Small businesses exempt from fuel hikes under carbon tax

Small businesses will be exempt from petrol price increases under Labor’s carbon tax but industry groups are divided over the plan, with some saying it could distort the economy.

In a desperate bid to ease taxpayer concerns Prime Minister Julia Gillard has confirmed that petrol will be exempt from her government’s planned carbon pricing mechanism.

“For the many, many Australians who drive long distances, maybe to work, maybe driving their kids on the weekend or going on holidays with the family this will be a big help,” Gillard said.

“This means that families, tradies and small businesses won’t pay a cent more at the petrol pump because of the carbon price.”

It is expected that the price of carbon will be around $25 a tonne when the tax starts in July next year and Gillard has indicated that the exemption will not be a temporary measure, saying: “Petrol will be out now and out for the future.”

But Greens leader Bob Brown – who campaigned for petrol to be included in the tax – has cast doubt over the prime minister’s claim.

“Forever is a very brave word in politics. Down the line I think there is an inevitability that all fossil fuels will, under the weight of evidence that they should, pay the full cost of the creation of climate change,” he said.

Peter Strong, executive director of the Council of Small Business of Australia, showered praise on the petrol exemption promise, saying: “I think someone’s been listening. It’s one of the first times I’ve seen something come out of the carbon tax that separates small business from big business.

“The fact that we’ve been excluded (from petrol price increases) is really refreshing. It will go some way towards levelling out the two-speed economy.”

Peter Anderson, chief executive of the Australian Chamber of Commerce and Industry, says the exemption for small business does not provide any real relief and could distort the economy.

He says some businesses will end up paying more, which could lead to higher prices for consumers or job losses.

“Some small and medium-sized businesses will end up paying a disproportionate part of the cost burden and may pass it on to households through employing fewer people or passing it on in higher prices,” Anderson says.

Heather Ridout, chief executive of Australian Industry Group, raised concerns about the impact of the exemption on business as a whole.

“We’d need to see the full detail of what’s proposed before commenting, particularly the impact on business as a whole rather than on certain categories of business,” Ridout said.

The deal to exclude petrol for individuals and small businesses comes as a blow to Opposition Leader Tony Abbott, who has vehemently opposed the carbon tax from the outset.

Abbott has ramped up his attack since Gillard’s announcement, arguing the exemption should not be believed.

“This is about as believable as her pre-election announcement that ‘There will be no carbon tax under the government I lead’, the fact is you just can’t trust this government,” he said.