Levy the levy elsewhere: economist

by Maryvonne Gray 13 Aug 2014

Levy the levy elsewhere: economist

The biggest challenge facing those wanting to change the fire levy to a fairer method of collection is getting politicians to make it a priority, says the man behind the latest report commissioned by the Insurance Council of New Zealand (ICNZ).

Principal economist at the New Zealand Institute of Economic Research (NZIER), Derek Gill, says they have tried to make it easier for the politicians by providing two options.

But actually proving there was a case to do so was the easy part, he says.

“The problem here is political will and relative priority,” Gill told Insurance Business.

NZIER has worked on two sizeable reports for ICNZ but when we looked into it we found a number of previous reports from reputable organisations which all lead to the same point that this really is a relic from a previous era.

“Lots of people choose not to insure or underinsure and you get problems with evasion, corporates are prepared to invest resources in arranging their affairs in a way that means that they don’t take the liability anyway – if you stepped out in front of a white board and came up with the fire service levy people would just roll around the floor laughing. It’s a no-brainer really.”

He said that’s why they came up with two options:
  • moving to general tax revenue funding of emergency services
  • moving to a mixed funding model
“Our proposal was to start by using car reggo to collect taxes and we looked into the rates base as an option and got some specialist technical advice to see if it’s do-able and the answer is absolutely it’s do-able.”

Gill says the timing would be good now with the government moving back into surplus.

Another obvious opportunity was with ACC levies coming off cars, it could replace that and it wouldn’t make a noticeable dent in pockets.

“Our argument would be that a sophisticated first world government like ours should aim to have the best revenue collecting systems in the world. A good government should continue to do good public management, to see it as a race without a finish line. You keep knocking over these little problems, that’s how you make the system better and don’t rest on your laurels. The All Blacks coach doesn’t say we’re unbeaten we don’t need to train for Saturday, you keep practising and looking for opportunities to get better and this is just an opportunity for New Zealand to get better.

“And I guess our view is now the government is moving back into surplus there’s an opportunity to improve the efficiency and effectiveness and the fairness  of how stuff’s done.”

Minister of Internal Affairs Peter Dunne said the way the fire service is funded is under consideration still and no decisions have been made yet about whether there will be changes made or not.

“Cabinet has agreed the Department of Internal Affairs will conduct a review of the service’s funding model in 2014.

“The review will consider various options for reform, and there are no preferred options at this stage.

“The objective of the review is to provide options for an equitable, efficient and modern funding system.”
 
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