5 Percent of Canadian Small Businesses Saw Boost From GST Holiday: Survey

A consumer pays with a credit card at a store in Montreal on July 6, 2010. The Canadian Press/Ryan Remiorz

About 5 percent of Canadian small businesses said they saw a boost in sales after the federal government introduced a “tax holiday” for two months.

The tax break for consumers was a two month pause on the GST and HST between Dec. 14 and Feb. 15. It covered items such as children’s clothing, toys, and Christmas trees.

Prime Minister Justin Trudeau’s former finance minister and deputy prime minister Chrystia Freeland said the goal of the GST/HST tax holiday was to tackle the “vibecession.” It was something that was defined as Canadians not feeling good about the economy, and it was impacting their spending habits. Freeland said the tax break would help Canadians feel more positive about the economy, and spend more.

However, a recent survey by the Canadian Federation of Independent Business (CFIB) found that just 5 percent of businesses reported stronger sales during the tax holiday period when compared to sales a year earlier.

The results led CFIB President Dan Kelly to call the GST holiday a “flop” for small businesses.

“For many retailers it was an administrative nightmare to get point-of-sale machines compliant just before Christmas, let alone sort out which LEGO sets the holiday applied to, or how many items in a gift basket had to be tax-free for it to qualify,” Kelly said in a Feb. 12 news release.

The CFIB survey found 4 percent of retail businesses had stronger sales, and 15 percent of the hospitality industry.

The majority of businesses (66 percent) said sales stayed about the same as the previous year during the same period.

Two weeks ago, Metro President and CEO Eric La Fleche said something similar at the company’s annual general meeting.

“I’m sure it was appreciated by customers, but for us, both in grocery stores and pharmacies, we haven’t seen an increase in demand because of it,” he said at the time.

Some small businesses also reported several challenges with implementing the GST/HST tax break, including reprogramming point-of-sale systems, which came with added costs, extra administrative workload, staff training, and managing customer questions.

“The past few months have been incredibly challenging and filled with uncertainty for many small firms,” Kelly said.

The CFIB said that both the Canadian Revenue Agency and Finance Canada had provided conflicting information to businesses about whether participating in the tax break was mandatory.

The online CFIB survey was conducted between Jan. 9 and 31 with 2,345 respondents.

The Canadian Press contributed to this report.