An alliance of economic stakeholders is calling for the implementation and return of a Visitor Tax Refund program to stimulate the Canadian economy.
The alliance includes Aldo Group Inc., Birks Group Inc., Harry Rosen Inc., Hudson’s Bay Company, Cadillac Fairview Corporation Limited, Quadreal Property Group, the Retail Council of Canada, Global Blue Group and Triple Five.
“The international context and the closing of borders have exacerbated an already serious issue of declining tourist spending in Canada. Every opportunity must be taken to stimulate the Canadian economy. This program would greatly benefit the tourism sector, retailers, and the Canadian economy in general, as it faces unprecedented economic challenges,” said Jean-Christophe Bedos, President and CEO of Birks.
“We are convinced that implementation of a Visitor Tax Refund program must be part of a series of actions by the government to ensure a strong economic recovery and position Canada as a global shopping destination and would substantially benefit the Canadian economy more broadly.”
The alliance submitted on July 20 its brief to the Minister of Tourism and Associate Minister of Finance, Randy Boissonnault, as part of the consultations of the federal government’s Tourism Growth Strategy.
The implementation of this measure is intended to ensure an economic recovery in the tourism sector, which has been greatly affected by the global situation of the last few years, said the alliance.
“The pandemic has affected many industries, including tourism, hospitality, and retail. The program proposed would allow international shoppers to reclaim the Goods and Services Tax (GST) and provincial sales tax on their purchases. The Alliance strongly believes this would boost both the number of visitors to Canada and the amount of money spent by those visitors.
An ongoing decline in per-capita tourist spending had already been observed, beginning in 2007, when the Government of Canada canceled the previous visitor rebate program,” said the alliance.
“A five per cent decline in this sector over the past seven years was a marked contrast to competing jurisdictions, such as the European Union, United Kingdom, or Japan, which has seen a 23 per cent increase in spending since its program was implemented in 2012. While the objective of the program is to ensure neutrality of tax treatment between tourist spending on exported goods and other exports, a VTR would enhance the international competitiveness of the tourism sector and domestic retailers, while increasing our country’s retail sales and exports, resulting in increased tourism shopping yield and a range of macroeconomic benefits.”
Just recently, the federal government dropped all COVID travel restrictions.
Bedos said that back in the Spring earlier this year the Tourism Minister invited the industry to contribute and make proposals about tourism in Canada.
“We had started working on analyzing with the Retail Council of Canada what difference it would make to reintroduce the Visitor Tax Refund. But when Mr. Boissonnault invited contributions to re-launch the tourism industry in Canada, post-pandemic, we felt that this was time to make a serious, well-documented proposal because we strongly believe, based on experience, that in many, many other countries that the Visitor Tax Refund makes a big difference in terms of number of visitors and in terms of how much visitors spend and how much revenue it brings to the economy,” he said.
“For Canada to emerge as a destination for true international tourists, Canada needs to step up to the best international standards and when you look at how much tourism represents in terms of percentage of GDP in Canada it’s less than two per cent. But in countries in Europe like France, Italy and Spain, it’s in the area of eight per cent and this is very much due to how the country has organized the strategy to attract tourists and the Visitor Tax Refund is part of that strategy.”
Bedos said the recent lifting of COVID restrictions in travel will have a very strong impact on the tourism industry in Canada.
“You need incentives not deterrents to attract people. A lot of people have a choice to decide which country they are going to visit. If we make it difficult or not very attractive for international travelers to come to Canada then they go somewhere else,” he said.
“And let me tell you, we have observed, and analyzed the data, since Canada dropped the Visitor Tax Refund, previous (system), that wasn’t very productive and expensive to manage for the government. The government dropped the program in 2007. Since 2007, the spend per capita for tourists has dropped year in, year out. Forget about COVID years. Of course, they were exceptions but over 15 years, every year the spend per capita has dropped between five and seven per cent. We need to bring that back up because countries like Japan, for example, or every other country of the OECD who have a Visitor Tax Refund program has seen spend per capita, how much each tourist spends when they visit, they have seen that number increase every year.
“So there’s a very big missed opportunity for Canada and the economy. We estimate that actually this would represent about $1 billion of revenue for Canada which is missed because we don’t have a Visitor Tax Refund system.”
According to Statistics Canada, tourism spending in Canada grew 19.8 per cent in the second quarter, a fifth consecutive quarterly increase. Tourism gross domestic product (GDP) (+20.4 per cent) and jobs attributable to tourism (+11.2 per cent) also rose in the second quarter.
The federal agency said travel restrictions impacting tourism activities during the first quarter of 2022 were eased effective February 28, allowing the tourism sector to continue its recovery in the second quarter. More visitors from outside of Canada were admitted, and passenger air travel expanded services. With this most recent increase, tourism spending in the second quarter was 21.7 per cent lower than the pre-COVID-19-pandemic levels of the fourth quarter of 2019, added StatsCan.
