Halfway through the federal tax break, who’s benefitting?
Posted January 15, 2025 9:42 am.
There’s one month to go until the federal government’s tax holiday will come to an end. Thousands of items were supposed to be cheaper while the GST was lifted in B.C., but it doesn’t appear everyone is saving a lot, if any, money.
Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), is not happy about it.
“Primarily, this was a big flop. There was virtually no sign of any increase in sales. Only four per cent of businesses saw an increase in sales, and that’s consistent from what we’re hearing from consumers. Consumers said it really made no significant improvement to their bottom line. Retailers, other businesses saw very little increase in traffic, as a result of the holiday,” said Kelly.
He explains most business owners had to overcome headaches to implement the changes, including having to itemize everything in stock to accommodate the tax break.
“The cost-benefit just wasn’t there. This has not been the big lift that I think politicians were counting on it to be. There were a whole bunch of confusing bulletins businesses had to sort through to try and put this in place. [There was] lots and lots of confusing information and costs to re-program their system. For a lot of businesses, they lost money because the increase in sales did not outweigh the administrative costs that they had to endure to put the thing in the place.”
Kelly claims businesses spent roughly $1,000 in point-of-sale machine changes to better handle the changes.
“And of course, every business in the country had to do it on the eve of Dec. 13. And they have to hire someone to come back in and do it on the eve of Feb. 14. You have to make up a bunch of sales to factor that $1,000 increase in, and if your sales aren’t improving, this has cost you money.”
He said retailers were worried if they missed an item that was or wasn’t supposed to be taxed, there’d be serious consequences.
“Of course, with great fear, if they do it wrong, in March or April they’re going to get a Canada Revenue Agency auditor to visit them, potentially passing them a big bill.”
He shared a frustrating tale from the owner of a children’s clothing store in Vancouver.
“When this was first announced, she said as soon as consumers heard that there was going to be a GST holiday on kid’s clothes, she had customers in her online store abandon their shopping carts; returning clothes in order to repurchase them during the holiday period. Of course, this happened during the Canada Post strike, where she was unable to get her goods to the consumer in a timely way. It was just a mess.”
Mark von Schellwitz, vice-president of Western Canada for Restaurants Canada, echoes Kelly’s calls for making the tax permanent. However, he points out the struggling industry has been thriving since the break was announced.
“I’m hearing anywhere between two to six per cent as far as an increase in sales, anecdotally, so that’s certainly helpful. And we’re still predicting for British Columbia that this will boost sales by $159 million over the course of the two months,” said von Schellwitz.
He thinks if people are saving anywhere, they have a little more money to spend and they’re choosing to spend it on food.
“Everything’s a little bit cheaper and if you’re anticipating spending so much on a meal and it’s five per cent cheaper, you might order that extra drink or dessert.”
Von Schellwitz admits he’s curious to see what sales will be like in January when they’re often softer post-Christmas break.
“In the slowest month… that five per cent will likely be more meaningful in the coming month than it was last month.”
He adds some restaurants are using the tax break to sway customers to spend.
“And they may some other value-conscious deals to coincide with the tax holiday, but of course, it’s only another month to go. And after that month, we’re back to where we were before.”
The restaurant industry has been vocal about its struggles from pandemic closures, to only 50 per cent of restaurants turning a profit, to ongoing closures.
Both men agree, they did not like the timing of the announcement, which was smack in the middle of the busy holiday season. But both say they’ll continue to advocate for it to become permanent, despite the federal government, which is currently in political turmoil, giving no indication it’s going to do that.
“This was just not fair. If you’re going to put in place a temporarily holiday, for goodness sakes, make it a longer stretch of time. Give businesses some time to put this in place and don’t create brand new tax categories that don’t exist before and expect businesses to try and turn this around,” said Kelly.
