“People are looking for deals,” Care said. “The economy is, you know, it’s tougher out there for a lot of families. And I think families are really going to take advantage of this.”
She has a few questions about the impact on her business: Will her store be empty until Dec. 14? Will she have to adjust her staffing schedule? How much inventory will she need?
“If it’s only going to be a two-month period, are people going to stock up or buy now for later? I don’t know. Everything is up in the air right now,” Care said.
Sam Care, the owner of Toronto toy store Playful Minds, says she’s glad the federal government brought in the new policy and expects that it will lead to a holiday rush at her store. (Shawn Benjamin/CBC)
Dan Kelly, president of the Canadian Federation of Independent Business, said in a statement that the organization welcomes any tax-cutting measure. But he said that “narrow, temporary sales tax holidays can add confusion and administrative complexity for small business owners.”
“While a temporary sales tax cut will help boost demand in some sectors, like restaurants, in the slow post-holiday period, Canadians and Canadian businesses really need permanent tax relief,” Kelly’s statement said.
Care said that she would have welcomed a heads-up from the government but added that she and her staff will be prepared. “It will be a little bit of time because we have products in our store that [are] not tax-exempt, so we have to go figure out everything and double check everything,” she said.
“So it will be a little bit of work behind the scenes, for sure.”
Does it go far enough on affordability?
Gillian Petit, a senior research associate at the University of Calgary’s economics department, said that while the policy will help people save money at the checkout, it might actually go further for those with higher household incomes.
“They have more income, so they consume more,” she said. “Persons with lower incomes are also going to save on the GST, but they’re not going to save as much in dollar values. They have less income, so they consume less.”
With the $250 rebate reserved for people who were employed in 2023, those who might need it most are excluded, Petit said. “If we really wanted to address affordability, we would target persons who are struggling with affordability [or] persons who are spending a large amount of their incomes on basic necessities.”
At one food bank in Toronto, most clients are looking for basic groceries. Foods like fresh fruits and vegetables, meat, eggs and bread are already tax-exempt across the country.
Kitty Raman Costa, executive director of the Parkdale Community Food Bank in Toronto, says Ottawa’s tax holiday doesn’t go far enough on providing affordability. (James Dunne/CBC)
The GST holiday will “provide Canadians with a small break, but it’s not nearly enough to provide a meaningful impact on affordability,” said Kitty Raman Costa, executive director of the Parkdale Community Food Bank.
More working people are using the food bank compared with past years, she said.
“These are long-term challenges that will require long-term support. It would definitely be great for us to see more of a dedicated approach to supporting these Canadians facing income insecurity and financial insecurity.”
WATCH | Record food bank use marks broader affordability crisis:
Measures could trigger inflation in spring
Reacting to the announcement, some economists said that the GST break could have inflationary consequences for the economy down the line.
Benjamin Reitzes, a managing director at the Bank of Montreal, wrote in a note on Thursday that headline inflation would likely decelerate in December and January (because the GST break starts mid-month), and then reaccelerate in February and March.
He said the stimulus package — combined with other factors like a cautious U.S. Federal Reserve and a potential upward revision to the GDP — likely means that the Bank of Canada will cut its key interest rate by 25, not 50, basis points at its next meeting.
Christmas trees are among the items that won’t be subject to the GST for two months, starting on Dec. 14. Other items include prepared foods, restaurant meals, children’s toys and books. (Daniel Thomas/CBC)
Rob Gillezeau, an assistant professor of economic analysis and policy at the University of Toronto, called the government’s move “a nightmare” for economists, saying that the temporary tax break will distort people’s spending behaviour.
He said that research out of the United States, where some individual states sometimes implement tax holidays, have shown that they aren’t effective as an affordability measure.
“What is the worst thing we could do with $6 billion? Maybe this is not the absolute worst, but it’s really, really down there. It’s disappointing,” Gillezeau said.
The tax holiday will cost the federal treasury an estimated $1.6 billion in foregone revenue, and the $250 cheques will cost about $4.68 billion, a Department of Finance official told CBC News following the announcement.
Gillezeau echoed Petit in saying that the lowest income earners and people who don’t have any income are excluded from the policy. “I don’t know how you justify that from an affordability perspective,” he said.
The two measures combined — “sending cheques out to a whole bunch of folks, plus getting all of this spending narrowed in this one short window” — could have an inflationary impact, he warned.