Taxes Take Some of the Blame for High Grocery Prices, MPs Told

Grocery prices have been rising significantly in Canada, largely due to inflation. (The Canadian Press/Nathan Denette)

A committee studying high food prices in Canada heard that grocery store profits are not the villains that some have made them out to be.

Ian Lee, an associate professor with the Sprott School of Business at Carlton University, told the committee that grocery store profits are actually quite low.

Lee pointed to the three biggest players in Canada’s grocery market, Loblaw, Empire (Sobeys) and Metro, which have profit margins of 3.7 percent, 2.7 percent and 4.5 percent respectively, he said.

“In fact, retail grocery store net profit margins are unbelievably low ... compared to the double digit profit margins in pharma, banking, beverages, automotive manufacturing, chemicals, computers, construction, electronics, entertainment, health-care products, and I haven’t touched on all of them,” said Lee.

He said MPs would have to look deeper, at things like fuel costs, pointing to a December Statistics Canada study that showed large increases in the price of inputs for products made of wheat, like bread.

“Most of those inputs identified by StatsCan in fact are used throughout the food chain. Diesel, pesticides, trucking costs, each show stunning increases—34 percent for pesticides, 28 percent for energy, 20 percent for trucking,” he said.

The largest farm group in Saskatchewan made similar arguments, saying many expenses are through the roof.

“In 2021, Saskatchewan farmers experienced their most expensive crop ever for livestock and grain production, spending $11.5 billion on farm expenses—11 percent higher than 2020. And 2022 wasn’t any better,” said Ian Boxall, president of the Agricultural Producers of Saskatchewan.

“Since 2019, glyphosate (herbicide) has increased 62 percent, fuel 52 percent, the price for urea (used in fertilizer) has increased 112 percent since May of 2019,” said Boxall. “These inputs are critical for food production.”

In response to a question from Conservative MP John Barlow, Boxall said the carbon tax has hit farmers hard.

“It’s had a huge impact. It’s a cost that comes right off our bottom line,” he said, adding the tax costs the average Saskatchewan farm between $14,000 and $25,000 per year.

“We’ve seen it go up every April 1 for the last number of years and we have no control over passing that cost along,” he added, referencing the fact that farmers sell much of their product into international markets where they compete with farmers who do not pay carbon taxes.

‘Stop Hiking Taxes’

The Canadian Taxpayers Federation argued federal policies like the carbon tax take much of the blame for why consumers face high prices at the supermarket.

“There’s an easy and quick way for the government to make food more affordable: Stop hiking taxes. But in less than two weeks, the government will raise the carbon tax for the fourth time since the beginning of the pandemic,” said CTF Federal Director Franco Terrazzano.

“Everything that gets delivered by truck will become more expensive, including your favourite kale salad,” he said. “Ottawa hikes taxes while many of our peers and competitors cut taxes during the pandemic.”

Terrazzano was challenged by Liberal MP Leah Taylor Roy, who pointed out that between May of 2021 to May of 2022, the price of gasoline went up around 61 cents a litre, while the carbon tax only went up by 2.2 cents per litre.

“When you look at the charts, what made up the increase was crude oil prices and wholesale margins on refining. It wasn’t the Bank of Canada printing money, it wasn’t the price of pollution. How do you explain that?” she asked.

“I think that Members of Parliament should control what they can control, and the number one thing that you can control is how much tax you take away from struggling families,” Terrazzano replied.

Earlier in the meeting the committee heard testimony that the price of groceries has food banks very worried.

“What we are seeing is unprecedented,” said Neil Hetherington, CEO of Toronto’s Daily Bread Foodbank, the largest in Canada.

“We used to see about 65,000 clients per month,” he said, with up to 120,000 per month during the pandemic. But since then, he said, numbers have continued to grow.

“Between January of 2021 and today, we are now seeing 270,000 client visits per month,” he added. “If there’s nothing else that you take from my testimony today, I hope you take that startling, horrific number away.”

Hetherington also pointed out that the circumstances of their clients have also changed.

“What’s new is that we are now seeing individuals who are working full time having to make use of food banks. In fact, that number has risen to about one-third of food bank clients having full time employment. ... So if you have a job, that doesn’t guarantee that you are not going to need a food bank,” he said.

And Hetherington had some other surprising statistics.

“So in Toronto, some 52 percent of food bank users have a post-secondary education,” he said. “If you played by the rules, you got an education, you got a job—that does not mean that you no longer need a food bank.”