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The luxury car tax: Hardly fair, unjust and not smart
This contribution has been submitted to Webdiary by a student in the Online Journalism unit for the Masters in Media Practice and Masters in Publishing courses at The University of Sydney as part of the unit's assessment. The topics covered in the pieces awaiting publication are interesting – and diverse. We hope that Webdiarists will enjoy reading them, as well as giving these aspiring journalists plenty of constructive commentary.
The luxury car tax: Hardly fair, unjust and not smart
by Katja Lieb
Family First Senator Stephen Fielding has become a surprise power player in the proposed increase to the luxury car tax (LCT), with the Rudd government expected to reintroduce the bill to the Senate this week with changes that both the Family First Senator and the Greens have lobbied for.
After Fielding voted against the bill two weeks ago, it has been revised to give farmers and tourism operators $40 million dollars in concessions, while the Greens have gotten concessions of $39 million by exempting cars under $75,000 if they use less than seven litres per 100 kilometres.
But even with these changes, is the LCT fair, justified and smart?
“No,” according to former CEO of DaimlerChrysler Asia-Pacific and current CEO of
It is a tax scheme that is unfair in its definition of what a ‘luxury car’ is. Kevin Rudd described those affected as “Porsche drivers of Australia”. Yes, a Porsche Boxter is $107,4000. But at $57,123, the ‘luxury car’ threshold also affects Holden Statesman Caprices and Toyota LandCruisers.
“The LCT is skewing the sales volume and forcing consumers to downmarket,” says Gerry Jenkins, CEO of Chrysler
“It’s a tax that exists only in a few places in the world, penalises innovation and hinders future technology whether it be environmental or safety related. Putting a higher tax is simply a money grab,” says Lieb.
The revised concessions are simply not enough. “It will become an administrative burden, proving that you deserve a concession. Taking a bad thing and making it more complicated does not make it a good thing.”
While some say life may be unfair, all laws must be justified for the good of the people. The LCT is not.
In 1986, 4.5% of all cars were considered ‘luxury’. Now, 12.5% fall under the heading. “If it is just a tax grab, the government should probably take another look across all car categories to see how the tax would be better organised,” says Jenkins.
How has the government justified the law? Rudd has said that the expected $550 million will go to the public transport system but has also said it would help the surplus. Former Opposition Leader, Dr. Brendan Nelson, recently told ABC Television, “The government can’t have it both ways.”
Finally, is the tax smart?
If consumers are smart, Rudd’s plan for $550 million over four years could be hindered. Research shows that sales of cars in the ‘luxury segments’ fell by 19.3% in August 2008 compared to August 2007. “Year after year, we see our volume growing in the vehicle lines below this threshold and dropping in the carlines above the LCT,” says Jenkins.
Being smart is also buying the safest, most environmentally friendly car available. “The LCT forces manufacturers to take elements out of the car. They are not design elements but safety and environmental features, so they can go under the luxury car bracket,” says Lieb.
The bottom line? “This is not a matter of affordability. It is a matter of right and wrong. It is about penalising innovation, safe technology and environmental awareness. The LCT is simply a money grabbing scheme,” says Lieb.
The LCT is unfair, unjustified and not smart. But these reasons will not stop the Rudd government from trying to make it law.
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I agree
I agree with the amendments for farmers who generally speaking, despite what Michael may think, legitimately require heavy vehicles, do not replace them yearly, and hardly ever purchase based on an abstract idea of ‘luxury’ but instead on capacity to fulfil farm duties – what the cars themselves were actually designed for.
Perhaps now that farmers can claim an exemption, the import tax on 4WDs can be brought in line with all other cars for those that purchase them unnecessarily. I would think it would be more prudent and prescient to base the tax on emissions, or some other measure of environmental impact, rather than on an arbitrary cut off of ‘luxury’.
Mind you, that is one expensive Porsche.
Ernst would say that, wouldn't he?
Dear Barnaby has to look after those struggling farmers - the ones we are to feel sorry for and keep having to subsidise with our taxes. I thought they were having a hard time but I must be mistaken if they can afford the new top of the range Landcruiser.
Why Holden or Ford aren't working on producing their own "Prius" is a mystery. The market is there waiting and willing to buy, plus they could bring it in for under a LCT price. Yet they keep making these "family" sized saloons but I never see a family in them, just solo drivers.
Is the CEO of Mercedes the right one to be quoting on this tax? I think not. I would like to see a few farmers grilled as to why they need a luxury car, whether they need a new one each year, and such.
Big Kev is right this time, but what would one expect from Mr Joyce? He rolled over on Telstra and always will on votes like this. He and Fielding make a good pair.
Spot on, Michael
G'day Michael,
"Big Kev is right this time, but what would one expect from Mr Joyce? He rolled over on Telstra and always will on votes like this. He and Fielding make a good pair."
How very true.
Both of these loud achievers are not at all what they pretend to be.
Yes indeed, Mr. Joyce betrayed his electorate when he helped the "New Order" to sell Telstra - completely reversing the very issue that he used to get elected in the first place - "I will not sell Telstra," said Barnaby Joyce!
Additionally, whenever he has supposedly acted independently by crossing the floor it has always been on a minor unimportant issue or where his vote doesn't matter to the outcome. With all important matters he has supported John Howard - with the Heffernans and Downers tut tutting even when his contrary vote meant nothing. What a setup.
Family First Fielding has now become another Harradine and can con the people with his anti-government stances on important issues like Mr. Joyce, by falsely claiming that he is protecting Australian families.
I wonder just how many Australian families would have been adversely affected by the luxury car tax compared to the number of Australian families who will likely miss out on the benefits forecast for that section of the Rudd budget? Including the farmers?
I do respect Jenny Hume's posts but I must ask: can farmers, who need these expensive vehicles for their work, claim them on tax returns?
The mind boggles. So Michael, lets hope that the WD contributors at least can see through these con men. They are, and always were, part of the Howard "New Order".
Cheers Ern G.
Of course Ern
Ernest William, of course, any business using a vehicle to carry on that business has certain tax deductions available for legitimate business costs associated with that vehicle, such as fuel, depreciation and repairs. Farmers are treated no differently to anyone else in that regard. If you are a plumber in the city you get the same tax deductions. All vehicles expected to be able to carry loads and tools of trade are by necessity quite substantial and expensive. They are not luxury vehicles and should not be taxed as luxury vehicles.
Buying a new Mercedes or a Ferrari however is another matter altogether. If you can afford such then you can afford a bit more tax.
I am sure if you look more closely at the issue you will see that the tax would in its present form sweep up those who need more expesnive vehicles for their work or profession, adding an unfair burden. In that regard the legislation probably needs some work.
Just as the social secutiry system needs some work to stop very wealthy people arranging their assets so that they can qualify for the old age pension. Have you not seen those ads in the seniors magazines where investment firms crow - you can have 1 million in assets beside your home and still get the age pension pension, when the after home asset cut off is around $171 000 for singles. Oh yes, the rich rort the system in the cities too - one of the reasons they are rich. There is probably far more rorting in the city than there ever was in the bush. The means test for drought aid is in fact so severe that very few actually ever see a cent of it.
The only thing I would agree with is that farm profits set aside for drought years in Farm Management Bonds should be taken into account as assets. However again you will find it is the wealthier farmers that have such bonds, so they should not be allowed, anymore that a city dweller, to arrange their assets in order to get interest subsidies, exceptional circumstances payments, or pension benefits.
A factual response
G'day Jenny,
Thank you for your explanation which, at least to me, makes amendments to the luxury tax logical, fair and appropriate.
Cheers Ern G.
Sigh
The old worn out city whinge about farmers, Michael de Angelos. A new car every year is it? How do you know? None of our neighbours ever had one. This is all just an old myth, Michael.
As for the Land Cruisers, if they are for business purposes then they should not be taxed. We bought one (a Nissan Navara) for the following reasons:
1. It was 4 wheel drive and we were sick of getting bogged on lonely country dirt roads around us that never see a grader in three years.
2. It serves to cart a lot of stuff - drums of roundup, bags of cement, rolls of barbed wire - same as a good farm ute.
3. It runs on diesel - used to be cheaper which was a consideration.
4. It can pull a trailer for bigger loads say of heavy farm gates, steel for sheds and such like - saving freight costs by a truck for a 250 kilometres round trip.
5. Doubles up as a car for the farm. We do have a 15 year old second hand one for knocking around in. We do not drive the wagon in the city other than in emergency. Before we bought the wagon our previous car - a second hand Nissan Pintara - had close to 400 000 kms on it but basically could no longer take the rough dirt roads, and pulling heavy trailers which it did for fourteen years..
Companies in the cities buy cars and turn them over regularly, usually on lease, and so do some farmers. It can be more economical to do so especially if you do hundreds of thousands of kilometres a year.
I think the luxury car tax should be applied selectively. It should be on Ferraris and the like and if a big wagon is being bought just as a holiday vehicle then it should be taxed also. Wagons for farms should not.
I think you need to spend a bit more time out in the bush. Even the big wigs are going broke - you won't see too many luxury cars and if you do they are probably Pitt Street farmers offsetting their high incomes by buying farms that lose money., thereby getting nice big tax breaks.
Spare me the old myths Michael.
No one likes tax - to some, a decent meal is a luxury
No one likes to pay tax. Because our governments have not kept pace with public transport or bike paths most of us need a car to get to work or to the shops. A Toyota Prius can be purchased for less the $40,000 with no luxury tax. A Honda Jazz would cost less than $20,000. Both of these cars and similar cars in their price range are fuel efficient safe cars.
If someone wants to pay two or three times the price of the average car to me that's a luxury. Many pensioners are on an income that does not cover food or a roof over their head. Most would not dream of owning a new car let alone a car over $60,000 in value. Until we can pay our sick and elderly a pension that would enable them to live, we need to tax those that can afford to pay. If you can afford to pay $60,000 for a car you can afford a little extra tax so a pensioner may be able to afford a decent meal.
One man's luxury is a Ferrari, another man's luxury is a piece of steak.
How could I resist?
In a surprise move in the Senate, newly elected Nationals leader Barnaby Joyce has introduced an amendment to the legislation exempting descendants of holocaust victims and slave labour camps from the tax.
"This will be a great boost to the Eastern Suburbs and my electorate," said recently installed Liberal leader, Malcolm Turnbull.
It is understood the vehicles targetted by the tax reforms are not capable of carrying cats.