IN YET ANOTHER example of blatant greed, the Victorian government has mooted that it will impose its own luxury car tax (LCT) on vehicles over $100,000.
Obviously, there’s a degree of self-interest for the Federal Chamber of Automotive Industries (FCAI) but FCAI chief executive Tony Weber makes a good point when he suggests “It’s money grabbing at its worst.”
“What’s more disturbing,” he continues, “is that it’s a tax on safety and technology. It targets vehicles that introduce innovative safety and technical features to the market. And the vehicle that attracts the most LCT is a Toyota LandCruiser – a popular vehicle for families and landholders. Hardly a luxury vehicle.” He’s right, of course. Since the LCT was introduced in 2001, many more vehicles now fall within its clutches, and many of them are large crew cab utes or large SUVs that could never be considered luxury vehicles.
For over-50s buyers, the LCT has a substantial impact, since many of them are buying large SUVs or crew cab utes to tow caravans, realising that smaller vehicles are not suitable for such duties. Inevitably, the over-50s end up paying a larger proportion of the LCT income than other age groups.
What makes the LCT particularly galling (apart from it being nothing more than an opportunistic cash grab) is that it was originally implemented as a means of assisting Australia’s local vehicle manufacturing industry. Local manufacturing in Australia ended in 2017, making the LCT clearly redundant, except as a means of raising revenue. Importantly, an Australian LCT could stand in the way of a European Free Trade Agreement.
Mr Weber points out, “The EU regards it as a false tariff and there is no doubt that it is a tax on technology and safety, preventing consumers from accessing the newest and safest vehicles.”
“Generally accepted guiding principles of a ‘good’ tax system include neutrality, equity, fairness and simplicity – and the LCT meets none of these.”
“The FCAI fully supports a considered withdrawal from the Luxury Car Tax. A graduated reduction of the tax over an agreed period, such as five years, could see the government end this inequitable taxation in a structured and responsible manner.”
The reason for the FCAI not calling for an immediate withdrawal of the tax is that it would have a marked impact on the value of used luxury vehicles on which the LCT has already been paid, further penalising owners. It is quite conceivable that should the LCT be removed, it would significantly erode values of second-hand luxury cars, whereas a graduated reduction in the LCT would minimise the immediate impact.
“The fact that states and territories are now considering implementing this tax is beyond rational belief,” concluded Mr Weber.
We agree. But however you slice it, the removal of the LCT is about as likely as the removal of income tax (which was introduced as a “temporary measure” during World War I – only in bureaucrat-speak could more than 100 years be considered “temporary”).
Sadly, Mr Weber and the FCAI are unlikely to win this battle. And we’ll all be poorer (literally) for it.