Calls to ‘tax the rich’ often fall on deaf ears - but Canada appears to be listening. The country is set to impose a new ‘luxury tax’ on the sale and importation of high-value cars, planes and boats.
Coming into effect on 1 September 2022, the Select Luxury Items Tax Act is billed as part of the Government of Canada’s commitment to a fairer tax system.
The levy is the realisation of budget proposals first made last summer, which have now received parliamentary approval.
Who has to pay Canada’s new luxury tax?
The new luxury levy targets certain vehicles and aircraft priced above CA$100,000 (€76,400) and certain boats priced above CA$250,000 (€191,000). It will be calculated at 10 per cent of the full retail value of the vehicle, aircraft or vessel, or 20 per cent of the value above the threshold.
The tax will only apply to new vehicles purchased by consumers for personal use. It will apply retrospectively to most sales made after 1 January 2022.
What are the financial and environmental benefits of Canada’s luxury levy?
Canada’s luxury tax aims to make things fairer for taxpayers, ensuring that “those Canadians who can afford to buy luxury goods are contributing a little more,” according to a statement on the Government of Canada’s website.
In May, Canada’s Parliamentary Budget Officer (PBO) estimated that introduction of a luxury goods sales tax will generate CA$163 million (€125 million) of revenue in 2023-2024.
However, industry spokespeople have raised concerns about the new levy’s potential impact on “Canada’s beleaguered aviation sector and its employees”.
“The economic impact of the luxury tax will be significant and [has] not been studied with a comprehensive understanding of our industry,” Anthony Norejko, president and CEO of the Canadian Business Aviation Association, argues.
The tax is part of Canada’s Budget 2022, which promotes various green initiatives. These include making zero-emission vehicles more affordable, supporting clean electricity projects, and providing investment tax credits for net zero technologies, battery storage solutions and clean hydrogen.