Canada Finance Department Study Predicts Drop in Sales Revenue, Job Losses Following Luxury Tax on Recreational Boats

The Canadian government’s proposed ‘luxury tax’ on new recreational boats valued above $250,000 CAD went into effect September 1, 2022 despite two years of NMMA and the Canadian marine industry advocating against this tax.

Following an economic analysis conducted by Jack Mintz, Ph.D., in conjunction with Fred O'Riordan at EY Canada, which found the tax on new boats will collect little revenue while threatening middle-class jobs, the Canadian Department of Finance released this month its own study and analysis on the economic impacts of the ‘luxury tax.’ The study predicts a severe drop in sales revenue and hundreds of job losses from the federal luxury tax on new boats, airplanes, and cars.

As profiled in the Globe & Mail:

When “broken down by sector, the report says the vehicles market would be hardest hit in terms of reduced sales, with an impact of between $125.2-million and $210.2-million. Vessels would be next, with reduced sales of between $32.7-million and $102.9-million, followed by aircraft at between $13.5-milion and $28.7-million.

The National Marine Manufacturers Association Canada released a report in 2021 by economists Jack Mintz and Fred O’Riordan that concluded the tax would lead to $90.5-million in reduced vessel sales and the loss of 896 jobs, with the potential of as many as 3,670 lost jobs in the sector.

Jim Wielgosz, the NMMA Canada Interim Executive Director, said the association is “deeply disappointed” that the department didn’t reach out to hear about the impact of the tax.

“We’re not surprised by the findings of the Finance study. It lines up with what we’ve been hearing from marine businesses across Canada, who have reported millions of dollars in sales losses and dozens of jobs destroyed. That’s just barely half a year after the tax was introduced.”

The government study findings include:

The direct recreational boating sector will sustain 30-44% of job losses (70-220 full-time equivalents), while only making up 21% of luxury tax revenues;

Sales losses for boating will amount to between $33M to $103M, or 1.84% to 5.81% of total domestic dales (compared to 0.15-0.26% for auto and 0.24-0.51% for aerospace);

When factoring-in indirect and induced economic impacts, the boating industry could see GDP losses between $17.6M and $55M and job losses between 127-401. Again, 21% of revenues but 32% to 46% of job losses

Canada’s Parliamentary Budget Officer also put out a costing note that estimated $2.9 billion in lost sales over five years because of the tax – and the boating industry would take 75% of that hit. Marine businesses across the country have been reporting economic damage through an ongoing survey by Canada’s Marine Trade associations. The latest data shows $277 million in lost sales and over 100 job losses.

NMMA Canada continues to monitor the situation and is proactively meeting with various government officials, Members of Parliament and their staff to encourage the removal of the luxury tax, and allow for reprieve for the country’s boat builders and those who deliver boats to customers.

For more information or questions, please contact Jim Wielgosz, Interim Executive Director of NMMA Canada, at [email protected]