Main navigation

Archive 2008

Jobs in premium automotive sector at riskIncrease to LCT would be counter-productive to intent

Reports of an increase to the Luxury Car Tax (LCT) from 25 per cent to 33 per cent by the Rudd Government in tomorrow night’s budget would be counter-productive, harmful and put at risk the jobs of thousands of Australians employed in the premium automotive sector, according to Porsche Cars Australia (PCA).

An increase to the LCT would be likely to have, at best, a neutral net revenue effect; but most likely a negative revenue effect as gains from higher taxes would be offset by the expected reduction in car sales, believes Porsche.

“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,” says Porsche Cars Australia managing director, Michael Winkler.

“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.” European car brands operating in Australia are responsible for in excess of 10,000 jobs in the wholesaling, importing, marketing, sales and servicing sectors.

Furthermore, Porsche sees any proposed increase in LCT as an unfair tax against the “innovators” of technology and safety. Mr Winkler says the premium European brands that pioneered technology – such as airbags, anti-skid brakes and stability control systems – are today responsible for these features becoming more affordable and available across a wider range of cars.

Moreover, the Luxury Car Tax mainly applies to premium vehicles imported from Europe and is therefore divisive by its very nature. “We find it extremely disappointing that any decision regarding the Luxury Car Tax appears to have been taken in isolation from the Australian Automotive Industry Revue commissioned by the Rudd Government to tackle such issues and which, incidentally, is not due to submit its final report until July 31,” says Winkler.

A one-third increase of the LCT from 25 per cent to 33 per cent would result in Porsche’s most affordable sports car, the Boxster, moving from $109,300 to $112,400 (+$3,100); while the price of Porsche’s most popular sports car – the 911 Carrera S – would rise from $227,600 to $237,700 (+ $10,100.)

For Further Information:
Paul Ellis, Public Relations Manager
Ph: 03 9473 0926 or 04 22 00 77 08