B.C.'s HST bad news for restaurants, consumers

CRFA's Garth Whyte (right) and Mark von Schellwitz (left) present hundreds of industry petitions against the HST to B.C. Finance Minister Colin Hansen. They also presented CRFA survey results showing over 90% of restaurant owners are against the HST.

ACTION ALERT!

We've told government how the industry feels about the HST -- have you? Contact your MLA today.

(Aug. 5 /09) On July 23, the British Columbia government announced it will introduce a harmonized sales tax (HST) beginning July 1, 2010. This new tax would replace the GST (5%) and the current provincial sales tax (7%) with a harmonized tax of 12%.

What CRFA is doing for you

Since the government’s announcement, CRFA has met Premier Gordon Campbell and Finance Minister Colin Hansen. Both say they wan to work with us to mitigate the damage that will be caused by a harmonized tax. We’ll continue to press this issue with the B.C. government.

CRFA has also launched an industry petition and a member survey to quantify the industry’s opposition to the new tax, and communicated industry concerns in numerous media interviews.

Why this is bad news for restaurant operators

While many business groups are applauding this move, an HST in B.C. will have a devastating impact for the province’s 12,000 restaurants, bars and caterers. Here’s why:

At present, restaurant meals are only subject to the 5% GST (no PST). Starting next July, your customers will be forced to pay more than double the current tax whenever they order a meal from your restaurant.
As if a 12% tax isn’t enough of a disincentive to dine out, customers will find comparable products at grocery stores even more attractive once the HST is in place. That’s because the HST is applied on the GST tax base, which treats food differently depending on where it is purchased. If you sell a pizza, you will have to charge your customers HST – but frozen pizzas sold at the grocery store will be HST-free.
The last time a new tax was added to restaurant meals – the 7% GST in 1991 – foodservice sales across Canada dropped by more than 10%. According to Ernst and Young, nearly three-quarters of this drop – 7.3% – was due to the GST.
When you add it all up, an additional 7% tax on meals will cost the industry $750 million each year in lost sales, according to CRFA’s econometric model. That’s an annual loss of 7.5% or nearly $50,000 for the average restaurant in the province.
Many are touting input tax credits as an upside to tax harmonization, but foodservice operators will not benefit from input tax credits in the same way as other businesses. The largest costs for foodservice operators, labour and food, are not eligible for these credits.

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CRFA's British Columbia Lobbyist

B.C.'s HST bad news for restaurants, consumers