Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Hansard source

Senator Conroy interjects, not from his seat. About one-sixth of the Taragos that are sold are impacted by the luxury car tax. Can I say in response to Senator Conroy: I know of nobody—and I would defy Senator Conroy or his very class-warfare-conscious minister, Senator Carr, to show one to the people of Australia—who drives around in a Toyota Tarago that has the status of a millionaire. Can I tell you: nobody does. It is a requirement for moving their children, moving people. To claim that they are somehow millionaires is of course quite offensive.

This measure is going to impact and hurt the Australian car manufacturing sector. All the evidence before the Senate committee showed that it was going to be anti innovation for the car industry—something that we have just spent $35 million on with Toyota with the Green Car proposal. It is anti innovation in relation to environmental initiatives and safety initiatives. Senator Cameron during the Senate hearing told us that a lot of these measures were luxuries and not really necessary. But, you see, what happens—if you have a proper understanding of this sector—is that these innovations then trickle down and become standard in lower priced motor vehicles. That is why it is so important not to stifle innovation. If Senator Cameron and Senator Carr had their way, indicators would be seen as a luxury, no doubt. All these safety systems, such as ABS braking systems, stability control and air bags, started at the top of the price range of vehicles and then trickled down. All the evidence was that it would be anti innovation both from a safety and an environmental perspective.

It is also going to be anti viability, because the clear evidence was that it is the higher priced cars that provide the profit margins to the manufacturers. If you make those vehicles less profitable to the manufacturers they then lose profitability. At a time of great marginality for them, it is very important to ensure that we do not impose any extra costs and on them. Indeed we had evidence that some motor vehicle importers despecified certain equipment from vehicles to ensure that they came in under the luxury car tax threshold.

When this luxury car tax first came in we were sitting at 2.5 per cent of the vehicles being sold. Today it covers 12 per cent. The Mitsubishi Pajero of 2000 was not a luxury car; the same model in 2008 is.

Before the dinner adjournment I pointed out that when the concept of a luxury car tax was introduced, 2.5 per cent of vehicles were covered. Today, 12 per cent are covered. The thresholds are clearly unacceptable and need adjustment. Also, thresholds need to be adjusted by the CPI rather than the CPIMV. Those matters are fully detailed in the minority report put down by coalition senators in relation to this legislation.

Another very bad aspect of this legislation is its retrospectivity. This is appallingly inappropriate. The situation is that if you ordered a motor vehicle before budget night, had locked in your finance, and all that you were waiting on was the delivery of the vehicle, if that delivery happened to be after 1 July you would then be liable for the increased tax, according to Labor’s approach. We believe that to be unfair and we believe it to be unreasonable. We also believe that if this aspect were to be removed, it would have virtually no impact in relation to the finances.

We have a situation where if somebody bought an expensive car—or a so-called luxury car—before the budget and locked it all in but could not get it delivered before 1 July, they would be liable. Somebody else buying another car might be able to rush into the showroom and get one that happened to be available before 1 July, knowing the tax was about to be incurred, and they could escape paying it. We say that this is unfair and unreasonable. The retrospectivity is also very dangerous and unacceptable to us. The retrospectivity has had a very real impact on people organising finance and their stamp duty liability. The arrogant lack of consultation in this matter is to be regretted and, hopefully, it is something from which the government will learn.

We then have the issue of what a luxury car is. There is no such thing as a luxury tax on anything else. Somebody who buys a Toyota Prado at $66,000, a Tarago at $64,000, a Mitsubishi Pajero at $64,000, a Ford Territory at $62,000 or a Nissan Patrol at $62,000 will incur a luxury tax, but anybody who wears a $200,000 Rolex watch around their wrist does not have to pay a luxury tax. We believe that to be inequitable. I remind honourable senators that in this so-called luxury car tax bracket the most heavily sold vehicle is not the Lamborghini, the Bentley or the Rolls Royce; it is the LandCruiser. It is hardly a status symbol, yet that is the most sold vehicle.

We then have the Labor senators very interestingly suggesting that the whole concept of luxury taxes should be put to the Henry review. I call on the Henry review to move us away from such a concept rather than entrenching this enigma.