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02/16/2022

Canadian Boat Builders Brace for Proposed Luxury Tax

The Canadian government’s proposed luxury tax on new boats valued at CA $250,000 – originally scheduled to take effect January 1, 2022 – is expected to be fully implemented in the weeks to come. A spokesperson for Canadian Finance Minister Chrystia Freeland confirmed recently that the government will release draft legislation to implement the tax in the coming weeks.

In its 2021 Budget, the federal government in Canada proposed to introduce a tax on the sale of certain luxury goods purchased for personal use such as cars, boats, and aircraft. The tax would apply to new cars and aircraft with a retail sales price over $100,000 and to boats over $250,000. The tax would be calculated at the lesser of 20% of the value above the threshold ($100,000 for cars and personal aircraft, $250,000 for boats) or 10% of the full value of the luxury car, boat, or personal aircraft.

Canada’s Globe & Mail – a major daily national newspaper – published a piece on the federal government’s tax, citing that Canadian yacht and private jet makers are expecting an increase in cancelled orders, resulting in the loss of a year’s worth of work in some instances, should the tax come into effect. Profiled in the article is Neptunus Yachts, a long-standing NMMA Canada member and among the few Canadian manufacturers of large boats operating today.

The proposed luxury tax would have adverse effects on Canada’s boat builders, as concluded in a recent economic analysis conducted by Jack Mintz, Ph.D., at the School of Public Policy at the University of Calgary, in conjunction with Fred O'Riordan at EY Canada. The analysis finds the luxury tax would lead to a minimum CA $90 million decrease in revenues for boat dealers and potential job losses for 900 full-time equivalent employees (FTE).

The Globe & Mail writes:

“But boat, plane and car makers say their customers have started to cancel orders because they don’t want to pay the tax – a result that means a steep drop in business for the manufacturing industry, and likely less tax revenue than the government expects.”

“It’s going to hit the industry,” Mr. O’Riordan said. “It’s only going to raise a fairly marginal amount of revenue on the high-wealth individuals.”

Sara Anghel, President, National Marine Manufacturers Association (NMMA) Canada has been strongly advocating against the tax for the past two years and recently spoke on the issue and the adverse effects the tax would have on small Canadian businesses as well as marine manufacturers.

NMMA Canada continues to proactively meet and communicate with federal officials, Members of Parliament and their staff to encourage the government to scrap or delay the proposed luxury tax, and allow for reprieve for the country’s boat builders and those who deliver boats to customers. For more information or questions, please contact Jim Wielgosz, Director of Provincial and Federal Government Relations, at jwielgosz@nmma.org.

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