Luxury tax draft legislation coming in early 2022

The federal government’s proposed tax on luxury cars, personal aircrafts and boats was meant to come into force on January 1, 2022.

Specific to luxury cars, the tax would be on vehicles with a retail sales price of more than $100,000, and would be calculated at the lesser of 20 per cent of the value above the $100,000 threshold—or 10 per cent of the full value of the vehicle.

The Canadian Automobile Dealers Association (CADA) already met with senior finance officials that are responsible for the design of the luxury tax. They also met with Deputy Prime Minister and Minister of Finance Chrystia Freeland’s office.

“CADA, along with the Canadian Vehicle Manufacturers Association, the Global Automakers of Canada, and the Canadian Finance and Leasing Association, formally requested an implementation delay of several months to stave off disorder in the transition to the new tax regime,” said the association in a CADA Newsline article.

Based on the 2021 Federal Fall Economic and Fiscal Update, it does not appear the government will implement the luxury tax as of January 1, as it plans to release the draft legislation sometime in early 2022.

One of the issues with the tax is the possibility that for some provinces, such as Quebec and British Columbia, it will lead to a compounding taxation since they already have a type of luxury tax. CADA said this could result in “exorbitant taxation levels” of up to 38 per cent. Their recommendation to the government is to find a way to exempt Quebec and B.C. from the luxury tax on cars.

“All provinces that currently have a luxury tax in place need an exemption for now and in the future,” said Huw Williams, Director of Public Affairs at CADA, adding that “The federal government used this principle for the carbon tax and it needs to be applied for the luxury tax.”

The consultation period for the tax ran from August 10, 2021 to December 2, 2021.

Further updates will be provided as they become available.

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