Automakers yesterday called on the Harper government to scrap an excise tax on the most fuel-inefficient vehicles for sale in Canada, saying it is “unconscionable” for Ottawa to keep in place a levy that is hurting families and business owners.
The so-called “green levy,” introduced last year as part of the ecoAUTO program to promote the purchase of more environmentally friendly vehicles, slapped penalties of up to $4,000 on manufacturers of the most fuel-thirsty cars and trucks.
As part of the same initiative, the government started a program that paid rebates of up to $2,000 to buyers of the most fuel-efficient vehicles, such as the Toyota Yaris and Ford Escape hybrid.
While documents released as part of the federal budget on Tuesday said Ottawa would wrap up the rebate portion of the program by April, 2009, they did not mention the levies.
Auto-industry representatives said yesterday they had to ask finance department officials in the budget lockup about the penalties and were told they were staying in place.
“Let’s get rid of all of it. It is bad policy. It is not effective,” said Mark Nantais, head of the industry trade group that represents the Detroit automakers in Canada.
A report recently made public by the Canadian Automotive Partnership Council, an industry-led consultative body whose members include company executives and government representatives, used more forceful language. “If the ecoAUTO rebate program is not continued, it would be unconscionable to continue the green levy as its main purpose would have been eliminated,” it said.
The levy cannot be justified on its own because there has been no discernible impact on sales of vehicles with the levy imposed, the report said. It said the levy, which has cost automakers selling in Canada an estimated $50-million per year in extra costs they pass on to buyers, is a “hidden tax on families and small-business owners that legitimately require seating capacity, space, and all-wheel-drive utility not available in smaller ‘unlevied’ vehicles.”
Vehicles hit with the levy are typically larger cars and trucks with high-powered engines, including Chrysler’s Aspen 4×4. Pickup trucks are excluded from the penalty.
Lawrence Cannon, the federal Minister of Transport, disputed the notion the ecoAUTO program has not worked, saying manufacturers are offering more fuel-efficient vehicles in Canada than before the initiative. “The program basically has served its purpose in raising consumer awareness of fuel-efficient models,” he said in an interview.
Mr. Cannon said the whole ecoAUTO program should be seen as the first step in a broader move toward improving the fuel efficiency of vehicles driven by Canadians. The federal government is working toward implementing regulations that will force manufacturers to meet more stringent fuel-economy standards. The new rules should be in force by the end of the year.
An official with the Department of Finance said that although the government introduced the green levy, the ecoAUTO rebate and a scrappage program at the same time, there is no direct link between the revenue generated by the tax and the funding of other programs.