Prime Minister Mark Carney released his government’s first federal budget earlier this week. It includes new tax measures, cuts to public services and major industrial investments that are promised to drive up economic growth, while projecting a $78 billion deficit.
Hidden in the fine print, is a decision to scrap a luxury tax on some yachts and private jets.
The previous Trudeau-era rules levied a tax on the sales, imports and leases of vehicles and aircraft worth more than $100,000 and boats worth more than $250,000. The tax was calculated as the lesser of 10 per cent of the total value of each item and 20 per cent of any value above the threshold.
By dropping the tax, the government is expected to lose $135 million in revenue over the next five years, according to the budget. Despite this, officials defended the measure, saying it would “provide relief to the aviation and boating industries and increase the overall efficiency of the luxury tax framework,” adding that more sales would “support employment.”
The measure was immediately welcomed by some trade associations and manufacturers.
“Canada’s boating industry applauds Budget 2025’s commitment to remove the devastating luxury tax on boats, a failed tax policy that unfairly punished Canadian manufacturers and workers,” the National Marine Manufacturers Association of Canada wrote in a statement.
“When the luxury tax was first implemented in September 2022, Canada’s marine industry leaders were quick to point out the impending losses of middle-class jobs, government tax revenues and sales declines. The removal of this failed tax was the direct result of sustained advocacy,” the group added.
However, not everyone agrees with the move.
Conservative MP Andrew Scheer rose during question period in the House of Commons on Friday to discuss his opposition to the changes.
“The Prime Minister heard the cries of working Canadians and what did he do?” Scheer asked. “He scrapped the luxury tax on private jets and yachts.”
“That is right. The only measure in this budget to make things cheaper will only apply to boats and airplanes,” he added. “Can the Prime Minister tell us how many Canadians lined up at food banks will benefit from the private jet tax cut?”
Conservative MP Jacob Mantle echoed that statement in question period saying, “Budgets are about priorities. Could the honourable member tell me why the priority of the budget is tax breaks for luxury jets and yachts but tax cuts and less money for clean water in Ontario?”
Financial experts expressed similar concerns at an economic policy conference in Toronto hosted by CSA Group a day after the budget’s release. Keynote speaker Armine Yalnizyan decried the federal government’s priorities for not focusing harder on affordability measures like reforming Canada’s Employment Insurance (EI) program.
Équiterre, an agricultural non-profit based in Quebec, also criticized the measure, saying it “doesn’t see how eliminating the luxury tax on private jets and yachts could possibly help build a stronger Canada.”
Meanwhile, the Canadian Automobile Dealers Association says the government’s changes haven’t gone far enough and expressed disappointment in the Liberals’ decision to maintain the luxury tax on vehicles, which it claims unfairly penalizes consumers and imposes an administrative burden on dealers, while negatively affecting revenues.
This is the second notable tax measure Carney has scrapped that will impact the lives of the ultra wealthy in Canada. In March, he also cancelled a proposed hike in the capital gains inclusion rate that was promised by his predecessor.
With files from CityNews’ Nick Westoll.
