Why is Australia still protecting the car industry?

Introduced in 2000, the Luxury Car Tax (LCT) was imposed on imported vehicles partly to protect the domestic car making industry that existed at the time. However, the LCT includes an exemption for "a commercial vehicle designed mainly for carrying goods and not passengers". The Australia Institute (TAI) contends that this exemption is essentially subsiding the purchase of luxury utes such as the Chevrolet Silverado, and that the loophole is costing Australian taxpayers more than $250 million a year in foregone revenue.

TAI analysed tax and sales data and found that most of the LCT exemption's cost was related to the largest, most expensive utes, including those from US brands Ram and Chevrolet. Advertisement "The price of these vehicles magnifies the impact of their exemption from LCT", TAI claims. The analysis found that the LCT ute exemption led to more than $250 million in forgone tax revenue in 2023, "almost three-quarters of which was due to sales of Ram and Chevrolet vehicles".

"Economics 101 says that governments should tax things they want less of, and subsidise things they want more of, and it is stunning that the...

Unconventional Economist.