Senator MILNE (1:52 PM) —I rise to support this amendment. When this matter of the luxury car tax was first raised, I made it very clear that it is my view that income redistribution should occur through the income tax system. I wish to remind the Senate that the Greens opposed the tax cuts for the wealthiest people in Australia and argued that in a just society, where we are trying to reduce the gap between the rich and the poor, we should have an income tax system whereby we collect the money from those who can afford it in order to provide public education, public health, pensions and all the things we need to do to make sure we look after our whole community and so that we are the equitable country, the country of the fair go, that we say we are. I think it is internally inconsistent that we should have a situation where we reduce the income tax paid by the highest income earners and then turn around and, in an ad hoc way, put a tax on goods on the basis that they are luxury items. Rather, the income tax system should deal with wealth redistribution, and a car tax should drive other outcomes: reducing our greenhouse gas emissions and reducing our dependence on foreign oil.

As the Senate would be aware, in 2006 I moved for an inquiry into Australia’s future oil supplies and our dependence on imported oil. I pointed out at the time that the current account deficit would be in a mess in future years because of our importation of foreign oil and how expensive that is going to be—and Australians have had a taste of that. Something that we foresaw years ago is happening, and it is unrealistic to expect governments to subsidise that in the longer run. What we have to do is reduce people’s dependence on petrol vehicles and, in particular, get our fuel efficiency up and gradually get off running our cars on petroleum based fuels and instead move to electric vehicles or hydrogen-powered vehicles. Other countries have recognised that the move to some biofuels has caused a problem in terms of food security, so we need to increase our research into the biofuels as well—second-generation lignocellulose biofuels.

I am arguing that what we should be doing in terms of vehicles is tax them on their fuel consumption, tax them on their emissions and actually try and drive a change in community behaviour towards driving less and, when people do drive, driving more efficiently. That should be the headline that we have: ‘Drive less and drive more efficiently when you do drive.’ Of course, in order to do that you have to have a public transport system that is adequate to the task, which we do not have either. So we should be using some of the money that we have got in the surplus and some of the money from the sale of permits under an emissions trading scheme to invest heavily in alternative public transport because, again, that assists people who cannot afford motor vehicles to move around cities. Ideally, we will also change the design of our cities over time to respond to climate change and peak oil so that we will have, if you like, urban villages linked by rapid transit.

It was with that perspective that we came to the government and said, ‘We want to put a signal into this legislation that there will be a change of view in the tax system to start driving people’s behaviour to reduce emissions and our dependence on foreign oil and at the same time build competitiveness in the Australian car manufacturing industry’—start rebuilding the car manufacturing industry instead of seeing it further hollowed out as it has been under the Howard government. That is why we put it to the government that we should actually phase out the luxury car tax and instead phase in a tax on all vehicles based on fuel efficiency and greenhouse gas emissions. So you would get rid of the luxury car tax and instead phase in a tax across the board, as indeed they have done in Europe and everywhere else. If you are going to have a competitive industry, that is what you would do.

We recognised that you cannot get such a phase-out of one and a phase-in of the other in a matter of 12 months and so we secured an agreement from the government to refer the phase-out of the luxury car tax altogether and the phase-in of a tax on vehicle fuel efficiency and greenhouse gas emissions to the Henry tax review, which ought to be looking at the big picture: what is the purpose of taxation; how does taxation drive changes in behaviour; and isn’t it time that we started moving our tax system to drive changes in behaviour that will lead to competitiveness in a low-carbon economy, which is where we need to be heading within a very rapid time frame?

So, in negotiation with the government, we secured an agreement that vehicles with a fuel efficiency of better than seven litres per 100 kilometres would be exempt from the luxury car tax, which would cut in at $75,000. That means that cars with that fuel efficiency will actually pay no luxury vehicle tax if they cost under $75,000. It is a very strong market signal. This was not about how much money it would cost the government or otherwise; this was purely about signalling a shift in the tax system, to show that it is possible to change a tax system to start taxing ‘bads’—and the ‘bads’ in this case are carbon emissions and fuel dependence. Look at that oil price and ask yourself: what are we in Australia doing to get ourselves off foreign oil?

This is a really important shift and one that hopefully will be advanced through the Henry tax review. It is the beginning of a change to the tax system in terms of vehicle fuel efficiency, and that is why it is such a critical move. It is a symbolic move and it is a real move in terms of about 20 makes of motor vehicles, but in overall terms it is about taking us where we need to go for the future. I find it very difficult to imagine that there is an argument as to why you would not want to shift the Australian car fleet to a more fuel efficient and less emission dependent footing.

Progress reported.