Australia's Future Tax System

Final Report: Detailed Analysis

Chapter E: Enhancing social and market outcomes

E8. Rationalising other taxes

E8–4 Australia's minor taxes

Taxes with narrow bases that raise small amounts of revenue are usually inefficient unless they effectively correct for a failure in a particular market (see Section E Enhancing social and market outcomes) or unless they function as charges for particular goods and services (see Section E1 User charging).

What we have now

Australia has at least 14 minor taxes that are not addressed elsewhere in this report. They are motivated by a wide range of public policy purposes and are mainly levied on narrow bases, restricted to individual industries or activities. Summary information about them is presented in Table E8–2. Together they raised more than $1.4 billion in 2007–08.

A number of other relatively minor taxes are dealt with elsewhere in this report:

Some smaller financial transaction taxes are levied by some States but, consistent with the Intergovernmental Agreement on Federal Financial Relations, are scheduled to be abolished before 1 July 2013. The relevant taxes are stamp duties on mortgages, bonds, debentures and other loan securities; non-quotable marketable securities; and non-real non-residential conveyances (that is, business assets such as goodwill or intellectual property).

This report deals with all the significant taxes levied by Australian governments and efforts have been made to identify all the taxes in the nine Australian jurisdictions. Nevertheless it is sometimes difficult to decide whether two taxes should be recognised or just one and sometimes difficult to distinguish between taxes and sources of non-tax revenue. This report does not, therefore, claim to present a definitive list of Australia's taxes.

A review agenda for minor taxes

Recommendation 81:

Governments should undertake a systematic review of existing and potential user charges and minor taxes against the principles set out in this report. This should be coordinated with the introduction of the system wide Tax and Transfer Analysis Statement proposed in Recommendation 132.

This Report includes comments on a number of Australia's minor taxes (see Section E1 User charging). However, given the time and resource constraints under which the Review has been conducted, and given the need to focus on the major taxes that have the greatest impact on Australians' wellbeing, the Review has not made firm recommendations about each of the minor taxes now levied in Australia. In many cases, it would have been necessary to conduct a specialised program of research and solicit input from specific stakeholders before it would have been possible to draw firm policy conclusions. Rather than attempt this large task, and run the risk of neglecting more central features of Australia's tax and transfer system, this Report sets out a number of principles for evaluating narrow-based taxes on specific goods and services (see Section E Enhancing social and market outcomes and Section E1 User charging).

The Review recommends that the Australian government and all state governments commit to a systematic review of their minor taxes (see Recommendation 81). Where a tax is found to perform poorly against the five core criteria identified in this report — efficiency, equity, simplicity, sustainability and policy consistency — it should be abolished and the revenue replaced with revenue from better performing taxes, particularly broad-based revenue raising taxes. This review should be coordinated with the process for the introduction of the system wide Tax and Transfer Analysis Statement proposed in Recommendation 132.

Table E8–2: Summary information on minor taxes

Tax Revenue (2007–08, $m) Rationale Legal incidence Base Rate Destination of receipts
Passenger Movement Charge (Cth) 420 Contributing to the funding of customs, immigration, quarantine and short-term visa processing services. In principle these services should be directly cost recovered or funded from the budget. Passengers, though in practice collected by airlines and other carriers. Passenger departures from Australia. $47 per departure. Consolidated Revenue Fund (CRF).
Aviation fuel excise (Cth) 77 Contributing to the funding of civil aviation safety services. In principle these services should be directly cost recovered or funded from the budget. Refiners and importers Litres of aviation fuel. $0.02854 per litre. CRF, then to the Civil Aviation Safety Authority.
Annual Carrier Licence Charge (Cth) 37 Recovers from carriers the cost to government of regulating the telecommunications industry. A carrier owns network infrastructure. There were around 170 carriers in Australia in 2007–08. Telecomms carriers. The costs of the Australian Communications and Media Authority, the Australian Competition and Consumer Commission, and Australia's contribution to the International Telecommunications Union. Fixed minimum amount (calculated by formula), $50K each in 2007–08, plus variable component, totalling $37m, divided among carriers in proportion to eligible revenue. CRF then to ACMA, ACCC
Save the River Murray Levy (SA) 22 Funds programs to increase environmental flows in the Murray River. No direct link between the charge and amount of water used. SA Water account holders. SA Water accounts. $38.65 a quarter for most account holders SA Water remits the levy collections to the SA government.
Universal Service Obligation Levy (Cth) 158 Revenue is used to fund consumer access to telecommunications services in areas where that would otherwise not be viable. In principle, all cross-subsidies should be transparent and other more efficient funding arrangements considered. Carriers. Total cost of providing universal service beyond what is commercially viable. The cost of providing the universal service is estimated, then divided among the carriers in proportion to their share of eligible revenue. Universal service provider (Telstra) by way of a Special Account administered by ACMA.
Summary information National Relay Service Levy (Cth) 12 The objective is for carriers to contribute to the cost of providing telecommunications access to people who are deaf or who have a hearing or speech impairment. In principle, all cross-subsidies should be transparent and other more efficient funding arrangements considered. Carriers, Estimated National Relay Service cost for the current quarter, plus any net levy shortfall from previous quarter. Cost is calculated then recovered from carriers in proportion to their eligible revenue (for carriers with more than $10 million in eligible revenue). Relay service provider and Outreach service provider by way of a Special Account administered by ACMA.
Annual Numbering Charge (Cth) 60 Charges carriage service providers (CSPs) for the use of phone numbers A CSP is a business which provides phone or internet access. The charge aims to encourage the efficient use of numbers by CSPs. CSPs. An arbitrary revenue target has been set at $60m since 1998. The rate is set annually to hit the revenue target, by reference to numbers held in April each year. The rate for a standard 10 digit number is $0.81, for 9 digits, $8.11 etc. 'Opportunity cost' methodology. Some types of number get lower rates. CRF
Coal Mining Industry Levy (Cth) 72 Maintain industry-wide long service leave scheme in the black coal industry. Black coal producers. Payroll. 2.8% CRF, then to statutory fund.
Livestock compensation levies (Vic, WA, SA) Aggregate figures not available. Provide pastoralists with compulsory insurance against livestock disease. In principle, fees should reflect actuarial risks. Sellers of livestock. Livestock sale price. Varies according to the type of livestock and from State to State. Statutory funds.
International Oil Pollution Compensation Levy (Cth) 0.2 Provide universal insurance against tanker spills of 'persistent oil'. Fund created by international treaty. Receivers of tanker shipments of persistent oil. Tonnes of oil received. Varies from year to year. CRF, then to International Oil Pollution Compensation Fund.
Broadcasting Licence Fees (Cth) 282 Charging broadcasters for access to broadcasting spectrum bands, and recovering scarcity rents created by regulation. Nearly all ($259m) comes from TV broadcasters, very little ($22m) from radio broadcasters. In principle, the fee should be transferrable and reflect the scarcity value created by regulatory restrictions. Commercial radio and television broadcasters. Gross earnings in previous year. Calculated as a percentage of the base which increases as gross earnings increase. The maximum rate is 9 per cent. CRF
Apparatus Licence Tax (Cth) 143 Recovers regulatory costs (not attributable to any one licence) and provide a return to government for use of the radio spectrum resource. Owners of radio communication devices. Radio transmitters: aeronautical, aircraft, amateur, broadcasting, datacasting, ships, scientific etc. Radio receivers: for ships etc. Proportional to bandwidth. Higher in congested locations and spectrum bands. Taxes are indexed to CPI. CRF
Parks Charge (Vic) 102 Funds parks in Melbourne. Property owners in Melbourne. Improved property value. 0.0189 per cent of value for most properties. Parks Victoria, botanic gardens, zoos.
Metropolitan Region Improvement Tax (WA) 78 Fund parks in Perth. Landowners in Perth Unimproved property value. 0.14 per cent on value in excess of $300,000 for most properties. Western Australian Planning Commission.