Smaller Packages at Grocery Stores in Canada Amid ‘Shrinkflation’ Could Trigger Taxes at the Checkout [Op-Ed]


Share post:

“Shrinkflation has bothered many people for a very long time. The taxman has given another reason why we should hate shrinkflation even more.”

As if shrinkflation wasn’t painful enough for all of us, looks like the taxman is making shrinking packages even more painful for our wallets. Shrinkflation is when a food manufacturer reduces quantities but continues to sell the product at the same price. We have seen this happening pretty much everywhere in all sections of the grocery store. It’s even now happening in the fresh section, with strawberries and blueberries.

The Canada Revenue Agency (CRA) has provisions that make some smaller products taxable that weren’t in their larger forms. This policy is not new, it actually dates back to 2007, when the GST/HST Memorandum was revised. Some articles of the memo even existed back in 1997. But what is new is the number of products now subject to this Tax Act due to reduced quantities. An increasing number of products, hundreds, are now taxed that weren’t before.

The Act’s policy section Schedule VI, Part III clearly defines a snack and the meaning of single serving. For instance, the threshold for ice cream is 500 millilitres. Anything below that means the product is taxable as it is considered a snack, not as part of basic groceries. Cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating, or similar products are all taxable if quantities are reduced below thresholds specified by the Act.

If food items are pre-packaged for sale to consumers in quantities of less than six items, these products are taxed. Grocery shopping is complicated enough, but now, due to shrinkflation, consumers have to worry about how much more they need to pay. Depending on the province you live in, it could add 5% to 13% more to the price tag of some products you’re buying. And chances are, you have likely never noticed.

Consumers are basically being double slammed by both the industry and the taxman himself, and in most cases, without knowing. By “skrinflating” a product, consumers get less and are taxed more. Just great.

CRA’s GST/HST Memorandum 4.3 on taxable food products includes in it 156 articles. Unless you’re a tax expert, few will ever understand or even know how to interpret the Act and appreciate how it will apply to the 18,000 to 25,000 different food products you can find in a regular grocery store. It is practically impossible to know how many items were taxed in compliance with the law.

A recent survey conducted by Dalhousie University, in partnership with Caddle, shows that 67 percent of Canadians have found at least one mistake on their grocery receipt in the last year. That is an astonishing number. And according to the same survey, only 9.2 percent have seen tax on a food item that shouldn’t have been taxed. The true number is likely higher, much higher. One can only assume that many consumers wouldn’t have been able to pick up on mistakes related to taxable items. The law is incredibly confusing for everyone. Even some grocers have admitted to having made mistakes and having applied taxes on food products when they shouldn’t have. 

With shrinkflation, many products which are now taxed find their way into lunchboxes for school children. Many are penalized by this. Most of these products were designed to bring convenience to our lives. Paying more taxes is certainly what most consumers would consider convenient.

In essence, food at the grocery store should never be taxed, unless it is serviced to be consumed right away. Or at the very minimum, the Act should be changed to exempt smaller single servings and packages that include less than six items. 

Skrinkflation has been around for well over 30 years, perhaps even longer. The strategy has angered many consumers for obvious reasons. With food inflation being at a 40 year-high these past few months, most consumers are blaming industry for their ills at the grocery store. Yet many tend to forget how our own fiscal regime also makes our food more expensive. The carbon tax is potentially impacting food affordability in our country. On April 1, the carbon tax will rise to $65 a metric ton and will reach $170 a metric ton by 2030. We need to know how the policy will influence our food bill over time.

However, the carbon tax is hidden and impacts the supply chain. A sales tax is very real for all of us. Seeing more taxes added to our food bill as we exit the grocery store adds insult to injury. This is just simply unacceptable.

Sylvain Charlebois
Sylvain Charlebois
Dr. Sylvain Charlebois is Senior Director of the Agri-Foods Analytics Lab at Dalhousie University in Halifax. Also at Dalhousie, he is Professor in food distribution and policy in the Faculty of Agriculture. His current research interest lies in the broad area of food distribution, security and safety, and has published four books and many peer-reviewed journal articles in several publications. His research has been featured in a number of newspapers, including The Economist, the New York Times, the Boston Globe, the Wall Street Journal, Foreign Affairs, the Globe & Mail, the National Post and the Toronto Star.


Please enter your comment!
Please enter your name here

More From The Author



Subscribe to the Newsletter


* indicates required

Related articles

Bloor Street Retail Transformation: Luxury Brands, Renovations, and New Openings in Toronto [Podcast]

Craig and Lee take a deep dive into the dynamic changes occurring on Toronto's Bloor Street West, noting the street's resurgence as a thriving hub for luxury shopping in the city.

Ricardo’s Kandy Korner to Open Flagship Candy Store at CF Toronto Eaton Centre in Toronto [Interview]

Entrepreneur Ricardo Rizaie says he’s planning to take his experiential candy retail concept across Canada after opening a third Canadian storefront in downtown Toronto.

PizzaForno Expands Into Toronto’s Public Transit System, Sets Sights on Airport Locations for Automated 3-Minute Pizzas [Interview]

This innovative move marks PizzaForno's entry into the public transit sector, and demonstrates its commitment to becoming the fastest-growing pizza chain in North America by 2024.

Calgary’s Retail Space Crunch Drives Surge in Rental Rates and Demand [Report]

A variety of complicated factors are at play as Calgary retail space sees demand given market growth, while new supply is limited due to factors such as construction costs.

Lush Cosmetics Sets Ambitious Expansion Plans for Canada Including New Spa Locations, Services, and Entertainment Partnerships [Interview]

The UK-based retailer is innovating with its Canadian operations with enhanced customer experiences and unique treatments, while launching a new app to facilitate bookings and provide more information about products and services.

Canadian Consumers Adjust to Higher Cost of Living [Survey/Video Interview]

An Angus Reid survey asked Canadians how they're navigating elevated inflation, a higher cost of living and a potential recession.

Canadian Shoppers Embrace Generative AI for Shopping Suggestions: Report

The groundbreaking Salesforce report focuses on the growing importance of AI-driven personalization in the retail sector.

Inside the New KITH Store on Yorkville Avenue in Toronto [Photos]

The stunning storefront took months to build, features Kith Treats and a restaurant concept from New York City, and could be a game changer for the Bloor-Yorkville area. 

Canadians Gear Up for Early Holiday Shopping Amid Economic Uncertainty [Feature Report]

As concerns about inflation and supply chain challenges persist, shoppers are on the lookout for deals and exploring alternative places to find gifts while controlling overall spending, says a report by Field Agent.

Walmart Canada Announces $50 Million Investment in Associate Career Development [Interview]

Walmart Canada's education program will support career-driven learning for associates, benefitting both employees and the retailer according to AnnMarie Mercer.

Eliminating Plastics Should not Jeopardize Food Security In Canada [Op-Ed]

Sylvain Charlebois says that concerns are being raised about potential increases to food losses and food prices, while at the same time Canada's unique logistical and trade realities are being overlooked.

Neo Coffee Bar Announces Major Expansion Plans, Including New Downtown Toronto Locations and a Foray into Japanese Cocktails [Interview]

The brand plans to continue growing more rapidly over the next several years in high traffic GTA locations.