Finance Committee on Nov. 9th, 2006

[John McCallum, Liberal, Markham—Unionville, ON]

Now, one of the defences I was told when I was the Minister of Revenue, or one of the arguments in favour of this, is, well, only 3% of the people use this rebate. I never thought that was a good argument, because even if it's only 3%, your testimony has indicated that nevertheless it is very important.

In anticipation of that 3% argument, I ask any one of you—perhaps Mr. Fritsche, or Mr. Pollard, or Mr. Jones—how do you respond when people say, well, obviously this program isn't important; only 3% of the tourists use it?

[Anthony Pollard]

May I answer, Mr. Chair? Thank you very much.

The reality is that in the hotel business, particularly for the group convention and the tour business, we aren't talking about 3%. This is an exemption that is used globally by virtually every tour group coming into Canada, and this is something I believe the government overlooked when they made this initial decision. They were looking at the independent traveller coming in. However, with the group tour and convention business, this is something that's used virtually by everybody in that segment.

[John McCallum, Liberal, Markham—Unionville, ON]

So put differently, it may be 3% of all of the people, but it's closer to 100% of that convention business, which is really the relevant issue.

[Anthony Pollard]

Completely, and as I pointed out in my statement, this is $1.28 billion worth of business, of which the federal government is receiving $218 million worth of taxes. The argument I put forward is that we're trying to save $75 million, but we're putting $218 million in jeopardy.

[The Chair, Conservative, Brian Pallister]

Mr. Jones.

[Christopher Jones]

We would contest the 3% number on the basis that I think the government or the Department of Finance made the calculation on the assumption that every one of the 35 million visitors to Canada would be making a claim, when in fact we know that people travel as couples, families, and in groups. Often one individual makes the claim for the family or the couple.

There's also the issue that the government lumped in same-day visitors, whereas the World Tourism Organization, when calculating claimant rates for these value-added tax rebate schemes elsewhere, only looks at overnight visitors. So we think the number is actually closer to 11%, which is well within the normal international range.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you. Do I have time for one quick question?

[The Chair, Conservative, Brian Pallister]

There are a couple of other panellists. It's your choice.

[John McCallum, Liberal, Markham—Unionville, ON]

I think we have enough on that. And I'm running out of time.

Mr. Boughen, under your scheme, somebody has to pay for the administration.

[Kevin Boughen]

Absolutely.

[John McCallum, Liberal, Markham—Unionville, ON]

Are you saying the government will pay zero?

[Kevin Boughen]

Yes, zero.

[John McCallum, Liberal, Markham—Unionville, ON]

Then who would pay for the services?

[Kevin Boughen]

The tourists pay, because when they show up at the point of exit, and they've spent $100 in GST, they're only given $80 of it instead of the $100. The other $20 goes to the operator to administer the program.

[John McCallum, Liberal, Markham—Unionville, ON]

So the tourists, the convention businesses, would get less money than they would have—

[Kevin Boughen]

The visitor rebate program is not part of the convention business. It is independent travellers who are coming, buying goods, and taking them home.

[John McCallum, Liberal, Markham—Unionville, ON]

So the government would continue to administer this for the convention business?

[Anthony Pollard]

For the convention business, the amount of administration is almost negligible. What happens is that a tour operator, conventioneer, wherever, outside of the country, using the proper CRA criteria, fills in the form stating that 75% of the people that are coming here are from outside of the country and are therefore exempt.

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

We will now go to Mr. Paquette. You have 10 minutes.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman.

I would like to thank the witnesses for their presentations. I found them very interesting.

We are also very surprised by the Finance minister's proposal. We find it hard to understand why the government would impose another burden on the tourist industry, which is already experiencing serious difficulties. You referred, among other things to the Western Hemisphere Transportation Initiative, which will take effect sooner or later. It has been put off until 2009 for land border crossings, but it will still have negative effects on the tourist industry.

I would first like to ask Ms. Zabel if the Canadian Tourism Commission was consulted on this initiative by the Finance department. Was there any consultation? Was the industry consulted as well? If you were consulted, what was your recommendation?

[Karin Zabel]

I don't know if the industry was consulted, but we were not consulted.

[Pierre Paquette, Bloc, Joliette, QC]

So no one was consulted on this issue.

Mr. Fritsche, do you know how much it costs to administer this program? No one has given us any figures. Since there are no officials here, can you tell us how much it costs to administer this program? Is there someone else who can give me an answer? Mr. Jones?

[Christopher Jones]

We were told by Department of Finance officials that the cost, including salaries and overhead, was in the order of $7.5 million.

[Pierre Paquette, Bloc, Joliette, QC]

So it seems basically that this government initiative, which is aimed at saving some $7.5 million, will jeopardize a great deal of money. Can you give us your estimate of the impact that eliminating the GST rebate will have?

[Alex Fritsche]

As I pointed out earlier, it's difficult, because a lot of the administration happens overseas for the visitor rebate program; for instance, for the convention business as well as on the part of some tour operators. So it happens in the U.S. and it happens in, say, Germany or the U.K., and it never really runs through the system. But we don't really have very reliable figures to give exactly a potential impact figure. But there is the potential that indeed the impact could be significantly larger on the industry than the $78 million that the government would save.