A Penticton campground operator is predicting last year’s whopping federal government tax increase could be a death knell for the industry.
“It will likely impact about 75 per cent of campgrounds across Canada. Out of the 2,400 campgrounds the majority of them are going to be affected,” said Barefoot Beach Resort president Max Picton.
With a spike in property values and a tax increase, he said running a campground is going to get tougher.
“There’s a very real possibility that we’re going to see up to 50 per cent having to shut their doors,” said Picton.. “In a town like Penticton if we were to lose half the campgrounds that’s literally hundreds if not thousands of people on any given weekend that wouldn’t be in Penticton.”
There are currently more than a dozen private campgrounds in the region that facing a tax rate hike to 50 per cent from the 15 per cent they were accustomed to according to Shane Devenish, executive director of the Canadian Camping and RV Council.
The change comes after Canada Revenue Agency (CRA) took a different approach to corporations labelled “specified investment businesses” in 2016.
A specified investment business is described in the Income Tax Act as a business with the principal purpose of deriving income from property, including interest, dividends, rents, or royalties and has a corporate tax rate of around 50 per cent.
However, income from a specified investment business is only eligible for the Small Business Deduction if the corporation employs five or more full-time employees all year.
Like most other local campsite operators the majority of the 12 people working at Picton’s campgrounds are seasonal with only three full time employees year round.
“It’s worrying and I don’t think the federal government realizes the impact this will have on not just camping but the whole tourism sector,” said Picton. “We’re seeing a time that it’s becoming more and more difficult for families, especially young families, to travel affordably and if we have campgrounds closing their doors left right and centre and that’s maybe the only vacation they can afford in a year they’re just not going to be traveling anymore, so you’re going to be seeing a serious lapse in tourism dollars as well as closures on these campgrounds.”
Barefoot has been in operation for five years, with a total of 100 tent and RV sites (plus 11 yurts). According to the president it is not showing a large profit yet so the impact will not be as severe for him initially.
“We’re still in the early stages of the game, but in the long run this really cuts into the viability of this type of business,” he said. “I am going to lobby my member of parliament and if you’re a person who enjoys camping in Canada maybe you should write your member of parliament as well.”
At 75 per cent of privately run campsites there’s no need to employ five or more people when summer wanes. Devenish said previously the CRA knew this, but didn’t bother to tax private campsites at the higher rate.
“Now they’ve hit three private campsite owners in Ontario, one in Quebec (with the higher tax rate),” he said. “They’re taking two of those to court.”
The Canadian Camping and RV council is backing those campsite owners in their legal battles because if the CRA sets precedence and continues doling out tax bills at the higher rate campsites across the country will likely fold.
Devenish’s organization made a presentation to them in the budget consultations and when they submitted their report Dec. 7, concerns of campsite owners were included as something to fix.
Todd’s RV and Camping has been a Peachland staple for 60 years and owner Graham Todd is worried this increase if it goes ahead will mean the end of his family business.
“The amount of taxes we already pay and then water, sewer and outrageous hydro bills — it is a challenge to keep a private campground running,” said Todd.
“Not to mention one of our main competitors are provincial campgrounds, which are under priced.”
Central Okanagan-Nicola-Similkameen MP Dan Albas was part of the standing committee and listened to industry concerns.
He’s since toured local campgrounds and listened to area campsite owners, like the Todd’s, and taken their concerns to Ottawa.
“Obviously, there are offices both in Kelowna and in my former riding of Okanagan–Coquihalla, in Penticton, and having toured them and met some of the people who are involved, I know they are certainly working very hard,” Albas said in the House of Commons last month, which is recorded on the transcript.
“That being said, I’d like to discuss the CRA a little. Obviously, it’s somewhat at arm’s length from government, for good reasons. Because of that, there is an opportunity for us to talk about things that have been a reason for concern. An example is the issue of campgrounds, particularly whether a campground is now no longer eligible for the preferential small business rate.”
Albas said he believed the problem was arising from the fact these businesses are seasonal.
“In British Columbia — I’m not sure if you are aware, Minister — real estate prices have increased dramatically over the past 20 years,” he said in the house. “Tourism is very important to the Okanagan, and many of these smaller campgrounds may decide that, if they cannot run as a small business and access that — instead of being classified as large operations, million-dollar corporations — they may simply sell. This is a concern in my area.”
Albas said while discussions are ongoing there is hope for changes to save the industry.
-With files from Kathy Michaels/Black Press