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5.2  A fee, a levy, or a combination?

In general, a fee is a defined payment from a specified party to another in return for the provision of a good or service. A levy will also be charged to a particular party or group, for a specified purpose, but not necessarily for a specific good or service. In this way, a levy might be more akin to a tax.

In practice, fees and levies might not fit into discrete categories and might instead be better conceptualised as being on a spectrum. This discussion of the difference is intended as a guide rather than a definitive statement on the difference between a fee and a levy. The exact nature of a charge will turn on the context and the facts of the situation.

The decision about whether to cost recover using a fee or levy will depend on the nature of the output that is being cost recovered, who should pay for it, and the legislative parameters around cost recovery. Refer to section 2.4 for more detail.

When an entity intends to charge a levy, it is crucial that the enabling legislation gives the ability to structure the cost recovery in this way. As with fees, levies should not charge more than what it costs to delivery those activities for which the entity is legally empowered to cost recover.

It may be that within the one charging regime, a combination of a fee for some outputs is appropriate, and a levy for others.

Example: Financial Markets Authority

The Financial Markets Authority (the FMA) is an independent Crown entity that has mandate to promote and facilitate the development of fair, efficient and transparent financial markets.

The FMA administers a range of fees and levies. Fees are charged for a range of services (for example, the provision of a licence for a new financial market service, or to apply to be an Authorised Financial Adviser). Levies are also a feature of the charging regime, as the FMA receives funding from the Crown with a proportion of these costs being recouped via levies.

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