WARNING:
This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 4 June 1996
CONTENTS
Date Introduced: 21 May 1996
House: Senate
Portfolio: Trade
Commencement: The amendments outlined in this
Digest commence on Royal Assent
The amendments proposed by this Bill relate to the Export Market
Development Grants Scheme (the EMDG Scheme). The major
amendments:
- reduce from $250 000 to $200 000 the maximum grant payable
under the EMDG Scheme to a person other than an approved trading
house;
- provide for a limitation on the number of joint ventures and
consortiums of which a person may be a member;
- reduce the amount of grant payable where details of unclaimed
expenditure are submitted after a claim is lodged;
- make non-claimable expenditure relating to illegal
activities;
- disallow certain claims prepared by disqualified persons;
and
- prevent claimants claiming grants for their own domestic
employee's
(a) Outline of EMDG Scheme
The Export Market Development Grants Act 1974 (the
Principal Act) contains provisions which govern the method of
application and eligibility for grants, a list of claimable export
oriented expenditure, and mechanisms for review of decisions,
recovery of overpayments, and termination of grant
entitlements.
The Export Market Development Grants Scheme (EMDG Scheme), which
is administered by the Australian Trade Commission (Austrade) under
the Principal Act, provides cash grants of up to $250 000 per annum
for approved small to medium sized business and is based primarily
on expenditure incurred by an Australian person or company seeking
to create or expand exports of their products in overseas
markets.
Provided a person has incurred at least $30 000 of eligible
expenditure in a grant year and has export revenue of less than $25
million, they will be entitled to a grant. A grant is calculated at
50% of eligible expenditure after the first $15 000. Claimants who
have received eight or more grants are not allowed to receive
further grants, and claimants who have received at least two prior
grants are subject to a performance test which is assessed against
costs such as travel expenses, special promotional literature and
overseas representation. Austrade considers the main benefits of
the scheme to include:
- grant funding is guaranteed by legislation;
- the grant is cash in hand; and
- the grant directly supports the majority of expenditure
categories likely to be incurred by the exporter.
In 1994-95 there were 3 497 Export Market Development Grant
claims processed, valued at $197.6 million.(1) In 1993-94, Export
Market Development Grants to the value of $195 million were paid to
3 277 claimants. This compares with 2 473 claims with a value of
$181 million in 1992-93.
Of the 3 497 claimants in 1994-95, 97% targeted a market in
South East Asia compared with 50%-60% for North America, South
America, East Asia and Europe. Approximately 43% of claimants were
exporters of services.(2)
(b) Recent Major Reviews
In 1993-94 the Auditor-General conducted a review the
effectiveness, efficiency and strategic planning of the EMDG
Scheme.
Major findings and recommendations of the audit included:
- While there appeared to be widespread support for the scheme
(especially from the business community/the recipients of grants)
the nature of the scheme had made direct measurement of
effectiveness elusive.
- Austrade's responsiveness to its clients (both private and
public) was impeded by the structure and wording of the Act and
regulations.
- The scheme presented Austrade with opportunities to add value
to Australia's exporting effort (in addition to grants) by
promoting other Austrade services.
- Management monitoring, review and control of the scheme's
administration was impeded by the incorporation of the EMDG Unit
administration budget with the general administrative budget of
Austrade, and narrowly defined work flow performance
indicators.
- More information on the focus, use and effectiveness of the
EMDG scheme be reported to Parliament.
- Performance measures be defined whenever a grant scheme is
established in the future.
- A system be developed to monitor the quality of risk
assessment.
- The overall approach of Austrade to misuse and fraud control
could be improved.(3)
In 1994, Austrade conducted an internal evaluation of the EMDG
Scheme. Key findings and recommendations of the evaluation
included:
- the EMDG Scheme is achieving its objective of encouraging firms
to seek out and develop export markets;
- revenues from taxes on grant receipts and profits on additions
exports were estimated to return 42% of the cost of the scheme to
the Commonwealth;
- most of the growth in the EMDG Scheme has come from the
services sector;
- the minimum level of qualifying expenditure, the grant rate,
number of grants and performance test are largely appropriate;
- the number of firms claiming grants and then dropping out of
the EMDG Scheme is not ideal;
- the EMDG Scheme should be extended to all claimants in the
tourism sector; and
- the EMDG Scheme should be extended for a further five
years.(4)
(c) Liberal and National Parties' Industry and Commerce
Policy and Recent Developments
As noted in the Second Reading Speech, and Senator Kemp's
(Parliamentary Secretary to the Minister for Social Security)
statement of reasons to the Senate seeking that this Bill be
considered during this sittings(5), this Bill is substantially the
same as the Export Market Development Grants Amendment Bill (No. 2)
1995 introduced on 22 November 1995 by the Keating Government. That
Bill lapsed with the dissolution of Parliament for the 1996
election.
The major amendments proposed by the Export Market Development
Grants Amendment Bill (No. 2) 1995 were as follows:
- reduce the maximum yearly grant available to claimants from
$250 000 to $200 000;
- limit the number of joint venture and consortium of which a
person may be a member; and
- introduce registration and grants entry testing of first time
claimants.
The amendments proposed by the Export Market Development Grants
Amendment Bill (No. 2) 1995 stemmed from two sources, that is, the
1995-96 Budget and Audit Report No. 33 of 1993-94, the major
findings and recommendations of which are outlined in paragraph (b)
above.
In the 1995-96 Budget the Keating Government announced that:
The efficiency of the Scheme will be improved by an enhanced
focus on firms that are export-ready. In addition, the maximum
yearly grant available to claimants will be lowered from $250 000
to $200 000.(6)
During the 1996 election campaign, the Liberal and National
Parties gave a number of commitments in relation to the EMDG
Scheme:
The Federal Coalition believes that action has to be taken, as a
matter of priority, to address Australia's poor trade performance
in manufacturing and services. To this end an incoming Coalition
Government will:
Develop a sharper strategic focus for AUSTRADE in the delivery
of export assistance programs. In particular, we will establish a
number of broadly based 'industry panels' to advise the AUSTRADE
Board on strategies for export promotion in particular industry
sectors, including the engagement of business associations with
links overseas.
Maintain the existing range of general export assistance
programs including Export Market Development Grants (EMDG) and the
International Trade Enhancement Scheme (ITES) and Export Access. We
will also continue to support sectoral programs of export
assistance such as the Export Facilitation Scheme (automotive) and
the Imports Credit Scheme (textiles, footwear and clothing).(7)
It is reported in The Australian Financial Review of 19
April 1996 that the Government has a plan to abolish the EMDG
Scheme. It is reported that the abolition plan is contained in a
Department of Finance minute endorsed by the Expenditure Review
Committee.
The alleged abolition of the EMDG Scheme has met with strong
resistance from the Australian Chamber of Manufactures. Mr Allan
Handberg, the chamber's national chief executive, said
... business assistance programs [such as the EMDG Scheme] had
been particularly useful to the small and medium enterprises that
made up 80% of the chamber's 6,000 member businesses.
Export market development grants assisted small businesses to
search and consolidate foreign markets while the business networks
initiative brought small businesses together in their exporting
strategies.
The taxpayer has every right to believe that if a program is not
working, it should be gotten rid of. But a taxpayer would also
expect that if a program is good for business and good for the
country, that it would be retained.(8)
(d) Rationale for Introduction of Bill
The rationale given by the Government in the Second Reading
Speech to the Bill for the introduction of this Bill is that
The previous governments bill introduced a number of measures
which would result in significant savings over the next three years
(ie. approx $32 million between 1996-1999). These savings have
already been incorporated in the forward estimates.
It should be noted that the Government in the Second Reading
Speech emphasises that the introduction of this Bill does not
signal a commitment to support or remove the EMDG Scheme in the
future. The Government states that
... this step [introduction of the Bill] does not provide any
indication about what may or may not be the subject of ongoing
budget discussions. The results of these discussions will be made
public at a later time, and will not be influenced by our decision
to introduce this Bill now.
Schedule 1 Amendments - Grant Ceiling
The effect of item 1 is to reduce from $250 000
to $200 000 the maximum grant payable to a person other than an
approved trading house. The reduction applies to balance-year and
full-year claims for 1995-96 and for all claims in subsequent years
(item 2).
Comment: The terms 'balance-year claim' and 'full-year claim'
are defined in section 13A of the Export Market Development
Grants Act 1974. A 'balance-year claim' is a reference to a
claim made in a grant year where the claimant has already made a
claim for the first six months of the grant year. Claims made in
other circumstances are referred to as 'full- year' claims.
Schedule 2 Amendments - Disclosure of Eligible
Expenditure After Claim Submitted
Proposed section 12A, which is inserted in the
Export Market Development Grants Act 1974 by item
1, provides:
- where a claim for a grant is made;
- Austrade has not determined eligibility; and
- the claimant subsequently submits undisclosed eligible
expenditure;
the submission of the unclaimed expenditure cannot increase the
claimant's grant by more than 110% of the grant that would have
been determined if no unclaimed expenditure had been disclosed.
Proposed section 12A applies to balance-year and full-year claims
for 1995-96 and for all claims in subsequent years (item
4).
Schedule 3 - Limit on Membership of Multiple Approved
Joint Ventures and Consortia
A new section 40BH is inserted in the
Export Market Development Grants Act 1974 by item
3 that provides the Minister, subject to disallowance by
Parliament, with power to specify the maximum number of approved
joint ventures and consortia a person may be a member of. Austrade
is not to approve a group of persons as an approved joint venture
or consortium or vary a group's approval if the approval or
variation would result in a person breaching the maximum set by the
Minister.
Schedule 4 - Conditions of Approval of Joint Ventures
and Consortia
The effect of item 1 is make expenditure of an
approved joint venture or consortium non-claimable to the extent
(if any) it is incurred in breach of joint venture or consortium
approval.
Item 2 makes Austrade decisions specifying
conditions to which a group's approval as an approved joint venture
or consortium subject to review by the Administrative Appeals
Tribunal.
Item 4 provides Austrade with power to specify
the conditions (if any) to which a group's approval as an approved
joint venture or consortium is subject to.
Schedule 5 - Claims Prepared by Disqualified
Individuals
The amendments proposed by Schedule 5 are fraud minimisation
measures. The major amendments provide:
- Where a claim for a grant is prepared for a claimant by or on
behalf of an export market development grants consultant, it must
name all those who helped in its preparation in an eligible
capacity [item 2 - proposed subsection
13(2AB)].
- A person will be taken to have assisted in the preparation of a
claim in an eligible capacity if they work on the
preparation of the claim and that work involves forming an a legal
opinion on a matter dealt with by the claim, or the person directly
or indirectly manages or supervises work such work, and the work,
management or supervision, is performed by or on behalf of an
export market development grants consultant (item 3 -
proposed section 13B).
- A claim for a grant will be taken to be invalid where: it is
submitted to Austrade; was prepared by or on behalf of an export
market development grants consultant; a person helped in the
preparation of the claim in an eligible capacity; and the person
assisting in the preparation is disqualified at
any time between when the claim is made and determined from the
time the claim was lodged to the time Austrade determines whether
the claimant is entitled to a grant (item 3 - proposed
section 13C).
- A person will be taken to be disqualified
where they have been convicted of an offence against a law
involving fraud or dishonesty punishable by a maximum period of
imprisonment of two years, or an offence under section 39 (eg.
knowingly obtaining or attempting to obtain a grant that is not
payable). A person is disqualified for the duration of the
disqualification period, which is the period
commencing from conviction and ending: if they are not sentenced to
imprisonment - five years after conviction; or if they were
sentenced to imprisonment - five years after their release from
prison. (item 3 - proposed section 13F)
- Where a claimant neither knew of, nor had reasonable grounds to
suspect the existence of an individuals conviction and
disqualification they may submit a new claim for a grant
(item 3 - proposed section 13E).
The amendments proposed by Schedule 5 will apply to a claim made
on or after the day this Bill receives the Royal Assent or 1 July
1996, whichever is the later (item 4).
Schedule 6 - Expenditure Relating to Illegal
Activities
A new section 11YB is inserted in the
Export Market Development Grants Act 1974 by item
1 which will make non-claimable expenditure, which in
Austrade's opinion is:
- incurred in, or in connection with, carrying out an illegal
activity; or
- promotes or is intended to promote, aids or encourages an
illegal activity;
The term illegal activity is defined to mean an
offence against a Commonwealth, State or Territory law, or any
other law.
Proposed section 11YB applies to balance-year and full-year
claims for 1995-96 and for all claims in subsequent years
(item 2).
Schedule 7 - Extended Meaning of Ordinarily
Employed
A new definition of ordinarily employed is
inserted in the Export Market Development Grants Act 1974
by item 2. The proposed insertion is a fraud
control measure aimed at preventing claimants claiming a grant for
their own domestic employees, double dipping in other words.
Basically, the proposed definition sets out the circumstances which
Austrade will consider in making a determination as to whether a
person is ordinarily employed by a claimant. These include:
- whether the person performs work at the premises of the
claimant;
- the extent to which the claimant exercises control over the
work performed by the person;
- whether the claimant is the only person for whose benefit the
individual performs work;
- whether it may reasonably be concluded that the relationship
between the claimant and the other person was entered into or
maintained for the sole or main reason of getting a grant; or
- any other relevant matters.
The proposed definition applies to balance-year and full-year
claims for 1995-96 and for all claims in subsequent years
(item 5).
(1) Australian Trade Commission, Annual Report 1994-95,
p. 46.
(2) Ibid., at pp. 45 and 46.
(3) The Auditor-General, Audit Report No. 33
1993-94.
(4) Australian Trade Commission, Helping To Meet The Export
Challenge - An Evaluation of the Export Market Development Grants
Scheme and the International Trade Enhancement Scheme, April
1994.
(5) Current Senate Hansard, 20 May 1996, p. 727.
(6) Budget Statements 1995-96, Budget Paper No. 1, p.
3-168.
(7) Hon. John Moore MP, Federal Liberal/National Coalition
Industry and Commerce Policy, February 1996.
(8) The Australian Financial Review, 23 April 1996.
Ian Ireland Ph. 06 277 2438
29 May 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
PRS staff are available to discuss the paper's contents
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ISSN 1323-9032
© Commonwealth of Australia 1996
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Published by the Department of the Parliamentary Library,
1996.
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Last updated: 5 June 1996
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