Says 10% levy applied in 2023 has been 'major setback' for business
The federal government’s proposal to cut the luxury tax under Budget 2025 will lead to more jobs in the country, according to one business leader.
The proposal to eliminate the tax on high-priced aircraft is poised to create up to 600 jobs at Bombardier’s Canadian facilities, claims CEO Éric Martel, according to a report from the Canadian Press (CP).
That’s because the change is expected to spark a surge in demand for business jets.
The luxury tax applies to luxury vehicle purchases over $100,000. It was updated in 2023 to include certain vessels such as yachts and sailboats, as well as private jets, helicopters, and seaplanes, according to a Global News report.
“To provide relief to the aviation and boating industries and increase the overall efficiency of the luxury tax framework, Budget 2025 announces the government’s intention to end the luxury tax on aircraft and vessels as of the day after Budget Day,” according to the federal government.
Tax brought down workforce growth: CEO
Martel said that the 10% levy has been a major drag on workforce growth and domestic sales.
“It was a major setback for us in the Canadian market,” he said, noting that domestic deliveries were down to two or three a year since the levy took effect in September 2022, according to the CP report.
“I have a lot of customers that I’ve been talking to who say, ‘I’m not going to place an order and buy a plane until this tax isn’t there.’”
That is changing right now, he said in the article: “We’re already receiving phone calls so that we can discuss the next purchase with a Canadian customer.”
Budget 2025 — released on Nov. 4 and Mark Carney’s first as Prime Minister — is framed as a response to significant global and economic changes with priorities ranging from workforce renewal and skills development to regulatory changes and public sector transformation. The budget will see the federal public service’s workforce shrink by 10%.
The budget has received mixed reactions from stakeholders.
For purchasers and lessees of subject aircraft, these proposed changes "translate to fewer administrative hurdles, lower acquisition costs, and improved liquidity," says an online post from Cassels.
"Vendors will benefit from reduced reporting obligations while still retaining rebate opportunities during the transition period. By eliminating luxury tax on subject aircraft, the federal government is clearing the runway for growth, innovation, and competitiveness, making Canada a more attractive market for aircraft manufacturers, vendors, and purchasers alike.
Business outlook
Bombardier’s global outlook remains robust, with demand for business jets continuing to rise despite broader economic uncertainties. In the latest quarter, the company delivered 34 planes and saw revenues climb 11% year-over-year to US$2.31 billion—more than double its aviation earnings from five years ago, according to the airline's financial results.
Despite the positive outlook, supply chain challenges persist, impacting margins and creating uncertainty around the timing of further improvements.
RBC Dominion Securities analyst James McGarragle noted, “Supply chain challenges continue to impact margin. The timing of improvement remains uncertain in our view,” according to the CP report.
More than nine in 10 business leaders want the government to provide broader supports and expanded financing options for companies affected by tariffs, with 80% of business leaders saying their companies are struggling due to U.S. tariffs, according to a previous KPMG report.
File photo from Bombardier's Facebook page
