Tax structure, funding cuts take toll on tourism

The world's expanding middle class is flying high, taking advantage of a kaleidoscope of captivating destinations - all of which pose a challenge for Canada's tourism sector.

Canada used to be No. 7 in terms of top travel destinations, according to the Ottawa-based Tourism Industry Association of Canada. Now, it is No. 18.

That matters. Tourism accounts for two per cent of Canada's GDP and 3.5 per cent or 600,000 direct jobs. Those jobs often are badly needed ones, in remote and rural areas.

They help generate a non-polluting stream of revenue - $80 billion in 2011.

But, by the government's own tally, Canada's share of the lucrative international travel market has been declining, from 2.9 per cent in 2000, to just 1.7 per cent in 2010.

That's worrisome because each international traveller spends more than each homegrown one. And we have a tourism deficit, with Canadians spending more abroad - mostly in the U.S. - than international visitors spend here.

Much of the problem results from stagnant overseas markets, including the UK, France, Germany, Japan and Australia.

These days, the industry relies on Canadian tourists for more than 80 per cent of its receipts. The tumbling numbers were attributed last week to a lack of federal action.

One-time Progressive Conservative cabinet minister Perrin Beatty, now president of the Canadian Chamber of Commerce, told the Economic Club of Canada that Ottawa's tourism policies are uncompetitive, one of a number of competitiveness barriers harming the economy.

"A huge industry, critical in every region, is struggling with its competitiveness and needs public policies that are forward-looking and supportive."

Tourism association president David Goldstein followed up on Beatty's speech, pointing to:

. a 2012 federal move to reduce by 20 per cent the $72 million budget of the Vancouver-based Canadian Tourism Commission, the industry's marketing arm, just as major competitors are boosting budgets. The U.S.'s marketing agency, for example, is spending $200 million. Canada's tourism commission has been forced to scale back its efforts to 11 foreign markets: the UK, the U.S., Australia, Brazil, China, France, Germany, India, Japan, South Korea and Mexico.

. an "inhibitive taxation structure" imposing more than $850 million in aviation taxes, fees and levies; $90 million in GST paid on those airline taxes; and $460 million in GST paid by foreign visitors, leaving Canada the only G8 country not reimbursing these tourists for its value-added tax.

It's worth noting that Conservatives embrace the idea that lower taxes can ultimately boost revenue by increasing economic activity; that was their strategy in lowering corporate taxes.

But they haven't applied this logic to the tourism industry.

B.C. tourist operators have long expressed frustration over sky-high aviation taxes as an increasing number of British Columbians bolt across the border to catch flights.

U.S. airports offer pricing that's about 30 per cent lower. Some 40 per cent of the differential is because of lower fees and taxes.

The industry says Canada's airlines, airports and government are losing as much as $1 billion a year as a result of the cross-border loss.

Among those who have lined up to chastise the Harper crowd for high aviation taxes are the Conference Board of Canada, a Senate standing committee on transport and the Canadian Airports Council - to no apparent effect.

The government understands tourism's importance. In 2011, it set a target of boosting revenues 30 per cent by 2015.

If it wants to achieve that goal, Ottawa may have to accept the notion that, these days, Internet savvy travellers are price sensitive and have lots of product from which to choose.

Original Article
Source: canada.com
Author: Barbara Yaffe