Canada’s federal tax holiday on GST and HST comes to an end of Saturday and industry groups are divided on whether or not the policy was a success.
The federal tax holiday began on Dec. 14, aimed at giving Canadians some reprieve from the high cost of living.
While basic groceries like fresh fruits and vegetables, most milk products, fresh meat, poultry and eggs already had no GST/HST before the tax break, prepared foods like sandwiches, salad and pre-made meals, as well as snacks like chips, candy and baked goods saw the GST/HST dropped during this period.
In addition to food, a whole range of items from clothing, footwear and children’s toys to books and drinks were included.
The Royal Bank of Canada’s consumer spending data indicated that Canadians were reluctant to spend money in January after strong holiday spending in December.
“January marked a sluggish start to consumer spending in 2025, but it was largely expected after spending surged at end of the 2024 holiday shopping season. Retail sector sales excluding autos pulled back in January both before and after adjusting for inflation,” RBC economist Carrie Freestone said in the bank’s Consumer Spending Tracker report Friday.
Industry groups are divided on the success of the measure.
Restaurants Canada called on Ottawa to make the tax holiday permanent. The group said it expects a $1.5-billion boost in food service sales over the 60-day period than if there were no tax holiday.
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In a new report on Friday, the group said restaurant transactions increased 7.6 per cent during the GST/HST holiday.
Data from online reservation platform OpenTable shows an 18 per cent jump in seated diners over the first two weeks of the tax holiday compared to a year earlier.
Ontario, in particular, saw a 23 per cent annual increase.
Kelly Higginson, president and CEO of Restaurants Canada, says the tax break has been “really positive” for the food service industry, particularly given weak consumer confidence heading into 2025.
Dana McCauley, CEO of the Canadian Food Innovation Network, said tax changes forced food retailers to recode inventory, which was a costly expense.
“A permanent tax holiday would eliminate this expense,” she said.
McCauley added that beverage and alcohol producers have also benefited.
“This has made local products more competitive against imports,” she said.
McCauley added that this would also help Ottawa’s push to get Canadians to buy more local goods.
“A permanent tax holiday would tempt those who aren’t in the ‘Buy Canada’ bandwagon as they will be less expensive at the checkout than the U.S. brands they usually buy,” she said.
‘Tax holiday a flop’
The Canadian Federation of Independent Business (CFIB) , however, said the tax holiday was a “flop.”
“By all accounts the government’s GST holiday was a flop for small businesses,” said Dan Kelly, CFIB president, in a statement.
According to a survey of 2,345 CFIB members between Jan. 9 and 31, just five per cent of small businesses said they saw stronger sales compared to the same period in 2024.
When it came to which sectors benefitted, of the five per cent who saw a boost, just four per cent of that number were retail stores while 15 per cent of hospitality businesses saw a sales increase.
Earlier this month, Moneris released its own data which found no year-over-year increase in spending by Canadians between Dec. 14, when the “holiday” began, and Jan. 15.
Across Canada, Moneris’ data actually showed overall spending was down by four per cent and the number of transactions seen by businesses during this period decreased by one per cent.
–with files from Global’s Sean Previl
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