Carbon theory at odds with SME business reality

| July 12, 2011

Most business owners are like the rest of us. We’re not political insiders, preferring politics in small doses. We’re interested in getting things done that make a difference, instead of political argument and bureaucracy.

This is why I don’t blame business people being confused about the carbon tax announcement. There are so many mixed signals from the government, with claim and counter claim dominating the headlines.

Last week we were told that only 500 big companies would pay the tax. Why then did the government announce $5 billion to be paid to lower income households to compensate for the costs?

Then we were told the tax is good for us all because companies and families will change behaviour and emit less carbon dioxide. How does diluting the price signal to the point of overcompensation make us do things differently? How can industrial production change if some of the technologies needed to reduce carbon aren’t safe to use, commercialised or even developed?

Next we were told that Australia needs to price carbon so we don’t lag behind the world. Yet before the announcement the government’s Productivity Commission said that existing Australian schemes already put us in the middle of the pack of global action. Not one of those other schemes was removed. It’s a carbon tax on top of existing carbon prices.

Then we were told we would have a fixed price before a trading scheme. At $23 per tonne in 2012 we not only have a high carbon price (double, for example, New Zealand’s) but it’s not fixed at that level. The government will increase it each year until the trading scheme come into play in 2015. And after that it’s estimated to go up further.

Next we hear that the carbon tax scheme is also tax reform because the tax free threshold is lifted. Good as that may be, the fine-print tells us that marginal tax rates will also rise. For every dollar of overtime worked you will now get taxed more. It’s tax reform at the bottom of the income scale, but not anywhere else.

And then Sunday’s ‘fact’ sheet on small business issued by the government says that “small business will not be required to pay a carbon price” but in the next breath it says “there may be some indirect costs on small business such as higher electricity bills”. Excuse me? Maybe? I haven’t yet seen an electricity retailer who charges households more but then exempts SMEs. Just as electricity bills rise for households, so they will for SMEs. It’s not a “maybe”. It’s a dead cert. And SMEs don’t get compensation.

Experience tells me that whenever there are mixed or half messages coming from government there’s a high chance that the political spin doctors are at work, in this case painting a new tax as sweet as mum’s apple pie.

For SMEs the carbon tax reeks of economic theory ahead of practical reality. A trading scheme might be good in theory if everyone is in, if markets are perfect and if auctioning of overseas carbon permits isn’t tainted by greedy or illegal behaviour. But everyone is not in, market prices are distorted by government protection (look at Europe for example), and where quick money can be made from a new market then history tells us that human greed corrupts the system. And that’s before we are asked to trust the government being able to implement the scheme efficiently, without bureaucracy or waste.

Small and medium business people live in the real world, and often doubt whether governments do. Take for example the way the government dealt with SME concerns about rising costs from a carbon tax. When asked by journalists last week, Ministers said that SMEs can pass the costs onto consumers, so won’t have to pay. Cold comfort. Just a walk down to the local shops provides evidence that SMEs can’t easily compete with larger companies over price. They don’t have the same scale to absorb or subsidise rising costs. Put prices up too much, and the customer goes to the cheaper and bigger competitor.

Going through the detail of the carbon tax forces us to filter fact from fiction, the devil from the detail. Whether it’s all worth it is the bigger question given that the government is trying its best to shield so many Australians from its own policy.

Peter Anderson is the CEO of the Australian Chamber of Commerce and Industry (ACCI). The ACCI speaks at a national and international level on behalf of the nation’s peak State and Territory Chambers of Commerce and Industry and National Industry Associations from all sectors of the economy.




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    July 16, 2012 at 10:35 pm

    nice blog here
    nice blog here

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    June 14, 2012 at 6:47 am

    We’re a bunch of volunteers
    We’re a bunch of volunteers and opening a brand new scheme in our community. Your website offered us with valuable info to work on. You’ve done an impressive process and our entire community can be thankful to you.

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    Fair Go

    December 20, 2011 at 10:30 am

    In the first line Peter
    In the first line Peter writes, “we’re not political insiders” but of course Peter is CEO of a large industry group and has a background as a staffer of Tony Abbott. I’d say his networks make him by definition a political insider. He’s not like the rest of us… He’s a lobbyist and a political operative. Not exactly an independent voice in the debate on how Australia should address dangerous climate change.

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    August 4, 2011 at 8:30 am

    Can you please tell me


    Can you please tell me exactly what SME’s you are referring to who will be negatively impacted by the carbon tax or aren’t already defined as emissions intensive and trade exposed and therefore able to obtain over 90% of their emissions permits for free? Last time I looked no one travelled overseas to get their daily coffee, their hair cut, their lamb chops, or to buy their vegetables. I could list about 100 other types of SME businesses that will not be exposed to meaningful competition from countries overseas that do not have a carbon tax. All of these businesses will be in the same boat, facing the same carbon tax and so they’ll pass it onto their customers. Why should we compensate small businesses for a cost that they’ll pass onto householders anyway? You need to be a bit more precise about which SMEs and explain precisely why the carbon tax will have as big an impact as you seem to be implying.

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    Bill Lang

    August 1, 2011 at 11:12 pm

    Peter – your analysis is spot
    Peter – your analysis is spot on. Having just read the 18 pages document delivered to my home this week, I discovered as will the other 2 million small business owners that the words “small business” were used twice in the whole document. Small business is once again being ignored by the Federal Government – our online petition, Let us V.O.T.E. will help local MP’s realise that when this get svoted on everyone in their electorate will be looking to them to do what is in the electorate’s best interests.

    Here is where people can sign the petition: