Carbon trading may mean $14 billion tax bill for Australian businesses

The Taxation Institute of Australia has warned 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.

Taxation Institute of Australia president Sue Williamson said the potential tax windfall would effectively translate into a 7% increase in today’s 30% 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 (ETS) is established,” Williamson said.

“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.

“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.”

Williamson said the Taxation Institute also hoped 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,
• immediately consult with taxation experts, such as the Taxation Institute’s Climate Change committee, in the development of the ETS.