AN Australian Wool Innovation appointed research panel have accused the Australian Wool Testing Authority of lacking effective competitive and advised an end to their tax free status.
The final report of the Wool Selling System Review (WSSR) identified a lack of competitive neutrality surrounding the operations of AWTA and proposed a tax equivalent payment towards research and development.
While the report dismissed AWTA as having any “legislated monopoly”, the report stated that their tax free status avoided effective competition and hindered innovation for growers.
AWTA provide certified testing of fibre diameter, yield, vegetable matter content, length, strength and sometimes colour, which is used as a product assurance for exporters’ customers.
The panel recommended the AWTA as a tax paying company, or retain the tax-free threshold but operate in an economically neutral way.
This would mean AWTA would have to earn a commercial return on capital invested and account for a tax equivalent payment.
This proposed return on capital and tax equivalent payment was to be used for wool testing research and development and not operational expenditure.
The increased investment in R&D was repeatedly guided towards the controversial on-farm testing of wool. This has been highly criticised by wool brokers and exporters due to questions surrounding quality assurances.
In their February 2015 submission to the WSSR issues paper, the AWTA board said their tax status had not made the organisation lethargic or avoid investment in innovation.
“With wool production falling significantly over recent decades, AWTA could not have achieved the fee minimisation performance it has if it was ‘lethargic’,” the submission stated.
In response to whether the wool industry would be better served by competition in the wool testing space, the AWTA submission stated “having your client as your owner is a great way to stay focussed and not take your position for granted”.
“There have been several competitors to AWTA over the years and generally most have failed,” it said.
“Not because of cost or profit but due to technical performance issues and a subsequent loss of industry confidence - both in Australia but importantly to overseas clients who rely on truly independent and accurate test certificates.”
AWTA director Michael Jackson said the board would consider the panel’s recommendations at its meeting later this month.
