Although the GST holiday has stimulated some consumer behavior in the short term, people believe it is just a drop in the bucket
To ease consumer pressure and boost economic growth and spending, the Canadian government has introduced a GST holiday. From Dec. 14 to Feb. 15, all eligible goods and services will temporarily benefit from a GST/HST reduction. From food and restaurants to children’s products and books, many businesses and consumers are eager to take advantage. However, while the policy has sparked initial excitement, its limitations have also come to light.
The national GST holiday officially started on Dec. 14. Many large supermarket chains have seized this opportunity to stimulate consumption.
The policy-driven boost to the restaurant industry is short-lived.
“Christmas and New Years are our peak seasons, so we were hoping this tax-free policy would bring in more customers,” said Michael Vo, owner of a Japanese ramen restaurant in Barrhaven. “During the first week, we saw a big jump in traffic. A lot of families came in to dine, which we rarely see often before. The sales went up, and we were super busy every day.”
However, like the final burst of a fireworks show fading away, the brief excitement over tax-free ramen quickly dwindled.
“After about the first week, the number started to drop,” Vo said. “Tax-free did work somehow, but I didn’t expect the appeal to fade so quickly.”
To address the drop in customer traffic, Vo tried three promotions over the past four weeks, including buy-one-get-one-free ramen deals and discounts through Uber Eats. These efforts brought some customers back.
Vo also noticed changes in consumer behavior during the tax-free season and brought them additional revenue.
“More families, friends, and coworkers chose to dine together during this period, and some people tipped an extra 5 to 10 per cent because they didn’t have to pay the usual 13 per cent tax,” Vo said. “Although these changes didn’t significantly boost our profits, it’s still a good thing and a good policy for celebrating the holidays.”
Students saw short-term gains, but long-term challenges persisted
Emily Fitze, an early learning and community development student at Algonquin College, took advantage of the tax break to buy books she wouldn’t normally splurge on.
“Even though prices are still high, I had fun experiencing a month of savings. Everyone around me is talking about how to make the most of it,” she said. “But at the same time, we all know that a month of tax-free won’t ease students’ financial pressure.”
Fitze believes that the rising costs of tuition and rent, along with the ongoing price increases, are the real challenges students face.
“I’m in a four-year program with high tuition fees, which is my biggest expense,” she said.
Jana Freeman, a biotechnology level 1 student at Algonquin College, also increased her spending during the tax-free period, particularly by dining out more and visiting the campus bookstore.
“As a student, it was great because I knew the campus bookstore was also tax-free. Everyone knows how expensive textbooks are,” Freeman said. “But overall, I don’t think this policy made a significant impact on my wallet. But if the government made it permanent, it might help with some problems.”
On the policy’s continuity, Freeman hopes it could extend to more areas.
“If there were similar discounts for rent or transportation, it would greatly reduce students’ financial pressure.”
Limitations and potential improvements of the GST holiday
Vo believes extending the GST holiday could attract more customers, but he points out that the policy alone is not enough to drive long-term growth.
“The government needs more measures because this is a complex problem, and it’s unlikely that a month of tax-free will lead to an economic recovery,” Vo said. “For example, they should reduce operating costs for small businesses or introduce consumer subsidy policies.”
Students are calling for an expanded scope of the tax break to cover more essential expenses.
Fitze suggests reducing taxes on medications, especially everyday over-the-counter drugs.
“This is something the government should consider because I know many people have had the flu in the past few months, and I often need to buy a lot of medications,” Fitze said. “Even though there is free healthcare, we all know it’s not that great, right?”
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