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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 [1](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” [2]. 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 [3], 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 [4]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.