Levy inquiry pitch begins

20 Feb, 2015 01:00 AM
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Senator David Leyonhjelm.
There seems to be very strong support already for improved accountability in the system
Senator David Leyonhjelm.

MOVES to increase the transparency and accountability of agricultural levy spending are continuing to gather political momentum in Canberra.

About 150 submissions, available for public viewing, have been received from farm groups and other key stakeholders to the federal Senate inquiry into agricultural levies.

The Rural and Regional Affairs and Transport References Committee inquiry was established last year and is due to report its recommendations by June 30.

Public hearings were held earlier this month in Sydney, Melbourne and Canberra with another scheduled for Perth on Friday, February 20.

In its inquiry submission, the Council of Rural Research and Development Corporations (CRRDC) said grower levies and matching Commonwealth contributions combined, provided about $500 million of research, development and extension (RD&E) funds, managed by the research and development corporations (RDC).

In quoting a 2011 Productivity Commission (PC) report, the Council said that the $500m represents around a third of total national annual investment in agricultural related RD&E funding of about $1.5 billion.

The PC report also said about 50pc of rural RD&E funds come from the Commonwealth ($715 million annually) and about 25pc is contributed by States and Territories.

The other 25pc is derived from industry compulsory levies ($270-300m) and direct research and development (R&D) investment (deduced from R&D tax offsets).

Accountability is the objective

NSW Liberal Democratic Senator David Leyonhjelm has welcomed the broad ranging investigation to try and improve transparency outcomes for primary producers.

Senator Leyonhjelm said a common theme to emerge during the four public hearings to date was the need to consider potential reforms that give levy-payers a greater say on how their funds are spent and increased accountability measures.

He said another repeated theme was the inability to properly identify and communicate with levy-payers, of various commodities, between various industry bodies and government agencies.

“Without pre-empting any outcomes of the inquiry, there seems to be very strong support already for improved accountability in the system which has always been my objective,” he said.

At an inquiry hearing in Canberra earlier this month, GrainGrowers Limited (GGL) trade and market access manager Dr Cheryl Kalisch Gordon conceded there was no comprehensive list of grain grower levy-payers and subsequently no way of contacting them.

“Out of the Marsden Jacob report that was initiated by the industry last year one of the key recommendations was that this was a ridiculous situation,” she told Committee Senators.

“So the key recommendation that we have been trying to move along is the establishment and movement of that database.”

Australian Wool Innovation executives appeared before the same hearing saying they had 55,964 levy-payers of which 40,446 are eligible levy-payers who had been paying $100 or more in levies for three consecutive years.

Identifying levy payers from members

Australian Wool Innovation (AWI) CEO Stuart Mr McCulloch said those eligible levy payers can vote at WoolPoll.

“Of those eligible levy payers, every year AWI writes to them and asks the ones who are not shareholders whether they want to be a shareholder,” he said.

“We know who they are, where they live, what their names are and how much levy they pay.”

Senator Leyonhjelm favours the WoolPoll as a potential standard for other levies to benchmark against.

He asked how AWI had solved the issue of being unable to identify its levy-payers.

“The challenge we have heard many times is that there are levy-payers and there are members, and you know who your members are but you do not know who your levy-payers are and so forth,” he said.

Mr McCullough said the problem was solved through a combination of the way the collection had been structured over time and how AWI works with the Agriculture Department’s Levies Revenue Service (LRS).

“We are always looking at ways of improving things with them,” he said.

“They are a very effective mechanism to deal with the brokers, a very powerful mechanism to deal with the brokers, and insist on things being done a certain way.

“We discovered something the other day that we are getting investigated that we think is a weakness, and those things pop up all the time.

“I suppose it is an evolution.”

Consultation onus on industry bodies

At the first inquiry hearing in Canberra last November, Department of Agriculture officials conceded the LRS didn’t know who all the levy-payers are.

Department acting First Assistant Secretary, agricultural policy division, Matthew Koval said the obligation to communicate and consult with levy-payers - not just peak industry bodies, prescribed industry bodies, representative organisations - was the industry service bodies'.

“For example, Australian Wool Innovation or Cotton Research and Development Corporation should actually go out there and make attempts to communicate to all levy-payers, not just those who are members of an industry organisation,” he said.

“We sit down with them on a six-monthly basis and go through governance and accountability arrangements.”

GGL policy and advocacy general manager David McKeon said consultation with his group’s 19,000 members showed they believed there was scope for operational and cultural improvement to the RDC model.

But Mr McKeon said growers remained supportive of the investment of levy funds into research, development and extension.

“It is an investment that has seen RD&E make a significant contribution to sustained growth and maintenance of competitiveness in the grains industry,” he said.

Mr McKeon said GrainGrowers had surveyed its member views on the 0.99pc grains levy and 62 per cent of respondents had voted for the status quo, while 5pc voted for an increase.

He also put forward GrainGrower’s recommendations to the inquiry, including a regular review of the levy rates at five-year intervals, and consultation on industry views for an additional levy for marketing, or a component of the current pooled levy funds to be redirected for marketing.

Mr McKeon also recommended the appointment of a “diligent” representative organisation that can appropriately oversight the Grains Research and Development Corporation (GRDC) and therefore the levy-payer funds and an annual survey of growers to hear feedback on research priorities.

Mr McKeon said increasing the 0.99pc GRDC levy may not be an issue “but ultimately that should be up to levy payers to decide”.

“Our recommendation is a review of the levy by growers every five years,” he said.

“Ultimately, it should be up to the growers. “They may wish to increase it. They may wish to maintain it or they may wish to decrease it or abolish it.

“That ultimately should be up to the levy payers.”

The marketing issue

Dr Kalisch Gordon said feedback from GrainGrower’s members and its policy body was that a component of the levy should be directed to a marketing system.

But she said that role wouldn’t necessarily be performed by the GRDC - which has an annual budget of about $180 million in grower levies and matching government funds.

“It would have a whole lot of caveats with it, because you need a joint supply chain response to this,” she said.

“But it is something that is well on our agenda.”

Dr Kalisch Gordon said the closest to a complete list of all the GRDC levy payers would be held by the National Grower Registry (NGR).

Western Australian Greens Senator Rachel Siewert said the inability to contact all levy payers, “seems to be a pretty common theme we are coming across”.

Dr Kalisch Gordon said levies are collated by the first receiver - being traders primarily and then directed via the NGR onto the LRS.

“Collectors would be traders,” she said.

“They are the ones that are audited by the LRS when they are travelling around, to make sure that payments are being made.

“That is distinct from the growers, whose invoices are reduced by the amount of the levies.

“Someone like CBH would know who they had deliver (grain) to them - and they would have an idea of their levy payers.

“And each of the other traders will know who they deducted levies for and transferred them through, but there is no comprehensive list.

“CBH will not be able to tell you that 'Joe Blow' also delivered down the road and contributed levies.”

One size does not fit all: NFF

The National Farmers Federation (NFF) has recommended the Senate Committee consider the various needs of individual commodities - like grains, wool, sugar and cotton - in consideration of any changes to levy payers’ ability to influence the imposition of levies.

At this month’s Canberra hearing, NFF deputy CEO Tony Mahar said the inquiry into the current RD&E arrangements was welcomed but “such an inquiry must not lose sight of the key principles behind the levy system that are as true today as they were at the time when the levies were first implemented”.

“Australia's levy-funded rural research and development corporations have played and are playing an increasingly important role in funding agricultural research and development in Australia in the face of declining levels of investment by State governments,” he said.

“The benefit and value that those levy funds deliver for the sector is critical to maintaining the national agricultural R&D investment productivity and, importantly, profitability levels.

“From the NFF's perspective, in exploring such improvements in R&D innovation, some consideration should be kept in mind.

“Actions aimed at improving accountability and efficiency should always be considered on a cost-benefit basis.

“A one-size-fits-all approach may not be appropriate,” he said.

“A flexible approach is required, and the long-term stability of the levies must be maintained.

“Research of this nature often has a long lead time, and the uncertainty in funding arrangements in the short term may jeopardise the realisation of long-term outcomes of RD&E.”

FarmOnline
Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Jock Munro
20/02/2015 2:59:24 AM

RDC levy payers should be able to vote for directors and nominate for election in an open democratic process. At present we have a system that is rife with cronyism through a selection committee process and there is no worse example then the bloated GRDC. We clearly have taxation without representation and there is no place for this in Australian agriculture.
angry australian
20/02/2015 8:06:23 AM

Transparency and accountability are all well and good but shouldn't it also be important that we see just what benefit these levies give us, not just producers but as a nation. From where I sit it appears as if a heap of dollars goes to paying shiny bums on seats and aspiring industry people who want to advance a prospective political career. The research industry, for that is what it is, is adept at milking both producers and taxpayers. I will keep hammering the point until these levies are tied to profitability/productivity increase we don't need them. Increase profits, we pay tax not levies
Lee
20/02/2015 8:37:24 AM

The current recommendation to Joyce re the grass fed cattle transaction levy Senate Inquiry is almost the total destruction of the Senate Inquiry recommendations. If you look at it it looks like Joyce's own department wrote it! I'd say the department of agriculture wants to maintain taxation without proper representation for another 20 years and it is a bloody disgrace!
The Serf
20/02/2015 10:15:28 AM

i agree there is no real economic benefit from the cattle levy at all, productivity gains of 1% -2% can never replace the erosion of profit below sustainable profitable levels. The document I have seen certainly looks like it has been drafted from within the department's "Agriculture Policy Taskforce" - "Agricultural Policy Division" - the structure is designed to be the direct opposite of the Senate Recommendations - exculcive, none of the other 6 recommendations will ever see the light of day if this is implemented; only a senate dis-allowance motion will secure our future!
John NIven
20/02/2015 5:47:49 PM

Just abandon the nonsense. Sen Leyonhjelm knows what he is talking about on this one.

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