Let’s scrap the used car tax racket

Dear Editor:
Newfoundlanders and Labradorians rely on their vehicles. In a huge province with little mass transit outside the overpass, a car or truck isn’t a luxury but a necessity. But every time someone tries to buy or sell a used vehicle, the provincial government grabs a cut. And in true government fashion, it doesn’t just tax you once. It taxes the same vehicle again and again. Whether you buy from a dealership or a private seller, you pay the full 15 per cent provincial sales tax.
Even worse, the tax isn’t based on what you actually paid. It’s based on whichever is higher: the sale price or the red book value. This is a generic estimate the government uses, regardless of condition, mileage or market realities.
So, if you find a good deal, like a fair price on a high-mileage Honda Accord in a private sale, the government doesn’t reward your thrift. It penalizes it. You’ll be taxed not on the price you negotiated, but on what some bureaucrat thinks the car is worth on paper.
Only government could find a way to punish people for getting a good deal.
And it gets worse.
If you sell that same car later on, the next buyer pays the full 15 per cent tax again. Then the next. Then the next. The Province happily taxes the same used vehicle over and over its lifespan, collecting the same hefty cut each time. It’s a tax-on-tax racket and taxpayers are getting fleeced.
The provincial government tries to justify it by pointing to a process where buyers can submit an affidavit to dispute the red book value. But that requires both the buyer and the seller to jump through legal hoops, including sworn statements and documentation. It’s paperwork most people don’t know exists. And even if they do, it’s a bureaucratic nightmare that many don’t have time to deal with.
This isn’t how tax policy should work. It’s arbitrary, regressive and unfair.
It doesn’t have to be this way. The federal government doesn’t charge GST on private vehicle sales. Saskatchewan waives PST on vehicles valued under $5,000. Alberta doesn’t charge any provincial sales tax at all, on cars or anything else.
Meanwhile, Newfoundland and Labrador is in the middle of a cost-of-living crisis. Car prices are higher than ever. Interest rates are still painfully high. Groceries, fuel and home heating are eating up more of everyone’s paycheque. And yet, the government keeps squeezing. Worse still, the province refuses to offer meaningful tax relief.
Newfoundland and Labrador has some of the highest income tax rates in the country. It’s tied with Prince Edward Island and New Brunswick for the highest sales tax in Canada. And still, it clings to an outdated, predatory tax model for used vehicles.
It doesn’t have to be this way either. In its most recent budget, Nova Scotia delivered real tax relief. It cut the HST by one-point, indexed income tax brackets to inflation and raised the basic personal amount so Nova Scotians can earn an extra $2,000 before paying tax. The average Nova Scotian will save more than $1,000 this year.
That’s real help when people need it.
Meanwhile, Finance Minister Siobhan Coady praised this year’s budget in Newfoundland and Labrador for not including any new taxes or fee increases. But at a time when families are struggling to keep up, the status quo isn’t good enough.
Taxpayers deserve better. It’s time to deliver real relief and that starts with scrapping the double (or triple, or quadruple) taxation of used vehicles. That lets families keep more of their own money. And it stops punishing people just for trying to get a fair deal on a car.
Devin Drover is the Atlantic Director and General Counsel with the Canadian Taxpayers Federation.