Tax disparities hurting border merchants

PRESQUE ISLE – Once booming with business, Maine border communities are now hurting as Canadian shoppers stay home and American shoppers head across the border to take advantage of discounts prompted by the devalued Canadian dollar.

The shift started on July 1, 1993, when the Canadian government began collecting taxes on purchases made by Canadians in the United States.

“It turned off the faucet,” Paula Gendron, Greater Houlton Chamber of Commerce executive director, said.

Gendron operated a fabrics business in downtown Houlton from 1981 to 1993. She said 45 percent of her business was from Canadians. The loss of that business forced her to close.

U.S. Treasury officials met on Monday with about 30 business and community leaders in Calais and Presque Isle to get a better handle on how bad the situation is. Both sessions were arranged by U.S. Sen. Susan Collins.

Their intention, said Timothy Skud, deputy assistant secretary for regulatory, tariff and trade enforcement, was to use that information to pressure Canadian trade officials to ease up on their residents who shop in the United States.

So far, efforts have been unsuccessful.

“We haven’t gotten a lot of traction,” he said while in Presque Isle.

The problem is that U.S. shoppers going to Canada get an exemption from duties on $50 in goods if they stay less than 24 hours. Between 24 and 48 hours, the exemption goes to $200, and more than 48 hours, it’s $400.

Canadian shoppers in the U.S. also can bring $50 worth of goods back with them in a 24-hour period. But in U.S. funds, that’s only about $35. The exemption is about $130 in U.S. funds for trips longer than 48 hours.

Business leaders are claiming there is an inequity not only on the difference in what Americans and Canadians can take home, but also on the 15 percent sales tax collected on goods at the Canadian border.

Adding to that is the hard-line attitude of Canadian customs officers collecting the taxes and, at least in the case of Calais, long lines of traffic at U.S. border stations as a result of last September’s terrorist attacks.

“It’s a pattern that favors shopping in Canada and discourages shopping over here,” Presque Isle City Manager Tom Stevens said during the Presque Isle meeting.

Keith Guttormsen, Calais Regional Chamber of Commerce executive director, said that in 1991-92, the city of Calais did $93 million worth in taxable retail sales. Now it’s down to around $70 million.

In some Aroostook County towns, more than a third of the stores are closed.

At the same time, local officials watch as once struggling Canadian border towns now are booming, with growing retail centers that not only keep local residents at home, but also lure American shoppers as well.

“As long as it’s unfair, they’re going to benefit,” Tony Levesque, Fort Fairfield economic development director, said.

Some people at the sessions questioned why, if Canadian shoppers are being taxed and hassled by Canadian customs agents at the border, there wasn’t some organized effort in Canada to change that.

Bill Francis, who owns Knock On Wood, a gift shop and year-round Christmas store in Calais and whose mother lives in Canada, said Canadians don’t want the U.S. interfering.

“Even my mother has given me a tongue lashing, [saying]’it’s none of their damn business,’ and this is the attitude,” he said Monday.

People attending both meetings suggested that perhaps U.S. officials should reduce duty exemptions for U.S. residents who shop in Canada.

“If Canada doesn’t want to change, then maybe we should change the way we do business because we’re dying here in Aroostook County,” Tina Deschenes, Madawaska Chamber of Commerce executive director, said.

Federal officials admitted that U.S. Treasury Secretary Paul O’Neill has the power to limit the $200 importation rule, but doubted he would do it.

“It costs more money to process that, and it takes resources away from security efforts, which of course are a top priority now,” Skud told the group in Calais.