12 Oct 2022

Immigration NZ $284m loss written off, visa levies hiked 279%

12:21 pm on 12 October 2022
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Photo: 123rf.com

The government has written off $284 million in losses sustained by Immigration New Zealand and has put visa levies up by 279 percent.

Another funding review is expected to look at how to overcome a further predicted deficit of $135m by the end of 2024.

The cost of an eTA (Electronic Travel Authorisations), which most tourists need instead of a visa, almost doubled from $12 to $23 in the changes, which came into effect in August. Skilled migrant residence visas now cost $5000.

Cabinet papers outlining the need for the price hikes and write-off showed about $60m of the deficits were accrued before Covid-19, with shortfalls every year since 2009.

The 2020 to 2021 deficit in its visa memorandum account has already been written off.

Immigration New Zealand (INZ) operates on a cost-recovery basis, with two thirds (67 percent) of funding coming from visa application fees and levies and one third from the taxpayer. That is shifting towards three quarters (73 percent) coming from migrants, tourists and students under this year's changes.

All up, the government has given INZ about half a billion dollars in the past two years.

"A large percentage of INZ'S expenditure is fixed in nature and therefore it is not possible for us to make commensurate reductions in expenditure to match the drop in revenue experienced as a consequence of border closures," INZ chief operating officer Stephen Vaughan said.

"This resulted in deficits in the memo accounts which would have been unreasonable to expect future fee payers to cover.

"As a result, to help cover the impacts of Covid-19, the government provided INZ with up to $479m through the Covid-19 Response and Recovery Fund and Budget 2021. Most of this funding (approximately $424m) was used to cover the previous under-recovery of costs.

"In Budget 2022, the government provided an additional $84m capital funding for 2022/23 (including $50m to be held in contingency) to maintain resourcing of the immigration system.

"The contingency funding reflected the ongoing uncertainty around how quickly and to what extent visa volumes recover. To date, $284.75m has been used to write off the Immigration Visa memo account. The closing balance as at 30 September 2022 is a deficit of -$156.1m."

The government is looking at a more fundamental review of the funding framework, to put INZ on a more sustainable footing.

Previous fee and levy increases in 2013, 2015 and 2018 failed to overcome a decade-long negative balance in the fee memo account, which reconciles department costs and user-pays fees.

Apart from eTAs which increased by 90 percent, working holiday scheme visas rose from $245 to $420, student visas from $275 to $375 and accredited employer work visas (migrant check) from $595 to $750.

Partnership resident visas increased from $1480 to $2750, investor migrant visas from $5070 to $7895 and skilled migrant visas rose from $3240 to a capped amount of $5000.

Some visa fees, including visitor visas and Pacific work and residence visas, have remained unchanged.

The former immigration minister Kris Faafoi outlined the extent of the problem in Cabinet papers that were recently released.

"If no change is made, the total deficit across the visa and eTA fee and immigration levy accounts would reach $378 million by the end of June 2024. As I am proposing to close only half of the projected revenue shortfall at this time, deficits will remain, but would be considerably smaller.

"I expect my proposed adjustments to result in deficits of $42m, $11m, and $83m by the end of June 2024 in the visa fee, eTA fee, and immigration levy accounts respectively ($135m total). The remaining shortfall in revenue is an issue that can be addressed in the next stage of the Immigration Funding Review."

The price of a visa remained a small proportion of the total cost of travelling to New Zealand to visit, work or study, he said, and was unlikely to have a significant effect on demand.