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
© Commonwealth of Australia 2000
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Published by the Department of the Parliamentary Library, 2001.
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