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Should traffic fines be based on income?

New South Wales has the most expensive CTP insurance in Australia but, during 2014-15, South Australia had the highest average traffic fine of $410. A report by Australia Institute claims traffic fines hit low income earners too hard and proposes Australia adopt the Finnish method of basing fines on income.

If the purpose of fines is to act as a deterrent, then flat fee fines deter low income earners much more than wealthy people for the same offence.

This violates the idea of proportional justice, where someone is punished according to the degree of the crime. Under our current system, low income earners are punished much harder for even minor offences just because they cannot afford the fines.

How it works in Finland

The Finnish system uses “day fines”, which relate to the monthly income of the driver and the number of dependants, defined as spouse, children below 15 and young people 15-24 who are studying. Each offence carries a fixed “day fine”. For example:

  • Fail to stop at red light – 14 day fines
  • Fail to wear seat belt – 4 day fines
  • Use mobile phone while driving – 6 day fines

Using the Finnish system, speeding 37 kmh over the limit costs 21 day fines. In NSW, someone on $271 a week, the lowest quintile of income earners, would pay $249. Someone on $1,542 a week, the highest quintile, would pay $2,182.

In Finland, police can use technical devices to access information from the tax office in seconds. In Australia, it is more complex because the federal government collects income tax and the states collect traffic fines. One option would be to have drivers report their own income and criminalise the act of lying about it.

Could it work in NSW?

NSW police issued 1,292,000 traffic fines in 2014. Australia Institute forecasts that using the Finnish system would increase total revenue from fines to $59 million. The lowest earners would pay 68% less ($54 million less), and the highest earners would contribute 158% more.

Even so, the report, Finland’s Fine Example, states that increasing revenue is not the purpose and its focus is to improve fairness and equity.

Bringing in such a system would not be easy, partly because of the federal/state split in Australia, but also because wealthy people can legally reduce their taxable income. This means they could pay lower fines than is fair, while those on lower to middle incomes have less ability to reduce tax and could pay proportionally unfair fines.

If traffic fines provide an incentive for drivers to obey road rules, then the current system provides less incentive to higher income income earners to do so.

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