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Saturday, Oct 19, 2002

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Carbon tax to cut CO{-2} emissions

STATISTICS show that New Zealand produces 70-90 million tonnes of carbon dioxide a year. About half of its greenhouse gases come from the methane and carbon dioxide emissions of more than 50 million sheep and cattle, whose products account for around a third of New Zealand's export earnings. To move towards the `climate change agreement', New Zealand has announced plans for a carbon tax of up to NZ$25 ($12) a tonne of carbon dioxide equivalent, after 2007, if the Kyoto protocol comes into force internationally. The impact of such a tax would be a rise in retail petrol prices by up to 6 per cent, diesel by 12 per cent, and gas and electricity prices by 8-9 per cent. Farmers will be exempt from the tax. On the positive side, the country has a large `green bank' — that is, its vast forests — adding to a credit of 55 million tonnes of carbon dioxide equivalent that can be sold to countries unable to meet their Kyoto standards, at a value of NZ$1.4 billion.

However, the Kyoto pact needs the approval of at least 55 states contributing at least 55 per cent of the industrialised world's 1990 greenhouse gas emissions.

With the US opposing the treaty, there is every likelihood that the accord may slip through a black hole.

Wish list

THAILAND'S major oil companies have put forth a long list of demands to tide over the industry slump and increasing debts that are hovering around $5 billion. The Petroleum Refining Industry Club wants exemption of fuel oil from excise tax, increased use of fuel oil in power generation by the Electricity Generating Authority, delay in imposing lower sulphur content requirements and reduction of the legal oil reserve requirement to 3 per cent of total demand from 5 per cent at present.

A lobby that is too difficult to ignore.

Hard loader

With a wafer thin win behind him, German Chancellor, Mr Gerhard Schroeder, is launching into bold tax moves such as an increase in contributions to the state pension fund for high earners and a bigger tax burden for companies. But his detractors complain this could hurt the economy. Proposals include: Allowing companies to offset only half their gains with losses incurred in earlier years to ensure that any business with profits pays tax — a change from current rules enabling companies to write off all gains against earlier losses; individuals to pay taxes on all gains from selling securities, regardless of how long they have held them — current rules allow private investors to sell shares tax-free if they keep them more than a year; pension contributions, shared equally between workers and companies, to be raised to 19.3 per cent of gross wage next year from 19.1 per cent; raise taxes for owners of company cars — to 1.5 per cent of the car's catalogue price from 1 per cent now; cut incentives for home-buyers; raise value-added tax on a range of products from flowers to dental plates and footwear.

He must be angry at the low margin of victory.

Profit sharing

Peru's Production Minister, Mr Eduardo Iriarte, is keen to attract investors and get its industrial sector back on its feet by offering tax breaks to companies that create jobs and boost quality. Manufacturing and production sectors represent 25 per cent of Peru's GDP. Its economy has strong mining and fisheries industries, which are top export earners; and construction sector is showing good growth. Unemployment and underemployment account for more than half the 26 million population. Under current rules, industrial companies share 10 per cent of their profits with workers, over and above salaries, while mining companies share 9 per cent, and banks and businesses 5 per cent. There are proposals to make the profit-sharing law uniform, at 5 per cent, for all sectors. Peru had to junk its ambitious privatisation programme after violent protests to the sale of power companies.

No different story here.

Education levy

Last year, more than 50,000 foreign fee-paying students studied in New Zealand and contributed about NZ$1.5 billion to the country's GDP. Even as more students consider New Zealand as an option for studies, the government there has plans to introduce a new tax. The new impost could be at 0.5 per cent of the gross tuition fee on foreign fee-paying students attending New Zealand educational institutions — an `export education levy' that could gross around NZ$3.9 million a year. The idea is to build a fund for expanding and developing the export education sector, paying for the overseas marketing of New Zealand as a centre of educational services, upgrading of quality assurance programmes and financing educationalists' professional development.

Not a big burden, is it?

Tailpiece

"For inaugurating his shop, he brought a film star!"

"And for the closure?"

"As usual, the CIT."

hindubusinessline@hotmail.com

D. Murali

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Stories in this Section
Unwarranted pessimism


Corporation tax receipts — How much comes from private sector?
How real is the festival cheer?
Environment protection is big business
Pulling in all directions
The conversion fiasco
VATman at the door
Works contract continues to be in the works
Carbon tax to cut CO{-2} emissions
Of added value


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