Australian Luxury Car Tax Hike Stalls In Senate

by Mary Swire, Tax-News.com, Hong Kong

04 September 2008

Legislation that would have raised taxation on the sale of luxury cars in Australia has been defeated in the country's Senate after two lawmakers teamed up with the main opposition parties to ensure that the bill would not pass.

The legislation was a key feature of Prime Minster Kevin Rudd's environmental tax policy and would have increased tax on cars sold for more than AUD57,123 (USD47,841) to 33% from 25%. It was blocked when Family First Senator Steve Fielding joined the Liberal-National coalition party and the Green Party to swing the vote 34-33 against the proposal.

The proposal ran into parliamentary opposition from an early stage, especially from the Green Party which wants to link car taxation to emissions rather then merely the price of a vehicle, so that the more polluting cars pay the most in tax. They also want to introduce tax incentives to encourage the development of, and more demand for, fuel efficient cars.

The Greens confirmed on Thursday that they have also secured a commitment from Australian Treasurer Wayne Swan that consideration of their proposal for a tax based on vehicle fuel inefficiency be referred to the tax review panel that is being headed up by Treasury Secretary Dr. Ken Henry.

However, the government has not given up on its plans to increase the rate of tax on luxury cars, and it has attacked the Greens for helping to block a measure that would bring in some AUD500bn in revenues.

Swan told the Senate following the defeat of the bill that the government would look to reintroduce the measure into parliament at the earliest opportunity.

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