About a year ago, Canada experimented with something rare in federal policymaking: a temporary GST Holiday on prepared foods. It was short-lived and poorly communicated, yet Canadians noticed it immediately. One of the most unavoidable expenses in daily life—food—became marginally less costly. Families felt a modest but genuine reprieve. Restaurants saw a bump in customer traffic. For a brief moment, Canadians experienced what it feels like when government steps back from taxing something as basic as eating. Then the tax returned—this time coupled with opportunistic pricing—restoring a policy that quietly but reliably makes the cost of living more expensive for everyone.
In many ways, the temporary GST cut was worse than doing nothing. It opened the door for industry to adjust prices upward while consumers were distracted by the tax relief. That dynamic helped push our food inflation rate from –0.6% in January to almost 4% later in the year. By tinkering with taxes rather than addressing the structural flaws in the system, policymakers unintentionally fueled volatility. Instead of experimenting with temporary fixes, it is time to confront the obvious: Canada should stop taxing food altogether.
Start with grocery stores. Many Canadians believe food is not taxed at retail, but that assumption is wrong. While so-called “basic groceries” are zero-rated, a vast range of everyday food products are taxed—and Canadians now pay over a billion dollars a year in GST/HST on food purchased in grocery stores. That amount is rising steadily, not because Canadians are buying more treats, but because shrinkflation is quietly pulling more products into taxable categories. A box of granola bars with six bars is tax-exempt, but when manufacturers quietly reduce the box to five bars, it becomes taxable. The product hasn’t changed. The nutritional profile hasn’t changed. Only the packaging has changed, yet the tax flips on.
This pattern now permeates the grocery aisle. A 650-gram bag of chips shrinks to 580 grams and becomes taxable. Muffins once sold in six-packs are reformatted into three-packs or individually wrapped portions, instantly becoming taxable single-serve items. Yogurt, traditionally sold in large tax-exempt tubs, increasingly appears in smaller 100-gram units that meet the definition of taxable snacks. Crackers, cookies, trail mixes, and cereals have all seen slight weight reductions that push them past GST thresholds created decades ago. Inflation raises food prices; Canada’s outdated tax code amplifies those increases.
At the same time, grocery inflation remains elevated. Prices are rising at 3.4%, nearly double the overall inflation rate. At a moment when food costs are climbing faster than almost everything else, continuing to tax food—whether on the shelf or in restaurants—makes even less economic sense.
The inconsistencies extend further. A steak purchased at the grocery store carries no tax, yet a breakfast wrap made from virtually the same inputs is taxed at +5% GST plus applicable HST. The nutritional function is not different. The economic function is not different. But the tax treatment is entirely arbitrary, rooted in outdated distinctions that no longer reflect how Canadians live or work.
Lower-income households disproportionately bear the cost. They spend 6.2% of their income eating outside the home, compared with 3.4% for the highest-income households. When government taxes prepared food, it effectively imposes a higher burden on those with the least margin—people often juggling two or three jobs with limited time to cook. But this is not only about the poorest households. Every Canadian pays more because the tax embeds itself in the price of convenience, time, and the realities of modern living.
And there is an overlooked economic dimension: restaurants are one of the most effective tools we have for stimulating community-level economic activity. When people dine out, they don’t just buy food. They participate in the economy. They support jobs for young and lower-income workers. They activate foot traffic in commercial areas. They drive spending in adjacent sectors such as transportation, retail, entertainment, and tourism. A healthy restaurant sector is a signal of economic confidence; it is often the first-place consumers re-engage when they feel financially secure. Taxing prepared food, therefore, is not simply a tax on convenience—it is a tax on economic participation.
Restaurants Canada has been calling for the permanent removal of GST/HST on all food, and they are right. Eliminating the tax would generate $5.4 billion in consumer savings annually, create more than 64,000 foodservice jobs, add over 15,000 jobs in related sectors, and support the opening of more than 2,600 new restaurants across the country. No other affordability measure available to the federal government delivers this combination of economic stimulus and direct relief.
And Canadians overwhelmingly agree. Eighty-four percent believe food should not be taxed, regardless of where it is purchased. In a polarized political climate, consensus of that magnitude is rare.
Ending the GST/HST on all food will not solve every affordability issue, but it is one of the simplest, fairest, and most effective measures the federal government can take immediately.
Food is food. The tax system should finally accept that.
