The Federal Government tabled its latest budget, including an election platform promise made back in 2019 - to implement an additional tax on “luxury vehicles”. The new tax that is being proposed would be effective January 1, 2022, would be the lesser of:
- 10% of the purchase price, or
- 20% by which the purchase price exceeds the threshold ($100,000 for cars and aircraft; $250,000 for boats)
In addition to this new tax, purchasers would also have to pay the GST/HST on the purchase price plus the new tax, raising the final cost even higher. For example, a car that is sold to you in 2022 for $125,000 will have an additional tax of $5,000 (20% of the excess over $100,000) plus GST/HST of $16,900 for a total cost of $146,900 ($5,650 up from a 2021 cost of $141,250). A good example of another tax on tax.
What’s not included in “luxury vehicles” and the new tax?
The government looks like they will exclude motorcycles, recreational vehicles (RVs and the like), and various non-public road vehicles such as racing cars, snowmobiles and all-terrain vehicles. Like most things, we have to wait for the final wording to see the actual list.
As BC found when it introduced a luxury car tax back in 2018, it caused some decline in BC car purchases and resulted in some imaginative ways for purchasers to bypass the additional tax.
I fully expect our imagination to come up with novel ways to try and minimize the impact of this tax increase. And of course, there are many questions yet to be explored and answered about the impact on trade-in values, leasing cost, personal use trucks, vans, etc. Stay tuned for further articles to clarify these and other questions.
