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Carbon Pollution Reduction Scheme draft legislation is still too taxing

Publication date: 10 Mar 09 | Source: THE TAX INSTITUTE

Australia’s premier professional tax body, the Taxation Institute of Australia, is disappointed that the Government has not taken the opportunity in the CPRS exposure draft legislation released today to rectify a number of the policy short comings in the Carbon Pollution Reduction Scheme.

Taxation Institute President, Joan Roberts, said that the Taxation Institute continues to be concerned that under the current policy proposals there will be an increase in the cost to the community because of:

  • unnecessary compliance costs arising from the application of GST to permits; and
  • the collection of additional GST through input taxation of certain climate change derivatives.

“The Taxation Institute acknowledges the Government's commitment to extensive community discussions in respect of the proposed CPRS,” Ms. Roberts said.

“However, given that the CPRS is designed to set the cost of carbon which is to be passed on to the consumer, the Taxation Institute believes it is important to ensure that the impact of taxation on the CPRS will be minimised.

"The additional compliance costs arise because finance trading markets do not currently apply GST to the items traded (share, options, etc). As a result they will need to incur substantial costs in developing systems that are able to capture the GST in an electronic trading environment where sellers are not aware of the identities of buyers.

“It was these costs and associated compliance difficulties that convinced the New Zealand Government to exclude permits from the GST net despite having a goods and services tax (GST), which applies to virtually all supplies of goods and services.

“Of key concern are the latent costs that will be passed on by business to consumers as a result of trapped GST in the estimated $115 billion per annum secondary market.  Businesses will be forced to recoup the trapped GST and high funding costs by higher prices to consumers.

The Taxation Institute says these costs impact the whole model as they will ultimately be passed through to the consumer.

“Whilst the exposure draft legislation is a crucial step forward in formulating a model to reduce of the impact of climate change on Australia, the Taxation Institute urges the Government to consult further to address these issues” said Ms Roberts.  

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Media Contacts:

Joan Roberts, President - Taxation Institute of Australia on 0419 308 141
Dr Michael Dirkis, Senior Tax Counsel - Taxation Institute of Australia on 0417 400 349