The announcement of a GST holiday beginning on December 14 has been framed as a relief measure for Canadians facing rising food prices. However, many economists, including those specializing in food policy, argue that this initiative may not only fall short of providing meaningful assistance but could also worsen the situation for consumers and the broader economy. Insights from the recently released 2025 Canada’s Food Price Report, a collaborative effort by researchers at Dalhousie University, the University of Guelph, the University of Saskatchewan, and the University of British Columbia in its 15th year, reveal why such a policy might backfire and exacerbate challenges for Canadian families.
The report anticipates food price increases of 3% to 5% in the coming year, with certain categories like meat products potentially increasing by as much as 6% and vegetables by 5%. These rising costs are occurring in an environment already strained by record levels of food insecurity, with over 22.9% of Canadian households affected.
Risks of Opportunistic Pricing by Retailers
The GST holiday also risks encouraging opportunistic pricing behaviours from major grocers, many of whom have faced public and political scrutiny for their pricing strategies. Retailers like Loblaws, Metro, and Sobeys could subtly adjust prices during the GST holiday to protect margins—not just for taxable products but also for non-taxable food items. That’s right, non-taxable food as well. This could lead to a tide-lifting-all-boats effect on food prices, undermining any savings consumers might expect.
Additional factors contributing to rising food costs include recycling fees manufacturers are now required to pay in Ontario and other provinces. These fees, designed to shift waste management costs from municipalities to producers, are often passed down to consumers through higher product prices. Combined with other pressures, including labor shortages in agriculture, logistical bottlenecks, and climate-related production challenges, these added costs make meaningful price relief difficult to achieve for Canadian families.
Limited Benefits for Food-Insecure Households
For households experiencing food insecurity, the GST holiday offers little tangible benefit. Families who dine out often may save $20 to $30 per person, but significant savings depend on having the disposable income to spend heavily on consumption—a luxury many vulnerable households lack. These families, often reliant on food banks, prioritize accessing basic staples over capitalizing on temporary tax relief. The record 2 million visits to food banks in March 2024, outlined in Food Banks Canada’s Hunger Count, underscores the growing reliance on hunger-relief organizations—a trend unlikely to be reversed by short-term measures like a GST exemption.
Critics of the policy also highlight the economic inefficiency of temporary tax holidays. While politically expedient, these measures fail to address the systemic issues driving food price inflation. Resources allocated to implementing a GST holiday might be better directed toward long-term solutions, such as strengthening local food supply chains, providing targeted subsidies for vulnerable populations, fostering innovation in agricultural practices, and addressing industry-wide cost pressures like recycling fees.
Temporary measures, like government-issued cheques aimed at “buying support with people’s own money”, further complicate the landscape. These one-time payments often fail to address the root causes of affordability issues, offering fleeting relief while adding to fiscal pressures. Critics argue that such initiatives are little more than political band-aids, giving the illusion of support while ultimately recycling taxpayer funds in a way that does little to mitigate systemic challenges.
A Case for Permanent GST Elimination on Food
A permanent elimination of the GST on food sold in grocery stores would have been a far better measure. The GST is a regressive tax, disproportionately affecting lower-income Canadians who spend a larger share of their earnings on basic necessities like food. Removing this tax entirely would provide meaningful, lasting relief to those who need it most, without creating the temporary distortions or potential for abuse that a limited holiday or one-time payments bring. By targeting the root of affordability issues, such a move would better support vulnerable households while simplifying the system and increasing trust in food pricing.
The GST holiday, despite its appeal as a quick-fix solution, may ultimately exacerbate the very problems it seeks to solve. Economists caution that while Canadians may experience initial relief at the checkout counter, the broader impact could include rising prices, increased frustration, and a missed opportunity to implement sustainable food affordability measures. The 2025 Canada’s Food Price Report emphasizes the need for policies that prioritize resilience and trust in the food system, advocating for a shift away from temporary relief toward addressing the structural challenges impacting food affordability and accessibility.
As one former U.S. President famously said, “Government is not the solution to our problem; government is the problem.” Experimenting with fiscal policies through temporary measures for political expediency is not only shortsighted but also dangerous.
