I'd like to start by thanking the chairman and the members of the committee for the invitation to speak to you today.
My name is Shane Devenish, and I'm the executive director of the Canadian Camping and RV Council, a federal non-profit association representing 2,347 private campgrounds across Canada.
With me today is Wayne Hambly, president of the P.E.I. Home and RV Centre.
Campgrounds offer an opportunity for families to spend time together, to create lifelong memories, and to discover Canada's natural landscape. Camping creates a sense of community that is unique to this form of travel accommodation, and it is also an industry that plays an important role in the health of Canada's tourism sector. It also makes a significant contribution to the economy.
Campgrounds stimulate economic activity and create jobs for Canadians in urban areas and rural communities coast to coast. The Canadian Camping and RV Council contributes $4.7 billion to the economy, employs 60,400 people full time, and pays almost $1 billion in federal and provincial taxes. There are 5.8 million Canadians who camp annually, with travel-related expenditures totalling $2 billion and another $850 million spent on non-travel-related camping expenditures.
The camping and tourism industry provides a growing source of income for rural and remote populations, not only through RVing and camping, but through the local businesses the incoming visitors support and utilize around campgrounds.
The small business tax reduction reduces corporate tax that Canadian-controlled private corporations would otherwise have to pay on the first $500,000 of their income derived from an active business. An active business does not include a specified investment business, which is, one, a business with the principal purpose of deriving income from property—for example, interest, dividends, rents, and royalties—and two, a business that does not employ more than five full-time employees.
For the past several years, campground corporations have been able to qualify for the small business tax reduction of around 15%. However, CRA's interpretation changed earlier this year, without notification to either campgrounds across Canada or their accountants, and they reassessed a number of campgrounds at the large corporate tax rate of approximately 45%. CRA and National Revenue representatives are stating that their interpretation of campgrounds that employ less than five full-time employees as a specified investment business is a question of fact, as written in the current Income Tax Act, and they're acting accordingly. This now has campgrounds grouped unfairly in the same category as apartment buildings and mobile home parks, not to mention large Canadian corporations.
CCRVC estimates that nearly 75% of its private campgrounds do not employ five full-time employees, meaning that up to 1,760 campgrounds are impacted. Most campgrounds are required to close during the winter months in order to comply with local zoning bylaws. Because it is a seasonal business, the majority of campground employees are part-time. It is not financially feasible or necessary to employ them year-round. Simply, on average, campgrounds are small family-run businesses with limited staff working endless hours, and they are financially incapable of sustaining their business if they're paying a triple increase in their taxes.
With required environment and infrastructure expenditures, new campgrounds entering the Canadian market are virtually non-existent. For Canada to remain an attractive destination for domestic and international travellers, current private campgrounds must remain vibrant, and we need help from this government to remain financially stable.
CCRVC endorses the following potential solutions.
The definition of income in a corporation for the year from an active business should be modified so that it includes income that is derived in whole or in part from property where at least 500 hours of time is spent by employees of the corporation or by contractors retained by the corporation in the income-earning process—this would allow for the inclusion of seasonal worker hours when determining if the business is “active” or not—and/or establish tourism exception guidelines similar to ones that currently exist for hotels, motels, and inns, or any other similar premises, to aid in the determination of whether a business is an active business and therefore eligible for the small business tax deduction.
For the 2017 budget, CCRVC respectfully asks the finance committee to endorse a modification to amend the Income Tax Act that clearly distinguishes campgrounds as “active” businesses, which would provide private campgrounds eligibility for the small business tax deduction, ensuring that the campground industry remains strong and financially viable.
If that is unsuccessful, rural areas across our country will be impacted with numerous campground closings, leading to decreased tourism numbers, negative economic growth, job losses, and lost tax revenue in the regions that we need to support the most.
With that, I conclude. I'm very happy to answer any questions that the committee may have afterwards.