The Taxation Institute of Australia is warning that the proposed carbon trading scheme could reap more than $14 billion in businesses tax unless the Australian Government takes immediate steps to clarify the tax effects of the proposed carbon trading scheme.
The $14 billion is based on the assumption that permits are required by all companies operating in the transport and stationary energy sectors. Taxation Institute of Australia president Sue Williamson says the potential tax windfall would effectively translate into a seven per cent increase in today’s 30 per cent company tax rate if the Government did not commit in its upcoming budget to outlining the compensation measures needed to support the carbon trading plan.
“While we commend the Government’s commitment to reducing carbon emissions, it is important the tax treatment of carbon trading is given immediate attention and agreed well before the final model for an emissions trading scheme is established,” says Williamson.
“To date we have not seen any evidence of the tax implications of an ETS being fully considered, yet we know that many tax issues currently exist for businesses that have already implemented their own carbon abatement strategies,” she adds.
“The Government must ensure that its climate change efforts are not undone by hastily introducing an ETS without giving full consideration to the tax regime that will support it. Otherwise we could see consumers wearing unnecessary additional costs for goods and services which will ultimately generate a significant inflationary spike,” says Williamson. Williamson says the Taxation Institute also hopes that the Government’s upcoming budget would: clarify the tax position of existing voluntary abatement strategies; ensure tax laws are changed to encourage the development of alternative energy sources; and, consider tax arrangements in the development of the ETS with taxation experts.
