Placing a tax on food prepared at the grocery store qualifies as not only regressive, but also unfair to those who don’t have the luxury of cooking – this approach needs to be rethought.
Posted at 6:30 a.m.
The GST holiday benefited some consumers more than others. According to data from Restaurants Canada for the first two weeks of this holiday, traffic in restaurants across the country increased by 18% compared to last year.
In provinces where the tax is harmonized, and where the reduction took a greater proportion, the results are more impressive. In Ontario, where the reduction reached 15% with the provincial tax, ridership jumped 23%. Increases were also recorded in the Atlantic and British Columbia. Restaurants Canada says the GST holiday played a significant role in this increase and this conclusion seems entirely plausible.
We expected this increase, because in restaurants, everything is taxed and the holiday season encourages people to go out more to treat themselves. However, in Quebec, the reduction was limited to 5% and the repercussions seem more moderate.
A question remains: did restaurateurs take advantage of this reduction to increase their prices? A very real temptation, especially when taxes fall. During Stephen Harper’s mandate, an increase in inflation was observed in the month following the national GST cut. In Quebec, this increase had been attenuated, because the Charest government had simultaneously raised the QST to compensate for the reduction in the GST from 7% to 5% over a period of 18 months. Inflation data over the coming weeks will allow us to confirm whether this phenomenon has repeated itself.
A transfer between grocery store and restaurant?
Another effect of the GST holiday could be reflected in a shift in spending between grocery stores and restaurants. At the grocery store, only 15 to 20% of food products are taxed, compared to all products served in restaurants. On average, the discounts obtained thanks to the GST holiday will not exceed $5.00 per person over the two months this measure lasts, until February 15. However, this reduction may have encouraged some consumers to cook less, visit restaurants more or buy more ready-to-eat meals, which are also taxed at the grocery store.
-In its report released last week, Restaurants Canada recommended an even more ambitious measure: completely eliminating taxes on prepared foods, both in grocery stores and restaurants. This is possibly the first time that a national organization has proposed such an initiative.
An idea to explore, especially at the grocery store
This idea is worth considering, particularly for prepared products sold in grocery stores. Why tax a salad or a sandwich when they are often practical solutions for those who don’t have the means or the motivation to cook?
According to the last census, which dates from 2021, 4,396,015 single-person households in Canada represented 29.3% of all households. Moreover, more than 90% of people aged 65 or over live in private residences. These consumers often buy ready-to-eat products to avoid wasting food, a costly problem for those who live alone or eat smaller quantities.
If the idea of eliminating taxes on restaurants is divisive, it is clearer when it comes to groceries. Taxing food is not only regressive, but also immoral, because it penalizes those who have no choice but to buy prepared foods. Contrary to what some people think, these taxes do not only apply to foods deemed unhealthy: salads, sandwiches and pre-cut vegetables also pay the price.
Clearly, eliminating taxation on ready-to-eat food products could not only ease the burden on consumers, but also reduce food waste. Perhaps it’s time to rethink this approach to taxing food.
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