B.C.’s tourism industry is predicting the new harmonized sales tax will cost the province several thousand jobs and reduce visitor spending by more than $300 million a year, if the provincial government doesn’t offer mitigation measures.
The Council of Tourism Associations has delivered a report on the HSTs impact on the provincial government. To ease the blow, COTA is asking for income tax credits for labour, like the film industry gets, over a three-year transition period.
The industry is waiting for a response from Finance Minister Colin Hansen to its proposals to ease the impact of the new tax on tourism.
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The report predicts the average price increase for the province’s tourism operators due to the new 12 per cent HST will be 4.66 per cent.
The industry association is forecasting that tourism will pay at least $363 million more in overall taxation as a result of the new tax and that should result in a spending decrease by visitors as high as $545 million, depending on how consumers respond to the new tax.
Employment losses in the range of 3,200 to 5,200 direct jobs plus 7,000 to 10,000 indirect jobs will be felt after the HST starts July 1, says COTA’s letter to Hansen.
“It could be worse depending on consumer reaction,” says Frank Bourree, of Chemistry Consulting. “It’s going to hurt, no question.”
COTA also predicts that the HST will mean tourism-derived tax revenues for all levels of government are expected to shrink between $105 million and $157 million.
The new tax will hit restaurants, attractions and convention business hard, especially sectors previously exempt—like restaurant meals—from the federal goods and services tax.
B.C. restaurants which now operate on average with a two per cent margin in the black will find the HST fallout “pretty brutal,” says Bourree.
Other mitigation measures asked for by COTA are to work with Ottawa to ensure foreign tourists can get the HST fully refunded, and streamline the rebate process, including point-of-sale rebates of HST to foreign visitors.
It’s also asking to eliminate the $10 million cap on income tax credit eligibility for tourism-related businesses.
COTA wants solid replacement funding for the current destination marketing organizations, which get a two-per-cent hotel room tax to spend on advertising and marketing.
The organization said it wants DMO funding that is “predictable and performance-based, preferably as a fixed percentage of industry-derived revenues.”
