Removal of the Luxury Tax on Boats

Hot off the press! In Canada’s 2025 federal budget, Finance Minister Chrystia Freeland announced a significant decision to eliminate the luxury tax on boats, which had garnered considerable attention from the National Marine Manufacturer’s Association (NMMA) Canada, the Canadian Marine Retail Association (CMRA) Nautisme Québec, Boating Ontario,Boating BC, and Canada’s boating industry, recreational enthusiasts, and other economic sectors. The luxury tax was introduced in 2022 under the Trudeau government, and imposed a 10% levy on boats and personal watercraft valued over $250,000. However, its repeal in the 2025 budget marks a notable shift in government policy, responding to growing concerns about its negative impact on Canadian businesses and jobs. Manufacturers, dealers and brokers within the boating industry reported a significant slowdown in sales as high-end boat buyers shunned Canada and hesitated to make purchases due to the additional tax burden. In particular, the tax disproportionately affected smaller and mid-sized Canadian boat-building companies, which were hit hard by reduced demand. The resulting decline in industry activity led to job losses in manufacturing and associated sectors, including design, sales, and service.

In response to these concerns, the Canadian government initiated a review of the tax’s effects in late 2024. The review process involved consultations with industry stakeholders, including boat manufacturers, dealers, and regional economic development organizations. The negative findings highlighted the loss of jobs, reduced economic growth, and a decrease in government revenue from industries linked to the boating sector. By eliminating the tax, the government aims to support the Canadian maritime industry, boost competitiveness, and stimulate job creation, particularly in coastal regions and smaller communities.