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(Aug. 6/09) In late July, the British Columbia government announced it will follow in Ontario’s footsteps and introduce a harmonized sales tax (HST) beginning July 1, 2010. This leaves only Saskatchewan, Manitoba and Prince Edward Island without a harmonized sales tax.
As recently as June 2009 the Saskatchewan government said it is not interested in harmonizing provincial and federal sales taxes, as the HST will mean a $400-million annual increase in sales taxes for consumers. Although the province recognizes the negative impact of harmonization, the federal government and other business groups continue to pressure Saskatchewan to harmonize.
What would the HST mean for foodservice operators in Saskatchewan? Simply put, it would have a devastating impact for the province’s 2,000 restaurants, bars and caterers. Here’s why:
- At present, restaurant meals are only subject to the 5% GST (no PST). Under a harmonized tax, your customers will be forced to pay a 10% HST – double the current tax – whenever they order a meal from your restaurant.
- As if a 10% 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 5% tax on meals will cost the industry $90 million each year in lost sales, according to CRFA’s econometric model. That’s an annual loss of 5% or approximately $31,000 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.
What CRFA is doing for you
CRFA has heard from Premier Brad Wall and Finance Minister Rod Gantefoer that they are not interested in a harmonized tax at this time. In light of the British Columbia and Ontario announcements, and the lack of industry consultation that preceded them, we are working to meet personally with Premier Wall to explain the impact harmonization would have on Saskatchewan’s 2,000 foodservice establishments and the 32,500 people they employ.
CRFA has also launched an industry petition to demonstrate the industry’s opposition to the HST in Saskatchewan.
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More information about GST and Harmonization
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