Good afternoon, Mr. Chair, members of the committee and ladies and gentlemen.
My name is Sara Anghel. I'm the president of the National Marine Manufacturers Association of Canada. I'm appearing today to speak against the luxury tax on boats included in Bill C-19. I realize the bill received third reading yesterday, but I think it's very important the committee hear our concerns.
Our industry is made up of mostly small businesses and, in many cases, family-run businesses. These include recreational marine manufacturers, dealers, marinas and service providers. The industry has a GDP impact of $5.6 billion, $10 billion in revenue, and employs 75,000 people across Canada.
Our industry has faced many headwinds since the start of the pandemic. Supply chain disruptions, production delays and inflation have affected our members. Tourism and recreational businesses were closed for months due to pandemic restrictions and border closures. On top of that, we are now facing an impending luxury tax on boats.
Our industry understands the government's need to raise revenue in the wake of the pandemic, but the luxury tax is not the way to achieve this. The history of luxury taxes shows that consumers will simply choose to take their discretionary spending elsewhere. That is what dealers and manufacturers are hearing from customers. The result will inevitably be a dip in revenue and hundreds or even thousands of job losses across the country.
According to an economic impact study by economist Dr. Jack Mintz, the proposed tax will result in a minimum $90-million decrease in revenues for boat dealers, and potential job losses of at least 900 full-time equivalent employees. In short, the tax will hurt the very middle-class families that the government is trying to help.
The problem with this kind of tax is that it can easily be avoided by consumers by either buying goods or purchasing and keeping their boats abroad, for example, in Florida or Seattle. The expected drop in sales will significantly impact the bottom line of manufacturers and dealers, who will then be forced to scale back their operations and staffing levels.
While we saw a boom in boat sales during the pandemic, the supply chain disruption has been very difficult for our industry and, in fact, dealers are expecting a significant drop in sales due to material shortages. An Ontario-based dealer, Crate's Lake Country Boats, in Orillia, expects a drop of 70% in sales by the end of 2022, and that doesn't account for what will happen once the tax is in place.
We can also expect a ripple effect on job losses at marinas and service shops. Fewer new boats sold means less work for the marine service industry, much of which is concentrated in rural and coastal communities.
In the early 1990s, the U.S. introduced a similar luxury tax on boats, which devastated the industry and was eventually repealed following the loss of thousands of jobs and a net revenue loss for the government. New Zealand, Italy, Norway, Turkey and Spain have all previously introduced luxury taxes on boats. In each one of these cases, the tax was ultimately repealed due to the net negative economic effects. There is no reason to think the same will not happen here.
We're also troubled by the singling out of recreational boats and not other recreational products. Boating is a cherished pastime for millions of middle-class Canadian families, and in this unaffordable recreational property market, many families choose to purchase a boat as their cottage. At a time when governments are trying to attract investment and rebuild our economy, a tax that guts homegrown manufacturing and retail businesses makes no sense. Instead of supporting our industry as a vital part of Canada's recovery, this tax is picking winners and losers in outdoor recreation.
The luxury tax also has the potential to damage Canada's trade relations. Concerns have been raised by the boating industry in the United States that this tax directly attacks our Canada-U.S.-Mexico agreement. Similarly, our trading partners in the U.K. and European Union could be hurt by what many see as an indirect tariff on boats.
In conclusion, I want to draw attention to the latest report released by the PBO, stating that there will be 2.9 billion dollars' worth of lost sales from boats, aircraft and cars. However, $2.1 billion of that, which is 75% of the loss, is expected to come from boats. This is a complete assault on the boating industry.
I saw that there was an amendment passed removing the September 1, 2022, implementation date for the aerospace industry. If 75% of the loss is expected to come from the boating industry, it would be only logical to have a similar amendment for boats, to save jobs and not decimate the industry in Canada.
Thank you for the time.