I’m confused! Can we raise prices because of the carbon tax or not?

G’day Aunty B,

We have been hearing that prices cannot be increased due to the carbon tax (thanks Julia for the big new tax).

However, I have received two letters this week stating the contrary. One was from one of Australia’s largest freight companies, and the other was from our local council for waste services.

This tax will have an impact across every business and home owner, like it or not. It will push many companies to increase their prices, but from what I have read, you cannot increase prices because of the carbon tax. How do these companies AND LOCAL GOVERNMENT agencies get away with this?

The simple way to fix this is to remove the tax. Isn’t it discrimination against these companies that have the tax imposed on them?

I don’t want this to be political; I just want to know what the boundaries are.

Frustrated with taxes and red tape for small business,

MP

Sydney

Dear MP,

I hear your pain! But look: it is discrimination against companies that have the tax imposed upon them and that is exactly the point. They are deemed by the community to be large polluters. The community has decided that the risk to the climate is too great if these polluters don’t change their ways. The most efficient way to get people to change behaviour is to make it too expensive for them to continue their current behaviour; think tax on cigarettes and alcohol.

But I’m afraid you’ve got the wrong end of the stick on the carbon tax. You CAN raise prices due to the carbon tax, provided you are able to justify those price rises if the ACCC (and your customers) ask you to do so. Presumably the freight company has seen its costs jump (I know refrigerated gas prices have soared) and the local council might actually be one of the top 500 polluters, as rubbish dumps (many of which are owned by local councils) are carbon emitters.

So now you have had these increased costs passed on, you would be justified in raising your prices and blaming it on the carbon tax. If the ACCC or your customers ask, you can point to higher freight and waste costs.

Of course, passing on costs isn’t easy for SMEs. Not only do they have to figure out how much the carbon tax has specifically added to their cost base, but they also have to have enough market power to raise prices. That’s not going to be easy and I know that’s what many SMEs are worried about.

SmartCompany is watching very closely to see the impact of the tax and to highlight any unnecessary consequences. But in the long run you have to ask yourself this: whether you believe in climate change or not, the current consensus by scientists who are a lot smarter than you or me is that we, our children, grandchildren and subsequent generations are at huge environmental risk from our current behaviour.

You are a businessman. Imagine if the environment and economy was your business and a great bevy of advisers advised you of a great risk. You would take action because to ignore it would just be plain stupid, especially as more time passes and proof builds.

It is just a bugger we left it so late to take action and the need to tackle climate change has collided with a global recession. People’s tolerance and capacity to cope with change is thus stretched to the limit and it’s hard to focus on the big picture and long-term future when the present looks so stuffed. But MP, we must!

So on we go!!!

Be smart,

Aunty B

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