The CRA Invested $19 Million to Collect $137 Million in Luxury Tax
Canada’s luxury tax on high-end vehicles, yachts, and private aircraft brought in $137 million this year, but it cost $19 million to collect.
The information was released by the government in response to an Inquiry of Ministry submitted by Conservative MP Scot Davidson in May in which he asked for information about the number of luxury items reported under the Select Luxury Items Tax and how much it cost the Canada Revenue Agency (CRA) to manage the tax.
“It cost the CRA a total of $19 million as of March 31, 2024, to implement and administer the luxury tax, including the amounts paid for the employee benefit plan and other indirect costs,” the CRA said in a June response to the question. The agency said the amount includes money paid for employee benefits and other indirect costs.
The CRA reported that as of March 2023, the latest available data indicated the agency had collected roughly $137 million in luxury tax revenues. That amount fell short of the federal government’s estimated annual revenue of $140 million in Budget 2022, which was expected to increase to $145 million in subsequent years.
A total of 71 aircraft were reported under the luxury tax, primarily from Ontario and Quebec, according to the government response. Additionally, about 73,000 vehicles and 400 vessels were also reported.
The luxury tax was first mentioned in the government’s 2021 budget but did not come into effect until September 2022. It applies to the sale of new luxury vehicles and aircraft priced over $100,000, as well as boats costing more than $250,000.
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During House debate on Sept. 25, Conservative MP Dan Albas expressed his concerns about the luxury tax, referring to it as “a tax on workers.”
“We actually had industry come and say the tax will harm industry and will push business to the United States and other places,” he said.
At the time of the tax’s announcement, Finance Minister Chrystia Freeland told reporters that she believed it was reasonable to impose higher taxes on those who can afford to spend $100,000 on a vehicle. “It’s also fair to ask those who have prospered in this bleak year to do a little more to help those who still need help,” Freeland said in her Budget 2021 speech.
However, the luxury tax has raised concerns about its impact on related sectors and potential job losses. A March 2023 report from the Finance Department estimated that the tax could eliminate between 400 and 870 jobs. This includes a loss of about 150 to 255 jobs in the automobile sector, 20 to 65 jobs in vessel manufacturing, and about 10 to 20 jobs related to aircraft.
