A temporary federal tax holiday on GST is set to come to an end Saturday for many retailers, but the two-month tax reprieve has many Albertans scratching their heads as to whether or not the program was a success.
The GST holiday, which started on Dec. 14, saw the tax of at least five per cent removed from dozens of items, including food, beer, wine and cider, and kids' diapers, clothes, shoes and toys.
Children’s board games, toys and models were also part of the GST holiday, for instance, but only if “intended for children under 14 years old,” the government’s guidelines state.
For some small business owners, the tax holiday was more trouble than it was worth.
Mitch Jacobsen, the co-founder and CEO of Rviita Energy Tea said his Calgary-based company saw no noticeable increase in sales, but instead dealt with a headache of extra administrative expenses.
“It cost us thousands of dollars in additional manpower and accounting expenses, and we didn’t have a single customer reach out and say, I’m buying your product now because there’s no GST -- so (overall), the increase in expenses far outweighed the benefit,” he said.
“We had to talk to an accountant to make sure we were doing this all right and then on our website for third-party sellers like Amazon, we had to make sure that customers weren’t charged for the extra GST.”
Jacobsen said one of his biggest sales partners is Amazon. The Canadian division of the world’s largest e-commerce website was dealing with several requests from small businesses like his to ensure proper price changes.
“I just think if a holiday like this was a more permanent, you know, maybe if it was like a year, it could have made a difference, but just for two months, the extra administrative and accounting expenses just didn’t make sense from a small business perspective.”
Meanwhile, other Calgary retailers like The Sentry Box said they actually noticed a minimal increase in sales compared to the same time last year even despite a GST reprieve.
“By the end of the month in January, we were up six per cent in sales total,” said The Sentry Box owner. Gordon Johansen.
“That tells me nobody cared and they were going to buy whatever they did anyway, it might have helped restaurants, but it was just such a small amount that it really didn’t make much difference to most of our customers.”
Johansen joked that putting a sign up on his store that says ‘five per cent off’ would probably make his customers chuckle too.
“I mean the one nice thing was that when people bought a game for example, they noticed that it was sweet looking at their bill and seeing it was exactly what it was priced for,” said Johansen.
“But many of us were still left wondering how we were going to do this, because literally there was no way that we could do it (in a) week and to go through 50 to 80,000 items and decide which ones were exempt was impossible.
“The system was not set up for that.”
Alberta small businesses see marginal five per cent increase in sales: CFIB
Bradlee Whidden, policy analyst for Western Canada with the Canadian Federation of Independent Business (CFIB) said the GST holiday was more of a hassle than anything for small business owners.
“Only five per cent of Canadian small businesses saw any increase in sales compared to the same year or the same time the previous year,” Whidden said.
“This really minimal increase has come at the cost of a mountain of administrative costs and small business owners have had to spend time and money going through all their inventory, earmarking specific items to be exempt, and then reprogramming their point of sale systems.”
Whidden said the same process of reprogramming administrative systems will now have to take place again, on a Saturday no less when shop owners might have to work overtime or pay staff their staff extra.
“It’s been an administrative nightmare that a lot of small business owners just don’t have the resources for,” he added.
Instead, Whidden said a more beneficial impact would come through the federal government cancelling its planned carbon tax hike for April 1 which will raise costs for all Canadians on thousands of products.
Mike Holden, chief economist with the Business Council of Alberta agrees that affordability for Canadians has been a major issue that simply can’t be addressed by a short term five per cent tax reduction on certain items.
“The areas that people spend the most money on, or that they’re most concerned about with affordability is really housing and food prices, but most food that you buy at the grocery store is already GST or HST exempt anyway, so you’re not really getting much savings in there,” Holden said.
“This is a policy that, you know, every little tax decrease, every little price decrease, helps a little bit, but it wasn’t really targeted at the areas that Canadians and Albertans are seeing the largest increases and feeling the pinch the most.”
