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Volkswagen deal to cost the federal government more than previously announced: PBO

OTTAWA — 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. 

That figure is higher than what the federal government said the deal would cost taxpayers, which included a $700-million upfront capital investment and up to $13.2 billion in production tax credits.

The analysis by the PBO looks at the fiscal and economic costs and benefits of the deal in the construction phase of the facility only.

The PBO estimate includes the $700-million contribution for the construction of the plant and $12.8 billion in production support, but also estimates Ottawa will have to make additional tax adjustments that total $2.8 billion to match the benefits offered by the U.S. Inflation Reduction Act.

The analysis also estimates that the deal would create a peak of 3,100 jobs at the start of 2026, but that figure would fall to 1,400 by the end of 2027.

The federal government announced in April the details of the deal — which would see Volkswagen build its first gigafactory outside of Europe —and promised it would create up to 3,000 direct jobs and 30,000 indirect jobs.

This report by The Canadian Press was first published June 14, 2023.

The Canadian Press

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