Volkswagen’s new Canadian battery plant may receive more monetary support than the $13.9 billion taxpayer money that was already announced by Prime Minister Justin Trudeau’s government.
In a new report released on Wednesday, parliamentary budget officer Yves Giroux estimated the federal government’s commitment to the German automaker to be roughly $16.3 billion CAD over a decade (via The Financial Post).
According to the government’s previously stated tally, $13.2 billion CAD went into “production subsidies,” and $700 million CAD for “capital costs.” The Financial Post suggests that the $2.4 billion CAD discrepancy comes from how Canadian subsidies may affect the company’s tax treatment compared to American incentives under the Inflation Reduction Act. This is because the federal government pledged to match the support Volkswagen would have received if it had chosen the United States instead of Canada for its first ‘out-of-Europe’ battery plan location.
If Volkswagen had chosen the United States for its battery plant, it would have received monetary support in the form of tax credits. However, the Canadian government is offering monetary support in a way that would be considered taxable income for Volkswagen. “With this in mind, the government would need to offer a tax adjustment to ensure an after-tax equivalency to the support offered under the IRA that it has publicly stated on numerous occasions,” said Giroux. “We estimate the tax adjustment required to keep Canada’s offer in line with the U.S. IRA to be approximately $2.8 billion.”
Read the full report here.
Source: Office of the Parliamentary Budget Officer Via: The Financial Post
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