Wednesday, December 09, 2009

Climate change: Big tax will solve big problem

Australian Opposition leader Tony Abbott opposes the Emission Trading Scheme, describing it derisively as a "a great big new tax". And he's right, but taxes aren't a problem because "what comes into government as taxes goes out as benefits to people." Australians will be compensated for ETS related price rises with money collected "from forcing industries to buy permits for the tonnage of carbon pollution they produced."

Since the left takes every opportunity to do its Robin Hood "take from the rich and give to the poor" thing, Australians will be compensated unequally:

But Mr Rudd said 2.9 million low-income families would be fully compensated for the rises. And 2.6 million of those - 90 per cent - would get a windfall, with compensation totalling 120 per cent of cost rises.

Fair enough, I guess. Unfortunately, government is not noted for its efficiency, so administration of this wealth redistribution scheme will cost plenty as the money is collected and then doled out. A cautionary tale of a bright tax idea:

Germany spent more than 30 times as much collecting taxes on coffee beans ordered online from abroad than it received in the tax revenues, the accounting office said on Tuesday.

Some 4,000 Germans who bought coffee over the Internet from other EU countries but failed to pay the coffee tax have been charged between a few cents to 10 euros ($14.81) in taxes and fees, said Dieter Engels, head of Germany's Federal Accounting Office.

Tax collectors ended up with just 25,000 euros, way below the 800,000 euros in the costs of staff charged with collecting the payments, Engels said.

The bureaucrats running this scheme might have noticed that the cost of collecting the tax was much more than was coming in but probably wouldn't have cared (it's not their money) and even if they were concerned there was nothing they could do about it anyway.

The obvious solution is raising the levy to match the cost of collection. This would result in a per kilo coffee tax of over €70 (roughly US$103). Now try to imagine the administration costs for a scheme taxing carbon emissions. Yikes!


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