Wednesday, January 07, 2009

Tax review - and imposts on communications companies

Today's AFR featured a front page story under the banner Labor's $2bn budget boost. It reported on a number of submissions to the Henry tax review complaining about the increasing level of fees and charges not related to cost recovery.

The first thing to note that the headline is inappropriate, because the fees and charges referred to were mostly imposed by the previous Government. In particular of the $2 billion, the article lists the $700 million that ACMA says it raises, but as far as I am aware not one of those fees or charges is attributable to changes in the last budget.

The article claims that Telstra was an organisation who criticised these fees, but the Telstra submission is, in fact, only focussed on the approach to dpreciation of investments and other investment incetives. It is, in fact, strange that Telstra would be complaining about the USO taxation arrangements as it is a nett receiver under the scheme - though clearly they would like to receive the whole USO cost as a subsidy from Government rather than just about 20 percent of it as a subsidy from their competitors.

The interesting part of the article really is the ACMA submission. ACMA has highlighted how the revenue they earn outstrips their expenditure - they are effectively (and correctly) objecting to being asked to operate as an arm of the taxation system. However, the position contrasts with the ACMA submission to the joint public accounts and audit committee enquiry into the effects of the efficiency dividend on small agencies. There the ACMA reasoning seemed to be that because they gathered so much in revenue they should be funded more.

The ACMA tax review submission provides a breakdown of the revenue they raise as follows;

Annual Numbering Charges$60M
Apparatus Licensing Tax$143M
Annual Carrier Licence Charge$37M
Spectrum Licence Tax$0.3M
NRS Levy$12M
USO Levy$158M
Broadcasting Licence Fee$282M
Fee for Service$0.17M
Do Not Call Register Fees$2.2M
Numbering Sales$4.5M
Spectrum Sales$0.03M

The whole process would be simplified if the taxes that are levied off the same base (eligible revenue) were combined into one - that is collapse the USO Levy, NRS Levy and Carrier Licence Charge into one, and no longer treating them as "hypothecated" but setting a rate for this value aded tax commensurate with the sums currently raised. These fees and the broadcasting licence fees are levied on the revenue of the relevant firms, and each necessitates ACMA becoming involved in receiving auditted accounts in support of claims. It would be far more efficient for this process to be conducted by the Australian Taxation Office in conjunction with other tax requirements reducing the number of returns.

The ongoing validity of these taxes is open to question, but as they do represent a fee for a licence to engage in certain conduct, and that licence does confer benefits (e.g. exemption from planning laws in the case of telecommunications carriers, or the use of spectrum and protection from competition in the case of broadcasting). Nothing in the taxation process is otherwise related to the ongoing process of regulation engaged in by ACMA and the need to maintain a taxing capability adds to the problems of scope experienced by ACMA. (I recall the option of moving the taxation function to the ATO as having been part of an earlier iteration of the legislative framework, but can't find it now).

The entire process of managing the number ranges should be moved to industry for self-regulation (including the provision of the IPND to be moved from Telstra), just like internet addressing or bar-codes on groceries. The only over-sight necessary is from the competition regulator to be able to direct the industry regyulator if its actions are limitting competition (e.g. entry). This is actually a little bit like the existing arrangement whereby the ACCC is the body that directs the regulator to make numbers portable (but, in a stupid twist, the regulator can't make them portable until so directed).

The maintenance of the Do Not Call Register does not need to be conducted by the enforcing body, just as the IPND is not maintained by ACMA.

That ACMA has been allowed to grow into this massive taxation agency ultimately reflects policy laziness on the part of the relevant Deparment.

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