Federal Treasurer Wayne Swan is off the Christmas card lists at Audi, BMW, Mercedes-Benz and Porsche.
The four German importers have been swift to apply the white-out to Swan's name following the treasurer's budget announcement that the Luxury Car Tax (LCT) would increase from 25 per cent to 33 per cent with effect from July 1.
Unlike the period in the early 1990s, when the previous Labor government raised the LCT from 30 to 50 per cent, the new impost will lead to an increase of just $2541 in the price of a car selling for $100,000.
In the media statement posted on the Australian Labor Party's website (more here), the government rationalises the whole luxury car tax debate away by citing a bipartisan precedent dating back to 1979 -- when the Fraser Liberal Government was in power and John Howard was Treasurer.
Also, according to the media statement, the government hopes to realise an extra $555 million over the next four years and takes the view that buyers able to afford luxury cars can also afford to contribute revenue at a higher rate than other new-car buyers.
And the response from the industry?
"The Federal Government's surprise tax increase could see the price of premium cars rise unnecessarily, affecting families and individuals who are prepared to invest in motor vehicles with the latest technological innovations -- from advanced safety and driver assistance systems, to cleaner, greener engine technology," says Joerg Hoffman, MD for Audi Australia.
"The Government has a direct interest in making cars safer and cleaner, yet has effectively put this kind of technology at risk for Australian buyers, a move that seems directly at odds with its green agenda," he concluded.
The reaction from BMW is one founded primarily on green principles.
"Increasing the tax burden on Australians who help fund innovation in cleaner and safer cars highlights a lack of appreciation for the role technology innovation plays in the market," says Guenther Seemann, Managing Director of BMW Group Australia.
"Luxury brands are today at the forefront of engineering cleaner cars which emit less CO2 emissions.
"For example, the BMW 530i emits nearly 20 per cent less CO2 than an equivalently sized and powered Holden Calais V.
"A tax system based on CO2 emissions would align better with the Government's position on the environment."
Seemann also suggests the tax increase will have unintended inflationary effects.
"The price of cars has been falling in Australia since the market was opened up and tariffs slowly reduced. This tax hike signals a return to price increases."
Whilst agreeing that the tax hindered progress on green and safety issues, the Managing Director of Mercedes-Benz Australia Pacific, Horst von Sanden, also questioned why cars over the LCT threshold ($57,123) were taxed as luxury items, when power boats, corporate jets and diamond necklaces are not.
But, on topic he said: "The LCT penalises those working families who purchase vehicles over $57,123 that are classified as luxury vehicles".
"There needs to be a genuine effort by the Government to reduce vehicle greenhouse gases and lower fossil fuel usage by reducing fleet average fuel economy. This increase in the LCT actively discourages the purchase of demonstrably lower emission vehicles and is far from being a green initiative, it is in fact a yellow initiative."
Porsche MD, Michael Winkler took the view that the tax had the potential to hurt the job market, without the anticipated gain in revenue for the government.
"To place at risk the jobs of employees in premium car dealerships across the country selling and servicing predominantly European cars for a potentially 'zero' gain in revenue is naïve and unnecessary," he said.
"The underlying assumption that raising prices does not have an effect on people spending money is a fallacy. The high-end of the market has as much elasticity as the low-end. In fact, you could argue that the high-end has more elasticity, as most purchases of premium and luxury goods are deferrable.
"For the Rudd Government to therefore suggest that an increase in tax would lead to an increase in revenue is overly simplistic and incorrect.
"We expect fewer expensive cars would be purchased and it would be middle-class
Australia -- the very people the Rudd Government claims to represent -- that would be most likely to feel the pinch.
"Fewer car sales means less sales staff required in showrooms, and fewer cars booked in for servicing means less technicians required in workshops."
The Victorian Automobile Chamber of Commerce has also opposed the change to the LCT percentage, supporting the local manufacturing industry. With Ford and Holden -- as well as their performance brands, FPV and HSV -- historically selling cars priced above the LCT threshold, sales for those companies may be affected also.
"The local automotive manufacturing industry is already fighting for survival," said the Chamber's Senior Manager Government and Corporate Affairs, David Russell.
"The LCT increase is another body blow which will affect sales, after-market service, jobs and the local economy. The Government should recognise that by putting up taxes, it has jumped the gun on the Bracks' Review.
"...It seems surprising to the VACC that Mr Swan did not consult Mr Bracks or wait to hear the results of his review, which is due to consider LCT."
When the Carsales Network spoke to Ford President Bill Osborne about the impact of the increased LCT at the launch of the new FPV range earlier this week (more here), the Broadmeadows boss shrugged it off, saying: "I don't think the typical FPV buyer is cash-strapped".
"At least for Ford, it will have minimal effect."
Undoubtedly true, now that the company is not in the marketplace pitching a Fairlane or LTD.
Scott Grant, MD at HSV was a little less sanguine, when he mused "Maybe the government hasn't given consideration to our humble digs at Clayton".
What nobody has really questioned among all this is the LCT tax threshold. Both FPV and HSV are now selling high-performance utilities priced above the notional threshold. Since when did Utes become luxury cars?
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