Is the Newly Imposed Canadian Luxury Tax Impacting You?
Are you a luxury car enthusiast? Do you have a love for flying planes or driving boats? If so, you may have heard about the Select Luxury Tax Act of up to 10% that came into effect on September 1st, 2022. Luxury Tax is applicable to personal vehicles and aircraft priced over $100,000 and boats priced over $250,000, as a way to ensure people pay their fair share of taxes, as stated in section 10.1 of the 2021 Budget.
Fear of Job Loss
One of the most prevalent critiques that has been brought up since the introduction of this Luxury Tax is from aircraft and boat manufacturers, who fear this tax will result in many job losses in their industries. The aviation sector has estimated that at least 2,000 direct jobs will be lost, and boat dealers fear a loss of 900 full-time jobs.
This fear is a reality that many Americans faced back in 1990 when Congress implemented a 10% luxury tax on boats, vehicles, and jewelry, among other things. However, the implementation of this tax did not go well in the United States. “The results were disastrous,” as noted by boating industry CEO Bill Yeargin. “Over 25,000 boating industry jobs were lost and a tax that was supposed to generate millions of additional government revenue actually cost the government revenue.” The damage caused was quickly noticed by Congress and the tax was repealed in 1993 and phased out by 2003.
Fear of Lost Revenue
Another recurring fear since the introduction of the Luxury Tax is that of lost revenue. This fear is felt by manufacturers, dealers, and any registered sales vendors. A study done in May of 2021 by the Parliamentary Budget Officer (PBO) suggest that sales of vehicles, boats, and aircraft will decrease by more than $600 million within one year of the Act’s introduction and $2.8 billion within the next five years.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.