Canadian Legislative Issues

During the recent Canadian election, a new luxury car tax was proposed by the Liberal Party of Canada. The 10% tax would apply on cars over $100K and affect close to 1.5 percent of the overall Canadian car market.

Since the re-election of the Liberal minority government, the luxury tax measure has been put into the Mandate letters of the Minister of Finance and the Minister of National Revenue. The Mandate letters are instructions to Ministers from the Prime Minister. They provide the marching orders to the Ministers in their respective portfolios. This radically increases the chance of this becoming law in the Federal Budget in February or March of 2020. However, it is not a forgone conclusion this will become law. Several important fiscal and tax measures from the Liberal Mandate letters since 2015 have not become law due to complications and advocacy push back.

Some provinces, such as British Columbia have already imposed a luxury tax on vehicles at the provincial level. The new federal proposal could impose a tax-on-tax that could negatively affect investments made in this market segment.

NAFA's Canadian legislative counsel advocated since the election campaign to exempt fleets from the proposed luxury tax. Preliminary discussions with the government indicate that if the luxury tax is implemented it will only target personal vehicles only, with fleets and businesses being exempted. We will continue to monitor any development around the luxury tax very closely and update the membership.