Critics warn Ottawa’s new ‘luxury tax’ on pricey cars, planes and boats could backfire
Ottawa’s luxurious tax on high-priced vehicles, planes and boats is coming into impact at present, regardless of warnings from some critics that the measure will harm the economic system and change into extra bother than it is price.
As of Thursday, luxurious vehicles and private plane with sale costs of over $100,000 and boats for private use with value tags of greater than $250,000 will likely be slapped with a ten to twenty per cent tax.
The measure acquired ultimate approval this previous June and is expected to raise $163 million in new revenue per year.
Deputy Prime Minister and Finance Minister Chrystia Freeland defended the tax Wednesday on the eve of its launch after touring a transportation facility in Calgary.
She cited the appreciable sums Ottawa spent “to maintain Canadians wholesome and secure and to maintain the economic system going” in the course of the COVID-19 pandemic earlier than particularly mentioning the brand new tax.
“I feel it’s solely cheap to say to somebody who has $100,000 to spend on a automobile or a airplane, or $250,000 to spend on a ship, ‘You want to pay a ten per cent tax to assist everyone else,'” Freeland stated throughout a information convention following her tour.
“I feel it’s nice for Canadians to achieve success. It’s nice for Canadians to be affluent. I additionally suppose that people who find themselves doing actually, rather well ought to really feel snug supporting everyone else.”
Companies ask: Why not RVs too?
Mark Delaney is director of gross sales and advertising and marketing at a Vernon, B.C., firm that manufactures boats price up to $500,000. He stated the tax will undermine a increase in boat gross sales that started when folks have been caught at residence in the course of the COVID-19 lockdowns.
Delaney stated the tax is coming at a time when inflation is driving up the price of components for boats. He warned that the measure will hurt tourism companies and will make purchasers, a lot of whom are enterprise homeowners themselves, suppose twice about shopping for.
Beginning this week, in the event you purchase an costly boat, airplane or automobile in Canada, the federal goverment says you possibly can afford to pay extra. However critics of the levy say it might harm the economic system whereas not offering a lot profit.
“They really feel like they’ve paid greater than their fair proportion in payroll taxes and every little thing else they do of their companies every single day,” Delaney stated. “And so to be hit … with this tax is definitely not placing us in an excellent mild with the client.”
Each Delaney and Pat Sturgeon, who sells sailboats costing as much as $700,000 in Mississauga, stated it is unfair that different expensive objects — similar to RVs — aren’t being hit with the tax as nicely.
“A lot of my purchasers aren’t essentially rich purchasers. In actual fact, most of them are simply common folks attempting to fulfil a dream,” Sturgeon stated.
“The one factor I am hoping is that the federal government will discover out this tax will not be working, it isn’t creating extra income, it is truly costing them more cash, that they will find yourself scrubbing it.”
Tax a ‘loaded method’: economist
Don Drummond, a former federal assistant deputy minister of fiscal coverage and a former chief economist for TD Financial institution, stated the tax might spawn “cottage industries” round folks attempting to avoid it.
“No matter you outline as the brink for a ship or no matter luxurious good it’s, someone will do one thing to get round it,” Drummond stated. “That is a waste of the shoppers’ time. And it is a waste of the tax officers’ time.”
The luxurious tax will likely be a tricky promote, he stated, as a result of — in contrast to a tobacco tax — it isn’t geared toward enhancing well being outcomes. And there are already mechanisms to tax the rich, Drummond added.
“It isn’t like this stuff are significantly harmful to people or to society,” he stated of high-priced boats, vehicles and plane.
“The marginal tax fee on higher-income people is already over 50 per cent. If you happen to needed 60 or 70 per cent, that can be the way in which to do it.
“However [the luxury tax] is a loaded method. It isn’t simply saying, ‘We wish to have the better-off paying extra tax.’ We’re saying we would like them to pay extra tax on very particular issues, not even near being all luxurious items.”
