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Carbon Tax Anti-Growth

May 4 2004

Carbon Tax Anti-Growth

"The carbon tax announced by the government today is a further anti-growth measure", the executive director of the New Zealand Business Roundtable, Roger Kerr, said today.

"The case for action other than 'no-regrets' policies to combat global warming is still far from clear. Moreover, the new tax does not "protect our environment" as claimed. The Kyoto measures will have only a minuscule impact on global warming and New Zealand is far too small an economy to make a difference.

"Even if there were a robust case for action, the government's response is incoherent. It has overlooked the advice in the McLeod Tax Review of 2001 that such a tax would be difficult to integrate with Negotiated Greenhouse Agreements, should cover the agriculture sector, and should not be imposed before 2008.

"From an economic growth perspective, a carbon charge is a distorting tax which can only be partially remedied by recycling revenue from it.

"In addition, it will harm New Zealand's international competitiveness, contrary to the government's claim, and put New Zealand policies further at odds with the policy directions of two key trading partners, Australia and the United States, neither of which has signed the Kyoto Protocol.

"Measures to alleviate the impact of Kyoto ratification on the economy by using forestry sinks and shielding certain industries are only short-term palliatives. In time the government's policies imply drastic action to cut emissions at large costs to growth. The lack of certainty about policies beyond 2012 will mean that long-term investment will be discouraged.

"The only way the government's decision can be made consistent with its top priority goal of raising New Zealand's growth rate to return New Zealand to the top half of the OECD income rankings is to adopt other vigorous pro-growth policies. The business sector is seeing no sign of these emerging", Mr Kerr said.


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