The carbon tax one year on: Businesses absorb costs as politicians squabble over impact

On the eve of its first birthday, politicians are once again butting heads over whether or not the carbon tax impacts small business.

While politicians are arguing, research published yesterday by the Australian Industry Group reveals the majority of businesses did not pass on costs to consumers.

The survey conducted by Ai Group of 400 Australian businesses shows 70% of businesses had not been able to pass on any energy cost increases to consumers.

Across all respondents, only 6% of the carbon costs were estimated to have been passed on to consumers.

Ai Group says these results indicate “a large share of the carbon tax burden has been absorbed by Australian businesses in its first year of operation”, resulting in tighter profit margins.

Despite these findings, earlier this week the parliamentary secretary for small business, Bernie Ripoll, said in a statement there are initiatives in place to ensure small business are not impacted by the carbon tax.

“Small businesses don’t pay the carbon price – it is a price paid by Australia’s biggest polluters.

“The Clean Energy Future package includes assistance for pensioners and low and middle income households, through tax cuts and increased payments, so they can continue to support small businesses in their local community,” he says.

Ripoll said the CEF package is for small business operators, particularly those from a non-English speaking background to understand the transition to a low carbon economy.

“Small businesses can improve their energy efficiency in lots of different ways, reducing their own energy costs and saving on their bottom line,” he says.

Re-igniting the debate in response to Ripoll’s comments, shadow small business minister Bruce Billson said in a statement Ripoll was deliberately misleading small businesses.

“No matter how the Gillard government likes to spin it, everyone has to pay the carbon tax as it’s passed through to small businesses and consumers.

“This latest display of Labor indifference toward the small business community simply adds insult to the economic injury the Gillard government has inflicted with its carbon tax broken promise,” he says.

Billson says the carbon tax has resulted in higher operating and input costs of running a small business, when few have the capacity to absorb the costs or pass it onto consumers.

“Many businesses that are electricity intensive like butchers, restaurants and dry cleaners are carrying a heavy burden from this tax.

“The carbon tax has made the cost of living more expensive which means consumers aren’t willing to spend a dollar more than is needed in this hyper cost-conscious low-confidence economic environment,” he says.

But despite Billson’s demand for the Gillard government to recognise the impact of the carbon tax, Council of Small Businesses of Australia executive director Peter Strong told SmartCompany there are more pressing concerns for small business.

“Every extra cost impacts small business and early on they didn’t let us know how much it would cost and we were forced to develop our own calculator to work out the expenses.

“But the bigger issues still remain red tape, contract laws, the duopoly of Coles and Woolworths, landlords and workplace relations and penalty rates,” he says.

Strong says penalty rates are the pressing concern for small business as they’ve caused costs to increase.

“I don’t think anyone closed their doors on a Sunday because of the carbon tax,” he says.

Regardless of the impact or lack thereof of the carbon tax, the Ai Group survey found Gillard’s carbon tax struggled to achieve its primary cause, a reduction in carbon emissions.

Seventy per cent of surveyed businesses had not reduced their carbon intensity in response to the tax, with the primary reasons being they’d already adopted energy efficient measures. They expected the carbon price would fall or reducing energy was not a high priority because they were a low energy user.

Others said they’d also faced difficulty accessing funds for new carbon reduction measures because they were either cash strapped or couldn’t access government grants.