Since the partnership between the Liberals and NDP was formed back in late March of this year, one of the joint political messages has been “tax the rich”.
In terms of policy decisions, this translated into a new federal luxury tax on vehicles and aircraft priced over $100,000 and boats priced over $250,000.
The tax rate is either 10% of the total post-tax purchase price, or 20% of value over a certain threshold, whichever is lesser.
For the purpose of this report, we will focus on boats.
The justification for this tax, from the Trudeau Liberal government, is anyone who can afford a boat costing $250,000 can afford to pay more in tax.
Some readers are probably already wondering why even bother to mention a tax that only an incredibly small percentage of the population will need to be concerned with.
I'm not writing to advocate for potential new boat owners but rather to explain the policy ramifications involved with taxation competitiveness.
When the Parliamentary Budget Officer (PBO) looked at the fiscal implications of the luxury tax, he concluded the luxury tax will generate government revenues of up to $760 million.
While this sounds positive, the downside is that the PBO also calculates there will be a sales decline of $2.9 billion.
The PBO estimates that 75% of that loss — or $2.1bn — will be incurred by the recreational boat industry here in Canada.
In other words, this tax creates a loss of revenue.
As we heard from representatives of the Canadian marine industry, this tax is expected to create job losses and other economic hardships.
As many will know, Campion Marine, an iconic made in Kelowna boat manufacturer, recently closed their doors creating the loss of roughly 100 well-paying jobs, as well as the loss of other economic contributions important to our regional and national economy.
It must be acknowledged that there is already a provincial luxury tax in BC, and an additional federal luxury tax will hit BC harder than other parts of Canada.
The provincial and federal luxury taxes would be applied to boat purchases -- before GST would be applied.
That means the GST is also ultimately applicable to the provincial and federal luxury taxes- which creates an even higher final sale amount on the boat in question.
These added costs create a larger incentive for buyers wanting to avoid paying these taxes and have the means to go to other jurisdictions where the taxes aren't an issue.
I am not suggesting the luxury tax was the sole reason for the closure of Campion in Kelowna, as most of the boats Campion built would not have been impacted by this luxury tax.
However, it does point out a pattern that we as Canadians should take note of.
Global Okanagan News has reported that Campion will be moving production to Texas and Mexico.
In Texas, Campion would pay no luxury tax, no carbon taxes, nor would it pay higher payroll taxes on EI and CPP as well as the Provincial Employers Health Tax.
In other words, as these new extra costs make Canadian made products and services more expensive -- it makes the cost of doing business outside of Canada more attractive.
For example, citizens may remember the Bombardier C-Series jet.
Despite Canadian taxpayers having invested roughly $1 billion into the development of this commercial jet, it is now built in Alabama and not Canada.
On another different but local note while Tolko industries has closed local lumber mills in communities of Kelowna and Merritt .
Tolko invested in several new lumber mills in places like Ackerman, Mississippi as well as Urania, Louisiana and Ruston, Louisiana.
This is not a problem that lands solely at the feet of the Federal Government.
Many Provincial Government policies also contribute to the lack of competitiveness and, in some cases, local government plays a role as well.
My question this week:
Are you concerned about the growing number of well-paying mill and manufacturing jobs moving from Canada into the United States?
I can be reached at Dan.Albas@parl.gc.ca or call toll free 1-800-665-8711.
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Dan Albas is the Member of Parliament for the riding of Central Okanagan-Similkameen-Nicola.