Restaurants Canada said it is pleased by today’s announcement from the federal government of a two-month GST holiday on restaurant meals, among other products.

This is a big win for the restaurant industry and comes after months of relentless advocacy from Restaurants Canada for meaningful cost relief for our sector and for Canadians, it said in a news release.

“The restaurant industry is doing worse today than at any time in recent history, including the pandemic. More than half (53%) of restaurant companies are operating at a loss or just breaking even, up from 12% pre-pandemic. They are seeing fewer guests and smaller cheques as a result of Canadians reducing their discretionary spending during the affordability crisis. At the same time, restaurants are still carrying heavy debt loads and all their operating costs have gone up by 20% or more,” said Kelly Higginson, President and CEO, Restaurants Canada, in a statement.

“The recent drop in foot traffic has been deeply discouraging for our operators as they head into the challenging winter season. Today’s announcement restores some much-needed hope to our industry and we are optimistic it will translate to increased spending at local restaurants across the country.”

When GST was introduced in 1991, it led to an immediate reduction in meals consumed at restaurants, especially as other food products sold at grocery stores were exempt. The foodservice industry suffered an 11% decline in real sales, 7% of which was attributed to GST. Based on Restaurants Canada’s econometric model, today’s announcement could result in a 5% increase in sales for the average restaurant. For a restaurant with $1.5 million in sales, this would result in an additional $5,700 in sales per month, said the national organization.

More Canadians will be able to celebrate with loved ones at a restaurant

“Today’s announcement by the Prime Minister means that more Canadians will be able to celebrate with loved ones at a restaurant, have lunch with colleagues or treat themselves to a morning pastry on their way to work. We also appreciate that the relief will be extended over January, which is typically the lowest time of the year for our industry, and right through to Valentine’s Day,” added Higginson.

“We congratulate Prime Minister Trudeau and Deputy Prime Minister Freeland on this significant announcement and encourage them to look at other ways they can support Canadians through this difficult time. Restaurants Canada has been urging the government to reduce EI payroll tax by 2% to put more money back in workers’ pockets and help employers invest in hiring and wages.”

Restaurants Canada is a national, not-for-profit association advancing Canada’s diverse and dynamic foodservice industry. Restaurants are a $120 billion industry employing nearly 1.2 million Canadians and is the number one source of first-time jobs in Canada.

The Canadian Federation of Independent Business (CFIB) said it welcomes any tax cutting measure, but adds that narrow, temporary sales tax holidays can add confusion and administrative complexity for small business owners. 

“The lack of consumer demand is currently the top limitation on sales growth for small firms, cited by 53% of CFIB members. While a temporary sales tax cut will help boost demand in some sectors, like restaurants, in the slow post-holiday period, Canadians and Canadian businesses really need permanent tax relief,” said Dan Kelly, the CFIB’s President.

“The temporary sales tax holiday will be reasonably straight forward and welcome in some sectors like restaurants and food service businesses but may add confusion and complexity for general retailers with both taxable and new exempt items. It will require retailers to reprogram point of sale systems twice in a two-month window. In addition, some small manufacturers and retailers will undoubtedly question why they are excluded from the exemption. It is hard to explain to a small producer of spirits why their products are taxed while other alcoholic beverages are not.

“It is good news that government and political parties are shifting their focus on reducing taxes rather than just increasing them. But Canadians need permanent, not temporary tax relief. Reducing the small business corporate tax rate or payroll taxes like Employment Insurance and CPP premiums are among the top priorities for small business owners.”

The CFIB also said that six weeks after the sales tax holiday ends in mid-February, government plans to hike the carbon tax by 19% on April 1 while cutting the carbon rebate to small firms by nearly half. Freezing, then scrapping the carbon tax, is an even bigger priority – supported by 83% of small business owners.

The Retail Council of Canada (RCC) said it welcomes today’s sales tax relief announcement from the federal government. The removal of GST and HST on a sizeable list of goods will create major tax savings for Canadians, along with economic stimulus for our industry, both in the holiday season and in the first six weeks of the new year, which is typically the slowest period of the year for retail.

“While we would have preferred to see a broader range of goods included in the tax relief measures, having more money overall in consumers’ wallets should also benefit sellers of other goods not captured in today’s announcement,” said Matt Poirier, VP Federal Government Relations, RCC.

“RCC understands that federal-provincial discussions have taken place with the non-harmonized provinces with their own provincial sales taxes (British Columbia, Saskatchewan, Manitoba and Quebec).  Retailers are asking that these provinces follow suit with today’s announcement so that full tax relief on these goods can benefit Canadians nationwide.

“And if we have one further ask on our “Santa’s List”, it is that the parties come to a swift settlement in the Canada Post strike, so that purchases incentivized by this new measure can be delivered on time and Canada-wide ensuring a smooth and efficient holiday season both for retailers and consumers.”

The Canadian Taxpayers Federation is calling on the federal government to make its temporary GST cut permanent and provide further tax relief.

“It’s good to see Canadians are finally getting some relief from this government’s high-tax burden,” said Franco Terrazzano, CTF Federal Director. “This tax cut will save Canadians money during an expensive time.

“But Prime Minister Justin Trudeau needs to make this relief permanent, because if he re-imposes sales taxes on diapers and rotisserie chickens after the holidays, it will be unacceptable to taxpayers.”

Today, the federal government announced it will remove the GST from children’s clothes, toys, diapers and car seats, as well as Christmas trees, beer, wine and cider, restaurant meals and prepared groceries, among other items, said the Federation.

The GST cut will save taxpayers an estimated $1.6 billion over two months, according to the government. 

Ottawa plans to end the GST holiday on Feb. 15 and re-impose the GST on all these items, including car seats and prepared groceries.

“The tax relief is helpful now, but do politicians really think taxpayers will be able to afford to pay more for all of these essentials on Feb. 16?” Terrazzano said. “Ottawa made life more unaffordable by hiking carbon taxes, payroll taxes, alcohol taxes and capital gains taxes, so the government needs to go beyond a temporary tax cut to undo the damage it has done.

“After raising taxes on everything all the time, temporary relief won’t cut it.”

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