Considerations toward an EPPRD Levy (sub-committee update)
EPPRD - Emergency Plant Pest Response Deed
Since October, much of the deliberations of the biosecurity sub-committee have been around possible levy models and how these models stack up on the basis of fairness, efficiency, effectiveness and ease of administration.
Potential Levy Models
We have considered models based on both tree numbers (with a variant derived on cultivated area) as well as truffle production. While these looked to have potential, particularly when “reverse proportional” loadings were applied, these models were unsatisfactory principally because of the high number of entities the levy collections agency would need to deal with and potential issues around verification and compliance.
The high number of collection points (distributors and growers) stems from the way in which our industry conducts its business. The east and west of the country have developed in different ways. WA growers, where most of the national production is derived, tend to move their product via a small number of distributors. In the east, with direct access to large metropolitan markets and larger population base, growers tend to market their product directly.
There is a cost associated with collecting a levy.
Government has adopted a “user pays” model for many of its services for quite some time now.
All agricultural levies are collected by one federal government agency, the levy collections group with the Dept of Agriculture and Water Resources. This agency then distributes that money on behalf of the agricultural industries to the “spending” agencies, dependent on how each industry has determined the purpose of the money collected. Research & Development levy money is meted out to Agrifutures, Biosecurity and EPPRD money is handed to Plant Health Australia or its partner group, Animal Health Australia etc.
Agricultural industries incur a cost for this service and this cost is determined by the administration and compliance issues associated with the levy as well as the number of entities the collections agency needs to deal with.
We have been given rough estimates of $150K per annum to collect an EPPRD levy using the tree- based model. The main cost driver is the number of collection points (growers and distributors) that levy collections would need to deal with. This cost renders the model to be non-viable.
The Strict Purpose of this levy
Our focus has been on introducing a levy to deal with EPPRD. This is the direct result of having signed on to the EPPRD and demonstrates our commitment to adhering to that agreement. I have heard this sometimes referred to as a biosecurity levy, but this is a misnomer. A biosecurity levy could be used to cover the annual costs of belonging to PHA and also to the development of specific biosecurity measures. A biosecurity levy cannot be used to cover the costs of an EPPRD. Money collected for EPPRD purposes cannot be used for biosecurity programs. Money collected for Marketing and Research cannot be used for purposes outside of Marketing and Research.
The proposed mode of operation of the EPPRD levy has always been to set this at a $0 or 0% rate until some kind of EPPRD incident occurs and our industry is involved - common practice for this kind of levy.
In my last report, I spoke to this levy being limited to 2% of the market value of production of our industry. Assuming we have a $10m industry, that sets the agreed limit to $200,000 with the potential to pay this off over a period of up to 10 years. The levy needs to raise sufficient funds to cover this potential cost.
Another potential model
At our recent full committee meeting, another option was proposed – apply the EPPRD levy on all new trees sold. Such a levy, set at say $1 per tree, could be applied and accumulated over a period of time, building a fund to be used to deal with any EPPRD events affecting our industry. This model appears to address the issue around costs of collections, as it is the limited number of nurseries selling inoculated trees, that the levy collections need to deal with.
On the surface, this model looks to have the best potential of meeting the industry’s needs, but, has yet to be discussed in any detail with the nurseries, PHA or the levy collections department. This will happen in the very near future.
Further down the track
These discussions are being shared with the intent of keeping our deliberations open and transparent. We are still at fairly early stages of the process and we will endeavor to keep you updated with more developments via our newsletters and web site.
Further information on the EPPRD deed can be viewed below.