Thank you, Mr. Chairman.
On behalf of the Retail Council of Canada's 45,000 storefronts, I'd like to bring a retail perspective to your pre-budget deliberations.
In the Tour de France, the last place cyclist is traditionally referred to as the lanterne rouge, and in recent years we've appeared at, or very close to, the end of these hearings, so we're delighted to be included today, close to the finish.
RCC made a written submission on August 4, providing somewhat greater detail on our proposals. In the time constraints imposed by a committee appearance, I'd like to restate our support for two measures in the last budget, notably the middle-class tax cut and the boost to the child tax benefit.
These provide major benefits to families, of course, but they're also important to retail merchants, both through increasing disposable incomes for our consumers and through providing higher take-home pay for the two million-plus Canadians who make up the retail workforce—and by the way, that is the largest private sector workforce in the country. Keep it coming, we say, and if members are looking for ways in which to provide further assistance to Canadian families, there are over four billion dollars in customs tariffs and five billion dollars in excessive credit card interchange fees that could certainly stand to be addressed. We've spoken to those in our written submission.
The matter I would like to address today is that of the de minimis rate on imported parcels coming in by post and courier. Merchants are deeply concerned by efforts to eliminate the level playing field between retailers operating here in Canada, whether in stores or online, and those who sell from outside Canada and ship parcels cross-border. In a nutshell, the foreign online sellers' lobbying effort is asking our government to provide a tax incentive to shop literally anywhere else but Canada. Under a de minimis regime, no sales taxes are collected on imported products. This means that all other things being equal, the final price of an imported parcel will automatically be 13% lower than that same item sold in Ontario, or 15% if it is sold across the river in Quebec. That's not a matter of debate; that's simple arithmetic.
In addition, foreign online sellers would be exempt from the customs duties that we pay on imported goods. The importance of this distinction cannot be overstated. A price differential of 13%—and in some cases upward of 20%, once duties are factored in—will lead to an inevitable shift away from Canadian retail. That could be devastating to our operations, to our investment plans, and to employment in our industry.
This tax advantage that the other side would gain is never, ever mentioned by the proponents of increased de minimis despite its being the obvious elephant in the room. It isn't simply a matter of fiddling with the level, hiking it to $40, $60, $80, or what have you; the effects of the de minimis level bite very differently throughout our industry, depending on its subsector. A $40 level puts most of our bookstores and toy stores in jeopardy, for example. A $60 level affects those selling shoes and apparel. At $80, think about the impact on your local hardware store and so on. What might seem like relatively minor adjustments, in fact, put tens of billions of dollars worth of goods in play. Of course, these are the very areas in which many local small and medium-sized retailers tend to specialize.
We also take huge exception to our adversaries' attempt to portray this as a move benefiting information technology investment in Canada. If you think about it for a moment, their argument makes no sense. Our Canadian and our many transnational members are investing heavily in IT here to serve the market here. Even our opponents on the issue need to invest here, because as the current rules operate, they can't simply service the Canadian market from outside.
One of our Ottawa area members put it very well. They've just invested $200 million in a distribution and IT centre in Prescott, 60 miles down the road, but if de minimis were to be increased significantly, they would have been better to go one mile further, across the St. Lawrence River and into New York State, and locate their plant and jobs there. If they did, they'd gain a 13% advantage for any sales into Ontario. Surely that cannot be the kind of policy that we want to introduce—a tax incentive not to shop here and not to invest here.
By all means, let's work together to diminish stickiness for processing times and brokerage fees at the border, but don't presume that bricks and mortar stores in our communities or investments in .ca websites are inevitable or that they're invulnerable. For clarity, when people talk about raising the de minimis threshold, what they're really talking about is giving foreign sellers a tax-free sale advantage over Canadian merchants on all sales under that level, and they're talking about giving themselves a duty-free advantage as well, which Canadian merchants will have already paid.
So, yes, it would be about creating a new advantage for foreign merchants, an unlevel playing field that clearly disadvantages Canadian retailers, be they bricks and mortar or online, and an advantage for the U.S. for jobs to move there from Canada.
Thank you.