This is a single section from Chapter 17. Read the full chapter here.

Should the objective or function be subject to a levy?

Levies should be imposed only if it is appropriate for a certain group to contribute money for a particular purpose.


A levy does not relate to a specific good or service. It is usually charged to a particular group (often referred to informally as a “club”) to help fund a particular government objective or function. Accident Compensation Corporation levies, for example, are factored into the costs of petrol and vehicle licensing to help cover the cost involved in treating people who are injured in motor vehicle accidents. The person paying might never benefit personally from the government service, but it is desirable that they contribute to the cost.

Another example is where the members of a particular industry pay a levy to cover the costs of a regulator or promoter of that industry. A particular member may have little direct contact with the regulator or may not directly benefit from the promotion, but it is appropriate that the member contribute towards the costs. If the Commodity Levies Act 1990 applies, it is usually not acceptable to enact (by Act) a parallel scheme for a particular industry.

The key distinction between a levy and a general tax (such as income tax or GST) is that revenue gathered by a tax is not usually earmarked for any particular purpose. Rather, it is appropriated and spent by the Government according to the particular policy objectives or requirements of the day.

In some cases, it will be appropriate to use a levy to pay for the costs of a particular government objective or function. In other cases, it will be appropriate to use a tax-funded appropriation; for example, if the benefits accrue primarily to the public as a whole and there is only a remote connection to the group that would pay the levy.

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