Thank you, Mr. Chairman and members of the committee.
I'd like to begin by saying that RCC's 45,000 storefront retailers were delighted with the focus on consumer issues in the recent Speech from the Throne. Not only is a consumer-focused approach of great importance in its own right, but it is also very beneficial for the retail industry and the over two million employees who work in that sphere.
While principles are foundational, presumably the reasons we're here today are the policies that flow from those. In the time available, I would like to touch on two of those areas: tariffs and payments.
In the last budget the government began the process of tariff reductions by removing duties on baby clothes and most sporting goods. RCC worked closely with the government on those deliberations, strongly applauds what was done last year, and is calling for further steps in budget 2014. The tariff reduction initiative stemmed, in part, from concern about price differential between Canada and the U.S., and particularly the Senate's— I think I'm supposed to refer to it as “the other place”—detailed study of that price gap.
One of the key issues noted in that study was the price impact of the customs tariff, a 98-chapter schedule of customs duties, organized, I believe, into more than 7,000 headings, though I've not made a personal count. Retailers are naturally concerned about the cost impact of the customs tariff on consumers.
As we understand the purpose of tariffs, they're tools of industrial policy, designed to support domestic manufacturers, but, of course, they also serve as revenue mechanisms for government. While tariffs may once have helped nascent Canadian manufacturers compete with imported product, they are now seriously out of alignment with any existing manufacturing base.
There are multiple examples of tariffs of 17% and 18%, and more, in areas where there is not even a single Canadian manufacturer and no reasonable likelihood of there being one soon. Once the industrial policy angle is lost, a tariff simply becomes another tax, targeted at a specialized list of goods.
In numerous cases, and I'm going to use the example of footwear, these taxes are often double or triple the 5% GST rate on the same items. Given the cascading effect of GST on top of those tariffs, and absent any markups by wholesalers or retailers, a woman’s shoe with a value under $30 carries a combined federal tax rate on landing of 24%. This isn't an unusual example. Indeed, pretty much every item of apparel and footwear at a wholesale level labours under an effective tax burden of between 16% and 24%. Most are not luxury items; in many cases, they're necessities.
RCC understands that the government lacks the fiscal capacity to provide immediate tariff relief across the board, what with the tariff bringing in approximately $4 billion annually. But neither can we ignore an issue that has such an obvious impact on consumers. The government did the right thing last year in starting the process of tariff reductions, and retailers are calling for further action this year.
The second issue that RCC would like to address is that of credit card acceptance fees, being the charges that merchants pay to the banks every time a credit card is used. Members may ask how that is a consumer issue rather than a merchant one. The simple answer is that over $5 billion dollars in credit card acceptance fees get passed on to all Canadian consumers, in the form of higher prices.
The Competition Tribunal recently found that there's a problem in the payments marketplace, that the networks possess market power, and that there's been a deleterious effect on competition. Worldwide, the European Union, Australia, New Zealand, France, and Israel, among others, have all moved to cap interchange rates. They've said enough is enough. Why should a Canadian consumer see the impact of interchange fees that are double those in Australia, quadruple that in France?
Burdened as they are by over $4 billion in customs duties and $5 billion in credit card acceptance costs, Canadians are delighted by the stated intention of the Speech from the Throne that this will be a period of focus on the consumer.
We look forward to the next budget and hope that it will give full effect to that principle.
Thank you.