Thursday, September 4, 2008

Wealthy Families First

The Federal Budget has just been stripped of $555 million worth of revenue. That was the amount expected to be raised by the increase in luxury car tax. The bill to introduce the tax increase was defeated in the Senate by one vote, the vote of Family First Senator Steve Fielding. It was embarrassing enough when a single Liberal Senator failed to show up for the original vote, allowing the Government to pass the bill. Now, after a motion to recommit, the opposition has prevailed, but only with the support of Senator Fielding. Senator Fielding wanted the Government to provide an exemption to farmers and tourism operators who use such vehicles as tools of trade. The Treasurer, Wayne Swan, failed to convince him to change his mind despite pointing out constitutional difficulties and the simple fact that this exemption would be a compliance nightmare.

Although there is a strong tradition of Aussie farmers driving Fairlanes, Statesmans, and the occasional Jaguar, that doesn’t make those cars a genuine tool of trade. Most utes are priced well below the luxury car tax threshold. As for tourism operators, the vast bulk of rent-a-cars for example are at the mid to lower end of the scale. Yes there would be some impact, but whether it is the devastating impost that some would claim is a less than certain matter.

While it seems that the Senator has missed several important points, the car industry along with customers have welcomed the defeat. At the same time, the Government has lost an opportunity. While a tax on luxury cars sounds as if it would only affect people who won’t miss the money, the fact is that the threshold of $57 180 is not so far above the price of many family cars. It captures not only genuine luxury cars, but also mid range cars with a handful of optional extras. Surely a luxury car tax should apply to actual luxury cars, with a threshold more in the region of six figures.

At the same time, the tax mechanism should be more accurately targeted towards achieving environmental and economic targets. Shouldn’t there be an incentive for people to buy smaller, more high tech environmentally friendly cars? Shouldn’t there be something to encourage people to invest the extra dollars required up front to purchase a hybrid vehicle? Shouldn’t there be an incentive to buy a people mover which carries eight or ten people who might otherwise be carried separately in two or three cars, adding to congestion and fuel consumption?

This is an opportunity for the Government to redraw its vehicle taxation regime to more accurately reflect the aims of the twenty first century. Of course, Senator Steve Fielding has to realize that too. Either that or he could change the name of his party to “Wealthy Families First”.

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