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Canada Quietly Drops Sales Tax Rebate for Americans 

Local Matters

QUEBEC - Planning a weekend trip to Montréal? It may end up costing you more than anticipated. That's because the Canadian government recently stopped refunding the federal sales tax American tourists paid on their hotel bills and some other purchases.

As of April 1, Canada no longer refunds the 6 percent federal goods and services tax (GST) to individual visitors. Previously, tourists returning to Vermont and other states could receive an on-the-spot refund of the GST paid on eligible goods and accommodations that cost at least $200 in Canadian funds. A Chittenden County couple who spent, say, $500 on a hotel room and a shopping spree at IKEA could have gotten back $30 in Canadian currency at the border station just north of I-89.

Purchases of meals, fuel and services, including tickets for entertainment events, were never eligible for a GST rebate.

"Tourists liked this rebate program quite a lot," comments Eric Paradis, a Montréal-based official with the Canada Border Services Agency. "And we thought ourselves that it was a pretty good program, so we were surprised to see it abolished."

The rebate was axed because "it didn't meet the grade" of providing the government with a good return on expenditures, said an official with the Canada Department of Finance in Ottawa. "The program was very costly to administer. It cost 10 cents for every dollar sent out to pay rebate claims," added the official, who stipulated she must not be identified by name because she was not authorized to speak for attribution.

The Canadian government last year spent about $78 million to administer the tax-rebate program.

Some tourism groups in Canada are protesting the government's decision to pocket the full amount of sales taxes levied on individual tourists. They warn that it could further reduce the number of Americans visiting Canada - which is already in decline due to the comparative strength of the Canadian dollar.

The impact may be felt most acutely by the privately owned duty-free shops on the Canadian side of the border.

Jeanne Keller, a Burlington resident who travels to Montréal about six times a year, says the end of the GST rebate won't cause her to make fewer trips but will discourage her from making purchases at the duty-free store in Phillipsburg, Québec, just across the border from Highgate.

"We'd get a rebate for a hotel room and spend it at the duty-free on a bottle of wine," Keller says. The end of the rebate "means that money from us will now go to the [Canadian] government instead of merchants."

Andre Beaulieu, manager of the duty-free shop in Stanhope, Québec, predicts the cancellation of the rebate will hurt sales at his small store across the border from Norton, Vermont. "I'm sure it's going to affect us, but I cannot say by how much," Beaulieu comments. "Summer is when we get the most tourists, so it's hard to tell right now."

Tax rebates will still be available on charges for accommodations in Canada that are part of a tour package booked by American visitors.

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About The Author

Kevin J. Kelley

Kevin J. Kelley

Bio:
Kevin J. Kelley is a contributing writer for Seven Days, Vermont Business Magazine and the daily Nation of Kenya. He is an adjunct professor of journalism at Saint Michael's College.

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