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
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ISSN 1328-8091
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Published by the Department of the Parliamentary Library, 2001.
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