July, 2015|Media Releases

Levies inquiry points to some sensible solutions

By Selwyn Snell*

Australia’s rural levies system and the structures that underpin it are complex, convoluted and difficult to penetrate. This finding from the Senate 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. Figures from the Department of Agriculture show that in 2014-15 about $430 million was collected in levies, money was disbursed to 18 different organisations, and the whole process needed almost 30 full-time jobs in the department to manage.   

For the outside levies arrangements can seem to be a black box and on the inside there appears to be 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 RDCs is delivering real and tangible benefits to producers.

This does not mean everything is as good as it could be and the inquiry identified 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 integrity of the system.

They 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. Our 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 R&D 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 that are 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 be 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 great strength of the model is also the source of the challenges that the Senate inquiry identified for reform and modernisation.

For example, for most industries is that 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 farm-gate.

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 lists of stakeholders, 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 timeframes, 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 suggest political processes are a greater source of delay than the administrative ones. Suggesting the Department of Agriculture provide industries with timeframes 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 representating 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 looking 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.

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