Travel the world and avoid the GST! (Sorry, domestic travelers, you’re S.O.L.)
July 8, 2009 Leave a comment
This was supposed to be a quick lunchtime comment on the absurdities of airline promotional pricing. It’s a controversy you’ve probably already heard about: airlines advertising bargain fares that sound too good to be true, until you add on all the fees, taxes and surcharges. Then you find out that the bargains really are too good to be true.
I was going to take a shot at the airlines for cynically not rolling up fuel surcharges (which they have control over) into their advertised prices, while conceding that the airlines were justified in not wanting to do the same with regard to money that they’re merely expected to collect and then hand over to others, such as taxes, airport improvement fees, Nav Canada surcharges and the like.
However, something else caught my eye.
To try to demonstrate the absurdity of not including fuel surcharges in the advertised price, I went to Air Canada’s web site and looked up the price for flights from Winnipeg to London Heathrow, departing Oct. 7 and returning Oct. 14. As expected, Air Canada’s advertised bargain price of $264 each way turned into a total price of $1,026.96 once you added on:
- The base fare for the return trip (another $264)
- The Canada Airport Improvement Fee ($36)
- The Air Travelers’ Security Charge ($17)
- The U.K. Passenger Service Charge ($40.24)
- The U.K. Air Passenger Duty ($75.92)
- Air Canada’s own Fuel Surcharge ($328 — boo!)
- Canada Goods and Services Tax ($1.80)
“Wait a minute!”, I thought. “The GST on a trans-Atlantic flight is just a buck-eighty — the cost of a small Second Cup coffee, give or take a few cents?!”
Indeed it was. It appears that the GST on a Winnipeg-London Heathrow flight only applies to the Airport Improvement Fee! ($1.80 divided by 0.05 = $36)
Well, how about that! Either Air Canada is holding a “We Pay the GST” sale, some poor soul at head office in Montreal (who will forevermore hate my guts if CEO Calin Rovinescu ever reads this post) made a boo-boo, or the GST doesn’t apply to overseas flights.
Curious, I decided to check out whether or not GST applied to a domestic flight to Vancouver and back on those same dates. Sure enough, the GST on those domestic flights came to $23.42, which meant that it applied to everything: the fare (2 flights @ $189 ea.), surcharges ($46), airport improvement fees ($35) and the Air Travelers’ Security Charge ($9.33)
Why the difference between domestic and international? If it’s due to government policy, is it really such a good idea to penalize people for travelling domestically by taxing domestic flights more heavily than international flights, especially when the total price for a short-haul trip to the West Coast is already nearly half the price of a long-haul trip to the U.K.?
The Canadian tourism industry probably wouldn’t think so. Hopefully for them it’s just a glitch in Air Canada’s reservation system.
(Update, July 9, 7:40 a.m.: Apparently this difference between domestic and international trips is due to Canadian tax law. International air travel, except to the U.S., is GST-exempt, even when purchased within Canada by Canadian residents. Travel within Canada and to/from the U.S. is not exempt.)