Do taxes on automobiles slow down sales? More importantly, do reduced taxes on automobiles increase sales? If recent changes in automobiles tax structures in Australia are any indication, reducing taxes can spur sales, but not as dramatically as first thought.

On July 1, the high sales tax on automobiles in Australia was replaced by a flat 10 percent Goods and Services tax, which effectively lowered auto prices. So what happened? Official figures showed that new motor vehicle registrations jumped by 55.2 percent in July, the largest increase ever recorded in a single month.

Analysts said, however, that the more than 50 percent jump in sales was a distorted figure caused by consumers waiting for the tax to be reduced. The sales increase during July followed a 15 percent fall in June and previous months of poor sales as buyers steered clear of automobile dealerships and waited for bargains.

When consumers know there is a tax break or a rebate coming on automobile sales, they will wait to take advantage of the lower price. But once that initial surge occurs, will consumers continue to buy? We'll see what happens in Australia and let you know.