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2008-2009-2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PRIMARY INDUSTRIES (EXCISE) LEVIES AMENDMENT BILL 2010
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Agriculture, Fisheries and
Forestry,
the Hon. Tony Burke MP)
PRIMARY INDUSTRIES (EXCISE) LEVIES AMENDMENT BILL 2010
GENERAL OUTLINE
The Primary Industries (Excise) Levies Amendment Bill 2010 (the Bill)
amends the Primary Industries (Excise) Levies Act 1999 (the Act) to
increase the cap on the research and development (R&D) component of the
laying chickens levy (the levy) from 10 to 30 cents per laying chicken.
Schedule 16 (Laying Chickens), clause 4(a) of the Act currently provides
for the imposition of the excise levy on laying chickens and that
Regulations may prescribe a levy rate not exceeding 10 cents. The levy is
imposed on laying chickens hatched at any hatchery where at least 1 000
laying chickens are hatched in a financial year. The levy is imposed on
laying chickens that are older than 48 hours of hatching. The operators
of hatcheries who produce laying hens are legally responsible for paying
the levy. However, the cost of the levy is routinely passed on to egg
producers.
The proposed levy cap increase to 30 cents will enable increases in the
operative levy rate above 10 cents (which is currently the maximum
allowable cap). The egg industry has already requested that the operative
levy rate be increased to 13.5 cents. This increase would enable the
Australian Egg Corporation Limited (AECL), on behalf of the egg industry,
to meet the core R&D objectives outlined in its 2008-12 Strategic Plan. The
30 cent cap will allow industry to seek future levy rate increases by
amendments to the Primary Industries (Excise) Levies Regulations 1999 (the
Regulations) without the need to further amend the Act.
Clause 6 of Schedule 16 to the Act provides that the Regulations must not
prescribe an amount for the purposes of paragraph 4(a), unless the
industry services body has made a recommendation to the Minister for
Agriculture, Fisheries and Forestry with respect to the amount to be
prescribed. AECL has been declared under the Egg Industry Services
Provisions Act 2002 as the industry services body for the laying chicken
industry. AECL also manages the egg industry's R&D activities.
AECL consulted widely with the egg industry regarding an increase in levy
rate from 7.2 to 13.5 cents per laying chicken. The majority of egg
production supported this change. In May 2009, AECL provided a submission
to the Minister for Agriculture, Fisheries and Forestry proposing a two-
step increase to the levy - initially from 7.2 to 10 cents and, after 12
months, from 10 to 13.5 cents. Amendments to the Regulations increased the
levy rate from 7.2 to 10 cents from 1 December 2009. To allow for the
further rise to 13.5 cents an increase in the levy cap is required by
amending the Act.
Under clause 6 of Schedule 27 to the Act, the maximum total rates of levies
applying to all animal or animal products is $5 per unit. The current levy
caps for laying chickens are 10 cents for R&D, 0.33 cents for Australian
Animal Health Council and 0.40 cents for National Residue Survey.
Increasing the R&D cap from 10 to 30 cents per laying chicken is therefore
well under the overall maximum allowable statutory cap. This will cover the
proposed levy rate of 13.5 cents and further increases that may be
requested in the future to account for inflation and strategic levy
increases.
The Bill does not include consequential amendments to other Acts.
FINANCIAL IMPACT STATEMENT
Amendment to change the Act to increase the levy cap from 10 to 30 cents
per laying chicken has been assessed as having no financial impact on the
Australian Government and affected parties. However, the proposed increase
to the operative levy rate, if approved would result in additional matching
Government contributions for R&D funding.
REGULATION IMPACT STATEMENT
(Office of Best Practice Regulation ID No 10134)
Laying Chickens (Research and Development) Levy
Background
The Australian Egg Corporation Limited (AECL) has proposed an increase in
the research and development (R&D) component of the laying chickens levy
(the levy) from 7.2 cents to 10 cents per laying chicken from 1 July 2009
and from 10 cents to 13.5 cents per laying chicken from 1 July 2010. The
levy was introduced in 1999 under the Primary Industries (Excise) Levies
Act 1999 (the Act). The levy was a continuation of the levy imposed under
the Laying Chicken Levy Act 1988 which had been set at 7.2 cents per laying
chicken in July 1997. The increase to 10 cents will restore the levy's 1997
purchasing power and the further increase to 13.5 cents will enable AECL to
meet its R&D objectives outlined in the industry agreed 2008-12 strategic
plan.
Following an industry-wide ballot a recommendation was made by AECL to
increase the levy. This recommendation was supported by a submission that
conforms to the Department of Agriculture, Fisheries and Forestry's Levies
Principles and Guidelines (the guidelines). The submission is available
from AECL (see http://www.aecl.org/ for details).
Under the guidelines, operators of commercial hatcheries (producing more
than 1000 chicks per year), as the levy payers, must be polled on proposals
to change the levy. The majority of hatcheries (77.8%) that voted, voted in
favour of increasing the levy to 13.5 cents on the proposed timetable.
Hatcheries pass the cost of the levy to egg producers, who are the primary
beneficiaries of the R&D funded by this levy. Therefore, egg producers are
clearly affected by this proposal and voted as well. AECL's constitution[1]
prescribes voting on a production-weighted basis. The majority of egg
production voting (79%), voted in favour. However, a simple majority ie, 87
out of 147 (58.4%) of the egg producers that voted on a one egg-producer
one-vote basis voted against the levy increase.
The egg industry is dominated by a few high-volume producers, with the top
five egg producers producing more than 50 per cent of Australia's eggs and
the top 20 producing more than 80 per cent of the eggs. The distribution of
production in the hatchery sector is also skewed, with four out of nine
active companies supplying 96 per cent of layers.
In light of the business planning and legislative processes required, AECL
proposed a two step increase. An increase in levy rate from 7.2 cents to 10
cents per laying chicken from 1 July 2009 will require amendment to the
Primary Industries (Excise) Levies Regulations 1999 (the Regulations). The
Act caps the levy at a maximum of 10 cents per laying chicken, therefore
the Act will require amendment to enable a further increase in the levy
rate from 10 cents to 13.5 cents per laying chicken from 1 July 2010.
In line with other primary industry R&D corporations, AECL has taken a
systematic and structured approach to the evaluation of the impact of R&D
investments. To assist consideration of an increase in the levy by the egg
industry, AECL presented a business case that includes an independent cost-
benefit analysis (available at http://www.aecl.org/). This analysis
provides strong support for increasing the levy. However, a key difficulty
for all such evaluations is that calculation of 'returns' can be highly
subjective, sensitive to the assumptions made about the social and other
benefits and the evaluation methodology employed.
AECL is an industry-owned company under the Corporations Act 2001 and has
been declared under the Egg Industry Services Provisions Act 2002 as the
industry services body for the laying chicken industry. Levy funds are
provided under the Statutory Funding Agreement with the Commonwealth
Government.
Assessing the Problem
Since July 1997 the levy has lost a significant amount of its purchasing
power. AECL asserts that the cost of service provision from research
institutions, scientists and contractors/consultants has also increased at
a similar or higher rate than the consumer price index. Anecdotal evidence
supports this assertion.
The proposed levy increase is a significant proportional change on the
current levy (39% for the increase to 10 cents and a further 35% for the
increase to 13.5 cents). Assuming 100% of the levy is passed on to
producers, the increases will cost an egg producer with an average sized
flock (AECL figures indicate the average flock size is around 80 000 laying
chickens[2]) around an additional $1650 per annum for the first and further
$2200 per annum for the second. For a producer with a median sized flock
(around 11 500 laying chickens) each increase will cost around $248 and
$310 per annum. The median number of laying chickens controlled by AECL
members is 11 500 and non-AECL member egg producers predominantly control a
relatively small number of birds. Therefore, the median number of laying
chickens controlled by levy payers is less than 11 500. On average, egg
producers replace 77% of their flock each year.
The levy is a small component of the overall cost of business for
hatcheries and egg producers. For example, in relation to $2.95 that it
currently costs to purchase a day old laying chicken, the cost is small
(less than 1% for each increase). In relation to the productive capacity
over a hen's life time i.e. around 27.5 dozen eggs, with current retail
price of around $100, the cost of levy is around 0.09 cent per dozen eggs
from 1 July 2009 and an additional 0.13 cents from 1 July 2010.
Egg producer R&D investment through AECL has totalled in excess of $3.5
million between 2003 and 2007. An independent analysis of AECL's R&D
investment showed that there is a demonstrable return on R&D levy
investment. The estimated return on egg R&D of $12.60 for every levy
dollar invested is not inconsistent with estimates from other industries.
This analysis reveals that 72% of project investments have delivered
benefits for egg producers and 65% have also delivered outcomes for the
Australian community. AECL estimates that only 5% of all project
investments made to date would have been funded in the absence of the
current laying chickens (R&D) levy.
The approximate distribution of AECL's proposed funding across the
Australian Government's national rural research priorities for the next
10 years is as follows ($m): Animal welfare (15%), Feed and nutrition
(15%), Environment (15%), Health and disease (25%), Food safety (15%),
Extension (10%) and Other (5%).
The results of egg industry R&D are a 'public good'. The use of a public
good by one person generally does not affect the ability of others to use
it. This encourages 'free riding' by individuals and is likely to result
in a market failure. Therefore, a statutory levy is necessary to
collectively address the egg industry R&D issues and challenges that are
outside the influence or capability of any one egg producer to address.
Objectives of Government action
The objective of the Government's use of its levy powers is to address a
market failure in funding the R&D for the general benefit of the egg
industry. The objective of increasing the levy rate is to respond to a
request from the egg industry to increase its funding of R&D activities. As
identified in the industry-agreed AECL's strategic plan 2008-2012, the egg
industry will need to target R&D investments over the next five years in
flock health and disease management; environmental sustainability; building
egg demand; food safety; animal welfare; profitability; feed availability
and nutrition; supply chain and egg distribution; and training, information
and technology transfer.
Options that may achieve the objective
Option 1 - Status quo
Under this option the current level of funding going to the egg industry
for R&D activities will remain at its current level of 7.2 cents per laying
chicken.
Option 2 - Implement a voluntary levy system
Hatcheries and egg producers could be asked to pay voluntary contributions
to raise money to fund R&D activities related to egg industry above the
funds collected under the statutory levy.
Option 3 - Increase the levy to 13.5 cents per laying chicken
The Government could accept the AECL's proposal to increase the levy to 10
cents per laying chicken from 1 July 2009 and to 13.5 cents per laying
chicken from 1 July 2010.
Option 4 - Use Primary Industries (Excise) Levies Regulations 1999 to
establish a new levy
The Government could increase the current levy rate to 10 cents per laying
chicken and at the same time create an additional levy of 3.5 cents under
clause 2.2 of Schedule 27 of the Regulations, without raising the levy cap
in the Act.
Impact analysis - costs, benefits and risks
Impact group identification
Increasing the funds available for R&D is expected to principally impact on
hatcheries and egg producers. Hatcheries are legally liable to pay the levy
and an increase will initially affect their cash flow. However, in line
with other operating costs they pass on the cost of the levy to egg
producers. AECL does research for its members, who are egg producers. They
are likely to be the direct beneficiaries of the outcomes achieved by the
R&D activities.
The impact on consumers in the long term will include the ability to more
regularly purchase better quality egg products. In the short term, the cost
of the proposed increase in levy is very low in relation to the retail
price of one dozen eggs. On an average each laying chicken will produce
around 27.5 dozen eggs during its productive life, worth around $100 at
current retail price. Therefore the cost of proposed levy increase per
dozen eggs will be around 0.09 cent from 1 July 2009 and an additional 0.13
cents from 1 July 2010. However, due to the competition in the wholesale
market for eggs, egg producers tend to be price takers and would most
likely need to absorb the cost instead of passing it down the supply chain.
Option 1 - Status Quo
Continuing the status quo, with no increase in levy would mean the egg
industry would have insufficient funds to pursue the R&D activities as
outlined in their strategic plan 2008-12. Not undertaking all planned R&D
will decrease the industry's ability to respond to challenges posed by
changes affecting production (e.g. climate change and new diseases) and
marketing (e.g. health claims made by other protein producing industries).
In the long run, this will reduce the competitiveness, productivity and
sustainability of the egg industry.
AECL believes that the investment in R&D is essential for the long term
future of the egg industry. Like other agricultural industries, the egg
industry relies heavily on R&D to improve productivity and maintain returns
to producers without significant increase in consumers' egg prices.
Option 2 - Implement a voluntary levy system
The option of raising the necessary funds through a voluntary levy system
would provide levy payers more flexibility to make contributions in
accordance with their financial state at the time.
Independent industry analysis commissioned by AECL indicates positive
returns for its R&D investments, estimating that, with Commonwealth
matching, for every levy dollar it invests, the egg industry and the
community receive $12.60 in return. However, to obtain such matching, the
Government's policy of matching research expenditure up to 0.5% of a
rural research industry's gross value of production would need to be
extended and the Egg Industry Service Provisions Act 2002 amended to
enable such matching.
A voluntary levy may encourage 'free riding' by individuals who realise
that they can benefit from the egg industry's R&D program as long as
somebody else is paying for it. This is likely to lead to a market
failure as it would be difficult or impossible to exclude free riding
individuals from the benefits of the R&D. This would result in equity
problems between levy payers.
Under this option, it would be difficult to forecast voluntary levy
contributions in any given year. Inconsistent and unpredictable funding
would make it difficult to commit to R&D projects that run for longer than
12 months. The potential for unpredictable and varying revenue is a
significant detraction of a voluntary levy system. In the event that AECL
is not able to undertake its entire planned R&D, the implications outlined
under option 1 would accrue to a greater or lesser degree depending on levy
income and access to matching contributions.
Option 3 - Increase the levy to 13.5 cents per laying chicken
The levy increase proposed (13.5 cents per laying chicken) would be a
significant change (39% from 1 July 2009 and further 35% from 1 July 2010),
however the cost to levy payers of the proposed increase is low in relation
to:
a. the current purchase price of a day old laying chicken (approximately
$2.95) and
b. the productive capacity of hens in their life time (worth
approximately $100).
Increasing the levy above 10 cents per laying chicken will require
amendment to the Act to increase the current 10 cent cap. The levy rate
would then be set by Regulation. To avoid administrative cost of further
changes to the Act the Australian Government Department of Agriculture,
Fisheries and Forestry (the department) believes it would be prudent to
factor the potential for further levy rate rises that may become
necessary in the future due to inflation or changes in industry or
Government policy. AECL has not formally proposed a levy cap figure
because it has no direct bearing on the collection of the levy. Any
future increase to the levy rate above 13.5 cents would require further
industry consultation similar to that conducted for the current change.
The department notes that under clause 6 of Schedule 27 (Regulations may
impose primary industries levies) to the Act, the cap applying to an egg
levy is $5 "per unit of animal product". Therefore, the department
considers a cap of 30 cents per laying chicken would be reasonable.
The levy would not have a disproportionate impact on a particular group
or size of hatchery, as the proportion of levy payable on the sale of
laying chickens would be the same for all hatcheries, irrespective of
size of operation (producing more than 1000 chicks per year).
As the levy is paid by hatcheries they will bear the direct cost of the
levy. However, it is likely that hatcheries will choose to pass the cost
of levy on to the egg producers by way of a minor increase in the price
of laying chickens. Assuming 100% of the levy is passed on, an egg
producer with a median-sized flock[3] (i.e. 11 500) would on average need
to pay $248 more following the first step and another $310 more after the
second step, on an annual basis.
There will be an annual cost to the Government under its policy of
matching rural research expenditure. It is likely that the government
will need to provide approximately $275 000 in the 2009-10 financial year
if the levy is increased to 10 cents per laying chicken from 1 August
2009. It will also need to provide in excess of $0.7m per annum in
additional matching contributions each financial year from 2010-11
compared with the current levy rate of 7.2 cents, if the levy is set at
13.5 cents per laying chicken. There will be no administrative costs for
the Government in collecting and remitting the levy as the Levies Revenue
Service of the department operates under full cost recovery.
AECL estimates that with the proposed two step increase in levy, the
gross R&D funds for egg industry will increase from $1 549 800 in 2008-09
to 2 206 312 in 2009-10 and then to $3 052 985 in 2010-2011. This
increase includes R&D levy funds and assumes full matching Government
contributions.
Over the ten years to June 2006, the number of new R&D projects supported
by the egg industry has declined by 30% while the average cost per
project has increased by more than 100%. Additionally, funds available
for R&D stayed the same.
The egg industry (in its Strategic Plan 2008-12) has identified nine
research areas as key priorities that will need to target R&D investments
over the next five years. These projects will benefit egg industry
through:
. Improving prevention, diagnosis and treatment of exotic and endemic
diseases to enhance management of flock health and poultry diseases
. Creating a sustainable future through improved environmental stewardship
. Building egg demand by promoting a positive association with health
. Minimising food borne illnesses by improving food safety and traceability
. Developing best management practices to improve animal welfare
. Building enhanced profitability into egg businesses
. Managing feed availability and nutrition to improve feed utilization and
decrease costs
. Optimising the supply chain and egg distribution to ensure consumer
requirements are met, and
. Providing adequate training to employees in the latest egg production
technology to ensure the benefits outlined above are maximised.
An increase in levy to 13.5 cents per laying chicken will account for:
. An appropriate level of funding for each of the nine industry agreed
key R&D projects;
. A portfolio of 28 new projects each year rather than the 20 proposed
under the partial funding model (i.e. at 10 cents levy per laying
chicken) or the 12 possible projects in the absence of any increase to
the levy;
. Optimal funding of market support, supply chain and on-farm R&D
investments.
There is a demonstrable return on R&D investment across agricultural
industries. The estimated return for egg R&D of $12.60 for every levy
dollar AECL invests on behalf of the egg industry is not inconsistent
with estimates from other industries. Accordingly, it is highly likely
that the benefits of the increased investment in R&D will result in a
positive return for egg producers and the community. The R&D programs to
be funded by the levy will be compatible with the Government's rural
research priorities.
Option 4 - Use Primary Industries (Excise) Levies Regulations 1999 to
establish a new levy
Increasing the total R&D levy collection from 7.2 cents to 13.5 cents per
laying chicken could also be done by creating an additional levy of 6.3
cents per laying chicken under Schedule 27 of the Regulations. The egg
industry was not consulted about this option and establishment of new
levy will require further industry-wide consultation similar to that
conducted for the current change.
This option will avoid the initial Government administrative cost
required to amend the Act. The need to administer two separate levy
payments would impose a minor additional ongoing burden in administration
and compliance costs on levy payers. However, the collection mechanism
could be structured to mirror the existing arrangements and therefore the
substantive costs and benefits of this option are the same as for option
3.
Competition Policy
The levy will be applied equitably across the entire egg industry. Laying
chickens are a fundamental production input in egg production, and while
the volume of eggs sold per chicken will vary depending on the production
system used (cage, barn or free range), the lower volume systems (barn and
free range) tend to offer a higher return per egg. As a result, the
proposed levy increase will have no significant impact on competition
within the industry.
Consultation
AECL consulted the egg industry at various times over an 18-month period
from June 2007, culminating in a national series of workshops and one-on-
one meetings in October 2008. The feedback obtained was predominantly
positive. Prior to the development of a business case, AECL discussed the
need and options for changes to the levy with Victorian Farmers' Federation
egg group in August 2007 and July 2008 and with New South Wales (NSW)
Farmers' Association egg group in July 2008. Both organisations which
represent producers in the two key egg producing states indicated their in-
principle support for AECL to review the levy. During the AECL consultative
workshops held in different states, various levels of support were
expressed to increase the levy. Egg producers from Victoria and Western
Australia indicated major support and no opposition was indicated by NSW.
In Tasmania some small scale producers did not support the levy increase
mainly as there is no AECL director in Tasmania and over concern about
the near monopoly of large scale egg producers in Tasmania. Other states
expressed concerns in relation to the value and appropriateness of
certain R&D investments, the increase in levy cost and the return on
investment. AECL responded that R&D was essential for the industry to
maintain its competitiveness, that the industry should be self-reliant in
the face of State Government cuts to research funding. It also noted that
the levy rate had not changed for 12 years and that independent analysis
showed a good return.
This was followed by a six week voting period from 12 December 2008 to
30 January 2009 regarding an increase in the levy rate from 7.2 cents to
10 cents per laying chicken from 1 July 2009 and from 10 cents to 13.5
cents per laying chicken from 1 July 2010.
A majority of hatcheries (77.8%) that voted, voted in favour of the
increase. A simple majority of egg producers (58.4%) voted against the
change. However, on a production-weighted basis, producers representing
79% of production supported the change. The department supports a
production-weighted vote as it reflects individual producer's economic
interest in the levy. In addition, AECL's constitution prescribes a
production-weighted voting system. Details of AECL's consultation process
are attached (Attachment 1).
The department is aware from discussions with egg producers that some of
the opposition has come from producers who do not intend to remain in the
egg industry. AECL surveys indicate that a significant number of
producers are operating with outdated production assets. Some of these
producers will have limited scope for adopting innovations because local
planning regulations in some areas, such as the peri-urban areas of
capital cities, prevent reinvestment in egg production facilities.
Therefore, it would not be in the interests of producers in this
situation to support the increase regardless of its benefit to the egg
industry as a whole.
AECL estimated that 48% of producers (as at September 2008) did not
comply with the changes in cage size regulations introduced in most
jurisdictions on or before January 2008, in line with the national Model
Code of Practice for the Welfare of Animals - Domestic Poultry 2001.
However, these producers only accounted for 17% of production, indicating
that the higher-volume producers have upgraded their facilities. Further,
10% of producers (33 farms accounting for less than 5 per cent of
production) had not indicated an intention to comply. It is likely that
these producers cannot re-invest in their current location due to
planning restrictions and, as they have not moved to a new site in order
to comply with animal welfare legislation, they are unlikely to be
committed to egg production in the long term, and therefore would not
support increased R&D funding.
After formal submission of the AECL proposal to the Government, the
Minister for Agriculture, Fisheries and Forestry invited dissenting
comments on the proposal during a six week period which ended on 24 April
2009. This was advertised by AECL at the department's request. This is
consistent with the department's guidelines. The Government did not receive
any dissenting submissions during this six week period.
Conclusion and recommended option
The recommended option is option 3 - increasing the levy to 10 cents per
laying chicken as soon as possible and further increasing the levy to 13.5
cents from 1 July 2010 to fund the egg industry R&D activities through the
industry services body. The later increase will require an increase to the
cap in the Act from 10 cents to at least 13.5 cents per laying chicken. The
department considers a cap of 30 cents per laying chicken is reasonable to
accommodate potential for future increases in the levy rate.
Failure to secure the proposed increase in the levy will result in under-
funding of the industry agreed AECL Strategic Plan 2008-2012 and lack of
capacity to fulfil its strategies and deliver its outcomes. Industry R&D
fundamentally underpins ongoing productivity across a range of agricultural
industries. Without adequate R&D funding the egg industry will not be able
to respond to the challenges posed by climate change, other protein sources
and other market developments.
The proposal for increase in levy for R&D for the egg industry:
. conforms to the department's levy principles and guidelines
. will be applied equitably across the levy paying population
. has clear potential to benefit the industry and community
. is not expected to impose significant extra costs on consumers.
Implementation and review
The increase in the levy to 10 cents per laying chicken is to be
implemented from 1 July 2009 and the further increase to 13.5 cents is to
be implemented from 1 July 2010. This will require changes to the
Regulations and the Act. Payment of levies is enforced by the Levies
Revenue Service of the Department of Agriculture, Fisheries and Forestry.
AECL's annual general meeting provides the industry with an annual forum in
which levy matters can be raised and reviewed as agreed by the members.
Intensive Livestock and Game Industries Section
Livestock Industries
Agricultural Productivity Division
Australian Government Department of Agriculture, Fisheries and Forestry
May 2009
Attachment 1 to RIS (ID No 10134) - Laying Chickens Levy
Australian Egg Corporation Ltd's Consultation with Stakeholders
AECL consulted the egg industry at various times over an 18-month period
from June 2007, culminating in a national series of workshops and one-on-
one meetings in October 2008. The feedback obtained was predominantly
positive. Prior to the development of a business case, AECL discussed the
need and options for changes to the levy with Victorian Farmers'
Federation egg group in August 2007 and July 2008 and with New South
Wales (NSW) Farmers' Association egg group in July 2008. Both
organisations, which represent producers in the two key egg-producing
states, indicated their in-principle support for AECL to review the levy.
During the AECL consultative workshops held in different states, various
levels of support were expressed to increase the levy. Egg producers from
Victoria and Western Australia indicated major support and no opposition
was indicated by NSW. In Tasmania, some small-scale producers did not
support the levy increase mainly as there is no AECL director in Tasmania
and over concern about the near monopoly of large-scale egg producers in
Tasmania. Producers in other states expressed concerns in relation to the
value and appropriateness of certain R&D investments, the increase in
levy cost and the return on investment. AECL responded that R&D was
essential for the industry to maintain its competitiveness, that the
industry should be self-reliant in the face of State Government cuts to
research funding. It also noted that the levy rate had not changed for 12
years and that independent analysis showed a good return.
The Australian Electoral Commission polled the egg industry on a proposal
to increase the levy from 7.2 cents to 13.5 cents per laying chicken from
12 December 2008 to 30 January 2009, as required by the guidelines. A two-
step increase was proposed; 7.2 cents to 10 cents per laying chicken from 1
July 2009 and from 10 cents to 13.5 cents from 1 July 2010. AECL also
advertised the poll in October/November 2008 edition of the bi-monthly
Poultry Digest. Poultry Digest is a poultry management magazine published
by CD Supplies Pty Ltd and it has an Australian circulation of 2000 copies.
PRIMARY INDUSTRIES (EXCISE) LEVIES AMENDMENT BILL 2010
NOTES ON ITEMS
Clause 1: Short title
This clause is a formal provision specifying the short title of the Act as
the Primary Industries (Excise) Levies Amendment Act 2010.
Clause 2: Commencement
This clause provides that the Act will commence on the day this Act
receives the Royal Assent.
Clause 3: Schedule(s)
This clause provides that the Primary Industries (Excise) Levies Act 1999
is amended as set out in Schedule 1.
SCHEDULE 1--Amendment of the Primary Industries (Excise) Levies Act 1999
Item 1: Clause 4(a) of Schedule 16
This item amends clause 4(a), to increase the maximum allowable levy rate
cap under the Act from 10 to 30 cents per laying chicken. This will
facilitate the egg industry's request to increase the operative levy rate
to 13.5 cents and will provide for future increases to the levy rate which
may be sought by industry to account for inflation or strategic levy
increases.
-----------------------
[1] Available at http://www.aecl.org/index.asp?pageid=553
[2] Note: The term average is potentially misleading. The egg industry is
dominated by a few companies who control very large flocks. AECL
figures indicate that there are only 27 (8.5%) producers with flocks
between 50 000 and 100 000 layers and that 38 (12%) have flocks over
100 000.
[3] The median number of laying chickens controlled by AECL members is 11
500 and non-AECL member egg producers predominantly control a
relatively small number of birds. Therefore, the median number of
laying chickens controlled by levy payers is less than 11 500. On
average, egg producers replace 77% of their flock each year.