Toyota urges axe for luxury car tax

Toyota? Contesting the "Luxury" Car Tax? Here’s why. In 2008 the Rudd Government increased this discriminatory levy to 33 per cent, which today applies from a threshold of $60,316 — or above $75,375 on so-called fuel-efficient vehicles that use less than 7.0L/100km.

When Rudd and then Treasurer Swan taunted the then-Opposition with pictures of Porsches in Parliamant their message was as clear as it was misleading.

Rather than encourage the purchase of affordable fuel-efficient cars, in practice the efficiency concession favours buyers of prestige vehicles. Given that most popular German cars use less fuel than this arbitrarily chosen amount, Toyota says its buyers are the biggest contributors to the LCT. 

FCAI chief executive Tony Weber says abolishing the LCT would "increase competition in the market" and improve vehicle affordability. In its submission to the Productivity Commission review, Toyota says the LCT is "not a form of protection for local car makers. In fact the market share of locally built cars has dropped significantly since the LCT was introduced."

Indeed the Productivity Commission advised against the LCT in its preliminary report into the car industry: "Because it is levied on a narrow base, the LCT is a higher-cost and less efficient method of raising revenue than more broadly-based taxes."

Quoting the 2010 Henry Tax Review, the commission adds that the LCT "falls on people with a preference for relatively expensive cars, but not on those with a preference for diamonds, fur coats or yachts.

It’s hard to argue with Toyota’s claim that the LCT is "punitive and inequitable". But will a government that when in Opposition decried the LCT as the "politics of envy" scrap a means of making an estimated $450 million each year?

The government claims Free Trade Agreements with South Korea, Thailand and Japan are the answer. But removing the 5 per cent tariff that applies to cars imported from other countries does not guarantee cheaper cars. Exchange rates are a bigger factor. Our dollar has moved by more than 60 per cent - from US63 cents in 2000 to a peak of $US1.04 last year - over the past decade

This reporter is on Twitter: @JoshuaDowling