While most RCC members will already have seen media and expert coverage of the broad themes in the 2014 Federal Budget, there were two announcements of particular interest to retail merchants.

Reducing Credit Card Acceptance Fees

The first of these is the long overdue recognition that the government needs to act to help reduce credit card acceptance costs.  As the Minister of Finance noted in his budget plan yesterday, credit card acceptance fees in Canada are among the highest in the World.  When other groups called for voluntary restraint by the banks and credit card networks, RCC disagreed and has consistently advocated that the government must step in to mandate a reduction in these fees.

It has been a long road since we first called for credit card acceptance fee regulation in 2008 but it is clear that government is listening and there has been an evolution in the language it is using.  Where government used to talk of “transparency” it has now added a criterion of “fairness”.  And where government used to refer only to “controlling” costs it is now committing to help “lower” those costs.

For those RCC members who have had on opportunity to read the Budget Plan document, it notes pointedly that card acceptance fees in Canada are among the highest anywhere and that the Competition Tribunal has found that credit card network practices have an adverse impact on competition.  RCC is heartened by the evolution in the government’s position and language.

RCC expect that details on how to lower credit card acceptance fees will be worked out this spring and through our engagement with the Minister, Department of Finance and the Finance Canada Payments Consultative Committee (“FinPay”), RCC will be fully engaged with those deliberations.

Canada-U.S. Price Gap

The second retail-related budget item is the government’s commitment to address the Canada-U.S. price gap and to move against “country pricing”, a practice of certain manufacturers, both foreign and domestic, whose Canadian distributors and wholesalers charge more than is charged by their U.S. counterparts.  The Budget document quotes RCC President Diane Brisebois on the issue: “country pricing is one of the largest contributors to the difference in pricing between Canada and the U.S.”

In Budget 2014, the government commits to introduce legislation to address the price gap between identical goods sold in Canada and the United States.  One move that will help achieve that goal is to amend legislation so as to facilitate parallel imports.  This would allow Canadian merchants to source goods from anywhere in the world, without being constrained by exclusive distributorship arrangements.

Though the government was non-specific on the legislation that it intends to introduce, RCC has already made suggestions as to how the Competition Act and Copyright Act can be amended to allow merchants to source goods at the best price that they can find anywhere, rather than being tied to typically more expensive exclusive arrangements. RCC will continue to engage with government on this important issue and help eliminate unjustified mark-up in the prices of goods supplied to Canadian merchants.

Red Tape Reduction – Payroll Remittances

Though not retail-specific, there is a small red-tape reduction measure in the budget that will benefit independent retail merchants in particular.

The government recognizes that the frequency of remittances (payroll source deductions for employees’ income tax, employer and employee CPP contributions and EI premiums) can be onerous for small business owners, especially those who have to remit on a frequent basis.

By raising threshold levels, the budget proposes to reduce the maximum number of payments businesses have to prepare and submit to the Canada Revenue Agency (CRA). It is estimated that some 50,000 small businesses will benefit from this change, including a significant number of retail merchants.

For details on the new threshold levels, click here to see Revising Remittance Thresholds for Employer Source Deductions.

Karl Littler, VP, Provincial Government Relations and Strategic Issues
Retail Council of Canada
Office: 416-922-6678 ext. 204
[email protected]