Chapter 3
Conclusion
3.1
The currently high inflation rate is a reason for tighter fiscal
policy. Given that high income earners have got significant income tax cuts,
and are probably benefiting more from the resources boom than are low income
earners, the committee regards it as reasonable for them to bear the burden of
higher prices for luxury imported goods, whose prices have in many cases fallen
due to the stronger Australian dollar.
3.2
The committee sees some merit in the argument that it is 'unfair'
that luxury cars are taxed but not other luxury purchases such as yachts or
expensive artworks and jewellery. However, as there is already a luxury cars
tax, there are less administrative and compliance costs in increasing it,
rather than introducing new taxes on other luxury goods. Introducing any more
general luxury taxes should await the Henry review of the tax system.
Recommendation 1
3.3
The committee recommends that the Senate pass the bill.
3.4
The committee was not convinced by the submissions calling for
the threshold to be raised. There are many comfortable, environmentally
responsible and safe new vehicles (not to mention second-hand vehicles)
available priced well under the current threshold, including vehicles with four
wheel drive and other features required by drivers in remote areas.
3.5
The committee thought a reasonable case had been made that the
treatment of imported historical vehicles may be anomalous and would like
Treasury to investigate this further.
The 'retrospective application' of
the LCT increase
3.6
There has been criticism of the uncertainty generated by the tax
applying to cars delivered after 1 July but the bill not having passed the
Senate yet. The vendor of a vehicle is responsible for paying the tax and it is
a matter of their commercial judgement whether or how they pass the tax on to
their customers. Complaints about this process are effectively criticisms of
tax office procedures and the decision of the Senate to conduct an inquiry and
have no bearing on the merits of the bill itself.
Senator Annette Hurley
Chair
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