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Home / New Zealand

<EM>Brian Fallow:</EM> All round blame for tax's all round pain

Brian Fallow
By Brian Fallow,
Columnist·
21 Dec, 2005 11:23 AM2 mins to read

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Brian Fallow
Opinion by Brian Fallow
Brian Fallow is a former economics editor of The New Zealand Herald
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No doubt Winston Peters and Peter Dunne will get some of the credit - or blame, depending on your point of view - for the scrapping of the carbon tax.

National may also take a bow for its "Axe the tax" campaign.

But make no mistake, this is Labour's policy.


The backdown on the tax was underpinned by a review completed before the shape of the Government was agreed in October.

Those agreements included undertakings to Mr Dunne and Mr Peters to have a cost-benefit analysis of the carbon tax before introducing legislation.

By then officials had already concluded that the carbon tax was more trouble than it was worth in terms of cutting emissions of the gases blamed for global warming.

The problem is, dropping it leaves a revenue hole of at least $350 million a year.

And at the same time the cost to the Government - that is, to the taxpayer - of New Zealand's international commitments is growing larger all the time.

The latest estimate, on Monday, was $440 million over the period 2008 to 2012.

That will now increase by $110 million because of the extra emissions the carbon tax was expected to prevent.

The estimate looks optimistic.

It is based on a price of US$6 a tonne for "carbon credits", as the tradeable rights to emit greenhouse gases are called.

That price looks more likely to go up than down as international carbon trading gathers pace, and as the kiwi dollar (hopefully) weakens.

So we have a growing liability and now no revenue to pay for it, at least not from those responsible for it.

Motorists and businesses may be pleased to avoid this tax.

Taxpayers more generally have no reason to cheer.

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