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Income and Expenditure Accounts Technical Series
Government revenue attributable to tourism, 2011
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In 2011, government revenue from tourism activities in Canada rose 6.6% to $21.4 billion. Most of the gains stemmed from a 7.4% increase in revenue directly related to domestic tourism spending, which was up for a second consecutive year after decreasing in 2009. Revenues stemming from tourism exports, which represented just over one-fifth of total government revenue from tourism, increased at a slower 3.8% pace (see Table 3).
Since 2003, government revenue resulting from domestic tourism has increased 50%, while that attributable to tourism exports has fallen 4%.1 These results reflect the growth in domestic tourism spending over the same period (+60%) and the decline in foreign tourism spending in Canada (-4%), most notably from the United States. The export shares of total tourism spending and government revenue due to tourism have declined since 2004, albeit at a slower rate in recent years.
After declining in 2009, due to a sharp drop in tourism exports, total tourism spending rebounded in 2010 and 2011 with increases of 6.7% and 7.2%, respectively. The increase in both years was driven by domestic demand. Government revenue from tourism increased at a slower pace however, such that every $100 spent by tourists actually generated less government revenue; $27.17 in 2011 compared to $27.33 in 2010.
Tourism exports made up a larger share of the government revenue due to tourism (22%) than their share of total tourism spending (19%). This is because international visitors spend more on highly taxed items such as recreation and entertainment (including casinos) and they do not receive tax credits on business travel expenses (unlike Canadian business travellers).
Tourism generated 3.8% of the government revenue from all sources in-scope in 2011, somewhat more than tourism’s 1.9% share of gross domestic product (GDP). This difference is due mainly to the relatively high taxes on many of the goods and services purchased by tourists (e.g., vehicle fuel, alcohol and casino entertainment).
Most of the revenue from tourism was collected by the federal and provincial/territorial governments (94%) while municipalities accounted for a much smaller share (see Table 4 and Chart 1). In 2011, tourism accounted for 3.9% of the federal government’s revenue, 4.3% of provincial/territorial governments’ revenue, and 1.8% of the revenue collected by municipalities. These shares have been quite stable over the last decade.
Table 4 Government revenue attributable to tourism, by level of government
Tourism generated $9.6 billion for the federal government in 2011, up 6.7% from the previous year. Higher revenues were attributable to increased tourism domestic demand and tourism exports. The export share of federal government revenue from tourism slipped to 20.6% in 2011.
The federal government collected $13.11 for every $100 of tourism spending by non-residents in 2011, compared to $12.03 for every $100 spent by residents. Overall, $12.24 was collected at the federal level on every $100 of tourism spending, down from $12.29 in 2010.
Tourism brought in $10.5 billion for the provincial/territorial governments in 2011, up 6.4% from one year earlier. The increase stemmed from higher government revenue generated by domestic demand (+7.3%) and tourism exports (+3.7%). The export share of provincial/territorial governments’ revenues from tourism was 22.5% in 2011.
On average, every $100 spent by non-resident visitors generated $15.60 for provincial/territorial governments in 2011, compared to $12.74 for every $100 spent by residents. It is noteworthy that for every $100 of spending, international visitors generated considerably more revenue for provincial/territorial governments than for the federal government. This stems from relatively high spending by non-residents on recreation and entertainment (including casinos) which generates significantly more revenue for provincial/territorial governments.
Municipal governments raised $1.3 billion from tourism in 2011, or $1.65 for every $100 of tourism spending. About three quarters of this revenue was generated through other taxes on production, mainly property taxes.2 Tourism revenues from sales of goods and services accounted for 21% of municipal governments’ total tourism revenues in 2011.
As mentioned earlier, taxes on incomes are the largest source of revenue for government (see Table 1). In contrast, when considering only the revenue from tourism, taxes on products (final sales) are the main source. In fact, about half of all government revenue from tourism came from taxes on products, a proportion that has remained fairly stable over the last decade. These taxes brought in $11.2 billion, up 6.3% from 2010 (see Table 5).
Table 5 Government revenue attributable to tourism, by source of revenue
About $4.7 billion was generated through income taxes, up 5.5%. Another $2.8 billion was raised through other taxes on production and intermediate inputs, while contributions to social insurance plans amounted to $2.3 billion. Government sales of goods and services to tourists added $483 million. The overall composition of government’s revenue from tourism has remained relatively stable over the last decade. In contrast, the export share of each of the various sources of tourism revenue has declined markedly, reflecting the declining share of non-resident spending in overall tourism spending.
Governments received $30.85 for every $100 spent by non-residents, compared to $26.30 for every $100 spent by residents (see Chart 2). The gap reflects the fact that Canadian businesses receive input tax credits for GST and in some instances PST on business travel expenses, which lowers the effective tax paid by resident tourists (which includes Canadian business travellers). It also reflects differences in spending patterns between resident and non-resident visitors, with the latter spending more on more highly taxed items, most notably recreation and entertainment (including casinos) and non-tourism commodities (including alcohol and tobacco). The following section examines some of these differences at the industry and commodity level.
Description for Chart 2
Notes
- In this publication, tables show the estimates from 2007 to 2011. Estimates for the full time series, 2000 to 2011 can be found in the supplementary tables, available on request.
- Hotel room taxes are another important “source” of revenue for municipalities, however, in most jurisdictions, these taxes are collected by provincial/territorial governments and then transferred to municipalities. In this study, they are recorded as revenues of provincial/territorial governments.
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