Canada's plans to boost the limit on how much shoppers can bring back across the border will harm local retailers, the Retail Council of Canada said Friday.
Finance Minister Jim Flaherty's Federal Budget 2012, released Thursday, proposes a plan to bring Canada's cross-border tax exemptions in line with those in the U.S., starting in June.
If approved, Canadians who travel to the U.S. for 24 hours or more will be able to bring back $200 worth of goods without paying tax or duty at the border. The current limit for that time period is $50.
For Canadians who travel to the U.S. for 48 hours or more, the limit would increase to $800 from the current $400.
There is no change planned for so-called "day trips" to border towns such as Buffalo, N.Y. or Bellingham, Wash. where there is zero limit.
The change will cost the government $13 million in lost duty by 2012-13 and $17 million in 2013-14, according to estimates.
Flaherty defended the change with reporters on Friday.
"The reality is there was some creative reporting happening and it's probably better in our view to harmonize with the Americans, which we are doing and in that way make it a more realistic assessment of what the purchases are," he told reporters following a luncheon speech in Toronto.
"I am not terribly concerned about the cross-border shopping because we haven't changed the 24-hour rule.
But the watchdog for Canadian retailers is worried that the plan will hurt its members who claim they are not on a level playing field with U.S. stores, which are able to charge considerably less for the comparable goods.
"It is a particular concern to our retailers along the border because they are facing price pressures that our American counterparts are not facing," Sally Ritchie, vice-president of communications at the Retail Council of Canada said in a telephone interview with CTV.ca.
The group has been lobbying the Canadian government for more than a year to eliminate import duties on finished goods, by reviewing supplied-managed goods and quotas for agricultural products.
"We weren't necessarily surprised that it was included in the budget as there have been discussions between President Obama and Prime Minister Harper regarding increased harmonization at the border," Ritchie said.
"However, RCC is disappointed that the cross-border shopping exemption increases and the announcement of this was not accompanied with an announcement that the government would be dropping import taxes imposed on merchants. Our merchants are not playing on a level playing field."
Ritchie notes that vendors charge Canadian retailers up to 30 per cent more for products than American retailers because items such as chicken, eggs, dairy products are set by marketing boards and at much higher prices than in the U.S.
"We have to deal with the government on the elimination of the import taxes. The playing field is not level for Canadian retailers," Ritchie said. "In order to maintain fairness across the board we have to ensure that the barriers are eliminated."
