Liberals’ new luxury tax cost government $19M to collect less than $150M

Tax on fancy boats, cars and planes also brought in $137 million in its first year

OTTAWA — Canada’s new luxury tax on luxury cars, boats and private planes brought in $137 million in its first year, but it cost $19 million to bring in those taxes.

Conservative MP Scot Davidson tabled an order paper question demanding information about the new tax in the spring and received answers from the government when Parliament returned this month.

According to that those answers, the tax was levied against 72,000 cars sold in Canada, 398 boats and 71 planes. The tax applies to cars and planes with a purchase price of more than $100,000 and leisure boats with a price tag over $250,000.

The tax was calculated as either 10 per cent of the total purchase price or 20 per cent of the amount above the $100,000 and $250,000 thresholds, whichever is less.

At the time it was introduced, Finance Minister Chrystia Freeland told reporters she thought it was entirely reasonable to ask someone who has $100,000 to spend on a car to pay more taxes.

“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. That is why we are introducing a luxury tax on new cars and private aircraft,” she said in her budget speech.

Although the tax was mentioned in the 2021 budget it was not implemented until September 2022.

The $137 million collected fell just short of the government’s estimates, which projected $140 million per year, slowly rising to $145 million. The Parliamentary budget officer reviewing the tax believed the levy would bring in slightly more, estimating of $163 million.

However, it cost the Canada Revenue Agency $19 million to administer the tax as of March of this year, which included one full tax year and a partial year.

The CRA believes the annual cost will be about $15 million per year. In a statement, the agency said every tax comes with its own complexities and the cost is on par with what it costs to collect other taxes.

“The cost of collecting the luxury tax is generally comparable to that of other taxes, and we expect it to stay relatively the same,” they said.

They said the $15 million figure is inclusive of everything including costs for the government’s IT branch and employee benefits.

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