Small businesses do not support the proposed two-month GST/HST holiday, according to a flash survey conducted by the Canadian Federation of Independent Business (CFIB).
Small firms have major concerns and questions over the timing, process and administrative costs associated with the change. Over 3,500 small firms responded to this survey conducted on November 26-27, 2024, said the national organization on Thursday.
“A majority of small firms oppose the planned GST/HST holiday – and this rises to 62% among those required to implement it,” said Dan Kelly, CFIB president. “Only 4% of small business owners believe they will have stronger sales as a result, with 66% of respondents suggesting it will simply shift sales into the tax holiday period.
“Instead of a complicated, temporary tax holiday, small businesses would far rather government focus on permanent tax changes, such as cancelling the 19% increase in the carbon tax planned for April 1. But if government proceeds with this plan, CFIB is calling on the Department of Finance to give affected small firms a credit of a minimum of $1000 in their GST/HST accounts to cover the administrative and programming costs.
“This legislation was introduced just yesterday – right in the middle of the busiest retail week of the year with Black Friday, Small Business Saturday and Cyber Monday. Small firms – particularly those in retail – do not have the time or resources to effectively make the changes to accommodate this temporary change and very few believe there will be any net benefit.”
The CFIB is Canada’s largest association of small and medium-sized businesses with 97,000 members across every industry and region.
The CFIB said small firms in the sectors that will be required to make changes to accommodate the temporary tax holiday report many concerns:
- 75% say it will be costly and complicated to implement the holiday – small firms report a median of $1000 in additional costs to reprogram their point-of-sale systems to remove and then reinstate the tax;
- 65% say there is not enough time to implement the change;
- 71% say big businesses and online giants will have the upper hand in benefitting from the holiday;
- 68% say it will be difficult to determine which items are temporarily tax-exempt;
- 66% of retailers of goods subject to the holiday report consumers will delay purchases and 54% believe consumers will return products to repurchase during the holiday period.
The CFIB said the GST/HST holiday does not just affect retailers and restaurants. Manufacturers, producers and distributors who sell exempted items to other businesses will also need to change processes to exempt the sales taxes during the two-month period. Many are unaware of this requirement.
“CFIB is calling on the government to order the Canada Revenue Agency to forgive the taxes owed, penalties and interests for any good faith errors made by small firms rushing to implement this change,” it said.
CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings.
Meanwhile, the CFIB released its Monthly Business Barometer survey on Thursday which showed that the long-term small business confidence indicator reached 59.7 points in November, just shy of its historical average of 60.
“We’re finally seeing parts of the economy normalize, with some key indicators hinting at a broader economic recovery. Some hard-hit sectors have started displaying optimism levels close to their historical averages, and we’re also seeing improvements on the labour front. We will see how confidence will evolve next month, once the survey captures the impact of the announcement on US tariffs,” said Simon Gaudreault, CFIB’s chief economist and vice-president of research.
“Like consumers, small businesses are left feeling the permanent effects of high prices. So, while inflation is on the right path, there is still a ton of work to do on improving the cost of doing business,” said Andreea Bourgeois, CFIB’s director of economics. “Small Business Saturday is this weekend, and this is another reminder to explore and support your local businesses.”
Across sectors, retail posted a slight increase in its long-term confidence level, reaching 55.9, a significant improvement compared to its 12-month confidence level (40.5) posted a year ago in November 2023, said the report.
Fewer small businesses were reporting challenges with low demand in November, but it remains the primary barrier to business and production growth for nearly half (49%) of small businesses. Although it has shrunk a bit recently, a significant share of businesses (44%) is still slowed down by skilled labour shortages, said the CFIB.
Despite the improvement in some economic indicators, significant roadblocks remain on the road to a full recovery, with historically elevated shares of small businesses reporting challenges with various operating costs. Insurance remains the top cost constraint for a record high share of small businesses (71%) and CFIB will release more findings on the impact of skyrocketing insurance costs on small firms in an upcoming research report this December. Tax and regulatory expenses and wage costs also cause difficulties for 67% and 64% of businesses, respectively, added the national organization.
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