The hidden cost of the federal government's tax holiday on food

GST/HST holiday on food

Photo: Pixabay

It’s official. Starting Dec. 14, the federal government’s two-month GST/HST holiday will temporarily reduce the tax to zero, offering Canadians a reprieve until Feb. 15.

While this initiative appears to be a gift for consumers during the holiday season, it comes with unintended consequences that could harm consumers, retailers, and the broader economy.

Under this policy, provinces with standalone provincial sales taxes (PST), such as British Columbia (7%), Saskatchewan (6%), Manitoba (7%), and Quebec (9.975%), will continue to apply these rates. Meanwhile, provinces using the harmonized sales tax (HST) — Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, and Ontario — will see the total tax rate on eligible items drop to zero. Alberta, which already lacks a PST, will remain tax-free.

At first glance, this may seem like a win for Canadians. Grocery stores will no longer charge taxes on snacks and ready-to-eat items, and restaurant meals will also see a significant tax cut. However, the benefits of this measure are unevenly distributed.

Minimal savings at the grocery store

For the average consumer, grocery savings over the two-month period are estimated at just $5. While this amount is negligible for most households, it creates a significant burden for grocers. Implementing system updates to reflect the tax holiday for more than 4,000 products on average will result in logistical headaches and additional costs. Retailers, already operating on slim margins, will likely feel the strain.

Restaurants reap the rewards

The benefits are much more pronounced for restaurants. Since the average Canadian spends roughly $180 per month dining out, families could save between $60 and $90 over two months. For restaurant operators, this measure could provide a much-needed boost, as taxes normally apply to all menu items.

However, regional disparities in tax rates could lead to unintended consequences. Quebecers, for example, may cross the border to dine in Ontario or New Brunswick, where they can save nearly 10% in taxes. This puts Quebec restaurant owners at a disadvantage. While interprovincial shopping migration may be less pronounced in Western Canada, these inconsistencies create unnecessary regional tensions.

Inflationary risks and market instability

While the tax holiday offers temporary relief, it also introduces inflationary risks. Retailers and restaurants, faced with the sudden absence of tax revenue, may adjust prices opportunistically. When Prime Minister Stephen Harper reduced the GST by 1% in both 2006 and 2008, prices initially spiked before stabilizing. This history highlights the potential for short-term price increases following tax changes.

Taxes, particularly those tied to food, leave lasting effects. Whether introduced or eliminated, they alter market dynamics and often disadvantage consumers. The temporary nature of this tax holiday increases the likelihood of opportunistic pricing, leaving Canadians paying higher prices long after the tax is reinstated.

Taxing food is regressive and ineffective

Taxes on food disproportionately penalize low-income households, making them inherently regressive. Proponents of taxing “unhealthy” foods argue that it encourages better consumer choices, but the evidence tells a different story.

Consider Newfoundland and Labrador’s soda tax, introduced in 2022. While it generated $6.1 million in revenue in its first year, the projection for 2023-24 has doubled to $12 million. Rather than curbing soda consumption, the tax has simply become a revenue generator, with no significant improvements in public health outcomes.

At grocery stores, taxes on food are often hidden unless consumers carefully check their receipts — a practice fewer than 25% of Canadians engage in regularly. Transparent policies and informed choices, not stealth taxation, lead to better health outcomes over time.

A missed opportunity

Instead of implementing this temporary tax holiday, the federal government could have eliminated the GST on food permanently. A permanent measure would shield consumers from market instability triggered by policy reversals and reinforce food affordability as a critical aspect of Canada’s social safety net.

While the GST/HST holiday might seem like a timely relief, it risks creating long-term instability. Food pricing is a delicate balance, and every policy shift has ripple effects across the supply chain. For many Canadians, the costs of this measure could outweigh the benefits, leaving them worse off in the long run.

Sylvain Charlebois is the director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Rob Shaw: Eby confronts Trump tariff threats with wishful thinking

Dealing with U.S. tariffs

Photo: Province of B.C./Flickr

Behind the tough talk, British Columbia Premier David Eby and his government has been left to scramble to respond to an unexpected trade crisis.

Surrounded by a friendly labour audience in Vancouver on Tuesday, Premier David Eby talked tough in the face of U.S. president-elect Donald Trump’s threat to slap a 25 per cent tariff on all Canadian imports.

“We’re going to stand together, and we’re going to ensure that we negotiate from a position of strength,” said Eby. “That we negotiate hard and we ensure any decisions that are made are in the best interests of British Columbians and Canadians.”

A position of strength.

The line played well for the hyper-partisan, NDP-loyal, Trump-hating audience at the B.C. Federation of Labour, where the crowd could be relied upon to shout “shame” and applaud on command. But back in the real world, you’d be hard-pressed to describe the Canadian position as anything remotely resembling one of strength.

For starters, nobody saw this move coming by Trump. There was no preparation for 25 per cent U.S. tariffs in the multi-week post-election “transition” effort between the Eby government and the, er, Eby government. Nor did the Canadian government have in place a scenario for such a move, so early, before Trump has even officially taken office.

B.C. has no co-ordinated strategy to work with highly exposed sectors of B.C.’s economy in response. The Canadian diplomatic corps has been caught flat-footed.

Everyone is scrambling. That includes Prime Minister Justin Trudeau, who has called a snap meeting with premiers on Wednesday to come up with a “Team Canada” approach.

The premiers, already though, are divided.

Ontario Premier Doug Ford has publicly advocated for a bilateral trade deal with the United States that would shut out Mexico. Quebec Premier Francois Legault is calling on Trudeau to appease Trump and his “legitimate” concerns about the Canadian border being a gateway for illegal drugs. Ford wants retaliatory tariffs. Legault does not.

Eby, for his part, spent the last few months hammering Trudeau publicly for ignoring and mistreating the province financially, turning him into a punching bag for partisan points.

Trudeau now has to try and herd all these wayward leaders into a unified direction. While he struggles with that, Trump will be essentially unopposed on his end, with Republicans in U.S. controlling both the House of Representatives and the Senate, able to enact whatever the president says into law.

Trump has a strong mandate from American voters, who elected him decisively into office. In contrast, Trudeau appears to be a lame duck prime minister, walking into a slaughter in the next federal election. And Eby got hit hard by voters in the October election, only squeaking through by a bare majority of 22 votes. Hardly positions of strength.

Already, you can see movement by Eby to respond to Trump’s demands.

“There are improvements we can make on our border,” offered Eby on Tuesday.

“We've called repeatedly for, for example, port police to ensure what comes into British Columbia is not contraband, is not illicit drugs or precursor chemicals. These are things that we can do to make life better here in British Columbia, as well as respond to concerns that have been raised south of the border.”

It was mostly the BC Conservatives, though, who have been talking about port security the last few months.

“Eby’s incompetent BC NDP has turned a blind eye to the booming drug trade at B.C. ports, allowing dangerous criminals to operate with impunity,” B.C. Conservative Leader John Rustad said in August.

The B.C. Conservative election platform promised to work with the federal government to “reinstate full and reliable funding for the RCMP-led Waterfront Joint Forces Operations, and expand the number of officers on the team.”

The B.C. NDP platform was entirely silent on the issue.

Rustad ratcheted that up Tuesday, calling on Eby to recall the legislature and pass legislation to fund port policing in the absence of federal dollars. Eby, though, has pushed off any legislative sitting until February.

And finally, it’s hard to claim a position of strength in negotiations when you don’t even know if the other side is serious. Could Trump be bluffing? Does he simply want to see Canadians increase border policing, and then back away from his threats? Or is 25 per cent a number he’s settled on, and he’ll charge forward no matter the economic implications?

Nobody has the foggiest clue in B.C. or Ottawa. And that ignorance is hardly a strength.

“Americans are dependent on what we produce here in Canada,” said Eby. “We are one of the top exporters to the United States, and certainly they're our No. 1 customer as well. We have more in common with Americans than what separates us, and focusing on that and how we can work together to strengthen and support working families across North America is critically important.”

Maybe. But it feels like the B.C. government’s position is less a position of strength than it is plain old wishful thinking.

Rob Shaw has spent more than 16 years covering B.C. politics and now reports for CHEK News and writes for Glacier Media. He is co-author of the national bestselling book A Matter of Confidence and host of the weekly podcast Political Capital.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

The rotten core of Canada’s food industry trust crisis

Losing trust in food industry

Photo: Pixabay

The Canadian Centre for Food Integrity recently released its report on consumer trust in the food industry.

Since 2016, trust levels had plateaued at a respectable level, but the situation has taken a dramatic turn. According to their latest survey, an unprecedented number of Canadians now believe the food industry is heading in the wrong direction. At the same time, trust in the industry has plummeted to its lowest level in eight years. Nearly one-third of Canadians think the industry is failing to focus on the right issues. While this is a broad critique, it raises valid and pressing questions.

Farmers, for instance, continue to enjoy considerable goodwill from consumers. However, this goodwill is often directed more toward farmers as individuals than toward their practices. Criticisms related to pesticide and herbicide use, on-farm milk dumping, feeding cows palm oil to increase butterfat content, ethical animal treatment and environmental concerns remain persistent. Farmers are often perceived as victims of a system dominated by multinational corporations that dictate products and rules. Yet as they move closer to consumers within the food supply chain, skepticism and doubt become apparent.

Food processors also face constant scrutiny, particularly over “shrinkflation” and so-called ultra-processed foods. Even though these companies innovate and deliver high-quality products, these efforts often fail to quell public dissatisfaction. Allegations of price fixing, such as in the bread industry and more recently targeting McCain Foods and Cavendish Farms over frozen French fries, are further eroding trust in this segment of the industry. Such accusations only reinforce the perception that some companies prioritize profit over fairness and transparency, deepening consumer skepticism.

However, it is food retailers who sit squarely at the top of the trust deficit. Whether independent or part of major banners, retailers are frequently accused of abusive practices and unjustified price hikes. According to a trust index developed by our Agri-Food Analytics Lab, nearly 80 per cent of consumers believe retailers’ efforts to address concerns are insufficient. Even when accusations lack solid evidence, resentment against retailers persists.

Grocers, in particular, need to step up. Loblaw recently acknowledged its willingness to eliminate property controls, a practice that has long suppressed competition by allowing major grocers to restrict rival stores from operating close to their own locations. These property control agreements, which often appear in commercial leases, limit consumer choice and keep prices high by stifling competition. Manitoba is poised to regulate property controls in food retail, likely becoming the first province to do so. Other provinces should follow suit, as greater competition would benefit both consumers and smaller retailers.

True capitalism thrives not by controlling competition but by driving innovation, creating value and earning trust through excellence in meeting market needs.

But here is the broader issue. Consumers tend to direct their criticism at what they see and interact with most — stores — rather than farms or barns, which feel distant and unfamiliar. Against this backdrop, a key question emerges: what can the agri-food sector do to regain Canadians’ trust?

The underlying issue is a mutual lack of understanding. For the industry to be better understood, it must first make a genuine effort to better understand consumers, particularly younger generations. Millennials and Gen Z now make up 19.8 million people in Canada — more than 50 per cent of the population. However, an equally significant challenge lies within the food sector itself. Observing conferences and industry events, it’s evident there is often a reluctance to address sensitive topics. Speakers frequently adopt overly agreeable tones or are constrained by sponsors who shy away from discussions on critical issues like supply management or carbon markets.

This culture of avoidance must end. If the industry is serious about rebuilding trust, it must break these taboos and embrace bold, forward-thinking conversations. Conference organizers and speakers must stop tiptoeing around difficult topics, as this only stifles innovation and leadership.

The agri-food sector must take a hard look in the mirror and critically assess its practices. Regaining consumer trust is not only possible but essential for the industry’s future. True transparency and a willingness to engage openly on challenging issues will be key to restoring confidence and ensuring the long-term success of Canada’s food industry.

Sylvain Charlebois is a professor and senior director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor podcast.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Why Canadians aren’t ready to trade steak for crickets

Dining on insects

Photo: Pixabay

Canadians are just not ready to turn to crickets as a food source.

Canada is home to the largest cricket farm in the world, located in London, Ontario.

Aspire Food Group, a leader in insect agriculture, launched its 150,000-square-foot facility in 2022 with much promise. Yet, just two years later, the company has laid off 100 of its 150 employees, raising questions about the viability of insect farming in Canada.

While the facility produces crickets as a pet food additive for the domestic market, most of its output is shipped to South Korea for human consumption.

Layoffs are devastating for those affected, but Aspire’s struggles underscore broader challenges facing the insect farming industry. While insect-based protein is often touted as a sustainable alternative, it has yet to gain a significant foothold in Canada’s food landscape. Although concerns about sustainability and reducing greenhouse gas emissions in agriculture are important, cultural resistance and market realities continue to pose significant hurdles.

Crickets offer undeniable environmental advantages. Compared to traditional livestock, they produce up to 30 to 60 times less CO2-equivalent emissions, require minimal water, land, and feed, and are considered one of the most sustainable protein sources.

Yet, the road to consumer acceptance is fraught with challenges. The “yuck factor” associated with eating insects remains a powerful deterrent for many Canadians, making it difficult to see insects as a viable dietary choice.

Public perception hasn’t been helped by government involvement. Aspire’s facility received $8.5 million in funding to cover much of its construction costs, sparking criticism about why taxpayers subsidized a project that, so far, does not feed Canadians.

While this could change in the future, the current reliance on export markets reinforces skepticism about the industry’s local benefits.

Meanwhile, conspiracy theories surrounding insect consumption have gained traction. Some claim a globalist agenda to replace traditional proteins with bugs despite no evidence supporting such claims. Still, government actions, like the public funding of Aspire’s facility, inadvertently fuel mistrust.

Insects are a resource-efficient protein source, but food is deeply tied to culture and tradition.

Changing protein preferences is a gradual process, and it’s unlikely that insects will significantly displace meat or dairy in Canadian diets anytime soon. Meat consumption remains culturally entrenched, and demand for traditional animal proteins is expected to remain strong for the foreseeable future.

While supporting innovative projects like insect farming, Canada must also focus on making traditional protein production more sustainable. Initiatives like the Canadian Roundtable for Sustainable Beef, which aims to cut sector emissions by a third by 2030, demonstrate how technology and innovation can improve the environmental performance of existing industries.

In New Zealand, researchers are developing a vaccine to reduce methane emissions from cattle, showcasing another promising pathway for reducing agriculture’s carbon footprint without requiring radical shifts in dietary habits.

A balanced approach is more practical and aligns better with consumer preferences. Canadians are motivated to make environmentally conscious choices, but expecting widespread adoption of insect-based proteins is unrealistic in the near term. Emphasizing improvements in both traditional and alternative protein production will help create a more sustainable food system that respects cultural norms while addressing climate change.

Aspire’s struggles serve as a reminder of the complexities involved in transforming food systems. While insect farming has potential, its success in Canada will depend on bridging the gap between sustainability goals, cultural realities, and market demand.

Sylvain Charlebois, a Canadian professor and researcher specializing in food distribution and policy, is a senior director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.