Monday saw the release of the first federal budget in two years with a few new tax measures that are expected to have an impact on various demographics. Canada’s wealthiest can expect to make bigger contributions to national coffers in the coming year following new plans to tax luxury purchases like cars, personal aircraft, and yachts. The new proposal will target car and personal aircraft purchases valued at retail of over $100,000, and personal use boats valued at over $250,000.
This tax will be calculated as the lesser of 10% of the full value of the asset or 20% on the value above the threshold. It is expected to contribute an additional $604 million in federal revenues over the next five years.
Smokers are also set to suffer a significant hit to their pockets following proposals under the budget to boost tax rates on tobacco and vaping products. Should the budget be passed, new excise duties will be applied to these products.
According to the budget document, this move would help boost tax revenues and hopefully reduce the consumption of these harmful products. Vaping liquids made locally or imported are amongst the affected items, whether they contain nicotine or not. Tobacco products are also to attract a $4 per carton additional tax that would raise revenues by an estimated $2.1 billion over five years.
In response to concerns over the country’s soaring housing costs, non-residents owning property that is deemed vacant or underused may be hit with a new tax. Under the budget proposal, the government would apply an annual 1% tax on the value of the residential real estate. If passed the new tax would take effect from January 2022. This is projected to increase federal revenues by $700 million over four years.
The federal budget also confirmed some changes in the application of GST to e-commerce transactions that is expected to take effect from July 2021. This includes expansion to include operators of distribution platforms and a simplified registration regime for non-resident and distribution platform operator registration. Distribution platform operators that make qualifying supplies of tangible personal property would also be expected to undergo normal registration. Another new requirement is to apply GST/HST to short-term accommodation services facilitated through digital platforms.
The government is further proposing a new 3% digital services tax (DST) for providers with revenues exceeding $20 million from Canadian users, as of January 2022. It would apply to businesses with global revenue from all sources in the previous year of at least $750 million.