LCT fight not over – Mercedes-Benz

THE federal government has promised the Greens that the controversial luxury car tax (LCT) will be reviewed with a view to replacing it with an emissions-based tax, according to Mercedes-Benz Australia.

The European Union has also entered the debate, asking Mercedes-Benz for more information on the situation, with a view to referring the issue to the World Trade Organisation (WTO).

Greens senators are understood to have won the undertaking through negotiations that resulted in the latest increase from 25 per cent to 33 per cent passing through the minority party-controlled Senate.

Mercedes-Benz Australia senior manager corporate communications, David McCarthy, said that the Greens have a written undertaking from the government that it will refer the LCT to Treasury chief Ken Henry, who is reviewing the entire Australian tax system and will report by the next federal election within two years.

“The Government has said to the Greens in writing that they will refer the LCT to the Henry committee for abolition and replacement with a fuel economy and emissions-based tax,” Mr McCarthy told GoAuto. “That will be their reference.”

In the meantime, Mercedes is preparing a submission in response to a request from the EU, which regards the LCT as a de facto tariff, and will present it to the Federal Chamber of Automotive Industries (FCAI) for comment before forwarding it to Europe.

Left: Mercedes-Benz Australia senior manager corporate communications, David McCarthy.



“The government realises that this tax has a shelf life, that over the long-term it is not absolutely sustainable... and it’s causing them grief on the trade front,” said Mr McCarthy.

“The EU don’t like it and they are not giving up on this issue. They’ve been in contact with us and the FCAI to do some fresh work on this matter.

“We’re still putting together a detailed submission for the EU on the LCT and they are very strongly of the opinion that this matter should go to the World Trade Organisation. It’s taking us some time because they’re asking for an awful lot of information, but we are proceeding on that.

“The EU believes that this is a false tariff and it discriminates in the majority of cases against European product. That’s where they are coming from. We’re on the radar. The EU are serious about it.

“The Germans provide the majority of those cars (affected by the LCT) and they are a very strong voice in the EU, so don’t underestimate it. Okay, it’s not iron ore to China, but it has impact and it has influence.

“We do not regard this issue as finished. It’s not. It’s too important.”

Mr McCarthy reiterated that the LCT does not make sense, is bad public policy and even brought the entire car industry together in a rare show of unanimity.

“You’ve got the entire industry opposed to the government position, you’ve got the EU opposed, you’ve got the retailers, you’ve got the buyers, so all you’ve got is 36 people in Canberra who think it’s a good idea,” he said, referring to Cabinet.

On a more positive note, Mr McCarthy said he is encouraged by the fact that the government has stated its intention of simplifying the tax system.

However, he is disappointed that the government has yet to announce its new car industry policy, even though the Bracks Report was handed down on August 15.

With the car industry facing an economic slowdown and tightening credit, as well as the LCT, Mr McCarthy said that the government’s industry policy is like a jigsaw that is missing a few pieces.

“They’ve had the report for a considerable period of time. There’s lots of rumours and we believe we know what the situation’s going to be, but they haven’t made an announcement about what they’re going to do with tariffs – it doesn’t help the local manufacturers, the importers, the components suppliers, the employees or the dealers.”

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