Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



I Support Sales Tax Exemptions / Zero-Rating for New Autos

Autos are very expensive to purchase.  Consumers are nervous about the economy and are less likely to go out on a spending spree.  This is a vicious circle for the auto industry because if consumers cannot afford to buy and cannot get credit (or do not want to take on new credit risk), the cars will not move of the dealers lots and there will be no need to manufacture new cars.

I believe that governments should incentivize consumers who have disposable income and want or need new cars to buy.  This can be done with sales tax exemptions and zero rating of autos.

Canada imposes the goods and services tax on cars at the rate of 5%.  the Government of Canada should temporarily zero-rate sales on new cars, which would mean the applicable rate of GST would be 0%.  If the Government of Canad exempted sales of cars, the dealers would be required to pay GST to the manufacturers or importers and would pass on the GST cost to consumers - creating a disincentive to buy a new car.

Some provinces have harmonized provincial sales taxes with the GST (Quebec, New Brunswick, nova Scotia, Newfoundland and Labrador).  Other provinces (such as Ontario) impose a retail sales tax (which is a single stage sales tax payable by consumers).  The provinces should temporarily eliminate or reduce the sales tax tax on cars.

However, based on my experience with car dealers, they have been struggling and may take advantage of this opportunity to gouge the consumers.  The GST and PST reductions should be tied to dealers licenses and certifications that the mark-up over dealer's cost is less than $1000.  If consumers knew that they were not paying high dealer's mark-ups and were saving the sales tax, they may go out an buy cars.

I have been a member of the Automobile Protection Association whenever I have wanted to buy a new car.  They have arrangements with dealers who have said they will sell cars to consumers for a set mark-up (usually less than $1000).  No haggling over price - what a great idea.  In addition, the latest deals have been that consumers et employee pricing (which is dealers cost plus a less than $1000 mark-up).

So, this would work and it would be enforceable as the tax authorities can check the mark-ups against the costs when auditing dealers.

This would be a win-win-win-win-win.  If consumers are not buying right now, then dealers would win (even if the mark-up is lower) because more consumers would be buying (even if the mark-up is lower) . The car companies would win because consumer demand would improve.  Consumers would win because they save the GST and PST and they know they are getting a fair deal for their limited cash resources. The taxpayers win because they would not have to provide as much of a bailout.  Finally, the Government wins because they could see employer health tax and income tax if the auto manufacturers continue to operate.

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