In Budget 2021 the Government of Canada proposed a “luxury tax” effective January 1, 2022 on sales of certain luxury vehicles – cars/trucks, aircraft, and boats - whose selling price exceed a $100,000 threshold for cars/trucks and aircraft, and a $250,000 threshold for boats. The proposed tax would be the lesser of 20% of the value above the threshold, or 10% of the full value of the luxury vehicle. At the time the government said the luxury tax is expected to raise $604 million over 5 years.

In an August 10, 2021 News Release the Department of Finance announced the launch of a formal consultation process with stakeholders and interested members of the public on the design and specifics of the new luxury tax. Consultations like this are one of the few ways that stakeholders have to provide input to the government while they design the legislation which will form the legal basis for the luxury tax.    

Accompanying the consultation is a 25-page Technical Paper providing an overview of the functioning of the luxury tax. The currently proposed luxury tax includes the following features:

Finally, as an aside, we note that the Technical Paper refers to the luxury tax as applying on “select goods”. This is a rather generic term for a tax which is essentially imposed on luxury vehicles - cars/trucks, aircraft and boats. One cannot help but wonder if the use of the term “select goods” might be an effort to allow future governments the ability to expand the scope of the legislation – perhaps to cover luxury jewellery, luxury clothing, etc. – more easily with an amendment to the definition of “select goods”.

For now, if you are an importer or exporter of luxury vehicles, note that the consultations are open until September 30, 2021, so if you have feedback to share with the government, make sure you respond promptly!

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