A tax break for your staycation? Not quite yet

The tourism sector has really taken it on the chin during this pandemic. The official Opposition says it’s time for the province to help
By Steve Paikin - Published on Jul 14, 2021
The Old Mill Heritage Centre, on Manitoulin Island, preparing its Empress of Ireland exhibit for a July 16 reopening. (Facebook)

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Do you remember what the government of Ontario said last year about 2021? 

The premier and various cabinet ministers called it “The Year of the Staycation.” And for good reason. 

The tourism sector has taken it on the chin perhaps more than any other during the COVID-19 pandemic. Think about it for a second. Tourism in Ontario is so much more than hotels and amusement parks. It’s pro sports such as the Maple Leafs, Senators, Raptors, Blue Jays, Argonauts, Tiger-Cats, RedBlacks, and Toronto FC, all of which have lost either full seasons in Ontario, or, at the very least, fans in the stands. 

It’s everything from the Shaw and Stratford Festivals and the Mirvish productions in Toronto, to community theatre across the province. It’s the crown jewels of the Royal Ontario Museum and Art Gallery of Ontario, all the way to the Old Mill Heritage Centre in Billings Township on Manitoulin Island, population 600. 

It’s the Toronto Symphony and NAC Orchestras and the Sudbury Symphony Orchestra; rock concerts in the ScotiaBank Arena, folk festivals on outdoor stages in tiny hamlets, and outfitters in northern Ontario. It’s the 142-year-old Canadian National Exhibition and the Wienerfest near Embro, which actually focuses on the dogs you walk (dachshunds), not the ones you eat (Oscar Mayer).

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Well aware of the economic pounding tourism has faced, the government announced to great fanfare that the “Year of the Staycation” would encourage Ontarians to plan a vacation within the province. Actually, two different finance ministers have promised it twice. The idea is to incentivize Ontarians to “staycation” by offering them $150 million worth of tax credits to enjoy their vacations within Ontario. The details have always been sketchy, but the gist of it seemed to be, save your receipts for hotels, restaurants, and attractions, include them in your annual tax filings, and the government will give you a tax credit to thank you for supporting local tourism operators. 

Except that it hasn’t happened. The government has made the announcement twice but never followed through. 

Interestingly, the official Opposition, not particularly known for its closeness to the small-business sector, has now weighed in. NDP leader Andrea Horwath went to Niagara Falls earlier this week to make a further pitch for the tax credit the government has delayed implementing. 

Horwath went to the Falls because it’s a city, perhaps more than any other in Ontario, that’s both known for, and depends massively on, tourism for its survival. The city estimates it’s lost 40,000 tourism-related jobs since the pandemic hit: the folks who work at the many attractions, hotels, restaurants, casinos, etc. 

Niagara Falls MPP Wayne Gates consulted with local businesses in the region and thus put forward a private member’s bill that would subsidize staycations much more generously than the original Ford government proposal, which would return $200 for $1,000 spent. Gates’s plan would see Ontario tourists spend $1,000 then receive a $1,000 tax credit in return. Just send your receipts to the Canada Revenue Agency, and you’ll get a maximum $1,000 off what you owe in taxes. 

“Unfortunately, not only did Ford back away from implementing what Wayne [Gates] had brought forward, but now we find out that he’s not even going to implement what he promised, which is really, really troubling,” Horwath said.   

It’s estimated that fully 90 per cent of tourism-related industries in Ontario have been adversely affected by COVID-19. The average reduction in revenue is a staggering 70 per cent. In the Niagara Region alone, 2,800 businesses have been affected. 

“This tax credit would help get people back on track,” Horwath said. 

The staycation tax credit is likely not a panacea that would compensate businesses for what’s been lost over the past year and a half. For example, in border communities such as Niagara Falls, a lot of tourism dollars come from Americans, whose money goes further on the Canadian side of the border. This policy would do nothing to encourage them to spend their dollars here. 

Furthermore, for this plan to work, you have to pay income taxes in the first place. So, for lower-income people who don’t pay income taxes, there’s no incentive here to staycation. 

But this policy seems aimed directly at middle- and lower-income families, for whom the tax credit could be the difference between going somewhere and going nowhere.   

“I’m certainly not a tax expert,” Gates said, “but I can tell you that working families have been at home have not gone anywhere, and they need support. They need a way to get it. I know most of my working friends probably would enjoy to come to Niagara Falls or go to Ottawa or go to Kingston, go up north, and have a tax credit. They’d be able to spend $1,200 or $1,300, knowing that they’re going to get that money back in their taxes. I know the Ford government is talking about waiting a year, and I think that’s a mistake.

“What we don’t want to see is people leaving the province to take a vacation, whether it’s internationally or in other provinces,” Gates continued. “We believe this would be a way to generate jobs, protect our businesses that are hurting, and get people to enjoy themselves over the course of the summer and into the winter months.”

Why has the government twice announced this measure and not yet implemented it? The issues-management and media-relations director for Finance Minister Peter Bethlenfalvy says, blame the continued trepidation around the pandemic and the fact that Ontario isn’t yet completely open for travel. 

“Due to the outlook of public health measures this summer, there was uncertainty about when it would be safe and appropriate to introduce the staycation tax credit,” said Emily Hogeveen in an email. She adds that further information will be available before the end of the year, when it’s safer to travel and thus when the tax credit can be offered. 

Gates admitted he has no studies he can point to that suggest the tax credit would actually work to incentivize staycations. Neither does the government. Gates also didn’t know what this tax credit would cost the treasury in foregone revenue but was content to use the government’s own $150 million figure as a starting point. 

While arguing against encouraging people to spend their tourism dollars in Ontario seems a silly thing to do, it is an open question as to whether incentives such as this one really work. Some economists argue that, rather than encouraging people to do something they wouldn’t otherwise have done, these kinds of policies merely reward people for things they were going to do anyway. If that’s the case, then $150 million could probably be better spent bringing the tourism industry back. 

To be sure, the idea of paying people something to vacation within Ontario sounds like a popular idea. Whether it actually fulfils its purpose is something we’d be unlikely to find out for years to come, if the tax credit happens at all. 

Regardless, I hear the special exhibit at the Old Mill Heritage Centre will be worth seeing, once we move into Step 3. It’s got relics from Canada’s Titanic, the Empress of Ireland, which crashed in the St. Lawrence River more than a century ago, killing more than 1,000 people. Worth seeing, tax credit or not. 

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