Canada - How the HST will affect Canadian tourism  

Nothing gets people aggravated more than a new tax, if you don’t believe me, ask the government of British Columbia. Ever since I could remember, the province of British Columbia (BC) has had two taxes, the 7% PST (Provincial Sales Tax) and the 7% GST (Goods and Services Tax). Having two taxes was confusing for locals and even more so for tourists, so when I read about the HST (Harmonized Sales Tax) that recently came to pass in BC, I figured they were on to a winning idea.

The HST combines both GST and PST in to one 14% tax, streamlining the taxation process and knocking out some administration costs along the way. Not understanding what all the fuss was about, I read further and discovered that under the new HST scheme, a considerable number of services that were previously PST free would now incur the full 14% tax. One industry that is taking the 7% hit is tourism, unfortunately. To get a better understanding of what this means for Canadian residents, domestic tourism and small businesses, I contacted Allison Wallace, Media and communications manager for Flight Centre Canada and Stephen Joyce, CEO of Rezgo.com for their thoughts.

Allison Wallace, Flight Centre: “As of May 1st, the industry now collects HST on bookings for July 1st and beyond. It’s a bit confusing for most as it is only applied if you’re departing from a province that has HST (Ontario, British Columbia, Newfoundland, New Brunswick) and if you’re traveling domestically. For example if you leave from Alberta and go to Ontario, there’s no HST, just GST but the if you were to do the reverse, you’d get charged HST. For land it depends on the hotel location and for car rental it is applied if you’re pick up city is located in a province that has HST.”

Stephen Joyce, Rezgo: “From a consumer’s standpoint, I am not confident that pricing will decrease as a result of the introduction of the HST. The added tax on services that were, to this point, non-gst taxable means that any home renovation service costs, restaurant, and personal services are going to cost an extra 7%. As a strata home owner we have had to budget an increase to cover the HST on everything from lawn maintenance, pool repair, and major painting projects. When you’re spending $100,000 on a paint project, the additional $7,000 is a big hit.

From a business standpoint, the streamlined administration will certainly decrease our paperwork. I don’t think, in reality, that the reduction in costs will come close to the increased cost our customers will have to take on for a service that, until now, has only been taxable at the GST level. Although I am not opposed to a consumption tax, the fact that we have to bear the cost to modify our systems to support a secondary tax level. As a small company, that’s just a development burden we don’t need right now.”

With domestic tourism representing a sizable portion of the market in BC, it seems counter productive to add additonal hurdles for both consumers and small businesses. The 7% increase in price may not completely crash the local tourism industry, but it could be the difference between recovery, stagnation, or even decline.

Source: Tips from the T-List, Canada, dated 10/05/2010