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Tuesday, 10 December 1974
Page: 3265

Senator WRIEDT(Tasmania-Minister for

Agriculture) ( 12.13)- I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

The DEPUTY PRESIDENT-Is leave granted? There being no objection, leave is granted. (The speech read as follows)-

The purpose of this Bill is to introduce a new export incentive scheme- the Export Market Development Grants Scheme- to replace the export incentive arrangements which expired on 30 June 1974. Shortly after coming to office the Government announced that the existing export incentive arrangements- the Export Incentive Grants Scheme and Export Market Development Allowance Scheme- which had operated virtually unchanged since 1961 and were due to expire on 30 June 1973, would be continued for a further 12 months until 30 June 1974. In the meantime the Government undertook to have a thorough review made of the operations of the incentive arrangements. In the light of this review the Government concluded that there was a need for a continued export incentive but that the schemes which had operated since 1961 and were running at an annual cost of some $100m were unsatisfactory and should be replaced. Furthermore the Government decided that the emphasis in a new export incentive scheme should be on market development rather than on perpetuating payments on exports. Under the previous export incentive arrangements the bulk of the benefits went to a few large companies. Moreover, because the benefits under the schemes took the form of rebates of income tax and payroll tax liability, many small exporting firms and other bodies engaged in export such as statutory marketing authorities and co-operatives were disadvantaged.

Against this background the Minister for Overseas Trade (Dr J. F. Cairns) announced on 1 8 December 1 973 the details of the Export Market Development Grants Scheme to operate from 1 July 1974. The scheme was developed on the basis of the following principles and criteria: the scheme should not involve rebates of tax and benefits should be in the form of grants; particular encouragement should be given to small and medium sized firms to become involved in exporting; there should be a ceiling limit on the benefits received by any one firm or groups of firms; and there should be a better balance established between the costs to revenue and benefits to the exporting sector.

Following the announcement of 1 8 December 1973, Dr J. F. Cairns requested the Department of Overseas Trade to conduct seminars in all States to acquaint exporters with the Government's intentions with regard to the new scheme and to comprehend difficulties that exporters might have with the proposed operation of the scheme. As a result of submissions made at these seminars and in representations from export industry organisations and individual exporters, a number of aspects of the original proposals were modified. The modifications were announced in a detailed statement on 2 July 1974.

In order to enable long term planning by exporters, the Export Market Development Grants Scheme will operate for a period of 5 years as from 1 July 1974, but will be reviewed after 3 years to permit any changes considered desirable to be made. The Export Market Development Grants Bill provides that grants will be payable to claimants on eligible export market development expenditure in respect of any goods, services, property rights or knowhow which are substantially of Australian origin. The eligibility criteria to be applied to export promotion expenditure will be generally the same as under the previous Export Market Development Allowance Scheme provided for in section 160AC of the Income Tax Assessment Act. The scheme will be administered by an independent Export Development Grants Board, responsible to the

Minister for Overseas Trade. Any individual, partnership, company or association carrying on business in Australia and incurring eligible expenditure will be entitled to apply for grants. Some statutory marketing authorities, cooperatives and associations previously excluded from export incentive benefits will be eligible under the new scheme. However, in view of the diversity of the functions and powers of the many authorities and associations operating in Australia, and also the need to ensure that the provisions of the scheme are applied equitably to all claimants, the Bill provides that each authority and association will be required to seek approval for claimant status and be prescribed by regulation.

As a general rule, a claimant must be a principal in an export transaction and must not incur promotional expenditure on behalf of or as an agent for someone else, for which he is being reimbursed or paid. The grants will be available at two rates: a premium rate of 85 per cent for eligible expenditure incurred by new exporters, or by established exporters in trying to develop new markets, and by participants in Australian Government sponsored trade promotions; and a standard rate of 60 per cent for all other eligible expenditure.

There will be a ceiling on annual payments to any one claimant of $100,000 or 10 per cent of export earnings, whichever is the lower, plus an additional amount of up to $25,000 in respect of eligible expenditure on Australian Government sponsored trade promotions. Within the $100,000 ceiling, the 10 per cent limitation will not apply to new claimants, certain prescribed marketing authorities or associations, or eligible expenditure incurred on Australian Government sponsored trade promotions. A new claimant will be regarded as one who has not incurred eligible expenditure in the first five of the 7 years immediately preceding a grant year. Whollyowned subsidiaries and their parent corporation will be treated as a group of corporations and considered as a single entity for the purpose of applying the absolute grant ceiling. However, for all other purposes, including the 10 per cent limitation, each individual corporation within a group will be considered separately.

For the purpose of the premium rate, a new market will be a market in which the claimant has not incurred more than $5,000 of eligible expenditure over the whole of the 3-year period immediately preceding the year to which the claim relates. Having satisfied this test, the claimant will be entitled to grants at the premium rate for 3 consecutive years in relation to eligible expenditure in that market. A market is denned as a particular country or external Territory. Australian Government sponsored trade promotions will include all overseas trade promotion activities such as trade missions, displays, exhibitions, store promotions, advertising and publicity organised or sponsored by the Department of Overseas Trade. In addition, the Department of Overseas Trade may approve as Australian Government sponsored certain overseas promotional activities organised by State governments, industry groups or firms.

The export incentive scheme provided for under this Bill gives clear evidence of the Government's constructive approach to export policy balanced with its objectives and priorities for the economy as a whole. The cost to revenue of the scheme in its first year of operation is estimated at $27.Sm. I commend the Bill to honourable senators.

Debate (on motion by Senator Durack) adjourned.

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