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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6 Comments

  1. Obviously the Canadian government learned nothing from the U.S. 1991 luxury tax debacle. It decimated the U.S. yacht industry and resulted in massive job losses. This tax seems poised to also devastate builders of less expensive boats.

  2. Luxury tax on boats? Why is it that the Canadian socialist politicians can’t learn from others? Actually they WILL learn. The hard way. It will be rescinded in a couple/few years.

  3. This is wrong and I’m sorry for the Canadian boaters.

    The idea of taxing a Luxury Items is not only to bring more revenue to the Government but they are attacking the minority.

    What they should do is to tax imports and that will create more businesses for the local builders and also encourage outside companies to move to Canada to build and create more jobs that should be the ultimate goal. When people works, less load to the social minded governments that help the non working people to a point they don’t need to work.

  4. WHY write such an article without researching the proposed tax rate. Or add how many Marine purchase of this level there are, and how many are foreigners capitalizing on low Canadian dollar? So many ways to beef up this story. Want to write ? Do some better research.

    1. If you notice there is no byline on this story. This is not an article from Boating Industry but a release sent out by the NMMA. I agree, however, it is remiss in not including the tax rate, and we have since added that to the second paragraph. 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.

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