KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...

Commercial-in-Confidence
KI Traveller’s Levy
Impact Assessment
need to consider a Traveller’s Levy) is the levels of road usage by tourists, it is reasonable to
consider the design of such a levy in a ‘user pays’ or cost recovery framework.
Where a government agency or industry body provides services that benefit a small,
identifiable group, it is rational to ensure that the group contributes to the cost of providing
the benefits received (to prevent a few individuals ‘free riding’). That is, it is reasonable to
apply principles such as ‘user-pays’ or ‘beneficiary-pays’. With regard to road infrastructure,
though in most cases usage is by a large and disparate group, governments are increasingly
looking to user-pays mechanisms as a way of partially funding major projects (such as toll
roads), or specific segments or areas (such as national parks).
The Productivity Commission 9 has outlined key issues to consider when assessing the
appropriateness of cost recovery initiatives.
Cost recovery charges should be linked as closely as possible to the costs of activities
or products. If fees-for-service reflecting costs are not possible, specific taxation
measures (such as levies) may be appropriate, but only where the basis of collection is
closely linked to the costs involved (i.e. in this case, to road usage). 10 If it is not
possible to link the levy closely enough to the activity for cost recovery to generate the
desired efficiency and equity effects, taxpayer funding may be preferable.
Cost recovery should not be implemented where: compliance costs or collection costs
are high; where it would be inconsistent with policy objectives (for example, a userpays
fee at the local transfer station may discourage the very recycling the transfer
station seeks to promote) or where it would unduly stifle competition or innovation.
Cost recovery should therefore be employed wherever it enhances efficiency and/or equity
and where it is cost effective to do so. If cost recovery is the preferred option, the revenue
raised should be derived from those who use/benefit from a service, in proportion with the
benefit derived or cost imposed. Of course there will still be instances where cost recovery is
not viable at all (e.g. when beneficiaries or risk creators cannot be identified or collection
costs are unacceptably high). In these cases, funding should come from consolidated
revenue rather than from cost recovery.
9 Productivity Commission (2001) Cost Recovery by Government Agencies
17