Algoma-Manitoulin-Kapuskasing MP Carol Hughes writes a regular column about initiatives and issues impacting our community.
Statistics Canada has recently released their data on the Consumer Price Index (CPI) for January 2025. While the monthly examination of the CPI is not particularly notable in most cases, last month had the benefit of providing us with a clear view of what the recent GST break may have accomplished. Turns out that it had a definitive impact on the cost of food in a way that actually helped people at a time when people needed a financial break.
One of the last things the Prime Minister did prior to announcing his resignation was the implementation of a GST tax holiday, a weakened version of an NDP proposal that cut the costs of some essentials, such as prepared foods like sandwiches and salads, restaurant meals, and bottled water, items for children including clothing items, diapers, footwear, and car seats, and a smattering of other items (although generally nonessential items.) It omitted items that should have been included, such as a GST cut on energy, internet, and cell phone bills, and wasn’t made permanent, spanning only from mid-December to mid-February. So what does the data tell us about the impact the GST break had on those items that were impacted?
“Prices for the food component fell 0.6% on a year-over-year basis in January, the first yearly decrease since May 2017, driven by a record decline in prices for food purchased from restaurants (-5.1%),” according to Statistics Canada’s The Daily. This is very significant. At a time when food inflation has been growing and driving headline inflation numbers higher, a cut to GST on food items drove the first yearly decrease in food costs in 8 years, and a record decline in the cost of restaurant meals. The headline inflation numbers for January 2025 rose 1.9 percent, in lockstep with the general Bank of Canada consensus of a healthy increase in the cost of goods. But those food numbers were offset by higher energy costs, another area New Democrats proposed eliminating the GST.
One area where the impact of the GST break seemed uncertain was with restaurants. January and February are typically the slowest months of the year for restaurants, with sales dropping about 10 percent compared to the rest of the year. Restaurants Canada, the industry group that represents Canada’s restaurants, said in their preliminary examination that the 60-day period covered by the GST break, they expect a $1.5-billion boost in food service sales. Restaurant sales improved so significantly that Restaurants Canada is now hoping to make the GST cut permanent.
While the tax holiday was good for grocery shoppers and restaurants, the retails side of the equation was a mixed bag. According to data from the Canadian Federation of Independent Business (CFIB), only about five percent of businesses reported an increase in sales. Because of the short, variable timeline, many businesses had to adjust their products to operate in line with the tax holiday, and that created an up-front cost.
This discrepancy illustrates exactly what the tax holiday did well and what it didn’t. The essentials contained within the tax holiday (namely, food) had the greatest impact, while the non-essential items were nice to have but made little measurable difference at the end of the day. The irony, of course, is that the area with the largest year-over-year increase in January, according to Statistics Canada, was energy, primarily home heating, rising 5.3 percent year-over-year. That increase could have been wiped out by a GST tax holiday on home heating as proposed by New Democrats, who know full well that people need the most help with essentials and making ends meet.
As we still face the threat of pointless tariffs from Trump and his gaggle of cronies, it’s important that we focus on things that can materially make things easier for Canadians at this moment in time. Cutting GST from essentials can be one tool in the toolbelt to help alleviate costs for people. It’s a tax measure that helps everyday Canadians, and unlike proposals levied by Pierre Poilievre, won’t go to lining the pockets of rich executives.