n the Spring 2009 issue of The Outfitter we provided an overview of the move to a Harmonized Sales Tax that was announced in the provincial budget. A number of operators have told
us that they took our matter-of-fact description of the change to be an indication of NOTO's support for this move. Nothing could be further from the truth.
WE BELIEVE THAT THE IMPLEMENTATION OF THE HST AS ANNOUNCED IN THE BUDGET IS EXTREMELY BAD FOR TOURISM IN ONTARIO. Although a single, harmonized tax has many benefits in principle, the implementation in the current budget contains several serious flaws.
The Tax Rate On Accommodations Increases From 5% To 8%
As part of harmonization, the lower tax rate on accommodations is eliminated. Besides increasing the cost to our guests, this move effectively eliminates the highly successful Destination Marketing Funds that were used in a number of communities. These funds used the lower tax rate to collect a two or three percent "bed tax" that funded local tourism marketing. The HST potentially puts a number of marketing organizations out of business and takes almost $40 million in tourism marketing away.
The HST Extends The PST To A Wide Range Of Services
Because a harmonized tax applies to both goods and services, harmonization extends the PST in a number of significant areas. Of particular concern is the fact that charter flights and guiding services will now have an additional 8% in tax charged to guests.
Proposed $40 Million For Tourism Regions
The budget proposed to use $40 million of the new revenue from the increased taxes on tourism to fund regional Destination Marketing and Management Organizations. It is clear from the discussion at the consultations around this initiative that there is very little industry support for this idea. Several points have been made strongly in the consultations, and these points have been made by a full range of tourism stakeholders throughout the province.
$40 million is far less than the new tax will generate. The competitiveness study estimated that voluntary destination marketing funds would take in $100 to $125 million. The application of the new tax to services would make the figure much higher.
The role and responsibility of the new regional organizations is still unclear. Will they displace successful regional marketing organizations already in place?
What will be the future role and funding of other provincial initiatives like the OTMPC?
If the government is determined to go ahead with the HST, we believe a number of steps must be taken to move this initiative in a more positive direction.
Dedicate all of the new revenue from the increased and expanded HST on tourism to effective and industry supported tourism development activities.
Invest the new revenue in areas that are consistent with the priorities of the tourism industry. The industry has clearly stated that the main priorities should be improving access to capital and attraction of new investment.
The province should match the federal GST rebate program with a similar program for the provincial portion of the HST to help offset the effect of the higher tax on visitors.
The current initiative to develop new tourism regions should be suspended and consultations undertaken with the industry on how best to invest these new tax revenues in ways that will bring real benefit.