As we discussed two weeks ago, the Government of Canada has introduced a break from sales tax on specific items during the holiday season. This tax break has been officially codified into law through the Tax Break for All Canadians Act, formerly Bill C-78. This removal of GST and HST from certain listed items is to run from December 14th 2024 to February 15th 2025. Our previous article on this topic discussed the specific items the tax break will apply to. This week, we will discuss whether Canadians actually value this gift or whether it bore no effect on their spending decisions (so far).As we discussed previously, there are specific items exempt from HST &amp; GST that are directly relevant to the homeownership process. The discussion can be expanded, however, to discuss the cost-of-living crisis in general, something we already know has had its own major effects on the housing market. With the holiday season imposing gift-buying obligations on everyone, the tax break may offer some relief from the additional financial burden of HST &amp; GST on select giftable options. For many Canadians, the opportunity to buy holiday meals, children’s clothes, toys, and books may take a load off from those who will already need to be buying these items as holiday gifts for their families. Tax breaks on items such as alcohol, restaurant meals, and other splurges we may deem less essential than gifts for our children, however, they may convince us to spend when we otherwise wouldn’t. If you’re like me and enjoy some good retail therapy, the tax break may merely be an added bonus on items we may otherwise be drawn to buy, especially during events such as Boxing Day. The items said to be exempt from sales tax was also random; I purchased adult pajamas for myself and, despite only children’s clothes being exempt, these items were also exempt.It is important to acknowledge how much this is supposed to cost us as a country. CTV News says that this tax break can cost up to $2.7 billion. When it comes down to saving a few cents on products many of us have no choice in buying anyway, it is easy to see, from a consumer’s perspective, why this would have no meaningful impact and may even do harm in the long run. Saving a few cents on a coffee may not be worth how much it will cost taxpayers in total, given the different things $2.7 billion could have gone to fund instead. On the bright side, after hearing that number we can’t call it a “cheap” political trick. (Readers will recall that this tax holiday was originally paired with a $250 cheque that was to be sent to a select group in February. That would have brought the total price tag of this stunt to over $6 billion. Thankfully, that idea seems to have disappeared from scope.)&nbsp; &nbsp;I asked people around my age to tell me whether the GST/HST tax break had any impact on their spending. 83% of people said the tax break had zero impact on what they spent this holiday season. When asked to explain, the answers were all the same. Many people said they would still be buying their family members gifts regardless of the tax. Others said they didn’t even know it was happening. Someone said that if they did not want a coffee, a 5-cent discount would not persuade them; the effects of a tax break on small items like this are negligible. Others said that a tax break was not enough to offer them any type of financial relief and that despite eliminating taxes, they still could not afford certain items. Others said that the tax break did not kick in until after they had already completed their holiday gift shopping and would only be useful for the very last-minute shoppers. Someone who said it did affect their shopping said that it only affected it to the extent that it made them decide to buy a certain item now rather than later, though it was an item they would have bought eventually regardless. As for the hoped for peripheral benefits, when asked if the break would influence their voting intentions in the coming 2025 Federal election, 100% of respondents said that it would not. In fact, rather than experiencing the warm and fuzzy feeling that the architects of this program no doubt hoped for, there was actually negative sentiment built when people started to realize how many items were not exempt and they started to calculate what the tax was costing them each and every day. (Spoiler Alert: It’s a lot.)The Government’s website offers some rather confusing information on whether businesses are required by law to comply with the tax break. By referring to this tax break as the law of the land, and by explicitly stating that it is instructing businesses to not charge GST/HST, it implies that this law mandates compliance from businesses. Then the website specifically asks that businesses make a “reasonable” effort to comply and that their efforts will focus on penalizing businesses that “willfully and egregiously refuse to comply with the temporary measures.” The website does not specify what exactly will happen to a business, should they continue to tax items.Many businesses, however, are opting out of this tax break, despite it being the law. Many businesses are confused, just like many customers, about what exactly “reasonable efforts to comply and egregiously refusing to comply” entails. This confusion is shared by many. The Toronto Star was unable to confirm whether compliance was mandatory; they say that the Federal Minister of Small Businesses did not tell them whether the removal of tax on exempt items was mandatory nor did he clarify what constitutes a reasonable effort to comply. The Star agrees that the Government is making it seem like it is mandatory, however many businesses in reality are opting out simply because it is far too complicated to sift through the thousands of items on their inventory to apply their discretion to determine whether a given item is exempt from the tax break at all and program their computers to reflect this deduction. The Star cited a pharmacy owner who said the labour involved is simply too onerous to have any positive effect on his business. CityNews Vancouver cited a restaurant owner who declined to participate in the tax break due to the additional expenses it would cost as a business owner. Specifically, the restaurant owner said that they still owe tax on their rent and utilities as a business owner and that the tax break would cost him money.&nbsp;It seems that the intended positive effects of this tax break aren’t being realized in a material way. It’s just not happening. While we can pretend it’s like when you get a gift that you have no interest in this holiday season and then say it’s the thought that counts, without corresponding government spending cuts with this gift you also get the bill in the next government deficit. Pay them now or pay them later. I’m not sure if we should laugh or cry, but as well intentioned as this may have been, it shows that they can’t even give money away efficiently. But still - thanks – I guess.

Canada’s Holiday Tax Break so Far: A Gift or a Gimmick?

Canada's GST/HST holiday tax break: Is it a thoughtful relief or a costly gimmick? Discover its impact on spending, businesses, and voters with RIFO

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