There’s some good news from north of the border. The Canadian government just decided to delay carrying out its luxury tax on new boats that was to have started on January 1. Implementation of the tax has been pushed back; details will be released after the start of the year.
The delay represents a major victory for the Canadian boating industry, which warned that the tax would lead to millions of dollars in lost sales and the loss of almost 900 full-time jobs.
The tax is calculated on 10 percent of the value of the boat, or 20 percent of the value over the threshold of C$250,000, whichever is lower. At current rates, C$250,000 is equal to about $194,700 in U.S. dollars.
A new report by a leading economist predicts that Canadian builders will lose about $90.5 million in potential sales as a result of the tax, and that 896 full-time workers will lose their jobs.
The Canadian tax is a raw reminder of the devastation caused by a luxury tax on boats in the U.S. that started in 1991, causing plant closings and job losses. Indeed, just a year in to the tax, the just-laid-off president of one of the largest boat companies in the U.S. told me that “the luxury tax just cost me my job.”
The National Marine Manufacturers Association says that boat sales in the U.S. fell 40 percent because of the luxury tax; large boat sales fell 80 percent. Some 30,000 people lost their jobs in the boat-building industry before Congress repealed the tax in 1993.
In Canada, the boating industry is predicting a similar reaction. “Unfortunately, the government has failed to recognize that a luxury tax won’t target the rich,” said Sara Anghel, president of the National Marine Manufacturers Association Canada. “Instead, it will punish the dealers, manufacturers and middle-class workers who will become collateral damage.”
A report by Dr. Jack Mintz, the economist, said that “luxury taxes on boats in many other countries have been repealed due to their ineffectiveness in generating revenue, their high administrative costs, and their negative impacts on boat sales.”
His report also said, “Enforcement of the tax would impose costly compliance burdens on small business owners who are already strained due to Covid-19 restrictions, supply-chain disruptions, and low inventory levels.” Read more:
