Nick Xenophon (SA, Independent) Share this | Hansard source

Mr Chair, I am trying to be generous. It is my nature to be generous, in a very bipartisan way. The response from the Treasurer’s office continued:

Because of these other factors the movement in the luxury car tax threshold will not therefore be sufficient to predict the number of luxury cars sold in the future and what percentage this represents compared to all passenger car sales.

While the many variables (especially car prices for many scores of different models) make it impossible to predict with any accuracy what proportion of cars will be captured by the luxury car tax in the future, I would add that the effect of the amendment to increase the threshold for more fuel efficient cars will have the effect of reducing the proportion of cars captured by the LCT as cars become more efficient over time.

The point is also made that:

The LCT threshold is indexed by the motor vehicle purchase component of the CPI, rather than the CPI itself, because it is an indicator of the changing price levels of a representative group of both imported and domestic vehicles purchased by consumers.

This index has been used in the tax law by successive governments since 1979.

There have been times since 1979 when the motor vehicle purchase component rose faster than the CPI—between 1987 and 1989 it rose broadly around twice as fast as the Consumer Price Index. When this has occurred, the LCT threshold has risen faster than it would have had it been indexed to the CPI.

It goes on to say:

The tax law also ensures that if the index of the motor vehicle purchase component of the Consumer Price Index declines over any year the luxury car tax threshold is not reduced but stays the same.

The increase in the number of luxury cars purchased over time will also reflect the overall demand for luxury cars. As incomes rise, there is likely to be an increase in demand for luxury goods, including cars.

The final paragraph of the email from the Treasurer’s office states:

We have undertaken a formal costing for indexing the threshold to the CPI from 1 July 2009. This is estimated to be $365 million over the forward estimates.

I wanted to read virtually the entire email so that it is completely in context. I have not taken out what I thought would strengthen any argument. I wanted the advice from the Treasurer’s office to be in its complete context, and I am grateful for that advice.

I am concerned about the budgetary impact in terms of the forward estimates. It does seem a very high amount, but I accept in good faith the figures given by the Treasurer’s office. However, I think it is important that at some point in the future a line is drawn in the sand, and that is why I will subsequently be moving an amendment to have CPI indexation or a sunset clause in respect of this from the end of the forward estimates—the 2012-13 financial year. That to me seems to be a more cautious approach, but it still makes the point that there ought to be a line drawn in the sand in respect of this. I would be grateful if the minister could provide confirmation that the Henry review of taxation will be looking at the specific issue of indexation.

In summary, I cannot support the amendment of Senator Abetz, but I will move an alternative amendment to deal with the issue of indexation through a sunset clause, with a fallback position, in the absence of this matter being dealt with satisfactorily by the parliament, of Senator Abetz’s position, albeit at the end of the forward estimates period.