John Murphy (Lowe, Australian Labor Party, Parliamentary Secretary to the Minister for Trade) Share this | Link to this | Hansard source

I move:

That the requested amendments be made.

The Senate last night passed the Tax Laws Amendment (Luxury Car Tax) Bill 2008 with amendments, and the government supported those amendments. The government acknowledges the cooperation of the Greens, Senator Xenophon and Senator Fielding on this important budget measure. The government amendments were made following agreement between the government and the Greens. The amendments establish a new threshold of $75,000 for fuel-efficient luxury cars in the luxury car tax law—that is, fuel-efficient vehicles will pay no luxury car tax up to $75,000. The vehicles eligible for the higher threshold will be those with a fuel consumption not exceeding seven litres per 100 kilometres. The fuel-efficient car limit will be indexed in the same way as the existing luxury car tax threshold. The threshold increase will reduce the amount of luxury car tax payable on these fuel-efficient vehicles. For cars that are currently on the market, in most cases the effect will be to reduce the luxury car tax payable to zero. The fuel-efficient car limit will act over time as an incentive to car manufacturers and importers to get very fuel-efficient cars into the Australian market.

Senator Fielding raised his concerns about the impact on farmers and tourism operators with the government. The government supported Senator Fielding’s amendments to provide a refund of the increase in the luxury car tax rate to eligible primary producers and tourism operators. The government is satisfied that the amendments will not impose undue burden on business and have protections in place to reduce the possibility of abuse.

Senator Xenophon raised his concerns about the indexation of the threshold and the application of the luxury car tax measure to car purchasers who entered into contracts before the budget announcement. The government supported Senator Xenophon’s amendments. The amendments changed the method of indexing the luxury car tax threshold, currently $57,180, in line with CPI from 1 July 2012 unless the parliament agrees to an alternative indexation method. The threshold is currently indexed by the motor vehicle component of the CPI—that is, the CPIMV. The amendments also retain the current 25 per cent rate where buyers entered into contracts to purchase cars before the budget for delivery after 1 July.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

The amendments to the Tax Laws Amendment (Luxury Car Tax) Bill 2008 increase taxes on certain vehicles. Overall, the bill and these measures offend the very principles that guide Treasury as set out in its report on the tax system released only last month. Those principles are efficiency, equity, simplicity and low administrative and compliance costs. The luxury car tax fails against every one of these principles. It is inefficient, inequitable, complicated and, therefore, costly to administer and to comply with. Of course, another point is that the government did not tell the people of Australia about this tax hike before the election. The bill as amended is an even greater failure against the Treasury principles. It is, as some of my colleagues have described, a dog’s breakfast.

The existing luxury car tax is 25 per cent. Add to that the GST, which was meant to be the consumption tax, of 10 per cent, and the government now wants to add a surcharge of a further eight per cent—a total of 43 per cent on certain vehicles. The coalition opposed the bill in its original form because, with a strong budget surplus and with a slowing economy, these tax increases are not needed and are not justified. Now the amendments make this an even worse piece of legislation, compounding the complexity and unfairness inherent in the original bill.

There are four amendments. We will oppose the amendment relating to fuel efficiency, which was a deal done between the government and the Greens, as it is fundamentally flawed. It allows a small range of vehicles to be exempted from this additional tax of eight per cent. All the vehicles to be exempted are small, European-made sedans. The list of vehicles that will be exempted provided by the government—not upront but in response to a request by the coalition in the Senate—includes: the Alfa Romeo 159 Sportwagon, the BMW 3 Series, the BMW X3, the Jaguar X-Type, the Mercedes-Benz C-Class and others, including the BMW 5 Series. These are all vehicles that are exempted under the Labor government’s new proposal. This is the party of the working classes exempting European sports cars but slugging Australian-made cars, such as the Ford Territory or the Holden Commodore, with an additional so-called luxury car tax. Not one car made in Australia will be exempted under the Labor government’s tax—not one. A family who wants a full-size family vehicle or a four-wheel drive vehicle that costs between $57,180 and $75,000 will be hit with the additional tax, but a Labor Party branch president driving a Jaguar X-Type down Collins Street in Melbourne will be exempt. They will be exempt from the tax but the family needing an Australian-made family car will be hit with the tax.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

What does Brian Burke drive, I wonder?

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Indeed. I wonder what Brian Burke drives. The amendment regarding the backdating was supported in the Senate, so I need not make any further comment on that. The indexation to CPI amendment is a most confusing and irrational amendment. It seeks to index the luxury car tax threshold to the CPI, not to the CPI motor vehicle subset, but not for another four years. If the policy is good, why not do it now? If a policy is worth doing, why is it not worth doing now? The government had no answer in the Senate. I invite my colleague opposite to tell the people of Australia why the government will not agree to index the luxury car tax threshold to the CPI now.

The fourth amendment relates to primary producers and tourism operators and was introduced by Senator Fielding. This is one of the most complicated and confusing exemptions that I have seen in tax policy, and that is saying something. It adds to the complexity and adds to the red tape. There will be arbitrary results that will be grossly unfair to people across Australia. Let me give you an example. If you own a farm and drive a four-wheel drive, you can get an exemption on the basis that you are a primary producer. (Extension of time granted) But if you are working as a fencing contractor, an irrigation contractor, a vet surgeon, a subcontractor or a tradie and you turn up to that same farm in an identical four-wheel drive, you will get slugged with the eight per cent additional tax. How is that fair? The primary producer who owns the farm gets a tax exemption but the worker on the farm gets slugged with the additional tax.

It is also entirely inconsistent with the first amendment relating to fuel efficiency, which was introduced by the Greens. The cars that will be exempted under the primary producer and tourism operator exemption are Toyota LandCruisers and vehicles of that type. People should appreciate that Toyota LandCruisers use fuel at double the threshold of the exemption introduced for fuel-efficient cars in the first amendment. On the one hand the government are supporting small European sedans for their apparent fuel efficiency and exempting them from the luxury car tax and, on the other hand, they are exempting, under the primary producers and tourism operators amendment, Toyota LandCruisers, which use fuel at double the threshold of the exemption. It is totally inconsistent. That underscores the dangers of policy on the run.

What we have had presented to us is a complex, complicated and unworkable mess. The bill should never have been introduced into this House. The luxury car tax increases were not revealed to the Australian public before the election. And yet, without notice and without consultation, the government introduces a bill to increase a luxury car tax that exempts European sports cars and the Toyota LandCruisers, driven by farm owners but not farm workers.

If the government wanted to increase taxes on luxury cars—and it has not ruled out increasing taxes on other luxury goods—why wasn’t the luxury car tax referred to the Ken Henry review into the taxation system? It makes a mockery of the government’s intentions of reforming the tax system. It will undermine the efficacy of the Henry review if this tax is just inserted into the system in an ad hoc fashion prior to the deliberations of the Henry review. How is it that the government can impose a tax without consultation—without sending it to its own tax review—yet cannot increase the single age pension by $30 without sending that off to a review that has to report next year and is going to feed into the Henry review? How is it that the government cannot increase the pension by $30 a week until it has sent it to a review that feeds into another review that will not report until the end of 2009, yet was able to get legislation ready and make a decision overnight to introduce an addition to the luxury car tax? 

The fact is that this legislation is a travesty, and the government should be condemned for it. They are making pensioners wait months and months and possibly years for the outcome of a review, yet their own Ken Henry review into the taxation system will not look into the luxury car tax. On the basis of the fundamental flaws in this legislation, the coalition will oppose the amendments.

Anthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | Link to this | Hansard source

The defenders of privilege over there are being true to form in their opposition to this increase in the luxury car tax. The Tax Laws Amendment (Luxury Car Tax) Bill 2008 was carried by this House and has been the subject of considerable debate in the Senate. Constructive suggestions have been put forward by the Greens, by Senator Xenophon, by Senator Fielding—by everyone except for the coalition, who have dealt themselves out of any constructive contribution to the federal budget. The coalition is determined to blow a $6.2 billion hole in the Rudd government’s budget. This comes at a time of considerable international financial uncertainty.

Under those circumstances, it is absolutely critical that the budget surplus be preserved intact—that the $22 billion which the Rudd government was able to achieve as a budget surplus be supported by both chambers. And it should be supported by both sides of the House. Those opposite suggest various spending measures from time to time, whether they be spending measures for individuals or spending measures for infrastructure. But the fact is that those opposite are determined to defend the people who drive Porsches and can afford to support this tax increase. Those opposite have chosen, by their actions, to exclude themselves from this debate. They have vacated the field when it comes to the debate about responsible economic management. I call upon them to have a close look at the report issued today by the International Monetary Fund. That report gives a great deal of support to the Rudd government’s budget surplus. It gives a great deal of support to the government’s budget strategy.

What those opposite seek to do, because they cannot accept the verdict of the Australian public on 24 November last year, is to deny the government its budget. On Sunday, on the Laurie Oakes program on Channel 9, the Leader of the Opposition was not quite sure whether $6 billion was a small amount or a large amount; he just knew that was the amount of the hole that he wanted to blast in the budget. It is quite extraordinary—and I say this as someone who is not close to the Australian Greens party, as those opposite would know—that the Australian Greens have been more economically responsible during this debate than the coalition, and that is where they are up to.

There are suggestions of opposition to the amendments that have been carried by the Senate. Those amendments have occurred of course because this is the second time that the Senate has considered this legislation. Had the coalition supported it in full, early on without the exemptions, that would be what we would be considering in the House right now—so their hypocrisy knows no bounds. (Extension of time granted) They have ensured that the minor parties have been in a position to negotiate changes to the government’s legislation. Of course governments like to have their legislation carried unamended—that is the basis on which they put bills up—but this government also recognises that there is a legitimate role for constructive discussion. Considering these amendments, we find we have legislation as amended by the Senate that we can certainly support because it is a part of the framework of the Australian government’s budget.

It is unfortunate that the opposition are not prepared to support the government’s $22 billion surplus—instead they want to make a smash-and-grab raid on the surplus—and that they are prepared to stand up for luxury car owners. That is essentially what their position before the House comes down to. They stand condemned for their position on this, just as they stand condemned for their position on the condensate measures and other measures that are before the Senate in terms of the government’s budget.

This government is determined to act responsibly. It is recognised by the business community and by economic commentators that the budget surplus is important. Today we have support for that from the IMF. This government will continue to act in an economically responsible way by supporting measures which, by having a substantial surplus in the short term, will serve to put downward pressure on interest rates and inflation and will provide for the medium-term and long-term objectives of support for our infrastructure.

Question put:

That the requested amendments be made.