Car News

New Tax for Cars Over $100k Could Be on the Way

In the lead up to the recent Canadian election, the Liberal Party said it would implement a new luxury tax on cars, boats and planes costing more than $100,000.

Now that Prime Minister Justin Trudeau has been re-elected, the 10% luxury goods tax looks set to be put in place - so long as the Liberal Party sticks to its proposed platform.

The party's platform dedicated a single line to the luxury tax, saying it will “introduce a new 10-per-cent tax on luxury cars, boats and personal aircraft over $100,000.”

The Liberals estimate the luxury goods tax generate roughly $585 million in revenue in the 2020 tax year and as much as $621 million by 2023. This revenue wouldn't come solely from luxury vehicle sales, with boat and plane sales also being taxed 10% under the proposal.

But seeing as the Liberal Party took less than half the seats in the Canadian House of Commons, Trudeau's government would need the support of an opposition party to get the tax bill passed. The luxury tax is seemingly in-line with the philosophies of the NDP party, however, which holds 39 seats in the House and could thus help the Liberals enact such a policy.

In its pre-election platform, the NDP said it would “ask the very richest multi-million millionaires to pay a bit more towards our shared services with a new one-per-cent wealth tax on wealth over $20 million.”

Last year, British Columbia, which is led by the NDP under John Horgan, raised the provincial sales tax on new and used vehicles priced between $125,00 and $149,000 from 10 percent to 15 percent. It also implemented a tax increase from 10 percent to 20 percent on vehicles priced at over $150,000.

Automotive News Canada recently spoke with Blair Qualey, the head of the New Car Dealers Association of B.C., who claimed adding a federal luxury goods tax on top of its existing tax for big ticket vehicles could hurt sales, in turn leading to job losses at automotive dealers.

The Ontario NDP party proposed a similar luxury vehicle tax in last year's provincial elections, saying it would impose “a modest luxury tax of three per cent” on cars costing more than $90,000.

“This is based on an existing measure in British Columbia,” the party platform said. “Only about one per cent of sales transactions [in the province of Ontario] will be affected, but those purchasing the most luxurious cars will pay a surcharge.”

The NDP estimated the Ontario luxury car sales tax would generate about $12 million in annual tax revenue.