Tax Will Punish Dealers, Manufacturers, And Middle-Class Workers
BRITISH COLUMBIA —The federal government’s proposed luxury tax on new boats will likely lead to significant job losses and could result in far less revenue than predicted, according to a third-party analysis by renowned economist Dr. Jack Mintz.
The federal government announced in the Budget last spring that it plans to introduce a tax on select items, including new boats above $250,000, beginning January 1, 2022. While the government’s goal of improving social equity is commendable, this tax will only hurt the people it intends to help.
“Unfortunately, the government has failed to recognize that a luxury tax won’t target the rich. Instead, it will punish the dealers, manufacturers and middle-class workers who will become collateral damage,” said National Marine Manufacturers Association (NMMA) Canada president Sara Anghel.
According to the paper by Dr. Mintz – An Economic Evaluation of the Proposed Luxury Boat Tax – written in collaboration with Fred O’Riordon (National Leader, Tax Policy – EY Canada), the proposed tax would lead to a minimum $90 million decrease in revenues for boat dealers and potential job losses of at least 900 full-time equivalent employees.
“Dr. Mintz’s analysis confirms what we know to be true: the proposed luxury tax will be economically destructive to Canadian businesses and is a self-defeating policy that will hurt middle-class workers at dealerships and manufacturing facilities – not to mention those who are employed at marinas and service shops in many boating communities,” said Anghel. “NMMA Canada urges the federal government to correct course on this misguided tax announced in the last budget. We cannot afford to jeopardize our fragile economic recovery by decimating our domestic industry and putting thousands of good, middle-class jobs at risk at a time when we need them most.”
“These findings demonstrate that a luxury tax on boats would hurt, not help, Canadians,” said Dr. Mintz. “Luxury taxes on boats in many other countries have been repealed due to their ineffectiveness in generating revenue, their high administrative costs, and their negative impacts on boat sales. This research confirms the findings of previous literature and underscores the lessons learned from international case studies of similar luxury taxes.”
Family-owned Bryton Marine Group has 180 full-time employees at its two locations – KingFisher Boats, in Vernon and EagleCraft in Campbell River – and service 28 dealerships across the nation, most of which are family owned and also employ hundreds of full-time employees. “On the cusp of a fragile economic recovery, we cannot afford another tax that would put good middle-class jobs at risk, said CEO Byron Bolton. “All EagleCraft recreational sales and approximately 22 per cent of KingFisher Boats sales would fall within the tax threshold, and the impact will severely impact our dealers, employees and suppliers. It would impact our ability to continue the strong operations we currently have, and of equal concern is the prospect of the tax being introduced as we are also developing a new manufacturing facility in response to market demand for larger vessels, including those specifically targeted by the proposed tax.”
Report’s Key Findings:
- Consumers could easily avoid the Canadian luxury tax on boats by purchasing and keeping their boats abroad, especially for those who reside in communities near the Canada-U.S. border.
- If consumers avoid the tax by purchasing and keeping their boats outside of Canada, as expected, then companies and employees in Canada’s recreational boating industry will bear the brunt of the damage—estimated at $90.5 billion in lost sales and 896 lost jobs for FTEs.
- The survival of Canada’s small domestic boat manufacturing base—already hollowed-out by years of competition with low-cost jurisdictions and offshoring—would be directly threatened by the luxury tax. The tax would also have a negative ripple effect on the wider recreational boating industry and other related sectors of the economy.
- Enforcement of the tax would impose additional costly compliance burdens on small business owners who are already strained due to COVID-19 restrictions, supply chain disruptions, and low inventory levels.
