The chief executive of lobby group and peak body for car companies in Australia has called on the federal government to scrap not just the luxury car tax (LCT), but also the five per cent import duty affecting some vehicles.
Tony Weber, who heads the Federal Chamber of Automotive Industries (FCAI), recently labelled the government’s current position on the tariff as “foolish” and called the polarising LCT — long a thorn in the industry’s side — devoid of merit.
Australia currently has a five per cent tariff on some import vehicles, but Weber contends the end of local manufacturing at the end of 2017 and the plethora of free-trade deals we’ve signed with major import partners makes it largely baseless.
“When we move to full import, I think that we should remove the tariff as well, the five per cent tariff, remembering that under free-trade agreements, about two-thirds of vehicles come into this country tariff-free today, and to have one-third of cars to come in with a five per cent tariff seems a very foolish position to be in,” he told CarAdvice.
“And once again it just makes vehicles more expensive for consumers.”
Australia has free-trade agreements with its three largest vehicle import partners, Japan, Thailand and Korea, which accounted for about three-quarters of the nation’s 1.18 million new vehicle sales in 2016. These vehicles attract no tariff.
Additionally, considering that Ford Australia has just closed its plants in Victoria, and Holden/Toyota will close theirs before the end of the year, one key reason for import tariffs – protecting job-creating domestic producers – disappears.
Regarding the LCT, which applies an impost on all vehicles priced above $63,184 (or $75,375 if the car's fuel economy meets under 7L/100km), Weber once again called for its axing – though naturally, the FCAI’s subscribers clearly have an interest in bringing the cost of expensive cars down, so long as it doesn’t hurt their margins.
“The LCT has zero economic merit to it, and that’s not just my view. Go and read Dr [Ken] Henry’s reviews of the Australian taxation system a few years ago, and any other leading Australian economist. I don’t think there’s anyone who supports the luxury car tax.
“It has no economic merit to it and distorts people’s behaviour, in terms of things like reducing safety features out of cars and environmental features,” he added.
The arguments against the LCT has long centred around the fact that a) many cars that cost above the threshold are not ‘luxury’ items (some Toyota Prados get slugged, for instance), and b) other luxury in terms from other sectors don’t have a specific tax in this way.