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New Tax on PTEs is Second-Best Option

New Tax on PTEs is Second-Best Option
Media Release 3 December 2003

“The Government’s decision to charge private training establishment (PTEs) if another PTE fails is a second-best option. It sets a very strange precedent where an industry is held accountable for the failing of a competitor, when it has no control over market entry. The Government controls entry to this industry and it must take joint responsibility for any PTE failures”, said Dave Guerin, ITI executive director.

The Government tabled the Education (Export Education Levy) Amendment Bill today, which includes a special export education tax on private training establishments. If the Government refunds international students when a PTE may not complete its contracted provision, then all other PTEs may be levied for the refund and any associated administration costs incurred by the Government.

“It is a real pity that decisions like this are made without real consultation. The Government put out a letter a couple of months back saying that they planned to charge PTEs for Modern Age students’ accommodation costs. ITI and other groups replied with some useful suggestions and some concerns, but we have heard nothing back. Now the Government has moved much further by putting a special tax into legislation. Surely someone could pick up a phone or set up a meeting to discuss these issues?”

“The proposed new tax creates some serious risks that have not been addressed in the legislation or in the various papers released by the Minister. The biggest risk is moral hazard – that PTEs on the financial edge will now simply close because they know that the Government will cover their liabilities to students. Since the Government has no standing as a creditor, it will not be able to claim the money back but other PTEs will be left to pick up the pieces.”

“This policy area is complex and any new policies need to be carried out in conjunction with the industry and suppliers of student fee protection products. Hopefully, we can get some real discussion in the select committee and with the Minister over the next few months.”

- Independent Tertiary Institutions (ITI) is a group of 15 high quality private tertiary education providers enrolling over 6,000 students pa.

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