As the two-month GST/HST tax holiday nears its conclusion on February 15, early evaluations suggest its impact may have been less substantial than anticipated. Though some businesses and experts report minimal benefits, the initiative, designed to reduce the cost of essential goods, has left a mixed response among Canadian shoppers and small business owners.
The federal tax holiday, which began on December 14, aimed to alleviate the financial strain on Canadians by removing GST/HST from a range of products. However, while the initiative was expected to boost consumer spending, initial data points to only modest economic shifts.
Economist Moshe Lander of Concordia University highlights that Canada’s GDP growth saw a slight uptick of 0.1 percentage points during the period, a change too small to be seen as a significant economic turnaround. Lander suggests that it may take several months before the full effect of the holiday on consumer habits becomes clear.
Many businesses, particularly small enterprises, found the implementation of the tax break to be more cumbersome than rewarding. According to a poll by the Canadian Federation of Independent Businesses (CFIB), the average small business spent around $1,000 to update their point of sale systems to accommodate the changes. Additionally, the list of tax-exempt goods was described as confusing and inconsistent, which created challenges for both merchants and consumers.
CFIB President Dan Kelly called the process a “major headache,” criticizing the complexity of determining which items were eligible for the tax exemption. “One type of doll would be taxable, another type would not. It made very little sense,” Kelly said.
For business owners like Trinh Ngo, who runs Juxtapose Cards & Gifts in Toronto’s Annex neighborhood, the timing of the holiday was particularly challenging. With the holiday season in full swing, Ngo found the extra administrative burden added stress during one of the busiest times of the year. She also reported no noticeable increase in sales due to the tax break.
Shoppers, too, expressed mixed feelings about the holiday. While some, like Meredith Kay, appreciated the savings enough to dine out more frequently, others like Mark Foran noted little to no impact on their shopping behavior. “Our shopping habits in January stayed the same,” Foran explained.
In contrast, the food service industry saw more tangible benefits. A recent Statistics Canada report revealed that employment in the sector reached its highest level since the pandemic began, with 34,600 new jobs created since November. Restaurants Canada President Kelly Higginson credited the tax holiday for helping boost consumer spending in the sector, particularly as Canadians grapple with ongoing affordability concerns.
However, not all restaurants experienced the same success. Donna Dooher, owner of Mildred’s Temple Kitchen, noted that while the holiday was supposed to stimulate spending, many consumers were unaware of the tax break. “We didn’t see the uptake that we hoped we would,” she said.
In conclusion, while the GST/HST tax holiday did offer some relief to certain sectors, its overall effectiveness in boosting consumer spending and supporting businesses remains questionable. As the program wraps up, it appears that its benefits were more modest than initially hoped, with some businesses and shoppers left feeling underwhelmed.
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