Yahoo Finance Should wealthy people pay larger fines?
Welfare recipients in New South Wales will be able to apply to have their fines halved under a new plan aimed at mitigating the financial pain from coronavirus.
And according to experts, the major decision could be the beginning of a progressive penalty system.
A progressive penalty system sees penalties and fines indexed to match different income levels, meaning people on low incomes would receive lower fines, while people on higher incomes would receive correspondingly high fines. Progressive penalty systems aim to provide the same disincentive for bad behaviour, regardless of wealth.
While countries like Finland have implemented such schemes, Australia has faced the challenge of states issuing fines while the federal government collects income tax.
But the NSW government’s decision provides a workaround by tying reduced fines with the receipt of welfare payments, The Australia Institute research director Rod Campbell told Yahoo Finance.
“The way our current fine systems work, they provide a pretty limited incentive for high-income earners to avoid the kinds of behaviour that we’re trying to discourage while at the same time, they’re providing a set of levels that can be pretty debilitating for low income earners,” Campbell said.
In extreme cases, Australians are locked up for unpaid fines, Campbell said, noting the story of Yamatji woman Ms Dhu who died in police custody after being incarcerated for unpaid fines.
“Looking at it from an economic perspective, are we really achieving what we’re trying to achieve? I would argue that at the moment, no, and a more progressive fine regime would at least improve those incentives.”
What’s NSW doing with fines?
As of 1 July, people receiving Centrelink payments in New South Wales will be able to ask to have fines collected by Revenue NSW reduced, with the discounts also applying to those on JobKeeper.
Parking fines, speeding and traffic fines and some police-issued fines for offences including drunk and disorderly conduct, offensive behaviour and stealing will be eligible for reduction.
However, people will not be able to reduce court-issued fines, voting-related fines, fines issued to body corporates and jury duty fines.
And the reductions only apply to those who have experienced financial hardship and where the fine isn’t overdue.
Additionally, in order to receive the fine reduction, Revenue NSW must be convinced a payment or work plan isn’t appropriate.
In a bid to protect road safety, demerit points, licence cancellations and suspensions will also still apply.
How do other countries implement a progressive fine system?
Finland has a system based on daily income.
“The point of it is that someone like an apprentice tradie doesn’t pay the same fine as their millionaire property developer ultimate boss,” Campbell said.
A 2016 working paper from The Australia Institute detailed how a system like Finland’s could work in Australia.
For speeding 20 km/h over the limit, the average Australian fine in 2016 was $236. But under a progressive system, the lowest income earners would be fined $100, while the highest earners would be slugged more than $1,000.
This is what the Finnish model on an Australian system would look like, divided into five income quartiles.
Traffic Offence | No. of penalty units | Median fine now | Fine Floor | Q1 New Fine | Q2 New Fine | Q3 New Fine | Q4 New Fine | Q5 New Fine |
Exceed speed limit by less than 10 km/h | 3 | $130 | $30 | $33 | $71 | $107 | $150 | $295 |
Exceed speed limit by 10 to 19 km/h | 7 | $236 | $70 | $78 | $166 | $249 | $351 | $687 |
Fail to stop at red traffic light | 14 | $361 | $140 | $155 | $332 | $499 | $701 | $1,375 |
Using mobile phone while driving | 6 | $361 | $60 | $67 | $142 | $214 | $301 | $589 |
Fail to wear seat belt | 4 | $373 | $40 | $44 | $95 | $143 | $200 | $393 |
“The big message for state governments looking to take action on this is that NSW provides a great example of a workaround that doesn’t involve complicated legislation or constitutional reform,” Campbell said.
“Hopefully it will serve as an example to other states for how they can make fine regimes more progressive.”
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