Impact Assessment of Passport Canada's Fee-for-Service Proposal

March 2012

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Executive summary

Passport Canada is undergoing the process prescribed by the User Fees Act to update its fee structure as a cost-recovery organization. Passport Canada needs to increase its fees so that it can keep pace with advances in technology, international standards and recommended practices, and continue to provide excellent client service to Canadians. On November 10, 2011, Passport Canada published its fee-for-service proposal, highlighting the proposed changes to its fee structure and related services.

The present document complements the impact assessment presented in the fee-for-service proposal and highlights the expected impacts of Passport Canada's proposed fee increase on key stakeholders. It shows that the proposed changes to Passport Canada's fees will have a positive impact on the government, Canadians, and passport holders.

The updated fee structure will allow the organization to generate sufficient revenues to deliver its mandate in regards to passport security, including introducing the ePassport and maintaining current levels of client service. The updated fee structure will also allow the organization to sustain itself over a 10-year business cycle and keep pace with advances in technology and international standards. The adoption of the ePassport will help preserve the ease of travel that Canadians currently enjoy and make the Canadian passport even less vulnerable to fraud. Furthermore, passport holders in Canada who opt for an ePassport with 10-year validity - who will make up the vast majority of passport applicants - will receive a high-value, secure ePassport for a lower annual cost than the current passport.

Pending parliamentary review as well as completion of the regulatory process, the new fees are scheduled to come into effect in 2013.

Introduction

Passport Canada was one of the first five Special Operating Agencies set up by the Government of Canada to improve services to Canadians. While Passport Canada is a government institution, it operates much like a private sector enterprise. Passport Canada finances its operations entirely from the fees charged for passports and other travel documents and must generate sufficient revenues to meet expenditures. There is no annual parliamentary appropriation; the service is supported by applicants rather than taxpayers.

In Budget 2008, the federal government announced that Canada would be adopting a higher-security electronic passport (ePassport) with a 10-year validity period. This commitment was reiterated in the March 2010 Speech from the Throne. Passport Canada needs to update its fee structure to support the adoption of the ePassport.

As a federal government organization that charges fees for services provided, Passport Canada falls under the purview of the User Fees Act. Under the Act, a department that wishes to make changes to a fee must complete a process that involves public consultations, complaints resolution and parliamentary review. Aside from a small $2 adjustment to reflect increased shipping costs in 2005, the fees Passport Canada collects have not changed for over 10 years despite increases in operating costs due to the growing complexity of the business, the need to modernize infrastructure and the costs associated with the implementation of the ePassport. The organization is currently undergoing the process prescribed by the User Fees Act to update its fee structure and service offerings.

Sub-section 4(1)(c) of the User Fees Act requires that federal government departments "conduct an impact assessment to identify relevant factors, and take into account its findings in a decision to fix or change the user fee". In other words, in establishing a fee structure to support the 10-year ePassport, Passport Canada must identify who will be impacted by this fee increase, as well as how and to what degree these organizations or individuals will be affected.

This document provides information on:

  • Why Passport Canada needs to update its fee structure;
  • Passport Canada's fee-for-service proposal; and
  • The expected impact of the proposal on Passport Canada's key stakeholders.

Why Passport Canada needs to update its fee structure

In Budget 2008, the federal government announced that Canada would be adopting a higher-security ePassport with a 10-year validity period. This commitment was reiterated in the March 2010 Speech from the Throne. Passport Canada is a cost-recovery organization and must have the means to keep pace with advances in technology, international standards and recommended practices in the field of travel document security. Adopting the ePassport will allow Canada to meet these requirements and maintain its reputation for issuing one of the world's most respected passports.

In addition, Passport Canada must have the means to stay abreast of new technologies and implement security features and processes as necessary. This has been acknowledged by the Public Accounts Committee of the Parliament of Canada and the Office of the Auditor General, who have stressed that more funding is required for Passport Canada to have the means to issue secure travel documents to Canadians.

At the same time, Passport Canada strives to provide the best possible client service to Canadians. This, too, requires investment. By the time the new fees are introduced in 2013 (pending parliamentary review and completion of the regulatory process), Passport Canada will not have seen a significant fee increase for well over a decade. Streamlining business processes and finding efficiencies have enabled Passport Canada to maintain its operations over the past years. However, at a time when Canadians are increasingly concerned about identity fraud, Passport Canada is quickly reaching a point where not only will new advancements be impossible, but the organization's ability to maintain current operations will be jeopardized.

Passport Canada's fee-for-service proposal

To develop its fee-for-service proposal, Passport Canada consulted extensively Canadians in accordance with the User Fees Act. Please consult the Public Consultations Findings Report for more information on these consultations.

The proposal was developed with a view to generating sufficient revenue to cover expenditures while maintaining a high level of client service and keeping pace with advances in technology and international standards. It reflects the upcoming adoption of the ePassport and the fact that Canadian adults will have a choice between 5- or 10-year validity.

The fee-for-service proposal was developed with two guiding principles in mind:

  • Passport Canada must secure enough revenues to:
    • Sustain itself over a 10-year business cycle;
    • Continue to improve the security of the Canadian passport;
    • Keep pace with advances in technology and international standards; and
    • Maintain its current levels of client service.
  • Passport Canada will keep the fees for the 10-year ePassport as low as possible.

The proposed fee for adult applicants within Canada who opt for an ePassport with 10-year validity is $160, including the consular feeFootnote 1. This means that Canadians will actually pay less per year of validity for the new 10-year ePassport than for the current 5-year non-electronic passport. For those who choose the 5-year option, the proposed fee is $120, including the consular fee, which provides a lower cost option for those who prefer it. Canadians will be able to obtain a passport that complies with the latest international standards and recommended practices in passport security.

With its proposal, the organization will also maintain all fees for children's travel documents at 60% of the fee charged for their adult counterparts. Passport Canada's public consultations, including consultations with Canadians and stakeholders and monthly passport demand surveys, clearly indicated that Canadians are in favour of a reduced fee for children's passports. Consultations also revealed that Canadians do not support reduced passport fees for other groups.

Expected impact of Passport Canada's fee-for-service proposal on key stakeholders

The expected benefits and costs of Passport Canada's fee-for-service proposal were identified through primary research conducted by the organization, including its monthly Passport Demand SurveyFootnote 2 (hereafter referred to as the monthly demand survey) and Passport Canada's consultations with Canadians and stakeholders. An international comparison was also conducted to compare passport fees in countries around the world. The following section describes the expected benefits and costs for the stakeholder groups most affected by the proposal.

Impact on government

Passport Canada's updated fee structure will allow the organization to offer Canadians a choice between a 5- or 10-year ePassport. The introduction of the 10-year ePassport will fulfill the government's commitment stated in Budget 2008 and in the Speech from the Throne of March 3, 2010. In addition, the updated fee structure will allow the organization to generate sufficient revenues to deliver its mandate in regards to passport security and client service, and meet internationally set passport standards.

Impact on Canadians

All Canadians benefit from Passport Canada having sufficient resources to keep pace with advances in technology, international standards and recommended practices in the field of travel document security, and to continue protecting the integrity of the passport.

The adoption of the ePassport will contribute to protecting borders and preserving the ease of international travel that Canadians currently enjoy. Possession of an ePassport is increasingly becoming a requirement to maintain visa-free access to foreign countries. Without the ePassport, Canadian travellers could potentially be subject to new visa requirements, face closer scrutiny at borders and experience longer delays at points of entry. Any additional entry requirements could disrupt international trade and have a significant impact on just-in-time and cross-border production, resulting in an impact on Canada's economic prosperity.

The evolving international environment, specifically in the form of transnational crime, terrorism, and the rise in identity fraud, has created an increasingly sophisticated threat to Canada's national interests. With approximately 95 countries now issuing ePassports to their citizens, Canada is one of the last major industrialized countries without an ePassport. Not deploying the ePassport would mean that the Canadian passport would be more vulnerable to fraud in comparison to the passports of other countries, thereby increasing its appeal to organized crime groups or terrorist operatives. Use of the Canadian passport for terrorist or criminal purposes presents an immediate and tangible risk to national security and public safety, both in Canada and abroad, in addition to affecting Canada's reputation on the international stage.

Impact on passport holders

Passport Canada's fee-for-service proposal will ensure the organization has the means to issue secure travel documents to Canadians. As illustrated below, when acquiring a passport, Canadians look for strong security features, recognition of the passport by foreign authorities, and visa-free access to other countries. Approximately three-quarters of Canadians identify these as the top factors relevant to obtaining a passport.

Importance of Factors When Getting a Passport - Percentage (%)

Importance of Factors When Getting a Passport
FactorsVery importantQuite importantFairly importantSlightly importantNot important
Recognition of passport by foreign authorities76%12%4%3%5%
Security features76%10%5%3%5%
Visa-free access to other countries71%14%4%3%6%
Ease of application process60%18%8%5%9%
Validity period59%19%8%6%8%
Time to obtain passport54%20%9%7%9%
Price44%22%11%8%15%

Source: Passport Canada's Passport Demand Survey - July, August and September 2011

Canadians currently have a very high level of travel freedom. According to the 2010 Henley Visa Restrictions Index, Canada is among the top countries in the world in terms of visa-free access to other countries. The possession of an ePassport facilitates visa-free travel to many countries. For instance, Canadians are one of only three foreign nationals from a country that does not use ePassports who may enter the United States for tourism without a visa. Obtaining a visa can add up to $150 per trip, depending on the country. The adoption of the ePassport will help maintain the ease of international travel that Canadians currently enjoy.

The current adult fee for a 5-year non-electronic passport is $87 (for applications made in Canada, including the consular fee). With its fee-for-service proposal, Passport Canada proposes a fee of $160 for the 10-year ePassport (for applications made in Canada, including the consular fee). While a significant portion of the Canadian population would be impacted by this proposed fee increase, as close to 65% of Canadians hold a valid passport, it should be noted that for the 10-year passport, on a per annum basis, Canadians will be paying less than what they currently do. What's more, they will benefit from a book containing more pages and the most up-to-date security features. In addition, the new 10-year ePassport will offer greater convenience and savings to Canadians since it will only be necessary to pay for photos and submit an application once every 10 years. Passport Canada has established the fee for the 5-year ePassport at 70% of the 10-year fee, giving Canadians a lower upfront cost option.

Passport Canada's research indicates that Canadians have a strong preference for a 10-year ePassport, with about 80% of Canadians preferring a 10-year ePassport at $160 to a 5-year ePassport at $120 (proposed fees for applicants in Canada, including the consular fee). The main reasons stated by Canadians for preferring the 10-year validity option are its convenience, including having to apply less often for a passport, and anticipated financial savings. Results from the monthly demand survey also indicate that changes in prices for 5- and 10-year passports have a relatively small effect on the demand, with a substantial majority of respondents consistently preferring the 10-year passport at various price points. Moreover, to the extent that there is variation, it consists mainly in switching preference to the 10-year passport as its price decreases.

Passport Canada's clientele remains the "travelling public" and the passport remains a minor component of overall travel costs. Passport Canada's monthly survey results indicate that two-thirds of surveyed Canadians assigned at least some importance to price when thinking of acquiring a passport. However, compared to other factors, price ranked last in terms of perceived importance. Respondents were much more likely to assign strong importance to features associated with the passport, as well as the ease of obtaining one.

As indicated in the graphic below, most passport holders assigned no impact (58%) or very little impact (18%) to price considerations when deciding whether or not to apply for their current passport. In short, current passport holders indicated that pricing considerations were not central to their decision-making when it came to obtaining a passport. Similarly, over 65% of non-passport holders assign no impact or very little impact to price as a factor explaining why they do not currently have a valid passport.

Influence of Price When Applying for a Passport - Percentage (%)

Influence of Price When Applying for a Passport
GroupsA great dealModeratelyVery littleNot at all
Current passport holders7%16%18%58%
Non passport holders13%17%18%49%

Source: Passport Canada's Passport Demand Survey - July, August and September 2011

It should be noted that some segments of the Canadian population might be more sensitive to an increase in passport fees and may choose an alternative travel document (such as an enhanced driver's license) or decide not to travel. For example, families may raise concerns about the increased cost, despite the fact that Passport Canada's fee-for-service proposal maintains all fees for children's travel documents at 60% of the adult equivalent to limit negative impacts on families.

Passport Canada offers a 5-year validity ePassport at $120 (for applicants in Canada), which represents a lower upfront cost option. Passport Canada research reveals that people more likely to opt for a 5-year validity passport at the proposed fee are more likely to have a family income of less than $20,000 per year or have less than a high school education.

However, age seems to be the most important demographic characteristic related to the choice between the 5- and the 10-year validity period. In particular, a substantial number of applicants 75 years old or more would opt for the 5-year validity passport (49% among this age group), compared to around 10% for Canadians of all age groups.

Passport Canada's research also indicates that around 37% of Canadians travel only to the United States (US), with over 20% crossing the border only by car. These Canadians might be more sensitive to a passport fee increase and decide to purchase an alternative travel document, such as an enhanced driver's license (EDL), to travel to the US. Passport Canada's consultations revealed that Canadians whose needs could be met by an EDL (e.g. Canadians travelling to the US by land only) or the NEXUS card (e.g. Canadians travelling only to the US) would mostly opt for the 10-year validity passport (86% to 90%).

The fee-for-service proposal establishes higher fees for Canadians who apply for a passport outside of Canada compared to Canadians who apply in Canada. The fee differences reflect the fact that it is more expensive to offer passport services outside of Canada. This is due to a number of factors, including a higher demand for children's passports that are offered at a reduced fee, higher international shipping fees, and the amount paid by Passport Canada to the Department of Foreign Affairs and International Trade for the delivery of the passport program outside Canada. The increased fees will allow Passport Canada to maximize the efficiency of its service offerings around the world. About 5% of Canadian passports are delivered outside of Canada. Therefore, although the proposed fees to obtain a passport abroad are higher and could have an impact on Canadians outside of Canada, by not subsidizing a small portion of passport holders, the overall impact on all Canadians will be positive.

Through Passport Canada's 2010 public consultations, representatives from the tour operators sector indicated that a fee increase may influence decisions on travel and thus impact their business. However, less international travel would likely mean an increase in domestic tourism. They added that the convenience of a 10-year passport, and any measure that may facilitate travel for Canadians, was seen as positive for the tourism industry.

Finally, the fee increase will ensure that Passport Canada has sufficient revenues to continue to deliver excellent client service. Over half of Canadians surveyed by Passport Canada through its monthly survey assigned strong importance to client service when acquiring a passport, looking at the ease of the passport application process and the time it takes to obtain a passport. Over the last decade, Passport Canada has introduced numerous initiatives to greatly improve the passport application process for Canadians. For example, the introduction of the simplified renewal process and the modernization of the guarantor policy have made it easier for Canadians to apply for a passport. What's more, since 2001, Passport Canada's service delivery network has expanded from 29 offices to a national network that comprises 34 Passport Canada offices and 200 Service Canada and Canada Post outlets that accept applications. Passport Canada has consistently achieved superior levels of client satisfaction (around 90%) over the last 10 years. All of this was done without a significant fee increase over the past decade. However, the organization has now reached a point where, without a significant investment to modernize its systems, operations and infrastructures, its ability to maintain current operations will be jeopardized.

Conclusion

Passport Canada's proposed fee increase will ensure the organization has the means to issue secure travel documents to Canadians, including a 10-year ePassport, and maintain high-quality client service. Although the fee-for-service proposal will increase the fees charged for passport services, the overall impact on stakeholders will be positive. Ten-year passport holders, who will make up the vast majority of applicants, will receive a high-value, secure ePassport for a lower annual cost than the current passport. The heightened security and integrity of the passport will benefit all Canadians, as it will act as a deterrent for identity fraud, increase border security, and help maintain Canadians' freedom to travel with few visa restrictions.

Footnotes

Note de bas de page 1

Passport Canada collects $25 in consular fees on behalf of the Department of Foreign Affairs and International Trade Canada to support the consular program at Canadian government offices abroad. This fee is added to the adult passport fee, but is not applied to children's applications.

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Note de bas de page 2

Passport Canada collects monthly quantitative data to help forecast passport demand. Data is collected monthly through a national telephone survey with a sample size of 1,100 Canadians 16 years of age and older, as well as an additional sample of 2,000 clients divided equally over two waves of monthly interviewing (October and November 2011).

Return to footnote 2 referer