GST break begins: Business owners frustrated at the last-minute measure
A temporary federal tax break on some goods and services that went into effect Saturday received mixed reactions from businesses and consumers, with shoppers welcoming the relief while some retailers lamented the additional cost of implementing the last-minute measure.
The two-month tax break on GST and, in applicable provinces, HST, covers wine, beer, holiday essentials and other products such as children’s toys, books and restaurant meals. While many basic grocery items are already exempt from GST, the new cuts will extend to additional items such as snack foods.
In midtown Toronto, business owners and consumers were ambivalent about the change.
Delmar Gutierrez, a manager at Harvest Wagon, a small grocery store in Toronto’s Summerhill neighbourhood, said he spent several hours training cashiers to make the proper deductions at the register and even scheduled extra staff to brace for increased demand over the weekend.
“Our system is older so we have to do it manually – I have to add a button and like a negative amount,” he said, adding that the deductions have to be made individually for each affected item.
Mr. Gutierrez said most people were surprised to see the taxes trimmed from their bill. “They’re like, ‘Oh, that’s nice.’ They don’t even know about it,” he said.
Though many shoppers in Toronto said the tax break didn’t change how much they shopped, it did change where they spent their money.
Naomi Morgenstern, who was shopping for books and children’s toys for her granddaughter at a bookshop in Summerhill, said that the tax holiday encouraged her to shop local. “It’s great not to buy things from Amazon,” she said.
In Montreal, holiday shoppers were happy about saving the GST on their purchases but said they did not necessarily make plans around the policy change.
Josée Deschênes, who was buying Christmas presents for her granddaughters at the Jolie Boutique toy store on Park Avenue, welcomed the tax break. “I was aware that it was coming, but I didn’t think about it when I went out shopping today. So much the better,” she said in an interview.
Louise Beaudoin was packing crime novels to read during the holidays at the Librairie du Square bookstore on Bernard Avenue. “It’s good timing, but we didn’t change our shopping plans accordingly,” she said of the tax break.
The bookstore’s owner, Jonathan Vartabedian, said the change was quick and simple for him to make. “I pressed three buttons, and it was done,” he said. Clients did not talk about it much, Mr. Vartabedian said, and he wasn’t sure yet if it would change anything for his business. “It’s the first day, we’ll see,” he said.
Other retailers had a harder time adjusting.
Dan Kelly, chief executive officer of the Canadian Federation of Independent Business, said that with this policy, “Ottawa has found the most confusing possible way to provide a sliver of tax relief to Canadians with a massive administrative cost on the part of business owners.”
In a phone interview Saturday, Mr. Kelly said the complexity of the changes can vary widely from one business to the next based on their inventory, the age of their point-of-sale system and the sector of the economy in which they operate.
“The real challenges are for gift stores, toy stores, hobby stores and mixed retailers. They are the ones that have the highest compliance costs,” Mr. Kelly said. Some card games and Lego sets, for example, are eligible for the tax break but not others, causing headaches for business owners, he said.
Sam Care, owner of the Playful Minds toy store in Toronto, confirmed that the policy’s application was confusing for some items. She also experienced logistical pains in making adjustments. “I was up until 2 o’clock in the morning then up again at 6:30 this morning trying to get things done, so, yeah, it’s been busy,” Ms. Care said in a phone interview Saturday.
“In-store, we can do it manually, but on our website, it’s more complicated,” she said. Customers, however, are happy to save, she added.
Noée-Rose Leblanc, a co-owner of the Boutique Citrouille toy store in Montreal, said Shopify contacted them on Thursday with instructions for how to apply the change by tagging each eligible item one by one.
“We decided to just remove the tax on everything after all, we didn’t want to make our lives more complicated,” Ms. Leblanc said in an interview, adding that it was unclear which products were exempt. “The government will deal with it if it’s not the category they wanted; honestly, we didn’t have a choice. Plus, with Canada Post letting us down, it’s like everything is happening all at once,” she said, referring to the strike that has paralyzed the postal service for weeks.
“It’s great for clients, I’ll take advantage of it, too, and buy boots and clothes for my baby and save the tax,” Ms. Leblanc said. “But when you’re a business owner, it’s a lot of logistics for Christmas.”
Erin Mealey, a senior staff member at Book City, a local bookstore chain in Toronto, said that navigating the change has required some improvising to please customers. “Kids sticker books and colouring books are not included but we include it anyway because it’s too much hassle to distinguish between the two,” she said.
Ms. Mealey also said it’s hard to tell whether the added foot traffic is a result of the holidays or the tax break, though she did find many customers pleasantly surprised.
“We will tell them ‘no tax’ and jokingly say ‘thanks NDP’ because they’re the ones who made this happen,” she said.
Natacha Finet, owner of Le Petit Italien restaurant in Montreal, said she had to pay $300 for the cash-register software to make the change. “It’s a little poisoned gift,” she said of the GST break. “I’m happy for the clients,” she added, but they generally don’t seem aware of the change.
The GST break extends until Feb. 15, 2025, and will cost $1.6-billion. The Parliamentary Budget Officer said last week that it could cost as much as $2.7-billion if provinces with a harmonized sales tax ask the federal government for compensation.
Conservative Leader Pierre Poilievre has called the move a “tax trick” made for political gains. The policy has also caused tensions within the government. The Globe and Mail has reported that Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland are at odds over the spending as her department worries it will make it impossible to stick to Ms. Freeland’s pledge to keep the deficit below $40.1-billion.
At an LCBO in midtown Toronto, Dezire Solanki, who was shopping with her partner, said she hadn’t been aware that the tax break applied to beer and wine. But she’s still pleasantly surprised by the small cuts to her grocery bill. “I mean, it’s a mess right now, so every bit helps.”
This article was first reported by The Globe and Mail
