Businesses report mixed results one month into GST ‘holiday’

It’s been over a month since the federal government introduced its GST tax “holiday” and businesses say they’ve seen mixed results.

The Liberal government announced plans to temporarily lift the federal sales tax off a slew of items starting December 14 to give Canadians a break when shopping or dining out. While restaurants have seen a boost in sales, other businesses say it has barely helped.

The organization which represents more than 100,000 small and medium-sized businesses says most business owners saw a reduction in sales because of the temporary nature of the tax break and that the change was hugely time-consuming.

“Businesses really had to scramble with almost no notice to put this holiday in place in mid-December. It cost the average business about $1,000 just to do the point of sale machine changes that they needed to create the change,” said Dan Kelly, the president of the Canadian Federation of Independent Business.

“I spoke to a Toronto gift store. The owner had just had a baby and she was on mat leave herself as a handful of staff had 75,000 items and had to go through each one of them by hand to figure out which ones the GST holiday would apply to and which ones it won’t.”

The CFIB conducted a survey and only five per cent of its members reported a boost in sales from the year prior. Kelly says retailers were also worried if they made a mistake in taxing an item, there would be serious consequences.

“They’re in great fear of an audit in say April or May and if the Canada Revenue Agency has found that you either charged tax when you weren’t supposed to or didn’t charge tax when you were supposed to, many business owners are worried about getting a giant audit bill with penalties and interest.”

Meanwhile, it’s been a more positive month for Restaurants Canada. The organization says restaurants saw a seven to nine per cent boost in sales overall, largely because customers were upgrading orders and adding items they may have previously avoided before the tax cut.

“We did some work with OpenTable to take a look at what’s happening with online reservations and in Ontario we found a 23 per cent surge through the last couple of weeks of December,” said Kris Barnier, the Central Canada Vice-President of Restaurants Canada.

“It’s been a really difficult go for restaurants. We are seeing more than half of restaurants continue to struggle just to break even. What we know is that over the past couple of years alone, we’ve seen the cost of running a restaurant go up by about 20 per cent in every category.”

Both the CFIB and Restaurants Canada are calling on the federal government to make the GST holiday tax cut, which is set to end on February 14, permanent.