Thank you, Mr. Chair and committee members. It's a pleasure to be with you today on behalf of the Canadian duty-free retail industry. The representatives of our industry before you today represent all land and airport duty-free retail outlets in Canada as well as selected land and airport outlets in the U.S.A.
In Canada alone we employ approximately 3,000 Canadians. On top of that, Mr. Chair, close to 40% of products sold in our stores are of Canadian origin. Our sales last year were just $349 million; however, in 2000 our sales combined were over $375 million. This represents a loss of 17% for land outlets and 6% overall.
Many events have influenced this drastic trend. Some have been beyond the control of government, but others are a direct consequence of a Canadian government decision.
Our business depends on tourism. Our sales have been affected, as you probably well know, by September 11, SARS, the falling U.S. dollar, the war in Iraq, longer lines at the U.S. border, a decision to require passports by 2007--in the minds of many, this has already taken effect--and of course the recent ban on liquids on airplanes. While we do not hold the government accountable for these events, we will need your help if we are to overcome these challenges.
Our sales have been affected by actions taken directly by government as well. We have been recognized by government as being an export industry; however, the government's imposition of an export tax on tobacco, aimed at smugglers back in April 2001, dealt a near-crippling blow to our industry. This particular tax on the sale of duty-free tobacco products was the first of its kind in the world. This tax created numerous significant negative impacts on our industry. It attacked the basic foundation and nature of our business, which is tax- and duty-free. It eroded the traveller's confidence: “Why do I pay tax on tax-free products?” It reduced our strategic advantage. It reduced penetration to the shops. It affected substantially our ability to pay rents to various authorities, and it reduced sales and increased costs.
Secondly, the announcement of the recent cancellation of the visitor rebate program dealt another stinging blow. The GST/HST visitor rebate program, although modest by international standards, contributes to Canada's competitiveness as a destination. All other countries we compete with provide rebate programs to visitors, and removing the GST rebate program will inflate our pricing in foreign markets by 6%. Tourism cannot afford the added loss of competitiveness that the elimination of the GST/HST visitor rebate program will entail.
As a result of these many challenges, the industry has already seen erosion in sales of some $26 million from 2000-2005 and is forecasting a further decrease of 10%, or $35 million, for 2006 alone. Mr. Chair, that represents a significant amount of Canadian product and many Canadian jobs.
Government and industry working in concert can, I am confident, work through these issues. As you may know, in its report entitled “Borderline Insecure”, the Senate committee on national defence last year recommended a review of allowances to bring our Canadian program more into line with those of Mexico and the United States. We fully support this and applaud the committee's recommendations.
Meanwhile, our industry also continues to invest to keep up with the global market in which we compete. We bring new programs and have added new stores. We've reinvested capital for store improvements. We continue to generate employment and pay corporate taxes, and in the last five years we have paid in excess of $150 million in export taxes on tobacco--this represents almost 10% of our sales.
There are solutions to these problems. Our industry is currently working with Finance toward solutions to the tobacco excise tax problem, and we are seeking your support to find solutions to this issue that may be dealt with in the next budget.
We are also looking to you and all of government to review and speedily rescind the proposal to eliminate the visitor rebate program or look at alternate solutions, and we encourage the government to take action on the Senate report recommendations regarding allowances, which were favourably viewed by this committee last year.
Further detail and more specific recommendations are presented in the package you have received.
Each of these measures will positively impact the Canadian economy and help to ensure a stable, long-term future for our industry.
Once again, Mr. Chair, on behalf of a duty-free industry in distress, our workers, and the border communities we live in, we want to express our appreciation for being invited here today, and we look forward to your help.
Thank you.