Feds abolish jewelry tax

Canada’s last remaining luxury tax — an 8% levy on jewelry — has been repealed, three years earlier than planned.

Bill C-259, a private member’s bill, jumped its final hurdle when it sailed through the Senate on Nov. 25, a year after being introduced in the House of Commons by John Duncan, a Conservative member of Parliament.

The jewelry excise tax was scheduled to be abolished — but not until 2009. In the federal government’s 2005 budget, a gradual phase-out of the tax was announced, with a 2% decrease (to 8% from 10%), effective immediately.

The tax applies to jewelry worth more than $3 and watches over $50. It was introduced in 1918 to help pay for costs related to the First World War.

Paid by both manufacturers and importers, the hidden tax inflates the cost of jewelry in Canada.

Gordon Peeling, the president and CEO of the Mining Association of Canada (MAC), says Canadian consumers won’t be the only ones to profit from the elimination of the tax.

“It also benefits Canadian producers of the raw materials that go into jewelry — diamonds, gold, silver, platinum and gem minerals — by removing a disincentive to the purchasing of Canadian jewelry products,” Peeling says.

The Canadian Jewelers Association says that after alcohol, tobacco, and gasoline, jewelry is the most heavily taxed consumer sector in Canada. The excise tax also means that diamonds mined in Canada cost more here than anywhere else.

While the jewelry industry and others have for years lobbied for the elimination of the tax, manufacturers and importers have been instructed by Canada Revenue Agency to continue to collect the levy due to “procedural issues” with the bill.