Canadians Make Up for Drop in Foreign Tourism

Tourism generated nearly $20 billion in revenue for federal, provincial and local governments in Canada last year, up 4.3 percent from a year earlier despite a drop in visits and spending by foreign tourists and the first half-point cut in the GST which cut into federal tourism revenues.

A Statistics Canada report released last Wednesday suggests that Canadians are picking up the slack resulting from the drop off in visits by foreign tourists, especially Americans, which have been curtailed by the strength of the Canadian dollar which rose above parity last year, soaring gasoline prices and increased security at the Canada-U.S. border.

Revenue attributable to domestic tourism rose 6.1 percent to just over $14.5 billion, while the revenue due to spending by international visitors was down 0.6 percent to $5.1 billion, it said. The drop in foreign tourism revenues has been a long-term trend, the report noted.

Taxes on products, such as the GST and provincial retail sales taxes, were the single largest source of tourism revenue for governments, it said, noting they accounted for $4.7 billion for the federal government in 2007, or 50 percent of its revenue from tourism, and $5.5 billion for the provinces and territories, or 60 percent of their tourism revenue.

Those tax revenues rose 2.7 percent in 2007, the second consecutive year of weak gains, reflecting the first one-percentage point reduction in the GST that took effect on July 1, 2006. The second point cut in the GST to five percent only began at the start of this year.

Last year, taxes on employment income and business profits were the second most important source of tourism revenue for the federal and provincial governments, while other taxes such as property and capital taxes, levies, license fees and permits, were the chief source of tourism revenue for municipalities.

While Canadians appear to have helped make up for the drop-off in foreign tourists, the report noted that international visitors generate more revenue for governments, for every $100 of spending. Governments took in $31.58 for every $100 of tourism spending by non-residents in Canada last year, compared with $26.61 for every $100 of spending by resident tourists, it said.