Luxury Goods Tax Could Hit Electric Vehicles: Expert


OTTAWA-

A new tax on yachts, luxury cars and private planes designed to hit the super-rich could also cover vehicles intended to help the environment, a tax expert warns.

The luxury goods tax, which takes effect September 1, will cover cars and SUVs, as well as private planes and helicopters, worth more than $100,000.

The federal tax will also cover yachts and boats – including motorboats – valued over $250,000.

But senior tax attorney Helena Gagné said the new tax could also affect certain electric and hybrid vehicles, including Tesla and BMW models, which cost more than $100,000.

The federal government encourages Canadians to invest in clean technologies and zero-emission vehicles, which can cost more than fossil-fuel cars.

Gagné said that when the luxury tax was introduced, the Ministry of Finance said “those who can afford to buy luxury goods can afford to pay a little more”.

“There seems to be an assumption that only the wealthiest will be affected by the luxury tax, but that’s not necessarily the case,” said Gagné, a partner at Osler, Hoskin & Harcourt LLP. “It may also have an indirect impact on taxpayers who may not consider themselves among the wealthiest but may decide to purchase an electric vehicle whose retail price exceeds the $100,000 threshold.”

Adrienne Vaupshas, ​​spokeswoman for Finance Minister Chrystia Freeland, said the measures, originally proposed in the 2021 budget, are not designed to hit the middle class.

She said the boat tax threshold was deliberately set at $250,000 to cover superyachts and not middle-class families buying boats.

Vaupshas said it was “fair and just that the wealthiest should be asked to pay their fair share”.

“The government was re-elected on a platform which included a commitment to introduce a luxury tax on yachts, private jets and luxury cars and implementing this measure is a priority,” he said. she stated.

The tax was originally proposed in the 2021 budget. It will cover luxury cars, planes and boats purchased for personal use and recreation. Commercial vehicles, including small planes selling seats, and emergency vehicles are among the categories of vehicles exempt from the new tax.

Tax is either 10% of the item’s taxable amount or 20% of the amount over the price threshold, whichever is lower.

Conservative Finance Critic Dan Albas accused the government of introducing a “job-killing” tax “that will devastate Canada’s auto, boating and aerospace industry”.

“As the Canadian economy emerges from the pandemic and businesses struggle to recover from the downturn, only Liberals would think that imposing new taxes on businesses that create and sustain good manufacturing jobs is the right way forward.” , did he declare.

The NDP is pressuring the federal government to do more to tax the super-rich. However, measures to raise taxes on the wealthiest people in Canada were not included in the Liberal-NDP confidence and supply pact.

NDP Tax Fairness and Inequality Critic Niki Ashton said at a press conference last month that she wants the federal government to close the loopholes she says are being used. by the super rich and corporations to avoid paying billions in taxes.


This report from The Canadian Press was first published on August 11, 2022.