Carbon pricing plan gets mixed small business reaction

Labor’s carbon pricing plan received mixed reaction from the small business sector, with industry groups condemning the economic impact but tax experts welcoming the details.

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

About 500 large emitters will be directly impacted by the plan but taxpayers are set to receive compensation of around $15 billion via tax reform due to likely impacts passed on a number of industries.

Businesses with under $2 million in turnover will get a $6500 instant tax write-off for assets purchased after July 1 2012, up from $5000.

Peter Strong, executive director of the Council of Small Business of Australia, says while he welcomes the announcement he expects the government to undertake 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 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.”

Peter Anderson of the Australian Chamber of Commerce and Industry described the tax as a harsh blow to import and export competing businesses, particularly SMEs.

Shadow small business minister Bruce Billson says Labor has “deliberately chosen to ignore the harm” the carbon tax will cause small business.

“Despite a chorus of concern from the small business community about the added cost of energy and inputs no compensation has been provided,” Billson said.

He said the government had failed to recognise that consumers are “in no mood” for further price rises from small businesses.

“This further hit on consumer confidence is the last thing small businesses, particularly retailers, needed,” he said.

Billson said the tax will cascade though supply chains and compound at every stage – a sentiment also felt by the Australian Retailers Association.

ARA executive direct Russell Zimmerman says Labor’s carbon pricing plan spells disaster for the retail sector.

“Retailers are at the very end of the manufacturing and supply chain and cost increases along the line will ultimately be caught by them,” Zimmerman says.

“The government’s planned carbon tax fails to offer retailers any compensation for being the catchment point for price rises, leaving them no choice but to pass these costs on to customers.”

Zimmerman says retailers are concerned that the price impact on the cost of goods has been underestimated, demanding more detail on how the modelling is determined.

“Retailers would also like to see a mechanism put in place to ensure the government’s final estimated CPI increase is not exceeded once a carbon tax is in place,” he says.

Despite his concerns, Zimmerman applauds the government’s $40 million scheme to provide information to small businesses on how they can reduce their energy costs and recognition for carbon-neutral businesses through its Low Carbon Australia scheme.

In contrast to the criticisms of the opposition and industry groups, tax experts say the carbon price policy provides business with some much-needed certainty.

Paul Drum, head of business and investment at CPA Australia, says while the pricing plan will impact on economic activity it will provide much of the necessary certainty to inform investment decision-making.

“Regardless of one’s view, a carbon price is about to become a business reality and it is imperative that businesses respond positively,” Drum says.

“This policy will have an initial impact on business and economic activity, making it imperative for all businesses to find ways to operate more efficiently.

“Having said that however we would like to see greater incentives and assistance to encourage research and development … R&D incentives are essential to deliver the low emissions technology on which the economic and environmental success of this scheme will rest.”