Thank you, monsieur le président.
ACADFO stands for the Association of Canadian Airport Duty Free Operators. We represent the providers of duty free retail services to international travellers at Canadian airports. We're also working in concert with airport authorities to introduce arrivals duty free in Canada.
Our industry is highly regulated. We are legislated through an act of Parliament and are regulated by the duty free shop program under CBSA.
Our members provide retail services to international travellers. We represent sales of $174 million, a source of employment for 1,000 Canadians, a source of promotion for Canadian-made products, an integral part of the tourist experience, and a significant part of the Canadian airport revenue stream, representing approximately $60 million paid yearly.
Our customers are Canadian and foreign travellers. More than half our customers are visitors to Canada. The profile of an international traveller has changed substantially over time. It's no longer true to say that only the very affluent are travelling internationally. In fact, it's very much a middle-income-earner business, and in most markets it even includes some lower-income earners.
Our competitors are airport duty free shops located in foreign countries. These are retail organizations that do not benefit the Canadian government or its people through employment, investment, or tax revenues. Nor do they provide fees to Canadian airport authorities on duty free sales.
Our industry has encountered many difficult, externally driven challenges: 9/11 and its after-effects; export taxes on selected products; SARS; the war in Iraq; the rising Canadian dollar; and, one of our most difficult challenges, the ban on liquids, aerosols, and gels. This ban has dramatically affected two of our most important sales channels. In August of 2006, when the ban on LAG was implemented, overall sales decreased by 35.6%. During the course of the year, losses carried on at approximately 15%. Sixteen months later we have not recaptured this loss.
Lastly, the widespread expansion of arrival duty free across all continents has resulted in a significant change in the duty free market. Canadian rules related to duty free sales have not kept pace with these changes. One measure that would greatly contribute to our competitiveness would be the introduction of arrival duty free at Canadian international airports. Arrival duty free enables international travellers arriving or returning to Canada to purchase duty free goods other than strictly at departure time. These purchases would still be subject to the same overall personal exemption limit set by the Canadian government.
Arrival duty free expansion has gained significant momentum over the last five years. It is now available in 55 countries, and this list is expanding quickly. Now is the time to take action to assist the development of the Canadian airport duty free industry so that we are not last in line in the international market.
The benefits of arrival duty free are numerous. It promotes and retains expenditures in Canada rather than in foreign countries. We have estimated that after the first 12 months, the program would repatriate $61 million in sales to Canada, would create 400 new jobs with $12.7 million in wages, would add close to $20 million to airport non-aeronautical revenues, and would generate $3.7 million in revenue paid to the federal government through employment and corporate taxes.
It would increase investment in Canada for inventory, working capital, and the construction of new retail outlets. It would increase tourism expenditures, as it has in countries such as Australia, where it has been available since 1984, while not affecting negatively the domestic retail industry, as demonstrated in studies of countries as varied as Australia, New Zealand, Norway, and Hong Kong.
To the traveller it provides great convenience and reduces the risk of confiscation due to the ban on liquids and gels onboard aircraft. For the tourism industry, it will provide opportunities to promote to arriving foreign visitors Canadian themes and events such as the upcoming Vancouver Winter Olympics or Montreal's numerous summer international festivals.
Finally, it provides a level playing field for Canadian airport duty free operators, as we are competing with duty free retailers at foreign airports.
To conclude, in our proposal we say that at a minimum, arrival duty free is revenue neutral to the government, as these purchases would have otherwise occurred in foreign airports. Arguably, arrivals duty free is a net revenue gain in terms of additional income and corporate taxes. It also has wide support, including the Retail Council of Canada, various boards of trade, and local chambers of commerce. In order to be successful, we need a business environment that is dynamic and enables us to compete with our foreign competitors. Enabling international travellers and Canadians to access duty free shops at departure and arrival would provide such an opportunity. Therefore, we ask your committee to recommend to the Minister of Finance that the government implement arrivals duty free in its next budget and effect the necessary changes to existing legislation by adding the words “and to enter Canada”.
Thank you for the opportunity to appear. I would be happy to answer any questions.