. The Attorney-General of the Commonwealth intervened in support of the plaintiffs.

The question for consideration was whether section 7(1) of the ZLEV Charge Act invalidly imposes a duty of excise within the meaning of s 90 of the Constitution. If so, this would mean that only the Commonwealth Parliament could impose such a charge.

In its judgment, delivered on 18 October 2023, the Court held that section 7(1) does impose a duty of excise and therefore is invalid. The Court ordered that the defendant should pay the costs of proceedings.

Issues:

The issues in this case revolve around the interpretation and application of sections 51(ii) and 90 of the Australian Constitution. These sections concern the taxation powers of the Commonwealth and State governments, respectively.

The first issue is whether a concurrent power to tax (s 51(ii)) equates to a limitation (s 90). The justices argued that these two provisions should not be conflated or interpreted to expand the power in s 51(ii) or the limitation in s 90.

The second issue relates to whether State taxation powers are concurrent with, and independent of, that of the Commonwealth. This question arises from different interpretations of Professor Zines' analysis on the scope of the taxation power in s 51(ii).

The third issue involves assessing whether what is proposed as a "duty of excise" - any tax on goods - alters and affects the structural, political and constitutional balance between State and federal governments.

The fourth issue is whether a tax with any assumed effect on demand for goods is beyond the legislative power of the States.

Finally, there is an issue concerning constitutional facts and their relevance in determining constitutional validity. The argument here revolves around whether it's appropriate for constitutional validity to be decided based on potential economic consequences, particularly without evidence.

All these issues are relevant because they involve significant interpretations of key provisions in the Australian Constitution that shape fiscal relations between different levels of government in Australia. Decisions made on these issues could have significant implications for state autonomy, fiscal federalism, and Australia's broader constitutional framework.

Main Issue: The main issue in the case of Vanderstock v Victoria [2023] HCA 30 was whether section 7(1) of the Zero and Low Emission Vehicle Distance-based Charge Act 2021 (Vic) ("ZLEV Charge Act") is invalid as it imposes a duty of excise within the meaning of section 90 of the Constitution.

Rule: Section 90 of the Australian Constitution gives exclusive power to the Commonwealth Parliament to impose duties of customs and excise. It restricts states from levying taxes on goods that could distort interstate trade, commerce, and market competition.

Application: The High Court examined whether the charge imposed by the Victorian legislation fell within the definition of an excise. The ZLEV Charge Act obliges registered operators of zero or low emissions vehicles ("ZLEV") to pay a charge for their use on specified roads, which includes all roads in Victoria and elsewhere in Australia where public access is granted. This charge is determined annually based on each kilometre travelled by the ZLEV on specified roads in a financial year, making it a debt payable by the registered operator to Victoria.

The court applied past judgments, particularly Capital Duplicators Pty Ltd v Australian Capital Territory [No 2] (1993) 178 CLR 561 and Ha v New South Wales (1997) 189 CLR 465, which held that duties of excise within s 90 are inland taxes on goods. The court had to consider whether a tax imposed at the stage of consumption could be considered an excise, something not decided in those previous cases. The court found that such a tax can indeed be an excise, contradicting Dickenson's Arcade Pty Ltd v Tasmania (1974) 130 CLR 177 and overruling its decision.

Conclusion: The court concluded that section 7(1) of the ZLEV Charge Act is invalid because it imposes a duty of excise within the meaning of section 90 of the Constitution. This decision reinforces the principle that the power to impose duties of customs and excise is exclusive to the Commonwealth Parliament.

Reasoning for Judgement: The court's reasoning was based on the definitions and characterizations of "excise" in previous cases and its application to this particular charge. They noted that a tax on goods imposed at the stage of consumption can indeed be an excise, which led them to overrule a previous decision (Dickenson's Arcade).

Take Home Lesson: This case reaffirms that states cannot enact laws that effectively impose taxes on goods, as this power is reserved exclusively for the Commonwealth Parliament under section 90 of the Constitution. It also broadens the definition of 'excise' to include charges imposed at the point of consumption, adding another layer of complexity to constitutional tax law. This means lawmakers must be careful when drafting legislation involving charges or taxes on goods, even when these are not traditional production or sales taxes.

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