BUSINESS
01/19/2018 13:19 EST | Updated 01/19/2018 13:19 EST

Duty-Free Allowance Increase Could Cost Canada Billions: Study

Lawmakers want Canada to increase the allowance from $20 to $800.

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PwC says the economic impact from lost retail sales from an increase in the duty-free allowance would actually be about $24.3 billion, but it would be tempered by an $18.7 billion increase in disposable income for consumers because of the lower cost of U.S. goods.

CALGARY — A new study commissioned by the Retail Council of Canada says an increase in the duty-free allowance for cross-border shopping would lead to hundreds of thousands of job losses and cut billions of dollars from the Canadian economy.

The PwC study comes as U.S. lawmakers push for Canada to increase the duty-free allowance from $20 to $800 as part of ongoing NAFTA talks.

The study says that the net economic impact of raising the allowance to $800 would lead to a $12-billion hit to Canada's GDP by 2020 and upwards of 300,000 job losses.

Estimated government revenue loss a sharp contrast to 2016 study

PwC says the economic impact from lost retail sales from an increase would actually be about $24.3 billion, but it would be tempered by an $18.7 billion increase in disposable income for consumers because of the lower cost of U.S. goods.

The study notes that job losses in the retail industry would affect lower-income employees, while the benefits to cheaper goods from the U.S. would go to those who consume the most.

PwC projects that the fallout would also include an estimated $10.9 billion loss of government revenue, a sharp contrast to a 2016 study by the C.D. Howe Institute that found a rise in the allowance would have a neutral impact from government revenue.

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