HBV response to HRA stallion levy proposal
The HBV executive, in consultation with the wider committee and the membership, have developed the following submission in response to HRA’s proposed levy on imported stallion services. You can refer to their release here and download our submission as a PDF here.
Submission from Harness Breeders Victoria on behalf of members:
Dear Mr Kelly,
Re: Proposed Stallion Levy
SUMMARY
Harness Breeders Victoria (HBV) is the recognised kindred body for Harness Racing Victoria in relation to breeding matters. HBV represents breeders, studs and associated individuals and entities with an interest in the breeding of Standardbreds. HBV has been made aware of a proposal by Harness Racing Australia (HRA) to introduce a Stallion Levy on services by certain stallions standing/registered in Australia. HBV has sought feedback from its members before the Committee formulated the following submission on behalf of its members.
This feedback has been overwhelmingly negative towards the proposal with over 90% of written submissions made by our members to HBV opposing the Levy. It is understood that this sentiment has also been provided to our counterpart breeding organisations around Australia. This level of national opposition should be enough for HRA to abandon the proposal forthwith. Harness Breeders Victoria and its members fundamentally oppose this proposal.
Our assessment is:
This proposal is ill conceived and has been put forward without any robust or rigorous assessment and would be detrimental to the future of the harness breeding industry, an industry that ALL authorities, including HRA deem essential to the future of the sport.
The breeding industry has worked incredibly hard in recent years to arrest the decline in foals born and implementing a tax on breeders, and it is a TAX on breeders, will significantly impact on the future of this sport, to its detriment. The direct feedback from our members is this will decrease breeding.
Good policy ideas need to encompass good implementation. However, in this proposal we note:
There are serious deficiencies with HRA’s understanding of the commercial realities of the stallion market and how it operates in commercial practice.
There is no genuine or meaningful assessment of the use of the funds raised, rather 4 short bullet point statements on possible areas and an overarching statement that “breeders are set to benefit with a prizemoney injection”.
The legal capacity of HRA to impose this tax is not clear. We note HRA is an Incorporated Association within the ACT and under its Rules of Association (Section 5) has powers to make regulations with respect to breeding, but does not have any direct powers for raising taxes/levies. Our understanding is only State Controlling bodies have the direct powers (i.e. HRV pursuant to the Victorian Racing Act 1958.
HBV MAKES THE FOLLOWING SUBMISSIONS:
The Concept
HBV does not support the proposal and is of the view that it should be abandoned.
It is unclear to HBV what the purpose of the Levy actually is. If there is a clear purpose it has not been stated in the press release of 16 April, 2021. It is understood that there are no support documents publicly available which might provide a basis for the proposal. We find this fact quite astounding given the manner in which the press release has been written.
The 2020 breeding season has been the most successful in recent years if the increase in services (to over 5,000) is used as the benchmark. For the first time in years there is positivity in the breeding industry. This Levy threatens to remove the positivity in the breeding industry and in fact negatively impact on breeding numbers.
HRA are of the view that the levy will be passed on by stallion owners through inflated stallion service fees. HRA states that it would be naïve of said stallion owners to increase the service fees. HBV believes it is naïve of HRA to think that the costs will not be passed on to breeders, and in fact HRA cannot control that this outcome may occur.
HRA must be aware that the cost of breeding Standardbreds is one of the key reasons for the decline in breeding numbers over the last 20 years. If HRA adopts this levy it risks imposing an increased cost on Australian breeders that undoes the increases in services that were achieved in the 2020 breeding season. This is a risk that HBV says HRA must acknowledge leading to an abandonment of the proposed levy.
The Implementation
Notwithstanding HBV’s clear opposition to the levy, we make the following comments on elements of the proposal that we believe should be changed if the Levy is imposed.
The 15% Levy appears to be arbitrary. The decision to impose a Levy of 15% does not appear to have been chosen as the figure necessary to achieve a desired outcome. In fact the outcomes for the use of the money have not been determined and are completely open, leading one to the conclusion that this is a levy for its own sake seeking to tax a certain portion of the breeding industry for an undisclosed reason.
This proposal would actively discourage Australian stallion owners from shuttling their stallions to other jurisdictions as they would then find themselves being subjected to this Levy.
The imposition of the levy upon a positive 42 day test is unreasonable. It fails to take into account that not every 42 day test results in a foal on the ground.
The HRA proposal is silent as to what will occur if the stallion owner fails to pay the invoice issued to it by HRA. Is it possible that a breeder could pay the service fee to the stud and the resultant foal not be registered by HRA if the invoice is not paid?That would indeed be unfair, unreasonable and quite probably illegal. It places breeders at significant risk that they cannot control.
HBV expects stallion owners to pass the levy on to its service fees. This view is held by every member who made submissions to HBV. It is therefore our view that Breeders, not stallion owners, will be the group that provide the majority of the funds that will be accumulated if the Levy is imposed. These are funds that breeders cannot afford and will result in a decrease inthe number of services.
The method of collection fails to understand the commercial relationships in the breeding industry. For example, frozen semen may be purchased by the Australian stud at a fixed price, the ownership of which transfers to the Australian Stud. In some cases, frozen semen may already be in the country and may have been for some time.
Where frozen semen has been in the country prior to the Levy is it reasonable to place a Levy on it and does HRA really expect the Stallion owner to pay the invoice?
The Levy fails to recognise the significant differences in the pacing and trotting markets. A review of the sires list on harness.org.au reveals that approximately 25 of the 110 Pacing sires would attract the Levy whereas 29 of the 48 trotting stallions would attract the Levy. The impact on the trotting market would be enormous and would seriously impact the one growing sector of the Australian breeding industry.
The Money
If HRA ignore the overwhelmingly negative feedback and the Levy is to be imposed, the proposal leaves it open as to how the money might be spent. It is submitted that if Australian breeders are set to benefit then the spending of the funds must be directed at breeders so as to offset the costs they will have imposed on them. Any money must be returned to the state of origin and use to support initiatives that would encourage breeding.We would expect HRA to consult with breeding associations on these matters.
HBV submits that any proposal that seeks to allocate the money into elite races are misguided and provide no benefit for breeders. If that is the aim, HRA must seek an alternative source of funding –not the breeding industry.
If you have any queries please to not hesitate to contact the undersigned.
Yours sincerely,
NICK HOOPER
HBV President