Parliament Should Consider Introducing an Excess Profit Tax for Grocers, Committee Suggests

Fresh produce is displayed at a store in a file photo. (The Canadian Press/Nathan Denette)

Parliament should consider implementing a new tax on excess profits for grocers, a House of Commons committee is suggesting, despite Canada’s grocery-store CEOs unanimously denying that they’ve profited on inflated food costs over the past year.

“Despite the range of inflationary pressures discussed above, some large firms in certain sectors have reported record earnings, leading some to question whether firms may be contributing to inflation by driving up prices,” wrote the Commons Standing Committee in Agriculture in a report published on June 13, as first reported by Blacklock’s Reporter.

In the report, titled “Grocery Affordability: Examining Rising Food Costs in Canada,” the committee recommended that MPs wait for the Competition Bureau of Canada’s upcoming market study to see if the bureau discovers evidence that “large grocery chains are generating excess profits on food items.”

If it does, then the committee said the government should consider implementing a “windfall profits tax on large, price-setting corporations to disincentivize excess hikes in their profit margins for these items.”

However, the committee did not outline what might be the scope of this prospective windfall tax.

Canadian grocers have denied profiting off inflated food prices during recent committee testimonies, saying their profit margins have not increased over the past year despite higher grocery prices.

“The numbers are very large, but it still translates right down to the bottom line at $1 per $25 of groceries,” said Loblaw president Galen Weston while testifying before the Commons agriculture committee on March 8.

Weston explained that Loblaw Companies, which owns Superstore, Extra Foods, No Frills, and other Canadian grocery chains, has seen 25 times less profit growth in 2022 “than the unprecedented increases in costs that are being faced by the industry and by the world.”

“If we didn’t raise retail prices, as costs went up … the companies that we operate would disappear almost instantly,” he said.

Testifying before the committee on the same day, Michael Medline, CEO of Empire, which runs Sobeys, Safeway, and FreshC0, said that all business input costs have risen over the last “17 or 18 months.”

“I couldn’t find anything that’s gone down,” he said, adding that the price of butter and flour have gone up by nearly 60 percent, among other common grocery items.

“Freight, fuel, labour—every input cost has gone up.”

Walmart Canada CEO Gonzalo Gebara testified on March 27 that the chain “is not attempting to profit from these inflationary conditions. In fact Walmart Canada’s gross profit rate from its food business actually declined last year.”

However, NDP leader Jagmeet Singh has maintained that grocery giants are posting “record profits” from the inflated cost of food—something he has called “greedflation”—and has called on the federal government to “tax the excess profits.”

Doug Lett contributed to this report.