Using tax offsets as a principal funding device to encourage self-assessing corporations to conduct research and development. What could possibly go wrong?

Providing a tax incentive for industry to conduct, in a scientific way, experimental activities for the purpose of generating new knowledge or information in either a general or applied form. [C’wealth Income Tax Assessment Act 1997 - SECT 355.5]

What could possibly go wrong when a federal government primarily funds business research and development (R&D) by offering private corporations tax offsets for conducting such activities, while at the same time allowing them to self-assess whether they are eligible for these tax incentives and whether their research is genuine?

Well for a start, the companies involved tend to employ less science, technology, engineering and mathematics graduates to conduct their R&D.

Given that on 15 June 2016 The Australian reported that; the Productivity Commission says STEM graduates fare poorly in the job market, apart from those who have studied healthcare, mining engineering and surveying. The outlook for mathematics and computer science qualifications are only slightly below average, however there are big gaps for graduates in life sciences, chemistry and the physical sciences. Employment outcomes improve three years after graduation, but 20 per cent of people with bachelor degrees in natural and physical sciences have still not got a job. Of those who do get work, many are in an unrelated field. About a quarter of people with science degrees say their qualifications are not relevant to their employment, one has to wonder why business and industry in Australia are not availing themselves of these qualified graduates.

Then there is the fact that it appears that this government program is not always well targeted.

Another flaw in this system is that voters have no way of knowing which companies are receiving these tax incentives and how much they are receiving, or of assessing what government foregoing so much tax income annually actually achieves as outcomes for the economy.

If science actually matters to the Turnbull Government it should matter not just in universities and identified research institutes but in all its aspects – including allegedly market-driven R&D.

One has to suspect that a little more academic discipline in business research and development might lead to better outcomes.

BACKGROUND

Dept. of Industry, Innovation and Science, Review of the R&D Tax Incentive (Ferris, Finkel and Frasier) 4 April 2016:

The R&D Tax Incentive (the Incentive) is the largest component of Australian government support for innovation, with around 13,700 entities performing $19.5 billion of R&D at an estimated cost to government of $2.95 billion in 2013-14. The Government commissioned this review to:

‘identify opportunities to improve the effectiveness and integrity of the R&D Tax Incentive, including by sharpening its focus on encouraging additional R&D spending.’

Reviewing the programme against these terms of reference involves the evaluation of the programme against its objectives, weighed against the costs, to measure the net social benefit.

The objectives, as stated in the programme’s legislation, are to ‘encourage industry to conduct research and development activities that might otherwise not be conducted…to benefit the wider Australian economy’. In other words, the Incentive seeks to encourage additional R&D (additionality) that benefits others (spillovers).

Most OECD countries have incentive schemes for R&D. Australia and most other countries use tax incentives as part of their public support, but Australia, Canada and the Netherlands are unusual in having tax measures as the principal form of support for business R&D. Countries such as Finland, Germany and Sweden are examples at the other end of the spectrum, in that they do not use tax incentives at all but rather support business R&D through direct measures such as competitive grants.

Overall assessment

The review panel finds that the programme falls short of meeting its stated objectives of additionality and spillovers. There are a number of areas where improvements could be sought in order to improve the effectiveness and integrity of the programme and achieve a stronger focus on additionality.

Based on the best estimates of additionality and spillovers, the panel found that the programme could be better targeted. The areas of improvement identified in this review would be likely to generate greater benefit from the programme for the Australian economy.….

The panel notes that there is a modest amount of collaboration with publicly-funded research organisations (PFROs) within the programme, but it is not an explicit focus. The panel also notes the low employment level of Science, Technology, Engineering and Mathematics (STEM) PhD graduates in Australian industry relative to other OECD countries. This represents a lost opportunity for greater spillovers of knowledge between larger companies, PFROs and the broader marketplace…..

The panel notes that despite the level of coordination between AusIndustry and the ATO, the significant growth in the scale of the programme is placing increasing strain on the administrative and compliance model for the programme. The Government should consider options to improve administration. These could include: adopting a single application process rather than the current separation of registration and claims, introducing a single database for the entire programme, reviewing whether both AusIndustry and the ATO should continue to administer the programme jointly and closer collaboration and streamlining around review and findings. Either or both agencies may require additional resourcing to enable such improvements.

To place the programme into alignment with modern expectations and to allow public visibility of companies receiving public support for their activities, tax secrecy provisions should be adjusted to allow the publication of the names of companies claiming the Incentive and the amounts of R&D they have claimed…..

Australian Federal Police spokesperson careful not to say that investigation had 'cleared' Brough & Ashby

This was The Daily Examiner (News Corp) take on the completion of the Australian Federal Police investigation into the unlawful disclosure of information by Commonwealth officers alleged to have occurred when a member of the Speaker of the House of Representatives’ staff photocopied details of the diary and gave it to a person desirous of unseating Peter Slipper:

However, what the Australian Federal Police (AFP) stated was not a clearing of anyone’s name.

As at the time of writing there is no published media release from the AFP one has to rely on details gleaned from various media articles.

“Following a thorough investigation material was provided to the Commonwealth Director of Public Prosecutions for certain advice. As a result of the advice provided by the CDPP the matter did not proceed further. The length of this investigation has been influenced by a number of factors, including, but not limited to the availability of individuals to provide statements, the provision of materials from third parties, and the substantial volume of material that needed to be assessed.”

http://www.couriermail.com.au/news/queensland/police-drop-investigation-into-alleged-copying-of-peter-slippers-diary/news-story/956daed844f1908d04b8eda5e29d3a2f

In a statement to the ABC, the AFP said it considered the matter now finalised.

"In September 2014 the AFP received a request to investigate matters relating to the alleged unauthorised disclosure of information from the official diary of former speaker of the House of Representatives, Peter Slipper," the statement read.

"Following a thorough investigation material was provided to the Commonwealth Director of Public Prosecutions (CDPP) for certain advice.

"As a result of the advice provided by the CDPP the matter did not proceed further."

http://www.abc.net.au/news/2016-10-04/afp-drops-investigation-into-peter-slipper's-diary-leaks/7902172

Mr Slipper said on Tuesday his lawyers has been informed by AFP assistant commissioner Shane Connelly that the investigation had been closed.  In a letter, Mr Connelly said a review found the available evidence was insufficient for any potential prosecution. 

http://www.smh.com.au/federal-politics/political-news/peter-slipper-diary-james-ashby-and-mal-brough-in-clear-as-afp-drops-investigation-20161004-gruiib.html

In a letter to Mr Brough’s lawyers, AFP Assistant Commissioner Shane Connelly said the investigation had been finished and no charges laid.

“I write to advise you of the outcome of the Australian Federal Police ‘AFP’ investigation into the allegation a former staff member of then Speaker of the House of Representatives Peter Slipper had disclosed parliamentary diary entries of Mr Slipper without his authority,’’ the letter says.

“A review of the evidence available to support a potential prosecution has determined the evidence is not sufficient to prove all elements of the relevant ­offence ... as a result, the AFP will be taking no further action in ­relation to the matter.’’

http://www.theaustralian.com.au/national-affairs/mal-brough-blasts-afp-for-killing-my-career/news-story/8e55735cefd5c0eee8af1036e8a53063

I write to advise you of the outcome of the Australian Federal Police ‘AFP’ investigation into the allegation a former staff member of then speaker of the House of Representatives Peter Slipper had disclosed parliamentary diary entries of Mr Slipper without his authority … A review of the evidence available to support a potential prosecution has determined the evidence is not sufficient to prove all elements of the relevant offence, being the disclosures of information by Commonwealth officers as described in section 70 of the Crime Act 1914 (CTH). As a result, the AFP will be taking no further action in relation to the matter.

https://www.themonthly.com.au/today/sean-kelly/2016/04/2016/1475559898/it-ends-whimper

The trouble with blueberries....

An Coffs Harbour man and a Canadian multimillionaire decide to farm water-hungry blueberries in the Clarence Valley.

The Daily Examiner, 3 October 2016, p.12:

VOICES FOR THE EARTH

Media reports in August of a proposed 850 hectare blueberry development at Bawdens Bridge raise serious issues that add to growing community concerns about the industry.

The application to Water NSW to extract 66ML of water annually from the Orara River indicated the proposed orchard size would be just 30 hectares.

In a meeting with concerned neighbours, the proponent scoffed at rumours they intended to plant as much as 100ha, explaining there just wasn't enough available water.

That comment is supported by the Department of Primary Industry's Primefacts which states: "Water storage facilities of 2-3 megalitres per hectare are required for blueberry production".

Currently there is only 90ML available to the proponent as a harvestable right (collected run-off in dams), plus the 66ML from the river if the licence is approved. So where will the remaining 2000ML come from, and how will it be stored?

Council's director environment, planning and community, Des Schroder, was quoted in the media, describing the partnership between a Coffs Harbour grower and Vancouver businessman Luigi Aquilini, as providing "a multi- national presence in the region", and seemingly in awe of Mr Aquilini describing him as, "a Rupert Murdoch figure in Canadian business circles".

However, as the former manager of the NSW Department of Land and Water Conservation, Mr Schroder should be well aware that, in a drought year, there would be insufficient water in the Orara River to pump at all, much less irrigate 850ha of blueberries.

Proponents engaged in intensive horticulture can legally clear native vegetation, even supposedly protected vegetation, to build massive harvestable rights dams, and can transform the rural landscape into an industrial complex, covered end to end by netting or plastic, without applying for approval, or any need to consult honestly with neighbours.

So the industry needs to do much more to change that perception, and open and transparent consultation would be a good way to start.

John Edwards

Clarence Valley Conservation Coalition

BACKGROUND

The Land, 19 August 2016:

THE sale of Grafton’s old abattoir to Golden Eagle Berries and its planned conversion to packing and cold store signals a new direction for the Clarence Valley with the business saying it will require 1200 picking jobs by 2018 – as much as the abattoir ever used to employ.

Clarence land previously deemed too poor for agriculture remains very attractive to the industry as blueberry shrubs prefer an acid soil, well draining.

Last year Mr Dosanjh formed a partnership with Vancouver businessman Luigi Aquilini and together they are growing blueberries on 120ha at Clarenza and will develop another 850ha at Waterview Heights.

Mr Dosanjh is both excited and a little frightened of a bright berry future in the valley. There is potential for employment and career paths but high prices are overdue for correction. The new reality will require smart farming.

“Unless we can export blueberries the industry may go the way of bananas,” says Mr Dosanjh.

Fruit fly protocall for markets like Japan remains the greatest obstacle but cold storage at low temperatures will kill fruit fly larvae.

NSW Government Gazette No 21 of 24 March 2016:

WATER ACT 1912

An application under section 10 of the Water Act 1912 for a 150 Megalitre dam & 150mm pump on UNNAMED WATERCOURSE has been received from HARJAP SINGH DOSANJH for irrigation and farming purposes (150 megalitres) on Lot 137 DP 751362 Parish Clarenza County Clarence. (30SL067326)

An application under section 10 of the Water Act 1912 for a 150mm pump on ORARA RIVER has been received from DOSANJH INVESTMENTS PTY LTD for irrigation and farming purposes (66 megalitres) on Lot 262 DP 751383 Parish Rushforth County Clarence. (30SL067327)

Objections to the granting of this licence must be registered in writing to Locked Bag 10, Grafton NSW 2460 within 28 days of this notice. The objection must include your name and address and specify the grounds of objection. Any queries please call (02) 6641 6500.

PETER HACKETT Water Regulation Officer. Department of Primary Industries (DPI) Water

Clarence Environment Centre Newsletter Winter 2016:

There is no gazetted Water Sharing Plan for the Clarence River, with only a Draft Report Card for the Lower Orara River available on the DPI web site, which is now rendered obsolete by the permanent closure of the Nymboida Power Station.

We also learned that the proponent had already begun work on a very large dam on a local creek line known as “Chain of Ponds”, removing some 300m of gully vegetation. Enquiries to Council revealed that, despite the Local Environment Plan clearly indicating the water storages cannot be built on land of that zoning, the proponent can in fact construct a dam big enough to store the property's harvestable rights, without any approval. Those rights, for the 1000 hectare plus property, amount to some 90 megalitres annually.

Because blueberries are highly chemical dependent, there are other matters of concern, particularly the potential for pollution of the Orara River, which runs along the property's boundary. Pollution could impact on threatened species like the endangered Eastern Freshwater Cod, and the unique riparian vegetation community. Dominated by a mix of Black Bean (Castanospermum australe), Silky Oak (Grevillea Robusta) and Satinash (Syzygium floribundum), that community, to the best of our knowledge, only occurs along the lower reaches of the Orara and nowhere else in the world.

Vancouver Sun, 9 September 2013:

a vast family empire that owns the Vancouver Canucks hockey team, development companies, investment and hotel properties, North America’s largest blueberry and cranberry farms, and a lot more. The empire is wrapped up tightly in an extraordinarily complex trust system that Francesco’s father Luigi set up years ago to protect the family assets for his wife Elisa, their three sons Francesco, Roberto and Paolo, and others.

The multinational Aquilini empire outlined here.

Turnbull Government barely keeping its fiscal head above water?

The 2015‑16 Final Budget Outcome document was released on Friday 30 September 2016 by Australian Treasurer Scott Morrison and the Minister for Finance Mathias Cormann. It can be downloaded here.

This is Stephen Koukoulas writing on the subject in The Guardian on 3 October 2016:

The treasurer, Scott Morrison, and the finance minister, Mathias Cormann, "took out the garbage" last Friday afternoon, dumping the final budget outcome for 2015-16 on the Treasury website under the cover of the football grand finals, a long weekend and the start of school holidays around much of the country.

Morrison and Cormann came close to breaching the Charter of Budget Honesty, which requires the release of each budget outcome for the prior financial year by 30 September each year. They made it with a few hours to spare.

They also released it without a press conference or detailed media release, making sure there was miniscule coverage of something that would normally be a key area of economic and fiscal management. This is especially the case with "budget repair", the "return to surplus", "paying off debt" and dealing with the "budget emergency" being the basis that saw the Coalition elected to power in both September 2013 and July 2016.

Looking at the budget outcome document, it is clear why it was released in the shadows of the Friday night without any fanfare.

The 2015-16 budget deficit was $39.6bn or 2.4% of gross domestic product. When the former treasurer Joe Hockey delivered the first budget of the Coalition government in May 2014, the budget deficit for 2015-16 was forecast to be $17.1bn.

Much of the blowout was due to decisions of the Coalition government. Foregoing revenue from the carbon price, gifting $8.8bn to the RBA and ramping up spending on border protection without any offsets were vital.

The Coalition, contrary to all perceptions, has been spending at an alarming rate. In 2012-13, the last full year of the previous Labor government, the ratio of government spending to GDP was 24.1%. In 2014-15, this had risen to 25.6% and, in 2015-16, it rose to 25.7% of GDP. The 1.6% of GDP blowout in spending between 2012-13 and 2015-16 is about $26bn and accounts for more than the blowout in the deficit from the time of the 2014 budget.

The deficit blowout fed into the level of government debt as it had to ramp up its borrowing to cover the ever growing shortfall.

Net government debt rose to $296.4bn at June 2016, up from $153bn in June 2013 just before the Coalition took power. As a share of GDP, net government debt has risen from 10% to 18%, just off the all-time high in the wake of the second world war. When the 2016 Myefo is released before year end, net government debt will be at a 60-year high and rising.

Gross government debt, according to the final budget outcome documents, rose to $420.4bn, or 25.5% of GDP, in June 2016. This is at the highest since 1971-72 when the Vietnam war effort was being funded.

Government debt is growing at a pace that will no doubt be the focus of the credit ratings agencies. Unless there is some miracle in terms of a growth spurt that fuels an unexpected windfall revenue gain to the government, further large budget deficits are likely in the near term, as are further increases in government debt……

Malcolm Turnbull & Co losing favour with rural/regional & older voters

The Australian, 3 October 2016

The Newspoll tables covering August-September 2016 clearly show the Turnbull Government continues to lose support in the electorate.

According to The Australian newspaper; The Turnbull government has lost support in every state since the election, with the sharpest falls in Western Australia, Queens­land and South Australia, and among older voters and those living outside the capital cities. A demographic analysis of Newspoll surveys conducted ­exclusively for The Australian since the July election also reveals Mr Turnbull’s support is weakest in his home state of NSW. Labor has made its biggest gains since the election among country voters, men and those aged over 50, with its biggest lift in South Australia and Queensland.

Like the Abbott Government before it, this government is increasingly seen as one which has achieved very little being led by a man who is either too frightened to govern or does not know how to govern effectively.

The ongoing issues with political probity certainly don’t help the Liberal and Nationals parliamentary parties with their public image – nor does the perception that far-right ideologues within their ranks have an inordinate influence on Coalition cabinet decisions.

Having squandered their double-dissolution card in order to achieve a slim two-vote majority in  the House of Representatives in July, holding only 30 of the 76 Senate seats and unable to go to another election until August 2018 at the earliest, one has to wonder how they will manage to turn matters around and regain the confidence of the national electorate.

Australian Government Data Retention: refraining from saying told you so......

ABC News, 29 September 2016:

The Health Department has removed data from its website amid an investigation into whether personal information has been compromised.

Australian Privacy Commissioner Timothy Pilgrim has launched an investigation after academics found it was possible to decrypt some service provider ID numbers in the Medicare Benefits Schedule and Pharmaceutical Benefits Schedule datasets.

In a statement, the Department of Health said the dataset published on data.gov.au did not include names or addresses of service providers and no patient information was identified.

"However, as a result of the potential to extract some doctor and other service provider ID numbers, the Department of Health immediately removed the dataset from the website to ensure the security and integrity of the data is maintained," it stated.

"No patient information has been compromised, and no information about the health service providers has been publicly identified or released."

Further comment has been sought.

The Guardian, 24 September 2016:

The Australian Bureau of Statistics inadvertently released contact names linked to more than 5,000 Queensland businesses in what was described as a “human error”.

The breach is one of 14 the ABS has reported to the Office of the Australian Information Commissioner since 2013, and was released to Guardian Australia under freedom of information laws.

The ABS has come under scrutiny over its handling of the 2016 census, initially for the extended retention of names and addresses for a period of four years. It then faced further criticism after the census website crashed, which it attributed to a series of foreign attacks.

While none of the breaches reported to the OAIC relates to the handling of any census data, some do highlight errors in the handling of other surveys as well as failures to correctly de-identify data, which is one of the criticisms raised by privacy advocates about the increased retention of census data.

The Canberra Times, 4 October 2016:

The federal government is caught up in a second data privacy scare, this time involving a massive data-set on more then 96,000 of its public servants amid fears their confidential information might not be secure.

In the second potentially serious Commonwealth data breach to become public in less than a week, the public service's workplace authority has confirmed that it has withdrawn the data gathered in its massive annual employee census from public view.

It is feared that identification codes for departments and agencies could be used to identify the individual public servants who filled in the census, the largest workplace survey undertaken in Australia, on condition of anonymity.

The data has been taken down from official websites to be washed of any features that could be used to breach the privacy of government officials.

But the Australian Public Service Commission has confirmed the data-set was downloaded nearly 60 times before the take-down, meaning the raw information is in circulation with no way to control how it is used or distributed further......