Canada's Federal GST Holiday Ends

Photo Credit: Michelle Mengsu Chang/Toronto Star file photo

On Nov. 21, 2024, the federal government declared a GST/HST break for certain items. The tax break went into effect on Dec. 14, 2024, and ended on Feb 15. 

The break applied to food, beverages, restaurant food, catering, children’s clothing, children’s footwear, diapers, car seats, children’s toys, jigsaw puzzles, video game consoles, video game controllers, physical video games, physical books, printed newspapers, and Christmas trees.

It was first announced on both the Prime Minister’s and the Government of Canada’s websites. Following the announcement, it was officially ratified when Bill C-78, titled the Tax Break for all Canadians, received Royal Assent after passing through Parliament. 

In a press release on the Prime Minister’s website, the government stated that the past few years had been challenging, especially as prices of goods continued to rise. As a result, the government hoped that the announced tax breaks would “provide Canadians with real relief at the cash register.”

“Our government can’t set prices, but we can give Canadians, and especially working Canadians, more money back in their pocket,” said Prime Minister Justin Trudeau. “With a tax break for all Canadians and the Working Canadians Rebate, we’re making sure you can buy the things you need and save for the things you want.”

The press release also mentioned the Working Canadians Rebate, which is a tax-free rebate of $250. Canadians who had worked in 2023 and earned up to $150,000 individual net income are eligible. The rebate will be deposited to 18.7 million eligible Canadians in early spring.

“The holiday season is when expenses are highest for many Canadians and their families – even with inflation back down to 2 per cent and interest rates being cut four times this year,” said Chrystia Freeland, former Deputy Prime Minister and Minister of Finance. “With new tax relief on groceries and seasonal expenses and a rebate for working Canadians, we are reducing costs when they are highest for Canadians. This is about helping you celebrate with family and friends and start 2025 with a little extra money in your bank account.”

The tax break also applied to businesses and manufacturers, impacting the entire supply chain, not just consumers.

However, reactions to the tax break were mixed.

On the positive side, according to Global News, Restaurants Canada, the Canadian restaurants association, hopes the tax break can be permanent, as restaurants nationwide saw an increase in dine-outs. Restaurants Canada also reported an estimated $1.5 billion in additional sales nationwide than if there were not a tax break. The CEO of Restaurant Canada, Kelly Higginson, said that the increased revenue was expected for the holiday season, but elaborated that the tax break may have also increased the profit growth. 

This estimated increase in profits from Restaurants Canada contrasts with data from the Canadian financial processing company Moneris, who said they saw a 6 per cent decrease in overall transactions within the first month of the tax holiday. Although, Moneris did say that an 8 per cent increase in sales was seen in children’s items.

On the other hand, the Chartered Professional Accountants of Canada (CPA) and the Fraser Institute stated several reasons why they think the tax break was useless and counterproductive. They believed that the tax break reduced the wrong taxes, was costly, and borrowed money from the future to give to the present. 

“In the short term, this measure accomplishes little and it will be costly for businesses and the government,” CPA Canada said. The Fraser Institute also believes that “it reduces the wrong taxes, shifts taxes temporally rather than cutting them, does nothing to improve economic incentives, and burdens future taxpayers.” Overall, they agree that the tax break accomplishes little and causes more problems than it solves.

With the federal government handing out rebates and economic events like the GST holiday, it may be possible that Canadians could see another tax break in the future.