The Future of the GST/HST Holiday: Implications for the Restaurant Industry and Canadian Consumers
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As the temporary Goods and Services Tax (GST) and Harmonized Sales Tax (HST) holiday approaches its end at 11:59 p.m. on February 15, 2025, the restaurant sector is advocating for its permanence. Restaurants Canada, a prominent trade organization, has reported significant positive outcomes during this holiday period, highlighting its importance for both consumers and the foodservice industry.
The impact of the GST/HST holiday has been notable, with Restaurants Canada citing an 18% increase in online reservations since the initiative began. Maximilien Roy, Vice President of Federal & Quebec Affairs at Restaurants Canada, notes that this surge has not only helped maintain existing jobs but has also resulted in the creation of approximately 35,000 new positions since November 2024. This marks a significant recovery in employment levels within the sector, reaching heights not seen since the onset of the pandemic.
Kelly Higginson, President and CEO of Restaurants Canada, emphasized the critical role the tax holiday has played in supporting the industry amid ongoing economic challenges. "The GST/HST holiday provided relief to Canadians and has been a vital support for our industry during the ongoing affordability crisis," she stated. "As Canada’s fourth-largest private-sector employer, we are often among the first to experience job losses during economic downturns. The tax holiday has been instrumental in creating jobs and sustaining livelihoods within communities across the country."
Traditionally, the months of January and February are marked by a slowdown in restaurant patronage, often leading to decreased employment levels in the sector. However, January 2024 proved to be an exception, with an increase of 67,500 jobs in the industry—a 6.1% rise—contrasting sharply with a mere 2% growth across all industries during the same period.
Despite these positive developments, many restaurants continue to face financial challenges. Restaurants Canada has reported that over half (53%) of restaurants are either operating at a loss or just breaking even. This statistic starkly contrasts with pre-pandemic conditions, when only 12% of restaurants reported similar struggles. The primary driver behind this downturn is a significant reduction in consumer spending, exacerbated by rising living costs.
In light of these challenges, Restaurants Canada is urging the federal government to consider a permanent exemption from GST and HST for all food items or, at the very least, extend the current tax relief until the ongoing tariff dispute with the United States is resolved. Higginson cautioned that if U.S. tariffs are implemented, Canadians could see further increases in living costs, particularly in food. "Canadians are already struggling to afford the essentials. The government can provide some stability and relief to Canadians and the restaurant industry by keeping all food tax-free," she emphasized.
As the deadline for the GST/HST holiday approaches, concerns have also been raised among restaurant operators regarding compliance with the Canada Revenue Agency (CRA) regulations for invoice payments. To address these concerns, the CRA has communicated that businesses making reasonable efforts to comply will not face compliance actions. They will focus their efforts on cases where businesses willfully and egregiously fail to comply, such as those that collect the GST/HST but do not remit it to the CRA.
The issues at stake are critical not only for restaurant owners but also for consumers who rely on these establishments for their dining experiences. The potential end of the GST/HST holiday could translate into increased prices for consumers, further straining household budgets in an already challenging economic climate.
The restaurant industry is a vital part of Canada’s economy, contributing significantly to job creation and community development. As the government considers the future of the GST/HST holiday, it is essential to recognize the broader implications of such policies on the livelihoods of workers and the financial health of businesses.
In conclusion, the upcoming decision regarding the GST/HST holiday will have lasting effects on the restaurant sector and Canadian consumers alike. The positive outcomes observed during this holiday period underscore the need for continued support for the industry. Whether through a permanent tax exemption or an extension of the current relief measures, it is crucial for policymakers to consider the potential ramifications of their decisions on employment, consumer spending, and overall economic stability. The restaurant industry is at a pivotal moment, and the choices made now will shape its future trajectory in the post-pandemic landscape.
