The federal government’s GST/HST holiday on sales tax for designated spending, in place since mid-December, is coming to an end this week. While it has been a boon for the food service sector, retail and hospitality small businesses haven’t benefited as much, two separate industry groups said Tuesday.
On the positive side, the food service sector added 34,600 new jobs since November 2024, reaching 1.18 million jobs — the highest employment rate since Covid-19, Restaurants Canada said in a release.
“The GST/HST holiday has provided much-needed relief to Canadians and has been a vital support for our industry during the ongoing affordability crisis,” Kelly Higginson, president and CEO of Restaurants Canada, said in the release. “Ending this tax relief now would directly hurt Canadian workers and families.”
Post-Christmas months of January and February are usually the slowest times for the restaurant industry, but there were 67,500 more jobs in the industry this January than in January 2024. This is a 6.1% increase compared to just 2% across all industries.
Still, 53% of restaurants operate at a loss or breaking even, compared to 12% pre-pandemic. Restaurants Canada called on the federal government to permanently exempt all food from GST and HST.
On the flip side, just 5% of small businesses saw stronger sales during the GST/HST holiday compared to the same period last year, according to a survey released by the Canadian Federation of Independent Business (CFIB) Tuesday. Of those, 4% of small businesses in retail and 15% in hospitality saw sales rise.
Two-thirds of small firms impacted by the tax break said their sales were the same as last year and they faced administrative hurdles like reprogramming point-of-sale systems and managing customer inquiries. The tax break applied to select retail items, including books, children’s toys and clothing and grocery store items not already subject to the tax. In restaurants, it applied to all food and alcohol.
“The government’s GST holiday was a flop for small businesses,” Dan Kelly, president of CFIB president, said in a release. “For many retailers it was an administrative nightmare to get point-of-sale machines compliant just before Christmas.”
When the GST/HST tax break ends this Saturday, businesses will transition their systems back to the original tax amounts, Kelly said. He called on the government to provide affected businesses with a $1,000 credit in their GST/HST accounts to compensate for administrative costs.
Restaurants Canada used data from Statistics Canada. The CFIB’s online survey was conducted between Jan. 9 and 31 with 2,345 respondents.