An Opportunity to Strike a Small Blow for Equity and Efficiency

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The Government will soon be issuing a consultation paper on the forthcoming Broadcasting Charge to be levied on all households.  This is intended to replace the television license fee and will be applicable regardless of whether a household has a television.  The rationale for this move is that people access television content via other devices such as tables and smartphones.

There will be a number of issues debated, notably the funding of other media outlets besides RTE (though it should be noted that already 7 percent of the license fee revenue goes to the BCI Broadcasting Fund for projects of a public service nature produced by independent producers and broadcasters).

Minister Pat Rabbitte has given a commitment that the charge will not exceed the current television fee of €160.  Given that there is near universal television ownership, the move to a household-based, rather than a television-based charge is not unreasonable.  According to the CSO’s Household Budget Survey, over 97 percent of households own a television, with 65 percent owning two TV sets or more.

If one accepts that a television is a necessity – not only for communication but recreation as well; if one accepts that public service broadcasting is a ‘public good’; then even the television license fee could be considered a tax by any other name.  The Broadcasting Charge will confirm that – all households will be required to pay it.

I suspect that the Government will introduce a flat-rate charge at the current level of the TV license fee.  This would effectively mean no change for households.    But is there an alternative means to finance the broadcasting charge – one that is more socially equitable and economically efficient?

First, let’s look at the distributional impact of the television fee – that is, how it impacts on particular households by income group.  The following examines the license fee as a percentage of net disposable income broken down by deciles.

TVFee

Unsurprisingly, the license fee is regressive – impacting more harshly on low-income groups.  For the lowest income groups, the license fee takes up over 0.6 percent of net income; for the highest income group it makes up only 0.1 percent of net income.  The national average is approximately 0.3 percent.

This is to be expected.  Any flat-rate charge, fee or levy is going to be regressive.  Of course, not every tax or charge need be, or can be, progressive.  VAT, for instance, is highly regressive but it raises over €10 billion a year.  Instead, one has to look at the overall impact of the taxation system.

However, where possible, we should minimise the extent of regressive charges and levies.  And the new broadcasting charge is an opportunity to do so. Why not levy income – all income:  work income, social protection, capital income (i.e. capital gains, inheritances, etc.).  Since everyone will be charged why not attach it to the ability to pay?

On average, households pay 0.26 percent of net income on the television license.  What would happen if we turned the flat-rate charge of €160 per household into a 0.26 percent levy on all income?

BroadCCharge

As seen, the majority of households would benefit.   Higher income households, in particular the top 10 percent, would experience an increase in the charge.

The social equity benefit is obvious but there is also an argument in economic efficiency.  The benefit to the lower households would no doubt result in higher consumer spending which would boost domestic demand, while the higher impact on the top income deciles would mostly result in reduced savings.  While the amounts per household are small, if you multiply that by over 1,000,000 million households, the benefit mounts.

There may be administrative obstacles to implement an income-based levy, though for in-work income, including capital income, the Revenue Commissioners could collect it on an agency basis.  The levy could be deducted at source by the Social Protection department, though there may be legal issues that would have to be addressed.  Even with deduction at source, social protection recipients would experience considerable gain.  For instance, a lone parent household with two children currently pays €160 for the television license; under the above proposal the cost would fall to less than €42.

There would be additional benefits.  First, it would greatly reduce avoidance (which the Minister puts at 20 percent).  Second, as incomes rise, the revenue from the charge would rise automatically.  This extra revenue could be invested in non-RTE supports for community and non-profit media outlets including on-line, in order to develop alternatives to commercial and oligopolistic media.

This is only a small intervention.  But social equity and economic efficiency is about a multitude of small interventions as much as it is about major policy departures.  Certainly the proliferation of charges impacts most on low-income groups:  bin charges, the upcoming water charges.  So wherever we can convert a charge or levy into a more progressive structure we should.

In time the small benefits would mount up.

 

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