The federal government continues the march toward its Sept. 1 target to enact a new luxury tax on vehicles that cost more than $100,000, despite stiff opposition from dealers and a warning from Ottawa’s budget watchdog that the tax would cause luxury-vehicle sales to decline by more than half a billion dollars over the next five years.
In a May 26 report, Parliamentary Budget Officer (PBO) Yves Giroux estimated that the new tax on luxury vehicles would add $572 million to government coffers through the 2026-27 budget year but reduce sales by $566 million, or 19 per cent, over the same time span.
The assessment reiterates what dealers have been warning about the tax since it was first floated, said Huw Williams, public affairs director for the Canadian Automobile Dealers Association (CADA).
“There’s going to be a clear decline in sales. There’s going to be a clear change in consumer behaviour,” Williams said, all to collect a “paltry” amount of tax dollars relative to overall government spending.