Canada Announces New Levy On Luxury Goods

August 25, 2022
Canada Announces New Levy On Luxury Goods

Canada recently announced a new tax that will make the country’s richest think twice about contributing to the global climate crisis with their lavish modes of transportation. The new legislation received criticism from wealthy citizens, particularly from the business community members.

Canada taxes the rich

The government plans to implement the new Select Luxury Items Tax Act on September 1. Under the new act, the total value of any purchases of aircraft and cars that cost over $100,000 will have a 10 percent tax. The same goes for purchases of boats worth more than $250,000.

Lawmakers penned the new legislation in an effort to support the country’s commitment to a fairer tax system.

The government believed the tax would discourage the most affluent Canadians from buying emissions-intensive vehicles while reducing inequality.

The levy is the realization of budget proposals introduced last summer. In a statement released during the tax’s proposal, the government said the impact of the COVID-19 recession was uneven, with some people losing their jobs while other sectors boomed.

The government said it was fair to ask those who could buy luxury goods to contribute a little bit more.

Benefits of the new luxury tax

The Select Luxury Items Tax Act ensures that Canadians who can afford to buy expensive cars, yachts, and private jets will contribute more to the country’s growth.

Moreover, it can discourage wealthy citizens from buying expensive luxury vehicles, which can be detrimental to the environment. With fewer people buying brand-new cars and aircraft, manufacturers can conserve resources.

But despite these benefits, some people are skeptical about how the new tax can affect the economy.

Flak from the business community

The tax received criticism from the members of the business community. People argued that it could have a negative impact on the country’s aviation industry, which already took a blow during the pandemic. The critics warned that the tax might result in the loss of roughly 900 jobs.

Anthony Norejko, CEO and president of the Canadian Business Aviation Association, said the new tax would have a significant economic impact. He believed that the tax implications had not been studied with a clear understanding of the aviation industry.

Some experts also expressed concerns that the government may have focused too much on individual actions rather than on making policy changes that would generate real progress.

This issue was raised since the introduction of the new tax coincided with the barrage of online criticism of celebrities and their extravagant modes of transportation.

The sustainability group Yard created a list of these famous individuals who contributed the most carbon emissions by using their private jets. The report underscored the environmental impact that wealthy individuals can inflict through private jet usage.

In a 2021 Oxfam report, the wealthiest 1 percent accounted for 15 percent of global carbon emissions in 2015. The number further highlights the potential impact of Canada’s new tax.

Many Canadians will be affected by the Select Luxury Items Tax Act. People concerned about how this tax would affect them should work with the best tax accountant in Toronto to get advice.

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