To the Minister of Finance and the Department of Finance,
In light of the tariff threats from the United States, I am writing to express my concerns regarding the adverse impacts of the Select Luxury Items Tax Act on the national recreational boating and marine sector. With Canada’s domestic industry already weakened by the Luxury Tax, the combination of this policy and potential U.S. trade barriers would be detrimental to Canadian businesses, workers, and our entire recreational boating industry.
The evidence clearly shows that the Luxury Tax is a self-imposed economic barrier that has failed to meet revenue expectations while crippling domestic sales, driving jobs out of the country, and weakening Canada’s competitiveness in North America. Given the 30-day pause on U.S. tariffs, now is the critical window for your government to act by permanently repealing this tax before any further economic harm is done.
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, More Economic Damage
The tax has failed to generate the expected revenue while simultaneously eroding Canada’s economic base. Before its implementation, the Parliamentary Budget Officer (PBO) projected $52 million in revenue over two years from the tax on boats. However, actual collections from September 1, 2022, to June 7, 2024, totaled only $12 million—$40 million short of expectations.
Instead of providing additional government revenue, the tax has reduced economic activity, forced layoffs, and increased business closures, outweighing any intended fiscal benefits.
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.
Canada’s continued enforcement of this tax combined with U.S. trade barriers would further drive investment and spending out of the country.
Recommendations
To safeguard Canadian businesses, jobs, and rural and coastal communities, I urge your government to take the following immediate actions:
1. Repeal 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. Engage with Industry Stakeholders and Impacted Communities
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.
Maintaining the Luxury Tax while facing U.S. tariff threats is a dangerous misstep that will accelerate job losses, business closures, and revenue declines. I urge your government to act now before further irreparable damage is done.
This letter is copying my local Member of Parliament to highlight the local impact of this issue.
Sincerely,
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