Speak up now, about the proposed Luxury Tax on boats

Apr 27, 2021

A coordinated effort by the NMMA Canada and all the Canadian marine trade associations is needed to defend our industry.

As you have likely heard, the Trudeau government tabled its budget Monday, April 19. Among the tens of billions of the dollars in new spending, the budget includes a luxury tax on new cars and airplanes over $100K and new boats over $250K. NMMA Canada and the MTAs were extremely disappointed to learn of this new tax, which was originally featured in the Liberal Party’s 2019 election platform. 

In February 2020, just before lockdown, an NMMA Canada-led delegation went to Ottawa and met with dozens of officials and MPs on the luxury tax as part of our annual Day on the Hill lobby initiative. Since then, the NMMA and your associations have been meeting regularly with Ministers’ staff, government officials and Members of Parliament to advocate against this unfair and destructive tax. We have made written submissions to the Finance Committee and Minister of Finance and recently published an online opinion piece warning of the impacts on our industry. 

The government has listened to a degree and raised the tax threshold for boats to $250K. I have no doubt that without our collective advocacy this past year, we would right now be staring down the barrel of a luxury tax on boats over $100K. However, a luxury tax at any level is still arbitrary and unfairly targets our industry. We will fight the tax proactively while staying mindful of the wider economic and social context of COVID-19.

NMMA Canada has provided this brief rundown of the tax and how it might affect marine businesses, as well as to update you on what NMMA Canada and the MTAs are doing on your behalf to defend our industry.

Sara Anghel
President, NMMA Canada

NMMA Canada and the MTAs ask that you please take 5 minutes to complete the following survey to give us the numbers we need to fight the luxury tax. Take Survey Now

How the Luxury Tax Would Work

• Starting in 2022, new boats valued above $250K would be taxed at either 10% of the full value or 20% of the value above the threshold — whichever is less;

• For example, a customer buying a $300K cruiser would pay $10K in luxury tax (20% of $50K); someone buying a $1-million yacht would pay $100K (10% of $1 million);

• The luxury tax will only apply to boats purchased “for personal use”;

• GST/HST would be applied to the luxury taxed final sale price, meaning customers will pay tax on a tax;

• “The tax would generally apply at the final point of purchase of new luxury vehicles, aircraft and boats in Canada. In the case of imports, application would generally be either at the time of importation (in cases where there will not be a further sale of the goods in Canada) or at the time of the final point of purchase in Canada following importation”

Market Impact

According to NMMA statistics (2019), boats over $250,000 CAD represent 12% of annual recreational boat sales revenue in the U.S. and Canada. What is less clear is the impact the luxury tax would have on consumer behaviour and sales revenue. As the Parliamentary Budget Officer noted in 2019: “a behavioural response is expected, as buyers might switch to lower-priced products and sellers could offer pricing options to avoid this tax. The exact magnitude of this response is uncertain and depends on the price sensitivity of consumers.” 

NMMA Canada and the MTAs are asking you to complete a 5-minute survey to give us the numbers we need to fight the tax. 

NMMA Action Plan

• Bilingual industry survey going out this week from NMMA Canada and all MTAs

• Work with friendly Members of Parliament to speak up in the House on the luxury tax and put forward an amendment at committee to delete it from the budget legislation

• Prepare messaging and a template letter to support a grassroots member-led campaign to lobby local MPs and Senators

• Follow-up with Finance minister’s office and officials to clarify rationale for the tax and reiterate the potential revenue hit and job losses

• Strategic outreach to media and opinion leaders to insert our industry’s perspective into the coverage and combat the government’s false narrative that this tax will only affect “rich yacht owners”

Suggested Speaking Points

• This luxury tax is arbitrary and unfairly targets workers in the recreational boating industry. The customer who chooses not to buy a luxury taxed boat isn’t any worse off — it’s middle-class business owners and workers who will bear the brunt of this policy when their jobs are lost due to lower demand.

• Every cruiser or yacht is its own microeconomy, with spinoff economic benefits from service, storage, fuel, and more. The impact of the luxury tax will ripple through the entire recreational boating sector. In fact, a $500,000 boat has a local economic impact of approximately $40,000 each year.

• It’s disappointing that the federal government would target boating businesses with a new tax in the middle of a devastating global pandemic. On the cusp of a fragile economic recovery, we cannot afford yet another tax that would put good middle-class jobs at risk.

• Luxury taxes are a failed policy and have backfired many times before.

• In the early 1990s, the U.S. brought in a similar luxury tax on boats that devastated the industry. One yacht builder went from 220 to 50 employees, another, from 95 to 8. The tax was eventually repealed…but not before destroying thousands of jobs in and resulting in a net revenue loss of $8 million to the government.

• There are other examples from New Zealand, Italy, Norway, Turkey and Spain where luxury taxes on boats were introduced and then quickly repealed.