Donald Trump, of all people, may prove to be the best friend of the Canadian consumer: Neil Macdonald
Put more simply, the government is spending more than two dollars to collect one on duties and taxes
In its relentless determination to keep retail prices higher for Canadians by severely restricting competition and consumer choice, the federal government actually appears willing to use taxpayers' own dollars against them.
No other sensible conclusion can be drawn from a recent report by the auditor general of Canada.
The report, delivered in the dry, uninflected jargon of the professional auditors who wrote it, basically concludes the government knows very well that for shipments from abroad valued at less than $200, it is spending more money collecting duties and taxes on shipments than those duties and taxes are worth.
Put more simply, the government is spending more than two dollars to collect one.
This point was already made in a study issued by the C.D. Howe Institute last year, but apparently, the government has reached more or less the same conclusion itself.
The AG's report further describes a chaotic system in which customs enforcement at the border is utterly inconsistent. Canada Border Services Agency administers nearly 90 acts, regulations and international agreements, unevenly imposing a web of rules many shippers (and customers) appear unable to comprehend. This all acts as a retardant to smooth cross-border trade and commerce, making life more expensive for both Canadian consumers and Canadian businesses that import goods from the United States.
Shocking? Hardly. It's actually the essence of the Canadian system: the consuming public is treated like a herd of lactating Holsteins, ready for milking and reserved exclusively for the enrichment of Canadian merchants. Competition is not welcome.
Canada's de minimis
The AG's report devoted an entire section to the de minimis level – the threshold under which any package sails through the system, with neither tax nor duty applied.
Until last year, the American government's de minimis limit was $200 US. In March of 2016, U.S. President Barack Obama quadrupled it, meaning that any American ordering from a Canadian retailer (or from anywhere else in the world), can expect any package worth less than $800 US to arrive promptly, without impedance at the border or an additional bill for hundreds of dollars in duties, taxes and fees.
American retailers didn't like it, but competition in the United States is regarded as inevitable and good for everyone.
Canada takes another view. At our border, the de minimis limit is $20 Canadian. Has been for 35 years.
Which means that any Canadian ordering, say, $100 worth of Chinese-manufactured garments from an American e-retailer can expect, along with the delivery, a bill for the usual 13 per cent or so in HST, and then duties, and — if the shipper chooses to hire a customs broker to navigate our gummed-up border (which most do) — fees for that "service," too. So the original $100 can easily double, or more.
Which makes a lot of Canadian consumers just give up. Which, again, is exactly the idea.
Polling suggests a large majority of Canadians – 76 per cent, according to Nanos Research – want the de minimis level raised to something like $200, and thousands have signed a petition organized by the Canadian American Business Council pushing for that change.
But Liberal governments tend to be protectionist, and they hate doing away with taxes, even nuisance taxes that cost more to collect than they bring in.
Plus, the Retail Council of Canada (RCC) — a powerful lobby that claims to represent 45,000 retailers — has made its position on the matter limpidly clear: no change, ever.
The RCC does make one compelling argument about fairness: waiving HST on shipments from foreign merchants, while Canadian retailers are obliged to keep collecting HST on the smallest of purchases, creates an uneven playing field.
Follow the EU
The obvious solution would be to do what the European community has done: create one de minimis level for taxes and another for duties.
Any shipment of less than 150 euros, for example, is allowed in duty free, but sales tax is still imposed on all value above 22 euros.
Simple. It would also curb the parasitic fees of the 286 licensed customs brokers operating in Canada.
But Canada is indifferent to any solution that alters the status quo. Milking rights on the herd of Holsteins must at all costs be preserved.
So the Trudeau government, which loves inventing meaningless talking points, came up last year with this masterpiece of boilerplate:
"While we're broadly supportive of streamlining custom processing and importation requirements, when it comes to waiving duties and taxes, we need to carefully consider the impact that would have on Canadians and on Canadian businesses, not to mention economic and administrative considerations for both the federal and provincial governments."
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There was additional drivel about listening closely to Canadians during pre-budget consultations, but there was clearly never any real intention to change. The de minimis wasn't even mentioned in this year's budget.
There is, however, one person who might in the end prevail over both the RCC's lobby and Ottawa's deep protectionist instincts: Donald Trump.
Raising Canada's de minimis level is, according to several reports in American media, among the demands Trump's negotiators will bring to the NAFTA renegotiations. The Americans, not unreasonably, consider the massive imbalance unfair.
An EU-style solution — one de minimis for taxes, another for duties — would be the most sensible solution. Protectionists will hold this up as American bullying. But it would open up a glory of choice and competition for Canadian shoppers.
Donald Trump, of all people, may prove to be the best friend of the Canadian consumer.