CADA urges Ottawa to delay luxury tax to avoid “fiasco”

A strongly worded letter has been sent to Minister of Finance Chrystia Freeland urging the government to clarify crucial details of the imminent federal luxury tax on vehicles, slated to begin on September 1st, or delay the implementation of the tax until these important aspects can be adequately explained. The letter is signed by Tim Reuss, CADA President & CEO, along with the CEO of the Canadian Finance and Leasing Association, Brian Kingston; the CEO of the Canadian Auto Manufacturers Association, Michael Rothe; and David Adams, CEO of the Global Automakers of Canada.

The impetus for the letter was the “Navigating the Federal Luxury Tax” webinar CADA hosted with MNP, one of Canada’s largest tax and accounting consulting firms, to offer dealers a detailed overview of the luxury tax. With over 1,000 dealers participating, It became clear during the question segment of the webinar that the representatives from the CRA that were on hand to answer questions did not have the answers to many of the most basic queries about what the tax applies to.

“The sheer volume of unanswered and unclear tax issues is unmatched in the history of retail automotive taxation,” states the letter. “On the eve of the tax implementation date of September 1st, our collective membership is shocked that there are no simple straightforward written interpretation guides on issues as simple as winter tires, leases and demonstrators.”

The letter goes on to state, “As an industry we are concerned about the chaos that will occur as substantial details remain unclear. We have collectively voiced these concerns for the past year. To avoid market chaos, we are asking that you take  extraordinary measures to resolve the current situation. These measures could include an extended grace period for implementation, greater resources to resolve concerns and even a delay in implementation.” 

An appendix to the letter provides “a summary of the most important aspects that require clarification and official written guidance before this tax can be made operational in the marketplace,” including written guidance on the application/inclusion of the Luxury Tax for finance, insurance and warranties products including: extended warranties and payment protection plans, maintenance plans, insurance products and financing fees. Written guidance is also requested for the purchase of winter tires, which is mandatory in Quebec, guidance around demonstration vehicles, and many other important aspects of the tax.

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