EU MUST be joking – European Union DEMANDS Australia dumps luxury car tax if it wants a trade deal
- Luxury car tax is worth $880m to Australia, but the EU wants it abolished
- EU also wants exclusive use of regional product names such as feta cheese
- Australia’s car market worth $20bn-a-year and the EU wants a bigger slice
The abolition of Australia’s $880m-a-year luxury car tax (LCT) has become a key block to a potential trade deal with the European Union (EU), while the right for Australian producers to call cheese ‘feta’ and ‘parmesan’ is also up for negotiation.
The LCT was introduced 22 years ago by then prime minister John Howard to protect local manufacturers when Australia still produced cars in large numbers.
But with the local car industry gone, the LCT remains on the books solely as a revenue-raising measure.
Now, the 27-country EU is dangling the carrot of more access to Europe for Australian farmers in return for giving it more access to Australia’s $20billion-a-year car market.
Luxury cars such as the Lamborghini pictured are subject to very high tariffs when imported into Australia
The EU’s outgoing ambassador to Australia Michael Pulch said the LCT is up for negotiation because it’s largely only European products that are affected by it.
The LCT is charged at 33 per cent on the portion of a car price over $66,331, or $75,526 for more energy efficient vehicles.
On top of that, European cars are also hit with a 5 per cent tariff, which raises $330m a year.
‘It makes it too expensive for many Australians who would like to have safer cars and more energy-efficient cars, but they now find them too pricey,’ Dr Pulch told The Australian.
Negotiations for an Australia-EU trade deal will resume in October after a rocky period following the ousted Coalition government’s cancellation of the $90bn French submarines deal as well as its climate change policies.
With Australia hoping to sign an agreement by May, it will almost certainly have to make major concessions to the EU’s huge car industry, which is mostly headquartered in Germany, Italy and France, but with plants across the continent.
The EU would, in return, allow more access to its markets for Australian farmers, though any improvements are likely to be gradual.
But protections for around 400 European products named for specific places – such as parmesan cheese from Parma and Prosecco sparkling wine, named after an Italian village – are also on the table.
The outgoing EU ambassador to Australia Michael Pulch (pictured centre) said the upcoming negotiations on a trade agreement will include Australia’s luxury car tax
The EU wants only cheese from Parma to be called parmesan, the feta name to be reserved for cheese from Greece, and many other regional European names that are common on Australian-made food and drink, to be restricted,
Australian Dairy Farmers president Rick Gladigau said Australia must protect its products with European names.
‘People migrated here from Europe (and) brought their expertise in making feta and other cheese varieties,’ he told the Weekly Times.
‘They should be able to put those names on the label to reflect the skill that goes into making the product.’
Porsche cars (pictured) are subject to a luxury car tax of 33 per cent when imported into Australia
New Zealand’s recent deal with the EU allows just $600million of tariff-free beef exports and 10,000 tonnes of dairy products into the EU, and only after seven years.
But Australia has more bargaining chips than its trans-Tasman neighbour, being a vastly bigger economy and having the LCT to dangle in front of European negotiators.
The Coalition’s last Treasurer Josh Frydenberg previously told Daily Mail Australia that ‘the government has no plans to phase out the luxury car tax’.
It remains to be seen if his successor, Labor’s Jim Chalmers, takes a more conciliatory tone in the upcoming negotiations with the European Union.
A cheesemonger is pictured putting pieces of feta cheese in a bag for a customer in Athens, Greece. The EU is seeking to stop Australian producers from using the name feta on their cheeses