The proposed federal luxurious tax, anticipated to be enacted Sept. 1, will cut back gross sales of luxurious automobiles in Canada by greater than half a billion {dollars} over the following 5 years, in line with a brand new estimate from Ottawa’s Parliamentary Finances Officer (PBO) Yves Giroux.
The PBO evaluation, launched Might 26, follows the federal government’s tabling of its newest funds implementation invoice in Parliament April 7. The posh tax bundled into Invoice C-19 is the results of a 2019 Liberal marketing campaign promise and prolonged consultations with trade.
Protecting automobiles retailing for greater than $100,000, the tax will add both a 10-per-cent cost to the total worth of the automobile, or 20-per-cent tax on the worth of the automobile above $100,000, whichever choice is more cost effective. It should add related new taxes to sure boats and plane.
The PBO report breaks out the quantity of presidency income the tax is predicted to usher in by way of its first 5 years, in addition to the influence the tax can have on luxurious automobile gross sales.
Ottawa can count on the levy so as to add $572 million to authorities coffers by way of the 2026-27 funds yr, the PBO report says, however automobile gross sales will endure in consequence.
From its implementation Sept. 1 — halfway by way of the 2022-23 funds yr — till the 2026-27 funds yr, the tax will cut back new luxurious automobiles gross sales by $566 million, the PBO estimates. That interprets to roughly $125 million in misplaced gross sales every year over the 4.5-year interval.
That additionally represents a 19-per-cent decline in annual luxurious automobile gross sales, which the PBO estimated would common about $666 million per yr between 2022 and 2027.
The PBO did warning its forecast was primarily based on a spread of shifting variables and unsure gross sales volumes for automobiles retailing over $100,000, which means there are uncertainties baked into the estimate. The blowback from luxurious automobile consumers ensuing from the brand new tax can also be unknown.
“A behavioural response is predicted. The precise magnitude of this response is unsure and depends upon the worth sensitivity of customers,” the report says.
The Liberal authorities has pushed ahead on the luxurious tax regardless of opposition from trade. The Canadian Car Sellers Affiliation, for one, has criticized the levy as damaging and ineffectual.
Ottawa’s unwillingness to incorporate an exemption to the tax for electrical automobiles has additionally attracted the criticism of the Canadian Automobile Producers’ Affiliation and the International Automakers of Canada (GAC), which collectively signify North American and abroad automakers working in Canada. The 2 teams say the refusal to carve EVs out of the tax runs counter to the federal government’s local weather commitments.
Invoice C-19 should nonetheless clear a sequence of legislative steps earlier than turning into regulation.