I had a quick squiz at the BCA’s recently released climate change policy. It’s in better shape than the current government policy and it is indeed an interesting phenomenon that a broadly based big business industry association would be adopting as policy a more politically difficult and divisive policy than the government can manage.
This usually doesn’t make sense within the politics of industry associations which are pretty strongly drawn to lowest common denominator responses.
Still it’s nice to see that the members could all agree on one point. That permits should be simply given away rather than auctioned off to retire some major distorting tax. When I last looked, a figure being bandied about for the annual value of permits was $12 billion and payroll tax raised around $14 billion.
Abolishing payroll tax would be a nice little fillip for the economy (certainly better than the nice little Phillip we have messing with our legal system). Anyway, the Business Council’s proposal to give the permits away means we can’t use the revenue to abolish other taxes. And who do you think they want the permits given to?
Like they say we should “1ssue free permits to compensate enterprises for the economic loss from the change in the ârules of the gameâ”. A very casual calculation of the value of the permits – around ten times their annual value – or $120 billion. I think Troppo readers should get some compensation too. Please form a queue and there’s a limit of $10 mill per person.
- i[↩]
The BCA are just pragmatically accepting the reality that quantity controls are going to be politically unavoidable, despite some good arguments to the contrary
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/31/AR2007033101040.html
Of course to auction off ‘real’ emissions permits, as distinct from allocating phoney ‘Kyoto’ type ones would be politically untenable for the quantity control evangelists. After all they’d have to play God in each country and set the target (presumably the hallowed 60% to 1990 levels). Then they declare the current quantity to be auctioned, based on current levels of national emissions, with each tonne of emitted CO2 for sale having the caveat that it would reduce by 2% per year for the next 30 years. Now that auction I’d like to see from the fixed quantity control advocates. Streuth, wouldn’t every man and his dog jump on those for capital gains? You could even have the bizarre outcome of no target China, flush with trading surplus funds, buying them up to sit on them for a rainy day and to protect the purchasing power of their surpluses.
Nicolas, have a look at page 11, re: cost of global action and cost of going it alone. I can see the election debate already. A massive difference in economic cost as modelled on global trading system vs. deeper cuts relative to trading partners. This issue hasn’t played out in the 07 campaign yet I’m sure … it will have sting in the tail for the main players yet – that goes for Rudd too. How long before the media starts asking about the differential of cost for go it alone vs. global action.
Short of the auction I describe Nicholas, how else, but donating $120 bill in economic rent to the Satanic Multis and Big Biz, are you going to flim flam the public( who don’t understand cap and trade is in principle the same as a carbon tax) that you are really going to tax them to mend their evil, fossilly ways. All with their best interests in mind of course. You could hand out the emission warrants I described on a per capita basis and make good little capitalists out of them all of course. Policing the emissions targets so issued could be a bureacratic nightmare, but not half as big a nightmare as discovering 10-15 yrs into the warrants’ life, that CO2 wasn’t the big GW culprit after all. Mind you that’s a few electoral cycles away, so what the hell eh?
The debate is hotting up alright Frank http://www.news.com.au/story/0,23599,21496042-1702,00.html
:-) I had to laugh at reading this. You know you’ve arrived as a mainstream political issue if people are trying to hyjack your agenda to hide the fact that they’re dipping into someone else’s coffers. Poor greens. I can just imagine the perversions this marriage of business and green language is going to lead to: ‘Be green, its the new greed!’
how an organisation can support a GST yet wish to abolish payroll tax when its impact is essentially the same is beyond me.
It is commonly said that payroll tax is the same as GST. Expcept for the fact that
*the base has big holes relating to small business
*capital value added is exempted from the tax; and
*exports are not exempt.
*the rate of payroll tax is different in every state.
Apart from that they’re pretty much the same.
Jeez BBCL, did you ever try to work out what proportion of your office supplies was used in production vs sending out invoices receipts and general accounting so as to work out your WST liability? If you printed a production sheet for the factory the ink and paper were WST exempt, but if for a customer invoice or advertising, not. Oil for the factory forklift vs oil for the sales reps car the same. Yeah we had our birthday cakes and candles with the variable rated WST and no input tax credits for company vehicles and the like. Exporters couldn’t net out all their input WST either. How’s the economy been doing ever since, despite all the doomsayers and rollbackers at the time?
Actually, between now and the election we’re going to have the same debate over a similar dinosaur in Kyoto and gradually the pundits and movers and shakers are going to see it for what it really is.
Observa Homer was talking about Payroll tax – not WST.
Nick ,
I didn’t say it was exact.
Tell me from your days at the BCA did businessmen ever click that the incidence was the same.
I remember advocating making it essentially identical to a GST and so-called businessmen saying this was a catastrophe. When I pointed out they were supporting a GST and this was slightly hypocritical they muttered darkly about the employment destroying consequences…
In essence they were double minded.
Twas so when I entered the workforce and still remains perhaps we should abolish payroll tax and simply lift the GST by the appropriate amount and leave them none the wiser.
Observa,
I have never met anyone who ever supported a WST
“I have never met anyone who ever supported a WST”
No but you must have met plenty who preferred it to a GST, or didn’t you ever meet any Labor voters at the time? Granted they’re pretty thin on the ground nowadays. Shhh don’t mention the Rollback!
Homer, you haven’t met me but I prefer a WST to a GST. Of course one mightn’t want the mess that the GST replaced, but what I like about a WST is that once paid by the wholesaler (and perhaps I someone can convince me that I’m wrong, but I imagine it should be relatively easy to make that a fairly simple process even if our multi-rate WST didn’t fit the bill) then its incidence cascades through the system without having to be separately invoiced and tracked by each level of business.
I know cascading through the system is supposed to be a bad thing. Of course it IS a bad thing. The only relevant question in this as in so many other economic debates is ‘how bad?’ and ‘compared to what?’. At relatively low levels of tax, the allocative inefficiencies this generates are small. In the language of those little diagrams we draw in Economics 101, if I see a rectagle I can get rid of I”m prepared to sacrifice a few little triangles on the end of it.
As for distortions between sectors – with some taxed and others not – firstly it was always a good idea to broaden the indirect tax base as much as possible under the WST, and secondly the large exeptions and exemptions in the GST system – health, education, finance, government services – provide good solid allocative distortions themselves.
Wouldn’t it all be purer and simpler to tax resources, including high carbon taxes to replace sales taxes and Kyoto type nightmares Nicholas? Then perhaps we could abandon income tax altogether(oh those 10000 pages of tax act and the tax minimisation industry), with the quid pro quo for a drop in material well being due to much higher carbon taxing, levying an annual nett wealth tax for real equity purposes.
Well now I have met one over the net.
Sounds like your preferred WST is almost a pseudo-GST!!
link to tax article
The link doesn’t work.
For others’ reference Ken’s comment seems to have been about the link on comment 15 – the link in the article is working fine. And I’ve fixed the link in comment 15.
How on earth did the conversation turn to promoter penalty laws??
Good question – that was the url that was wrongly formatted into the link that I ‘liberated’ from bad coding as it were.