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PRIMARY INDUSTRIES (CUSTOMS) CHARGES AMENDMENT REGULATIONS 2002 (NO. 1) 2002 NO. 106
EXPLANATORY STATEMENTSTATUTORY RULES 2002 No. 106
Issued by the Authority of the Parliamentary Secretary to the Minister for Agriculture, Fisheries and Forestry
Primary Industries (Excise) Levies Act 1999
Primary Industries (Excise) Levies Amendment Regulations 2002 (No. 4)
Primary Industries (Customs) Charges Act 1999
Primary Industries (Customs) Charges Amendment Regulations 2002 (No. 1)
Primary Industries Levies and Charges Collection Act 1991
Primary Industries Levies and Charges Collection Amendment Regulations 2002 (No. 2)
Section 8 of both the Primary Industries (Excise) Levies Act 1999 (the Levies Act) and the Primary Industries (Customs) Charges Act 1999 (the Charges Act) provide that the Governor-General may make regulations prescribing matters required or permitted by that Act to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to each Act.
Section 30 of the Primary Industries Levies and Charges Collection Act 1991 (the Collection Act) provides that the Governor-General may make regulations prescribing matters required or permitted by that Act to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to that Act.
The purpose of the Regulations is to implement a research and development (R&D) levy and export charge scheme for the onion industry. The levy and export charge will be imposed on hard onions (being bulbs of the species Allium cepa) and payable by onion growers or exporters.
Horticulture Australia Limited (HAL) is the industry services body and it co-ordinates R&D programs for many horticultural industries. It will be the body to manage moneys for the levy and export charge scheme for the onion industry. HAL is funded by statutory levies and export charges, voluntary contributions and Commonwealth Government matching funding for eligible R&D expenditure.
Subclause 4(3) of Schedule 15 of the Levies Act and subclause 3(5) of Schedule 10 of the Charges Act provide that regulations may fix a rate of levy and export charge, respectively, for R&D purposes.
Subclause 6(6) of Schedule 15 of the Levies Act and subclause 5(5) of Schedule 10 of the Charges Act provide that before the Governor-General makes regulations to respectively fix rates of levy and export charge the Minister must take into consideration any relevant recommendations made to the Minister by HAL.
Subclause 6(8) of Schedule 15 of the Levies Act and subclause 5(7) of Schedule 10 of the Charges Act respectively require HAL to consult with the body that is the eligible industry body for the relevant horticultural product before recommending rates of levy and export charge to the Minister.
Subclause 6(9) of Schedule 15 of the Levies Act and subclause 5(8) of Schedule 10 of the Charges Act require that a recommendation made by HAL to the Minister be accompanied by a written statement of the views of the industry body consulted in relation to the recommendation. The Regulations prescribe the Australian Onion Industry Association (AOIA) as the eligible industry body with which HAL must consult in relation to hard onions. HAL recommended the initial operative rates of levy and export charge to the Minister after consultation with the AOIA. The Regulations give effect to the recommendations of BAL, which are consistent with the onion industry's request.
The Regulations:
• Prescribe AOIA as the eligible industry body to be consulted by HAL before making recommendations to the Minister about levy and export charge;
• Impose a statutory R&D levy and export charge on hard onions;
• Set an initial operative levy and export charge rate of $1.60 per tonne on hard onions. The moneys raised will to go to HAL to fund R&D. The Commonwealth will match eligible expenditure by HAL on R&D on a $1 for $1 basis; and
• Provide for the manner of payment of levy and export charge, the provision of returns by persons who become liable to pay the levy and export charge and the keeping of records.
In order to minimise costs, the levy and export charge are to be collected at the same time and under comparable arrangements as are in place for the existing National Residue Survey (NRS) levies on onions.
The Office of Regulation Review was consulted in the preparation of the Regulations. A Regulation Impact Statement is attached, as annex "A".
Details of the Regulations are set out in the Attachment.
The Regulations commence on 1 July 2002.
ATTACHMENT.
PRIMARY INDUSTRIES (EXCISE) LEVIES AMENDMENT REGULATIONS 2002 (No. 4)
Regulation 1 provides for the name of the regulations to be the Primary Industries (Excise) Levies Amendment Regulations 2002 (No. 4).
Regulation 2 provides for the commencement date to be 1 July 2002.
Regulation 3 provides that Schedule 1 amends the Primary Industries (Excise) Levies Regulations 1999, (the Excise Levies Regulations).
SCHEDULE 1 AMENDMENTS
Item 1 substitutes in Schedule 15, paragraph 17. 1 (c), which relates to the vegetable levy, the term hard onions with the term hard onions (being bulbs of the species Allium cepa). This is intended to clarify the specific varieties not covered by the arrangements for the vegetable levy.
Item 2 amends Schedule 15, paragraph 17.1, note 2 by correcting the reference from Division 2 to Division 3.
Item 3 substitutes in Schedule 15, paragraph 17.1, note 3 to provide additional explanation that Agaricus mushrooms and hard onions are dealt with in Parts 18 and 19 of Schedule 15 to the Excise Levies Regulations.
Item 4 inserts a new Part 19 about hard onions into Schedule 15 of the Excise Levies Regulations.
PART 19 HARD ONIONS
Clause 19.1 provides that hard onions are leviable horticultural products for the purposes of the definition in clause 1 of Schedule 15 to the Levies Act.
• Note 1 provides a cross-reference to the definition of hard onion in clause 19.2 of the Collection Regulations.
• Note 2 advises that clauses 19.2 and 19.3 are intentionally not used.
Clause 19.4 sets the initial operative rate of the R&D levy on hard onions at $1.60 per tonne.
• Note 1 indicates that levy is not imposed on leviable horticultural products that are exported from Australia. These may however be subject to the export charge under the Customs Charges Act.
• Note 2 provides cross-references to the details about the NRS levies. The levy imposed by this Part (and the corresponding export charge under the Primary Industries Customs Charges Regulations) will be collected under comparable arrangements as are in place for the existing National Residue Survey levies on onions. These particulars are dealt with in Schedule 9 to the National Residue Survey (Excise) Levy Act 1998, Schedule 4 to the National Residue Survey (Customs) Levy Act 1998 and Division 3 of Part 11 of the Primary Industries Levies and Charges (National Residue Survey Levies) Regulations 1998.
- As at 1 May 2002, the operative rate of NRS onion levy is 40 cents per tonne.
Clause 19.5 provides that the Australian Onion Industry Association Inc (ABN number 26 558 335 296) is the eligible industry body for hard onions.
PRIMARY INDUSTRIES (CUSTOMS) CHARGES AMENDMENT REGULATIONS 2002 (No. 1)
Regulation 1 provides for the name of the regulations to be the Primary Industries (Customs) Charges Amendment Regulations 2002 (No. 1).
Regulation 2 provides for the commencement date to be 1 July 2002.
Regulation 3 provides that Schedule 1 amends the Primary Industries (Customs) Charges Regulations 2000, (the Customs Charges Regulations).
SCHEDULE 1 AMENDMENTS
Item 1 substitutes in Schedule 10, at paragraph 17.1 (c), which relates to the export charge on vegetables, the term hard onions with hard onions (being bulbs of the species Allium cepa). This is intended to clarify the specific varieties not covered by the arrangements for the export charge on vegetables.
Item 2 amends Schedule 10, paragraph 17. 1, note 2 by correcting the reference from Division 2 to Division 3.
Item 3 substitutes in Schedule 10, paragraph 17. 1, note 3 to provide additional explanation that Agaricus mushrooms and hard onions are dealt with in Parts 18 and 19 of Schedule 10 to the Customs Charges Regulations.
Item 4 inserts after Part 17 of Schedule 10, a Part 18 reserved for future use for a charge on Agaricus mushrooms. At present, there is no charge applying to Agaricus mushrooms. Next, a new Part 19 about hard onions is inserted into Schedule 10 to the Customs Charges Regulations.
PART 19 HARD ONIONS
Clause 19.1 provides that hard onions are chargeable horticultural products for the purposes of the definition in clause 1 of Schedule 10 to the Charges Act.
• Note 1 provides a cross-reference to the definition of hard onion in clause 19.2 of the Collection Regulations.
• Note 2 advises that clauses 19.2 and 19.3 are intentionally not used.
Clause 19.4 sets the initial operative rate of the R&D charge on hard onions at $1.60 per tonne.
• Note 1 indicates that charge is not imposed on chargeable horticultural products that have had levy previously paid on them. These may however be subject to the levy under the Excise Levies Act.
• Note 2 provides cross-references to the details about the NRS levies. The charge imposed by this Part (and the corresponding levy under the Primary Industries Excise Levies Regulations) will be collected under comparable arrangements as are in place for the existing National Residue Survey levies on onions. These particulars are dealt with in Schedule 4 to the National Residue Survey (Customs) Levy Act 1998, Schedule 9 to the National Residue Survey (Excise) Levy Act 1998, and Division 3 of Part 11 of the Primary Industries Levies and Charges (National Residue Survey Levies) Regulations 1998.
- As at 1 May 2002, the operative rate of NRS onion levy is 40 cents per tonne.
Clause 19.5 provides that the Australian Onion Industry Association Inc (ABN number 26 558 335 296) is the eligible industry body for hard onions.
PRIMARY INDUSTRIES LEVIES AND CHARGES COLLECTION AMENDMENT REGULATIONS 2002 (No. 2)
Regulation 1 provides for the name of the regulations to be the Primary Industries Levies and Charges Collection Amendment Regulations 2002 (No. 2).
Regulation 2 provides for the commencement date to be 1 July 2002.
Regulation 3 provides that Schedule 1 amends the Primary Industries Levies and Charges Collection Regulations 1991, (the Collection Regulations).
SCHEDULE 1 AMENDMENTS
Item 1 inserts a new definition for "personal details" into Part 1, clause 1.1 of Schedule 22 of the Collection Regulations.
Item 2 substitutes Part 15, paragraph 15.6 (b) of Schedule 22 of the Collection Regulations (except the note). The effect is to insert the word ´not' after 'is' and before `lodged'. This corrects a previous error.
Item 3 substitutes a new explanation of 'hard onions' into paragraph 17 (1) (c) of Schedule 22. This is intended to clarify the specific varieties of hard onions not covered by the arrangements for the levy and export charge on vegetables.
Item 4 inserts a new Part 19 about hard onions into Schedule 22 of the Collection Regulations.
PART 19 HARD ONIONS
Clause 19.1 provides that the part applies to hard onions (species Allium cepa).
Clause 19.2 provides definitions for use in the part.
• "chargeable onions" means hard onions on which an export charge is imposed.
• "deal" means to sell, buy, process or export hard onions.
• "hard onion" means a bulb onion of the species Allium cepa.
• "intermediary amount" means an amount that a person, who as an intermediary under any of subsections 7 (1), 7 (2) or 7 (3) of the Collection Act, is required to collect levy, charge or penalty from the producer and then pay it to the Commonwealth for the producer.
• "leviable onions" means hard onions on which a levy is imposed.
• "quarter" means a period of 3 months ending 31 March, 30 June, 30 September or 31 December.
• "retail sale" means a sale of hard onions other than a sale to or through an intermediary under any of subsections 7 (1), 7 (2) or 7 (3) of the Collection Act. The intention is to capture only the small roadside stall or on-farm type sales. Other sales will be captured in the mainstream arrangements and not be considered as retail sales.
• Note 1 is a cross-reference to Part 19 of Schedule 10 to the Customs Charges Regulations, where hard onions are defined as chargeable horticultural products.
• Note 2 provides a cross-reference to Part 19 of Schedule 15 to the Excise Levies Regulations, where hard onions are defined as leviable horticultural products.
Clause 19.3 defines what is a levy year. A levy year will be a calendar year. The first levy year for this Part will be from 1 July 2002 to 31 December 2002. This is important when the period for the first annual return is considered (refer also to clauses 19.9 to 19.15).
• The note indicates that a calendar year is specifically defined in subsection 22 (1) (h) of the Acts Interpretation Act 1901 (Cwlth), as the period of 12 months beginning on 1 January and ending on 31 December.
Clause 19.4 defines who is a producer of hard onions.
• Note 1 clarifies that a producer can be the person who owns the product immediately after it is harvested (as defined in paragraph (b) of the definition of producer in the Collection Act). Hard onions are prescribed for the purposes of that definition.
• Note 2 identifies the person who exports chargeable horticultural products from Australia as a producer. Chargeable horticultural products are prescribed for the purposes of paragraph (g) of the definition of producer. Hard onions are chargeable horticultural products under Part 19 of Schedule 10 to the Customs Charges Regulations.
• It is feasible that the same person could be simultaneously interpreted as the producer for both paragraphs of the definition - the person could be the owner at harvest time and the exporter of those hard onions. This would mean that if levy has not been previously paid then charge would be payable (see note 1 clause 19.4 of the Excise Levies Regulations and note 1 clause 19.4 of the Customs Charges Regulations).
Clause 19.5 prescribes chargeable onions for the purpose of subsection 7 (3) of the Collection Act.
• The note indicates that the legal responsibilities for intermediaries who are exporting agents are outlined in that subsection.
Clause 19.6 prescribes hard onions for the purpose of paragraph 7 (2) (b) of the Collection Act.
• The note indicates that the legal responsibilities for intermediaries who are processors are outlined in that paragraph.
Clause 19.7 prescribes when charge or levy is due for payment by people who must lodge a quarterly return.
• For example, payment for a return covering the period 1 October 2002 to 31 December 2002 is (under the time allowed by clause 19.9) due by 28 January 2003.
• The note cross-references section 15 of the Collection Act which is about penalty for late payment.
Clause 19.8 prescribes who must lodge a quarterly return. These are selling agents, buying agents, first purchasers, processors, exporters, and exporting agents as described in the Collection Act. Subclause 19.8 (2) outlines circumstances under which such persons do not have to lodge quarterly returns in a particular levy year.
• The note, after subclause 19.8 (1), cross-references section 24 of the Collection Act which details offences in relation to returns.
Clause 19.9 provides for when a quarterly return must be lodged. A quarterly return must be lodged within 28 days of the end of the quarter to which it relates.
• For example, a return for the quarter 1 October 2002 to 31 December 2002 must be lodged by 28 January 2003.
• The note cross-references section 24 of the Collection Act which details offences in relation to returns.
Clause 19. 10 prescribes when charge or levy is due for payment by persons who lodge annual returns.
• For example, payment for a return covering the initial levy year from 1 July 2002 to 31 December 2002 (see clause 19.3) is due by 28 February 2003 (under the time allowed by clause 19.12).
• The note cross-references section 15 of the Collection Act which is about penalty for late payment.
Clause 19.11 specifies who must lodge an annual return. There are two categories of persons allowed to lodge annual returns. Firstly, a person who would normally have been required to lodge quarterly returns but has been granted an exemption from the obligation to do so and instead been allowed to lodge annual returns (see also clause 19.14), and secondly a producer who sells hard onions by retail sale in the levy year.
• The note cross-references section 24 of the Collection Act which details offences in relation to returns.
Clause 19.12 prescribes that an annual return must be lodged by 28 February in the next levy year.
• For example, a return covering the initial levy year from 1 July 2002 to 31 December 2002 is due on or before 28 February 2003. Similarly, an annual return for the 2003 calendar year is due by 28 February 2004.
• The note cross-references section 24 of the Collection Act which details offences in relation to returns.
Clause 19.13 stipulates what must be included in a quarterly or annual return.
• The note cross-references section 24 of the Collection Act which details offences in relation to returns.
Clause 19.14 specifies who may apply to be exempt from the requirement to lodge a quarterly return in a levy year but lodge an annual return instead. The main criterion is that the person has reasonable grounds for believing that the quantity of hard onions to be dealt with in the levy year from all sources is or is likely to be less than 1,250 tonnes.
Clause 19.15 specifies what must be included in a written application for exemption from the requirement to lodge a quarterly return, and in its place be allowed to lodge an annual return for that levy year.
Clause 19.16 stipulates the conditions for granting or refusing an exemption from the requirement to lodge quarterly returns. When deciding whether to grant or refuse an application, the Secretary must consider the amount of levy, charge, or intermediary amounts for the previous levy year and any other available information about the applicant's potential liability for the current levy year. The applicant is to be given written notice of the decision.
Clause 19.17 stipulates what conditions apply for continuing to exempt from lodging a quarterly return. When making a decision whether to continue an exemption, the Secretary must consider the amount of levy, charge, or intermediary amounts for the previous levy year and any other available information about the applicant's potential liability for the next levy year. The applicant is to be given written notice of the decision.
Clause 19.18 stipulates when a quarterly return is to be lodged if exemption is refused or not continued. The intention is that if an exemption is refused or not continued, the person required to lodge a return must lodge it:
• Within 28 days of receiving the notice, if the quarter had just ended before the person received the notice; or otherwise
• Within 28 days of the end of the quarter.
- If the exemption is refused or not continued after more than one quarter has passed in that levy year, it is likely that the person may lodge a single return containing separate data for each of the passed quarters. Separate returns for each following quarter must be lodged within the period specified in clause 19.9.
• The note cross-references section 24 of the Collection Act which details offences in relation to returns.
Clause 19.19 stipulates what must be kept as records.
• A penalty of 10 penalty units is provided for breaches of the regulations. As at 1 May 2002 a penalty unit equals $110.
• Note 1 cross-references to section 6.1 of the Criminal Code, which considers strict liability of offences.
• Note 2 cross-references to Division 3 of Part 11 of the Primary Industries Levies and Charges (National Residue Survey) Regulations 1998, which outlines record keeping requirements for the NRS levies on onions. The intention is that this levy and charge on hard onions be collected under comparable arrangements as are in place for the existing National Residue Survey levies on onions.
Clause 19.20 stipulates that a person may apply to the Administrative Appeals Tribunal for a review of a decision made by the Secretary relating to the grant or refusal to grant an exemption under paragraphs 19.16 (1) (a) or 19.17 (1) (a) of these regulations.
ANNEX A
REGULATION IMPACT STATEMENT
(Office of Regulation Review reference: 99.38(13):2734)
ONION INDUSTRY RESEARCH AND DEVELOPMENT (R&D) LEVY AND EXPORT CHARGE
Onions are grown in all states of Australia with South Australia and Tasmania being the largest producing states by volume. Produce from the mainland states is mostly sold on the domestic fresh market or processed, while produce from Tasmania is mostly exported.
Australian Bureau of Statistics figures for 1999-2000 give the gross value of production of onions in Australia at $114 million, with the gross value of production for South Australia $53 million and for Tasmania $20 million. Australian onion production in 1999-2000 was 247,000 tonnes with 92,000 tonnes produced in South Australia and 63,000 tonnes in Tasmania.
In 2000-01 Australia exported 34,300 tonnes of onions valued at $18.7 million. Exports from Tasmania in 200001 totalled 31,400 tonnes with a value of $16.5 million. Major destinations were the European Union, Japan, Hong Kong, Malaysia, Singapore, Indonesia and Taiwan. Onions were historically Australia's major vegetable export with Australia supplying out-of-season produce to northern hemisphere countries, principally during February to June. Australia faces significant competition from New Zealand, Chile, Argentina and South Africa, and from the northern hemisphere countries themselves when they have a high-yielding harvest.
The Government's 2001 Innovation Statement Backing Australia's Ability recognised the importance of R&D as a key contributor to improving productivity, profitability and enhancing competitiveness of Australia's agribusinesses. A major factor to achieving this is through significant investment in R&D by the Government, in partnership with industry, through the rural Research and Development Corporations (RDCs).
Returns from this investment in rural R&D have been estimated in independent surveys at averaging around $7 for every $1 invested. In 2000-01, RDCs invested about $364 million in R&D of which $173 million was contributed by Government and the rest by rural industries and other sources.
The Government's R&D priorities for agricultural industries relate to sustainability, including enhancing Australia's clean green image, improving the whole production, processing and marketing chain, food safety, biotechnology, improving market access for Australia's produce, and investment in the rural sector's human resource.
Problem to be addressed
There is market failure in R&D undertaken on behalf of the Australian onion industry.
The onion industry has not been able to fund integrated R&D work on a national basis. There is a compulsory state contribution collected on Queensland growers and a voluntary contribution made by some growers in Tasmania. The 'free-rider' problem has now caused a breakdown in the voluntary contribution system paid by Tasmanian growers. The Queensland compulsory contribution will become voluntary on 1 July 2003.
Given there has been no national levy in place only small amounts have been made available for onion R&D in the past. Growers in states other than Queensland and Tasmania have been 'freeriders'. R&D undertaken on onions has been non-excludable. Therefore, although supported by a minority of growers, all onion growers have had access to the outcomes of what R&D has been done. The number of 'free-riders' is increasing and will increase further in the future if a national compulsory levy is not introduced.
Like many horticultural industries the onion industry is highly fragmented. No individual growers, or groups of growers, are able to fund R&D to capture their benefits without significant flow on effects to all producers. Without some form of government intervention, the onion industry believes that the R&D that should be undertaken may not be undertaken and therefore benefits that should accrue to the industry would not occur.
A key reason for Government involvement in rural R&D is to overcome the market failure associated with the lack of incentives and difficulty in organising the many rural producers to fund and pursue R&D and then capture the benefits of successful research projects. The significant Government investment in rural RDCs has enabled market failure to be overcome by overcoming the under-investment in R&D by the numerous small production units in the private sector.
The onion industry has developed a Strategic Plan which, among other things, has identified the following R&D priorities:
• market development, with a research focus on market intelligence and market research;
• product development, with a research focus on varietal improvement, value-added products and packaging; and
• production, with a research focus on production efficiency.
The R&D envisaged for market development is to achieve a better understanding of the market so that production is more in line with market trends, including in relation to organic produce. Understanding consumer preferences is expected to lead to better decision making by growers and those in the supply chain. R&D for product development will focus on variety selection and evaluation, identification of value-added product opportunities, including uses of second grade product, and improved packaging to enhance quality throughout the supply chain. Production efficiency R&D will focus on developing a suitable integrated pest management strategy to enhance food safety and ensure production is sustainable and environmentally sound.
Objectives of the Regulations
The objective of the peak body representing the onion industry, the Australian Onion Industry Association (AOIA), in seeking a compulsory levy and export charge on onion growers is to overcome market failure in funding industry R&D activities. The AOIA sees R&D as necessary to increase returns to growers, develop an efficient supply chain in production, handling, storage and transport and ensure the needs of consumers in domestic and international markets are met. In addition, a compulsory national levy and export charge has the bonus of attracting matching Commonwealth funding for expenditure on R&D activities.
The Commonwealth's objective in supporting R&D in the rural sector is to ensure its future productivity and sustainability, and is part of the science, engineering and technological advances that will underpin future national prosperity. Furthermore, the RDC model is a successful investment management model, unique in the world, and represents a true partnership between Government and industry. This partnership is based on the Commonwealth Government's commitment to match dollar-for-dollar industry contributions to 0.5 per cent of each industry's gross value of production.
The Government's continuing investment in rural R&D confirms the importance placed on the RDCs to deliver benefits to industry, the wider community and preserve our natural resources, particularly in rural and regional Australia. Government funding allows for rural industries to invest in wider 'public good' R&D that promotes sustainable natural resource use, environmental quality, improved food safety and improvements in occupational health and safety.
Options
Only one option has been advanced by the AOIA, that of a compulsory national levy and export charge. The AOIA has requested that a statutory levy and export charge of $1.60 per tonne at first point of sale be imposed on onion growers to fund R&D activities through Horticulture Australia Limited (HAL). This will compliment the existing onion industry statutory levy and export charge paid to the National Residue Survey (NRS) of 40 cents per tonne. When the R&D levy and export charge is implemented it would bring the total levy and export charge payable by onion growers to $2.00 per tonne.
Voluntary levies for R&D have been tried in the past. However, the voluntary contributions paid by Tasmanian growers have become insignificant. In addition, under Queensland legislation, the Queensland compulsory contribution will become voluntary on 1 July 2003. Long-term attempts to fund R&D through voluntary contributions in states other than Queensland and Tasmania have failed. The compulsory national levy will replace, not be in addition to, the voluntary contributions paid by Tasmanian and Queensland growers.
Also, voluntary contributions have not been recommended by the industry because of the recognised potential for producers to act as 'free-riders', failing to contribute while gaining the benefit of the R&D activities.
If it was left to a voluntary levy regime, R&D undertaken on behalf of the onion industry would be insignificant, contributing to stagnation in the industry. In a fragmented industry, voluntary levies would not be able to capture the national benefits which would flow from a national compulsory levy.
At this stage it is not possible to forecast the returns that the investment in onion R&D from a compulsory levy will generate. A voluntary levy regime would not provide the necessary sum of money needed to ensure that R&D contributes to the onion industry remaining competitive, sustainable and profitable.
The export charge is not an additional impost on top of the levy. It is a separate impost applicable to export sales only. As is the case with other compulsory national horticultural levies, where produce is initially directed to the domestic market with a levy paid at first point of sale and such produce is later exported, the export charge is not imposed.
As most onion exports emanate from Tasmania, the export charge will principally be borne by Tasmanian growers. The export charge may lead to an increase in onion exports. Ten years ago onion exports were Australia's largest vegetable export by value but onion exports have fallen in recent years owing to a number of factors. Onion exports in 1994-95 totalled $36 million but in 2000-01 totalled $19 million. Adverse weather conditions in Tasmania which reduced produce available for export and oversupply of onions in Europe reducing prices in Australia's principal export market have been influences on reduced export returns.
Without an export charge R&D would be focussed on the domestic market and would hinder the industry regaining the export performance it had previously achieved. Monies raised from the levy on domestic sales can also be spent on enhancing the industry's export performance. The industry's Strategic Plan envisages R&D proceeds being spent on: overseas market development, with an emphasis on consumer research; ensuring varieties meet the needs of international customers; and identifying new overseas market opportunities.
Impact Analysis
Likely Costs
There will be no significant extra business compliance costs or paper work as the levy and export charge will be collected with the existing NRS levy and export charge, and will utilise the same collection mechanism.
There will be an extra cost to onion growers through paying a levy and export charge of $2.00 per tonne, instead of 40 cents per tonne currently. The $2.00 per tonne as a proportion of gross value of production is 0.4%.
It is not expected that the imposition of the levy will have a significant impact on consumer prices. The levy will be borne by the growers. In the future R&D should lead to better quality produce becoming available which may attract higher consumer prices, but R&D should also lead to a reduction in grower input costs.
There will be an additional cost to the Commonwealth of about $300,000 annually. The R&D onion levy and export charge will raise around $320,000 annually. After deducting collection costs and the HAL administrative fee, it is expected there would be around $575,000 (including government matching funds) for expenditure on onion R&D annually.
There will be no significant cost to the Commonwealth for the administration of the onion R&D levy and export charge as the Levies and Revenue Service unit within Agriculture, Fisheries and Forestry - Australia operates on a cost recovery basis. Collection with the existing NRS levy means little additional work will be entailed in collecting the levy.
Likely Benefits
The AOIA believes the R&D levy and export charge will benefit all onion growers in the industry, which number in excess of 600.
Imposition of the R&D levy and export charge will enable the AOIA to implement its Strategic Plan. An Industry Advisory Committee will be established under the auspices of HAL to ensure the current Strategic Plan and future Plans are implemented in accordance with industry wishes and government priorities. Both AOIA and HAL will be accountable to levy payers and the Commonwealth for funds invested.
Expected benefits from implementing an R&D levy and export charge:
• involving and uniting the industry towards common goals;
• advancing the industry through growing produce which meets the needs of consumers;
• increasing efficiencies on-farm, post-harvest and throughout the whole supply chain;
• undertaking necessary market intelligence research (especially for export markets);
• providing for a healthier product;
• causing more environmentally friendly use of chemicals.
Onion growing areas would benefit through environmental gains. Consumers would benefit through consuming a healthier product. Part of the levy proceeds will be used to disseminate the results of R&D projects, thus benefiting all onion growers and those associated with the onion industry.
These outcomes are in line with the Government's R&D priorities for agricultural industries.
If R&D results in new improved onion varieties, which in turn leads to higher prices received by growers, then for every one per cent increase in the price of onions there will be around an additional $1 million in value accruing to the levy payers. The AOIA also estimates that for R&D that brings about a reduction in growers costs, then for every one per cent decrease in input costs there will be around an additional $500,000 in cost savings to the levy payers.
Competition
There would seem to be no restriction on competition through the introduction of this levy and export charge, as it would be applied equitably to all commercial producers of onions. It should increase the onion industry's ability to better compete against the producers of other produce.
Consultation
The proposal conforms to the Government's levy principles and guidelines. The AOIA's membership consists of growers as well as other members of the onion supply chain. The AOIA has conducted an extensive information campaign within the industry. Growers were informed of the proposal by newsletters and in meetings held in all the significant growing regions. Only growers were permitted to vote on the AOIA proposal.
Onion growers were given an opportunity to vote at meetings or to vote by proxy if unable to attend a meeting. 88 onion growers chose to vote on the R&D proposal with 59 growers supporting the introduction of an R&D levy and export charge. Those in favour represent 67% of those growers who voted.
The low voter turnout was disappointing. Nevertheless all growers, whether members of the AOIA or not, were informed of the proposal and given an opportunity to vote. Grower apathy, rather than lack of awareness, appears to be responsible for the low voter response. The Government's principles and guidelines applying to proposals for new primary industry levies provide that it is only a requirement for a majority of those that vote to be achieved to implement an R&D levy and export charge.
In spite of the low voter turnout there was a majority of growers who voted for the proposal in every state. Thus support has been across all geographic areas rather than confined to just one or two production areas. The only known opposition to the R&D proposal is from those that voted no during the voting process.
HAL, the company that will be paid the R&D levy and export charge monies and hence fund R&D activities on behalf of the onion industry, has, in accordance with the relevant legislation, recommended to the Government that the AOIA proposal be implemented.
Implementation and review
The levy and export charge is to be implemented as early as possible, depending on the legislative process.
The AOIA intends that the purpose for and performance of the levy and export charge, the Strategic Plan and the individual R&D programs be reviewed every three years.
In addition, issues concerning the levy and export charge can be raised by onion growers at the Annual General Meeting of the AOIA or at the annual levy payers meeting.
Conclusion and recommended option
The onion industry proposal to implement an R&D levy and export charge of $1.60 per tonne on the sale of onions (species Allium cepa):
• conforms to the Government's levy principles and guidelines;
• does not impose any significant extra regulatory burdens upon business;
• does not restrict competition; and
• has clear potential to benefit the industry.
The recommended option is to implement a compulsory levy and export charge under the Primary Industries Levies and Charges Collection Act 1991, the Primary Industries (Excise) Levies Act 1999 and the Primary Industries (Customs) Charges Act 1999 to fund onion R&D through HAL.
Horticulture Policy
Food Business Group
Agriculture, Fisheries and
Forestry - Australia
April 2002