Thank you, Mr. Chair.
On behalf of the Arrivals Duty Free Coalition, we are pleased to appear before the committee. The coalition draws its membership from Canada's largest airport and duty-free operators. Coalition members include six airport authorities—Vancouver, Toronto, Calgary, Winnipeg, Montreal, and Halifax--and three airport duty-free operators—Aldeasa, Aer Rianta, and the Nuance Group.
The coalition's goal is simple: to put a framework in place to allow arrival duty-free operations at Canadian international airports.
Currently, Government of Canada policies allow only for the sale of duty-free products to passengers who are departing from Canada. However, Canada is falling behind the global trend. Already, 55 countries have implemented arrival duty-free programs that allow passengers arriving in a country to access duty-free shopping. Countries that have adopted this type of program include Hong Kong, China, Australia, New Zealand, and Italy.
The prohibition of arrivals duty-free creates a competitive disadvantage for major Canadian airports and reduces the potential revenues that could be generated by international visitors and returning residents. It is estimated that implementing arrivals duty-free in Canada would yield some $61 million per year in new revenue for Canadian airports. The addition of these non-aeronautical funds would in turn be directed toward improving the competitiveness of all major airports in Canada.
Implementing arrivals duty-free will offset some of the negative impact and lost sales incurred by duty-free retailers in the aftermath of restrictions on carrying liquids and gels on aircraft.
Canadian airports depend on retail operations to maintain their global competitiveness. While air travel has recovered since 9/11, between 2002 and 2005 duty-free sales have declined by some 23%. A large part of this decrease is attributable to the increasing trend towards arrivals duty-free at foreign competitor airports. As previously stated, 55 countries already have arrivals duty-free, and more countries are conducting feasibility studies.
The economic impact analysis of arrivals duty-free at Canadian airports suggests that over a five-year period, from 2007 to 2011, incremental sales would generate some $15.9 million in wages and $4.6 million in federal taxes. In terms of employment benefits, arrivals duty-free would generate direct employment for over 490 Canadians.
Other benefits have been noted in jurisdictions that have introduced arrivals duty-free programs. These benefits include: 1) increased tourism; 2) additional non-aeronautical revenue for airports, which in turn helps to keep costs to airlines and passengers low; 3) reduced carry-on luggage loads for aircraft, with corresponding reductions in operating costs; 4) reduced airline fuel consumption from not transporting duty-free goods, with a corresponding reduction in emissions; 5) the ability to promote Canadian products to travellers; and 6) increased customer convenience and purchasing options.
Arrivals duty-free is an excellent opportunity for Canada to repatriate sales that residents would normally make when departing foreign airports prior to returning to Canada. Further, experience in other countries, such as Australia, where arrivals duty-free has been in place for some time now, has shown no negative impact on domestic sales.
For these reasons, Canada's airports and duty-free operators, along with other organizations, such as the Retail Council of Canada and local chambers of commerce and boards of trade, support arrivals duty-free.
Arrivals duty-free is tax neutral, as these goods would otherwise be purchased abroad. In no way are we seeking an increase in the current personal exemptions. Simply put, introducing this option to travellers who wish to purchase duty-free products would be beneficial to Canadian industry rather than to foreign markets. Implementing arrivals duty-free at airports is consistent with the federal government's Advantage Canada goals for innovative regulations in Canada's economy and with promoting a tax system that ensures that the Canadian economy remains globally competitive.
Our recommended action is that in order to support the competitiveness of all major airports in Canada, the committee should recommend that the Minister of Finance implement arrivals duty-free, permitting the sale of duty-free goods to international passengers upon arrival at Canadian airports.
Thank you for your time. I'd be pleased to answer your questions regarding arrivals duty-free.