Coalition considered, then rejected ‘envy tax’ on foreign students

Student contributions in science, agriculture, nursing and engineering fell, but students opting for law, economics, history, English or gender studies faced huge fee increases.

Several studies have found that the policy had close to zero impact on what courses students chose. It is under review and expected to be overhauled in the coming accord, which will be handed to Education Minister Jason Clare at the end of December.

Torrent of opposition

In a submission to the accord, Professor Zelinksy and his University of Technology counterpart Andrew Parfitt championed the idea of taxing international students. It faced a torrent of opposition from others in the sector, particularly the Group of Eight research-intensive universities, which attract most of the international students, as well as private colleges.

The original idea was to tax international students, estimated to raise about $10 billion, and then redistribute this among universities less successful in recruiting overseas students.

The proposal, which the Financial Review understands is being taken seriously by the accord team and has been modelled by the education sector, has shattered any notion of unity within the rancorous group of 39 vice-chancellors who make up the membership of Universities Australia.

Professor Zelinsky later refreshed the idea to suggest that the way the tax worked would be 0.5 per cent or 1 per cent of total university revenue and it would go into a special fund to support disadvantaged students, university infrastructure and research.

Based on total university revenue of $39 billion in 2021, the levy would raise $200 million to $400 million a year.

The idea is backed by educational economist Bruce Chapman, a neighbour of Mr Anderson, and has the ear of Mr Clare, but others reject it as destructive and counterproductive.

Writing in the Financial Review this week, economist Richard Holden said such a levy “would reduce total income from international students, reduce GDP, and lead to a reduction in high-quality research. It’s a terrible idea – one which is unsafe at any speed.

“The Group of Eight have estimated that a $500 million levy would reduce the number of international students by 27,800. That’s just a flat-out self-inflicted wound,” he wrote.

Angela Lehmann, a specialist on China and head of research with The Lygon Group, said the proposal to tax international students was being met with dismay overseas.

“What I’m concerned about is growing negativity from the China market because there is a real sense of Australia treating them like cash cows. It won’t be well received,” she said.

Dr Lehmann said the idea of placing a tariff on students, when Australia took a tariff on barley to the World Trade Organisation, was deeply hypocritical.

There was growing negative sentiment on social media towards the idea, she said.