By Skies Magazine | March 14, 2022 Estimated reading time 5 minutes, 11 seconds.
The Government of Canada has announced new provisions in the draft legislative proposals, released on March 11, to implement a Luxury Tax on the sale of new cars and aircraft worth over $100,000, and new boats over $250,000. The tax would be calculated at the lesser of 20 percent of the value above these price thresholds, or 10 percent of the full value of the luxury vehicle, aircraft, or vessel. The proposed tax would essentially apply to almost all aircraft manufactured since 2018.
While the proposed tax is expected to have a huge impact on Canadian aviation, one of the new provisions offers relief for the aviation community, as the list of air activities that are exempt from the tax has been expanded.
Specifically, “relief for aircraft is proposed to be expanded to take into account qualifying flights that are conducted in the course of a business with a reasonable expectation of profit,” a federal government news release reads.
Included on the original list of exempt air activities are police or fire department operations, as well as service to remote communities accessible only by air; medevac or flight training services; scheduled public or cargo flights; and charter services where all or most seats are sold individually.
The new provision is positive news for business aviation in Canada, and Canadian Business Aviation Association (CBAA) president, Anthony Norejko, agrees.
“We celebrate this change for the Canadian jobs that it represents,” he wrote in a LinkedIn post.
Since the proposed tax was first introduced in Budget 2021, Norejko and association members have been vocal about the negative impacts such a tax would have on jobs, among other things.
“Job losses are the principal point here. Going in and creating this luxury tax for aircraft manufactured after 2018 is just going to hurt domestic manufacturing,” Norejko said in an interview with Skies earlier this year. “You’ve got fantastic aircraft made in Canada, employing Canadians, and yet we’re going to design a system that completely penalizes the purchases from that asset.”
The tax was originally slated to take effect in January 2022. With that date come and gone, the government has set a new target date of Sept. 1, 2022 — subject to Parliamentary approval — and is welcoming public comment on the draft legislative proposals. The proposals are meant to “reflect and respond to input received during consultations with stakeholders.”
Norejko made a point to thank CBAA members for voicing their stories of impact relating to the proposed Luxury Tax. “This allowed the team and our partners to share the feedback and impact such a decision would have on our industry,” he wrote.
Norejko added that while the latest provision is a step in the right direction, the CBAA is continuing to advocate for a higher threshold minimum of $5 million, versus the $100,000 aircraft price threshold currently being suggested.
The government said the draft legislative proposals released on March 11 “build on, and replace, the backgrounder that was released on Aug. 10, 2021, as part of the consultation on the proposed Luxury Tax.”
The deadline to submit comments on the draft legislative proposals is April 11, 2022. Those interested can email comments to fin.luxury-luxe.fin@fin.gc.ca.
