FREIGHT & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) have received clarification that the new levy effective 1 July 2019 is a general taxation with revenue to contribute to consolidated government revenue.
As a general taxation, industry will have no transparency as to how this money will be spent and will have no guarantees the revenue will find its way back to Department of Agriculture and Water Resources (DAWR) frontline services.
As the levy is not considered a "cost recovery", we understand that it is not required to comply with the Cost Recovery Guidelines and is not subject to industry review via the Industry Finance Consultative Committee (IIFC) or other industry committees.
Surely there is a better way.
A better outcome, instead of a tax, would be an equivalent increase in cost recovery
The proposed method of collection, via the stevedores, presents further issues for industry. Like the notorious "infrastructure charges", it is anticipated that stevedores will look to recover this cost via the Vehicle Booking System (VBS) used by transport companies to book time slots for the collection of import containers. If this were to occur, it is again anticipated that transport operators would look to recover this cost with an additional administrative fee to address operational costs and offset negative cash flow implications. This cost recovery is likely to cascade down the supply chain with importers ultimately paying an inflated price with the additional impost and complexity of GST payments.
FTA and APSA have recommended the department consider alternative models, including collecting the levy via the Full Import Declaration (FID). The FID is already a collection point for duty, GST, import processing charges and other government-imposed charges. Andrew Crawford, FTA's head of border and biosecurity, has recommended that the Integrated Cargo System (ICS) has code reinstated to calculate containers per FID to administer the new levy. The benefit of the FID is that costs are usually passed on from customs brokers to importers at a net rate as per costs displayed on the FID.
A better outcome, instead of a tax, would be an equivalent increase in cost recovery. At least that way industry will know that the department will receive the revenue. This would provide industry with some guarantee that the revenue would be spent on frontline border activities, as well as delivering a level of transparency and accountability as to how the revenue will be spent.
Instead, we have another fixed tax. A stamp duty on international trade movements. As container volumes increase so will the government's revenue, with no guarantee that frontline services will be improved.
At a time where many media commentators are decrying "trade wars" between our major trading partners, it is a curious time for Australia to be introducing a general tax on imports. The question must be asked: how do our trading partners feel about such a tax? Does this breach any of our existing international commitments? Will some of our trading partners simply respond in kind with a levy of their own?
It is unsurprising that the response from the Australian freight industry to this levy has been strong and swift. The Australian Logistics Council (ALC), Ports Australia and other bodies have all provided media commentary opposing the levy. While FTA participates on several DAWR industry forums, we can confirm that there was no consultation or warning before the budget announcement. It caught the entire industry off guard. The only warning was a "teaser" article in The Australian, immediately before the budget, which suggested the possibility of such a levy. In that article, the suggestion was made that a similar arrangement may be put in place for airfreight imports. The final budget announcement, however, was limited to sea freight imports only.
While we appreciate the ongoing engagement with DAWR in exploring alternative models, FTA and APSA also look forward to working more closely with Treasury on this issue.
FTA and APSA will continue to advocate for industry and will provide further updates as they emerge.
This article appeared in the July edition of DCN Magazine