Education Minister Chris Hipkins announced today an increase in the levy paid by international education providers to the government.

The rate for private training establishments (PTEs) will increase from 0.45 per cent to 0.89 per cent of international student tuition fees. For universities, and Institutes of Technology and Polytechnics (ITPs), the rates will increase from 0.45 per cent to 0.50 per cent.

Why has the levy been increased?

The increase in levy has been necessitated by the desire to safeguard New Zealand’s reputation as an international education destination and general well-being of international students.

“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,” Chris Hipkins said.

Earlier this year Ministry of Education ended up paying about million-dollar payout to international students who were left stranded halfway through their education when New Zealand Qualifications Authority (NZQA) – an authority charged with monitoring and assessment of educational offerings in NZ shut down a few PTEs.

The closure had left close to 200 students in limbo, primarily Chinese students, which threatened to jeopardise NZ’s reputation as a desirable international education destination in the lucrative China market, forcing Ministry of Education to pay out a full refund.

A Newsroom story had then reported that during the 2014/15 and 2015/16 financial years only $45,000 was required, but in 2016/17 that rose to $908,000 after three institutions were closed.

Following that experience and overarching-will of regulating the PTE sector, the government has proposed an increase in the export education levy so as to augment its resources earlier this year.

A consultation on the proposed changes to raise the EEL rate took place earlier this year from September 18 to October 15, with feedback received through an online survey and via email.

Has the levy come at the right time?

It’s not clear how the PTE sector which comprises a major chunk of the $4 billion international education sector is already facing the heat because of a number of factors, including some bad-players affecting the overall experience of international students in the country will receive this new increase in the EEL.

Expressing caution over the announcement, an international marketing manager of an Auckland based hospitality school, who chose to remain anonymous for obvious reasons said, “In the broader scale of things the increase in Export Education Levy might not affect PTE’s negatively. However, it might affect in the short term as the sector is not in good shape as of now.

“The PTE market is already shaky with many other reasons, increasing the levy is not coming in at the right time.”

Anticipating some reservations within the PTE sector, the Education Minister Mr Hipkins has suggested the possibility of linking the levy surcharge with the quality of education and overall service being delivered.

“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,” Mr Hipkins said.

Will the levy be passed on to international students?

Given that an increase in the Export Education Levy will make a dent in the revenue that educational institutions make from international education service it is likely to generate some concerns that the levy, in full or in part, might be passed on to new international students.

However, it might be too early, or in absence of any firm evidence, it cannot be stated with confidence, if the increase in levy will be passed on to prospective future international students coming to NZ, thus potentially making it a less-favoured choice of international education in comparison to other global destinations.

The new rates take effect from 1 January 2019.