While shoppers with a penchant for deals are salivating at the thought of being able to bring back more duty free loot, economists warn that the $20 billion lost annually in Canada to cross-border shopping is going to skyrocket.
With credit cards in hand, Canadian staying 24 hours or more south of the border can now bring back $200 in duty free goods, compared to $50 and the limit has doubled from $400 to $800 for those staying between two and seven days. And the limit for Canadians gone for a week or more increases $800 from $750.
There continues to be no duty and tax exemptions for out-of-country trips of less than 24 hours. Volume and quantity limits on alcohol and tobacco products also remain unchanged.
Bank of Montreal’s chief economist Doug Porter recently said there is a downside to the new limits introduced in this year’s federal budget, specifically that Canadian retail businesses are going to suffer in a big way.
“There are already more than 50 million visits to the U.S. by Canadian residents annually ... (and) those numbers are poised to swell when Ottawa increases the duty-and-tax free limits on June 1,” he said.
Porter said even though the price difference between U.S. and Canadian goods has narrowed to 14 per cent on average from the 20 per cent, the cross border shopping craze appears to be intensifying.
The Senate banking committee is expected to report later this year on the causes of the persistent price gap between the two countries, despite near parity in the value of the U.S. and Canadian dollars in most years since 2007.
“A culmination of factors is likely to unleash a wave of Canadians cross-border shopping this summer in numbers not seen in two decades,” Porter said.
“There are already more than 50 million visits to the U.S. by Canadian residents annually ... (and) those numbers are poised to swell when Ottawa increases the duty-and-tax free limits on June 1.”
Porter has taken issue with the Bank of Canada’s estimate that cross-border shopping is less than two per cent of total consumer spending, adding that doesn't taken into consideration that Canadians don't always report everything they buy in the U.S.
“Even at a conservative estimate of five per cent, we are talking over $20 billion a year,” he said.
“If correct, that represents a real drain on domestic retail sales, employment and government revenues — a drain that looks (likely) to deepen.”
Diane Brisebois, the Retail Council’s president and CEO, told the Toronto Star Friday the new rules certainly do not help Canadian retailers, but before the Senate committee she was far more blunt, saying the government's decision to increase duty exemptions “is salt in the wounds of retailers in border communities.”
Brisebois said Canadians retailers understand that consumers are looking for deals and have every right to shop where and when they want.
“We can’t blame consumers … however, we are also saying we want to make sure consumers understand that retailers in Canada are not gouging them and that the reality is that there are two big problems for retailers in Canada: one is the import duty … and two is the multinational suppliers who have traditionally always charged more for their products in Canada,” she said.
For example, she said retailers in Canada that import sport goods pay 18 per cent duty while their American counterparts pay no duty.
Brisebois said Canadians have to remember there is a trickle-down effect when retailers are being hurt financially.
“If retailers are losing business they are not renovating their stores, they are not building new stores, they are not using contractors, designers, electricians, they are not hiring more people,” she said.
Meanwhile, speaking in Toronto today federal Natural Resources Minister Joe Oliver said the new limits, which are now harmonized with those in the U.S., are long overdue because it means expedited customs clearance for returning Canadian consumers and making cross-border business and personal travel more convenient.
“Our government understands how important an efficient border is to Canadians and our economy. Every year, Canadians take some 30 million overnight trips outside of Canada,” Oliver said.
Stephen Fine, founder of online shopping resource crossbordershopping.ca, said would-be bargain-hunters are keen to take advantage of the new limits.
Shoppers had begun mobilizing to pressure the government into changing the personal exemption rules, he said, adding the 24-hour duty free limit was a frequent bone of contention.
Fine said the government’s new regulations have addressed those grievances, but have failed to eliminate the main source of inconvenience. Canadians are still barred from bringing back any duty-free goods purchased on a same-day excursion to the U.S., in sharp contrast to Americans who are entitled to $200 worth of exemptions when crossing the border from Canada.
“There’s been a lot of disappointment about that from our audience because the majority of cross-border shoppers are same-day shoppers,” Fine said, adding trips of less than 24 hours make up about half of all visits to the U.S.
The lack of a same-day exemption, Fine said, will almost offset the impact of the other rule changes on cross-border traffic.
Local chambers of commerce across the country and the Retail Council of Canada are calling for Ottawa to make immediate changes that would help them combat cross-border shopping.
They said Friday the federal government should immediately eliminate the tariffs charged on imported finished goods which, they say, add to the costs that Canadian retailers must deal with when they set consumer prices.
Original Article
Source: money ville
Author: Richard J. Brennan
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