All levels of government face the difficult challenge in finding the resources required to fund the multitude of needs and wants that society demands of them.
However, there are occasions when a government will come to a conclusion without the benefit of research, context or a full understanding of the implications of a decision. The vehicle luxury tax being proposed by the minority Liberal government may be an example of this.
The federal minority government campaigned last fall on a platform that included establishment of a new 10 per cent luxury tax on vehicles over $100,000 – and the implications in British Columbia, where car dealers are already experiencing the impact of a provincial luxury tax, is significant.
The BC luxury tax on vehicles has been in place since the 1990’s and kicks in at a $55,000 purchase price – a cost not uncommon by today’s standards for pickups that are required by many businesses and individuals who live and work in resource communities. In 2018, the provincial government established an additional luxury surtax on vehicles priced at $125,000 and beyond.
The NCDA canvassed its members in December on the impact of the provincial luxury tax and the implications have been substantial. Of the 60 dealer-members that responded (only 15 per cent of our membership), 66 per cent have experienced a reduction in sales – and the drop in sales has had a corresponding impact on employment. Twenty-seven dealerships have cut between 1-5 jobs, eight dealers have cut between 5-10 staff and one has cut more than 10 staff.
Additional taxation in a highly competitive sector like ours is always a concern, as consumers in BC can simply go to other neighbouring jurisdictions with more favourable tax structures for their purchases – putting BC companies and family-supporting jobs at risk.
Now, the federal proposal threatens to impose and tax-on-tax for new car dealers, providing an even greater incentive for consumers to take their business elsewhere
The survey of members underlines how the impact will be significantly compounded should the tax come into force. They use terms such as “absolutely devastating” and “complete disaster” to describe the potential impact – and suggest it means more layoffs and putting on hold any additional staffing being contemplated. In some cases, it means deferring capital expenditures and as a result, spending less on local suppliers. Inevitably this will mean less money for the provincial and federal treasuries.
Our association represents close to 400 new car dealerships doing business in 55 communities across the province. They generate close to $16 billion activity annually, over $2 Billion in net GDP to local economies and employ 36,000 British Columbians, directly and indirectly, in a wide range of high quality, family supporting jobs.
Since the re-election of the Liberal minority government, the luxury tax measure has been put into the Mandate letters of senior ministers, giving every indication they intend on enacting this measure, in the federal budget in February or March.
Our Association, in cooperation with our national Association CADA, is hoping to be able to work with government and ensure the political decision makers understand the additional context and implications so they might reverse or at least limit the impact of this measure – because without their full attention, a great deal is at stake.
Blair Qualey is President and CEO of the New Car Dealers Association of BC. You can email him at [email protected].
