Local retailers are anticipating even more business lost due to cross-border shopping after duty-free rules changes June 1.
The duty-free limit for visits to the U.S. longer than 24 hours rose from $50 to $200. Stays 48 hours or longer will qualify for $800 in duty-free purchases, up from $400 previously for visits up to a week.
According to Mission’s Carlo Billinger, it’s impossible for Canadian retailers to compete with Americans on pricing.
“It’s an unfair playing field,” said the co-owner of Rex Cox Men’s Wear. “I can’t give those prices.”
Lower U.S. wages, combined with import duties ramp up the cost of goods in Canada.
“It’s very short-term thinking on some people’s parts to run across the border” for a few hours to pick up items, he said.
Most distressing to Billinger are stories he’s heard of many returning Canadians not being asked to pay the HST even when they declare their purchases, which equates to lost tax dollars.
Billinger says he’s spoken to managers from several different industries and they’re all suffering.
Bank of Montreal economist Douglas Porter warned in a report issued this month the drain of Canadian shoppers heading south is weighing heavily on retail sales here.
He said official estimates that cross-border shopping accounts for less than two per cent of consumer spending likely “vastly understate” the size of the problem.
Porter suggested cross-border spending may actually account for eight to 10 per cent of goods that can flow across the border, since half of all consumer spending goes to rent and other captive services.
Porter compared various goods and found they currently cost 14 per cent more on average here than in the U.S., before taxes and adjusted for exchange.
That’s down from a 20 per cent differential a year ago, due to a slightly softer Canadian dollar.
For some products Porter surveyed there’s virtually no price difference, while others can cost more than 30 per cent extra on this side of the border.
– with files from Jeff Nagel