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New Canadian Federal Luxury Tax

Discussion in 'General Yachting Discussion' started by Rodger, Jan 3, 2022.

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  1. Rodger

    Rodger Senior Member

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    A new federal tax aimed at Canada’s super rich could be a tough blow for a St. Catharines company and the roughly 50 people it employs.

    “Basically, it will eliminate a company like ours from the map. I don’t see a way that we can survive,” said Neptunus Yachts spokesperson Jan Willem De Jong.

    The tax, announced last spring by the Liberal government, took effect this month and will affect new luxury cars and airplanes selling for more than $100,000 and yachts that go for more than $250,000.

    Vessels built by Neptunus start at $2.5 million, De Jong said. The new tax will add at least $250,000 to the cost of every yacht built there.

    “We sell the majority of our vessels to Canadian customers, and I’ve got contracts for three new builds next year and one for the year after,” said De Jong.

    “Two of those contracts are subject to there not being any luxury tax, because they simply will not pay it. They feel like they are being taken advantage of.”

    Those two contracts combined are worth more than $10 million, he said.

    De Jong said Neptunus, which opened in 1989 on Keefer Road, is the only Canadian manufacturer of yachts in the price range the new tax would affect

    It manufacturers two or three boats per year, most ranging in price from $4 million to $6.5 million, and each yacht takes 10 to 18 months to build. All sales are direct to buyer.

    Originally, the government proposed the tax on yachts costing more than $100,000, the same rate it will apply to luxury car and airplane sales.

    It raised the limit to $250,000, which will spare makers of cheaper boats but not Neptunus.

    The tax can be applied in two ways: As either 10 per cent of the entire sale price or 20 per cent of the sale price over $250,000, whichever is less.

    “I do have concerns,” said St. Catharines Liberal MP Chris Bittle, who has spoken with operators at Neptunus. “There are people’s jobs and livelihoods on the line, and these are good middle-class jobs that are being impacted.

    “But the best way we can protect that is to ensure a level playing field in this industry.”

    He said the new luxury tax was included in the government’s most recent budget as “something we have always committed to, in terms of taxing the wealthiest one per cent.”

    He said he has spoken to Finance Minister Chrystia Freeland to make sure there are no loopholes and the tax is applied fairly.

    That means ensuring new “American vessels or European vessels can’t enter the country quote unquote ‘used’ — though they may have been just purchased through a third party — and resold to avoid the luxury tax.”

    Bittle said he believes most people who can afford those kinds of yachts will still buy them, even with the added tax.

    De Jong disagreed, noting the two contracts that were signed with the proviso there would be no luxury tax. Currently, he said, only the 13 per cent HST applies to yacht sales.
  2. Pascal

    Pascal Senior Member

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    Another stupid moved by politicians. Just like here in the US they killed boat building and general aviation back in the early 90s

    they don’t realize that decreasing taxes increase revenue, like what happened with fl sales tax
  3. Capt Ralph

    Capt Ralph Senior Member

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    The best example of what will happen, happened just south of their boarder.
    It will have the same effect on them.
    Carl will have to excuse me on this; SFB Politicians.

    For those that do not understand slang from the swamp, PM me and I can explain.
    After these many years, I'm sure most know what SFB means.

    Workers, shops, assembly, support companies and the end product MFG, already working on a shoe string budget, will just start closing down.
    The politico will have nothing to tax and face a rush of un-employment, if not companies try to leave the country to survive. Does any of that sound familiar?
    Adopo likes this.
  4. Slimshady

    Slimshady Senior Member

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    Most of these politicians have never owned a company and personally felt the pressure that comes with it. They're envious of what they can't achieve themselves so they just take it with legislation.
    Adopo and Kevin like this.
  5. DOCKMASTER

    DOCKMASTER Senior Member

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    Another misguided attempt to redistribute wealth. Instead of accomplishing that, they will put people out of work that need the jobs the most.

    I consider myself extremely fortunate. I pay my fair share of taxes and then some. I’m not opposed to paying more than those less fortunate but you have to draw the line somewhere. And people often fail to realize that to pay that extra $250k of a luxury tax, you have to earn $500k because you already lost 50% to taxes in the first place. At least in the US, not certain about Canada but I believe tax rates are similar if not higher than the US?
    Adopo likes this.
  6. MBevins

    MBevins Senior Member

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    Also, I wouldn't be the least bit surprised if they applied the 13% HST to the sale price then applied the 10% luxury tax to that total.
  7. rtrafford

    rtrafford Senior Member

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    When you ignorantly vote your freedoms into the hands of the bottom-of-the-barrel used car selling law school failures....well, you deserve what you get in return.
    Adopo, vacser, Scott W and 3 others like this.
  8. v10builder1

    v10builder1 Senior Member

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    I don't give a whit about the Canadian Luxury tax one way or the other. It is almost impossible these days to get through the day without someone bringing up a particular political position. Fortunately, this forum is generally an exception. The original post of this thread and several comments are in violation of Forum Guidelines for negative content. The Wooden Boat Forums have a section for this type of content - called the bilge - I suggest Forum Administrators add such a sub-forum.
    SeaLion likes this.
  9. rtrafford

    rtrafford Senior Member

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    Yes, let's push any discussion of the potential loss of a boat building industry into the bilge where we don't have to see it...it's just too unpleasant.
  10. mapism

    mapism Senior Member

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    Beware of complaining about politicians, folks...
    leeky and Capt Ralph like this.
  11. Capt Ralph

    Capt Ralph Senior Member

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    BINGO!!
  12. Scott W

    Scott W Senior Member

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    Government regulation is an inescapable reality of the boating industry, for manufacturers, buyers, enthusiasts and maritime professionals. The disposition of the respective global governments on the boating industry be it hostile, friendly or indifferent impacts the industry and its people more than any other force. How can any boating forum run from that and/or ignore it?
    Rerm likes this.
  13. dennismc

    dennismc Senior Member

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    Canadians should never complain about their leaders, in 1982 the Canadian constitution was created based on social equality and that comes through wealth distribution, because it is happening at an accelerated rate does not change the basic concept.
  14. olderboater

    olderboater Senior Member

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    Getting away from the politics, the US tried luxury taxes and they were a disaster. I'd expect the same in Canada although their boat buyer could be different. What was found on both autos and boats was that buyers who will spend outrageously on lavish accessories, will not spend when a luxury tax is added. Now, Canada may be different as you're already dealing with a high tax on the boat. Maybe Canadian buyers are immune to tax impact. They will find out quickly, as in the US, sales didn't slowly drop but instead plummeted to a standstill. This is the same US buyer who is going crazy on higher priced homes and higher priced boats, but just refused a luxury tax. Had nothing to do with price or affordability, but the label killed it.

    We'll soon know if the Canadian buyer responds similarly to the US buyer and to buyers where other luxury taxes that have been tried. The proof of concept is left to the market. Perhaps, the Canadian buyer will prove us all wrong. Won't take long to find out.
    FlyingGolfer likes this.
  15. rtrafford

    rtrafford Senior Member

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    Agreed that it won't take long to understand the impacts.
  16. Capt Ralph

    Capt Ralph Senior Member

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    So much un-reversable damage was done in the U S. Hope they realize the mess up in less time.

    On the next line of reason, another lesson was/will be; just how much the whole boating industry produces in taxable revenue already. That little dink anchor and beach towel mfgs will probably suffer also.
    Last edited: Jan 4, 2022
  17. Capt Ralph

    Capt Ralph Senior Member

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    I'm still laughing / crying over that Carlin skit..:(:):mad::)
  18. Slimshady

    Slimshady Senior Member

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    This isn't a left or right bash fest. It's how government rules and regulations can disastrously affect an entire industry. Poorly thought out rules can cut better than any Damascus steel.
    I spend a great deal of my time with government employees and local politicians as a part of my occupation. Most are good people with good intentions. They error in how their rules are written and the real world consequences of these rules. It is essential to our survival to explain how they hurt our businesses and a better way to get the desired results. Some listen some don't.
    gr8trn and Rerm like this.
  19. FlyingGolfer

    FlyingGolfer Member

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    The politicians advocating for and writing legislation such as this have good intentions. The results are very damaging, and do not increase revenue.
  20. olderboater

    olderboater Senior Member

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    I like the balance in your post. You've hit the key elements. Our government isn't run by experienced businesspersons. They honestly don't grasp the ramifications. They're often not bad people, just ill equipped and don't realize how little of how the world works they really know.

    Now this tax isn't one party, and it's not liberal vs. conservative. It's just like the US tax was, an attempt to cut the deficit. In the US, Bush signed it into effect in November 1991 and Clinton signed the repeal on boats in August 1993. The auto tax remained much longer. I believe you could have switched the two Presidents and Clinton would have signed it and Bush repealed it. Advisors recommended it and it was bought. Easy to say we knew it wouldn't work, but did we? I don't know if it will work in Canada or not. Frankly, it surprises me when it a yacht buyer changes their mind over a tax. We'll find out. Perhaps the US buyer is more stubborn than the one in Canada.

    All of government is hurt over the lack of experience of lifetime workers and of politicians. It doesn't just apply to business or to yachts. Our leaders don't understand being poor, they don't even do grocery shopping. They don't have kids in public schools generally. They don't grasp the challenge of paying for college. They don't even grasp being laid off jobs except on a fixed calendar where scheduled years in advance. Some do a better job of educating themselves on the problems the general population faces. It all starts early too. Have a group of young people do a household budget and just see the differences.