This is a single section from Chapter 17. Read the full chapter here.

Should the service or function be subject to a fee?

Fees should be charged only if the nature of the service or function is appropriate and the fee can be quantified and efficiently recovered.

Whether a service or function should be subject to a fee is not always clear and will involve a number of considerations. The table below sets out some of the key issues to consider when determining whether it is appropriate to charge a fee:


Fees may be appropriate

Fees may be inappropriate

Service or function is rendered to an individual and confers a benefit

Service or function is provided to the community as a whole

Service or function is rendered by request

Service or function is non-voluntary

Fee is easily quantifiable

Impractical to quantify the fee

Fee is easy to recover

Impractical to recover the fee

Service or function is transactional or regulatory in nature

Service or function is contractual in nature (and the level of charge can be negotiated contractually)

Examples: driver licensing and passports, and Overseas Investment Office consents

Examples: police, public hospitals, and Department of Conservation concessions


Legislation should not provide for secondary legislation to set a fee for a service if the service is something that the user is not bound to use or the provider is not bound to provide, and the level of the fee could be negotiated contractually when the service is requested (such as granting a licence to run a business in a national park).

Whether the courts find that a particular charge is a fee or a tax will involve considering:

  • the terms of the empowering provision;
  • the level of the charge;
  • the costs of providing the service or performing the function, relative to the income from charges;
  • the purpose for the charge;
  • who the charge applies to; and
  • in what circumstances the charge is imposed.

A fee may be considered a tax if it does not bear a proper relation to the cost of providing the function or service to which it relates.

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