Commonwealth Numbered Regulations - Explanatory Statements

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PRAWN EXPORT PROMOTION LEVIES AND CHARGES REGULATIONS 1997 NO. 409

EXPLANATORY STATEMENT

STATUTORY RULES 1997 No. 409

Issued by the Authority of the Minister for Resources and Energy

Prawn Export Charge Act 1995

Prawn Boat Levy Act 1995

Prawn Export Promotion Act 1995

Prawn Export Promotion Levies and Charges Regulations

The Prawn Export Charge Act 1995 (Charge Act), Prawn Boat Levy Act 1995 (Levy Act), and Prawn Export Promotion Act 1995 (Export Promotion Act), provide respectively in their sections 7, 9 and 28, that the Governor-General has power to make Regulations prescribing the rates of prawn export charge and prawn boat levy, arrangements for their collection and other matters related to export prawn promotion.

These Acts, which came into effect on 1 July 1995, give legal force to a Governmentindustry scheme to promote Australian sea-caught prawns in overseas markets using funds raised from industry by means of the export charge and boat levy. The Charge Act and Levy Act impose the export charge and boat levy under section 4 of each Act and the Export Promotion Act provides for the collection, management and expenditure of these funds.

Under the respective sections 7 and 9 of the Charge Act and Levy Act, before making Regulations prescribing the rate of export charge or boat levy, the GovernorGeneral is to take into consideration any recommendation relating to the proposed Regulations made to the Minister by the prescribed industry organisation and approved at the last annual general meeting of the organisation held before the making of the recommendation.

Section 6 of the Export Promotion Act provides that the prescribed industry organisation is the Australian Prawn Promotion Association Limited (APPA), and a copy of APPA's recommendations, approved at its annual general meeting held on 12 November 1997, is at Attachment B. The rate of boat levy recommended by APPA was zero and the amount of export charge recommended was $0.02 a kilogram.

The purpose of the proposed amendments to the Regulations is partially to implement the decision by the Minister for Resources and Energy to abolish the prawn boat levy and prawn export charge from 1 January 1998.

A Regulatory Impact Statement is at Attachment A.

The Minister's decision to abolish the levy and the charge was made after he considered APPA's recommendations, the results of discussions with APPA, representations from prawn operators and exporters, and the results of an industry plebiscite.

The plebiscite showed that 85 per cent of the operators that voted opposed the levy and the charge. The response rate, 67%, was extremely high.

The Minister considered the results in the context of the Government's view that primary industry levies should only be imposed on an industry if the levies have substantial industry support, and there is significant market failure.

After considering all of the available material, the Minister announced that the prawn boat levy and prawn export charge would be abolished as of 1 January 1998.

The amendment to the Regulations will only partially implement the Minister's decision to abolish the boat levy and export charge. In order to cease the boat levy by 1 January 1998, amendments to the Levy Act are also necessary because the levy amount provided for in the regulations applies to a full "levy period" which is defined by the Levy Act as a financial year. It is not possible to change the levy amount half way through the levy period (ie. from 1 January 1998).

The Regulations will prescribe a nil rate for the prawn export charge as of 1 January 1998, and will split the current boat levy amount for the current levy period (ie. 1 July 1997 to 30 June 1998) into two amounts.

Splitting the current boat levy payment, and providing that only half of the levy is payable in January 1998, with the remainder of the levy being payable on 30 June 1998 will allow for amendments to be made to the Levy Act prior to 30 June 1998 that will have the effect of halving the amount of levy imposed for the levy period beginning 1 July 1997, thus in effect eliminating the second payment.

The Regulations, with respect to the boat levy, will in effect have the same outcome as terminating the boat levy as of 1 January 1998, but require additional future action to amend the Levy Act before the end of the levy period (30 June 1998) in order to ensure that the decision to cease the boat levy is implemented. The Export Charge Act will also be repealed at a later date, thus terminating the export charge from 1 January 1998.

Details of the Regulations are set out below:

Regulation 1 provides that the amendments take effect on 1 January 1998.

Regulation 2 provides that the Prawn Export Promotion Levies and Charges Regulations are amended as set out.

Regulation 3 provides that there will be no prawn boat levy prescribed from 1 July 1998.

Regulation 4 provides that no prawn export charge be prescribed from 1 January 1998.

Regulation 5 provides that half of the boat levy prescribed for the levy period commencing 1 July 1997 is due for payment on or before 28 January 1998 and that the other half is due for payment on or before 30 June 1998.

Splitting the levy payment is necessary because normally the levy is imposed on 1 July for the full levy period (ie. the financial year) and in order to achieve the desired result of terminating the levy as of 1 January 1998, it is necessary to have two payments, the first being for the first half of the full levy period, and the second being for the remainder of the levy period, payable on 30 June 1998. Splitting the levy payment will then allow for amendments to be made to the Levy Act prior to 30 June 1998 that will have the effect of halving the amount of levy imposed for the levy period beginning 1 July 1997, thus in effect eliminating the second payment.

Regulation 5 also provides that if a ship becomes a commercial prawn boat on or after 1 January 1998 then any levy payable' must be paid on or before 30 June 1998.

Regulation 6 provides that returns under the Regulations for the period 1 July 1997 to 31 December 1997 are to be lodged at the office of the Secretary on or before 28 January 1998. Under normal circumstances, returns would only be lodged once the threshold of 5,000 kilograms is passed, but under the amended regulation it is intended that any person who exports sea-caught prawns, parts of sea-caught prawns or sea-caught prawn products during the period 1 July to 31 December 1997 must lodge a return regardless of whether they are liable to pay the export charge or not.

Note:

Once the Levy Act is amended retrospectively to terminate the levy from 1 January 1998, no levy will be payable for the second half of the levy period commencing 1 July 1997 in respect of ships that do not become commercial prawn boats in that levy period until on or after 1 January 1998.

The proposed amendments are to commence on 1 January 1998.

Attachment A

REGULATION IMPACT STATEMENT

for the proposed amendments to the

PRAWN EXPORT PROMOTION LEVIES AND CHARGES REGULATIONS

B.1       PROBLEM OR ISSUE IDENTIFICATION

In 1989 the Australian Prawn Promotion Association Ltd (APPA) was formed with the objective of increasing the awareness, profile and value of Australian sea caught prawns and the Australian prawn industry on world markets. APPA membership is not compulsory.

The prawn industry has approximately 480 operators, 28 of which are members of APPA.

In 1995, following numerous industry representations, the previous Government introduced the Prawn Boat Levy Act 1995 (the Levy Act), the Prawn Export Charge Act 1995 (the Charge Act) and the Prawn Export Promotion Act 1995 (the Export Promotion Act). This suite of legislation imposes a compulsory prawn boat levy and a prawn export charge, to provide a funding base for the prawn promotion activities of APPA

*       the current boat levy is $50 for a ship that is less than 10 metres long; $100 for a ship that is at least 10 metres but less than 15 metres; $200 for a ship that is at least 15 metres but less than 18 metres long; $400 for a ship that is at least 18 metres but less than 20 metres; and $600 for a ship that is at least 20 metres long

*       the current export charge is 2 cents ($0.02) a kilogram net weight of exports of sea-caught prawns, parts of sea-caught prawns and prawn components of sea-caught prawn products, payable by an operator only after the operator reaches a threshold of 5,000 kilograms of prawns.

The amount of boat levy collected is approximately $150,000 a year. The amount of export charge collected is approximately $240,000 a year, which varies depending on the quantity of prawns exported.

The Fisheries Research and Development Corporation (FRDC) funds the collection of boat levies and export charges and the amount is then recovered from the levies/charges collected. The Levies Management Unit (LMU) in the Department of Primary Industries and Energy takes action to recover outstanding levies/charges on a cost recovery basis.

Government support for APPA and the compulsory levies/charges was predicated on there being widespread industry support at the time.

However, since late 1996 Senator the Hon Warwick Parer, the Minister for Resources and Energy, (the Minister) has been receiving representations from disaffected industry members, and by other Members of Parliament on behalf of their constituents, indicating a lack of support for the levies/charges.

*       there was considerable resistance to paying the levies/charges by a number of operators, principally due to

- the boat levy being seen as double charging (ie exporters, and fishers may be required to pay levies on the same prawns);

- the annual APPA membership fee was considered to be an impediment to increased industry involvement because a levy/charge payer could not participate in the decision making process unless the levy/charge payer was a member of APPA.

As a result of this widespread industry dissatisfaction with compulsory levies/charges, a plebiscite was undertaken to assess the level of support within the prawn industry for their continuation

*       85 per cent of those who participated in the plebiscite opposed the continuation of the levies/charges.

Following consideration of the results of the plebiscite and discussions with prawn industry operators and representatives of APPA, on 4 November 1997 the Minister announced that the boat levy and export charge would be terminated as of 1 January 1998.

In announcing his decision the Minister stated that the Government believed that compulsory primary industry levies should only be imposed on an industry if the levies have substantial industry support, and there is significant market failure, which was not the case in the prawn industry. This reasoning is also consistent with the broader Government policy statement titled "General Principles Applying to Proposals for new and changed Primary Industry Levies for R&D, Promotion, Marketing or Fees for Chemical Residue Testing and Animal Health Services" (copy attached).

B.2 SPECIFICATION OF THE DESIRED OBJECTIVE

The objective is to implement the Minister's decision to cancel boat levies under the Levy Act and export charges under the Charge Act from 1 January 1998.

B.3       IDENTIFICATION OF THE OPTIONS (REGULATORY AND NON-REGULATORY)

There are two ways of implementing the decision.

(1)       Amending the Regulations and the Levy Act (Recommended option)

Amendment of the Levy Act is necessary because the levy amount applies to a "levy period" which the Levy Act defines as a financial year. A change to the levy amount during a "levy period" therefore requires a change to the definition of "levy period" in the Levy Act.

Under this option the Regulations are amended to:

(a)       prescribe a nil charge from 1 January 1998; and

(b)       divide levy payments into two within the full levy period:

(i)       half of the present prescribed amount levy would be payable in the first half of the levy period - 1 July 1997 to 31 December 1997; and

(ii)       the remainder of the levy would be payable in the second half of the levy period - 1 January 1998 to 30 June 1998; and

In the Autumn 1998 session of Parliament, prior to the end of the second half of the 1997/1998 levy period, an amendment to the Levy Act will be proposed which will cancel the payment for the second half of the levy period. The Acts will also be amended so that no levies/charges are imposed from 1 January 1998. No additional financial burden is imposed on levy payers as a result of the proposed retrospective amendments to the Acts.

The Acts will be repealed in about 2 years, possibly by a sunset provision, to enable all outstanding levies and charges to be either collected or written off. Repealing the Acts before this may adversely affect recovery action.

(2)       Repealing the Acts without amending the Regulations

Repealing the Acts will take some time and it would not be possible before 1 January 1998. Repealing the Acts too early may create difficulties in the Commonwealth's ability to collect outstanding levies and charges.

B.4       ASSESSMENT OF IMPACTS (COSTS AND BENEFITS)

Costs to prawn industry operators

Costs

The termination of charge/levies will reduce the future funding available for APPA activities such as promotional campaigns for Australian sea-caught prawns and the Australian prawn industry overseas

Exporters dependent on APPA will have to organise their own promotional activities and APPA will have to organise its own funding sources.

As there is no market failure, and the benefits of APPA's promotional activities are problematic. The removal of levies and charges will have no impact on the demand and price for prawns on the export market.

Benefits

There are no direct costs imposed on commercial prawn operators as a result of the Regulatory amendments.

The Regulatory amendments will terminate levies/charges, thus reducing administrative and financial costs to small business operators.

As APPA collects levies/charges, it's work load will be reduced as it will no longer have to carry out the task of reconciling data and payments received from levy and charge payers with boat registration and prawn export data.

APPA will continue as a private company governed by the decisions of its membership and it's board, with the ability to obtain funds from other sources.

Removal of levies/charges will have no impact on consumers, but there will be a direct benefit on the prawn boat owners who will no longer have to pay the boat levy and exporters will no longer have to pay the export charge.

Cost to Government

Costs

Nil.

Benefits

Nil.

Restrictions on competition

Nil. Effects on small business

The amendment will reduce paperwork and record keeping required of businesses under the scheme.

B.5       Consultation

Those in the prawn industry who pay levies/charges were consulted via a prawn export promotion levy plebiscite, which was undertaken to assess the level of support for continuing the levies/charges

*       the outcome of the plebiscite indicated that 85 per cent of those who participated in the plebiscite opposed the levies/charges

*       the lack of support was also evidenced by the number of direct representations to the Minister by disaffected industry members and from representations by other Members of Parliament on behalf of their constituents.

Prior to announcing that the levies/charges will be abolished, the Minister considered the results of the plebiscite and had discussions with prawn industry operators and representatives from APPA:

*       the primary concerns expressed by industry members and Members of Parliament who support the continuation of levies /charges were that termination may cut APPA's activities "off at the knees"

-       a large number of direct representations by disaffected industry members that did not support APPA or the activities of APPA highlighted considerable resistance to paying the levies/charges by a number of operators.

There has also been consultation with the APPA Chairman and Executive Officer with regard to the proposed amendments to the Regulations. The proposed course of action was announced at the APPA Annual General Meeting and in accordance with Regulation 9 of the Regulations a draft was forwarded to the Minister to be forwarded to the Governor-General for consideration at Executive Council.

B.7       CONCLUSION AND RECOMMENDATION

Since the provisions that set the amount of levies and charges are contained within the Regulations and there is no other option other than legislative change to terminate the levies and charges, the recommendation is to amend the Regulations as an interim method of terminating the levies from 1 Jan 1998 until the Levy Act, the Charge Act and- the Export Promotion Act can be repealed.

B.7 IMPLEMENTATION AND REVIEW

The amendments to the Regulations will be administered by Fisheries & Aquaculture Branch in DPIE. It is proposed that the amendments to the Regulations will be considered by the Governor-General before the end of 1997, at the Executive Council meeting of 20 December 1997.

The amendment to the Regulations is very simple and the impact on small business will be minimal.

The amendments to the Acts will then be proposed in the Autumn 1998 session of Parliament, to provide retrospectively that no levy can be imposed after 1 January 1998. This will give final effect to the Minister's decision to terminate levies/charges from 1 January 1998.

Attachment B

AUSTRALIAN PRAWN PROMOTION ASSOCIATION LTD

17 November 1997

Senator the Hon Warwick Parer

Minister for Resources and Energy

Parliament House

CANBERRA ACT 2600

Dear Minister

The Annual General Meeting of the Australian Prawn Promotion Association Ltd was held on 12 November 1997. In accordance with the legislative requirements for changes to the levy rates, the AGM considered and unanimously carried the following motion:

'Considering

(a) the results of the recent plebiscite,

(b) that the plebiscite did not solicit responses that differentiated attitudes to the Boat levy and the Export Charge,

(c) that a single export charge was the originally preferred option and

(d) that the removal of the Boat Levy is in keeping with Government policy to give administrative relief to small business,

the members of the Australian Prawn Promotion Association Ltd recommend to the Minister for Resources and Energy, pursuant to subsections 9.(2) and 9.(3) of the Prawn Boat Levy Act 1995 and subsections 7.(2) and 7.(3) of the Prawn Export Charge Act 1995, that

(1) the prawn boat levy be set at zero, and

(2) the prawn export charge be maintained at $0.02/kg.'

In view of this recommendation from APPA, I would appreciate your giving consideration to a poll of exporters on the question of the continuation of the export charge. R was suggested in discussion at the AGM that a working party of Departmental officials and representatives of APPA could be established to agree on the wording and style of approach to the industry, given the belief that the recent plebiscite was biased against the levies. I would appreciate your views on this proposal.

1 refer to your media release of 4 November 1997 headed 'Government abolishes prawn levies'. In the absence of any formal advice on your decision, 1 would be grateful for clarification of the situation in respect of the boat levy. Currently, the boat levy is applied on a financial year basis, with payment due by 31 December is it intended that boat operators Will pay as in previous years, or that the levy will apply on a pro rata basis (ie half the current rate)?

1 look forward to your advice.

Yours sincerely

W R Widerberg

Chairman


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