Canada rolling up welcome mat by cancelling visitor rebate program, coalition tells Ottawa

OTTAWA, October 18, 2006 - Eliminating the GST/HST Visitor Rebate Program will put Canadian jobs, economic growth and tax revenues at risk. That's the message the federal government got today from the VRP (Visitor Rebate Program) Coalition, a broad-based business group formed to fight the planned measure, announced last month as part of a wide-ranging series of spending cuts.

"Canada's competitiveness as a tourism destination is at stake," said Randy Williams, President and CEO of the Tourism Industry Association of Canada (TIAC), which is leading the multi-stakeholder initiative. "While other countries are going out of their way to attract visitors, Canada is essentially rolling up the welcome mat. All of our major competitors have visitor rebate programs and a number of them have, in fact, been expanding those programs and making them easier to access."

The GST/HST Visitor Rebate Program not only entitles international visitors to a refund of the Goods and Services Tax or Harmonized Sales Tax they pay on short-term accommodation and goods they buy to take home, it enables tour operators and convention planners to price the packages they sell in foreign markets exclusive of GST/HST. The result is an average 6% price advantage that allows them to compete against other countries that do the same with their tourism offerings.

"It's a case of short-term gain for long-term pain," noted Tony Pollard, President of the Hotel Association of Canada, a VRP Coalition member. "The government was looking to save some cash up front, but it overlooked the huge long-term impact that eliminating the Visitor Rebate Program will have on the hotel convention, group and tour business which in 2005 totalled $1.28 billion. Canadian prices in foreign markets will be permanently increased by an average of 6% and this business is now in great jeopardy."

The government says the program's cancellation will save $78.8 million a year, and justifies it on the grounds that it has a take-up rate of just 3%. In fact, the savings figure only includes GST/HST refunds processed by the federal Visitor Rebate Centre and duty-free shops, and does not take into account the program's importance to Canada's volume inbound markets. And the true take-up rate among independent travellers, according to industry estimates, is likely closer to 11%, which is well in line with other countries' visitor rebate programs, and would be even higher if not for weak promotional efforts and the program's administrative complexities. The take-up rate for tour operators and convention planners, however, is effectively 100%.

"The value of the GST/HST Visitor Rebate Program to Canada's tourism competitiveness is much higher than the government has indicated," said Mr. Williams, whose organization has pegged the actual dollar value at upwards of $100 million, using data provided by tour operators, hoteliers and convention planners. As more data is collected, the total is expected to rise significantly. "But the real cost of driving away international visitors will be lost jobs, unrealized economic opportunities and lower government revenues, as Canada loses market share in the battle for international tourists and convention delegates."

The VRP Coalition delivered its message to the federal government at a news conference this morning in Ottawa. Its members are:

Air Transport Association of Canada
American Bus Association
Association of Canadian Travel Agencies
Canadian Airports Council
Canadian Association of Convention and Visitor Bureaux
Canadian Sport Tourism Alliance
Frontier Duty Free Association
Hotel Association of Canada
National Tour Association
North West Cruise Ship Association
Premier TaxFree Canada
Retail Council of Canada
Tourism Industry Association of Canada
Travel Industry Association of America

Prime Minister Stephen Harper, Finance Minister Jim Flaherty, their Cabinet colleagues and MPs from all parties have been getting the same message from tourism businesses across the country. There are over 200,000 tourism-related businesses in Canada, the majority of them small and medium-sized enterprises. They support economic and community development in every province and territory, keep 1.6 million Canadians working, and generate tax revenues estimated at $18.8 billion in 2005, including a federal share of $9.2 billion. Domestic and international business and leisure travellers spent $62.7 billion in Canada last year.

The industry is already struggling with a substantial decline in visitation from the United States, Canada's primary international tourism market, which was 28% lower in 2005 than in 2000. Factors include a stronger Canadian dollar, rising fuel prices, an underfunded national tourism marketing effort, and confusion about border documentation requirements under the Western Hemisphere Travel Initiative. Now, by cancelling the GST/HST exemption for convention, group and tour business, the government is effectively revoking tourism's status as an export industry.

"The Canadian tourism industry is working hard to reposition itself in a market that has changed radically in recent years," said Mr. Williams. "Cancelling the Visitor Rebate Program is an additional blow that could prevent it from doing that. The federal government is kicking the industry while it's down."

For more information, please contact:
Ms. Lee Morris, CEO
Tourism Kamloops
Ph: (250) 372-8000 or Email: lee@tourismkamloops.com