Time to drive the luxury car tax out of Australia

Liberals Tim Wilson, Craig Kelly, Jason Falinski and James Paterson are grinding Treasurer Josh Frydenburg’s gears by demanding we send the luxury car tax the way of the dodo (or the Holden). The luxury car tax was introduced in 2000 to protect the domestic car industry, but like most protectionistic policies it has failed.

It isn’t the government’s job to pick winners and losers and yet they continue to favour certain businesses and groups over others. Taxes like the luxury car tax are one of the reasons people don’t trust lobbyists. Rather than competing against other vehicles to create better more affordable products, the local car manufacturers — may they rest in peace — grabbed their blankies and lobbied the government to get rid of their mean competitors.

Now that Holden has reached the end of its road there is no excuse to keep the protectionist luxury car tax, which continues to harm individuals, businesses, and farmers.

As is standard for sloppy taxes, the government failed to tie the luxury car tax to inflation. So as the buying power of a set dollar amount inevitably decreases, the luxury car tax has metamorphosised into a ‘kind-of-nice’ car tax and eventual into just a car tax.

Most people think of Porsches, not Kenworth trucks when politicians talk about the luxury car tax. Senator Matt Canavan nailed it when he said at the very least Australia needs an exemption for farmers. Too often pollies forget the impact of legislation on people living in regional Australia. It costs more to outfit a farm than a billionaire’s garage.

If politicians had truly wanted to help Australian industry, they would have worked to make Australia a more amicable climate for business. Our corporate tax rate is well above the average for OECD countries, clocking in at 30 per cent. It is little wonder companies like Exxon and Netflix Australia pay taxes in foreign countries. Even Holden wasn’t Australian at the end, but a subsidiary of General Motors in the United States.

The federal government brings in $675 million annually by taxing imported vehicles. For context, that adds up to nearly 12,000 tanks of petrol if left in the pockets of the people purchasing the vehicles. It appears Frydenburg doesn’t want to lose a nice chunk of government revenue that he could spend supporting his favourite sports teams and other re-election stunts.

Politicians have not been known to give money back to the people after a tax has been implemented. It is up to people no matter what they drive to demand the government give back the money that belongs in pockets where it can be spent to boost the economy. And maybe one day we will have another great Australian car.

This article appeared in the Spectator 20 February 2020.