Canada’s Federal Tax Holiday on GST/HST Ends Tomorrow: Mixed Reactions from Industry Experts

Canada’s temporary suspension of the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) is set to end on Saturday, February 15, 2025, after a 60-day implementation. The measure, introduced on December 14, 2024, aimed to provide financial relief to Canadians grappling with the rising cost of living. However, industry experts remain divided over whether the policy successfully boosted consumer spending.

While staple groceries such as fresh fruits, vegetables, dairy, meat, and eggs were already exempt, the tax break extended to prepared foods like sandwiches, snacks, and baked goods. Additionally, a broad array of consumer products, including clothing, footwear, children’s toys, books, and beverages, benefited from the tax relief.

Despite the government’s efforts to boost purchasing power, data from the Royal Bank of Canada (RBC) suggests that consumer spending remained sluggish in early 2025. According to RBC economist Carrie Freestone, the sharp increase in holiday spending during December led to a predictable slowdown in January.

“January marked a sluggish start to consumer spending in 2025, but it was largely expected after spending surged at the end of the 2024 holiday shopping season,” Freestone noted in RBC’s Consumer Spending Tracker.

One of the strongest advocates for extending the tax holiday is Restaurants Canada, which reported a 7.6% rise in restaurant transactions during the period. The industry group estimated that the temporary tax cut contributed to a $1.5 billion increase in food service sales, a much-needed boost amid declining consumer confidence.

OpenTable, a popular online reservation platform, reported an 18% jump in seated diners within the first two weeks of the tax break compared to the same period a year earlier. Ontario saw the most significant gains, with a 23% increase in restaurant reservations.

Kelly Higginson, President and CEO of Restaurants Canada, emphasized the positive impact on the sector:

“The tax break has been really positive for the food service industry, especially as we head into 2025 with weak consumer confidence.”

Not all industry voices share the same enthusiasm. Dana McCauley, CEO of the Canadian Food Innovation Network, pointed out that food retailers faced increased costs due to the tax policy.

“Tax changes forced retailers to recode inventory, which was a costly expense,” McCauley explained. However, she acknowledged that beverage and alcohol producers benefited, as lower prices helped local products compete against imports.

Meanwhile, the Canadian Federation of Independent Business (CFIB) criticized the tax break, calling it a “flop” for small businesses. CFIB President Dan Kelly stated that only 5% of small businesses saw increased sales during the tax holiday. A survey of 2,345 CFIB members conducted between January 9 and 31 revealed that only 4% of retail stores experienced a noticeable boost, while 15% of hospitality businesses reported gains.

Further questioning the effectiveness of the tax holiday, financial services company Moneris released data showing that overall consumer spending in Canada actually declined by 4% between December 14 and January 15, compared to the previous year. The number of transactions processed by businesses also dropped by 1%, indicating that the tax break may not have significantly influenced consumer behavior.

With the tax holiday now over, the debate over its effectiveness continues. While restaurant groups push for a permanent exemption to sustain industry momentum, small business advocates argue that broader economic measures are needed to support independent retailers. As inflation and cost-of-living concerns persist, policymakers may face growing pressure to explore alternative relief strategies for Canadian consumers.