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Wednesday, 16 October 1985
Page: 1290


Senator PUPLICK(10.11) —I move:

That the Customs Regulations (Amendment), as contained in Statutory Rules 1985 No. 71 and made under the Customs Act 1901, be disallowed.

The Senate has before it a motion which I have moved on behalf of the Opposition to disallow a regulation which seeks to make major increases in licence fees applied to Customs licensed ware- houses. It is necessary to put this matter in a little historical perspective and to indicate how these licence fees came to be established in the first place and how they have been developed over recent years. The Customs Act is one of the oldest Acts of the Federal Parliament. It goes back to 1901. As part of the administration of the customs system, it has been necessary to establish a series of bonded warehouses throughout Australia into which goods may be imported. When goods are imported into those warehouses the payment of customs and excise duty is deferred until such time as the goods are subsequently removed from the bonded warehouse either to enter into what is called home consumption or, in the case of operations such as duty free stores, to be re-exported, and at no stage is the relevant customs and excise duty paid upon them.

For many years the cost of a bonded warehouse licence was $1,300. It was intended that this should cover a certain proportion of the costs incurred by the Commonwealth in the administration of customs warehouses. The report of the Auditor-General on an efficiency audit entitled `The Collection of Excise Duties and Deferred Customs Duties by the Department of Business and Consumer Affairs', a report which was made in March 1982, indicated:

The fees payable by licencees had been intended, when established in 1969, to cover two-thirds of the cost of Inland Services surveillance.

As I said, originally those fees were at the level of $1,000 then $1,300. In January 1983 they were increased to $1,900. It was felt by the Government, rightly, that the fees charged for the service, which is essentially permitting people who hold these bonded warehouse licences to defer the payment of customs and excise duties, ought to be increased in order to move more closely to some formula of cost recovery. Indeed, the then Department of Industry and Commerce was subject to criticism by the Auditor-General for not having increased fees over a period in line with changes in the cost to the Department. In the Auditor-General's report of September 1983 the Auditor-General, under the heading `Department of Industry and Commerce' commented:

Review of Fees-At the time of the audit, fees had not been reviewed or revised since 1977. It also appeared that certain fees were charged on a basis which did not have full regard to the Department's cost recovery policy.

Similarly, when the Joint Committee of Public Accounts presented its 224th report entitled `Collection of Excise and Deferred Customs Duties', the Joint Committee endorsed the comments made by the Auditor-General and indicated that these fees should be increased from time to time. It indicated that there were some 1,400 licensed premises in Australia of which 1,100 were customs warehouses, and it gave a number of recommendations. It is also interesting to note that the Joint Committee, at paragraph 7.17 in its report, said:

According to information provided by Customs only 43 man-years were devoted to warehousing throughout the whole of Australia in the 18 months from January 1982 to June 1983.

That will be apparent as a matter of some significance when I discuss the steps that were then taken by the Government to investigate the cost of administration of Customs warehouses.

Following these criticisms from the Auditor-General and the Joint Committee of Public Accounts, the Government commissioned the firm of Price Waterhouse to undertake a study into the way in which warehouses and depots were licensed. The title of the Price Waterhouse study, which was produced in August 1984, was `Improved procedures for determining and recovering costs relating to warehouses and depots'. It is true that the Price Waterhouse study examined a large number of options about the way in which the Government should determine the fees to be applied for licensed warehouses and depots. I do not intend to go through the numerous formulae that were put forward by Price Waterhouse as suggestions as to the way in which the fees should be structured. It is entirely the Government's responsibility, it having received the Price Waterhouse study and recommendations, to pick the formula which the Government thought most appropriate to give effect to the policies that it was pursuing.

It is, however, important to indicate one thing that the Price Waterhouse study rejected as an option. It rejected as an option any attempt to differentiate significantly between the types of warehouse which were involved and imposed differential charges depending on such things as the throughput of the warehouses, their size, or the precise nature of the warehouse business. I think to a certain extent that has been unfortunate, not the least reason being the report of the Auditor-General on his efficiency audit in March 1982. When dealing with the question of bonded warehouses, on page 13 of his report, the Auditor-General indicated that he believed that an ADP system should be developed to enable analysis of dwell time-that is the amount of time goods are held in these warehouses-and assists a discriminatory approach to the preparation of check programs based on age, value and previous risk history. So some support was given in a number of quarters, including the Auditor-General, for the development of a system which would have due regard to the differential nature of warehouse operations. Nevertheless, the Government proceeded to establish a scale of fees based on the recommendations of the Price Waterhouse study, modifying them on its own appreciation of what was required.

I seek leave to incorporate in Hansard two brief documents, one being Australian Customs Notice No. 85/107 which sets out the scale of fees as indicated, and the second being a table prepared very helpfully by officers of the Department of the Minister for Industry Technology and Commerce (Senator Button) setting out the relevant charges which are to be applied as a result of the introduction of this new customs regulation.


Senator Button —You are quite sure they are accurate documents, are you?


Senator PUPLICK —They were supplied to me by you, Mr Minister, and so I accept that their accuracy is beyond question.

Leave granted.

The documents read as follows-

Warehouse Licence Fees

Customs Regulations 50/52 have been amended to prescribe a new scale of warehouse licence fees. Details of the amendments are contained in Statutory Rule No. 77 of 1985 published in Commonwealth of Australia Gazette No. S 169 of 20 May 1985.

The new scale of fees comprises two elements:

(a) A flat fee based on the initial issue or renewal of a warehouse licence; plus

A variable element related to the purpose/ conditions of licence; less

A deduction based on the recording systems of warehouses where computer recording systems maintained by warehouse licensees provide `real time' status reporting and/or monthly status reporting.

(b) A transaction fee of $7 per Nature 30 entry/weekly settlement return.

The new fee will operate on and from 1 July 1985.

The prescribed scale of fees increases the flat rate element of the warehouse licence fee from the existing $1900 to approximately $6000.

The Australian Customs Service has been concerned to recover, as far as practical, the administrative costs incurred in the administration of the Customs licensed warehouse system. An independent firm of Management Consultants, Price Waterhouse Associates Pty, was engaged to advise and report on the administrative costs to be recovered and to recommend an appropriate fee structure based on the principles of cost recovery. The increased warehouse licence fees now prescribed follow consideration of that report.

The new scale of fees requires that an individual fee be calculated in respect of each warehouse. For example, the Regulations provide for an annual fee payable in respect of:

(a) A warehouse licensed for the first time from 1 July 1985:

a fixed fee of $6646

plus a variable element related to a:

petroleum warehouse

$340

private warehouse

$240

general warehouse

$210

spirit warehouse

$310

manufacturing warehouse

$160

duty free shop

$300

warehouse approved for the storage of excisable goods under Section 5A, Excise Act

$340

less where the systems used by the warehouse for the recording and accounting of goods include the use of a computer having a facility for:

`real time' status reporting

$100

(This can be accepted as meaning a computer facility that will provide `on line' and `immediate' or `instantaneous' access to processed information, e.g. a report that can be called up at any time and which will be completely up to date, including stock, underbond movement and invoicing details, and relevant N20 and N30 Customs entry identification.

monthly status reporting

$250

(A computer facility that will provide a monthly print-out of stocktake at, for instance, the end of each month, and which will accurately record all the `ins', `outs', and consequent balances of each commodity stored during the month to which the report relates, including underbond movement and invoicing details, and relevant N20 and N30 Customs entry identification.)

(b) The renewal of a current warehouse licence from 1 July 1985:

a fixed flat fee of $5346 together with the addition (or reduction) of the variable elements of the fee set out above.

The Regulations will continue to allow the payment of the annual fee by instalments.

(T. P. HAYES)

Comptroller-General

20 May 1985

(Inland Services)

Fee variables

Initial

fee

Renewal

fee

Stat rule

71 of 1985

legislation

$

$

Fee is calculated as follows:-

A TOTAL OF:

Licence application

Number of licences established

Time taken to process licence

Mix of salaries (Assumed Band 4 salary level)

1300

. .

Reg 50 (2)

Licence issue/renewal

Number of warehouses-1250

Mix of salaries

Policy and planning costs

Time taken to renew licence

1032

1032

Reg 50 (2B)

Purpose of Warehouse

Number of warehouses in each category

3964

3964

Reg 50 (2),

50 (2B)

Licence Standards Real Time Status Reporting

Nominal fee only Variations in investigating time

100

100

Reg 50 (2D)

Monthly Status Reporting

250

250

Reg 50 (2D)

6646

5346

AN ADDITIONAL AMOUNT OF

Purpose of Warehouse

Reg 50 (2C)

Bulk Liquids

Duty Free Shops

Manu-

facturing

Bond

Variations in investigation time

340

300

160

Public Receipts and Delivery

Private Receipt and Delivery

Based on historic deployment of resources between major categories

210

240

Spirits

High Volume Special Ops (personal effects)

Ship Privodor Bond

Container Bond

Car Bond

Project Warehouses

310

Nil

Nil

Nil

Nil

340

Nil

A DEDUCTION BASED ON COMPUTER FACILITIES USED BY WAREHOUSE:

Licence Standards

Real Time Status

Reporting

deduct $100

Reg 50 (2D)

Monthly Status Reporting

deduct $250


Senator PUPLICK —The import of these has been that the charges which were previously $1,900 have been raised in one hit to $6,646 for a licence to be issued for the first time, and from $1,900 to $5,346 for a licence to be renewed, something that is required on an annual basis. The one thing I am particularly concerned about is the extent to which this is an attempt in part by the Government to move to a system in which people will be discouraged from having their own small warehouses. In the report by the Public Accounts Committee it was clearly indicated that there was some concern that people should always be in a position to have access to their own bonded warehouses. The Committee indicates quite clearly in the section headed `Alternatives to the Bonded Warehouse System', that the Government, and, indeed, the Committee were not averse to the idea that small warehouses should be totally phased out. The Committee stated:

The Committee also recommends that the perceived need for the bonded warehouse systems should be re-examined, including the implications of abolishing or modifying the system.

It called for that matter to be referred to the Industries Assistance Commission. Senator Button, in a letter responding to some inquiries on this matter, stated:

Some small private warehouses make use of the ware- housing system on an occasional basis. This raises the question as to why these small businesses would need their own private warehouse when the facility is freely available through the use of a general warehouse and charges would then only be incurred on a `use' basis.

I think it is quite clear that underlying a great deal of this is the Government's hostility to the system of small bonded warehouses being operated by people in the private sector.


Senator Button —Don't get silly. You were going well to this point.


Senator PUPLICK —I am going well enough, I am sure, for the honourable senator to see the logic of the argument that I am putting forward. The impact of this enormous increase in charges has been to put small business in an extremely invidious position. I have received a large number of representations on this matter. I would like to indicate the thrust of those representations. The Small Business Combined Association of New South Wales in a letter relating to what amounts to a 247 per cent increase in government imposts stated:

This was announced without any prior consultation with our member or other senior industry associations concerned.

These increases are believed to be anti small business and discriminatory in some cases, will lead to the closure of bonded warehouses and the consequent loss of employment.

The Australian International Movers Association wrote to Senator Button. It stated:

The high volume operators in my industry will be forced to pass on this cost impost to our clientele who, in the majority of cases, are immigrants arriving in Australia as first time settlers.

The low volume operators, having fewer customers upon whom to spread the fee, will be forced from the industry. Already some of our members have advised that they will not be renewing their Warehouse Licnce's.

The New South Wales Transport Association in its submission to Senator Button protested that appropriate consultation clearly did not take place with the industry. It stated:

We respectfully request that the Regulations be withdrawn and Licence Fees either remain unaltered or increased in line with the more normally accepted practice of aligning them with the Consumer Price Index.

It is our view that the fees, as they stand, are anti small business.

A small business operation in Queensland, P. R. Floors Pty Ltd, which has a small bonded warehouse into which it imports floor covering materials, from which it makes fairly small withdrawals from time to time, wrote as follows:

. . . I am astounded to think that some person in the Customs department or the Ministers Office could have approved this enormous increase in fees. Such person could not have given any consideration to the samll business community or consider what effect a 294 per cent increase for any type of charge would make in the very tight economic situation that the Australian Community is living in

Finally, the Distilled Spirits Industry Council of Australia made a submission to Senator Coates in his capacity as Chairman of the Senate Standing Committee on Regulations and Ordinances. It stated:

It is our contention that such a view is totally inappropriate-

that is the view of the user pays principle upon which these regulations were established-

with regard to bonded warehouses, where the Australian Customs Service is merely providing an audit to insure that appropriate duties have been paid. The view completely ignores the fact that such special warehouses would not be necessary if the Government was not levying substantial taxes on the commodities being handled. It is, in our view, no different than asking the PAYE taxpayer to remit a handling fee each year with his tax return.

The impost of this increase in charges on Australian small business ought to be one of the compelling reasons for this regulation to be disallowed. The Opposition does not in any sense oppose the principle of cost recovery for government services provided. We do not seek to substitute our judgment as to what these fees should be for the judgment that the Government has made based upon its assessment and the assessment of the Price Waterhouse study. What is at issue here is our request that these regulations be disallowed now and be brought back with a phasing-in operation attached to them so that cost recovery can be phased in over a reasonable period.

I remind the Government that it has committed itself to the principle of the phasing in of cost recovery arrangements in two areas. Let me instance those. They are in regard to export inspection services and aviation cost recovery. When the Minister for Primary Industry, Mr Kerin, made a ministerial statement on 24 August 1983 on the question of export inspection services-I quote from page 170 of Hansard, under the heading `Basis for Future Charging of Inspection Services'-he stated:

Another major development is the basis for future charging of inspection services. Present charging arrangements provide little financial incentive for individual companies to use inspection resources in a more efficient manner with the consequential effect of reducing their costs. I believe that this is an essential ingredient of any effective charging arrangement. Industry is entitled to be provided with an efficient inspection service if it is paying part of the cost. However, this service should be tailored to the specific level of inspection required, which in turn should be based on a company's approach to quality control and track record.

In other words, quite clearly the Minister is indicating support for a differential type of arrangement. In a Press release of 21 August 1985 by the Minister for Primary Industry headed `Inspection charges for 1985-86' the Government indicated that its proposal on cost recovery would be 50 per cent for the coming year, that is, it would not move to full cost recovery in one hit, and that there would be a phasing-in period. If honourable senators look at the attachment to that Press release they will see that the anticipated operative date for various inspection charges is different throughout different sections of the industry to give those sections time to cope and adjust to these new arrangements.

I will look at a more interesting example of cost recovery, this time in the aviation industry. Paragraph 8.3 of chapter 18 of the report of the Independent Inquiry into Aviation Cost Recovery, the Bosch report, presented in November 1984, states:

The Committee recommends that the Department of Aviation should be required to develop a master plan for introduction in the 1985-86 financial year for phasing in full cost recovery over a ten year period to 1994-95.

The Minister for Aviation (Mr Peter Morris) in a Press release of 14 August 1985, although not giving a full response to all of the recommendations of the Bosch inquiry, stated:

The Government recognises that a gradual approach to achievement of the policy of full cost recovery will be necessary.

Here again, in terms of the phasing-in arrangements, the Government, in the report which it received from Mr Bosch and in the statement put down by the Minister, has committed itself to an understanding that cost recovery ought to be phased in over a prolonged period or over a reasonable period. When one considers it, going from a licence fee of $1,900 to $6,500 or $5,500, as the case may be, is a very severe impost for many small businessmen to take in one hit. They have to renew their licences each year; their business depends upon their having their warehouse licences. It seems extraordinary that the Government cannot be persuaded to have a simple phasing in of these arrangements.

Pages 32 and 33 of the Bosch inquiry indicate, in terms of aviation, that the Government always intended an eventual, rather than an immediate, move to full cost recovery. Government policy established in the Airlines Agreement Act 1973 was to seek recovery of 80 per cent of attributable costs within a five year period. So moves towards partial or full cost recovery have been phased in where they imply major additional imposts, particularly upon small business.

Let me conclude simply by saying that the Opposition is not opposed to the principle of cost recovery. Indeed, it is not opposed to the principle of full cost recovery where that appears to be justified. What it does oppose and what it seeks to disallow is the movement to full cost recovery in one hit. Where cost recovery has been introduced by the Government, whether it be in the airline industry or whether it be in respect of export inspection charges, there has been either less than full cost recovery or a phasing in of cost recovery. This measure is yet another assault upon the position of small businesses and private entrepreneurs in Australia. It represents a real threat to them.

I put it to the Senate that the Government would have no difficulty in fact in agreeing to a phasing in of these charges. Such action would not result in a major loss of revenue to the Government. It would not be a major inconvenience to the Government. It will be a tangible test of whether or not the Government and the Democrats are serious when the say that they support the position of small business in Australia. The Opposition is quite serious on this matter. We believe that this impost upon small business should not be handled in this fashion. We hope that the Government, the Australian Democrats and other members of the Senate will see their way clear to disallow this regulation. The regulation should be brought back in a more appropriate form. It should provide for cost recovery to be phased in over a reasonable period. Such a regulation would give some substance to the arguments which honourable senators opposite have put forward in the past about their support for small business in Australia.