PBO’s $16B Estimate for Volkswagen Deal Is ‘Wrong,’ Freeland Says

Minister of Finance Chrystia Freeland stands during question period in the House of Commons on Parliament Hill in Ottawa, on Nov. 28, 2022. (Sean Kilpatrick/The Canadian Press)

Parliamentary Budget Officer (PBO) Yves Giroux was “wrong” in estimating that the federal government’s recent deal with Volkswagen to incentivize the German automaking giant to build an electric vehicle battery manufacturing plant in Ontario will cost taxpayers over $16 billion, says Finance Minister Chrystia Freeland.

Freeland spoke to reporters in Ottawa on June 14 just hours after the PBO released his “Fiscal Analysis of Canada’s Support for Volkswagen’s Electric Vehicle Battery Manufacturing Plant,” in which Giroux estimated the federal government’s deal with Volkswagen will cost $2.5 billion more than the $13.8 billion Ottawa previously projected due to tax adjustments that weren’t accounted for.

The tax adjustments stem from the Canadian government competing with the U.S. Inflation Reduction Act (IRA), under which production subsidies in the United States would be exempt from taxation.

The PBO said in his report that Ottawa will need to give Volkswagen an estimated $2.8 billion in tax adjustments “to achieve an after-tax equivalency” to the support being offered under the U.S. IRA.

“When it comes to the PBO report specifically, I think the principal point of difference comes when considering the future tax treatment of the VW investment,” Freeland told reporters.

“The PBO has made has drawn one conclusion about what that tax treatment will be and that’s a hypothetical conclusion.”

When asked by reporters if Giroux drew “the wrong conclusion” about the Volkswagen deal’s tax treatment, Freeland replied, “Yes.”

“We simply could not and will not accept a universe in which investment is sucked out of Canada to south of the border,” she added. “And so when the IRA came into place, we understood we needed to level that playing field and ensure that Canada was competitive.”

The Epoch Times reached out to the PBO for a response to Freeland’s comments but did not hear back before publication time.

Cabinet and PBO

Freeland’s stance in opposition to Giroux marks the second time in the last month that members of the federal cabinet have taken a stance contrary to the PBO.

The budget officer estimated in a May report based on federal figures that Ottawa’s incoming Clean Fuel Regulations will increase the cost of gas across Canada by an average of about 17 cents per litre by 2030 while also decreasing the country’s GDP by upwards of $9 billion.

Shortly afterward, Environment Minister Steven Guilbeault called Giroux’s analysis “very partial” and “incomplete.”

“If you have an incomplete analysis, of course your numbers and your conclusions will be skewed,” Guilbeault told reporters on May 19.

Giroux said in response that his estimates were based on figures provided to his office by the Environment Department.

“They [the government] want to proceed with Clean Fuel Regulations and their climate agenda, generally speaking, and they don’t necessarily want people to focus on the cost,” Giroux said in an interview. “They’d like people to focus more on the benefits.”