The Irish Small & Medium Enterprises Association (ISME) has slammed the introduction on May 1 of a new carbon tax on gas and other fuel types in the Republic, arguing that it will increase costs for already struggling Irish small businesses.

The Natural Gas Carbon Tax (NGCT) applies to supplies of kerosene, marked gas oil, liquid petroleum gas (LPG), fuel oil, and natural gas, with certain exemptions, including natural gas used in the generation of electricity, chemical reduction, and electrolytic or metallurgical processes.

According to Revenue guidance, liability for payment of the tax (which has been introduced at a rate of EUR3.07 per megawatt hour) will fall on the supplier, with self-supply of natural gas for a supplier’s own consumption also taxable.

The ISME has argued that the introduction of the new levy will increase gas prices 6% for businesses, resulting in lost jobs, especially for SMEs.

ISME Chief Executive, Mark Fielding urged a reversal of the tax, arguing ahead of its introduction at the weekend that:

"It is beyond comprehension that the Government is introducing another tax on energy while businesses struggle to stay open. The national carbon emission has already reduced due to the increased energy efficiencies of SMEs and the effects of the recession on business, thereby eliminating the need for a tax."

"The very idea of a 6% carbon tax, adding to business costs in the current environment, is utter madness. We have already experienced an increase in transport costs, with five cents per litre added to the price of diesel and petrol and now we are expected to stomach an increase in gas prices."

The arguments put forward by the Association for the removal of the tax include that:

- The reduction in emissions obviates the need for a prohibitive tax.

- The government’s commitment that tax would be ‘cost neutral’ has been broken.

- The tax will increase costs and cause job losses.

“You can dress it up any way you want but a carbon tax is an additional cost on business, already at a distinct disadvantage to our international competitors, putting further pressure on jobs and livelihoods,” concluded Fielding.

The ISME has previously expressed grave concerns regarding the impact of rising costs on small businesses, most recently in late February, when it was revealed that nearly 7,000 redundancies had been recorded in Ireland the previous month.

Commenting at the time, Mark Fielding cited state-influenced costs, such as commercial rates, water, waste charges and energy costs, which are outside the control of individual businesses, as a major source of financial strain for small businesses in the Republic.

“We are not and have not been competitive in a very long time, and recognizing this, small businesses have cut their controllable costs to the bone, as evidenced by the reduction in consumer prices of goods and services of 3.4% and 4.4% respectively. In stark contrast, state-influenced costs have continued their inexorable rise, undermining the cost cutting efforts of the Private Sector," he observed.

Mr Fielding also revealed that labour costs represented a high proportion of the cost burden borne by small and medium-sized enterprises, explaining that:

“Because SMEs are more labor-intensive than other businesses, they are disproportionately affected by higher labor costs. The percentage of value-added in a multinational is 8% of wages – in other words, 8% of all money spent is on labor costs. For SMEs, the figure is 48%. Any change in wages over the last few years has had a six-fold impact on the SME sector.”

He went on to claim that Ireland “is in a state of flux … Small business owners are indicating that this situation will deteriorate further, with many companies just about hanging on by their fingernails, unless economic conditions improve. If the Government is serious about steering the country on the path to growth, they need to realize that a stable jobs market is essential to both confidence and spending, key ingredients to any upturn.”