Liberal James Paterson sees Conservative Party policy is a better way

July 09, 2018

The next domino to fall in the Turnbull government's tax-reduction agenda should be to end outdated taxes on motor vehicles according to Victorian Liberal MP James Paterson who acknowledges this Conservative Party policy is a better way for Australia.

Mr Paterson writes in The Australian Financial Review today:

Many Australians would be surprised to learn they are still paying more than $1.1 billion in taxes each year that were designed to protect an auto industry that no longer exists.

Removing them will not only benefit consumers, it will also make our roads safer.

Currently, the average Australian vehicle is 10 years old. According to analysis by the Australian Automobile Association, lowering this average by just one year would save 1377 lives over a 20-year period. It would reduce crashes by 5.4 per cent, leading to 44,000 fewer hospitalised injuries and a staggering 262,000 fewer non-hospitalised injuries. Put simply, this is because newer cars are safer.

The Coalition's comprehensive free trade agenda since 2013 has not only opened new export opportunities for Australian companies, it has also slashed tariffs for consumers purchasing imported goods.

But even after striking agreements with China, Japan, Korea and the TPP nations there remains a significant protectionist measure that deserves the government's attention: the 5 per cent tariff on passenger motor vehicles, which applies to all cars imported from countries we don't have a free trade agreement with.

Imposing protectionist policies like import taxes is never a good idea.

They may benefit a particular industry over the short and medium term, but this benefit comes at the expense of all Australian consumers who are not only forced to pay higher prices but are also deprived of the benefit of a truly competitive market, often leading to inferior options.

It also leads to the protected industries becoming inefficient and uncompetitive over the long term.

That's when there's an industry to protect.

Without one, the idea of imposing tariffs is simply absurd.

The Luxury Car Tax wasn't explicitly introduced as a protectionist measure. But it is unlikely to be a coincidence that, given the level it cuts in, it has almost always only applied to imported cars. For example, as recently as 2014, industry estimates indicated that 94 per cent of the vehicles subject to the Luxury Car Tax were imported. This is why it likely to be an issue in free trade negotiations with the European Union, who rightly view it as false tariff.

In 2017-18, the Luxury Car Tax cost Australians $650 million. This means that, when combined with the 5 per cent tariff, Australians are being hit with over $1.1 billion in taxes designed to protect an industry that no longer exists.

Only last month, Senator Bernardi spoke on the subject to radio station 2GB:

And as far back as October last year, Senator Bernardi was calling for the axing of the car tax:

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