Authors: Xianglong Locky Liu, James Giesecke and Jason Nassios
We investigate the economic impacts and tax efficiency of an international student levy (ISL) levied at a rate of 5%. Like many other taxes, an ISL has adverse economic impacts. At the regional level, the adverse impacts are largest for regions that have relatively large export education sectors. At the industry level, the adverse impacts are largest for sectors involved in the export of education services. To compare the tax efficiency of an ISL to other Australian taxes, we calculate its marginal excess burden (MEB). We find that an ISL levied at a rate of 5% on international student fees has an MEB of 15, i.e. it generates economic damage of 15 cents per dollar of ISL revenue raised. This compares favourably with a number of major federal and state taxes, like personal income tax, GST, payroll tax, stamp duty and insurance duty, all of which have higher MEBs. When assessing tax mix change, comparative efficiency arguments should be balanced against broader economic implications and clear policy objectives.
JEL classification: C68, H2, H5, H72
Keywords: Taxation; International Student; CGE modelling; Excess Burden
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