Fairer cattle levy idea would replace flat $5 fee

Cattle levy revamp floated


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TIME FOR CHANGE: MLX analyst Simon Quilty suggests replacing the cattle levy's flat $5-a-head fee with one that takes a percentage of the value of the sale up to a certain limit would be more equitable.

TIME FOR CHANGE: MLX analyst Simon Quilty suggests replacing the cattle levy's flat $5-a-head fee with one that takes a percentage of the value of the sale up to a certain limit would be more equitable.

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The flat $5 cattle transaction levy would go the way of the dinosaurs under a new proposal floated by Simon Quilty that found favour at the East Gippsland Beef Conference.

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The flat $5 cattle transaction levy would go the way of the dinosaurs under a new proposal that found favour at the East Gippsland Beef Conference and has been welcomed by both the Cattle Council of Australia and the Agriculture Minister.

During a 10-minute pitch at the Bairnsdale event, MLX analyst Simon Quilty suggested replacing the flat fee with an "ad valorem", that is, a percentage of the value of the sale, coupled with a cap.

The levy fees go to Animal Health Australia, Meat & Livestock Australia (MLA) and the National Residue Survey (NRS).

Producers currently pay a $5 fee for every head of cattle they sell, other than the 90 cent bobby calf fee.

Using the example of a 0.5 per cent fee with an $8 cap, Mr Quilty said such a system would be more equitable.

"During drought, when farmers are dealing with high costs and low livestock prices, the levy would be far more affordable," he said.

"During times of good cattle prices and lower input costs, farmers can afford to pay a little bit extra."

The flat nature of the levy also had consequences for industry bodies during the restocking phase after drought.

"I'm predicting we will see close to a 25pc fall in the revenue collected from the transaction levy because the throughput through abattoirs will fall probably 16pc," Mr Quilty said.

"When there's a lot less transactions at $5, you suddenly get an enormous drop in revenue and the likes of MLA and all these other programs we've got to have suffer.

"Normally they collect around $95-$100 million for promotion and research and I'm predicting it would drop in the vicinity of $20-25m.

"Can you imagine when suddenly you've got a 25pc funding cut, what happens to those programs?

Mr Quilty predicted funding would be affected for two to three years, playing havoc with long-term funding programs.

A show of hands revealed overwhelming support for the concept among the conference audience of 200.

The last Beef Levy Review conducted in 2009 saw 72.5pc of votes cast to maintain the cattle transaction levy at the rate of $5 per head.

Cattle Council of Australia president Tony Hegarty welcomed a discussion about the best model.

"While the method of collection of the levy and the amount collected are important, the main point is how the levies are being used and the outcomes achieved," Mr Hegarty said.

"Clearly, a lot of work needs to be done at an industry level to build consensus around reform and adequately research the effectiveness and implications of various potential levies, including any cap on the transaction levy.

"We should also look to other sectors such as dairy to see how ad valorem systems work in a practical sense.

"As the environment in which our industry operates changes, we have to consider the levy structure which best suits our needs, both in terms of producer advocacy and our marketing, research and development work.

"Last year, one of our founding member organisations, the NTCA, proposed a 50c/head levy to broaden the base from which we fund advocacy work.

"It may not be the only solution but the NTCA must be commended for showing leadership and furthering the discussion.

"Is now the right time to have this discussion given so much of our industry is in drought and herd numbers are declining?

"I believe we can't shy away from reform, regardless of market or season cycles.

"Lower production arising from the drought will hinder our ability to continue to supply existing markets and, when production recovers, we'll need a robust marketing program to ensure our beef can find shelf space overseas.

"In either scenario, we've got to be getting the maximum bang for our levy buck - not just to uphold industry systems, animal health and welfare, biosecurity and market access - but to also reinforce our social licence to operate."

Federal agriculture minister Bridget McKenzie said she was ready to review an industry-led proposal.

"Primary industries drive all aspects of their levy - whether they need one, how it will be charged and collected, what the rate is, and when to review the levy," Ms McKenzie said.

"I understand the Cattle Council of Australia is currently undertaking scoping for a potential review of the cattle transaction levy, including how the levy is imposed, and consultation with levy payers.

"Following the review, the next steps would be for industry to put together a proposal for my consideration.

"I look forward to seeing where the industry lands and will consider any proposal put forward by industry to manage their levy funds."

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