Julia Gillard's 'carbon tax' regrets debatable

Updated

Julia Gillard says her decision not to argue against a fixed carbon price being labelled a "tax" hurt her terribly politically.

"I erred by not contesting the label 'tax' for the fixed-price period of the emissions trading scheme I introduced," the former prime minister wrote in The Guardian on September 14.

"I feared the media would end up playing constant silly word games with me, trying to get me to say the word 'tax'.

"I wanted to be on the substance of the policy, not playing 'gotcha'. But I made the wrong choice and, politically, it hurt me terribly."

The claim: Julia Gillard says her decision not to argue against a fixed carbon price being labelled a "carbon tax" hurt her terribly politically.

Julia Gillard says her decision not to argue against a fixed carbon price being labelled a "carbon tax" hurt her terribly politically. The verdict: Ms Gillard had strong grounds to argue the carbon price was not legally a tax, but she would have faced credible counter-arguments to the contrary.

Could Ms Gillard have argued that the fixed carbon price - which the federal government set at $23 a tonne last year - is not a tax?

Defining a tax

The Clean Energy Act of 2011, which established the emissions trading scheme as a mechanism to deal with climate change, talks about a "price" on carbon, not a tax.

The Gillard government typically referred to a "carbon price" when communicating its policy.

Professor Michael Dirkis from the University of Sydney says legally the ETS is not a tax.

"It was not enacted under the taxing powers in the constitution," he said.

But Professor Dirkis, who is an expert in taxation law, also says there is no practical difference between a carbon tax and a fixed carbon price.

"Its impact is the same - to drive up the cost of energy to bring about a reduction in energy use," he said.

I made the wrong choice and, politically, it hurt me terribly. Julia Gillard

According to Professor David Stern, an energy and environmental economist at the Australian National University, "a fixed emissions price is effectively a tax when the government sells permits to firms."

Dr Ben McNeil from the Climate Change Research Centre at the University of New South Wales agrees the fixed price stage of the ETS is effectively a tax.

But he argues it's not like a tax when it moves to a floating price - determined by the market, not the government.

However the Gillard government's climate change advisor, economist Professor Ross Garnaut, told ABC Fact Check: "It is not a tax. Nor will it be a tax when we have to a floating price linked to Europe."

The difficulty in arguing against the "carbon tax" label is that there is not one single definition of the word "tax".

"At the broadest end, a tax is seen as an additional price paid as a consequence of government restrictions," Professor Rick Krever from Monash University, a former advisor to both the International Monetary Fund and the Australian Taxation Office, said.

Under this broad definition, Professor Krever argues not only is a carbon price a tax, but a seatbelt is also a tax in that it is a compulsory cost that must be paid as a result of a government regulation.

The Institute of Chartered Accountants Australia says the government could have chosen to call the carbon price anything it wanted.

But Yasser El-Ansary, the institute's general manager of leadership and quality, says it was reasonable for the carbon price to be labelled a tax.

"In the end, the actual fixed charge imposed on companies would still amount to a 'tax' in substance, and so it was quite reasonable ultimately for the carbon price charge to be labelled a tax by the then opposition," he said.

The verdict

Ms Gillard had strong grounds to argue the carbon price was not legally a tax, but she would have faced credible counter-arguments to the contrary.

It remains debatable that she made the wrong choice.

Sources

Topics: climate-change, environment, alp, federal-government, emissions-trading, gillard-julia, australia

First posted