For the reason that partnership between the Liberals and NDP was shaped again in late March of this 12 months, one of many joint political messages has been “tax the wealthy”.
By way of coverage choices, that translated into a brand new federal luxurious tax on automobiles and plane priced over $100,000 and boats priced over $250,000.
The tax price is both 10% of the full post-tax buy worth, or 20% of worth over a sure threshold, whichever is lesser.
For the aim of this report, I’ll give attention to boats.
The justification for the tax, from the federal government, is anybody who can afford a ship costing $250,000 can afford to pay extra in tax.
Some readers are in all probability already questioning why even trouble to say a tax that solely an extremely small share of the inhabitants will must be involved with.
I am not writing to advocate for potential new boat house owners however relatively to elucidate the coverage ramifications concerned with taxation competitiveness.
When the Parliamentary Finances Officer (PBO) appeared on the fiscal implications of the luxurious tax, he concluded it is going to generate authorities revenues of as much as $760 million.
Whereas that sounds optimistic, the draw back is that the PBO additionally calculates there can be a gross sales decline of $2.9 billion.
The PBO estimates 75% of that loss — or $2.1bn — can be incurred by the leisure boat trade right here in Canada.
In different phrases, this tax creates a lack of income.
As we heard from representatives of the Canadian marine trade, the tax is anticipated to create job losses and different financial hardships.
As many will know, Campion Marine, an iconic Kelowna boat producer, lately closed its doorways, creating the lack of roughly 100 well-paid jobs, in addition to the lack of different financial contributions essential to our regional and nationwide economic system.
It should be acknowledged there may be already a provincial luxurious tax in B.C., and a further federal luxurious tax will hit B.C. more durable than different elements of Canada.
The provincial and federal luxurious taxes can be utilized to boat purchases earlier than GST is utilized. Meaning the GST can also be in the end relevant to the provincial and federal luxurious taxes, which creates a fair greater closing sale quantity on the boat in query.
These added prices create a bigger incentive for patrons desirous to keep away from paying these taxes and have the means to go to different jurisdictions the place the taxes aren’t a problem.
I’m not suggesting the luxurious tax was the only real purpose for the closure of Campion in Kelowna, as many of the boats it constructed wouldn’t have been impacted by this luxurious tax.
Nonetheless, it does level out a sample that we, as Canadians, ought to pay attention to. International Okanagan Information has reported Campion will transfer manufacturing to Texas and Mexico. In Texas, Campion pays no luxurious tax, no carbon taxes, nor wouldn’t it pay greater payroll taxes on EI and CPP, in addition to the Provincial Employers Well being Tax.
In different phrases, as these new additional prices make Canadian-made services dearer, it makes the price of doing enterprise outdoors of Canada extra enticing.
For instance, you might keep in mind the Bombardier C-Sequence jet. Regardless of Canadian taxpayers investing roughly $1 billion into the event of this business jet, it’s now in-built Alabama and Canada.
On one other totally different however native notice, whereas Tolko industries has closed native lumber mills in communities of Kelowna and Merritt, it has invested in a number of new lumber mills in locations like Ackerman, Mississippi, Urania, Louisiana and Ruston, Louisiana.
This isn’t an issue that lands solely on the ft of the federal authorities. Many provincial authorities insurance policies additionally contribute to the shortage of competitiveness and, in some instances, native authorities performs a task as effectively.
My query this week:
Are you involved concerning the rising variety of well-paying mill and manufacturing jobs shifting from Canada to the US?
I might be reached at [email protected] or name toll free 1-800-665-8711.
This text is written by or on behalf of an outsourced columnist and doesn’t essentially mirror the views of Castanet.