Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Aston Martin vehicles on display at Grand Touring Automobiles in Toronto.

Glenn Lowson/For The Globe and Mail

More people than ever are driving around this country in Rolls-Royces, Lamborghinis, Ferraris, McLarens, Aston Martins and the like. Improbably, given our wintry climate and pothole-ridden roads, sales of super-luxury cars boomed in Canada over the past decade.

If you can afford a car like that – or any car over $100,000 – you can also afford to pay a little more tax on it, which is exactly what the federal government’s 2021 budget has proposed. The luxury tax also targets yachts and private planes, but for vehicles, it will amount to the lesser of either 10 per cent of its full value or 20 per cent of the value above $100,000. It seems the tax will apply whether you purchase, finance or lease a vehicle.

“If you’ve been lucky enough, or smart enough, or hard-working enough, to afford to spend $100,000 on a car, or $250,000 on a boat – congratulations! And thank you for contributing a little bit of that good fortune to help heal the wounds of COVID and invest in our future collective prosperity,” Finance Minister Chrystia Freeland wrote in the budget’s foreword.

Story continues below advertisement

It’s a real crowd-pleaser of a tax. Of all the things in the massive 700-page budget document, the luxury tax on yachts and cars grabbed headlines right alongside news of the $10-a-day child-care plan.

The problem here is not that taxing these expensive toys is a bad idea – quite the opposite. It’s a good idea that simply doesn’t go far enough. It’s more symbolic than impactful, or, more cynically, a smokescreen for the fact the Liberals have once again failed to take more ambitious measures aimed at reducing extreme wealth inequality.

As The Globe’s personal finance columnist Rob Carrick notes, “Unmentioned in the budget are tax measures that have been talked about for months – a wealth tax, a heavier tax load on capital gains from the sale of financial assets such as stocks and, more recently, an end or changes to the capital-gains exemption on principal residences.”

The luxury tax’s narrow focus on cars, yachts and planes will raise a relatively small amount of revenue: $604-million over five years, according to the government. It’s a drop in the bucket. By comparison, the Office of the Parliamentary Budget Officer estimated last year that a wealth tax on 1 per cent of net wealth above $20-million would raise $5.6-billion in 2020-21.

That wealth tax, by the way, is also a crowd-pleaser. An Abacus poll conducted last year found 79 per cent of Canadians supported it, including 73 per cent of households in the top income bracket.

The stated goal of the luxury tax, indeed of the entire budget, is not simply to raise revenue, though. At Prime Minister Justin Trudeau’s behest, the budget was meant to address wealth inequality, one of his favourite talking points.

A narrow luxury tax on fancy cars and yachts isn’t going to make much of dent on that front either. If the shock of paying an extra 10-per-cent tax on a new full-size Range Rover, Cadillac Escalade or Mercedes G-Wagon is too much, wealthy buyers may very well take that money and spend it on some other luxury toy not covered by the new tax.

Story continues below advertisement

That appears to be what happened in 2018 in British Columbia, at least initially. When the provincial government raised taxes on vehicles over $125,000, sales declined, according to a Scotiabank analysis. On message boards including Reddit, luxury-car shoppers shared ways to avoid paying B.C.’s tax. The extent of the sales hit is hard to quantify since it coincided with a market-wide downturn after years of record highs and also a glut of used cars hitting the market. In some high-end dealerships, sales did rebound after an initial drop. Nevertheless, there were job losses at some dealers, which is not an outcome anyone wants to see.

In B.C.’s case, the tax may be acting like a “sin” tax in that it curbs consumption, which is what you want for cigarettes but not necessarily for fancy cars.

A broader tax, such as the aforementioned wealth tax, wouldn’t necessarily have such a pointed impact on luxury-car sales and would be vastly more effective in achieving the government’s stated goals of raising revenue and reducing the extreme wealth inequality that plagues this country.

But a niche tax on yachts and supercars is easier, and it makes for better headlines. It’s a good start, but it’s only a start.

The luxury-car tax comes into force on January 1, 2022. Expect lineups out the door at your local supercar dealer until then.

Shopping for a new car? Check out the new Globe Drive Build and Price Tool to see the latest discounts, rebates and rates on new cars, trucks and SUVs. Click here to get your price.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies