Potential Canadian luxury tax on cars over $100K

[TrevTremaine]

So, depending upon which vehicle one is looking at (along with it's configuration), then combine it with the relative exchange with the US dollar, Canadians might be paying even more to get a Tesla. I'm not a fan of the National Post/Financial Post, but something people who are considering a purchase to be aware of.

High-end Teslas and other electric vehicles could get sideswiped by Liberal luxury tax

 

[OILMAN]

I refer you to the existing thread on this topic. My view is bad policy as it will dampen demand in Canada for Models S and X. Federal 10% luxury tax on Models S and X

 

[Corsair]

Double whammy for BC as we already have BC luxury tax since 2018. Getting expensive to have nice things these days..

 

[TrevTremaine]

So...it's even worse than expected - 20% tax on luxury cars forthcoming in 2022. Luxury tax on yachts, cars and personal aircraft laid out in new federal budget

Anyone thinking of a Tesla better start thinking about a purchase before the end of this year or deal with the added cost.

 

[angus[Y]oung]

So...it's even worse than expected - 20% tax on luxury cars forthcoming in 2022. Luxury tax on yachts, cars and personal aircraft laid out in new federal budget

Anyone thinking of a Tesla better start thinking about a purchase before the end of this year or deal with the added cost.

@TrevTremaine well, you may want to revise that to "Anyone thinking of buying a Model S or X better start thinking about a purchase before the end of this year" since it only applies to vehicles over $100k. This is actually a lot more of a fair "luxury" starting price point, vs. what the BC government does which is to apply luxury tax (higher PST on the full purchase price) on vehicles over $55k (with tiered rates as the purchase price goes up).

 

[Tarpan]

From a policy perspective, I don't mind this. While we want to get more EVs on the road, this does seem like it should depress sales/the shift to evs dramatically. A lot of people buying cars in that price point are either not going to be discouraged by this price point to the point of not purchasing an ev. Those that are convinced to not purchase an S or an X are likely still going to end up in an EV. Not 100%, but I would garner a guess that it is not going to be statistically significant.

I think it is relatively predictable that we would see a shift towards to higher luxury/wealth taxation. From an EV adoption perspective, this is a pretty harmless impact.

This will have an impact on my dreams of a tri-motor cybertruck though!

 

[Vawlkus]

From a policy perspective, I don't mind this. While we want to get more EVs on the road, this does seem like it should depress sales/the shift to evs dramatically. A lot of people buying cars in that price point are either not going to be discouraged by this price point to the point of not purchasing an ev. Those that are convinced to not purchase an S or an X are likely still going to end up in an EV. Not 100%, but I would garner a guess that it is not going to be statistically significant.

I think it is relatively predictable that we would see a shift towards to higher luxury/wealth taxation. From an EV adoption perspective, this is a pretty harmless impact.

This will have an impact on my dreams of a tri-motor cybertruck though!

It might or might not have an effect on the CT. Even at the max trim level, it’ll only be close to this cost. We’ll have to wait and see.

Regardless, I’m still getting my truck.

 

[TrevTremaine]

From a policy perspective, I don't mind this. While we want to get more EVs on the road, this does seem like it should depress sales/the shift to evs dramatically. A lot of people buying cars in that price point are either not going to be discouraged by this price point to the point of not purchasing an ev. Those that are convinced to not purchase an S or an X are likely still going to end up in an EV. Not 100%, but I would garner a guess that it is not going to be statistically significant.

I think it is relatively predictable that we would see a shift towards to higher luxury/wealth taxation. From an EV adoption perspective, this is a pretty harmless impact.

This will have an impact on my dreams of a tri-motor cybertruck though!

They "could" reduce the luxury tax a few percentage points if you're buying an EV as opposed to a gas vehicle - if that's truly the direction the government is heading. I just don't think you could ever call it an incentive.

I'll lop that in with a hope that Tesla adjusts the exchange rate to better reflect the current Canadian/US dollar rate.

Neither is likely to happen.

 

[Tarpan]

They "could" reduce the luxury tax a few percentage points if you're buying an EV as opposed to a gas vehicle - if that's truly the direction the government is heading. I just don't think you could ever call it an incentive.

I'll lop that in with a hope that Tesla adjusts the exchange rate to better reflect the current Canadian/US dollar rate.

Neither is likely to happen.

EV incentives and luxury tax are different issues and I don't see the need to combine them. You can have both. We do have both. They just made a decision to not incentivize the the purchasing of luxury EVs.

 

[jdw]

In BC that would mean 25% + 20% = 45% tax rate on an S or X which I find excessive and will likely kill most sales. On the bright side (?) it will create a short term boost in sales for the next few months and probably increase the resale value of used ones.

 

[Tarpan]

In BC that would mean 25% + 20% = 45% tax rate on an S or X which I find excessive and will likely kill most sales. On the bright side (?) it will create a short term boost in sales for the next few months and probably increase the resale value of used ones.

Short term, I think you may be right. All cars will hit that though, so it's equal for all cars at which point it'll be accepted as just the way of the world. I do wonder how it would compare against importing a car from the US.

 

[pb2000]

Is this a marginal tax on anything over $100k or does the whole thing get taxed once it crosses that threshold (ie $99,999.99 jumps to $110,000.00 if you add one more penny)? If it's the former, the sort of person that has $115K to drop on a model S isn't likely to care about a bit of tax that costs less than upgrading from the default paint color.

 

[gforce2002]

Is this a marginal tax on anything over $100k or does the whole thing get taxed once it crosses that threshold (ie $99,999.99 jumps to $110,000.00 if you add one more penny)? If it's the former, the sort of person that has $115K to drop on a model S isn't likely to care about a bit of tax that costs less than upgrading from the default paint color.

From the linked article:

”The tax is calculated at the lesser of:

• 20 per cent of the value above threshold ($100,000 for cars and personal aircraft; $250,000 for boats) ; or
• 10 per cent of the full value of the luxury car, boat or personal aircraft.”

 

[Silicon Desert]

So...it's even worse than expected - 20% tax on luxury cars forthcoming in 2022. Luxury tax on yachts, cars and personal aircraft laid out in new federal budget

Anyone thinking of a Tesla better start thinking about a purchase before the end of this year or deal with the added cost.

This reminds me that one of my friends in Indonesia says the import tax can be more than 50%. I don't know that for fact. Just what he says after researching to buy a Tesla there.

 

[Tarpan]

From the linked article:

”The tax is calculated at the lesser of:

• 20 per cent of the value above threshold ($100,000 for cars and personal aircraft; $250,000 for boats) ; or
• 10 per cent of the full value of the luxury car, boat or personal aircraft.”

The math....

On the s that is 3k, 12k, 20k (lr vs plaid vs plaid +)
On the x that is 5k/12k (LR vs Plaid).

If you really want the S or the X, buy the LR models. If you want a bunch of crazy performance features, and you're already in the 160-200k range, I don't think the 12 or even 20k are going to be critical decision makers for you. This isn't to say that people that buy those cars have bottomless wallets but if you are going to get faced with a luxury tax, this is just about the smallest possible form of a luxury/wealth tax that you could have possibly expected. And, in all honesty, I would expect there to be more coming along this line in the coming years that will be far more significant.

 

[TrevTremaine]

EV incentives and luxury tax are different issues and I don't see the need to combine them. You can have both. We do have both. They just made a decision to not incentivize the the purchasing of luxury EVs.

I agree, but given how the Ontario governments (past and current) have dealt with EV incentives (one excessive, one non-existent), any incentive program for expensive EVs would only hurt them politically. A 5% reprieve still is tax dollars in and doesn't potentially have a negative perception.

 

[MD-2000]

So...it's even worse than expected - 20% tax on luxury cars forthcoming in 2022. Luxury tax on yachts, cars and personal aircraft laid out in new federal budget

Anyone thinking of a Tesla better start thinking about a purchase before the end of this year or deal with the added cost.

Just a side note but... luxury tax on aircraft over $100K? Is there even such a thing as an aircraft less than that? Although I doubt I'd call a Cessna 172 on floats "luxury" transport compared to a Model S. Seems more like some civil servant who thinks every guy with a million to blow is buying a private jet. (I think they start at several million... and then you lease them, so someone in a cheaper jurisdiction buys it for you.)

 

[angus[Y]oung]

Just a side note but... luxury tax on aircraft over $100K? Is there even such a thing as an aircraft less than that? Although I doubt I'd call a Cessna 172 on floats "luxury" transport compared to a Model S. Seems more like some civil servant who thinks every guy with a million to blow is buying a private jet. (I think they start at several million... and then you lease them, so someone in a cheaper jurisdiction buys it for you.)

@MD-2000 airplanes for commercial use are exempt, as noted in the linked article: "New aircraft affected include airplanes, helicopters and gliders. Commercial aircraft and aircraft equipped to carry more than 39 passengers are exempt."

That said, other than some edge cases where people live in extremely remote areas and need a small aircraft to get in and out, I think you could argue that just about any aircraft owned by individuals would be considered a luxury. Of course, I could well be missing some important considerations that might invalidate what I just said. Maybe hobbyist/recreational pilots will have to stick to renting seat time from commercial operators, or instead buying some really nice PC hardware and flying in MS Flight SIM? (side note: a buddy of mine is a huge aviation enthusiast and routinely sends me screencaps of him in MS Flight SIM and that product produces absolutely stunning imagery in the latest versions!)

 

[ChrisOtt]

I guess it's going to be a tight window for X/S deliveries for those looking to get before the cost of ownership increases, considering the new S/X must have a nice backlog now.

 

[MD-2000]

My experience (admittedly, more than 30 years ago when I flew occasionally) was a lot of these planes, the owner buys the plane and leases it to an FBO for general leasing out. This makes it a commercial plane, and the owner simply has priority when renting over everyone else. The owner will pay the same rate as everyone else when flying it (out one pocket, in the other, minus a percentage for the FBO). The FBO takes care of leasing to others, maintenance, hangaring, and care and feeding. This way, you eventually have the aircraft paid off by other users, much like buying a rental property - unless you have a ton of money to burn and are selfish with your toys - in which case you deserve to pay a tax.

But yes, someone willing to pay over $100,000 for a car can probably afford the extra.