On September 1, the federal government’s controversial luxury tax on high-priced cars, planes and boats came into effect.
For now, the power brokers in Ottawa seem determined to persevere with this new tax, despite an outcry from Canadian vehicle and pleasure boat suppliers, as well as warnings from critics that the measure will hurt the economy and turn out to be more trouble than it’s worth.
The so-called luxury tax applies to cars and personal aircraft with sale prices of over $100,000 and boats for personal use with price tags of more than $250,000. The one-time sales tax will be either 20 per cent of the value of the vehicle above that threshold, or 10 per cent of the total value, whatever is lower.
The measure received final approval this past June and is expected to raise $163 million in new revenue per year.
For obvious reasons, the boating industry is particularly perturbed by this. Industry advocates state that this tax is cumbersome and unfair and completely out of step with the simplicity and fairness of the HST/GST taxation system.
Stakeholders in this region are also speaking out — including John Sutherland, Executive Director of the Boating Atlantic organization.
“A smooth rollout of this tax is essential for our members, their customers, employees and respectfully, your government itself. Unfortunately, we have yet to see simple straightforward written interpretation guides that would support our members’ implementation of the luxury tax. Our members operate small businesses in Atlantic Canada. Our industry is seasonal, which presents operational and financial challenges. The pandemic has brought with it challenges as in other industries and we are heavily affected by disruption in the supply chain and the ongoing disruption COVID-19 has on our workforce. We are concerned about the market disruption the luxury tax will have on the viability of our business. Now, our members are concerned about the chaos that will inevitably incur if this tax is implemented before clear guidelines are made available by either the Department of Finance or Canada Revenue Agency. Lack of clear guidelines will expose our members to significant tax liability once the audit cycle for the luxury tax commences,” Sutherland explained in a letter to Deputy Prime Minister and Finance Minister Chrystia Freeland.
The pleasure boat industry in Canada, like its cohorts around the globe, is still trying to recover and bounce back from the major disruptions and hardships created by the pandemic. The last thing it needs right now is the implementation of this complicated and unnecessary tax.
“Minister, we respectfully suggest that your government move quickly to resolve the current confusion. We would suggest that perhaps an extended grace period for implementation of the tax might be considered while the Department of Finance and Canada Revenue Agency dedicate sufficient resources to resolve concerns and confusion. We submit a delay in the implementation of the tax itself would be highly desirable,” Sutherland added.