Canadian business leaders pursue Senate changes to proposed luxury tax that could cost thousands of manufacturing jobs

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Business leaders have urged senators to address concerns that a new luxury tax on autos, boats and planes could trigger thousands of job losses in Canadian manufacturing.

The House of Commons is scheduled to give its final approval Thursday to Finance Minister Chrystia Freeland’s budget bill, C-19, which includes the tax. The third-reading vote will send the bill to the Senate, where several committees are already holding preliminary studies of the legislation.

The luxury tax has surfaced as the most controversial element of the 440-page budget bill. Some tax-fairness advocates have praised the measure as a way of forcing wealthy Canadians to contribute more toward government services. However, business and labour leaders alike have warned that it will hurt working- and middle-class people who rely on the high-end products being targeted by the tax for jobs in manufacturing and tourism.

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The luxury tax would apply to new automobiles and aircraft that cost more than $100,000 and on vessels selling for $250,000 or more. The tax rate will be the lesser of 10 per cent of the full value of the vehicle or 20 per cent of the value above the threshold.

A report released last month by the Parliamentary Budget Officer said the tax would reduce sales by more than $600-million a year.

Late Tuesday, MPs voted unanimously in favour of an NDP amendment to the budget bill that gives the government flexibility to delay the planned Sept. 1 implementation date for the new tax, but only with respect to aircraft.

Several business leaders told senators on the national finance committee Wednesday that while the amendment was welcome, the Senate should further soften the impact of the tax.

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Sara Anghel, the president of the National Marine Manufacturers Association, warned the senators that the tax could cost hundreds, and possibly thousands, of Canadian jobs in the boating sector, according to a research paper by University of Calgary economist Jack Mintz.

“This is a complete assault on the boating industry,” she said.

She also questioned why this week’s amendment only applied to the aviation sector, not autos or boating. “The tax will hurt the very middle-class families that the government is trying to help.”

The committee heard similar concerns from Mark Agnew, the senior vice-president of policy and government relations at the Canadian Chamber of Commerce, and Aerospace Industries Association of Canada president and CEO Mike Mueller.

Proposed amendments from the Conservatives and the Bloc Québécois aimed at addressing business concerns about the luxury tax were voted down by Liberal and NDP MPs.

The majority of senators sit as independents, so it’s not clear how the chamber may vote. The Conservatives are the only national party represented in the Senate, with 16 members in the 105-seat chamber. There are currently only 88 senators, due to 17 vacancies.

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On Wednesday, several senators on the national finance committee made comments that appeared sympathetic to the issues raised by the business groups.

“I’m troubled and worried by what I’m hearing,” said Senator Clément Gignac, a former Quebec cabinet minister and National Bank chief economist. He asked the speakers to offer specific suggestions for amendments to the budget bill.

He told The Globe and Mail after the meeting that it is premature to discuss potential amendments until the Senate receives the final version of the bill from the House.

While it is rare for the Senate to amend a budget bill, the Library of Parliament notes that it did so in 2016 and 2017.

Adrienne Vaupshas, a spokesperson for Ms. Freeland, said in a statement Wednesday that implementing the luxury tax “remains a priority.” She did not say whether the government intends to delay the implementation date for the aviation sector.

NDP finance critic Daniel Blaikie, who moved the amendment giving the government that option, said he hopes it will give Finance Department officials extra time to address the concerns that have been raised.

But he said he and his party continue to support the principle of a luxury tax.

“It’s not meant to be a panacea,” he said. “It’s one way among many that we can use in order to try and ensure that the people that have the highest incomes and the most wealth in Canada are paying their fair share.”

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