Canadian luxury tax.

[Ronnie]

@jEt_jAk @FSH 210 Sport , I don’t know guys, what you wrote makes academic sense but it’s not consistent with what I’ve seen here in CA, at least not where Yamaha sport jet boats and Waverunners are concerned. That is, the dealers within 150 miles of San Francisco sold out of their units early this year (around June), can’t keep them in stock and their waiting lists are really long, some of the boats and Waverunners on the waiting list have been paid for in full. I’d bet that many new boaters don’t know about the luxury tax but anyone who owned a boat registered in CA over the last 10 years knows and stays in it or buys new boats anyway.

 

[Yammi]

This will not apply to any boat under $250k...so that means all Yamaha boats will be under that range....so just the "normal" taxes - for Ontario thats 13% for everything.

 

[Julian]

Being taxed on what you spend on a boat over 1/4 million dollars doesn't seem like a major burden. If you can afford that, it's unlikely to stop you from buying it. As others have said....those who spend $1M plus on a boat probably have multiple houses and will just buy in a different location.
Lots of US states already do something similar....here in NC I pay tax every year on my boat.

Bet a bunch of boat get sold in December! (If they have any)

 

[BlkGS]

Being taxed on what you spend on a boat over 1/4 million dollars doesn't seem like a major burden. If you can afford that, it's unlikely to stop you from buying it. As others have said....those who spend $1M plus on a boat probably have multiple houses and will just buy in a different location.
Lots of US states already do something similar....here in NC I pay tax every year on my boat.

Bet a bunch of boat get sold in December! (If they have any)

I'd imagine the people spending 250k on a boat have some sort of loophole. Buy through an llc that writes it off as a business expense, lease it, something like that.

 

[seanmclean]

Yes, above sales tax. In my province of Ontario, sales tax is 13%. Add another 6.8% luxury tax (only on boats above 250k) and you end up paying that example 19.8%. On a boat worth less than 250k, you pay 13%.

I don't know man, this seems perfectly reasonable as a Canadian that values bridges that won't collapse on me. lol I think people that can afford a 380k boat can afford to pay an extra 6.8% tax.

Bridges are nice. 20% tax on a purchase is ridiculous (paid for with your income that's already seen 30+% taxation). Yeesh.

 

[Luc Lafreniere]

Bridges ain't free yo? lol I kid. I hear ya @seanmclean I'm not going to pretend to be well versed in the Canadian economy or taxation system. We, presumably, have qualified people to do that. Sometimes that's a stretch of a statement. But they are definitely better than me! Vote one party in, they tax this. Vote another party in, they tax that. Canada has fairly high taxes because many Canadians value the social services, infrastructure, etc. including myself. It's always a balancing act. Where do you tax, how much do you tax, where does it go, what are the priorities, does it go in a general pot for anything? Or specifically back to the same industry, etc.

I agree it sucks for the guy having to pay nearly 20% on that 380k boat. Keep in mind the way it's done is graded. You don't pay 20% as soon as it goes over 250k. It increases as per the amount spent above 250k. In Ontario, that starts at 13% and increases accordingly. Is that too much? Depends on who you ask of course. Should we tax other stuff? Probably and I'm sure they do. But you're going to get very, very few Canadians complaining about this luxury tax. I don't know a single person that owns a boat worth over 150k. We have a reasonably comfortable extended family financially, but none of us are rich. In Canada, anybody who can afford a 250k boat would definitely be considered very wealthy if not rich by most people. So yeah, it's just the reality. Almost none of us will complain about this beyond a forum. It's just not worth our time.

I'm actually surprised so many here are so against this. As someone else pointed, aren't ALL of our boats whether Yamaha, Scarab, Chap, etc. all worth less than 250k CAD? So why is it that "we" care so much? Because we don't like the concept of taxes? Just speculating. Taxes are needed to have what we value as a G7 country. This particular tax has almost no effect on probably over 95% if not 99% of the population of Canada.

 

[FSH 210 Sport]

As I said in my intro with this post, ”apparently the Canadian govt didn’t learn the lessons the US govt did in 1991”.

We all want good roads, bridges, and other infrastructure, and we should have it. The real problem is when the majority of the users are not paying at the same level as the minority of users.

What this tax will do is hurt the average blue collar worker in the end, you know the non rich guy who works at the boat shop, and other associated industries, and it will. I stated as much in a subsequent post. In the end, the US version of this luxury tax led to a SUBSTANTIAL DECEASE in overall revenue, and I’m sure that will be the case with the Canadian version.

The reason I “care” is that I love all boats big and small, and the innovations found on “rich peoples” boats ultimately becomes inexpensive enough to find its way onto boats in our price range. Without that money being invested in higher end boats it hurts the poor mans boats.

And I’ve never liked the adage “they (rich) can afford to pay” the taxes, because sooner or later, someone else is going to decide what you have is what they “need” and you (now considered rich) will get taxed in a confiscatory fashion on the simple poor man things you like. If one takes the time to really delve into how many taxes are paid, and what the actual purchasing power of every dollar you earn is, you’ll find that the actual purchasing power on a given dollar is around 28-32 cents. And with inflation in the teens at best, that number goes down even further. So the real problem I have is that the govts are crack addicts and their drug is other peoples money. The other reason I “care” is that these embedded taxes make it so the average blue collar person is priced out of goods that said blue collar person would be able to afford.

I’m not rich. I’ve worked very hard to get what I have. I’d love to have a higher end boat, a CC with twins, but I can’t afford that. What I can afford is my awesome little 210 FSH for which I’m grateful, and to me that $62K USD boat was a substantial outlay in my disposable income. So no, if this ”tax” was in the US it would not affect me as proposed, $250K CAD/$194 USD, but in my life I’ve seen the mission creep in so many other ways where the govt just slides into your wallet like the blob going under a door, sly and insidious.

 

[Luc Lafreniere]

OK, I admit defeat.

Your comments made me do some actual research. I admit, I simply dismissed many of these types of comments because I assumed (voilà the problem), that there were very few boat manufacturers in Canada that sell such boats above 250k. As I delved into some articles, I found an analysis done by Jack Mintz. I verified and yeah, he's an actual economist, with actual vetted academics and real world experience. His report, Economic Analysis: Proposed Luxury Tax On New Boats Will Be Job Killer & Have Major Negative Impact on Boating Sector , evaluated the possible impacts of this tax. But it does state in the report the impacts are highly dependent on an "elasticity" number he uses to forecast the possible severity of the problem. Nobody knows that number exactly for Canada... yet.

I'll spare everyone the details because I'm probably the only one stupid enough to get sucked in to reading such a report. But yes, the effects to the boating industry, dealers, workers, service industry, most likely balance any net gains from the tax. In essence, it seems it's to portray the government as taking from the rich to give to the poor. I personally couldn't care less about that last statement, but I get that those optics look good to many people.

I still don't think the people buying those boats will be hurting by this, but yeah, it does hurt others enough that I'm fairly convinced it's not really worthwhile. Better off doing other things to get this money.

I also came across multiple sources about the USA luxury tax failure that you mentioned along with other countries too. Each time, the rich people avoid it, postpone purchases, etc. until the tax is taken away. In the meantime, hurting those industries.

Yes, for those wondering, people that admit they were wrong do exist. lol I like to base myself on facts in life. I reserve the right to change my mind when I learn new things. Just like I reserve the right to change my mind again if I learn new things that oppose what I just discovered. That's right, that's my future "out" in case I need one.

 

[FSH 210 Sport]

OK, I admit defeat.

Your comments made me do some actual research. I admit, I simply dismissed many of these types of comments because I assumed (voilà the problem), that there were very few boat manufacturers in Canada that sell such boats above 250k. As I delved into some articles, I found an analysis done by Jack Mintz. I verified and yeah, he's an actual economist, with actual vetted academics and real world experience. His report, Economic Analysis: Proposed Luxury Tax On New Boats Will Be Job Killer & Have Major Negative Impact on Boating Sector , evaluated the possible impacts of this tax. But it does state in the report the impacts are highly dependent on an "elasticity" number he uses to forecast the possible severity of the problem. Nobody knows that number exactly for Canada... yet.

I'll spare everyone the details because I'm probably the only one stupid enough to get sucked in to reading such a report. But yes, the effects to the boating industry, dealers, workers, service industry, most likely balance any net gains from the tax. In essence, it seems it's to portray the government as taking from the rich to give to the poor. I personally couldn't care less about that last statement, but I get that those optics look good to many people.

I still don't think the people buying those boats will be hurting by this, but yeah, it does hurt others enough that I'm fairly convinced it's not really worthwhile. Better off doing other things to get this money.

I also came across multiple sources about the USA luxury tax failure that you mentioned along with other countries too. Each time, the rich people avoid it, postpone purchases, etc. until the tax is taken away. In the meantime, hurting those industries.

Yes, for those wondering, people that admit they were wrong do exist. lol I like to base myself on facts in life. I reserve the right to change my mind when I learn new things. Just like I reserve the right to change my mind again if I learn new things that oppose what I just discovered. That's right, that's my future "out" in case I need one.

I don’t look at it as defeat.. I look at it as a victory for you! I’m glad you did some research, you are not stupid for reading a report, on the contrary, that makes you a smart person. Anytime we can educate each other it is a huge win, I didn’t know there was a report on the Canadian version, I’ll be reading that this evening.

And…. Major kudos to you for being pragmatic! I like to think I am the same.. as the Dude would say in The Big Lebowski, “Hey man, new shit has come to light”

Post Script:
I know there is at least one Canadian manufacturer that produces aluminum hulled boats, great company and very nice boats. My friend and I have some long term plans on perhaps going halvers on a build of a 28-30’ cuddy/pilot type of boat that we could take anywhere, we call it the fear no evil boat. It might get to that threshold but I doubt it.. we are thinking it will be in the $165-$185K range depending on how we out fit it.

 

[FSH 210 Sport]

OK, I admit defeat.

Your comments made me do some actual research. I admit, I simply dismissed many of these types of comments because I assumed (voilà the problem), that there were very few boat manufacturers in Canada that sell such boats above 250k. As I delved into some articles, I found an analysis done by Jack Mintz. I verified and yeah, he's an actual economist, with actual vetted academics and real world experience. His report, Economic Analysis: Proposed Luxury Tax On New Boats Will Be Job Killer & Have Major Negative Impact on Boating Sector , evaluated the possible impacts of this tax. But it does state in the report the impacts are highly dependent on an "elasticity" number he uses to forecast the possible severity of the problem. Nobody knows that number exactly for Canada... yet.

I'll spare everyone the details because I'm probably the only one stupid enough to get sucked in to reading such a report. But yes, the effects to the boating industry, dealers, workers, service industry, most likely balance any net gains from the tax. In essence, it seems it's to portray the government as taking from the rich to give to the poor. I personally couldn't care less about that last statement, but I get that those optics look good to many people.

I still don't think the people buying those boats will be hurting by this, but yeah, it does hurt others enough that I'm fairly convinced it's not really worthwhile. Better off doing other things to get this money.

I also came across multiple sources about the USA luxury tax failure that you mentioned along with other countries too. Each time, the rich people avoid it, postpone purchases, etc. until the tax is taken away. In the meantime, hurting those industries.

Yes, for those wondering, people that admit they were wrong do exist. lol I like to base myself on facts in life. I reserve the right to change my mind when I learn new things. Just like I reserve the right to change my mind again if I learn new things that oppose what I just discovered. That's right, that's my future "out" in case I need one.

The article you linked, with its embedded link to the analysis by the economist was thorough and spot on. I do think his analysis was conservative in its impact given the observed increase of boat sales all around over the past year, but the data used was from 2019-a sound but conservative was to analyze it.

The one thing you mentioned, the elasticity number used by the PBO was -2.4, a very conservative number when compared with the observed elasticity number of -25 In other countries wherein luxury taxes have been enacted on other luxury items. The author mentions that no firm number can be determined because the actual purchasing behavior cannot be forecast. Having said that, it seems that an elasticity number somewhere in between the -2.4 and -25 could be used which is reasonable and would dramatically affect the impact on Canada’s boating industry as well as the overall revenues forecast for the luxury tax. Toss in the cost of implementation and the likelyhood of a net negative revenue becomes inevitable. Meanwhile, all of the people who work in the industry are impacted for a net negative gain.

Thanks again for sharing the link! The analysis done by the economist was great reading!

 

[Ronnie]

Canada’s luxury tax structure seems a lot better than California’s from the perspective it is only charged once not once a year and, unless I’m mistaken, it only applies to new purchases. I wish CA would adopt Canada’s practice but have a feeling it will be the other way around.

 

[212s]

Sucks to have to pay more taxes... but then again, sucks not to have enough money to help pay for infrastructure, hospitals, schools, transit, etc. etc. etc. These services that many Canadians value have to be paid somehow.

I don't mind taxes to fund services...but we're losing more and more services every year. Instead of cutting costs, our government cuts our services while raising taxes for their salary hikes.

Not many Canadians buy a boat worth over 250k.

Have you been to the marinas lately and checked out the boats there? Easily over half of the boats are over 500k, and about 25% are over 1m. Sure there are lots of smaller fishing boats, day boats, etc. not at the marinas, but we spend a lot on boats. For instance a nice 42ft cruiser is over 1m, a 32ft high performance CC with twin 450R is 1m too. Those high performance boats you see in the poker runs are 1-5m each and I typically see 100 1m+ boats on the water each day we're out boating. Yeah we spend a lot on boating.

 

[Luc Lafreniere]

True in big cities/big waterways, but not in the vast majority outside the GTA. If you go to any other area, those boats are very few. I grew up on Lake Nipissing, I still don't know a single person with a boat worth more than that. Even the very wealthy people there don't own such big boats. Such big boats only exist on big waters since they serve very little purpose anywhere else. Ocean, great lakes and a few on rivers like the Ottawa, Thousand Islands area (hence your region), etc. "We" is a relative term. There are still very, very few Canadians by percentage that buy expensive boats worth over 250k. They just take up a lot of space in marinas around big cities, so they are prominent. But yes, I'm not saying there is no significant amount, I'm saying the percentage of Canadians affected by the actual purchase of the boat is an extremely small percentage (not actual number of people). That small percentage of people do spend a lot and I'm sure there's a good amount of money to be made selling these boats. But basing yourself on the Thousand Islands... lol. I've boated there, driven by many marinas in that area.. that is NOT standard. Even the Muskokas, a pretty wealthy area, northern Ontario, eastern Ontario... the waterways don't support such large boats. Alberta? What water? lol Hence the small percentage. I've travelled all over Canada. I stand by my statement. The median income, average income, upper middle class and everyone under can't afford 250k+ boats (or shouldn't except a few that decide to get into serious debt).

And I hear ya on pay increases. Ugh. I hate all politicians equally. But I also respect anyone that's willing to even attempt that job. They signed up for it, but there's no way I'm doing that job. But I also don't think it's very fair to increases their salaries when everyone else is getting a cut back. So yeah.

 

[mrcleanr6]

a boat over 250k isnt a very big boat at all. just a small center console with twin outboards is going to be over 250k. its actually hard to find a new boat under 250k anymore. lakes may b e a different story but anywhere along the coast of the US most of the boats will exceed the 250k mark. not sure about canada but go to most marinas and i bet 80% of the boats there are over 250k. just a single outboard is $65k anymore and how many boats have a single engine....very few. then you'll have 20-40k just in electronics on a small boat. the luxury tax in the 90's put most boats mfg here out of business. for larger boats you can register the boat offshore to get around the taxes. i am having a boat built right now. i will get rid of my 275 end of 2023 season when my new boat comes in. new jersey like florida has capped the sales tax for boats at $20k. we have alot of boat builders here like in florida and they have learned not to tax boats too much otherwise it just kills the economy. the cap is great otherwise i would be paying about $115k in sales tax for a boat that is about $1.7m. thats a big chunk of change. in the uk you have the vat taxes. all these taxes are why many large yachts you will see the home port in the cayman islands, etc. these boats and people are not from cayman. the boat is registered there to avoid all the taxes. i have the option to take delivery of my boat offshore and register it outside the US if i wanted. this would allow me to skip the 20k sales tax as well as the 100k in tariffs when it comes into the US. i dont know all the details but i think every six months i believe you need to leave the country in the boat then you can return. unfortunately i really dont feel like bothering with that so i am going to be forced to pay the tariffs and taxes.

 

[Jim_in_Delaware]

Let's be careful not to confuse what we see in a marina as the average boater. Lendingtree (the boat loan folks) notes the average boat sells for 60 - 75K, so for every 240K boat sold, there are 3 much less expensive boats sold. This shouldn't be too surprising because when we look at Yamaha's for example, this covers all the 19 and 21 foot boats, and some of the 25 foot boats as well.

I see a lot of 21 - 27 foot center console used for fishing. It's pretty easy to find these boats for under 250K. For example, one could well option a new Robalo r272 for $200K.

Unless one is living aboard a vessel and cruising the vessel, its probably a good idea to get the boat registered in the state of primary use. Many states will require that if a vessel which spends more than 90 days a year in the state must pay the vessel excise tax unless the owner can prove that the vessel is principally used in another state. I believe that this also holds true for Coast Guard documentation or offshore flagging a vessel.

Jim

 

[HangOutdoors]

Lendingtree is a marketer/broker for the most part they are not a lender. They also generally cater to a different financial demographic. They send your info to their paying clients/advertisers. Individuals whom could afford higher end or larger purchases typically do not use these type of services, have excellent financing and options available already and they dont want their financial information passed around.

 

[Jim_in_Delaware]

If someone can offer a more comprehensive number than Lendingtree, I would surely be interested in seeing the numbers.

Regardless, the National Marine Manufacturers Association has reported that ninety-five percent of boats on the water in the U.S. are less than 26 feet—boats that can be trailered by a vehicle to local waterways.

NMMA also reports that ninety-five percent of boats sold in the U.S. are American made. And that the recreational boating industry supports 691,149 American jobs (511,117 direct jobs and 180,032 indirect jobs) and 35,277 American businesses.

Jim

 

[212s]

True in big cities/big waterways, but not in the vast majority outside the GTA. If you go to any other area, those boats are very few.

I don't know about that...we trailer everywhere from Wasaga and Lake Simcoe to Lake Erie to Kingston and Gananoque, and while there are lots of smaller boats, half the boats we see are 25ft or larger and they're not cheap models. Many are older models, but still not cheap in their day. In places like the Bay of Quinte there's a million fishing boats due to the very popular fishing areas, but if you ignore those, most boats there are over 30ft.

There's a lot of money in the water because if you like water, you spend your money on it. We don't ski or sled anymore and decided to spend that money on a nice new boat. We're not rich but we could afford a bigger or nicer boat but decided on this size and model with jet drives for the fun, versatility, size, features, etc. We looked at everything from 19ft to 26ft all similarly equipped and trailer-able, and they ranged from 65k to 225k plus tax...the prices start to climb faster once you hit the 22ft range, and skyrocket once you go wider than 102" due to width restrictions while trailering, and we see dozens of boats like these and bigger every day. Speaking of fishing boats, even a nicely equipped 20ft Ranger is 100k plus tax and there's millions of those in the fishing areas. Add a decent pickup and you're looking at 160k rolling down the road just to go fishing...that's more than our first house.

And I hear ya on pay increases. Ugh. I hate all politicians equally. But I also respect anyone that's willing to even attempt that job. They signed up for it, but there's no way I'm doing that job. But I also don't think it's very fair to increases their salaries when everyone else is getting a cut back. So yeah.

Well you live in Ottawa, go tell them off for me!

 

[FSH 210 Sport]

Again.

The mindset is that those that can afford the more expensive boats can afford to pay the tax=soaking the “rich”. The irony is, as has been stated here, the majority of boaters are small boats ergo the largest users / majority of facilities etc, yet the “rich” / minority aka smallest users of facilities are being targeted to pay for the majority.

This is further exacerbated by the “rich” paying beyond 50% in income taxes, and the above paragraph applies here as well. To me this is confiscatory taxation which was tried during the depression with disastrous results to recovery. With WWII and conscription of 10 million men bringing recovery.

 

[FSH 210 Sport]

So was watching some vids and came across this boat. I would call this a very nice single CC that has the legs to go offshore. I selected the options I would like, I could probably reduce the price point some by going with a less zoot electronics suite… but it does have radar, the point is this what I would call a workin mans boat. It’s not huge, it’s not overpowered, it is trailerable of course it doesn’t come with a trailer so tack on another $6K for a trailer and another .. what? $2500 for freight and dealer prep. ( this to me also illustrates what a great bang for the buck my 210 FSH is or any of the Yamaha boats for that matter, it is knocking on $200K more than my 210 without a trolling motor, and roughly $144K more than the 255 FSH sport E.). The point is, if a body wants a good fear no evil non sinkable boat for off shore or Great Lakes fishing this is a great boat for that. At today’s exchange rate this boat is $312,881 CAN.