Canada's Luxury Gem Tax - Repealed or Just Reduced?

Canadian jewelers are facing an extra hurdle this holiday season; they do not know what price to charge for their goods. The outgoing federal government was supposed to have abolished a luxury tax on gems, but now it appears that the tax might only have been reduced, dashing jewelers' hopes for their best fiscal quarter since the tax was introduced nearly 90 years ago.

The bill to abolish the eight percent tax on Canadian-made jewelry, which was introduced on Friday, was actually passed but despite this, federal officials have not followed the direction of parliament and moved to scrap the tax, reports CBC.ca.

Montreal jeweler Pierre Akkelian blames the large amount of money generated by the tax for the reluctance to eliminate it. Akkelian told CBC that the tax was "killing business." If the bill was repealed, it would deprive the federal government of between C$70 and C$80 million ($599 to $685 million).

Catherine Sproule, executive director of the Canadian Jewellers Association, formed in 1920 specifically to fight the jewelry tax, explains that because of the confusion, "there are goods sitting at the border" because of the confusion over the amount of tax to charge. Jewelers are also waiting to bill customers she told the Canadian newspaper, The Gazette.

Meanwhile, Canada's jewelers just have to wait and see how the uncertainty affects what should be one of their busiest periods.

The tax is a relic left over from 1918, when it was introduced to help fund the First World War It was initially imposed on all luxury items but was gradually lifted from all luxury goods but jewelry.