Bills Digest No. 63 2001-02
Air Passenger Ticket Levy (Imposition) Bill 2001
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Air Passenger Ticket Levy (Imposition)
Bill 2001
Date Introduced: 20 September 2001
House: House of Representatives
Portfolio: Transport and Regional Services
Commencement: At the same time as the Air
Passenger Ticket Levy (Collection) Act 2001
To impose a levy
on air passenger tickets purchased in Australia on or after 1
October 2001 in order to fund a Special Employees' Entitlements
Scheme. The levy will offset the costs to the Commonwealth of
paying out Ansett employees' entitlements pending action against
Air New Zealand to recover amounts attributable to Ansett group
employees' entitlements.
Basis of policy commitment
On Thursday 13 September 2001, Air New Zealand, the owner of the
Ansett group of airlines, announced a write-off of Ansett's book
value to $1; the Ansett group of airlines was subsequently put into
administration and all of its scheduled flights were grounded from
close of its operations on Friday 14 September.
Among the immediate public concerns of Ansett's 16 000 plus
employees has been the payout of their entitlements. This concern
has no doubt been highlighted by the loss of significant
entitlements by employees of other collapsed Australian firms in
recent years, in part because other non-employee creditors have had
preferential access to liquidation proceeds.
Two days after the Ansett failure, the Minister for Workplace
Relations, the Hon Tony Abbott MP, announced a proposal for a levy
of around $10 on each air ticket purchased in Australia and used to
board a flight starting its journey at an Australian airport. It is
not intended that the levy would apply to the second leg of a
return ticket nor would it be applicable to tickets for Australian
domestic travel purchased offshore. It would apply however to
tickets purchased in Australia for outbound international
travel.
The levy is to finance Ansett group employees' entitlements if
Air New Zealand (ANZ) does not fund the entitlements and if the
proceeds of any liquidation of Ansett assets prove insufficient. Dr
Farmer, acting chairman of ANZ, has said that ANZ would not pay for
Ansett group employee entitlements.
On 18 September 2001, the Prime Minister
announced that the Government would use the levy proceeds to fund a
free standing Special Employee Entitlements Support Scheme. The
Scheme would guarantee Ansett group employee entitlements, namely
all of their statutory entitlements such as unpaid salary, long
service leave, holiday pay and redundancy payments up to what is
loosely called 'a community standard', ie no more than eight
weeks.
However the Prime Minister has indicated that
there are some redundancy provisions in the former Ansett group
that exceed community standards and the Government's proposals
would not meet these provisions. However it is open to debate
whether eight weeks redundancy pay is 'a community
standard'(1).
The Government's proposals for Ansett employees relaxes some of
the caps placed on entitlements under the current Commonwealth
Employee Entitlements Support Scheme (EESS). However the Government
has recently indicated that the EESS is to be terminated and a new
more generous scheme will replace it, but not to the standards
provided to be provided under the Government's Ansett scheme.
Action against Air New Zealand
The Government maintains that ANZ has a moral
and a legal responsibility to meet Ansett employee entitlements and
accordingly, has committed itself to vigorously pursue ANZ to
recover the amount represented by the entitlements owing. Towards
this end, the Australian Securities and Investment Commission
(ASIC) is investigating the collapse of the Ansett group, focussing
on possible breaches of directors' duties under the
Corporations Act.
The case for the Levy versus other
options
The Government considers that the potential
losses from any permanent grounding of the Ansett group could
constitute one of the biggest corporate collapses in Australian
financial history and in those circumstances, the budget could not
bear the cost of the unpaid entitlements of all Ansett group
employees. It also believes it would not be fair to impose a tax on
the whole community to meet this need.
The Government also stresses that the levy does
not apply to air travellers who take possession of their ticket
outside of Australia so it would not represent an impediment to the
inbound tourism industry.
A countervailing argument is that the levy
should be imposed on all taxpayers to spread the burden more
broadly. The impact of the levy will fall disproportionately on
Australians who earn their livelihood from tourism, including many
in rural and regional Australia.
The Labor Opposition has criticised the levy
saying it would hurt tourism, cost jobs and further damage regional
and rural economies, many of which were wholly reliant on Ansett
group air services and so are already suffering disproportionately
from the Ansett collapse.
The tourism industry is and will suffer heavily,
not only from the loss of air services as a result of the Ansett
grounding, but also from the weakening of the international economy
in the aftermath of the terrorist actions in the USA and air
passenger concerns about the security and safety of air travel. Mr
Christopher Brown, the chief executive of the prominent tourism
industry organisation, the Tourism Task Force, is reported to have
described the levy as 'basically bad public policy, because
actually deciding to levy a tax without actually knowing the
liability, you can't strike an appropriate rate'(2).
A more broadly applicable basis for recovering
the cost of unpaid entitlement would be consistent with the Howard
Government's 'gun buy back' scheme of 1996 where the scheme was
financed through a Medicare levy surcharge, effectively recovering
the levy from all income tax payers.
The Opposition Leader has called fo the use of a
portion of the proceeds of the long-term lease of Sydney
Kingsford-Smith Airport (which is scheduled for finalisation later
in 2001) to finance the Ansett entitlements payout. The Sydney
Airport lease proceeds (prior to the terrorist attacks in the USA)
were 'guesstimated' at around $4 billion to $5 billion whereas the
Ansett entitlements pay out has been reported to be in the vicinity
of $400 million. However the Government may now defer the sale of
the Sydney Airport lease in response to the marked contraction of
the global aviation industry in the aftermath of the US
situation.
While the Labor Opposition sees the levy as a
'last resort' it has indicated that it would vote for the levy
legislation. Failure to pass the air ticket levy legislation would
further delay the payment of entitlements to Ansett group
employees, most of whom are still without alternative employment
and are facing an uncertain future.
Commencement
Section 2 provides for the Act to
commence on 1 October 2001.
Imposition of levy
Section 6 provides that the rate of levy on an
air passenger ticket is $10.
-
- For example, Stephen Long: 'Prime Minister Howard has said
throughout the Ansett crisis that, and most people get no more than
that. This is at best misleading and at worse plain wrong', The
Australian Financial Review, 21 September 2001, p. 17.
- 'Kelly to face angry tourism leaders'. The Canberra
Times, Wednesday 19 September 2001.
John Kain
24 September 2001
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
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Published by the Department of the Parliamentary Library,
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