THE
Rudd Government's planned carbon trading system will cost business
between $14billion and $22billion a year and will have to be considered
in a review of the taxation system.
Taxation
Institute director Michael Dirkis yesterday said that the money
generated by the emissions trading system would be equivalent to more
than 40 per cent of company tax revenue.
"You cannot design a system that impacts on business and brings in
that level of government revenue without dealing with tax," he said.
Dr Dirkis said the European price for carbon was equivalent to
$37.70 a tonne. Based on the Government's assessment of Australia's
progress towards meeting its Kyoto targets, that would cost the
electricity industry $11.5billion, while transport costs would rise by
a further $3.3billion. The agriculture sector's carbon gas emissions
would carry a price of $3.5billion while the emissions from industrial
processing and waste would cost a further $3.7billion, based on
European prices.
Dr Dirkis said that although some had suggested that Australia's
carbon price might be set below European levels, this would be hard to
achieve in practice, because companies were already operating on the
basis that carbon emissions were a global commodity. "You already have
Japanese industry coming in and picking up forestry interests in
Australia through managed investment schemes so they can use them as
carbon sinks."
Dr Dirkis said the $22billion figure was an upper limit, because
Ross Garnaut, who is examining the issue on behalf of the Rudd
Government, was proposing that smaller businesses emitting less than
25,000 tonnes a year would not need a permit.
Any comparison of Australia's current 30 per cent company tax rate
with international practice would have to take account of the
additional impost from carbon emissions, he said.
A spokeswoman for the Garnaut review said it would not be
considering the interaction with the tax system, and was considering
macro-economic impacts at only a "high level".
Although it has been reported that the Garnaut review would
recommend cuts in company tax, this has not been suggested in its
discussion papers to date, which suggest only compensation for
low-income earners. It has generally opposed compensating business for
the additional cost.
Dr Dirkis said the proposed carbon scheme raised more technical tax
issues for business, ranging from how obsolete power plant should be
treated, whether buying emissions permits would be tax deductible, and
whether the permits themselves would carry GST. If the emissions
permits include GST, the cost to business would be 10 per cent higher.
Australian School of Taxation director Neil Warren said carbon tax
issues should be resolved separately from the tax review. He said the
Government must first consider the cost to the economy of
"going-it-alone" with an emissions trading system.
"If we act unilaterally on carbon tax, we will make ourselves uncompetitive," he said. Source
