The federal government’s temporary “tax holiday” could deliver narrow savings for consumers, but some small businesses are unconvinced they’ll see any benefits.
The two-month tax break comes into effect Saturday, cutting the goods and services (GST) or harmonized sales tax (HST) from dozens of items, including prepared foods and select groceries.
The Liberal legislation will save consumers an estimated $1.5 billion, according to a costing note published by the parliamentary budget officer.
Pat Nicastro, owner of La Bottega Nicastro in Ottawa’s ByWard Market, is optimistic about the savings the tax break could deliver his customers, especially on prepared foods. La Bottega features a small groceteria, a café and restaurant and a deli sandwich counter.
However, Nicastro said he wasn’t certain his store would reap any lasting benefits from the tax break, aside from a small “boost” during the slower months in January and February.
Tax breaks on small businesses would help more than a temporary tax break for consumers, he said, further explaining taxation on his business is daunting to understand and implement.
“They could help us out in other ways, definitely … Tax breaks, definitely less red tape — we are bombarded with red tape, it’s unbelievable.”
Nicastro said this latest legislation is just an “extra job for us to get ready” for the holiday season.
The late-notice legislation created significant labour to change the store’s point-of-sales systems during their busiest time of the year, he explained, which has also caused some confusion about which products are tax-exempt.
The Canadian Federation of Independent Business said some small businesses “are panicked the CRA in March or April is going to show up and send a giant bill upon audit — charging the back taxes, penalties and interest.”
For that reason, the Canadian Federation of Independent Business (CFIB) is urging the federal government to show leniency on businesses.
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Dan Kelly, president of the CFIB, says there are also now questions about if the implementation of the tax holiday may be optional for businesses.
He said a notice from multinational corporation PepsiCo surfaced online stating it would continue to charge sales tax on its products sold to wholesalers and retailers, sparking confusion about whether the legislation is compulsory for all businesses.
“The entire GST holiday is a mess,” Kelly said Friday afternoon.
“Small business owners are trying to make heads or tails of all these new rules. Now we’re trying to source that, sort out whether or not this is even mandatory or if, in fact, it’s optional to participate in the holiday. We don’t at this hour have a straight answer.”
Katherine Cuplinskas, deputy director of communications for the minister of finance, said the tax break is “a recognition that, while inflation is back within target and interest rates are coming down, not everyone is feeling that progress yet.”
“We can’t set prices at the checkout, but we can give Canadians a break on essentials, including groceries, and on holiday gifts – to help them afford the things they need and save for the things they want,” she said in a statement. “And that is exactly what we’re doing.”
Global News has asked the Canada Revenue Agency and the Department of Finance for clarification.
Despite the unknown variables, Nicastro said his team is “happy to do the work” if it means their customers will save money.
Ivan Gedz, co-owner of restaurant-bar Union Local 613 in Ottawa, also shared his views.
“I don’t think this is going to make a difference whatsoever for us,” Gedz said.
Gedz explained he sought out advice from their local MP’s office and the Alcohol and Gaming Commission of Ontario to understand the new tax exemptions, but said very few of Union’s beverage offerings qualify. The establishment specializes in upscale mixed cocktails, and spirits and liqueurs do not qualify under the government’s guidelines.
Gedz said while the tax break is supposed to incentivize consumer spending, people with lower incomes are not in the best position to take advantage of a 13-per cent tax break on inflated prices they may not be able to afford anyway.
“It’s a lot of song and dance as opposed to anything really meaningful.”
The restaurateur said that like many restaurants, Union was hit hard by the pandemic, and the road to recovery could be helped by more targeted government measures
“The struggle since the pandemic is still very real. There could have been things along the lines of breaks for rent or something a lot more strategic or targeted for us,” he said.
“Perhaps I’ll be pleasantly surprised and great if that happens. But I’ve been doing this for 25 years and I think I’m right that it’s not going to do much for us.”
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Will ‘tax holiday’ spur more Canadians to spend? Why some stores doubt it
