Australian Nonprofits Face Bizarre Government Efficiency Tax

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August 14, 2012; Source: Colin Penter Blog

ACT in Australia is a little like the District of Columbia in the U.S. ACT is the Australian Capital Territory, which includes the nation’s capital of Canberra. Colin Penter’s blog notes that the ACT chief minister is trying to reduce red tape and fix unworkable and outdated business regulations. In one of the more strange moves related to nonprofits that we’ve ever heard of, “the ACT Government is imposing a $1.4 million tax on the not- for- profit community sector to fund these [efficiency and deregulation] initiatives. However, the private and business sector who will primarily benefit from the reduction in red tape will pay nothing.” Penter quotes extensively from an article in the Canberra Times by Richard Denniss of the Australia Institute. This excerpt from the article gets at the strangeness of the ACT proposal:

While these initiatives make sense, especially the commitment to remove illogical regulations, it is hard to see why the community sector should be asked to incur the costs of meeting some of these commitments. The government has argued that because the highly efficient community sector would benefit from a reduction in government red tape they should be the ones to pay for it. This argument is as novel as it is confused.”

Denniss points out that the “community sector” loses $1.4 million in this deal, and while it benefits from having to face less red tape in the future, it doesn’t have a profit margin against which it can recoup its payment for the government’s initiative. One might think of the $1.4 million charge as something of a user fee, as popular in Australia as it is in the U.S., but in this case, the nonprofits pay the user fee to benefit themselves and the for-profit sector, and the for-profit sector somehow doesn’t have to pay the fee. If nonprofits take from existing resources to ante up fees like the ACT charge, all it means is that there are less resources to provide basic services, usually for clients that are going to nonprofit providers for a reason (i.e., because they can’t afford or can’t get served at the for-profits).

We will have to keep an eye on the ACT government’s “novel” proposal, if only to make sure that some lunatic legislators in the U.S. don’t pick up on the idea and think that they can get nonprofits to pay for the costs of deregulating corporations here. For now, the closest thing to a corollary in the U.S. is the propensity of many units of government to raise fees on activities typically carried out by nonprofits, such as day care programs. For an example of this, see Arizona’s big time hike on day care center fees. —Rick Cohen