Canada passed a new tax on luxury goods that will make six-figure vehicles slightly more expensive. The tax goes into effect September 1 on new vehicles built after 2018 that cost more than $100,000. The luxury tax also applies to ships, and planes with less than 40 seats, although the threshold value for these items rises to $250,000.
This is not an all-encompassing tax. Commercial vehicles are free of charge, as are vehicles such as motorhomes or anything over 8,501 pounds (3,856 kilograms). Motorcycles are also excluded, as are recreational machines such as ATVs and snowmobiles. The tax will be levied on manufacturers and companies selling or importing vehicles, although it will only be assessed once. Presumably, the tax will then be passed on to consumers.
How much are we talking about? It depends on the price of the vehicle. The system uses two methods to calculate costs: 10 percent of the total price, or 20 percent of difference between the price and the $100,000 threshold. The lowest of the two will apply, with a 20 percent threshold in favor of vehicles approaching the $100,000 mark.
Consider a $110,000 vehicle as an example. The tax of 10 percent of the total value will be $11,000. However, the difference between the price and the $100,000 threshold is only $10,000. The 20 percent tax is $2,000 – much less than the whole enchiladas tax. A little more basic math tells us that $200,000 is where it all balances out. Beyond that, a 10 percent tax on all vehicles is cheaper. Alternatively, you could buy a GMC Hummer EV, which in theory would be tax-exempt for £9,000.
Based on CTV News, an industry group in Canada claims the tax could eventually cause $2.8 million in lost sales over the next five years. Remember, that figure applies to all industries affected, not just automotive.