Photo: Nick Xenophon not telling the full story on price of Australian cars overseas. (AAP: Stefan Postles)
Holden confirmed the Australian car manufacturing industry’s worst fears when it announced on December 11 it would close its operations in South Australia and Victoria by 2017.
Before the announcement, Independent Senator Nick Xenophon and his Democratic Labor Party counterpart John Madigan made pleas to Prime Minister Tony Abbott to keep Holden in Australia by increasing government assistance.
Senator Xenophon said the Australian car industry does not compete with other car-making countries on a “level playing field”.
“We have this crazy deal with Thailand, a free trade agreement, where cars made in Thailand come here with no duty whatsoever, but if you want to buy a Ford Territory that retails for $38,000 to $40,000 in Australia, it will cost you over $100,000 in Thailand,” he said in Canberra on December 9.
- The claim: Nick Xenophon says a Ford Territory that retails for $38,000 to $40,000 in Australia costs over $100,000 in Thailand.
- The verdict: Senator Xenophon’s claim is not the full story. Excise is levied on all cars in Thailand, locally made or imported.
ABC Fact Check asked Senator Xenophon for the basis for his figures. His office said they came from ‘The strategic role of the Australian automotive manufacturing industry’, a report prepared by ACIL Allen Consulting in September 2013 for the Federal Chamber of Automotive Industries, an industry organisation.
The report says the Ford Territory costs “an unattractive $100,000 [in Thailand], which is far above the price of a comparable locally made product”.
Price of a Ford Territory
Ford Australia shipped 100 Ford Territorys to Thailand in August 2012. Currently the Ford Territory Titanium model sells for 2,990,000 Thai Baht, which is equivalent to $102,211.
The same model in Australia, the Ford Territory Titanium RWD, costs between $59,357 and $61,076 depending on which state it is purchased in.
Thailand-Australia Free Trade Agreement
A Thailand-Australia Free Trade Agreement came into force on January 1, 2005. It has eliminated the majority of Thai tariffs on goods imported from Australia.
Following the agreement, Thailand eliminated tariffs on Australian large passenger motor vehicles, defined as cars with an engine capacity of over 3000cc, as well as goods vehicles such as pick-up trucks. Previously these tariffs were 80 per cent and 60 per cent respectively. For smaller vehicles and all automotive parts, components and accessories also, tariffs are now zero. These Australian products enter Thailand duty free.
Tariffs on engines were halved to 15 per cent.
Thailand’s car excise
Shortly after the agreement came into force, the Thai government introduced a new automotive excise regime based on engine capacity, a Department of Foreign Affairs and Trade spokeswoman said.
All cars, whether they are manufactured locally or imported, attract an excise of up to 50 per cent.
Excise tax rates for personal vehicles in Thailand
- Passenger car with cylindrical volume not exceeding 2,000cc and engine power not exceeding 220 horse power – 30%
- Passenger car with cylindrical volume exceeding 2,000cc but not exceeding 2,500cc and engine power not exceeding 220 horse power – 35%
- Passenger car with cylindrical volume exceeding 2,500cc but not exceeding 3,000cc and engine power not exceeding 220 horse power – 40%
- Passenger car with cylindrical volume exceeding 3,000cc or with engine power not exceeding 220 horse power – 50%
Source: Thailand Excise Department
Vehicles with engines larger than 2,500cc attract excises ranging between 40 and 50 per cent. Smaller vehicles such as pick-up trucks with engines up to 3,250cc attract excises between 3 and 20 per cent.
A later publication from the Thai government’s Fiscal Policy Office, ‘A Guide to Thai Taxation 2008’, described the excise as an indirect-selective sales tax.
“Apart from the dominant role of a revenue generator the purposes of imposing excise taxes are to restrict consumption of certain goods, to promote social and economic equity, encourage saving, and to reflect energy conservation and environmental issues,” the publication said.
For locally made cars, the excise is levied when they leave the factory, and for imported cars, when they arrive onshore.
“Large engine PMV (engines larger than 2,500cc), which are mainly imported to Thailand, are Australia’s primary export interest to Thailand,” the department’s spokeswoman said. “By contrast pick-up trucks and passenger pick-up vehicles (with engine sizes up to 3,250cc) are mostly produced by Thailand itself. By default, this excise regime discriminates against imported vehicles.”
The Ford Territory Titanium has an engine size of 2720cc and therefore attracts an excise of 40 per cent.
Adding other domestic taxes such as the value added tax (VAT) brings the Ford Territory Titanium to its retail price of about $100,000.
Thailand is however now moving to a new automotive excise regime based on CO2 emissions which is expected to take effect on January 1, 2016.
While these changes mean Thailand moves away from engine sizes as the driver for excise taxation, “the impact of these new changes on Australian exports is still unclear”, according to the department.
The department also says the Thai government did not breach the free trade agreement by introducing new excises after the agreement was entered into.
“Excise duties were not covered in the agreement. Excise duties are a domestic matter, determined independently by governments, and are generally not covered in FTAs. We are pursuing the matter with Thailand through bilateral trade discussions,” the department spokeswoman said.
Other countries that Australia has a free trade agreement with such as Malaysia and Singapore also have high car excises. In Singapore in order to own a large car like the Territory, a purchaser has to bid for and pay for a Certificate of Entitlement (COE) to own a car. For cars bigger than 1600cc, COEs cost $SG73,010 or $65,036, more than the price of the Territory itself in Australia.
The Singapore government says these additional motor vehicle taxes are “to curb car ownership and lower congestion”.
Excise is levied on all cars in Thailand, locally made or imported.
Senator Xenophon’s claim is not the full story.