Bills Digest No. 34 2002-03
ACIS Administration Amendment Bill 2002
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
ACIS Administration Amendment Bill 2002
Date Introduced: 22 August 2002
House: House of Representatives
Portfolio: Industry, Tourism and Resources
Commencement: The substantive provisions
operate retrospectively commencing on 1 January 2001.
To amend the ACIS Administration Act
1999 to include utilities, panel vans and pick-ups in the
definition of passenger motor vehicles.
The Automotive Competitiveness and Investment
Scheme (ACIS) is the single, largest assistance package for any
Australian industry. The legislation implementing the assistance
package is the ACIS Administration Act
1999.(1)
ACIS is the keystone of the Government s
post-2000 assistance arrangements for the Australian automotive
industry, which includes:
-
- a tariff pause on imported passenger motor vehicles. The
current tariff is 15 per cent and will remain at this level until 1
January 2005, when it will fall to 10 per cent
-
- 5 per cent tariffs on four-wheel-drives and light commercial
vehicles, and
-
- retention of the additional specific tariff of $12 000 for
imported, second hand used cars.
ACIS commenced on 1 January 2001 and will
conclude on 31 December 2005. Specifically, the Scheme provides
tradeable import duty credits for the automotive industry in two
separate packages for motor vehicle producers and automotive
component manufacturers, toolmakers, and design and engineering
firms. The duty credits are based on investment and R&D
levels.
|
Summary of ACIS
Motor Vehicle Producers (MVPs) are able to claim import duty
credit equal to:
- 25 per cent of the value of production of motor vehicles,
engine and engine components, multiplied by the relevant tariff
rate; and
- 10 per cent of the value of new investment in plant and
equipment.
Automotive component producers, machine tool and tooling
producers, and automotive service providers can claim:
- duty credit equal to 25 per cent of the value of the new
investment in plant and equipment; and
-
- duty credit equal to 45 per cent of the value of R&D
investment.
(Where MVPs produce automotive components,
tooling or services for a third party, they are also entitled to
claim the same benefits.)
|
On 21 March 2002 the Treasurer referred the
Government s post-2000 assistance arrangements to the Productivity
Commission for inquiry. The Commission received submissions from
all sectors of the industry, business groups and labour
associations, state and local governments, and Commonwealth
agencies. The Commission also held several public hearings and on
27 June 2002, released a position paper, Review of Automotive
Assistance, setting out its preliminary views on options for
assistance to the industry beyond 2005.(2)
While the Commission acknowledged the industry
had special features, these were not such as to justify indefinite
preferential treatment. Of the tariff options, the Commission s
view was that there would be significant advantages in providing a
pause at 10 per cent from 2005, before reducing to 5 per cent in
2010, and keeping this rate until 2015. There would also be
advantages in extending ACIS beyond 2005 and retaining its present
structure. Funding should not exceed current levels and under
options being considered by the Commission the Scheme could end in
either 2010 or 2015.
The purpose of ACIS as set out in the ACIS
Administration Act 1999 is "to promote competitiveness, and
encourage investment, in the automotive industry".
One measure of the automotive industry s
competitiveness is its export performance. In 2000 01, Australian
automotive exports increased by 35 per cent to $3.1 billion. The
major markets for exports were Saudia Arabia ($1.4 billion), the
USA ($569 million) and New Zealand ($364 million).(3)
This suggests that Australia is capturing an increasing share of
the world market.
However, an accurate assessment of the impact of
the Scheme is difficult for a number of reasons. Firstly, the
Scheme is only half way through its second year and the evidence of
its impact is largely unproven. The Commission s position paper
noted anecdotal evidence of the Scheme s benefits but did not
conduct its own study of the effects of the
Scheme.(4)
Secondly, it is difficult to differentiate the
effects of ACIS from a whole range of other factors affecting the
industry s performance, such as exchange rates, technological
change, skill levels and general economic conditions.
ACIS provides around $2.8 billion over five
years. This amount is drawn from two pools . One is capped at $2
billion for the life of the Scheme and an uncapped pool, which is
estimated to cost $840 million.
In the 2000 01 financial year, assistance to the
automotive industry under ACIS and its predecessor scheme was $599
million in foregone revenue.(5) In its submission to the
Commission s review, the Federation of Automotive Products
Manufacturers (FAPM) stated:
Currently there is no information available on
the efficacy of ACIS other than information relating to claims
made. ACIS is effectively an untied cash subsidy that can be used
in a myriad of ways to improve a company s competitive position.
Performance monitoring would seem to be a basic pre-requisite to
improved policy administration. Any ACIS monitoring should be
designed in close consultation with the industry.(6)
Subsection 42 of the ACIS Administration Act
1999 establishes the methodology for calculating incentives to
motor vehicle producers under the capped and uncapped elements of
ACIS for the production of motor vehicles.
The uncapped element is equivalent to the Duty
Free Allowance (DFA) under the previous scheme and is equal to 15
per cent of the value of production of passenger motor
vehicles sold in Australia and New Zealand, multiplied by the
current tariff rate on imported cars.
The Explanatory Memorandum states that the
current ACIS definition of passenger motor vehicles
excludes utilities, panel vans and pick-ups. This exclusion is
inconsistent with the Government s 1997 policy to continue the DFA,
which applied to the production of utilities, panel vans and
pick-ups.
Item 1 of Schedule 1 of the
Bill inserts the definition of specified load-carrying
vehicles, which covers utilities, panel vans and pick-ups.
Item 3 of Schedule 1 clarifies
that a passenger motor vehicle or a specified
load-carrying vehicle is a motor vehicle for the purposes of
ACIS.
The Bill corrects an oversight in the original
legislation establishing ACIS a scheme that is widely supported by
the automotive industry. Accordingly, the amendment operates
retrospectively from the commencement of the Scheme.
-
- See ACIS
Administration Bill 1999 Bills Digest No. 208, 1998 99 for a
general discussion of the policy objectives of the Bill. In 2000,
changes were made to the administration of the Act to ensure the
cap on the cost of the Scheme was achieved. See ACIS
Administration Amendment Bill 2000 Bills Digest No. 46, 2000
01.
- See Review
of Automotive Assistance, Position Paper, Productivity
Commission, June 2002.
- See Composition of Trade, Australia, 2001, Department
of Foreign Affairs and Trade, June 2002.
- Review of Automotive Assistance, Position Paper,
Productivity Commission, June 2002, pp. 100 102.
- ibid., p. 97. The amount reflects 6 months of ACIS and the
previous scheme.
- FAPM Submission to the Productivity Commission Inquiry into
Post-2005 Arrangements for the Automotive Industry, May 2002, p.
78.
Michael Priestley
12 September 2002
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 2002
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