Bills Digest 95 1995-96
Export Market Development Grants Amendment Bill (No. 1) 1996
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 with Senators
and Members and their staff but not with members of the public.
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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