Navigating the levy labyrinth

29 Jul, 2015 02:00 AM
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Levy arrangements seem something like a black box and on the inside they appear like a maze

OPINION: AUSTRALIA’S rural levies system and the structures that underpin it are complex, convoluted and difficult to penetrate.

This finding from the Senate Rural and Regional Affairs and Transport References Committee’s recently completed inquiry examining the research, development and marketing levies came as no surprise.

There are 74 commodity levies and more than 15,000 collection points across the agriculture, fisheries and forestry industries.

Department of Agriculture figures show that about $430 million was collected in levies in 2014-15 with money disbursed to 18 different organisations and the entire process needing almost 30 full-time departmental jobs to manage.

From the outside, levy arrangements seem something like a black box and on the inside they appear like a maze of bureaucracy and jargon.

Yet the inquiry found general support for the levies system, indicating that Australia’s approach and commitment to rural innovation through the rural Research and Development Corporations (RDCs) is delivering real and tangible benefits to producers.

This does not mean everything within the system is operating at its optimum, but the inquiry did identify some sensible opportunities for improvement; primarily to increase transparency for producers about what levies they pay, how that money is managed and what value is created.

The committee was also concerned that levy payers be given a say on how levies are used and saw this industry engagement as fundamental to the system’s integrity.

The participating Senators did not go so far as to suggest that every industry should conduct a regular poll of levy payers, noting that the complexity and diversity of rural industries means a one-size-fits-all solution is just not appropriate.

It is up to each industry to determine what is right for them.

The rural RDCs are a partnership between industry and government and our operating model is unique and envied around the world, for the way brings industry to the innovation table and gives them a strong voice.

Levies are the mechanism industry uses to ensure there is funding available to pay for the research and development that drives improvement, with rules in place to secure and assure the agreement of producers before a levy can be established or amended.

Some industries have also agreed to use the levies system to support market access, development and promotional programs designed to increase market opportunities and build demand for Australian products.

Without the industry-government partnership and the funding through the levies system, it is likely that the nation’s overall investment in rural innovation would be significantly less than it is today, and probably shrinking.

Effective innovation programs need long-term funding and without innovation our rural industries would be going backwards in real terms relative to competitors.

However, the partnership that is the model’s great strength was also identified by the inquiry as a source of a challenge for reform and modernisation.

For example, for most industries there is no complete and up-to-date register of all the producers who pay levies or of how much they pay.

Levies are paid by producers but collected by the government, more often than not from third parties along supply chains, such as wool brokers, livestock agents, cotton gins and chicken hatcheries.

This creates efficiencies, reducing costs and red tape.

Managing the system has not needed, or been resourced, to track levies right back to every farmgate.

A lot has changed since the first compulsory agricultural levy was established in 1936, or even since the current RDC model was developed and implemented 25 years ago.

Today’s technology opens up new possibilities, but privacy legislation prevents the Department of Agriculture and many the RDCs from quickly and regularly getting a complete list of producers who have paid a levy.

Each RDC has extensive stakeholder lists which capture significant but varying proportions of their industries by number of levy payers and by production.

But inclusion on these lists does not come automatically with paying a levy.

Those who haven’t signed up may be missing out.

As there is no complete list of levy payers, demonstrating agreement within industry to a levy change, whether of its rate, formula, collection, purpose or existence, becomes more difficult.

Voting entitlements that balance the number of producers against the volume of production can be based upon amount of levies paid, if this detail is available.

A further issue is that the process to change a levy must be completed by government.

Increasing flexibility for levy payers to amend levies will need political will as well as bureaucratic support.

While the committee has recommended the Department of Agriculture provide industries with time frames, levy decisions rest with ministers, rely on government processes which can be delayed for any number of reasons and are scrutinised by Parliament.

Remember that this inquiry was triggered by the government seeking to change three horticultural levies through the 2013 Budget.

The committee did not comment or make recommendation on these issues even though current experience suggests political processes are a greater source of delay than the administrative ones.

Suggesting the Department of Agriculture provide industries with time frames for decisions will not make a difference.

The other major recommendation from this inquiry relates to the identification and declaration of prescribed industry bodies.

These are the peak organisations and associations that the government formally recognises as representing industry for the purposes of the partnerships underpinning the rural RDCs.

These organisations have an important role within the system and the RDCs have a defined accountability requirement to their respective industry organisations as well as to the government.

It is important to note that the RDCs are not allowed to act as industry representative bodies, except for Australian Pork Limited, and all RDCs are expressly prohibited from engaging in any agri-political activity.

This is the domain of the industry representative bodies and in some industries it is a contested space.

The committee has recommended that organisations already declared as prescribed industry bodies, or who wish to be, must be able to meet certain credentials and thresholds, while the process used to determine a prescribed industry body must be transparent, uniform and contestable.

This could be useful to improve clarity and transparency for producers and officials about who the industry representatives are and who they are representing.

The RDCs work for the overall benefit of rural industries and seek to broadly engage with producer levy-payers. They are accountable to industry and government through a range of mechanisms.

We look forward to working with our industry partners and the government to progress some sensible improvements that can make a strong and stable system even better.

Selwyn Snell is chair of the Council of Rural Research and Development Corporations and Horticulture Innovation Australia Limited.

FarmOnline
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READER COMMENTS

angry australian
29/07/2015 6:21:37 AM

Is this a case of circle the wagons the empire is under attack Selwyn? Now over a $billion of farmers and taxpayers funds being spent on what? Fancy offices in Chifley Sq and Nth Sydney, overpaid bureaucrats answerable to who exactly, not industry or apparently Parliament. For that sort of money we should be able to cure cancer or the common cold! Tell me Sel what is the annual return to industry or the taxpayer on this ANNUAL TAX on our farmers? 5%,10%15%% or do you or any of the other RDCs know? Can it be measured? Do we need a system where individuals get paid for multi directorships...
angry australian
29/07/2015 6:34:49 AM

... of what essentially are government organisations? And what about the ownership of IP Sel,in your industry especially the right to "own" gene technology is well recognised why shouldn't the growers who paid for it be entitled to half the profits if it is then onsold or licenced? As for the Senate Committee, I am not certain that they fully appreciate the impact levies have on the everyday profitability of farmers, for no matter where the levy is collected the reality is everybody in the chain takes the money out of the price paid to the farmer.
angry australian
29/07/2015 8:23:06 AM

And, furthermore Selwyn, what about the fairness of a system that taxes farmers on turnover, not profit. Work all year, it's been a tough imaginary year, drought, flood pestilence all the typical problems make a LOSS, borrow more money than you should have because the government took a compulsory levy to fund RDCs. It's actually worse for fishermen because they pay levies on potential OPTIMUM turnover based on their quotas. If we have people like HIA, MLA, GRDC etc why do we need DoA? And vice versa? Selwyn, in my opinion you are trying to defend the indefensible.
Hilda Hereford
29/07/2015 3:20:32 PM

What a one sided article. Industry is government and the Ag Dept should relinquish the collection of these taxes to the ATO, via Bas statements that could create the register for levy payer voting on levy requirements , R&D etc. These levies have to be the biggest tax collection system without representation, that there is in the world and government knows it and wishes to maintain control of the millions collected for Little or no benefit to the levy payer. In effect this is a socialist system collecting taxes and the tax payer cannot vote the lot out of existence if they even wished to.
angry australian
29/07/2015 7:14:39 PM

Did I forget to say Selwyn, then there are issues of corporate governance, after all "we" ARE spending other people's money whether it be farmers or taxpayers. When directors and employees of RDCs fly on "corporate" business which end of the aeroplane do they sit in? Do they take the cheapest flight or pay flexible full fare? Who receives the frequent flyer points? So is flying directors and employees all over the country and putting many in high rent buildings in cities like Sydney and Canberra while overstaffing them with expensive staff making good use of our ag levies?
Hilda Hereford
30/07/2015 7:13:48 AM

Unfortunatey Angry, MLA is not a Corporation and the shareholders (taxpayers/levy payers) are not even identified. How can it be a company at all and even be registered as one
John Carpenter
30/07/2015 11:52:01 AM

MLA is not a "corporation" and in my view should be removed from the register.It cannot identify it's shareholders or their voting entitlements;it cannot give a proper notice of meeting;it is not controlled by it's directors;it is a prescribed body under the control of the Minister and the DoA;it is funded by a compulsory levy raised against it's members;and last but not least it is classified as a government agency.This is a scandal!
newbroom
30/07/2015 2:20:43 PM

I understand MLA is a limited by guarantee company and comes under the Corporations Act 2001. ASIC regulates the Corporations law. Take it up with them.
Hilda Hereford
30/07/2015 4:06:54 PM

Newbroom, we did and ASIC panicked referring it to the Minister whom did nothing. MLA is a public authority not a Corporation. Do a bit or research and see what you find, it is not a Corporation, tell me whom the individual shareholders are?
John Carpenter
30/07/2015 6:01:22 PM

ASIC an administrative body and not qualified or relevant to the issue I have raised which is pure company law. The points I have raised above cannot be denied. My submission to the Sterle inquiry dated jan 2014 stated that MLA should be wound up on the basic grounds that it could not produce a register of members without which it cannot, in my view, possibly exist. This means that every resolution passed in general meeting is invalid! MLA is repeatedly referred to as an "producer owned company" which is not true and highly misleading.The levy is a tax which the government use to fund its agency.
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