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

Madam Acting Deputy President Fierravanti-Wells, I think this is the first time that I appear before you in your new role as an acting deputy president. I congratulate you on that appointment and wish you well in your task.

Concetta Fierravanti-Wells (NSW, Liberal Party) Share this | Link to this | Hansard source

Thank you.

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

The opposition opposes this tax grab. We oppose it for one simple reason: it is bad policy. As an opposition we oppose tax increases. We are the party for lower taxation, but apart from that fundamental principle this particular proposal is punitive and counterproductive to the stated aims of this tax grab. We were told this tax grab was needed to fight inflation. To oppose this is, according to the economic illiterates in Labor opposite, tantamount to economic vandalism. Let us analyse that assertion. I must say that tax increases to fight inflation is an interesting proposition. I thought price rises, which are necessitated by tax increases, were in themselves inflationary. Indeed, Labor senators in their majority report on this group of four bills—the Tax Laws Amendment (Luxury Car Tax) Bill 2008, A New Tax System (Luxury Car Tax Imposition—Excise) Amendment Bill 2008, A New Tax System (Luxury Car Tax Imposition—Customs) Amendment Bill 2008 and A New Tax System (Luxury Car Tax Imposition—General) Amendment Bill 2008freely acknowledged at paragraph 2.19 that this measure will be, you’ve guessed it, inflationary. So the one argument Labor put forward for this tax slug—the need to fight inflation—has been undermined, knocked out, by Labor senators themselves. They acknowledge it will be inflationary.

Having said that, I acknowledge the inflationary impact will be minimal. But if the argument is that we need this to fight inflation then surely this measure should be anti-inflationary and not inflationary, as the Senate Standing Committee on Economics determined. Might I add that Senator Hurley, the chair, and Senators Cameron, Furner and Pratt were part of the committee which came to that conclusion. So even Labor senators are rejecting the Team Rudd spin on this one. The spin and rhetoric of Labor simply do not match the facts. The evidence simply does not support the reason for this measure.

We have these assertions of economic tough times. We heard about it at question time again today. Interestingly, when Mr Costello made those warnings on behalf of the former government last year, Labor and the media in virtual harmony condemned him as scaremongering—it was untrue, was not going to happen, it did not exist. Yet, very interestingly, here we have the Labor Party now acknowledging that which the former government said Labor would be facing if they were elected to government. We of course had a proper plan to deal with these issues, unlike Labor, who have a very ad hoc approach to the economy. They are going to fight inflation by doing something inflationary—that is, increasing taxes.

I will not be holding my breath for Senator Conroy to apologise to Mr Costello and the former government for denouncing the concerns that were expressed by the former government last year as to the economic times that we might be facing. But we have been told by Labor that we are facing an inflation crisis. I think that is overstated and an exaggeration simply for their own political purposes. But the inflation issue is quite different to that which we have previously experienced. We are experiencing heightened inflation at a time of economic downturn. Now that is a double whammy only Labor could manufacture!

We are told the rejection of this proposal will hit the surplus. Yes, it will—marginally. But the surplus we needed to pay off Labor’s debt of $96 billion was opposed every inch of the way by all those opposite, including Senator Conroy, who of course was one of the people who led the charge so often on behalf of the then opposition. I remind honourable senators that it was only in April 2006 that Labor’s massive $96 billion debt was finally paid off. After we paid off that massive debt we then moved to establish future funds to ensure that our future liabilities were looked after and catered for as well. But once the basics are covered—debts are paid off, liabilities covered—my view in general is that surpluses should in fact be given back to the people. Labor’s empty rhetoric on the economic front is unsustainable, as pointed out by Labor senators themselves inquiring into this legislation.

It is not only bad policy as a result of its impact on the macroeconomic picture, namely that it is going to be inflationary, but it is also bad politics, because one of the other justifications has unfortunately been a reversion to something that I thought went out with the last millennium: the very distasteful throwback to the old class warfare concepts. Senator Carr, who is the minister for industry and who should be championing the cause of the motor vehicle sector in these very difficult times, simply says that the luxury car tax is okay because millionaires can afford to pay. Indeed, his words, I think, were, ‘We’re not in the business of giving money to millionaires.’ What that shows is a minister completely and utterly out of touch with the realities of the Australian motor vehicle manufacturing sector. That was highlighted when we asked a question of him in question time just recently. He got the luxury car tax threshold wrong and he got when the tax was actually introduced wrong. He had to come back after question time to correct the record. That shows his disregard for this issue as industry minister—somebody who should be very concerned about the impact of this measure on the motor vehicle sector.

The fact that Labor is willing to treat this simply as a Treasury matter, as a taxation measure, is emblematic of the way the government is treating this issue. The fact that this might actually impact on industry—on a sector that is doing it tough—that it might impact on jobs, that it might impact on a whole host of people who under no measure could be described as millionaires, is a matter of great regret. This proposal is bad policy because it will hit all three of the car manufacturers that are left in Australia manufacturing cars for Australians.

Senator Carr and the government said that they champion the cause of manufacturing. Everything they have done since they have come into government has hurt the manufacturing sector. The thousands of job losses that they have presided over bear testament to their mismanagement. All three car manufacturers are saying, ‘This will be detrimental to the Australian car manufacturing sector.’ Senator Carr dismisses it because it is something that only millionaires will have to deal with. No, it is not. That is the problem when you have such a blinkered, ideological view of matters economic—you do not understand the broad sweep of the consequences of what you are doing. This tax on so-called millionaires, which is very offensive to those people who actually need a people mover like a Toyota Tarago or a LandCruiser in rural and regional areas—

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

Senator Conroy interjecting—

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to 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.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

Why didn’t you when you were in government?

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

Because we were busy paying off your debts, Senator Conroy. You left $96 billion worth of debts, but they are now paid off.

This decision pre-empted the Bracks inquiry, which had been asked to look into the concept of the luxury car tax and how it might impact. The government of course arrogantly disregarded its own inquiry and increased it. As a result, Mr Bracks constrained himself and did not say anything, albeit Labor senators claim that he made a positive finding in relation to that. He clearly did not.

The impact on tourism is huge. It is worth noting that about 8,000 motor vehicles that are subject to the luxury car tax are sold to the tourism industry each and every year. They are mainly small businesses and I might add they are largely buying LandCruisers. At a time when the tourism industry is suffering, the Labor Party is adding this extra impost above and beyond the $1 billion of extra taxes that Labor is imposing on the tourism sector.

Can I also dispel another myth about this luxury car tax. Only about five per cent of vehicles sold and revenue raised comes from Lamborghinis, Rolls Royces and Bentleys. The vast majority of sales and income is in the area where people are purchasing these vehicles because of necessity rather than some desire to show that they have a status symbol.

In brief, we oppose this bill and we oppose the second reading because this legislation is inflationary, inequitable and job destroying in the car sector. If the Senate decides to pass the second reading, I can flag that we will be involved in the committee stages and we will vote to try to make a bad policy less bad. But I should indicate that on the third reading we will still be opposing this legislation.

Debate interrupted.