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Government never modelled impact of backpacker tax hike

Thursday, 27 Oct 2016 12:09:53 | Anna Vidot

Backpackers are a vital source of labour on Australian farms, but Treasury can't say how higher taxes might affect the agriculture industry. (Amy McCosker)

The Federal Government never specifically investigated whether its backpacker tax proposal would hurt farmers and the tourism industry, or hasten the decline of working holiday makers entering Australia, a Senate inquiry has revealed.

Treasury officials admitted their department did not have complete information about the ramifications of a 32.5 per cent tax on backpackers' earnings, which was first proposed in the Coalition's 2015 budget.

They told a Senate Economics Committee hearing that Treasury's modelling did not specifically forecast the impact of a higher tax on the national farm workforce, 25 per cent of whom are backpackers.

Tasmanian Senator Jacqui Lambie put it to Treasury's acting head of tax analysis, Robert Ewing that his department and Australian Tax Office were "flying blind" on "the detailed costs and the negative impact" of the backpacker tax proposal.

"I wouldn't say that we are blind, I would say that we have less information than would be ideal," he responded.

The Coalition announced its intention to enforce a 32.5 per cent tax on all backpackers' earnings in its 2015 budget without any prior consultation with the agriculture industry or tourism operators.

That led to a protracted fight which remains unresolved.

The Senate's Economics Committee is currently reviewing the Coalition's compromise proposal, unveiled last month, for a 19 per cent backpacker tax.

Treasurer Scott Morrison said the proposal would remain revenue neutral thanks to a new 95 per cent tax on backpackers' superannuation, and a $5 increase to the Passenger Movement Change — the departure tax paid by all international travellers.

Over the course of an hour on Wednesday evening, perplexed senators pressed Treasury officials for answers to seemingly straightforward questions only to be told the answers did not exist.

In an aside after confirming Treasury had not modelled the impact of a higher Passenger Movement Charge on tourism, Labor senator Chris Ketter asked if modelling had been done on any other aspect of the package before the Senate.

"I don't believe there was economic modelling done of any of the aspects of this package," Mr Ewing responded.

The National Farmers' Federation (NFF) has slammed Labor for referring the compromise backpacker tax bills to the Senate Economics Committee for review, arguing the law needs to be finalised as soon as possible.

The government has promised that new tax rates will take effect on January 1, 2017.

Labor's agriculture spokesman Joel Fitzgibbon told the NFF Congress in Canberra on Thursday that the backpacker tax bills would be passed "in some shape or form" before Christmas.

In giving its own evidence to the committee on Wednesday, NFF workplace relations manager Sarah McKinnon urged the senators to finalise the 19 per cent rate as soon as possible.

"The seasons don't wait. Parliament has a process to go through, but every day of delay is costing the farmer and that's why an urgent resolution is so critical."

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