July 15, 2024

The Queens County Citizen

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Disagreement in Ottawa over estimated cost of Volkswagen battery plant

Disagreement in Ottawa over estimated cost of Volkswagen battery plant

Canadian Deputy Prime Minister and Finance Minister Chrystia Freeland, however, believes that Yves Giroux’s calculation is based on a false assumption.

Construction of the plant is scheduled to begin next year and is expected to be completed in 2027. The battery plant – the first of its kind built by Volkswagen in North America – occupies an area equivalent to 210 soccer fields.

The facilities are supposed to produce batteries that can power one million electric cars a year.

As part of the agreement with the German manufacturer, the federal government must grant 8 to 13 billion dollars over 10 years for the construction and operation of the plant, which means an initial investment of 700 million and subsequent subsidies. for each battery manufactured and sold by Volkswagen.

However, according to the Parliamentary Budget Officer, the plant will cost Canadians more than expected.

According to our analysis, the federal government’s financial commitment to Volkswagen will total approximately $16.3 billion over the term of the agreement. »

A quote from Yves Giroux, Parliamentary Budget Officer

Tax adjustments

Most of the project’s cost increase will come from a $2.8 billion tax adjustment for Volkswagen Inflation Reduction ActA $478 billion domestic plan to boost green technology.

Under the plan, Washington promises manufacturers subsidies of US$35 per kilowatt-hour produced. However, the Volkswagen plant in St. Thomas has an estimated annual output of 90 million kilowatt hours. Accordingly it is about US$3.1 billion PBO.

Tax adjustment calculated by PBO As needed US assistance is provided through a refundable and non-taxable tax credit, while Canadian assistance is taxable under the current provisions of the Income Tax Act.Yves Giroux said during a technical briefing.

Added to this was an additional $500 million in direct financial assistance from the Ontario government to Volkswagen, but the analysis PBO The project dealt only with federal participation.

So if the government really wants to match the US aid, it should give Volkswagen a $2.8 billion tax adjustment. »

A quote from Yves Giroux, Parliamentary Budget Officer

A flawed assumption, according to Freeland

The government did not specify PBO Whether or not he intends to pay this tax adjustment, he has stated several times that he wants to match American incentives.

At a press conference on Wednesday, Deputy Prime Minister and Federal Minister of Finance Chrystia Freeland confirmed that the resolution had been reached. PBO Trudeau does not reflect the government’s intentions.

I think the main disagreement is about the tax treatment for investing in VolkswagenMrs. Freeland underlined.

The PBO A conclusion has been reached on what that tax system will look like and that is a hypothetical conclusion. »

A quote from Chrystia Freeland, Deputy Prime Minister and Minister of Finance of Canada

Asked if Yves Giroux had come to the wrong conclusion, Ms. Freeland said yes.

Marginal benefits

As for the promised financial benefits, the PBOIt mainly focuses on the fallout from plant construction: These benefits are limited. We expect the construction of the plant to increase further GDP 0.01% compared to the base projection by the end of 2027, as well as the employment level, 1,400 new jobs over the same period.

The tax benefits of the plant’s construction for the federal government are estimated to be about $700 million.

The Parliamentary Budget Officer stated that other analyzes are being done to subsequently assess the various costs and benefits generated by the production of this plant.

Public assistance Substantial

When asked how much financial resources Ottawa deployed to get their hands on the plant, Yves Giroux bluntly said it was the state’s major financial intervention in a single project.

If we consider public support over the duration of the contract, we come to the conclusion that it is almost six times the annual budget of Environment and Climate Change Canada. »

A quote from Yves Giroux, Parliamentary Budget Officer

There are many reasons for the government to make this kind of offer, including creating an ecosystem for electric vehicles. But this is clearly a significant cost.

Although this is a good deal for Canada, the PBO It will be decided by the members of the House of Commons.

In collaboration with Marc-Antoine Ménard

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