OPINION: Canada’s Luxury Vehicle Tax Misses the Mark

Canada’s luxury tax was supposed to make the wealthy pay more. Instead, it’s punishing the people who build, sell, and service the vehicles and vessels this government deems too expensive.

Since September 2022, the federal government has taxed new cars and aircraft over $100,000, and boats over $250,000. The idea, according to then-Finance Minister Chrystia Freeland, was simple: fairness. If you can afford a $100,000 vehicle, you can afford to pay a little more.

But the numbers tell a different story.

In its first year, the tax brought in $137 million—slightly below projections—but cost $19 million to administer. The Canada Revenue Agency said at the time that annual administration would cost about $15 million.

That’s a multi-hundred-million-dollar policy with high overhead, modest returns, and growing fallout. A 2023 Finance Department report projected the tax could lead to between 400 and 870 job losses and shave up to $125 million from Canada’s GDP. Industry groups said those estimates were too low, warning of thousands of jobs lost in the marine, aerospace, and auto sectors.

Nowhere is the impact more frustrating than in British Columbia, where a long-standing provincial luxury tax already kicks in at $55,000—a level that hasn’t moved in years. As a result, more and more ordinary vehicles are getting taxed as “luxury” items, including family SUVs and work trucks.

Meanwhile, high-end buyers can simply shop in provinces without double taxation—an option not available to BC residents. Dealers in British Columbia, already stretched by supply chain issues, are losing business across borders.

This is less a well-designed tax policy than it is a political gesture—one with real economic consequences.