Bills Digest No. 64 2001-02
Air Passenger Ticket Levy (Collection) 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 (Collection)
Bill 2001
Date Introduced: 20 September 2001
House: House of Representatives
Portfolio: Transport and Regional Services
Commencement: 1 October 2001
To facilitate the
collection of a passenger ticket levy on all passenger tickets for
regular public transport flights that originate in Australia in
order to meet the cost of payments by the Commonwealth under the
Special Employee Entitlements Scheme for Ansett group
employees.
Basis of policy commitment
On 18 September 2001, the Prime Minister
announced that the Government would use a levy on the price of air
passenger tickets levy to fund a free standing Special Employee
Entitlements Support Scheme for Ansett group employees (SEESA). 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. 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 to
be provided under the Government's SEESA arrangements.
Dr Farmer, acting chairman of Air New Zealand (ANZ), has said
that ANZ would not pay for Ansett group employee entitlements. As
the issue of Air New Zealand's liability to pay Ansett group
employees' entitlements may take quite some time to resolve, funds
generated by the levy effectively provide bridging finance to
facilitate some payout of entitlements. The proceeds of the levy
also provide a guarantee to Ansett group employees that their basic
entitlements will be funded even if ANZ is not found liable to fund
them over the longer term and if the proceeds of any liquidation of
Ansett assets prove insufficient.
Administration of the
Scheme
-
- The levy is to be administered by the Department of Transport
and Regional Services (DTRS) and will apply on every ticket
purchased on or after 1 October 2001
-
- Funds raised through the levy will reimburse DTRS for payments
in connection with the Scheme and the Government's costs in
administering the Scheme
-
- Collection responsibility will rest with the airlines and the
costs of doing so will be absorbed by the airlines
-
- The levy will continue until it has met the costs of payments
made to former employees of Ansett Australia under SEESA and
related administration, and
-
- In the event of the levy generating any surplus, the Government
will distribute it in accordance with a scheme prescribed by
regulation.
Pros and cons
-
- Budgetary issues: 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.
-
- Inbound tourism: 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.
-
- Equity issues: 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.
-
- Regional impact: 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.
-
- Tourism effects: The tourism industry is and
will suffer significantly, 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)
-
- Impact on hotels industry: The Tourism Task
Force concerns were reinforced on September 24 2001, when the
Australian Hotels Association (AHA) asked the Government to delay
the ticket levy until next year, arguing that the hotels industry
was in enough trouble already. Its spokesman Simon Birmingham said
the collapse of Ansett and the uncertainty in the global airline
business was enough to cope with, without the Government's planned
levy.(3)
-
- Precedent for income tax surcharges: A more
broadly applicable basis for recovering the cost of unpaid
entitlements such as an income tax surcharge 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
-
- Alternative sources of funds: The Opposition
Leader has called for 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
employee entitlements pay outs. 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 has indicated that it will 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.
-
- Concern for welfare of former Ansett
employees: 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.
Proposed Section
5
Defines an Australian flight for the purpose of
the ticket levy as a flight that takes off from a place in
Australia (whether the flight is to another place in Australia or
to a place outside of Australia).
Proposed Section
6
Identifies what constitutes one passenger ticket
for the purpose of the Act - including circumstances where an air
passenger ticket covers flights provided by 2 or more operators;
this is treated as one passenger ticket for the purpose of the
Act.
Proposed Section
9
Levy is payable on air passenger tickets
purchased on or after 1 October 2001 for use on an Australian
flight that is operated as part of a regular public transport
operation as defined in the Air Navigation Act 1920.
Proposed Sections 10 and
11
The passenger is liable to pay the levy while
the flight operator is responsible for its collection from
passengers
Proposed Section
22
The Workplace Relations Minister may determine
the terms of SEESA including the companies to be covered by the
Scheme, the entitlements to be covered by the Scheme and the terms
on which payments under the Scheme are to be made. It provides that
no more than $500 million in total may be authorised under this
section.
Proposed Section
24
-
- 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.
- The AHA claims that hotels had already had $15 million worth of
contracts cancelled in the week following the Ansett collapse and
stood to lose $200 million in business by the end of the year. The
AHA considers that by delaying the levy at least until after the
peak Christmas school holiday season, the Commonwealth would have a
clearer understanding of the amount of revenue required to fund
entitlements and what Air New Zealand can and can't contribute.
Source: AAP newsline, 24 September 2001.
John Kain
25 September 2001
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to
Senators and Members of the Australian Parliament. While great care
is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
should not be attributed to the Information and Research Services
(IRS). Advice on legislation or legal policy issues contained in
this paper is provided for use in parliamentary debate and for
related parliamentary purposes. This paper is not professional
legal opinion. Readers are reminded that the paper is not an
official parliamentary or Australian government document.
IRS staff are available to discuss the paper's contents with
Senators and Members
and their staff but not with members of the public.
ISSN 1328-8091
© Commonwealth of Australia 2000
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
duties.
Published by the Department of the Parliamentary Library,
2001.
Back to top