Luxury Tax legislation delay continues as industry uncertainty grows
December 2, 2021
CADA continues to fight to minimize the impact of the Liberal Budget measure to impose a luxury tax on vehicles over $100,000.
The Budget measure was drafted to implement the 2019 Liberal party platform pledge to impose the new tax on cars, boats and airplanes. While the federal government made a major adjustment at CADA request to only tax the marginal rate over $100,000 and avoid a tax cliff at the 100,000 mark, many challenges remain with the tax approach.
As part of this lobbying effort, CADA met with senior finance officials responsible for the design of the tax and Finance Minister Freeland’s office. CADA, along with the Canadian Vehicle Manufacturers Association, the Global Automakers of Canada, and the Canadian Finance and Leasing Association, formally requested an implementation delay of several months to stave off disorder in the transition to the new tax regime.
CADA led the auto sector in pointing out that the entire auto industry is now reeling from a critical shortage of semiconductor microchips that are essential to the production and sales in the Canadian automotive industry. They highlighted for the government that this shortage will be devastating to sales in the coming months, thereby creating critical inventory shortages at dealerships.
CADA and its partners also made clear that the introduction of a federal luxury tax will result in compounding taxation, which will lead to exorbitant taxation levels of up to 38 per cent. This level of taxation will more severely impact retailers of new luxury vehicles in British Columbia and Quebec. CADA recommended that the federal government find a method to exempt BC and Quebec from the luxury tax on cars, so as to not destroy the sectors in those provinces.
“All provinces that currently have a luxury tax in place need an exemption for now and in the future” said Huw Williams from CADA’s Ottawa office.
“This exemption must include both BC and Quebec, and any provincial jurisdiction that steps into this arena in the future. The federal government used this principle for the carbon tax and it needs to be applied for the luxury tax,” concluded Williams.