Peter Grant doesn’t understand the carbon tax.
It’s not that the idea is beyond him. Instead, Grant, owner of Mackay Bakery Bushmans Bread and Regional Chair of the Chamber of Commerce and Industry Queensland, doesn’t understand why Australia will implement a tax he feels won’t change anything.
“In Queensland we have 50 per cent increase in the cost of electricity over the last three years without changing consumption one iota,” he told My Business. “If you are not going to change people’s behaviour it won’t make a difference.”
Grant also feels the tax will make things harder for his business.
“We’re a big electricity user: power is about five per cent of our cost of production and energy for transport is another five per cent” Increased energy prices will mean increased retail prices. And with the big supermarket chains recently deciding to use bread as a loss leader – Grant says they are selling well below the cost of production – he faces “costs going up and prices going down.”
For a small baker, that spells trouble.
“The numbers of bakers has shrunk enormously,” Grant says. “In Mackay it’s probably half what it was ten years ago.”
Peter Towers, Director of business advisory company ESS Biztools also feels small business will be hit by the tax.
“Whilst the advocates of the carbon tax are pointing to long-term benefits, there is certainly going to be some considerable pain for most small business operators from the introduction of the carbon tax,” he said.
“There will be extreme competitive pressures which will inhibit SMEs being able to pass on extra costs relative to electricity, gas, freight, airfares, accommodation, rent and the higher input costs on product purchases made by thousands of small businesses around Australia.”
Erik Bigalk of Smart Solutions PR also feels the tax could bring extra cost for small business.
“Energy costs and rising costs for other carbon tax related products and services will mean higher costs for families and hence possibly less available spending dollars. For small businesses that have end-user customers, they may feel the impact of the tax.”
“I think that we will see a ripple effect and as for small business operators, they will have to combat this with clever marketing, loyalty strategies and ways to win new customers. I have clients like that and that is what they are doing.”
But because small business has not been offered specific assistance in the carbon tax package, unlike those likely to be most affected, business groups worry that the impact on the sector won’t get the buffer it needs and deserves.
“It is unfortunate that the only direct benefit that small business owners will receive will be in the reform of personal income tax,” said Institute of Public Accountants CEO Andrew Conway. We are deeply disappointed that there will be no direct assistance provided to the small business sector – many of whom are already feeling the pinch.”
The CEO of the Australian Women’s Chamber of Commerce and Industry, Yolanda Vega makes a similar point.
“Providing rebates for big business and for low income earners means the majority of SME’s have been ignored,” she said.
Vega points out that women are over-represented among home-based business operators, but that the compensation offered to consumers may not be adequate to meet the costs of running a business in the home. The current carbon tax package, she says, “… leads them to be totally confused as to where they stand if this legislation is passed and introduced in 2012. On one hand we are told of an expected increase of about $10 to households per week, yet on the other hand we are advised that SME’s will not be worse off … please explain!"
Some see upside
But some businesses feel the carbon tax represents opportunity.
Sam Nelson, Principal Environmental Accountant and Director of Perth Environmental Accounting firm Greenbase says the tax is fuelling growth at the 20-person organisation.
“The carbon tax has lifted the profile for our profession, and the recent establishment of the Australian Institute of Environmental Accounting highlights that. This wouldn't have happened now without the carbon tax coming in.”
Business intelligence company IBISWorld also sees some upside. The company has released an assessment of the tax’s impact on business, The Clean Energy Plan and Australia’s economy and says the tax’s impact will increase for legal, accounting, engineering and environmental sciences services.
The report also predicts good times for the renewable energy sector, which it says “will continue to grow strongly over the next five years and beyond,” but says the resources and automotive sectors have some big challenges ahead.
The report also calls into question the impact of increased transport costs on business’ supply chain, noting that transport companies spent 45 per cent of income on fuel in 2008 when petrol hit $1.70 a litre. Today, with petrol at $1.45, that figure is just 27 per cent, leading IBISworld to conclude that the price increase to fuel caused by the carbon tax will mean “an increase in operating costs of about 1 per cent. A 1 per cent increase in operating costs is mild, with most trucking companies able to introduce measures to minimise the impact, such as more fuel-efficient vehicles, new vehicle management systems, improved vehicle maintenance and better routes.”
That analysis challenges the position of the Australian Retailers Association (ARA), which labelled the tax a “disaster” within minutes of its announcement, in part because of Executive Director Russell Zimmerman’s analysis that “Retailers are at the very end of the manufacturing and supply chain, and cost increases along the line will ultimately be caught by them.”
The ARA also worries that “There are too many households that will miss out on any compensation at all as a result of an estimated $9.90 increase per week in the cost of living. Tax cuts averaging $10.10 per week for only 40 per cent of households leave little margin for error and don’t go far enough to absorb other costs people will face on top of household and utility costs such as the cost of consumer goods.”
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