By Andrew Mitchell
After April 1, visitors to Canada will no longer be able to receive a rebate for the six per cent Goods and Services Tax they pay during their visit, as per the new federal budget that passed this week with the joint approval of Conservative and Bloc Quebecois Members of Parliament.
In its place, the minority Conservative government has announced an initiative that would provide tax rebates to foreign tour operators and meeting planners, the details of which have yet to be released.
Overall, B.C.’s tourism industry is unhappy with the decision to get rid of the Visitor Rebate Program, but will welcome any incentives that would bolster group travel.
Mary Mahon Jones, the chief executive for the B.C. Council of Tourism Associations, said they fought hard to save the visitor rebate program, but are glad that the federal government acknowledged the potential impact on tourism.
“This is an improvement over what we were facing, which was the complete and utter cancellation of the VRP,” she said. “Our feedback when the government first proposed this in September of 2006 was that they didn’t do their homework or understand the impact of this. What they were assuming was that there was very little uptake of this program, but they weren’t considering the fact that for tourism operators and meeting planners the uptake was 100 per cent.”
Tourism associations across the country lobbied against dropping the VRP, prompting the federal government to counter with an initiative program for tour operators and meeting planners. While Mahon Jones said that will save those sectors of the tourism industry, COTA is still concerned that dropping the VRB will have a negative effect on tourism, as Canada already has the reputation as being expensive and “tax-heavy”.
“We’re really very glad (the federal government) responded, but we’re sad to lose the whole program which gives us a competitive edge over other countries,” she said. “The problem is that Canada is competing with a lot of other countries out there, some of which don’t even charge value-added taxes, like the U.S.
“(The economic impact) has yet to be determined, but we certainly think this will have an impact on individual spending. The saving grace is that the biggest impact would have been on organized tourism and meetings and covers transportation and accommodation, but when someone comes here on a tour they spend money in restaurants, they go shopping and buy souvenirs and clothing, and that incremental spending is what will be affected by the inability to rebate tax.”
Duty Free shops at airports and land borders will be particularly affected, as they offer rebates on the spot.
The Visitor Rebate Program, which has been in effect since the GST was first introduced in 1991, allows visitors to reclaim taxes spent on goods and services during their stay in Canada. Tourism in a $62 billion industry for Canada, and generates up to $20 billion in revenues for various levels of government, according to Ottawa Business magazine.
However, the VRB cancellation comes at a time when visits from the U.S. are down about 34 per cent overall in the past 12 months, which is mainly credited to the narrowing exchange rates, new passport requirements, and a variety of economic factors.
The VRP uptake rate for U.S. visitors is currently a low seven per cent, while costing about $75 million in operating costs each year.
However, the Hotel Association of Canada determined that saving the $75 million would cost Canada about $218 million in tax revenues generated by group travel and meetings on an annual $1.2 billion in revenues.
Tourism Whistler was disappointed in the cancellation of the VRP, but encouraged by plans to exempt group business.
“Group business is a major contributor to visitor bookings in Whistler,” said Karen Goodwin, director of sales for Tourism Whistler. “The announcement of this new incentive program for foreign convention and tour business helps address some of the concerns we’ve raised about the cancellation of the Visitor Rebate Program.”
Approximately 25 per cent of room nights booked in Whistler are attributed to group business and meetings, and conference sales are relied on to fill rooms during the resort’s slower seasons.