EU wants luxury car tax to go in ‘give and take’ on trade deal

The chamber wants the luxury car tax removed either as part of the free trade agreement or in a “side agreement” between the bloc and Australia.

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“In its current form, the [luxury car tax] is neither efficient nor simple to administer. We think that it has no economic merit,” Rose said.

Federal Chamber of Automotive Industries chief executive Tony Weber said scrapping the tax would give Australia more negotiating room, opening up opportunities for sectors such as agriculture to gain better European market access.

“With a bit of vision, we can have a win-win scenario where Australian motorists are better off, Australian farmers are better off, and we have higher GDP in Australia and higher GDP in Europe,” he said.

The luxury car tax does not just apply to European manufacturers. Weber noted that Toyota owners were the largest payers of the tax because of higher-priced vehicles such as the LandCruiser.

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However, European manufacturers also face a 5 percent tariff on their vehicles, unlike car makers in countries including Japan, Korea and the United States with which Australia has free trade agreements.

A German-made BMW iX electric SUV has a base price of nearly $113,000, which includes the 5 per cent tariff paid by the manufacturer of about $5000 to $6000, and Australian buyers then need to add about $12,000 in GST. After GST is counted, nearly $14,500 in luxury car tax is added – taking it to a total of roughly $139,500, before stamp duty and registration.

By contrast, the Korean-made Genesis GV60 starts at a base of about $99,400, including GST, and does not come with a 5 percent tariff. The luxury car tax for that electric SUV is about $5200, taking its price tag to about $104,600 before stamp duty and registration.

Rose said the luxury car tax was a “further disincentive” for greater adoption of electric vehicles in Australia, given there were family-sized EVs priced above the threshold.

A government move to provide further incentives for emission-efficient vehicles by scrapping tariffs on cars valued under $85,000 faces a fight from the crossbench and the Coalition over the estimated $4.5 billion cost of the scheme over 10 years.

Rose said the chamber was following developments closely.

“[We] think that a range of support measures is appropriate in order to achieve stronger uptake of electric vehicles in Australia,” she said. “This will also be an incentive for German and other car manufacturers to offer a wider range of electric vehicles to Australian car buyers.”

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