Finance Committee on Nov. 9th, 2006

[Christopher Jones]

I wonder if I could just briefly read into the record—it'll just take a second—the testimony from one tour package operator on the potential impact here. She says:I realize we're just one small example of the U.K. tour operator industry. However, this additional 6% will, most probably, result in our company being forced to cancel our winter charter flight series for Winter 2007-08, if sales are significantly impacted by the increase in ski tour package prices. That would mean 15,000 fewer U.K. ski visitors from our company alone. That's 150,000 bed nights and skier days, and a total revenue spent by our clients in Canada of $30 million, with an average stay of 10 nights and an average spend in Canada of $2,000 per person.

I don't think we can afford to see this reproduced across the country at this point.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Can you answer? This is an unusual set of hearings, because we have a ways and means motion in Parliament that normally isn't debated, it's just voted on, so the government can bring it forward any time. It is a money matter, so if it's defeated, it's a confidence issue. If we have to vote on this. Is it worth bringing down the government on this issue?

[Voices]

Oh, oh!

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

I'm sorry, but that's the reality of the situation.

Let me also ask Karin this. When I look at the estimates for the Tourism Commission, you had a huge drop from the 2005-06 year. The Conservatives have been arguing that the money we save here will go into tourism, yet you're dealing with what looks like.... Is it $78 million you get? And you went down to $76 million in 2006-07. That's a $2 million loss, so that's a significant drop.

[Karin Zabel]

Our funding this year is $78.8 million, and next year it will be $75.8 million.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

That's a significant drop, so you're going to be hit from both ends.

I'm sorry, Kevin you wanted to jump in on this.

[Kevin Boughen]

Yes, I wanted to come back to the question of VRPs being smart economic decisions for the host country. Global Refund has a lot of experience with this. Usually we're entering countries; we've never had to exit a country. When we enter countries, we often have an independent economic model done to see the impact on GDP. Since this announcement, we have already started to have an independent analysis done for the Canadian economy, and we expect the results very shortly. If it's based on what I've seen on one we just did in New Zealand, for example, the VRP will have a positive impact on GDP. It is not money out of the country.

[The Chair, Conservative, Brian Pallister]

We'll continue with Mr. McGuire now for five minutes.

Welcome, by the way.

[Joe McGuire, Liberal, Egmont, PE]

Thank you very much. Welcome to everybody who is appearing here today, in particular Dawn, who comes from Summerside, in my riding.

I'm glad you clarified the number of jobs lost. It's not just the indeterminate jobs, it's the contract jobs and the casual jobs that are needed in the peak season to deal with the rebate. So you're now saying that some of these people will never get a job offer, because only the indeterminates will have any kind of bumping areas or could be absorbed by the tax centres in other areas.

[Dawn Hardy]

Job protection really only applies to permanent employees. In Summerside we have a very strong workforce. They've been there since the centre opened and they've shown their dedication. They can do the job. For these people, when their option is to find something in the private sector, it's quite a loss, because good, well-paying jobs are hard to find on P.E.I. It costs $2.3 million at this point to keep 60 people working on the visitor rebate program. When you take $2.3 million out of the economy, you can't say there's not going to be an impact, so as I said earlier, there's a huge impact on Summerside.

[Joe McGuire, Liberal, Egmont, PE]

So the figure that Mr. Jones quoted the government is $7.5 million in costs, and less than half of that is occurring in Summerside.

[Dawn Hardy]

Exactly, $2.3 million of that.

[Joe McGuire, Liberal, Egmont, PE]

So P.E.I. is getting a double whammy here. It's their second-highest industry, depending on how the fishery goes--which one never knows--or agriculture, for that matter, but it's the second largest industry. It will be impacted because of the difficulties everybody here has outlined. It will be a disincentive for tourists to come to Atlantic Canada, particularly to P.E.I., and we'll lose the jobs and the economic impact in the Summerside area besides.

I just wanted to point that out, Mr. Chair, that Summerside will get hit twice. And as Dawn says, the cost of operating this in Summerside is less than half the total administrative cost of the whole program.

I was just wondering this. I know 9/11 has been mentioned twice here by the NDP and the Conservatives, and I believe that quote was made by Randy Williams, not by a Liberal or a Conservative or any politician. It was made by the president of the Tourism Industry Association of Canada, who said in his deposition this is the biggest issue he's faced in his five years, that it's bigger than 9/11.

Maybe we should clarify why this is bigger than 9/11.

[Christopher Jones]

Randy Williams is the president of our association. He was making that observation in the context that post-9/11, airline traffic gradually climbed back to a pre-event level after a few years, and SARS had a temporary impact on visits to Toronto as well. I think the point he was trying to make was that this would be a permanent addition of 6% to the cost structure facing these people, and hence it may well have a longer-term impact.

[Joe McGuire, Liberal, Egmont, PE]

We can get over the 9/11s that occur, but we're not going to get over the visitor rebate cancellation.

[Christopher Jones]

It's going to make life more difficult.

[Joe McGuire, Liberal, Egmont, PE]

How many jobs would be saved in Summerside through your counter-proposal to the government?

[Christopher Jones]

I don't want to get too much into the details of our proposal, but it would see the creation of sub-licensees or rebaters at all the border points, airports, and marine embarkation points across the country. I can't speak specifically to Summerside. We understand the situation, and it's more than just the loss of those jobs. I might add that it's also the issue of the small craft and tourist shops selling product to tourists for whom the 6% is a significant amount, and that's going to be a disincentive to purchasing those things.

The business plan for this project hasn't been completely rolled out, but we have a good conceptual proposal here for you to consider.

[Joe McGuire, Liberal, Egmont, PE]

As far as the reaction from the provinces is concerned, Mr. Chair, I was wondering what our witness has received in terms of correspondence from the provinces and territories in this country as to their position. I've gotten seven letters from tourism ministers and premiers decrying this move by the federal government.

I'm wondering what kind of response you got from the provinces you reside in and from provinces in general.

[The Chair, Conservative, Brian Pallister]

You have a very brief time for a response, Mr. Pollard.

[Anthony Pollard]

The response we've had from various provincial governments right across the land, when I pointed out to them that there's a potential loss of $183 million to provincial coffers because of a proposed cut, is that obviously they are supporting our position for the maintenance of the program. I want to underline the fact, Mr. Chairman—

[The Chair, Conservative, Brian Pallister]

I'm sorry, we've gone quite a bit over Mr. McGuire's time, but work it into the next response. I'm sure there'll be another question for you.

I just wanted to interject with one observation. I take it from the competitiveness concerns you've all expressed that this is obviously important to the tourism industry; that's self-explanatory. Would anybody want to go on record, then, as opposing reductions in the GST? If this rebate program is so important, and obviously from your testimony you believe it is, then it would follow from a competitive standpoint, wouldn't it, that a lower GST would assist your industry in some respects? I'm very interested in knowing if anybody is supportive of raising the GST at this point.

[Anthony Pollard]

Mr. Chairman, I would like to respond to that question by saying that by maintaining this program, federal government coffers are in fact going to be enhanced. As opposed to taking that route, I would encourage the government to maintain it. You'll actually generate more revenue. You don't need to get into the issue of whether we would support or not support a GST cut or what the implications of that would be.

[The Chair, Conservative, Brian Pallister]

Thank you very much for that. That was a good political answer, Mr. Pollard.

We'll continue with Mr. St-Cyr now.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

I would like to thank all of the witnesses.

I want to concentrate my comments and my questions on how the effectiveness or ineffectiveness of this program is calculated. It is probably owing to my professional background that I'm interested in this aspect. As an engineer, I was often called upon to calculate the productivity of what we were doing. If I had used the same calculation method as the government is using, I probably would have lost my job pretty quickly. In my opinion, even if the figure of 3% is surprising, it is still anecdotal in nature. That is not the way to measure how productive this program is. That was made clear earlier. Generally speaking, only one person makes a claim on behalf of all members of the family, so you need to multiply that figure by three or four, so we are looking at 11%. Even there, we are omitting the key element of how much money is not actually claimed. It is unlikely that someone who spends a day here and who buys a $100-walkman would ask for a rebate of $6, minus administration fees.

I do not know whether you have the figures, but what proportion in terms of dollars—and not in terms of travellers—is claimed? That would give us a better idea.

I would like to bring up a second point regarding the program's effectiveness. It seems to me that, if we want to measure the effectiveness of the program, we need to measure not how much people claim but what percentage of people decides to travel for business or tourism because of the rebate. In other words, we need to measure the effect of the rebate from a marketing standpoint. Companies that offer mail-in rebates on products in stores know very well that a whole lot of people who buy a printer, for example, because of the mail-in rebate never claim it. But it is still a very effective tool for the vendor. In fact, it is doubly effective, since the product sells because of the rebate, but the rebate is never claimed.

Do the industry people have figures, not for the number of people who make a claim, but for the number who take this rebate into account when they choose their destination?

Those are my two questions. What dollar amount are we talking about? What are the marketing arguments involved?