Alan Eggleston (WA, Liberal Party) Share this | Hansard source

I rise to speak on the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills. The Rudd government’s decision to increase the luxury car tax from 25 per cent to 33 per cent on the end price of a vehicle appears to be yet another example of a measure imposed by this government that selectively disadvantages those living in regional areas of Australia. To explain why this is the case, I draw the attention of senators to the fact that statistics kept by the car industry show that 70 per cent of the vehicles subject to the luxury car tax are purchased below the $75,000 price line. This is relevant because the top selling luxury car is the Toyota LandCruiser, which costs $74,000 and is the workhorse of regional Australia. Some 6,000 of these vehicles are sold each year, compared to Australia-wide sales of just 17 Rolls Royces and 522 Porsche 911s, both of which would be more widely regarded as genuine luxury cars.

The point is that the Toyota LandCruiser, as I said, is a common-use vehicle all over regional and rural Australia, as are other four-wheel-drive vehicles such as the Mitsubishi Pajero, which costs $58,290 for the basic model, and the Nissan Patrol, which costs $58,000 for the basic model.

Senators should know that all three of these four-wheel-drive vehicles—which as I said, and will repeat, are in common use in regional Australia—attract the luxury car tax, which the Rudd government proposes to increase. Yet very often these so-called luxury cars do not even have carpets on the floor, much less leather upholstery—they instead have vinyl seat covers—and have none of the other standard fittings that would qualify them to be regarded as luxury cars.

There are of course some four-wheel-drives that really do fit into the definition of luxury cars. These include the Porsche Cayenne, the basic model of which costs $265,000, the Mercedes Benz M Class four wheel drive, which costs $167,245, and the Lexus 570 Sports luxury auto, which is an SUV that costs no less than $175,000. These cars have all the features that you would expect to find in a luxury vehicle, from genuine leather upholstery to all of the latest electronic fittings; however, you do not find these vehicles in common use in rural and regional Australia. In fact, these vehicles are to be found in the suburbs of the big cities of Australia—suburbs such as Double Bay in Sydney, Toorak and Camberwell in Melbourne, and Peppermint Grove, Cottesloe and Dalkeith in Perth.

As Mr Smith from the Motor Traders Association of New South Wales said in reference to my questions in the Economics Committee hearings in Sydney:

I do not know any dealers in the outback region who actually even sell those upper vehicles such as the Lexus and the Porsche.

Mr Smith was referring to high value four-wheel-drive vehicles.

The point that I want to emphasise is that the market for these high-priced genuine luxury cars is very small. Sales of them represent fewer than 2.5 per cent of the sales of so-called luxury cars, compared to 70 per cent of the market being represented by vehicles under $75,000, which are mostly sold in regional Australia and which are chiefly standard four-wheel-drive vehicles of the type I have described.

It seems quite clear that the luxury car tax is a selective penalty applying for the most part to people purchasing four-wheel-drive vehicles in rural and regional Australia. This is consistent with what appears to be the deliberate agenda of the Rudd government to penalise rural and regional communities and the people living in them.

In the short period that it has been in office, the Rudd government has cut programs for rural and regional Australia. It has abolished the hugely successful Regional Partnerships and Growing Regions programs, with no new money for regional projects proposed until late 2009, which, coincidentally, will be just before the next federal election. It has axed the Agriculture Advancing Australia program, including Advancing Agricultural Industries, FarmBis and Farm Help. It has axed the women’s representation in decision-making program. There have also been cuts to rural health services, regional arts programs and the Rural Financial Counselling Service. Most importantly considering that we have Minister Conroy here, it has cancelled the $900 million Optus and Elders joint venture, denying regional and rural Australians access to competitive high-speed broadband by the end of 2009. Given this record it would appear that the luxury car tax is no more than yet another penalty the Rudd government is applying to Australians living in regional areas.

I repeat that the so-called luxury four-wheel drive vehicles such as LandCruisers are vehicles that are used in country towns by small business and in mining, fishing and a myriad of other purposes for which a robust vehicle that can handle country roads and rough conditions is required. These are standard use vehicles just like ordinary sedan cars are in metropolitan areas. These vehicles represent some 70 per cent of the vehicles classified as luxury cars for the purposes of the luxury car tax and one must say that by any reasonable understanding of the meaning of the word ‘luxury’ these vehicles do not fit that definition. It seems clear to me that the Rudd government, as I said, is selectively penalising those living in rural and regional Australia by proposing this tax increase on what for them are standard use vehicles.

Another rather interesting question, which has been raised about this proposed increase in luxury car tax, is that it may be a discriminatory non-tariff trade barrier designed to protect locally made luxury vehicles from competition from imported cars. This possibility was raised in the Sydney Morning Herald in an article on 20 May this year by Mark Davis, who reported on evidence given by the European Union ambassador to Australia to the Bracks inquiry into the motor vehicle industry. Most of the real luxury cars to which the new tax will apply are imported from Europe. As I said, it was the EU ambassador to Australia at the Bracks inquiry into the Australian car industry who first raised the question of the luxury car tax being a non-tariff discriminatory trade barrier.

At the Sydney hearings of the Standing Committee on Economics inquiry into the luxury car tax I asked Mr Hofmann, CEO of Audi in Australia, whether the increase in the luxury car tax to 33 per cent could be regarded as a non-tariff trade barrier directed at European imported luxury cars. Mr Hofmann stated that there was certainly a strong opinion in that direction, which was a view reinforced by the Victorian Automobile Chamber of Commerce submission to the Bracks review which stated in the Hansard:

From the European Union’s perspective the luxury car tax should be seen as a non-tariff barrier, as it is discriminatory in its effect by mainly impacting on imported cars, particularly from Europe; and, as recognised by the Productivity Commission, provides a form of domestic assistance.

It is understandable that the European car importers could take such a view based on the fact that the majority of genuinely luxury cars are priced above the luxury car tax threshold and are imported especially from Germany and are disproportionately taxed compared to cheaper, locally made vehicles as well as other imported vehicles, as Senator Abetz has referred to. This is a very interesting issue. There is no doubt at all that these issues concerning whether the luxury car tax is a non-tariff trade barrier and is in fact a subsidy to the local car industry, together with the fact that there has been a delay in lowering tariffs on imported cars, raises questions about the Rudd government’s commitment to freer trade.

In conclusion, while this bill may on the surface appear to be a simple alteration to a rate of tax, during the inquiry held by the Senate Standing Committee on Economics it became clear that there was far more to this change than was evident at first reading. Quite obviously, this bill discriminates against rural, regional and remote Australians and I look forward to the contribution of Senator Bushby on this point. This tax ignores the needs and the day-to-day realities faced by people living in rural and regional Australia and it places an insulting level of luxury on a vehicle which is often a necessity in the country areas of Australia. There are many issues that this bill raises but the government has failed to provide answers to those issues and I therefore urge the Senate to reject this bill and, most importantly, do so because of the manner in which it extends the Rudd government’s well-established agenda of discrimination against those living in rural and regional areas.