Retail group urges Ottawa to cut taxes for tourists

BANFF, AB - SEPTEMBER 3: Banff Ave.  Downtown Banff on September 3, 2014 in Banff, Canada.  (Photo by Santi Visalli/Getty Images)

A group of Canadian retailers are asking the government to introduce a tax refund program for international visitors. (Photo by Santi Visalli/Getty Images)

A group of Canadian retailers is calling on the government to introduce a tax refund program for international visitors, a move said will help boost sales and spur the tourism sector’s economic recovery. The group – which includes the Retail Council of Canada, Aldo Group, Birks Group, Harry Rosen, Hudson’s Bay Co., Cadillac Fairview, Quadreal Property, Global Blue and Triple Five – submitted a proposal for a Visitor Tax Refund (VTR ) a federal government this summer as part of consultations for Ottawa’s tourism growth strategy.

The group says it wants the government to allow international tourists to reclaim provincial goods and services tax (GST) and sales taxes on purchases made while visiting the country, and says the rebate “reduces both the number of visitors to Canada as well as the amount of money spent by those visitors.”

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“The international context and border closures have exacerbated an already serious problem of falling tourist spending in Canada. Every opportunity must be seized to boost Canada’s economy,” Birks Group President and CEO Jean-Christophe Bedos said in a statement released on Tuesday.

“This program would greatly benefit the tourism sector, retailers and the Canadian economy in general as it faces unprecedented economic challenges.”

While international tourism to Canada has increased in 2022, it is still below pre-pandemic levels, even with an increase in global travel demand. According to Statistics Canada, international residents made 2.8 million trips to Canada in July 2022, up 10 times from the same month in 2021. While that was a significant year-on-year increase, it was just over half (57 percent). of trips by international guests in July 2019.

Statistics Canada also says the share of tourism demand from non-residents fell to 14.2 percent in the first quarter of 2022, down from the 18.1 percent recorded in the first quarter of 2020, which included the onset of the COVID-19 pandemic. Before the pandemic, non-residents accounted for about 26.8 percent of total tourism demand in the country.

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The group of retailers says per capita tourist spending has been steadily declining since 2007, when the then federal government canceled an earlier visitor discount scheme.

“A 5 percent decline in this sector over the past seven years was a stark contrast to competing jurisdictions such as the European Union, the United Kingdom or Japan, which have seen a 23 percent increase in spending since implementing their program in 2012” , the group announced.

Canada introduced a visitor discount program back in 1991 when GST was first introduced. The program was scrapped in April 2007, making Canada the first OECD country at the time to scrap such a policy, according to an analysis by the Retail Council of Canada. The government at the time said the program was incurring excessive costs to administer and that discontinuing the program would save Canadian taxpayers $86 million annually.

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The RCC conducted an analysis of the scrapped program in 2018 and found that while the government saved money on administrative costs, it also lost $139.7 million in revenue a year, resulting in a net loss of $51.6 million US dollars per year due to the abolition led deduction.

“A VTR would improve the international competitiveness of the tourism sector and domestic retailers, while boosting our country’s retail sales and exports, leading to higher tourism purchase income and a range of macroeconomic benefits,” the group said.

Alicja Siekierska is Senior Reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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