Under a carbon tax cloud

Next month sees the introduction of the carbon tax – a turning point in the history of Australian industry.

Since it was first announced, it has been interesting to observe the similarities between John Hewson's attempt to sell the GST in the 1993 election campaign and today's government efforts to educate the Australian public on the need for a price on carbon.

Nineteen years after Hewson's obscure explanation about the real cost of a birthday cake under a Coalition government it appears some important lessons are yet to be learned about presenting complex policy change to the electorate.

MYOB recently surveyed business owners and managers on the contentious carbon tax. The March 2012 Business Monitor report uncovered widespread confusion about what a price on carbon means for them. Despite the tax's imminent introduction, 42 per cent of small to medium business operators didn't have a good understanding of the impact the tax will have on their business.

Of note for our political leaders, the survey also found 61 per cent would turn their election vote towards the party that proposed to abolish the tax.

The carbon tax introduction has other similarities to the introduction of the GST. GST revenue collection buffered the federal coffers well ahead of the GFC, which helped many business owners stay in the game during that tumultuous period. What many don't realise is that the carbon price will also benefit them. As a percentage of GDP, taxes are not going up – rather the form of the tax is changing. Income tax (taxing work) is coming down and the carbon tax (taxing pollution) is going up. This change in the form of taxation doesn't have to be bad for business.

Putting a price on carbon could provide the catalyst for Australian businesses to lead globally. It will surely strengthen their desire to leverage lower carbon alternatives, seeking smarter, more cost-effective ways of running their venture. There will be tangible advantages for businesses that take a proactive approach to reducing energy and material consumption, and lowering production costs in the wake of the new legislation.

The majority of Australian consumers are worried about carbon pollution. In a competitive environment, any opportunity for businesses to promote their responsible sustainable credentials can help build a healthier bottom line. It may even present opportunities to attract staff, as more people search for roles within businesses that play their part in caring for the environment.

A key point for business owners to note about the carbon tax legislation is that the top 500 polluters will be the ones directly paying the carbon price. For the balance of Australian businesses, there is no direct ‘tax' or additional paperwork burden. Instead, the tax will come in the form of indirect increases in costs such as business travel, freight, waste removal and utilities.

The burden of these cost increases is not intended to sit with small business. Consumers have been compensated for the increase in these costs and businesses should feel confident to pass these cost increases on to customers through higher prices. Of course those that can lower the use of these services could be at a competitive advantage, but no business should go backwards from this change in the form of taxation.

MYOB's Carbon Tax Toolkit includes tips for business owners on how to save money while working in a more sustainable and strategic manner.

Australian businesses have proved in the years since the GST that they are adept at embracing change. We are now in the uncertain period of lead-up, implementation and adjustment before this change takes place. We hope to help clarify the changes that are coming.

Tim Reed is the chief executive officer of business management software provider MYOB.