This post argues that a carbon tax may be a smarter way of increasing revenue than changes to the GST. This would be particularly true if we are talking about replacing Labor’s complex carbon tax collection system with a KISS driven approach that collects the tax close to where the fossil carbon comes out of the ground or across our borders. This post is about revenue. Helping to save the planet is just a very desirable bonus.
The table below from ABC Just in suggests that a carbon tax would add only $1.07 to the average weekly individual household expenditure for every billion dollars raised Vs $2.15 for removing GST exemptions or $2.75 from raising the GST to 12.5%.
Before we get too carried away it would be good to know a bit more about why the figures are different. (See questions after the table.) However, even if it turns out that the carbon tax and GST have about the same impact, it makes sense to choose the carbon tax instead of the GST because helping to drive down greenhouse gases would come as a very desirable bonus.
The other thing to understand is that there are much lower cost ways of collecting the tax than the one used by Gillard. The logical, lowest cost place to collect is close to where the fossil carbon comes out of the ground or across our borders. For example, in the case of coal mines the sampling plants and weightometers required to give the information needed to calculate the tax are already in place. Things like fugitive emissions should probably be ignored for the sake of Keeping It Simple Stupid (KISS)
In the case of imports, we should also resist the the urging of the complicators and limit the tax to bulk shipments of things like oil, cement, steel etc. plus tonnages of things like cars using rough estimates of tonnes CO2 per tonne car.
In retrospect, the Greens and Labor stuffed up when they tried to deny the carbon tax was a tax. They would have been smarter to argue that the tax was needed (or better than an existing tax) and that helping to reduce emissions would be a bonus.
When reading this keep in mind that, up till now, I have been consistently against carbon taxes.
|Carbon price at $23 per tonne||Carbon price at $27-$29 per tonne||GST at 10 per cent without exemptions||GST at 12.5 per cent with current exemptions|
|Estimated annual gross revenue||$8.5 billion||$10.58 billion||$14.2 billion (on top of revenue from existing GST in 2015/16)||$14.26 billion (on top of revenue from existing GST in 2015/16)|
|Estimated average impact on household expenditure ($ per week)||$9.10||$10.68-$11.47||$38.70||$30.60|
- Are gross revenues calculated after cost of collecting the extra GST?
- What would the GST figures look like if they allowed for carbon tax style compensation for the effect on lower income earners?
- What would the GST figures look like if the tax applied to exports as well as imports? (Adding exports to what the GST applies to would have little effect on household expenditure apart from the effects of the lowering of the $Aus in response to the GST applying to exports.)
Questions Carbon Tax:
- Are gross revenues calculated after cost of collecting the carbon tax?
- Was it assumed that no compensation to lower income earners would be needed because Abbott did not take away the the compensation introduced along with the original carbon tax?
- Does the carbon tax apply to exports?
- What exceptions were included in the carbon tax proposal?