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Every Australian new-car buyer would be hit with a carbon tax based on their car's greenhouse gas emissions under a new proposal from Mercedes-Benz.
The luxury brand argues it is time for the Federal government to get serious about CO2 emissions and follow the global move towards emission-based taxation.
It would mean a $1250 price rise on the top selling Holden Commodore in the first year and about $750 on a Toyota Corolla.
Mercedes put its carbon tax proposal in a submission to the Senate inquiry into the proposed increase in the Luxury Car Tax from 25 to 33 per cent, but argues that the move — which would raise more than the $400 million over-three-years target for the LCT — was not just a counter-proposal to negotiate a re-think on the budget proposal.
"It's not to give us an advantage. It's based on good public policy,"
the managing director of Mercedes-Benz Australia, Horst von Sanden, says.
"It is time to get everyone thinking about CO2 and exhaust emissions.
We have simply moved past the point where we can ignore it. Money is a very good pressure tool and peoeple are not doing enough about it.
"Certainly, the discusssion about the Luxury Car Tax has given us a bit of a wake-up call, to be honest. There are people who say we should have thought about it a long time ago, but it's a human thing to do one thing at a time.
"We acknowledge the goverment has the right to look for new revenue streams. But we decided instead of just arguring against the tax we should come up with a new proposal."
Most major car brands presented arguments against the LCT increase, and were joined by industry bodies including the Federal Chamber of Automotive Industries.
Mercedes-Benz compiled its carbon tax proposal with a staged introduction which would more than offset the potential gains from the LCT. It also believes that the downturn in luxury car sales since the end of June means the proposed increase could easily be wiped out, just as an increase in the 1980s was revenue negative and eventually reversed.
Mercedes says the carbon tax, similar to one in Britain, must be introduced to force buyers and carmakers to think green.
It believes the threshold should be set at 119 grams of CO2 per kilometre by 114, with a gross polluter level set at 200 grams. Many luxury and performance cars today are at more than 300 grams.
"Some of the politicians might doubt us at the moment, but it is a genuine approach to finding a solution to the biggest challenge the automotive industry will face for the next 10-15 years," von Sanden said.
"We have had informal discussions with our colleagues and find a fair bit of support there. Judging from some immediate reactions from the politicians there is a fair bit of interest."
Mercedes already offsets the emissions of every car it sells for the first six months by 115 per cent and is pushing hard for greener models in coming years, including a plug-in electric Smart car from 2010.
Von Sanden admits the Federal government could easily come back with a double whammy, with both an LCT increase and a new carbon tax, but backs his submission on the green road.
"Of course, we believe it. We put our name to it. Carping from the sidelines is not very attractive," he says.
"You can disconnect the discussion, and I think you should. If we stopped all of a sudden on the carbon tax that would be a pretty opportunistic approach."
The result of the Senate hearing is expected on August 26 and Mercedes is hoping for a move on a carbon tax by next year.
"We would basically like to see it starting next year. We made a proposal of phasing out the LCT, and replacing it with the luxury
car(bon) tax," von Sanden says.
But he says the impact of the proposed LCT increase had already hit luxury brands.
"We had a drop in the order intake of nearly 40 per cent since the start of July.
"You could call it a disaster, but to be honest we didn't see it only in cars above the threshold. It was across the range.
"There is a concern from the impact of interest rates and concern about the economy. All of us talking about the LCT and its inequity has reminded people there is a luxury car tax.
"When you put import duty, GST and LCT together it's compounding at the rate of 10 per cent, 10 per cent and 25 per cent. There is a resistance to paying such a high percentage of the purchase price to the government."