Businesses sideswiped by ‘tax holiday’
Prime Minister Justin Trudeau announced last week that it will be implementing a tax holiday from Dec. 14 to Feb. 15, offering an exemption on “holiday essentials.”
The government has said it will be introducing legislation in Parliament that, when passed, would provide for a two-month Goods and Services Tax/ Harmonized Sales Tax (GST/HST) break for certain taxable items that will render almost all food items tax-free.
Convenience stores like Jug City in Creemore carry almost all of the items impacted by the tax break, making for a labour intensive transition to the at- the-till tax relief program.
The aisles of Jug City are stocked with thousands of the affected items – alcohol, carbonated beverages, chips, candy, Christmas trees, even select children’s toys.
Like all small independent business owners, Helen Chung has only heard about the program through the media and is getting information via the Ontario Korean Business Association.
Chung says the change poses a serious dilemma for independent small business owners who have to figure out how to change their point-of-sale (POS) systems and cash registers at a busy time of year, only to have to change it back in February.
Businesses collect tax on behalf of the government and pay it in the form of quarterly remittances.
“A rebate is the better way,” said Chung. “It’s a waste of money.”
She says the announcement of the program through the media, and a lack of detailed information, has been a stress for her.
“The Ontario Chamber of Commerce is a strong advocate for policies that support a stronger economy – and good economic policy requires partnership and predictability. While the GST tax relief measure will stimulate demand and bring some financial relief to consumers during the holiday season, it also means added costs, confusion and stress for businesses that must now retool and adjust their systems during the busiest time of the year,” said Ontario Chamber of Commerce president Daniel Tisch in a media release Monday. “Good public policy usually should not come as a holiday surprise. Affordability measures will be better received – and more impactful – when there is clarity and coordination with the business community and with other orders of government. The Ontario Chamber stands ready to collaborate with all governments to ensure businesses have a predictable policy environment that will spur growth and entrepreneurship.”
The tax holiday is also planned for restaurant meals, children’s clothing, books, and jigsaw puzzles.
The federal government estimates the two-month tax holiday will equal $1.6 billion in tax relief. In provinces with a blended tax rate (Ontario, Newfoundland and Labrador, Nova Scotia, New Brunswick, and Prince Edward Island) the HST will also be removed from qualifying goods. In Ontario, a person buying a $2,000 basket of qualifying purchases will see a savings of $260.
Pere Armengol, co-owner of four Heirloom and Lagom stores in Creemore, says he too has only heard about the program in the media and has been working out a method for altering the POS systems. He said it will be quite labour intensive and expects the switchover to take a couple of days, even though the program really only impacts the baby store, and books.
“We’re hoping for more information and that an official list is released once the legislation passes,” said Armengol. “But I don’t think it’s going to have the effects they intend.”
Although it’s a headache for store owners, Armengol hopes it will be good for customers.
“Everything that can help people save a little bit is good,” he said.
The tax program is two-fold. In addition to the sales tax discount at the till, a new Working Canadians Rebate will see a $250 cheque go out to all Canadians who worked in 2023 with net earnings up to $150,000 starting early spring, totalling 18.7 million in aid.
This is being pitched as a rebate for “the middle-class – those who have worked so hard to beat inflation.”
Despite inflation now being back to the two per cent target and falling interest rates, the rebate is in recognition of consumers having felt the pinch from rising costs over the past few years.
“It feels like the government is scrambling to come up with ideas,” said Conservative Simcoe-Grey MP Terry Dowdall. “It’s scattered. They’re in such a big hurry to get this rolling and it doesn’t make sense.”
Dowdall said he has been hearing from businesses in his riding that are concerned about managing the pricing changes, and also from constituents who believe they will not be receiving the Working Canadians Rebate. Cheques will be going to Canadian residents who filed their 2023 tax return by Dec. 31, 2024, and those who claimed the tax credit for Canada Pension Plan contributions on employment or self-employment earnings; claimed the tax credit for Employment Insurance (EI) premiums on employment or self-employment earnings; or reported income from EI benefits.
The Conservatives would rather see Canada’s carbon pricing system axed before it is set to increase next year, negating tax relief for fuel consumers offered by the holiday program.
He said, with a deficit of more than $40 billion, the cost to roll the program out is millions of dollars.
“The $250 cheque is not going to allow someone who is struggling to pay for groceries to be able to afford to go to a restaurant,” said Dowdall, adding that Dec. 14 is too late for people who have already purchased their Christmas trees.
He questions the chosen items, the timing, and the overall impact of the program.
“The basket of goods that the government has decided should get this break is kind of questionable in my mind,” he said. “There’s no substance to it. Most retail businesses are so busy trying to keep the doors open and keep stock and inventory. The last thing they have time for is to research how this program is going to be rolled out.”
“It’s not very well thought out,” said Dowdall. “To me, it seems like the government is just grasping and doesn’t seem to have anything concrete. It’s mind-boggling.”
Trina Berlo photo: Jug City owner Helen Chung estimates that more than 30,000 items at the convenience store will be impacted by the two-month Goods and Services Tax/Harmonized Sales Tax (GST/HST) break proposed by the federal government.
