Numeracy

I just remind all readers to be aware of the numbers game and how easily it is to lose track of the real issues when people are quoting figures at you.

Remember back in 2000 when the GST was introduced?  The pollies were going out and buying baskets of groceries and comparing prices before and after the GST.  Yes, at that time some things were taxed at the 22-1/2% wholesale sales tax, 12-1/2% and 32-1/2%.

Go buy a basket of dog food, and lo and behold, under a GST that 32-1/2% wholesale sales tax rate gives you an actual saving!  Go buy fruit and vegetables and you're paying 10% more.  (Well Meg Lees got her way and the GST stayed off Fruit and Veg - so what I ask).

All these comparisons were done and a whole lot made of the findings.  But people were not really taking the right information into account.  Okay, you can muck around by comparing taxes at different rates and on wholesale and retail prices and you get different numerical outcomes.

The one thing that wasn't being discussed at the time was the most important thing, and the NAME of the tax gave it away.  "Goods and SERVICES tax".  Okay, there'd be a change to the tax rates on goods, but on SERVICES, the current rate was zero, and ten per sent of the retail was going to be added to all services.

Now you'd be taxed on getting your hair cut, buying movie tickets, getting the car serviced, paying for the services of a professional person (lawyer, accountant, etc), taxi fares, plumbing services, electricity supplies, petrol (in addition to all other taxes), and so on and so on ad infinitum.

Never mind the goods side of things - mathematically they will vary a little.  Worry about the services side of things, where everyone is worse off.   And all income the tax cuts promised simply never eventuated.  Bracket creep was given back, but essentially income tax revenue remained almost the same!

This is just a reminder to worry about materiality.  You may hear incredible stories about how power bills will increase under a carbon tax, and this is usually because they will include an actual quantum (eg electricity bills will increase by $50,000 a year for this particular business).  Ask instead what PERCENTAGE increase is this going to be (and according to Treasury it's around 15% for electricity.  For food it's estimated at a 1.2% increase).

The figures are then easy to work out.  Say your business currently spends $80,000 a year on electricity.  This means it will cost an extra $12,000 a year for power.   Don't mention the existing $80,000 and a $12,000 increase sounds massive, doesn't it?   Honest reporting would say the bills will rise from $80,000 to $92,000 per year.  (Power is probably the highest increase of all commodities, because it emits a massive amount of carbon in its production).

This is, of course, assuming you still use coal to make the electricity...  Generate your electricity from gas, and already the carbon cost is halved.  Generate it using hydro, wind or solar and you pay virtually NO carbon tax at all (which is the whole point of the exercise)!