Cancel the Luxury Tax

This is a campaign by NMMA Canada

To the Minister of Finance and the Department of Finance,

I am writing to express my concerns regarding the adverse impacts of the Select Luxury Items Tax Act, particularly on the national recreational boating and marine sector. The evidence shows that applying the Luxury Tax to the sector produces unintended and harmful economic consequences that far outweigh its intended benefits. I urge your government to reconsider this policy and adopt measures that support, rather than undermine, Canada’s economy, small businesses, and workers. Below, I outline the critical issues with the Luxury Tax on this sector and offer recommendations for your consideration:

Economic Harm to Workers and Rural and Coastal Communities

The recreational boating and marine sector is a vital economic driver for Canada, particularly in rural and coastal communities. The sector cumulatively adds $9.2 billion to Canada’s GDP and supports several thousands of good-paying jobs in every province. The Luxury Tax on boats priced above $250,000 has already severely impacted local economies and jobs, with recreational boats sales plummeting by nearly 70 per cent as a direct result. This decline has reverberated through the supply chain, impacting manufacturers, dealerships, maintenance providers, and other ancillary businesses that depend on a thriving boating and marine sector to make ends meet. Many of these businesses are small, family-owned enterprises that form the backbone of rural and coastal economies.

Less Government Revenue to Support Critical Public Services

In 2022, the national recreational boating and marine sector generated $4.6 billion in government revenue. However, following the implementation of the Luxury Tax that year, there has been a net loss of government revenue. As sales have declined, so too have the associated tax revenues intended to support Canada’s critical public services.

Prior to the implementation of the luxury tax, the Office of the Parliamentary Budget Officer (PBO) released an analysis in May 2022 estimating that the vessels category would generate $18 million for the 2022-2023 period and an additional $34 million for the 2023-2024 period, totaling $52 million over 24 months.

The CRA data from September 1, 2022, to June 7, 2024, show that 450 vessels were subjected to the tax, with total collections amounting to $12,040,000 — falling $40 million short of the PBO's projections.

Placing Canada at a Competitive Disadvantage

In the highly competitive North American market, the Luxury Tax places various Canadian manufacturing sectors, specifically the marine sector, at a significant disadvantage. The United States, having recognized the harmful effects of such a policy, repealed its luxury tax on boats years ago.

In contrast, Canada’s Luxury Tax has prompted Canadian consumers to increasingly purchase and store their boats in tax-free jurisdictions like the United States. This shift has both eroded the customer base for Canadian businesses and driven economic activity, along with associated jobs and tax revenues, out of the country.

Recommendations

To safeguard Canadian businesses, jobs, and rural and coastal communities, I urge your government to take the following actions:

  1. Repeal or Amend the Select Luxury Items Tax Act for Recreational Boats: Exempting boats from the Luxury Tax would restore stability to the sector, enabling businesses to recover, grow and remain in Canada. This action would support small businesses, protect jobs, and revitalize rural and coastal communities at a time when Canadians and Canada need it most.
  2. Collaborate with Industry Stakeholders: Engage with stakeholders from the boating industry, rural and coastal communities, and worker organizations to develop policies that balance fiscal responsibility with economic growth. Their insights can help shape a more equitable and effective approach to taxation.

Repealing or amending the tax to exempt boats and adopting a more balanced approach would enable The Government of Canada to foster economic growth, protect jobs, and strengthen the vital industries that contribute to Canada’s prosperity. Please act now to ensure a thriving future for Canada’s boating and marine industry, along with the communities and hardworking Canadians it supports.

This letter is copying my local member of parliament to highlight the impact of this issue locally in my riding.

Repeal the Government of Canada’s Luxury Tax on Boats
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To the Minister of Finance and the Department of Finance,

I am writing to express my concerns regarding the adverse impacts of the Select Luxury Items Tax Act, particularly on the national recreational boating and marine sector. The evidence shows that applying the Luxury Tax to the sector produces unintended and harmful economic consequences that far outweigh its intended benefits. I urge your government to reconsider this policy and adopt measures that support, rather than undermine, Canada’s economy, small businesses, and workers. Below, I outline the critical issues with the Luxury Tax on this sector and offer recommendations for your consideration:

Economic Harm to Workers and Rural and Coastal Communities

The recreational boating and marine sector is a vital economic driver for Canada, particularly in rural and coastal communities. The sector cumulatively adds $9.2 billion to Canada’s GDP and supports several thousands of good-paying jobs in every province. The Luxury Tax on boats priced above $250,000 has already severely impacted local economies and jobs, with recreational boats sales plummeting by nearly 70 per cent as a direct result. This decline has reverberated through the supply chain, impacting manufacturers, dealerships, maintenance providers, and other ancillary businesses that depend on a thriving boating and marine sector to make ends meet. Many of these businesses are small, family-owned enterprises that form the backbone of rural and coastal economies.

Less Government Revenue to Support Critical Public Services

In 2022, the national recreational boating and marine sector generated $4.6 billion in government revenue. However, following the implementation of the Luxury Tax that year, there has been a net loss of government revenue. As sales have declined, so too have the associated tax revenues intended to support Canada’s critical public services.

Prior to the implementation of the luxury tax, the Office of the Parliamentary Budget Officer (PBO) released an analysis in May 2022 estimating that the vessels category would generate $18 million for the 2022-2023 period and an additional $34 million for the 2023-2024 period, totaling $52 million over 24 months.

The CRA data from September 1, 2022, to June 7, 2024, show that 450 vessels were subjected to the tax, with total collections amounting to $12,040,000 — falling $40 million short of the PBO's projections.

Placing Canada at a Competitive Disadvantage

In the highly competitive North American market, the Luxury Tax places various Canadian manufacturing sectors, specifically the marine sector, at a significant disadvantage. The United States, having recognized the harmful effects of such a policy, repealed its luxury tax on boats years ago.

In contrast, Canada’s Luxury Tax has prompted Canadian consumers to increasingly purchase and store their boats in tax-free jurisdictions like the United States. This shift has both eroded the customer base for Canadian businesses and driven economic activity, along with associated jobs and tax revenues, out of the country.

Recommendations

To safeguard Canadian businesses, jobs, and rural and coastal communities, I urge your government to take the following actions:

1. Repeal or Amend the Select Luxury Items Tax Act for Recreational Boats:

Exempting boats from the Luxury Tax would restore stability to the sector, enabling businesses to recover, grow and remain in Canada. This action would support small businesses, protect jobs, and revitalize rural and coastal communities at a time when Canadians and Canada need it most.

2. Collaborate with Industry Stakeholders:

Engage with stakeholders from the boating industry, rural and coastal communities, and worker organizations to develop policies that balance fiscal responsibility with economic growth. Their insights can help shape a more equitable and effective approach to taxation.

Repealing or amending the tax to exempt boats and adopting a more balanced approach would enable The Government of Canada to foster economic growth, protect jobs, and strengthen the vital industries that contribute to Canada’s prosperity. Please act now to ensure a thriving future for Canada’s boating and marine industry, along with the communities and hardworking Canadians it supports.

This letter is copying my local member of parliament to highlight the impact of this issue locally in my riding.

Sincerely,
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