Want cheaper access to American e-commerce? Better tell it to the feds: Neil Macdonald
Canadian retailers are making their case to keep the expensive status quo
In Florence, it can be exceedingly difficult to find a taxi.
This is unsurprising, given that Italy allows its taxi drivers to control the number of taxis on the streets of Italian cities.
To them, there's a fixed pie of revenue, and allowing more taxis would merely ensure every driver a smaller slice.
The notion that more taxis might lead to more business, and more employment for taxi drivers, and more convenience for shoppers, and therefore more money being spent in Florence's economy, never enters their heads. They aren't terribly interested in the benefits of competition.
Similarly, Canadian retailers want to make damned sure their privileged access to Canadian consumers remains undisturbed by competition from outside the country. And, like the Italian taxi drivers, they're counting on government to ensure that.
By contrast, the de minimis level in the United States, our largest trading partner and a nation with which we nominally have free trade, is $800 US.
That means an American consumer can order an expensive piece of clothing from Canada, or anywhere else in the world, and expect it to sail unimpeded through U.S. Customs and arrive a few days later, without a cent added to the purchase price.
- U.S. duty-free limit for web purchases 40 times higher than Canada's
- Surprising fees Canadians pay for shopping online
But for anyone living on this side of the world's longest undefended economic barrier … sorry, border ... the prices on American and other foreign websites are just imaginary.
If a Canadian orders something priced at $100, it's entirely possible the actual cost will be double that or more once taxes, duty, and parasitic customs broker fees are tacked on.
Pros and cons
The Retail Council of Canada, which represents Canadian merchants, is anxious to preserve that state of affairs.
The council actually makes a compelling argument about fairness. Canadian retailers must impose 13 per cent in federal-provincial sales tax on any purchase, so why should businesses based outside Canada have the huge advantage of shipping into Canada tax-free?
The council's opponents, a coalition of American and Canadian businesses and e-commerce players, have a pretty compelling reply.
First of all, there is no consistency at the Canadian border. Make a quick shopping trip to an American border town, and you will be charged only sales tax on your return, or just waved on through with no charge at all, if customs agents are busy.
Furthermore, they argue, while couriers like FedEx observe the letter of the law, turning all shipments over to customs brokers and passing on taxes and fees to the customer, Canada Post often simply ignores the rules, because following them is too much expense and fuss.
Then there's the fact that the government actually loses money collecting taxes and duties on smaller purchases. A study published by the C.D. Howe Institute last spring concluded that by not raising the de minimis level to, say, $80, Ottawa is effectively spending about $166 million to collect $39 million in revenue.
Which means the government is actually paying to discourage cross-border commerce. That affects not only consumers, but Canadian businesses that order supplies from the States. It makes the border more sclerotic, and navigating the rules an expensive pain.
The American-led business coalition, knowing there is no chance of raising the Canadian de minimis to match the $800 American level, is now lobbying for $200.
Upside for consumers
But an Ottawa insider with extensive government experience in fiscal matters says the government has no interest in raising the threshold for now.
It would "create a tax hemorrhage, and build in a bias to go online instead of buying retail. It would cause a shift in (Canadian) consumer behaviour, and nobody knows how to model that. Nobody can predict the revenue consequences … What's the upside, other than the obvious one for the consumer?"
A very Canadian question, that one. In the U.S., where consumer spending drives the entire economy, that would be the upside.
eBay Canada, a major player that lobbies on its own, seems to have lowered its de minimis target to $80.
Free traders in the Liberal caucus seem more comfortable with that figure.
But the Canadian Retail Council wants the current $20 engraved in iron, in perpetuity, and is maximizing pressure on members of Parliament.
"We need to stand firmly against this threat," it told its members in a recent communiqué.
Says Conservative MP Dan Elbas, who sits on the Commons finance committee: "I think it needs a lot more study. I've been getting a tonne of emails from constituents" on the issue.
The American-led coalition has put up a website asking the Canadian public to support a $200 de minimis, and has managed to gather more than 15,000 signatures on an e-petition to Parliament.
It has also commissioned a poll suggesting 58 per cent of Canadians favour such an increase.
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- ANALYSIS| Why feds keeps spoiling your online bargains
But really, Canada's consumers are notoriously supine, and the coalition hasn't generated much of an uproar.
Meaning that if the protectionist door is indeed ever opened, it will likely be only by the thinnest of cracks.
This, as the song says, is not America.