Volkswagen deal to cost the federal government more than previously announced: PBO
CTV
The parliamentary budget officer says Canada's exclusive contract with German auto giant Volkswagen to build an electric vehicle battery plant in southwestern Ontario will cost the federal government up to $16.3 billion over the next ten years.
Finance Minister Chrystia Freeland said Wednesday that the federal government plans to make the production subsidies it's offering to Volkswagen tax-free to match the incentives offered by the U.S. Inflation Reduction Act.
Her comments came after the parliamentary budget officer published a report saying Canada's contract with the German auto giant to build an electric-vehicle battery plant in southwestern Ontario would cost the federal government up to $16.3 billion over the next 10 years.
That figure is higher than what Ottawa previously said the deal would cost taxpayers, a sum that included a $700-million upfront capital investment and up to $13.2 billion in production subsidies.
The Parliamentary Budget Office estimate included the $700-million contribution for the construction of the plant and $12.8 billion in production support.
However, the PBO said that for the production subsidies to be equivalent to the incentives offered by the U.S., the federal government would have to make tax adjustments totalling $2.8 billion.
That's because the U.S. offers production tax credits that are tax-free, whereas the Canadian subsidies would have to be taxed under current tax legislation.
"The IRA tax credits are not taxable, and so it makes sense that the treatment of our incentives, which are designed to level the playing field, would be comparable. And that is how we will proceed," Freeland told reporters on Wednesday.
