A combined 27 per cent in taxes on a $150,000 vehicle adds $40,500 to the final price.
British Columbia new-vehicle dealers are facing another “layer of taxation” amid Ottawa’s plan for a federal luxury levy on vehicles costing more than $100,000.
The measure will strike especially hard in B.C., where the provincial government in 2018 hiked the sales tax to 15 per cent for cars priced at $125,000 to $149,999, and to 20 per cent for vehicles $150,000 and higher.
On April 1 2018, B.C. increased the PST rates to: 10 per cent for vehicles priced $57,000 to $124,999; 15 per cent for vehicles priced $125,000 to $149,999; and 20 per cent at $150,000 and above. Rates apply to new and used vehicles, including private sales and leases.
A $91,000 car which faces a 10 per cent provincial sales tax would be pushed just over the $100,000 threshold for the new federal luxury tax to be applied.
For a $150,000 vehicle, the combined B.C. and federal taxes will add 27 per cent to the price, according to Automotive News Canada calculations based on federal Finance Department figures.
Blair Qualey, president of the New Car Dealers Association of B.C., said dealers are “just frustrated to see another layer of taxation in what’s already a challenging situation.”
Qualey said his members have expressed “consternation” with the federal tax.
“It’s definitely a double whammy,” said Paul Killeen, customer relations manager for Brian Jessel BMW in Vancouver.
Pre-pandemic annual new-car sales were 2,200 to 2,500.
“We’re afraid there’s going to be some pause [in sales] for sure.”
Killeen said the dealership saw sales plunge shortly after B.C. increased the tax on cars that cost more than $125,000. In the first few weeks after the rate hikes, sales of cars priced over $125,000 dropped by 50 per cent, he said. Since then, they have recovered but not to the pre-tax increase levels.
He estimated that 12 to 15 per cent of the BMW models sold would fall into the federal luxury tax category, and as much as 25 per cent of the M-series performance cars.
“It doesn’t help our economy, it hurts it,” Killeen said. “Do they want people not to buy cars?”
To avoid B.C.’s tax, many buyers choose to register their vehicles in other provinces or jurisdictions with lower tax rates, and where they have a registered business or home, said Qualey.
“It just makes it worse when there’s jurisdictions close at hand here that don’t have taxes like that.”
If the goal is to raise more tax revenue, the B.C. experience suggests the federal government will be disappointed. Qualey said the actual remittance of the luxury tax dropped by nearly one-third in 2019 because customers took their business elsewhere.
The B.C. Ministry of Finance told Automotive News Canada that the government did not break down how much PST it received for different categories of cars and was unable to say whether the new tax rates have affected revenue.
