‘It’s been a flop’: CFIB says GST holiday cost small businesses

Bradlee Whidden, Canadian Federation of Independent Business Policy Analyst, discusses the GST holiday with Alberta Primetime host Michael Higgins.

Bradlee Whidden, Canadian Federation of Independent Business Western Canada Policy Analyst, speaks with Alberta Primetime host Michael Higgins about the impact of the GST holiday on consumers and small businesses.

This interview has been edited for clarity and length

Michael Higgins: What are your members here in Alberta reporting about challenges they’ve navigated through this two-month window?

Bradlee Whidden: Only five per cent of our members saw any real increase in sales from the year previously, and this minimal increase has come at the cost of a mountain of administrative costs.

Small business owners have had to spend time and money going through their inventory, earmarking certain items for the exemption, and reprogramming their point-of-sale systems. Now they’re going to have to go through and undo that now that it’s ending, and this whole process we’ve estimated will cost a typical small business around $1,000.

To be honest, the GST/HST holiday has been a real big mess, and it’s been a flop.

MH: What was it like having to deal with customers in that regard?

BW: That’s been a challenge too. We’ve had mixed messages coming from the government. The Canada Revenue Agency and the minister of finance have been issuing contradictory instructions on this.

Small business owners have had to figure out what items are exempt and what aren’t. For example, LEGO sets - not all LEGO sets are exempt from the GST agency exemption. This is something small business owners had to figure out on their own, which we think is just ridiculous. If one LEGO set is exempt, they all should be.

MH: The federal government touted this as a tax break that would put money back into the pockets of Canadians. Why do you think it may not have lived up to that expectation?

BW: Just due to the administrative costs that have come with this. It’s been an administrative nightmare for many small businesses that really don’t have the resources to execute this properly. Any savings that were passed down, as minimal as they were, were likely offset by this large burden.

Small business owners reported many customers waiting to purchase items until the GST/HST holiday began, or returning items to repurchase them later, so they didn’t really see any meaningful increase in sales as a result of this.

We think if the government wants to ease affordability in the country, they should look at permanent measures, such as scrapping the planned carbon tax increase on April 1.

MH: Some shoppers may notice prices going back up on certain items as the GST holiday comes off. Is there potential for lingering, long term impacts?

BW: Perhaps some, and of course, small business owners are going to have to answer the questions as to why these cost more (now) and why these costs less a week ago.

We hope that the government will provide some more clarity on this going forward, as they should have done earlier. If the government wants to address affordability, there’s plenty of opportunities to do so in a more permanent and meaningful way than the short term and uncertain action.

MH: Are there hurdles or headaches in dealing with the Canada Revenue Agency as a consequence of moving on from this?

BW: What we’ve been asking the Canada Revenue Agency to do is to waive any taxes, penalties or interest owed as a result of errors made in good faith. The implementation of this was just so rushed, so haphazard, there wasn’t enough turnaround time for many small business owners.

If mistakes were made in the implementation of this, we don’t want to see the CRA going after business owners, and we have heard that intention from them, which we’re grateful for.

MH: Apart from what to do with taxes, what kind of responsibilities do you feel should rest on the shoulders of the federal government post-GST holiday?

BW: The government needs to provide more clarity in terms of remitting taxes owed to small business owners that didn’t partake - which we found out six hours before the holiday was set to begin that it may not be mandatory to comply.

That would have been good to know from the start, but now that we do know that, we’re just asking the government to provide some clarity, some leniency, and not go after small business owners who, perhaps, made some mistakes in the implementation process.

MH: What impact is the uncertainty of U.S. tariffs having on the business community? What’s your membership reflecting about current dynamics?

BW: This occurred at the worst time of year. It occurred alongside a Canada Post strike and tariff threats in the United States. The key theme here is uncertainty.

We’ve heard conflicting messages also from President Trump as to whether or when tariffs will be implemented. Small business owners are wondering if they should seek out alternative suppliers or not. This uncertainty is resulting in a large cost burden.

Small business owners might jump the gun or feel that they need to switch different suppliers that are perhaps more expensive, before tariffs actually kick in, if they do kick in at all. So a lot of uncertainty,

MH: Some decisions there to make. How’s that impacting business confidence here in Alberta? What do you see for the road forward?

BW: We have taken a dip this month, unsurprisingly. The real piece of unknown here is whether the Government of Canada will issue retaliatory tariffs.

It’s one thing if exporters in Alberta face higher costs as a result of exporting their product to American consumers. American consumers are going to pay the tax due to the American tariffs, of course, but if Canada slaps retaliatory tariffs, far more Alberta small businesses import goods than export goods, and that’s where the real damage could come from here.

MH: What’s the likelihood some businesses might pull up their Canadian roots and head south of the border?

BW: We don’t have survey data that gets at that exactly. That is always a risk, which is why we’re encouraging Canada to remain as tax competitive as possible.

Right now, the U.S. does have a significant tax advantage when it comes to taxes levied on small businesses in the wake of these tariff threats. We’d like to see Canada reduce internal trade barriers, lower taxes, reduce regulation, and help Canadian small businesses compete.