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COMMENTARY: Coronavirus will change the way Canadians travel – Global News
I flew from Japan to Toronto on March 1, finishing that journey on a puddle jumper to Ottawa. Like many Canadians, I have been dolefully wondering when I might next board an airplane.
Whenever the black curtain that now shrouds most of the world is lifted — and that may only come several months after a vaccine or a cure is found — the landscape will be much different than it was only two months ago.
Tourism was a luxury reserved for the wealthy when Britain created the modern travel industry by taking holidays on the European continent in the late 19th century. It was not until the 1960s and 1970s, with the advent of the jet airliners, that tourism to the far corners of the planet became affordable to many westerners. Canadians embraced this wonderful new world, jumping on aircraft and cruise ships to almost anywhere.
READ MORE: Coronavirus — Air Canada suspending flights to U.S. for 4 weeks after April 26
Before all others, the most crucial question is whether many Canadians will still have enough savings or even jobs that will let them dash off to Patagonia, Phnom Penh, Pangnirtung or wherever their whims used to take them.
It may be hard to comprehend for folks used to cruising in the Caribbean every winter or enjoying the good life in Europe every summer, but whenever the coronavirus pandemic ends, many of them may once again regard tourism as an extravagance that will be well beyond their means for the rest of their lives.
This will be especially true if Ottawa tries to get out from under its debt load by taking the draconian step of reducing pensions, or at least civil service and military pensions, by 20 per cent or 30 per cent. That will kill many would-be travellers’ bucket lists.
Corporations and small businesses that depend on foreign trade face a similar quandary. Most of them have their own crushing debt problems and pension liabilities. Fewer foreign customers will be able to pay for the goods and services those companies offer. It is highly debatable whether many of them still want to shell out $10,000 for a quick business trip to Vietnam when words such as Zoom have suddenly entered our lexicon to describe face-to-face video meetings with scores of people that don’t cost more than a few bucks to set up.
Ditto for think tanks, universities and professional associations used to hosting international conferences with enough delegates to pack an NHL rink. Going forward, many conventioneers will understandably be anxious about flying to Las Vegas or Honolulu just to sit cheek-by-jowl for several days with people from everywhere.
Another factor that may dissuade some from travelling afar, or even to New York, is that their calculations about where to go will be heavily influenced by whether theatres, museums, galleries and even parks will be open. The millions of Canadians with much thinner wallets may choose to go pickerel fishing or for a cross-country bicycle ride.
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The broad outlines of the challenge ahead for those who badly want to travel again can be seen in the current air travel figures. Domestic air travel is down 96 per cent in the U.S. IATA, which represents air carriers, reckoned in its latest public report a few days ago that its members expected revenue to drop by $312 billion this year.
READ MORE: WestJet cancels thousands of domestic flights as demand drops
Especially vulnerable will be my favourite train travel experience, Via Rail’s historic flagship, the Canadian, which runs from Toronto to Vancouver. That run already cost taxpayers $48.9 million in subsidies two years ago. With $394 million in overall federal subsidies in 2018, Via is likely to be one of the mendicants trying to push the airlines aside in the rush to ask Ottawa to keep them going.
How bad are things already? Sydney Airport announced on April 20 that it had borrowed A$850 million to help see it through a 97 per cent slump in traffic.
Few passengers will ever see it, but one of the few parts of the travel industry that is booming today is the obscure business of mothballing aircraft. Some 16,000 commercial airliners are idle around the world, including hundreds in Canada.
The stark gravity of the situation was revealed in Lufthansa’s shock announcement earlier this month that effective immediately, it was retiring six of its 14 Airbus 380 superjumbo jets. In doing so, it is walking away from a nearly $3-billion investment on aircraft that are, on average, less than nine years old.
Even if we can afford to travel, shrinking airliner fleets mean fewer flights flying to fewer places. This shrinkage will have an insidious effect on places that rely heavily on tourism. Nor has anybody a clue yet how many (or few) tourist-dependent hotels, restaurants, nightclubs, casinos and marinas will ever reopen.
Amid the gloom about the future of travel, a few outliers speak optimistically about what happens next. I don’t buy it, but Michael O’Leary, the boss of the biggest European low-cost carrier, Ryanair, is forecasting “a bumper year in terms of earnings next year” because of low oil prices and “massive discounting.”
That would be quite a comeback for O’Leary’s company. At present, 99 per cent of the Ryanair fleet is parked.
One of the few winners could be Airbus’s extraordinarily fuel-efficient A220 (formerly Bombardier’s C-series), which was designed in Canada and is made at Mirabel, north of Montreal. While many airlines have slashed or are delaying orders from Airbus and Boeing, Air France remains committed to buying 60 A220s, with the first of them to be delivered next year. Air Canada and Delta have also promised to honour their outstanding orders.
Though it sounds counter-intuitive, given that several cruise ships recently demonstrated that they were ideal breeding grounds for the coronavirus, bookings for some of these palatial floating leviathans are reported to be good for this fall and winter, albeit with steeply discounted fares.
This passenger demand may explain how the world’s largest cruise operator, Carnival Corp., which owns Princess, Holland America and other lines, has 18 new ships on order. The company was able to raise US$6 billion through a bond offering during the past few weeks, even though no cruise ships are going anywhere for several months at least.
On the other hand, Alaska will lose revenue because fewer because few ships will be making the Inside Passage or visiting Glacier Bay this summer. This is because the West Coast cruise hubs in Seattle and Vancouver, which anticipated 250,000 cruise passengers this year, will not accept any ships until July at the earliest. Alaska had been looking forward to revenue of US$793 million this season.
Airline companies, cruise ship operations and hotels will take a long time to reconstitute themselves. Many frequent travellers will be broke or fearful of catching the expected second or third wave of COVID-19 infections. Another likely hurdle: a quagmire of newly imposed visa restrictions and other government-imposed limits or outright bans on travel.
The upshot of this is that many Canadians are likely to spend more time at their cottages or travel more within their own country for the next few years. This should be a modest boon to Canada’s shell-shocked tourism industry. It has been heavily reliant on American visitors and, more recently, on European, Japanese and Chinese visitors who may now be as leery of travel to Canada as many Canadians will be about visiting those countries. As for winter holidays, reaching Florida by car will likely cost Canadians less than it did because gas prices are much lower, though this may be offset if the loonie tumbles further and ends up only being worth, say, 60 U.S. cents.
I had planned to fly to Europe, Asia and Western Canada this spring. Those trips have been postponed indefinitely. In hindsight, I was darn lucky to get to Tokyo and Okinawa just days before the coronavirus turned global travel upside down.
Only six weeks into isolation, like most Canadians, I have a bad case of cabin fever. I want to get going again.
Matthew Fisher is an international affairs columnist and foreign correspondent who has worked abroad for 35 years. You can follow him on Twitter at @mfisheroverseas.
More money will land in the pockets of Canadian families on Friday for the latest Canada Child Benefit (CCB) installment.
The federal government program helps low and middle-income families struggling with the soaring cost of raising a child.
Canadian citizens, permanent residents, or refugees who are the primary caregivers for children under 18 years old are eligible for the program, introduced in 2016.
The non-taxable monthly payments are based on a family’s net income and how many children they have. Families that have an adjusted net income under $34,863 will receive the maximum amount per child.
For a child under six years old, an applicant can annually receive up to $7,437 per child, and up to $6,275 per child for kids between the ages of six through 17.
That translates to up to $619.75 per month for the younger cohort and $522.91 per month for the older group.
The benefit is recalculated every July and most recently increased 6.3 per cent in order to adjust to the rate of inflation, and cost of living.
To apply, an applicant can submit through a child’s birth registration, complete an online form or mail in an application to a tax centre.
The next payment date will take place on May 17.
News
Capital gains tax change draws ire from some Canadian entrepreneurs worried it will worsen brain drain – CBC.ca
A chorus of Canadian entrepreneurs and investors is blasting the federal government’s budget for expanding a tax on the rich. They say it will lead to brain drain and further degrade Canada’s already poor productivity.
In the 2024 budget unveiled Tuesday, Finance Minister Chrystia Freeland said the government would increase the inclusion rate of the capital gains tax from 50 per cent to 67 per cent for businesses and trusts, generating an estimated $19 billion in new revenue.
Capital gains are the profits that individuals or businesses make from selling an asset — like a stock or a second home. Individuals are subject to the new changes on any profits over $250,000.
The government estimates that the changes would impact 40,000 individuals (or 0.13 per cent of Canadians in any given year) and 307,000 companies in Canada.
However, some members of the business community say that expanding the taxable amount will devastate productivity, investment and entrepreneurship in Canada, and might even compel some of the country’s talent and startups to take their business elsewhere.
Finance Minister Chrystia Freeland unveiled the government’s 2024 federal budget, with spending targeted at young voters and a plan to raise capital gains taxes for some of the wealthiest Canadians.
Benjamin Bergen, president of the Council of Canadian Innovators (CCI), said the capital gains tax has overshadowed parts of the federal budget that the business community would otherwise be excited about.
“There were definitely some other stars in the budget that were interesting,” he said. “However, the … capital gains piece really is the sun, and it’s daylight. So this is really the only thing that innovators can see.”
The CCI has written and is circulating an open letter signed by more than 1,000 people in the Canadian business community to Trudeau’s government asking it to scrap the tax change.
Shopify CEO Tobi Lütke and president Harley Finkelstein also weighed in on the proposed hike on X, formerly known as Twitter.
We need to be doing everything we can to turn Canada into the best place for entrepreneurs to build 🇨🇦<br><br>What’s proposed in the federal budget will do the complete opposite. Innovators and entrepreneurs will suffer and their success will be penalized — this is not a wealth tax,…
—@harleyf
Former finance minister Bill Morneau said his successor’s budget disincentivizes businesses from investing in the country’s innovation sector: “It’s probably very troubling for many investors.”
Canada’s productivity — a measure that compares economic output to hours worked — has been relatively poor for decades. It underperforms against the OECD average and against several other G7 countries, including the U.S., Germany, U.K. and Japan, on the measure.
Bank of Canada senior deputy governor Carolyn Rogers sounded the alarm on Canada’s lagging productivity in a speech last month, saying the country’s need to increase the rate had reached emergency levels, following one of the weakest years for the economy in recent memory.
The government said it was proposing the tax change to make life more affordable for younger generations and fund efforts to boost housing supply — and that it would support productivity growth.
A challenge for investors, founders and workers
The change could have a chilling effect for several reasons, with companies already struggling to access funding in a high interest rate environment, said Bergen.
He questioned whether investors will want to fund Canadian companies if the government’s taxation policies make it difficult for those firms to grow — and whether founders might just pack up.
The expanded inclusion rate “is just one of the other potential concerns that firms are going to have as they’re looking to grow their companies.”
He said the rejigged tax is also an affront to high-skilled workers from low-innovation sectors who might have taken the risk of joining a startup for the opportunity, even taking a lower wage on the chance that a firm’s stock options grow in value.
But Lindsay Tedds, an associate economics professor at the University of Calgary, said the tax change is one of the most misunderstood parts of the federal budget — and that its impact on the country’s talent has been overstated.
“This is not a major innovation-biting tax change treatment,” Tedds said. “In fact, when you talk to real grassroots entrepreneurs that are setting up businesses, tax rates do not come into their decision.”
As for productivity, Tedds said Canadians might see improvements in the long run “to the degree that some of our productivity problems are driven by stresses like housing affordability, access to child care, things like that.”
‘One foot on the gas, one foot on the brake’
Some say the government is sending mixed messages to entrepreneurs by touting tailored tax breaks — like the Canada Entrepreneurs’ Incentive, which reduces the capital gains inclusion rate to 33 per cent on a lifetime maximum of $2 million — while introducing measures they say would dampen investment and innovation.
“They seem to have one foot on the gas, one foot on the brake on the very same file,” said Dan Kelly, president of the Canadian Federation of Independent Business.
Some business groups are worried that new capital gains tax changes could hurt economic growth. But according to Small Business Minister Rechie Valdez, most Canadians won’t be impacted by that change — and it’s a move to create fairness.
A founder may be able to sell their successful company with a lower capital gains treatment than otherwise possible, he said.
“At the same time, though, big chunks of it may be subject to a higher rate of capital gains inclusion.”
Selling a company can fund an individual’s retirement, he said, which is why it’s one of the first things founders consider when they think about capital gains.
Mainstreet NS7:03Ottawa is proposing a hike to capital gains tax. What does that mean?
Tuesday’s federal budget includes nearly $53 billion in new spending over the next five years with a clear focus on affordability and housing. To help pay for some of that new spending, Ottawa is proposing a hike to the capital gains tax. Moshe Lander, an economics lecturer at Concordia University, joins host Jeff Douglas to explain.
Dennis Darby, president and CEO of Canadian Manufacturers & Exporters, says he was disappointed by the change — and that it sends the wrong message to Canadian industries like his own.
He wants to see the government commit to more tax credit proposals like the Canada Carbon Rebate for Small Businesses, which he said would incentivize business owners to stay and help make Canada competitive with the U.S.
“We’ve had a lot of difficulties attracting investment over the years. I don’t think this will make it any better.”
Tech titan says change will only impact richest of the rich
Toronto tech entrepreneur Ali Asaria will be one of those subject to the expanded capital gains inclusion rate — but he says it’s only fair.
“It’s going to really affect the richest of the rich people,” Asaria, CEO of open source platform Transformer Lab and founder of well.ca, told CBC News.
“The capital gains exemption is probably the largest tax break that I’ve ever received in my life,” he said. “So I know a lot about what that benefit can look like, but I’ve also always felt like it was probably one of the most unfair parts of the tax code today.”
While Asaria said Canada needs to continue encouraging talent to take risks and build companies in the country, taxation policies aren’t the most major problem.
“I think that the biggest central issue to the reason why people will leave Canada is bigger issues, like housing,” he said.
“How do we make it easier to live in Canada so that we can all invest in ourselves and invest in our companies? That’s a more important question than, ‘How do we help the top 0.13 per cent of Canadians make more money?'”
More money will land in the pockets of Canadian families on Friday for the latest Canada Child Benefit (CCB) installment.
The federal government program helps low and middle-income families struggling with the soaring cost of raising a child.
Canadian citizens, permanent residents, or refugees who are the primary caregivers for children under 18 years old are eligible for the program, introduced in 2016.
The non-taxable monthly payments are based on a family’s net income and how many children they have. Families that have an adjusted net income under $34,863 will receive the maximum amount per child.
For a child under six years old, an applicant can annually receive up to $7,437 per child, and up to $6,275 per child for kids between the ages of six through 17.
That translates to up to $619.75 per month for the younger cohort and $522.91 per month for the older group.
The benefit is recalculated every July and most recently increased 6.3 per cent in order to adjust to the rate of inflation, and cost of living.
To apply, an applicant can submit through a child’s birth registration, complete an online form or mail in an application to a tax centre.
The next payment date will take place on May 17.
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