Canadian luxury tax.

[FSH 210 Sport]

Looks like the Canadian govt failed to learn the lesson the United States did in 1991.

Q&A: Canada’s new luxury goods tax

Canada proposed a new tax on luxury vehicles, yachts, and personal aircraft. Our Q&A answers all of your questions.

www.bdo.ca

 

[HangOutdoors]

Wow, 10% or 20% depending on the purchase price? That is ridiculous...

 

[Ronnie]

Don’t know about the time 1991 lesson but Canada’s luxury tax seems to be a lot higher than CA’s. CA = 1% of current hull value, for discussion purposes assume the car is new and just sold for $120k.

ca luxury tax is $1,200

Canada’s luxury tax is the lesser of $4,000 and$12,000

I thought Uncle Sam was greedy, now not so much.

 

[HangOutdoors]

@Ronnie How did you come up with $4000? Maybe I dont understand. wouldn't it be $10,000 plus 20% of anything over $100,000?

Either way, It is nasty. I also wonder if you can finance the luxury tax in, like sales tax? So it is just tacked onto MSRP etc.

 

[FSH 210 Sport]

From what I read, it states the tax is computed on the purchase price of the thing..

 

[Jim_in_Delaware]

My thought is that the Canadians can tax themselves however they want. ?‍

I seem to recall that in the US, however, when we tried this is the 90's, many folks just postponed buying boats and airplanes, as after all, they are luxury items and you really don't need to buy them now or buy them new. I recall it really hit the U.S. boat manufacturing industry hard.

Jim

 

[FSH 210 Sport]

@Ronnie How did you come up with $4000? Maybe I dont understand. wouldn't it be $10,000 plus 20% of anything over $100,000?

Either way, It is nasty. I also wonder if you can finance the luxury tax in, like sales tax? So it is just tacked onto MSRP etc.

The way I read it… for a boat?

20% tax if the retail price is $250,000 or above.
10% tax if the retail price is below $250,000.

 

[Britboater]

Welcome to our world here in the UK, 20% sales tax on EVERYTHING!
Yes, even boats and cars

 

[Luc Lafreniere]

I think people misunderstood how to calculate this.

Look at example 4 here: Consultation on the Select Luxury Goods Tax - Canada.ca

You have to do two calculations:

a) 10% of total value
b) 20% of value ABOVE 250k.

Whichever is less you pay. So in there example, a boat worth 380k:

a) 10% of that is 38k.
b) 20% of the value ABOVE 250k... so 380k - 250k = 130k. 20% of 130k = 26k.

Total luxury tax paid is 26k on a 380k boat. So 26k/380k = 6.8% luxury tax.

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. We can agree to disagree on where the money should come from... but I for one agree with this one. But I suspect I'm in the minority on this one. Not many Canadians buy a boat worth over 250k.

Also, yes, Canadian here.

 

[HangOutdoors]

@Luc Lafreniere is the Luxury Tax over and above Sales Tax? Not sure what Canada does, haven't been there in a while on land at least !

When you break the numbers down like that it appears more palatable.

 

[Luc Lafreniere]

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.

 

[Ronnie]

Don’t know about the time 1991 lesson but Canada’s luxury tax seems to be a lot higher than CA’s. CA = 1% of current hull value, for discussion purposes assume the car is new and just sold for $120k.

ca luxury tax is $1,200

Canada’s luxury tax is the lesser of $4,000 and$12,000

I thought Uncle Sam was greedy, now not so much.

View attachment 168363

Ok here are my calcs/showing my work was the term used in school, back in my day anyway.

first I used a car worth $120k instead of a boat because the threshold for a boat in Canada is $250k whereas a car is $100k but the calcs will be the same in either case.

note there are two calculations to determine the tax due. It is the lessor of the two.l that applies.

first calc is 20% of the value over the $100k threshold. If the car is worth $120k - $100k threshold amount = $20k x 20% = $4,000.

Second calc is 10% of the retail sales price of the car. Again if the car is worth $120k x 10% is $12,000.

$4k is less than $12k, so 4K is the tax.

In CA it’s an annual luxury tax and its 1% of the hull value, mine started around $400 in 2012, this past season I paid $280ish. This is on top of the sales tax which is based on the country you live in, in alameda county where I live it’s 10.5%. I just bought two 2021 Waverunners earlier in 2021, i paid sales taxes but not luxury tax initially, they didn’t start billing me luxury taxes until after the first season, currently I pay more luxury taxes on my Waverunners than I do on my boat.

 

[Miitch]

you guys got room down there in Uncle Sam land for one Frosty Boy???

 

[HangOutdoors]

@Ronnie So the CA Luxury tax is yearly

@Luc Lafreniere Is the Canadian Luxury tax 1 time or yearly?

 

[rkluck]

We have something similar in Ga as well. The rate changes from county to county but the concept is the same. If the boat (etc.) is worth over xx value it will have a tax. Like property they will use a reduced value typically 40% of the value and apply the millage rate say .0282 (or something like that). I was paying about $480 a year.

 

[Luc Lafreniere]

@HangOutdoors , one time.

 

[Ronnie]

@HangOutdoors , it’s annual here in CA, I wish it was one time for sure.


I should know this by now, but I think my county assessor sends me a letter every April asking if I sold the boat/Waverunners or moved it/them out of state before January first of that year. If i did I send a letter back saying so, if I did not I do nothing and the assessor sends me the bills for the taxes due a month or two later. It’s like the dmv in that I will get the bill in say June but it’s not due until august.

also not sure what the threshold is in CA but I bought a used waverunmer a few years back for $3k. A few months later I got the notice and eventually a bill for a little over $30.What’s really frustrating to me is that hardly any of the money, less than 2%, is used to fund boating related things like parks and recreation.

 

[BlkGS]

My thought is that the Canadians can tax themselves however they want. ?‍

I seem to recall that in the US, however, when we tried this is the 90's, many folks just postponed buying boats and airplanes, as after all, they are luxury items and you really don't need to buy them now or buy them new. I recall it really hit the U.S. boat manufacturing industry hard.

Jim

I'm sure we will try it again, except with exemptions for things the really rich like, and ways around it like buying through a shell company so the really rich can avoid it.

 

[jEt_jAk]

Unfortunately the biggest impact will be likely the Canadian boat companies and local dealerships that have reduced sales. Never understood why one would try to increase tax revenue by decreasing people from purchasing or purchasing out of state/country. Similar laws here in California unfortunately.

If you incentivize more retail purchases not only to you increase tax revenue by increasing number of individual tax contributions but you also create jobs.

Anyways I am no economist that is just my view.

 

[FSH 210 Sport]

Unfortunately the biggest impact will be likely the Canadian boat companies and local dealerships that have reduced sales. Never understood why one would try to increase tax revenue by decreasing people from purchasing or purchasing out of state/country. Similar laws here in California unfortunately.

If you incentivize more retail purchases not only to you increase tax revenue by increasing number of individual tax contributions but you also create jobs.

Anyways I am no economist that is just my view.

You may not be an economist but your economics are spot on. And the main problem with places like ca is that they kite their funds, meaning, they establish a tax, ummm like a gas tax, and then that revenue ends up in the general fund instead of going to repair roads and bridges for which the tax was established.

And, as the feds learned, the “rich” will just spend their money on other things, or they will just buy their boats somewhere else where confiscatory taxation is not present.

You are also spot on in that luxury taxes like this end up hurting the “little guy” aka non rich and rarely show a net gain in revenues, in fact it is usually a detrimental loss in revenues, again, witness what happened with the US luxury tax.