Finance committee approves minor change to budget bill’s luxury tax, rejects more substantial changes

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Members of Parliament on the House of Commons finance committee approved a minor change to the budget bill’s luxury tax Tuesday related to its implementation date, but voted down more substantial proposals that had been recommended by Canadian businesses in the auto, aviation and boating sectors.

Following the House committee votes, Finance Minister Chrystia Freeland appeared before a Senate committee that is also studying the bill, which the government is aiming to pass into law before the upcoming summer recess.

The minister defended the luxury tax in her comments to senators, when asked about the concerns being expressed by Canadian businesses.

Ms. Freeland said the luxury tax received strong support from the public when she was campaigning before last year’s federal election.

“I know questions have been raised by people in the sector. We are in frequent discussions with the aerospace sector. I am convinced that the sector will continue to be very, very strong in Canada even after this tax takes effect,” she said in French.

MPs on the House finance committee are in the midst of a line-by-line review of Bill C-19, the government’s latest budget bill. During recent hearings on the legislation, MPs heard from business and labour leaders who said the tax will ultimately hurt business owners and workers through reduced sales and job losses, even though it is targeted at Canada’s wealthiest.

First announced in the 2021 budget and promised again in the Liberal Party’s election platform, the tax, which would be enacted by the 440-page budget bill, is on new automobiles and aircraft covering the value above $100,000, and on vessels priced above $250,000. 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 recent report from the Parliamentary Budget Officer said the tax would bring in $170-million in revenue in the 2024-25 fiscal year. That is higher than the $145-million in expected revenue for that fiscal year listed in Ms. Freeland’s April budget. The report also said the tax would reduce sales in those three categories by more than $600-million a year.

On Tuesday, the Bloc Québécois put forward several amendments that were primarily aimed at easing the impact of the tax on Canada’s aerospace manufacturing sector, which has a large presence in Quebec and has warned the luxury tax would lead to unintended consequences, such as job losses.

The Conservatives and the Bloc were frequently aligned in pushing for substantial amendments, but needed the support of the lone NDP MP on the committee, finance critic Daniel Blaikie, in order to outvote the committee’s Liberal members.

Mr. Blaikie, who had recently said that he would be open to amendments even though he supported the principle of a luxury tax, explained to MPs Tuesday why he would be voting against the Bloc motions.

He said his party is sensitive to the concerns expressed by Canadian manufacturers, but questioned whether MPs should be altering the tax through amendments.

“I’m reticent to try to rewrite the provisions of the luxury tax bill at this committee table under the time constraints that we have,” he said. Instead, Mr. Blaikie proposed an amendment that would give the government the flexibility to decide when the aerospace-related provisions of the law will take effect, essentially removing the Sept. 1 start date.

“By delaying the implementation of this tax, if they feel that’s suitable, they may well be able to respond in the fall in other legislation that they may bring forward,” Mr. Blaikie said, referring to the government. He noted that the Conservatives had also proposed that the tax implementation should receive a more detailed study before it takes effect.

The Liberal committee chair, Peter Fonseca, ruled Mr. Blaikie’s motion out of order. However the committee members voted to overturn the chair’s ruling and then approved the NDP motion in an 11-0 vote.

The full list of budget bill amendments approved by the House finance committee will be finalized and detailed in writing in the coming days when the committee reports the bill back to the House.

Any amendments to bills approved in committee can later be rescinded by a majority vote in the full House of Commons.

Senators did ask Ms. Freeland about the luxury tax Tuesday. The Senate has the power to amend legislation, but any Senate changes must go back to the House for approval before a bill becomes law.

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