Car tax targeted in trade talks

August 16, 2018

Australia’s luxury car tax and 5 per cent vehicle tariff are in the sights of European trade negotiators, who will mount a “strong case” for Australia to axe the dual hit on motorists in free-trade talks.

Conservative Party policy is to scrap Australia's car tax, which was originally introduced to protect our now non-existent car industry.

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Former trade minister Simon Crean said both trade barriers should fall as part of an Australia-European Union free-trade agreement, in a move that would slash the price of vehicles for Australian consumers.

Mr Crean, the deputy chairman of the European Australian Business Council, said axing the taxes would have been more difficult if Australia still had a vehicle building industry to protect, but now they were up for grabs.

European cars are still subject to the 5 per cent car tariff, which under bilateral and regional free-trade deals no longer applies to cars made in Japan, South Korea and Thailand.

The abolition of the luxury car tax, charged at 33 per cent on the portion of vehicle prices over $66,331 or $75,526 for more ­efficient vehicles, would have wider implications. The most common vehicle hit with the tax is the Toyota LandCruiser.

The car tariff contributes about $500 million a year to the budget, and the luxury car tax about $700m a year.

But the former Labor leader condemned “ridiculous” arguments that the taxes should be ­retained as revenue-raisers. He said the lost revenue would be more than made up by the benefits of free trade, with agricultural exports and services the key sectors to benefit from a deal.

Consumers would also benefit from better access to safer and more environmentally friendly cars, Mr Crean said. The Swedish-made Volvo XC90, one of the world’s safest and most efficient internal combustion cars, attracts a $3052 tariff, and $8271 luxury car tax charge.

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