Policy Forum: The Thresholds Set for Automobiles—Are Tax Policies Outdated in Light of New Challenges?

Annick Provencher ()
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Annick Provencher: Faculty of Law, University of Montreal

Canadian Tax Journal, 2023, vol. 71, issue 4, 1111-1124

Abstract: The Income Tax Act has often been criticized for its complexity and arbitrary distinctions. This article offers a reflection on two of these arbitrary thresholds related to automobiles: (1) the personal-use limit of 20,004 kilometres, to reduce the standby charge benefit; and (2) the ceiling for the capital cost of an automobile for the purposes of calculating the capital cost allowance. The article traces the historical evolution of these thresholds and argues that they may no longer align with their original tax policy objectives. The 20,004-kilometre limit, introduced to address situations of minimal personal use, seems to have deviated from this objective. The capital cost limit, designed to prevent the financing of luxury cars with public funds, raises questions about its sufficiency after years without adjustments. The author suggests that environmental considerations were likely not considered when these measures were introduced. In this context, she proposes that policy makers reconsider measures related to automobiles to account for social, economic, and environmental changes, especially considering Canada's emphasis on reducing greenhouse gas emissions.

Keywords: Automobiles; capital cost allowance; employee benefits; tax policy (search for similar items in EconPapers)
Date: 2023
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DOI: 10.32721/ctj.2023.71.4.pf.provencher

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