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THE federal government’s plan to reduce the company tax rate to 25 per cent by 2026-27 from its latest budget will be good for the economy according to the Victorian Automobile Chamber of Commerce (VACC).

But the peak body for car-makers, the Federal Chamber of Automotive Industries (FCAI), has again railed against the proposed parallel import legislation, which was not mentioned in this week’s federal budget.

The FCAI believes parallel importing will undermine the investments in, and employment at, dealerships by allowing private individuals to bring in “near- new” vehicles and by-pass official distribution channels.

VACC chief executive Geoff Gwilym said the federal tax cuts would build on the benefits that are likely to flow from the gradual rise in Victoria’s payroll tax threshold

“The Turnbull government’s 2016 budget announcement of tax rate cuts will be good for business and good for the economy,” Mr Gwilym said. “That means it is good for everyone.”

In his first budget, federal treasurer Scott Morrison mapped out a program of tax cuts that would achieve a corporate tax rate of 25 per cent for all sizes of company. The first step will be to reduce the tax rate for small and medium enterprises (SMEs) from 28.5 to 27.5 per cent from July 1, 2016.

That will be cut to 27 per cent in 2024 and then to 26 per cent and then 25 per cent in consecutive years.

“A lower company tax rate will encourage entrepreneurs to enter the business environment and enable existing companies to employ more workers over time. That’s a great win for all Australians.

Parallel lines: The Federal Chamber of Automotive Industries has taken a swipe at the government's proposed parallel import legislation following the budget announcement today.

Parallel lines: The Federal Chamber of Automotive Industries has taken a swipe at the government’s proposed parallel import legislation following the budget announcement today.

“VACC sees the 2016 budget as being beneficial for small automotive businesses. Some of the measures announced by Treasurer Morrison reward business owners and incentivise them to employ more workers. This will have a positive flow-on all over the state.”

The FCAI had a bleaker view of the budget, with chief executive Tony Weber contrasting the strong April registration figures – a record 87,571 vehicles were sold last month – with the government’s failure to drop the proposed parallel import legislation.

He said the continued sales growth in the industry was indicative of the fierce price competitiveness in the Australian new-car market.

“(But) this vigorous tax- and employment-generating segment of the economy was facing significant uncertainty under the proposed government legislation,” he warned.

“By the government’s own modelling, at least 30,000 sales could be lost out of our market, consumer protection diminished, and jobs exported overseas when this new legislation is introduced,” Mr Weber said.

“The April record just posted provides further evidence that the industry is price-competitive, offering great value to buyers, delivering jobs and investment, and in no need of change.

“We are just a handful of months into 2016 and already the market is on target for another record. And yet the government wants to put this investment, these jobs, this tax revenue, at risk. It makes no sense.”

By Ian Porter