The federal government has released a draft of its proposed new-vehicle luxury tax, set to be implemented Sept. 1.
But auto industry stakeholders remain upset that high-priced electric vehicles are still subject to the levy.
Justin Trudeau’s minority Liberal government in 2021 proposed a tax on the sale of new luxury cars and aircraft with a retail sale price over $100,000, and new boats over $250,000.
The tax will be calculated at the lesser of 20 per cent of the value above these price thresholds or 10 per cent of the full value of the luxury vehicle, aircraft or vessel.
Ottawa held public consultations from Aug. 10, 2021 through Dec. 2, 2021. But little in the proposed act changed.
Zero-emissions vehicles (ZEV) priced above the threshold will still be taxed, much to the chagrin of the Canadian Vehicle Manufacturers’ Association (CVMA), which lobbies for the Detroit Three in Canada, and the Global Automakers of Canada (GAC), which represents the interests of all other brands in the country.
“Canada will not achieve its ZEV targets without a focused and ambitious plan to help more Canadians switch to electric. Taxing ZEVs when price is the most significant barrier to ZEV adoption is the wrong policy at the wrong time,” CVMA CEO Brian Kingston said in a statement.
David Adams, head of the GAC, shares Kingston’s sentiments.
“From our perspective, it is still incomprehensible that the government does not seem to be providing an exemption for ZEVs, especially when they have indicated [after the beginning of discussions on the luxury tax] that they will be mandating the sale of ZEVs. It is just bad and inconsistent policy,” Adams wrote to Automotive News Canada. “Surely any ZEV is better than no ZEV and not taxing a luxury ZEV [which would not qualify for any consumer rebates] may just make the difference between someone choosing a ZEV over an ICE vehicle.”
Canadians are invited to share comments on these draft legislative proposals by April 11, 2022.
“We will be responding to the draft,” Adams said.
The only vehicles exempt from the tax are those equipped for policing activities and those purchased by “a police authority or a military authority.”
The government says the tax “becomes payable at the time at which the sale is completed.”
It is not yet clear whether there is a system in place to pay the tax.
