CARBON TAX: SMEs want more detail on price impacts as business warns of impact on competitiveness

Business groups have welcomed the fact that they now have some certainty around Government intentions but have warned that the competitiveness of some sectors will be impacted and have demanded more modelling on how the tax will affect SMEs in various industries.

Organisations such as the Australian Industry Group pointed out that the tax will hurt sectors already struggling, such as manufacturing, but they welcomed certainty after several years of debate.

“We know what’s going on now,” says Council of Small Business of Australia chief executive Peter Strong. “But we want modelling done and case studies as soon as possible.”

Strong says the Government should fund modelling so that each industry will know how it will be affected.

“We want case studies for businesses as soon as possible. We want to know how this will affect the retailer in the shopping mall, what it means for a pharmacist. At the moment it’s simply everyone yelling at each other,” Strong says.

“Will it increase costs and by how much? It’s difficult for businesses to plan if they don’t know how much they’ll be impacted.”

Strong says it’s difficult for the organisation to speak on behalf of all SMEs because they operate in a wide array of industries.

“This includes home businesses and so on, which may not be impacted as much – but we need more information on how they will be impacted,” Strong says.

Prime Minister Julie Gillard announced the carbon tax plan yesterday, putting a price of $23 per tonne of carbon.

About 500 companies will be directly impacted by the plan but taxpayers are set to receive compensation via tax reform due to likely impacts passed on by a number of industries.

Gillard warned that the average cost of living increase will be about $10 per week.

Strong welcomed extra assistance for SMEs – mainly expanding the threshold for instant write-offs to $6500 – but says more money needs to be put into modelling so businesses know how to prepare.

“It’s always good to get more money and the Government has said there won’t be more red tape, although we’ll be watching that. But we need more money to do modelling,” he says.

“My fear is that landlords will pass costs on unfairly and the other is that with the way contract laws are set up anchor tenants in shopping malls will see more costs on, which makes it difficult for smaller retailers.”

Retailers said they are fearful about possible impacts of the tax, particularly what it will mean for already thin margins. Myer chief Bernie Brookes said costs will have to increase.

“This will add about $3 million to $6 million to our costs,” he told the Australian Financial Review.

“We will naturally pass those on to consumers. I don’t think there are many retailers that can absorb those costs right now. There is no magic pill to reduce supply chain costs.”

Major airlines said they will need to pass costs on to consumers due to higher fuel costs and the building industry, which is already suffering due to lower demand and rising interest rates, has warned that employment will suffer.

“Unfortunately jobs in Australia’s residential building sector and building product manufacturing sector will be lost under this carbon tax,” HIA chief Graeme Wolfe said.

Strong says it is difficult to speak for SMEs as a group because the opinions of individual businesses can vary wildly. “They will voice their opinions at the polls,” he says. 

Australian Chamber of Commerce and Industry head Peter Anderson said the tax will weaken the economy and redistribute costs for “little if any environmental gain”.

“Economically, the tax is a harsh blow to import and export competing businesses, especially small and medium businesses. Our international competitors get a free kick of our own making,” he said.

“The carve-outs and industry compensation packages, while sensible for those sectors, move the total tax cost around the economy, forcing other sectors like most small business to pay proportionately more.”

Anderson says he is concerned that employment will start to become affected as businesses cannot find ways to pass on costs.

Many big miners, which are part of the 500 companies to be hit by the tax, have expressed fears that it  will discourage investment and force international entities out of the country despite billions in compensation.

The heads of BlueScope Steel and OneSteel expressed concerns over the tax but welcomed help for investing in lower-emission steel.

Australian Industry Group chief Heather Ridout said the package raises many questions, especially about how industries already under pressure such as manufacturing will be able to thrive under the double impact of the tax and stressful economic conditions.

The AIG wants three changes – trade-exposed businesses need to have more support, the $23 price should be reduced and more plans to phase out current “inefficient and costly” carbon abatement schemes.

“Today’s announcement leaves many exporting and import-competing businesses exposed to a sharp erosion of competitiveness,” Ridout said.

For some businesses the costs will come to 2.5% of revenue and will reduce margins.

“The initial price of $23 a tonne, which the Greens took to the last election, will present a major shock to industry and there is a significant risk that in 2012-13 the carbon price in Australia will be above global prices.”

 Ridout says the tax provides certainty and there is good support for companies researching renewable technology, with small businesses most likely to be negatively affected.

“While this assistance is welcome the design of the measures needs to be improved