New Zealand Business Reacts Angrily To Introduction Of Carbon Tax

by Mary Swire, Tax-News.com, Hong Kong

05 May 2005

The government of New Zealand is to press ahead with the introduction of a new carbon tax despite criticism from the business community that it will increase costs and burden affected firms with additional red tape.

Under the new carbon tax regime, to be introduced in April 2007, power generators and factories will pay a tax of NZ$15 (US$11) per metric ton of carbon dioxide emitted while burning coal, oil and gas, according to Pete Hodgson, convener of the government's ministerial working group on climate change, who announced the measure.

Although the tax, which will be paid when buying the fuels, is not due to come into effect for two years, the government has received much criticism from the business community for creating uncertainty about the level of the tax and how it will be applied, making planning difficult for many companies.

“The measures that will supposedly give the worst affected businesses relief from the carbon tax are complicated and perverse," remarked Business NZ Chief Executive Phil O’Reilly.

"Only around 40 companies will get exemptions, and the grants for smaller companies will bring undesirable incentives - all companies will be paying for grants which will be distributed to only a few, in other words companies will be taxed to fund their competitors," he added.

The new tax has also been slammed by the opposition National Party, who are fearful that the carbon tax will put New Zealand at a competitive disadvantage in the international economy.

“Why is it necessary for Labour, which has already collected an extra $50 billion in taxes during the past 6 years, to wallop Kiwis with yet another tax?” asked National Party Finance spokesman John Key.

“The imposition of Labour’s new carbon tax will put us at a significant competitive disadvantage to our major trading partners, the United States and Australia, who have both rejected carbon taxes," he warned, adding:

“A better approach would be to ditch the tax and have a policy that would let all businesses contribute to energy efficiency, for example an accelerated depreciation regime on new, energy-efficient machinery."

New Zealand's largest source of greenhouse gases, flatulent cattle and sheep, are reportedly exempt from the tax.

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