The 10 percent Canadian luxury tax on boats costing more than $250,000 started on Sept. 1, despite the efforts of the boating industry there and in the U.S. to derail it.
Officially, the tax is called the Select Luxury Tax Act. It will add 10 percent to the value of new boats that cost more than $250,000 Canadian (just over $191,000 in U.S. dollars), and cars and aircraft that cost more than $100,000 Canadian (about $77,000 U.S. dollars.) The tax applies to new boats purchased for recreational use.
The Canadian government says it is one way to redistribute wealth and address the economic devastation caused by the Covid pandemic. The Government also wants to dissuade people from buying such high-polluting vessels as yachts and jet planes.
When the tax was first proposed two years ago, the government website said, “The impact of the Covid recession has been very uneven. Some Canadians have lost their jobs or small businesses, while some sectors of the economy have flourished. That’s why it is fair today to ask those Canadians who can afford to buy luxury goods to contribute a little bit more.
Canada’s Parliamentary Budget Officer this year estimated that the tax would generate $163 million in new revenue in 2023 and 2024.
The National Marine Manufacturers Association Canada has been arguing against the tax. They quote a study of the tax lead by Dr. Jack Mintz of the School of Public Policy at the University of Calgary that said the tax “will collect little revenue while threatening middle-class jobs across the country.” The study said the tax would cause a $90 million fall in revenue for boat dealers and the potential loss of 900 full-time jobs.
The NMMA is continuing to work against the tax, discussing its impact on Canada’s $10 billion recreational boating industry with members of Parliament.
Boating leaders in Canada point to the devastation caused by a 10 percent luxury tax on boats in the U.S in 1991, resulting in almost immediate plant closings and job losses. The NMMA says boat sales fell 40 percent because of the tax; sales of large boats fell 80 percent. About 30,000 people lost their jobs in the boating industry before Congress repealed the tax in 1993. Read more:
https://www.bdo.ca/en-ca/insights/tax/tax-articles/luxury-goods-tax/
