Thank you very much, Mr. Chair.
Good afternoon to all, and thank you very much to the committee for the invitation to appear today.
The Canadian Taxpayers Federation, for those who are not familiar with us, is a national, non-profit, non-partisan group founded in 1990. We have approximately 235,000 supporters across the country. We focus really on three broad areas; lower taxes, less government waste and accountability and transparency in government.
With respect to the committee's study, the reason for our appearance today is our submission with regard to the second point on government waste, specifically, what we see as a well-intentioned but ultimately wasteful program intended to encourage the purchase of ZEVs.
In October, our group released some access to information documents we obtained regarding the cost of a program launched by the federal government last year entitled “Incentives for Zero Emission Vehicles”. This was a program that provided a taxpayer subsidy of up to $5,000 off the purchase price of electric vehicles if the base model was listed for less than $45,000. If that base model was under $45,000, higher price versions of the same model up to $55,000 would then also qualify.
The way it works is that dealerships apply this to the price of eligible vehicles when they are purchased, and then they apply to Transport Canada in order to be reimbursed for the subsidy afterwards.
This program was launched in May 2019. It was expected to run for three years and had a budget of $300 million. As of January of this year, $134 million in rebates had been issued, with the rest of the funds expected to be entirely gone by the end of 2020.
Tesla has received the most subsidies from this program, taking in more than $60 million just between May 2019 and the end of March, a little bit under a year. Notably, Tesla's Model 3 did not qualify for this subsidy initially because the base model was priced too high. It was priced at $53,700, well above the $45,000 price cap.
To solve this, Tesla introduced a Canada-only version of the Model 3, which they called “standard”, with a non-negotiable reduced range of 150 kilometres per charge. Tesla priced this at $44,999, one dollar below the program cut-off rate, to be eligible for the subsidy.
Interestingly, they only sold 126 of this base model, but they did sell 12,000 of the higher-priced “standard plus”, which is now eligible for the subsidy because of the existence of this base model.
I would suggest that this is a problem. Presumably the purpose of setting a cut-off price was precisely to avoid having these subsidies go to more expensive vehicles, and yet that's exactly what happened here. Perhaps even more importantly, if the purpose of these subsidies is to encourage the uptake of zero-emission vehicles, it seems that a relevant question is whether they are actually leading to a higher uptake or simply providing subsidies to people who were going to buy ZEVs anyway. It's especially fair to ask that question given the price points we're talking about here.
Even a $45,000 vehicle, I would suggest—never mind a $55,000 vehicle—would be considered a luxury vehicle by most Canadians, and I think it's a fair question to ask whether regular Canadian taxpayers should be subsidizing the purchase of luxury vehicles for people who are fully prepared to pay full price for them. I would suggest that the answer is no, and for that reason our organization believes this program should be scrapped or, at the very least, revised.
I will close by observing that this government has in the past demonstrated an awareness of this windfall effect, where subsidizing the cost of something simply gives extra benefit to people who would be happy to incur the full cost anyway. The current government eliminated tax credits for transit, children's sports and arts using this exact argument since there was little evidence that they were leading to increased uptake of these things. They were simply providing a windfall to people who were going to buy transit passes or enrol their kids in sports anyway.
Taxpayer dollars, of course, are valuable for every use they have. There are many other potential alternative uses, and I would urge this committee to explore some of those uses to ensure that taxpayers are getting good value for their money.