Since Finance Minister Wes Sheridan’s announcement on April 18, 2012 that Prince Edward Island would be adopting the Harmonized Sales Tax in 2013, there have been many discussions – in the public forum and around the dinner table – on the pros and cons of HST. Some of the issues raised during these discussions are based in fact, while others have been based on speculation, fear and a lack of education. The Tourism Industry Association of PEI (TIAPEI) has been lobbying Government to adopt a harmonized sales tax since 2007 and we have greeted the announcement of the 2013 implementation date with enthusiasm. It is our firm belief that this will be the best thing to happen to the tourism industry since the completion of the Confederation Bridge and, with proper education and a firm understanding of the changes this switch in taxation system will entail, the transition will signal a change for the better in the product our operators present to visitors to PEI.
Tourism on PEI generated $368 million in direct revenues in 2011 and employed approximately 15,000 Islanders on a full time, part time and seasonal basis. 1,238,276 visitors from around the world came to PEI last year, staying in hotels, motels, cottages, campgrounds and bed and breakfasts across the Island. They ate in local restaurants, shopped in our stores, played on the beaches and generated Provincial Sales Tax revenues during their stay. In turn, PEI tourism operators and their employees spent their money in local shops and restaurants, purchased supplies and equipment for both business and personal use, used the services of local repair shops and service personnel and generated more Provincial Tax Revenues. Tourism businesses generated $45.5 million in tax revenues in 2010. Combined with other businesses in PEI, these tax dollars make a significant contribution in building and renovating schools, paving roads, improving health care facilities and creating employment for Islanders.
The significant role that tourism and all businesses on PEI play in the state of the economy cannot be overlooked. The vast majority of businesses across PEI, including tourism businesses, are small to medium size operations that are locally owned. These are your friends, neighbours and family members and their goals are relatively basic: they want to run a successful operation and provide for their families and their future. In recent years, with the downturns of the economy, this has become much harder to do. Issues such as increasing minimum wages, rising electricity and fuel costs, the global economy and world wide competition have presented serious challenges for PEI tourism operators. The current taxation system has further hampered our efforts to compete on the global market. We have been placed at a disadvantage within Atlantic Canada as the only Province without HST and our pricing structure has been unable to keep pace with the rising cost of doing business.
Many people are shocked to discover that tourism is the only major industry on PEI that has absolutely no tax exemptions or incentives available to business owners. When an accommodations operator purchases new linens, they pay the full tax. Each time the sheet is washed, more taxes are paid. By the time it has been washed 20 times, more money has been paid in taxes than the original cost of the sheet. None of the current 10.5% paid out in PST on supplies, new construction or product maintenance can be claimed back and there is no alternative but to pass these costs on to consumers. Over the past several years a number of tourism businesses have failed or simply closed their doors when it was no longer financial wise to continue operations. Many other have delayed improvements to their properties and hired less staff to offset rising costs.
The HST will help change the way tourism operators do business. The money returned to their businesses through HST rebates on good and services will provide much needed additional revenues. These revenues can be used to increase wages for valued employees and perhaps hire additional staff. Much needed product enhancement and expansion projects will be possible and operators will have the option to freeze or reduce their rates. Additional funds will be freed up to try new and innovative marketing techniques to attract visitors now that our pricing is comparable to that of the rest of the Maritimes. And last, but certainly not least, tourism operators will hopefully find themselves with a little extra cash left over for themselves which they will spend at other Island-owned businesses. In most cases, HST will mean an immediate point of sale reduction in prices of 1.5%. The circle of benefits to Island businesses will continue to widen - improving the economy and Provincial finances, creating new jobs, employing more Islanders and allowing us to compete on a more level playing field.
Tourism is a major contributor to the Island economy. In order to strengthen our position on the global market and increase visitation to our “Gentle Island” we need to provide fresh and innovative product for our visitors to enjoy and offer competitive pricing to entice them to come often and stay longer. When Island businesses prosper, so does the Provincial economy. As the economy improves, the lives of Islanders will improve through higher wages, more available hours and new job growth. A harmonized sales tax system will assist us in accomplishing these goals. It will be vital to offset any negative effects of HST to the most vulnerable of our population through exemptions and rebates but this can be achieved through careful planning. The benefits to businesses under HST will allow Government to provide that protection through growth in the Island economy.
I urge all Islanders to educate themselves on the facts surrounding HST. Education of both the business community and the general public will be critical in the days leading up to the implementation of HST to ensure a smooth transition. We must be open to change and embrace new opportunities in order to experience real growth and base our decisions for the future on the best available information. HST has proved to be strong economic driver for other areas and can be for Prince Edward Island as well. The tourism industry is looking forward to the possibilities created by the coming changes for our sector through HST.
Guest Commentary – The Guardian
Submitted by; Don Cudmore, Executive Director – Tourism Industry Association of PEI (TIAPEI)
