16 July 2008: Three-quarters of respondents to a survey recently conducted by professional services firm, Deloitte, do not believe, or do not know, whether the impending Australian Emissions Trading Scheme (AETS) will achieve tax neutrality.

Conducted in May and June 2008, the survey asked a cross section of the Australian business community questions on taxation issues and other areas associated with the AETS.

Mr Chris Leach, tax partner with Deloitte, said the survey clearly indicates that business has many concerns to be addressed by the Federal Government.

“One key issue that both the Government and the business community still need to turn their mind to is that of taxation. There needs to be a significant discussion on what business would like to see adopted from a tax reform point of view. The challenge for the Government will be to introduce a system that promotes decision-making by business consistent with carbon emission goals set by Government,” Mr Leach said.

The survey found that when it comes to climate change the vast majority of the respondents (80%) believe that one of their biggest taxation concerns is inadequate state taxation laws. There is uncertainty about whether stamp duty and property taxes will increase transaction costs in relation to the trading of carbon credits.

The majority of respondents agreed that a lack of clear transfer pricing rules governing the trading of emissions permits between jurisdictions is also a major taxation concern.

“While inadequate interaction with other jurisdictions’ trading schemes is one of their biggest concerns, 63% of respondents would also like to see emissions permits traded across jurisdictions free of withholding tax,” Chris Leach said.

The survey also found that the prospect of introducing excise to alternative fuels, such as ethanol and biodiesel, is a concern for nearly 60% of respondents.

Mr Leach said that it was clear that respondents believe the underlying focus of the Government’s commitment to climate change should be on incentives that encourage the development of low emission energy technologies.

Chris Leach
Partner, Taxation
Tel: +61 (0) 2 9322 7109