To quote Yogi Berra, this is a case of déjà vu all over again. Canada’s on-again, off-again 10 percent luxury tax on boats costing more than $250,00 looks like it’s on again, with new draft legislation calling for it to start on Sept. 1.
Canada’s Liberal government last year enacted legislation for the tax to take effect on the first of January, 2022. But vigorous lobbying from the boating industry and others warned that the tax would lead to millions of dollars in lost sales, while costing almost 900 full-time jobs. In December, the government postponed the Jan. 1 deadline.
Now it’s back on the table again. The Select Luxury Items Act applies to expensive cars, airplanes, and boats, with the tax kicking in for cars and airplanes costing more than $100,000 and boats over $250,000. (Those are Canadian dollars. At the current exchange rate, C$250,000 is the equivalent of about $200,200 US dollars.)
The boat tax is calculated at the lesser of 20 percent of the value above the $250,000 threshold, or 10 percent of the full value of the boat. Under the act, the tax applies to recreational boats, defined as a yacht, houseboat or any sailboat or motorboat with sleeping amenities, made after 2018. Commercial fishing vessels, floating homes, ferries and cruise ships are exempt.
The tax is applied at the point of purchase, and it would take effect on boats delivered or imported on or after Sept. 1. The tax is on top of a 13 percent sales tax for new boats sold in Ontario and some other provinces.
Last July, the Canadian National Marine Manufacturers Association conducted a survey finding that a total of 598 boats would have been subject to the tax if it had been effect for the previous 12 months.
A luxury tax on boats devastated the U.S. boating industry 30 years ago. It was started in 1991 and resulted in almost immediate plant closings and job losses. The NMMA says boat sales in the U.S. fell 40 percent because of the luxury tax; sales of large boats fell 80 percent. About 30,000 people lost their jobs in the boat building industry before Congress repealed the tax in 1993. Read more:
https://www.bdo.ca/en-ca/insights/tax/tax-articles/luxury-goods-tax/
