LCT "an unfair tax" says Audi

If you bought a new turbo-diesel Audi A7 in Victoria, Australia, at the list price of $106,163, more than $10,000 of your hard-earned would go straight to the government as part of the Luxury Car Tax, or LCT.

Is that unfair?

"Absolutely," says Anna Burgdorf, Audi Australia's general manager, corporate communications.

"It's an unfair tax," she stated. "What it's designed to do among other things was support a local industry. What we've seen in Australia is that the industry is so competitive that even that level of support wasn't successful."

The LCT was introduced in this country in mid-2000, a 25 per cent tax slapped onto any new car priced above $57,180 – but only the amount above that threshold. The tax has since risen to 33 per cent on cars costing more than $63,184, or $75,375 for 'greener' vehicles that use less than 7.0L/100km.

The LCT adds around $500 million annually to government coffers.

The purpose of the LCT is to ostensibly slug buyers wanting more expensive vehicles. As Burgdorf argues, it was implemented in part to protect the local car industry.

"Now that the local manufacturers are all but gone, aside from making money for the government, what's the point of that tax?"

Some will argue that no taxes are fair. That the point of any tax is ensure the government can run the country.

Step up to the Audi RS 7, which has a list price of $200,434, and it's slugged with LCT of $42,510 according to Audi's price calculator. Here's the full breakdown:

Audi RS 7 cost in Victoria
- Manufacturer's List Price (Inc. GST) $200,434.00
- Federal Govt Luxury Car Tax (LCT) $42,512.10
- Dealer Delivery Charge (Inc.GST) $4,457.00
- VIC State Govt Total Registration $806.60
- VIC State Govt Stamp Duty $12,875.20
- Vehicle Drive Away Price $261,084.90

Although Burgdorf's point is relevant, if somewhat partisan (it's in Audi's interest to sell more cars), the importer is a little late to the anti-LCT party.

Mercedes-Benz has been talking about the unfairness of the tax since its inception, although Benz did imply the LCT was pushing buyers into more efficient vehicles, which could be seen as a positive.

Audi Australia wants the government to repeal or at least reduce the LCT, something that's likely to happen sooner rather than later, particularly if a free-trade agreement with Europe is to be introduced.

Then there's the Productivity Commission's review into the automotive industry, whose findings were unequivocal – scrap the LCT.

If – or rather when – the LCT is axed, it could result in a German luxury car importer entering the top 10 sales charts in Australia. And this, Burgdorf argues, would deliver better, safer cars to more motorists.

"If we're successful in having the LCT reduced or removed, or changed over the next couple of years, there's certainly much more opportunity for us because in general manufacturers believe that it's not a tax that's benefiting customers."

Another contentious element of the LCT is that it's indiscriminate; it doesn't just target 'luxury' cars. For instance, there are large SUVs from Japanese manufacturers, such as the Nissan Patrol and Toyota LandCruiser, that cop a hefty LCT hit.

"If the government is serious about better, less expensive vehicles for Australian consumers, then there's a really clear way to do that, and it's to reduce or remove the LCT," concluded Burgdorf.

Do you agree with Audi Australia's sentiment, that the LCT is unfair? Tell us what you think in the comments.