Government will pilfer international levy proceeds, critics warn

Criticism of Australia’s ‘tax’ on international students escalates amid signs that it may be a done deal

December 4, 2023
Spectators take temporary cover as rain stops play to illustrate Government will pilfer international levy proceeds, critics warn
Source: Getty images

Educational lobby groups have escalated their opposition to Australia’s mooted levy on international students’ fees, amid signs that the proposal will receive backing from an influential review.

The Independent Tertiary Education Council Australia has urged Canberra to “unambiguously rule out” the measure, citing “unintended consequences” on international education and the economy.

Chief executive Troy Williams warned that the proposed “tax” could increase students’ costs, undermining enrolments and potentially damaging Australia’s reputation. “At the end of the day, students will foot the bill,” he said, adding that the Australian Universities Accord’s interim report – which floated the idea – had not specified a use for the proceeds.

“Without clear and defined outcomes, funds could be used on a discretionary basis to [address] political priorities of the day.”

Privately, some educational leaders consider it inevitable that some version of the levy will be recommended in the accord panel’s final report this month. This perception was bolstered when the influential economist Bruce Chapman, architect of Australia’s income-contingent student loan scheme, backed the idea.

Professor Chapman said top-ranking universities benefit from prime “rent-free” locations and an average head start of almost 80 years on their younger rivals, so it was only fair that they share part of their foreign fee windfall with the taxpayers who have supported them for decades.

He also argued that the “price elasticity of demand” among international students – the likely deterrence of a levy-fuelled increase in their fees – was small because of the attractions of Australia’s labour market, weather, safety, healthcare, egalitarian society and Asia-friendly time zone.

“There is a real possibility of making all our institutions better off via a levy on international student revenue,” Professor Chapman and Australian National University colleague Rabee Tourky wrote in The Australian.

The Higher Education and Research Group (HERG) consultancy says modelling “using certain assumptions” shows that if a levy were introduced, net international education revenue would either increase or remain unchanged at all but two public universities.

HERG executive chair Keith Houghton said revenue from a levy could help to plug the “shortfall” in research funding. He said redistributing overseas fee income among institutions would be little different from current practice, where earnings at prestigious universities’ business schools are redistributed to other faculties.

But a Victoria University study found that a 5 per cent levy would generate “economic damage” of 15 cents for every dollar raised through the levy. The researchers warned that demand elasticity among international students was considerable, with a 1 per cent increase in fees triggering a 3.5 per cent cut to international education earnings.

“Such a levy would reduce total income from international students, reduce GDP and lead to a reduction in high-quality research,” UNSW Sydney economist Richard Holden wrote in the Australian Financial Review. “It’s a terrible idea.”

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