The proposed Canadian luxury tariff on cars priced above $ 100,000 could cost up to $ 566M

A proposed federal tax on luxury cars sold in Canada could cut vehicle sales by more than half a billion dollars over the next five years.

Vehicles costing more than CA $ 100,000 will be taxed by adding 10 percent charge to the full value of the vehicle or CA $ 100,000 (equivalent to the current rate of $ 79,000) will add 20 percent tax on the value of the vehicle. On which the alternative is less expensive. Australia handles a very similar luxury vehicle tax.

A report by Ottawa’s parliamentary budget officer suggested that taxes could raise CA $ 572 million ($ 451 million) for the government through the 2026-27 budget year. However, the PBO report suggested that the tax would reduce sales of new luxury vehicles by CA $ 566 million ($ 446 million), or an estimated CA $ 125 million ($ 98 million) annually over a 4.5-year period.

Autonnews Canada notes that the report warns that its forecast is based on variable variability and may not prove completely accurate. It is also difficult to determine the blowback from the buyers of luxury cars.

Read more: The Canadian Black Book predicts four more years of higher prices for used vehicles

The proposed tax is facing strong opposition from dealership groups across Canada. According to Tim Reuss, president of the Canadian Automobile Dealers Association (CADA), such a tax would probably prove ineffective.

“Historically, these taxes have never achieved their main goal, which is to increase revenue, and is considered ineffective,” he said. “It will be detrimental to the industry, and especially now in the midst of an epidemic, the sector will be hit hard by 2020 and down 20 percent. Now is not the time to introduce new taxes, as the auto sector seeks to recover from the crisis. “

A report by Scotiabank suggests that luxury taxes may not meet government expectations. The report analyzes British Columbia’s provincial sales tax on cars over CA 125,000 ($ 98,700), adding up to 20 percent of the sale price. Sales of luxury cars have fallen sharply since the tax came into effect, with a five per cent contraction per year despite reports of an increase of over 10 per cent a year before the tax came into effect.

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