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The Economic Effects of an International Student Levy Under Alternative Price Elasticity Assumptions

Author

Listed:
  • Xianglong Locky Liu
  • James Giesecke
  • Jason Nassios

Abstract

We investigate the economic consequences and tax efficiency of a 5% international student levy (ISL). Like any tax, ceteris paribus, an ISL will reduce certain economic activities. At the industry level, the negative effects on activity will be largest for sectors involved in the export of education services. At the regional level, the negative economic consequences will be largest for regions that have relatively large export education sectors. Due to limited empirical evidence on the price elasticity of demand for export education, we test the sensitivity of our results under a range of elasticity estimates. For sufficiently inelastic demand for export education, an ISL improves the terms of trade and increases real consumption. By evaluating and comparing the marginal excess burden of an ISL with other hypothetical service export taxes, we demonstrate that these results stem from imposing an export tax at a low rate on a commodity that is generally tax-exempt and carries a low foreign export demand elasticity, rather than being a unique feature of the ISL. If the policy objective is to assist the education sector, our results draw into question the suitability of the ISL.

Suggested Citation

  • Xianglong Locky Liu & James Giesecke & Jason Nassios, 2023. "The Economic Effects of an International Student Levy Under Alternative Price Elasticity Assumptions," Centre of Policy Studies/IMPACT Centre Working Papers g-343, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-343
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    References listed on IDEAS

    as
    1. Philip Adams & Janine Dixon & Mark Horridge, 2015. "The Victoria University Regional Model (VURM): Technical Documentation, Version 1.0," Centre of Policy Studies/IMPACT Centre Working Papers g-254, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. James A. Giesecke & Christopher King & Jason Nassios & Nhi Hoang Tran, 2021. "The impact of GST reform on Australia’s state and territory economies," Applied Economics, Taylor & Francis Journals, vol. 53(51), pages 5929-5947, November.
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    More about this item

    Keywords

    Taxation; International Student; CGE modelling; Excess Burden;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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