Small business owners are struggling to adjust to the Trudeau government’s GST holiday.
Businesses have said that they’ve been forced to frantically change prices, retrain staff, and buy new pricing labels in time for the holiday rush, all while incurring additional bookkeeping and accounting expenses.
True North interviewed Beverlee Rasmussen with Systems Business Coach to get an idea of the most frequent problems small business owners have had to face as a result of the tax break.
“I can’t wait to spend Dec. 12,13 and 14 manually reviewing every SKU I sell to temporarily adjust its tax status, only to do it all again on Valentine’s Day. What a nightmare,” said Rasmussen, reading from a recent email she’d received.
In addition to the repricing, the fact that the GST holiday overlaps two fiscal years means it will impact owners’ taxes for 2024 and 2025 if their year-end is Dec. 31.
Rasmussen noted that while the initial feedback she received from small business owners was trepidation due to the hassle of repricing so many items for such a short period, she’s noticed the problem shift towards consumer outrage.
“I was at the mall last night and met with one of our local business owners who’s owned a jewelry store for thirty years and he said ‘clients are angry.’ He’s been yelled at, it’s not good,” said Rasmussen, who also authored the bestselling book Small Business, Big Opportunity.
Consumer anger has been caused by confusion about what exactly qualifies for the tax break. Many people shopping in stores are under the impression that there won’t be GST on whatever they plan to purchase.
“This is going to cost small business owners $1,000 to $1,500 at the very least,” said Rasmussen. “We have 1.9 million small businesses in Canada and 29% of them are affected by the GST, so multiply that out, we’re looking at about a half a billion dollars cost to small business owners. They didn’t ask for this, no one consulted them.”
On top of not being consulted, small business owners now also run the risk of getting their calculations wrong, triggering a GST audit.
“If you look at the fine print,” said Rasmussen, referring to the GST holiday’s framework. “If you order from a restaurant directly yourself, there’s no GST but if you order through a third party provider, there’s GST on the delivery. The complexity of the entire thing is absurd.”
Another flaw in the GST holiday’s vague rules surrounds food and drink, both of which qualify to be tax exempt as long as the food is “considered by the average person to be a food to satisfy hunger” and beverages that are “considered by the average person to be a beverage to satisfy thirst.”
This open-to-interpretation rule has led to many confrontations between consumers and retailers regarding what items should qualify for an exemption.
It’s not just small businesses that are struggling to deal with these changes, giant corporations are as well.
PepsiCo Canada announced that it would continue charging the GST and HST through the holiday, citing complexities around its billing infrastructure and time constraints.
In a statement sent out to retailers, the food and beverage giant said it will “continue charging GST/HST on qualifying products from Dec. 14, 2024 through Feb. 15, 2025.”
“There will be no changes to our current invoicing processes. Customers can continue to claim input tax credits for any GST/HST paid,” it continued.
The tax break will also cost around $2.7 billion to compensate provinces with a harmonized sales tax, according to the Parliamentary Budget Officer’s latest report.
Rasmussen said that there has been so much confusion around this, that many Canadians are opting to shop via Amazon because they can better understand the pricing and many retailers are also low in stock due to the Canada Post strike.
“It’s not driving sales, it’s just creating confusion. We’ve spent $1.46 billion and added the extra burden to small business owners,” said Rasmussen.
“We could’ve taken that money and actually supported our small business owners and helped them with sustainability and training, as opposed to just using them as a political pawn.”
