A retail advocate says the incoming GST holiday will turn out to be time-consuming and complex for B.C. retailers.
British Columbians, meanwhile, will miss out on some savings available to other Canadians.
The tax holiday approved by federal legislators Thursday (Nov. 28) lifts the federal General Sales Tax from toys, beer and wine and restaurant meals among other items for two months starting Dec. 14 until Feb. 15, 2025.
Greg Wilson, director of government relations in B.C. for the Retail Council, welcomed the tax holiday. "Any time you put money in consumers' pockets, that's probably good for retail, because consumers will spend it," he said, adding that January and February are traditionally slow months for retailers. But the holidays also comes with complexities that will demand time and therefore money from retailers during what is already their busiest season.
Stores with thousands of different items now have to change their point-of-sales systems not once, but twice – first when the tax holiday kicks in, then when it ends, Wilson said.
He used the example of a bookstore to underscore this. While the holiday temporarily lifts the GST off books, many bookstores sell more than just books. "In fact, many of them will sell cards, candles, wrapping paper and other things that are not subject to the GST holiday, so they don't get away without re-programming."
He added that that "complexity" only goes up with the size of the store and the number of items.
Wilson said the smallest retailers are doing one of two things when reprogramming their sales systems. They are either "painstakingly" doing the work themselves, going item through item, or they are paying a third party to do the reprogramming. "That has a cost, but those third parties are reprogramming for all sorts of other clients at the same time, so they have to book that time."
Wilson acknowledged that "obviously more lead time would have been better" when asked whether Ottawa could have saved retailers hassle by announcing the holiday earlier. At the same time, Wilson also expressed hope that Canadians won't be delaying their purchases until Dec. 14.
Looking more broadly, Ottawa's tax holiday also points to the patch-work nature of taxation systems across the country. British Columbia is one of four provinces (the other being Saskatchewan, Manitoba and Quebec) without a harmonized sales tax that combines the GST and a provincial sales tax. Items subject to respective provincial sales also vary across provinces.
When Ottawa first announced its plans for a tax holiday, experts immediately pointed out that British Columbians stand to benefit less because some items exempt from the GST including children’s toys, board games and video game consoles are still subject to the PST. This prompted questions about whether B.C. would also lift the PST off those items for the duration of the federal tax holiday.
B.C.'s Finance Ministry said on Nov. 25 that most of the goods in the federal plan are already exempt from the PST, including groceries, snacks, prepared food, many beverages, restaurant meals, books, children’s clothing and footwear, children’s car seats, reusable diapers and natural Christmas trees.
Speaking Nov. 27 to reporters, Premier David Eby confirmed that B.C. won't lift the PST off those items for the duration of the federal tax holiday, when asked about Ontario's decision to match Ottawa's exemption by removing PST from items not currently covered by existing provincial rebates in that province.
Eby instead pointed to his government's proposed middle-income tax cut. "Our proposal is to go well beyond matching the federal GST holiday," he said in echoing comments that he had made earlier that week when he spoke to labour leaders. "We are going to bring their (working families') costs – a $1,000 tax for middle income families across the province, not just for the holidays," he said Nov. 26.
Eby also criticized Ottawa.
"I will admit I am frustrated to hear another announcement from Ottawa about federal spending that disproportionately benefits other provinces," Eby said. "They will give significantly more money per person in provinces that have the HST compared with British Columbia ... I'm expecting in my conversation with the Prime Minister about this that I will hear about how he's going to ensure British Columbians get the same benefit as people in other provinces from the federal dollars that they paid through their federal taxes."
The former B.C. Liberal government of Gordon Campbell had introduced a harmonized sales tax in the summer of 2010. But opposition from the public with more than 700,000 British Columbians having signed a petition against it and parts of the political spectrum including former Social Credit premier Bill Vander Zalm and then New Democratic leader Carole James eventually triggered a referendum that split the HST back into the GST and PST. Opponents at the point pointed to the process behind the HST's introduction and fears that it would shift the tax burden to middle-class British Columbians.
The pending tax holiday comes during on-going concerns about affordability.
Carson Binda, B.C.'s director for the Canadian Taxpayers Federation, said it's good Canadians are getting some relief from Ottawa. But he questioned the scope of it.
"This is a tiny band aid on a big wound that the Trudeau government has opened in people's pocketbooks," he said. Binda also called on B.C. to match exemptions. "I think it's only fair that David Eby matches the tax that we are seeing in HST provinces. It doesn't make sense for British Columbians to be left out in the cold when everyone knows that our province is the one being hit most acutely the affordability crisis in this country."
Federal NDP Leader Jagmeet Singh, who represents the B.C. riding of Burnaby-South, said his party had pushed to remove the GST from what he called "daily essentials" and monthly bills. "So that is what we had envisioned," Singh said, adding that a government under his leadership would make these changes. "The holiday though has the Liberal let-down of being temporary and not including monthly bills, but it will certainly mean some relief."
"With new tax relief on groceries and holiday expenses, we are reducing costs when they are highest for Canadians," Chrystia Freeland, Deputy Prime Minister and Minister of Finance," said in a statement Thursday. "Helping Canadians celebrate with family and friends is something all Parliamentarians and all parties should support.”
Federal Conservatives as well as the Bloc Quebécois voted against the measure.
