Submission by the Aerospace Industries Association of Canada on Legislative Proposals Relating to the Select Luxury Items Tax Act

May 17, 2022


The Honourable Chrystia Freeland, M.P., P.C.
Deputy Prime Minister and Minister of Finance
90 Elgin Street, Room 16-027
Ottawa ON K1A 0G5


Submission by the Aerospace Industries Association of Canada on Legislative Proposals Relating to the
Select Luxury Items Tax Act


INTRODUCTION


The Aerospace Industries Association of Canada (AIAC), representing 95% of aerospace activity in Canada,
is pleased to submit our comments on Legislative Proposals Relating to the Select Luxury Items Tax Act.

The legislation as currently drafted will not achieve the desired purpose of taxing the wealthiest but will
instead have a dramatic, negative impact on Canadian manufacturing and on Canadian jobs.


Aerospace has been one of the hardest-hit industries through the pandemic, as acknowledged in Budget 2021. Government research by Innovation, Science and Economic Development (ISED), through a
partnership with AIAC, revealed that Canadian aerospace lost almost 30,000 jobs in 2020 alone and the
sector’s contribution to Canada’s GDP declined by $6.2B1. However, Canadian expertise in business
aircraft including helicopters, turboprops and jets, and the associated supply chains for parts, systems and
services helped to buoy against the even steeper declines seen globally. Business aircraft is a strength for
Canada, providing a solid foundation for recovery and jobs, and should not be punished in a misdirected
effort that will target manufacturers and workers.

As designed, the tax will have a devastating impact on manufacturers, operators, distributors and
suppliers, with estimates of close to $1 billion in lost revenue and losses of over 1,000 direct value-added
Canadian jobs, for airplane and the helicopter industry. Some manufacturers project as much as a 50%
reduction in demand for business aircraft as a result of the tax’s announcement, with orders already
slowing and creating uncertainty for businesses.

We would like to recognize the exemption introduced by the government for business flights following
the comments and concerns expressed by the industry, however, the criteria to qualify for the exemption
are restrictive and very few companies will qualify. In addition, there are still many outstanding questions
that need clarification in order to better understand how this legislation will be applied.

New legislation should not unduly harm the aerospace industry as it continues to recover from the effects
of the pandemic.

Click here to read the full submission.