Trudeau's Luxury Tax

[leeman]

I'm curious if anyone has seen any numbers yet showing the effect of the luxury tax on boat sales in Canada. I would imagine the high end sector took a big hit. Or perhaps the sales moved to used boats built in 2018 or earlier?
It would be interesting to know if the only result of this ingenious regulation was the crushing of new boat sales.

 

[PierreR]

I believe they tried this in the USA years ago and the result was exactly that. It crushed new sales by 90%. I was repealed in a short time but not before irreparable damage was done to the industry, talent and jobs.

 

[Action]

The Canadian Luxury tax that went into effect 9-1-2022 has created sales for items outside of the threshold of the tax. There are a lot of situations the tax applies or does not apply. As one example - does not impact aircraft with greater than 39 seats. The 40th seat on a private plane could mean a big savings.

Generally only the very wealthy will pay the tax on items in the threshold and not care. The rest, even though they are buying a "luxury item" will find ways to buy around the rules or have stopped buying. This has hurt new aircraft sales and auto sales.

The threshold for boats is rather high, $250,000. (Maybe not wanting to repeat the US mistake) While aircraft and automobile sales are at $100,000. So far the biggest negative impact has been on aircraft sales.

And as stated above, the 1991 US luxury tax did not work. It did not generate more sales tax because the market just stopping buying (mostly yachts) Then companies made labor layoffs due to the reduced demand. It was repealed in part in 1993 and completely in 2002.

Government looking to generate more revenue by making market place business decisions is a problem. The fix is for governments to pull back on spending, not look for ways to take more revenue.

Action

 

[Wdeertz]

Generally only the very wealthy will pay the tax on items in the threshold and “do” not care.

The threshold for boats is rather high, $250,000.

Action

I don’t know too many wealthy people that don’t care about an extra tax. They didn’t get wealthy by paying unnecessary taxes.

You’re not serious at $250k being a high threshold for the luxury tax? Not exactly only jetsetters buying boats over this level.

 

[Action]

That $250,000 is a lot higher than the $100,000 threshold for aircraft.

The potential buyers for items that have this tax will fall into 3 categories.
The first group will not buy. They were considering and now because of the tax they are just no longer buyers.

The second group will buy however it is a negotiation. They will negotiate with the seller to offset the tax. In any way shape or form. And the buying process will take longer because of that tax. It is just another part of the buying negotiations.

The third group doesn't care. They want it and they are buying it and the cost of the thing just isn't much of a factor. In fact, they likely do not even get involved in the buying process for a yacht or aircraft. They have people for that. That person has a goal of having that product on a given time table. Then they send their person out to get relevant details to make the purchase happen. The tax .... well that is just a detail that came with the purchase. It all doesn't matter because they have the assets to make the purchase. And the purchase doesn't really impact their financial position. The tax was not unnecessary. It had to be paid to get what they wanted. Just like the rest of have to pay excise tax on a vehicle registration renewal. We didn't have much of a choice if we want to drive legally on the public streets. This kind of wealth would have the same view point on the tax. The government that created the law believes these are the only buyers of this kind of "luxury" item. I get it that you don't know that kind of wealthy people. They tend to not be available to the rest of us.

My daughter works in a high end (designer) clothing store in Scottsdale. There are buyers that will come in and drop thousands in 45 minutes for a couple of pieces of clothing. It is a different kind of person/lifestyle. That kind of "wealthy" buyer does not give a lot of consideration to the cost. That kind of wealth makes decisions and then buys. They buy the same way someone in Target makes the same decision for clothing,

 

[Wdeertz]

Well, I worked directly for a multi billionaire but maybe that doesn’t qualify as wealthy enough in your book. ��

Does this luxury tax apply to all Canadien citizens regardless of where the vessel is registered? If not then might another option be for registering offshore? Of course there is a cost to doing this but maybe overall makes sense. This is exactly why the state of Florida caps the sales tax on vessels to $300k, they were losing out of the mega yachts and figured this tax level was lower than the legal fees to register offshore so at least they got something.

 

[Action]

Has nothing to do with me or my book.

If you are interested in that Canadian law, the data is on the internet.

 

[Wdeertz]

Has nothing to do with me or my book.

If you are interested in that Canadian law, the data is on the internet.

You wrote a book on this subject? If so please share the link as I might be interested in reading.

 

[PierreR]

Even in US dollars those thresholds are very low for a luxury tax trying to hit the wealthy. Those numbers are paid by the upper middle class.
$250k means there is a whole lotta posters here with mega yachts. You KNOW who you are.

 

[leeman]

Well, I worked directly for a multi billionaire but maybe that doesn’t qualify as wealthy enough in your book. ��

Does this luxury tax apply to all Canadien citizens regardless of where the vessel is registered? If not then might another option be for registering offshore? Of course there is a cost to doing this but maybe overall makes sense. This is exactly why the state of Florida caps the sales tax on vessels to $300k, they were losing out of the mega yachts and figured this tax level was lower than the legal fees to register offshore so at least they got something.

I was wondering about the rules for offshore registering. Also, is it required to register a boat? Is it possible to buy a boat and just sail away?
If you buy a boat offshore, do you only pay the tax upon entering Canada? There must be lots of builders and other vendors not enrolled with the Canadian government, so tax not collected/paid at point of sale.

 

[Action]

https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/luxury-tax.html

 

[Bacchus]

Most locations have a time limit that allows out of area registered boats to visit / transit to prevent " just register it somewhere else" and bring it into a country, state,netc

 

[Wdeertz]

Even in US dollars those thresholds are very low for a luxury tax trying to hit the wealthy. Those numbers are paid by the upper middle class.
$250k means there is a whole lotta posters here with mega yachts. You KNOW who you are.

My point exactly.

 

[High Wire]

Nov 1991, the US enacted a Luxury Tax. It killed new boat sales. Anyone thinking of buying a boat put that thought on hold. Boat builders everywhere went out of business and tens of thousands lost their jobs.

 

[Blissboat]

The fix is for governments to pull back on spending, not look for ways to take more revenue.

Action

Do you have any specific recommendations?

 

[Action]

Do you have any specific recommendations?

Give the Congress (Federal Government) $4 trillion dollars to spend however they want. If they run over, anyone in congress and the president that is up for re-election is no longer eligible.
Following year repeat. Following year repeat. Following year repeat.

Current levels of US Federal government spending are about 6 trillion a year.
IRS revenue is about 4.
Even if that strategy is tiered to down to 4 trillion (or what is collected) over some years at least that is the direction to stop the unsustainable.

The US Federal Government spends $100,000 USD every second. By the time you finish reading this post the government will have spent several hundred thousand dollars. At the current level of spending the debt increases by $1,000,000,000,000. ($1 Trillion) every 140 days.

Congress got us here. They need to be the solution to get us out. We pay them to do a job. They need to start doing the whole job just not spend money like there is no end.

 

[Blissboat]

Congress got us here. They need to be the solution to get us out. We pay them to do a job. They need to start doing the whole job just not spend money like there is no end.

"Congress" does what its members think their voters want. For the last 40+ years, it appears that Congress has thought that voters want to pay little or nothing in taxes, while continuing to spend. That's obviously unsustainable, but every attempt to change one side or the other side of the equation causes howls of protest. I am just wondering where and how you instructed your Representative and Senators to either reduce spending or increase revenue.

Partisan politics aside, the fact is that since the 1980s, my generation and those who came before having been living on borrowed money. I do not want to leave it to my grandchildren to pick up the tab.

 

[Action]

Partisan politics aside, the fact is that since the 1980s, my generation and those who came before having been living on borrowed money. I do not want to leave it to my grandchildren to pick up the tab.

I agree.
Not sure I have much of a choice for my descendants at this point.

As to specifics, I don't have a clear answer.
The border bill is what is currently in the new cycle.
Regardless if it would work or not, the bill is set up to spend too much.
This $118 billion dollar bill has $60 billion going to Ukraine, $14 to Israel, $10 to Gaza and $20 billion for the border.

The title of the bill is inaccurate. Why? (That was rhetorical, I know the answer)
The US has sent $75+ billion to Ukraine in the past. This bill would essentially double the money. When does it end?
It was pointed out to me the US Marine Corp has a smaller annual budget at $47+ billion for 2022. Why are we spending more military money in Ukraine than for the Marine Corp?

Just an example, at least for me, that the bill creators have a problem. It is a spending problem, not a taxing problem as the start of the thread. Luxury Tax.

 

[SteveK]

Eliminate debt, ban borrowing. Introduce balanced budgets. If this year goes over then the deficit is to be repaid in the next budget, by taxpayers, not by borrowing.

From a search I see the US is paying 24% of taxes on interest. Canada details are harder to determine, the target was 10%, but rising rates made it 37% in the last quarter of 2023.

Not only is a large part of the taxes going to pay interest, the rising debt is passed forward to the next generation to deal with.

 

[Larry M]

Thread closed. General discussions and/or statements that are political in nature are not allowed in ANY areas of the forum. Discussions about current or pending legislation or regulations that directly pertain to Boating are acceptable but will be closed or removed if they wander off topic.

Thanks for understanding