Luxury car tax relief in sight

THE federal government is considering the relevance of the luxury car tax (LCT), which the Australian motor industry says is penalising buyers of more vehicles that cannot be considered luxurious under the original meaning of the tax.

Prime minister Julia Gillard recently signaled that the tax would be considered for withdrawal once the federal budget moves into surplus, the Cars of Tomorrow conference was told today in Melbourne.

She gave the indication in a recent meeting with car industry chiefs in Canberra, according to the chief executive of the Federal Camber of Automotive Industries, Ian Chalmers.

“There is a glimmer of hope,” Mr Chalmers told the conference. “In a meeting with FCAI president Bob Graziano and myself, the prime minister conceded that the industry did have a case in arguing against he tax,” he said.

“But she said the industry would have to wait until there was a budget surplus,” Mr Chalmers said.

Federal treasurer Wayne Swann has long signaled his intention to present a budget surplus in 2012-13, but here was no specific indication from the PM that the tax would be killed in the next budget.

Mr Chalmers said more and more cars that are considered everyday vehicles were being caught by the tax, the threshold for which is now set at around $57,000.

“Perversely, additional customer demands for safety and other features has pushed the price of many cars above the luxury car tax threshold,” he said.

He said it wasn’t the traditional luxury car brands like Mercedes-Benz or BMW that were most affected.

“You may be surprised to learn that, here in Australia, the brand with the most cars falling over the LCT threshold is not Jaguar, Mercedes or Porsche. It’s Toyota.

“The luxury car tax, famously described at the Tax Forum last year by former treasury secretary Ken Henry as ‘truly absurd’, is an outrageous impost on the introduction of advanced safety and environmental features into the Australian car market.

“With a threshold of only $55,000, the LCT is nothing more than a misdirected revenue raising exercise, which transfers hard earned dollars from the pockets of many ordinary Australian families into the government’s coffers, with no discernible benefit other than to bolster the budget bottom line.”

Mr Chalmers also railed, albeit discretely, against the unevenness of automotive trade barriers around the world, which he said was working against the local car-makers.

“Securing the future of the Australian car industry will not be without challenges,” he said.

“Australia has the most open market of the 13 car-producing countries around the world.

“The automotive tariff in Australia is an average of 3.5 per cent, down from more than 30 per cent in the 1990s. That is lower than the tariffs applied to imported manufacturing equipment and electrical equipment.”“All the other car manufacturing countries we compete against for investment and sales al impose trade barriers inn support of their industries.”

These ranged from 80 per cent import tariff in Thailand – which last year sent Australia more vehicles than Australian manufacturers sold in Australia – through 60 per cent in India and 25 per cent in China.

He said that even Brazil, which has an economy similar to Australia’s with around a quarter of the economy in manufacturing and a mining boom inflating the value of the real economy, imposes a 35 per cent tariff on imports.

In addition, Brazil also levies an Industrial Products Tax of up to 55 per cent to make sure imported products don’t get a competitive advantage against product s made in Brazil. The extra tax raises the price of imported goods to a level which maintains the price parity between imported and Brazilian goods seen before the commodities boom started.

The Cars of Tomorrow conference was organised by the Automotive Australia 2020 Co-operative Research Centre (AutoCRC), the Society of Automotive Engineers and the Society of Plastics Engineers and Low Emission Vehicles.