Work continues on the luxury tax front
June 21, 2021
Lobbying efforts against the federal government’s luxury tax continues, as all vehicles over $100,000 (not including GST/HST or provincial sales tax) will be included in the program.
As a reminder, the federal budget proposed introducing a separate piece of legislation to create a tax on the retail sale of new luxury cars and personal aircrafts, set to take effect on January 1, 2022. And personal imports of vehicles are also subject to the tax.
“It’s more of a Robin Hood theme policy,” said Oumar Dicko, Chief Economist at CADA. “Our focus and concern right now is whether or not the federal government will impose the luxury tax on provinces that already have such a system in place, such as Quebec and British Columbia.”
In an interview with CADA Newsline, Dicko said that, if the federal government’s proposed luxury tax plan passes and is imposed on provinces with a similar tax in place, it will lead to the destruction of the market for luxury vehicles in those provinces—and specifically in BC ,where the effective tax rates could reach 40 per cent.
“At that point, it will lead to a behavioural change from consumers,” said Dicko. “They will shy away from buying these vehicles.”
The issue would lead to revenue loss for the government, and employment loss in the field for workers that touch on the various aspects associated with luxury vehicles, including technicians and dealership staff.
“The COVID-19 and post-pandemic period is not the time to introduce policies that could lead to job losses, but rather to focus on economic recovery and help spur economic activity,” said Dicko.
CADA is currently in talks with finance officials, the Office of the Prime Minister, and other officials towards an agreement that could provide a tax exemption on provinces that already have a luxury tax system in place—or for provinces that implement one in the future.
“We need to set a precedent right now that if it's already legislated at a provincial level, there shouldn't be a federal luxury tax on top of that,” said Dicko. “That would result in a scenario where we would have a tax, on a tax, on a tax, which is completely inefficient and will lead to the destruction of the luxury market in Canada.”
More information regarding progress on the luxury tax front will be provided in future CADA Newsline articles.