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Loophole plugged for B.C. 'gift' cars

The B.C. government is plugging a loophole that has prompted hundreds of people to claim they are giving away vehicles.
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B.C. Finance Minister Kevin Falcon

VICTORIA – The B.C. government is plugging a loophole that has prompted hundreds of people to claim they are giving away vehicles to friends or "acquaintances" rather than pay sales tax on the transaction.

When it adopted the harmonized sales tax in 2010, the B.C. government increased its separate tax on private sales of cars, boats and other vehicles from seven per cent to 12. The federal goods and services tax doesn't apply to private sales, and the B.C. government said it wanted to level the playing field between private sales and used cars purchased from dealers.

The jump in the tax rate appears to have made a chronic tax evasion problem worse, as sales of even high-end cars have become popular to give away, at least on paper. Finance Minister Kevin Falcon said the new provincial sales tax legislation specifies that vehicle gifts can only be given to a genuine relative or a registered charity.

"Clearly we've had a situation in British Columbia where there has been an enormous effort underway for the public to avoid paying tax owing when they sell vehicles," Falcon said. "Either you accept that explanation or you just believe that people have become extraordinarily generous in British Columbia in giving away their high-end vehicles, including Mercedes, Porsches and BMWs, to individuals who they are not acquainted with but they are describing as friends or best friends or acquaintances."

Falcon estimated the tax dodge has been costing the B.C. treasury "tens of millions" each year. An effort to tighten up the gift process last year by replacing a letter declaring the vehicle is a gift with a detailed form for buyers and sellers didn't relieve the problem, he said.

The B.C. sales tax on privately sold vehicles is called the "Tax on Designated Property," and it applies to aircraft and boats as well as cars and trucks.