Canadians are starting to feel the impact of the temporary Goods and Services Tax (GST) and Harmonized Sales Tax (HST) tax break as it winds down this weekend. The two-month relief, which began on December 14, 2023, aimed to ease the burden of rising living costs on consumers by eliminating federal taxes on various everyday items. But the effectiveness of this measure, which ends at 12:01 a.m. local time on February 15, is now open to scrutiny.
Upon implementation, thousands of goods previously untaxed—including groceries, restaurant meals, children’s clothing, and even alcohol—were joined by several others benefiting from this offer, generating mixed reactions among consumers and businesses alike. Early evaluations have yielded a complex picture, with some sectors reporting increased sales and others grieving losses.
Sylvain Charlebois, senior director of Dalhousie University’s Agri-Foods Analytics Lab, indicated contrasting experiences within food service and retail. On one hand, he pointed out evidence from Moneris, Canada’s largest payment processor, showing a downturn of about six percent year-over-year across the restaurant sector, with fast food seeing declines of one and eight percent, respectively. Sean McCormick, director of business development there, noted, "Our data shows a decline in both transaction count and average spend, likely reflecting post-holiday budget tightening." More telling still, Moneris reported four percent less overall spending across Canada during the initial month of the holiday, illustrating how consumer behavior can vary widely even amid incentives.
Yet it wasn’t all bleak. An 18 percent boom in dining was recorded between December 14 and 27, according to Restaurants Canada, asserting the holiday pumped life back to their sector. Kelly Higginson, president of Restaurants Canada, expressed enthusiasm: "We’re very pleased to see these early signs of recovering consumer demand for our sector. This shows the holiday supports Canadians, businesses, and workers. We urge the federal government to make the GST and HST tax break on prepared food permanent.”
Disparate experiences have emerged among smaller businesses as well, where the tax holiday’s administrative demands proved taxing. Dan Kelly, president of the Canadian Federation of Independent Businesses (CFIB), voiced disappointment, stating, "By all accounts, the government’s GST holiday was a flop for small businesses." Many owners felt overwhelmed, spending on average $1,000 to reprogram point of sale systems for compliance. Kelly claimed the criteria for tax-exempt items were convoluted: "The list was as confusing as sin," adding, "One type of doll would be taxable, another type of doll would not.”
With fractions of time before the holiday ended, small business owners like Trinh Ngo lamented the messy timing. The owner of Juxtapose Cards & Gifts reported no spike during the busiest shopping period pre-Christmas. She reflected, “There was no break. Two weeks before Christmas, for our gift store — it's our busiest time.” Such frustrations echoed across small businesses struggling with the implementation.
On the consumer side, the holiday didn’t induce universal excitement either. Polling indicated mixed reactions about whether the tax break impacted shopping habits significantly. Some shoppers, like Meredith Kay, confirmed noticing its benefits at restaurants: "It’s certainly a nice benefit to save a little money, and it did get us to go out more often.” Conversely, other shoppers felt indifferent, concerned the tax break didn’t change their purchasing behavior much.
Economist Moshe Lander of Concordia University warned against presuming success solely from marginal rises – indicating GDP only ticked up by 0.1 percentage points during the holiday: “But 0.1 of a percentage point is hardly anything to get excited about.” Lander suggested only time would reveal solid conclusions on savings amid growing economic constraints and consumer hesitance.
Given this tricky mix of responses, it seems the initial intent of stimulating the economy and supporting families is still being evaluated. Future policy discussions may find this tax holiday to inform decisions going forward about whether to make it permanent or revise the strategy altogether.
Such uncertainty could accompany discussions on funding and tax exemptions, as industry leaders have initiated talks with government representatives about streamlining future rollouts. Overall, Canada’s temporary GST/HST tax holiday has served both as a regulatory experiment and economic stopgap, leaving behind lessons on the intersection of policy, consumer behavior, and business realities.