Govt doubles tax on private tertiary institutes for overseas student fees

Education Minister Chris Hipkins has announced a tax increase on education providers for international students. Photo / Mark Mitchell

The Government is almost doubling a tax on international student fees for private tertiary providers, but has signalled that the tax could be tied to the quality of education in future.

Education Minister Chris Hipkins announced the change to the export education levy this morning.

For Private Training Establishments (PTEs), it will increase from 0.45 per cent to 0.89 per cent of international student tuition fees. For universities, polytechnics and institutes of technology, the rates will go from 0.45 per cent to 0.5 per cent.

The levy is used for quality assurance and marketing, and also to reimburse international students caught out by programme and provider closures.

Last year the tax pulled in just over $5 million, mostly from universities, with $476,478 coming from PTEs.

Hipkins said it was the first increase for this tax in 15 years, and the Ministry of Education was "doing its bit by reducing annual expenditure commitments against the levy by $300,000".

"The levy fund has to be made financially sustainable to safeguard our international reputation for education and continue to support the wellbeing of our international students.

"It almost ran out this year due to payouts resulting from closures at PTEs."

Hipkins said further work was being done to recognise quality in the PTE sector.

"It may be possible in future to introduce a system where PTEs that are delivering a consistently high-quality service might pay a lower levy, while the few PTEs falling into risk categories, including having previous quality issues, might face a higher one."

The new tax rates take effect from January 1, 2019.

The tax was defended by the bosses of Education NZ, the Government agency that builds international education sector, who appeared before the education and workforce select committee yesterday.

"We are supportive of the levy model to make sure the student has a very good experience," Education NZ chief executive Grant McPherson said.

National MP Simeon Brown asked whether declining international student numbers - including about 20 per cent fewer students from China - were due to Government rhetoric about cracking down on low-quality international education courses.

Education NZ chair Charles Finny said the rhetoric was not a factor, but uncertainty around the government review this year may have been a factor.

Changes from the review, announced in August, mean it will be harder for international students to work in New Zealand after finishing studying.

"The fact of a review may have been an issue, but Australia has had a similar decline of the same scale from students from China," Finny told the committee.

"The feedback from key agents and governments has been positive ... I suspect there are just other factors at play."

He said the numbers of international students had declined by about 2000 for 2018, and was likely to be mostly flat for 2019.

Wellington-based National MP Nicola Willis asked whether the proposal to change the name of Victoria University might impact its appeal for overseas students.

"We see challenges from a number of universities in getting recognition in the market," McPherson said, adding that a Google search Victoria University can lead to half a dozen results.

"We have been working with them. Any way we can differentiate New Zealand as a place to study ... we welcome."