ISSUE FOCUS: The Impact of the HST on Tourism in Ontario and British Columbia
On Monday, December 07 at 3:30 pm EST, TIAC will appear before the House of Commons Standing Committee on Industry to discuss the recent economic performance of the services sector in Canada. Appearing on behalf of TIAC will be Chris Jones, Vice President, Public Affairs, supported by Catherine Sadler, Manager, Research.
To follow the proceedings online, visit the ParlVu website by clicking here.
While TIAC will convey to the committee its pleasure at the signing of an Approved Destination Agreement with China announced last week, it has focused its presentation on the impact of the Harmonized Sales Tax regimes, which will be introduced in July 2010 in both Ontario and British Columbia. The new policy change is likely to have adverse implications for the tourism sector in these two major destination provinces.
The HST is nominally a “smart tax”. However, the introduction of the new regime will result in the tourism industry in both Ontario and B.C. facing significant tax increases in the price of tourism-related products and services. (7% in BC and 8% in ON.) This increase in the tax applied to goods and services such as campsite fees, boat tours, air charters and restaurant meals, will result in higher prices for the end consumer, as many of these tourism products and services were previously exempt from PST/RST.
As such, and given the recent declines in visitation and tourism spending that Canada has seen over the past year, TIAC is urging the federal and provincial governments to consider mitigation strategies to help alleviate the impact of the HST.
TIAC will also highlight to the committee that while some mitigation strategies exist in the HST regime as currently outlined, including Input Tax Credits (ITC), these will not sufficiently alleviate the impact of the additional tax as tourism is a labour-intensive industry and labour does not qualify as an ITC.
As an example, TIAC will put forth the case of a B.C.-based company, the Oak Bay Marine Group. With 15 operations and more than 1,000 employees on Vancouver Island, Oak Bay estimates that the impact of the HST as follows:
- 78% of their products and services will have 7% tax added
- $1.8 million - Net cost increase for their products and services
- $300,000 - To be reimbursed through ITCs
- Net loss of $1.5 million
- Job loss of 40-50 positions
TIAC acknowledges that the Federal Government’s mandate does not include specifying which provincial industries will be exempted or grandfathered under the HST, however it does believe that steps can be taken at the national level to alleviate the impact of the new measure. To help lessen the impact of the HST on the tourism sector in these provinces and across the country, TIAC will put forth to the committee three essential recommendations:
- Ensure the full HST amount is eligible for rebate under Foreign Convention and Tour Incentive Program (FCTIP).
- Reinstate individual rebates to foreign visitors on GST/HST for qualifying goods and services.
- Re-affirm the principle in the tax code that tourism, as an export industry, ought to be exempted from national value-added taxes such as the GST/HST.
Click here to view the submission to the Standing Committee on Industry.
For more information on TIAC’s appearance, or the HST issue, please contact Christopher Jones, TIAC Vice-President, Public Affairs at cjones@tiac.travel or 613-238-7557. |
