SMEs stuck in carbon tax no-man’s land

I expect many SME business owners will have decidedly mixed feeling today about the Gillard Government’s carbon tax announcement.

Many entrepreneurs are supporters of policies to tackle climate change – they rightly see the warming of the planet as a major business and economic risk and want something done about it, with many already trying to be as efficient and sustainable as they can.

But there was lack of any substantial assistance for SMEs in the plan announced by Julia Gillard yesterday.

While the Government’s move to increase the immediate asset tax write-off from $5000 to $6500 is a welcome one, it is, in the words of CPA Australia’s head of policy Paul Drum, hardly a show stopper.

Tax write-offs are great if you’ve got money to spend on assets but the measure won’t answer the big question that hangs over this carbon tax plan from an SME perspective – will small businesses really be able to pass on the extra costs associated with tax?

Several in the sector – most prominently the Australian Chamber of Commerce and Industry and the Australian Retailers’ Association – have doubts.

After costs are increased up and down the supply chain in many cases it will fall to SMEs to pass them on to consumers.

If the Australian economy was performing strongly and consumer spending was back at pre-GFC levels passing on costs would be manageable but as we all know, consumer confidence is shot and spending is not expected to increase for at least 18 months.

When this tax starts in July next year SMEs are going to face an interesting choic – increase costs and protect margins at the risk of losing business or hold prices steady and watch margins fall in order to keep the cash registers ringing.

It would have been good to see the Government at least recognise that issue in some way.

Yesterday’s announcement contained very few mentions of small business – it seems SMEs have become stuck in no-man’s land between the big polluters and households.

Not even the tax reform package announced within this will do much for entrepreneurs given that most people earning over $80,000 will end up worse off when extra costs are taken into account.

Entrepreneurs understand that carbon pricing was always going to involve some pain – taking action against climate change is not easy and it’s not cheap. 

But it seems strange that the Government has done little to help the group that it wants to distribute that pain, in the form of higher prices at the same time as it is pouring billions into the pockets of big polluters.

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