With only 24 hours left until the federal government’s GST holiday kicks in, small retailers say they’re preparing as best as they can for what could be a period of shopping chaos.
The tax break, announced on Nov. 21, applies to goods such as prepared foods and restaurant meals; children’s clothing; diapers; footwear; car seats and toys; jigsaw puzzles; video game hardware; print books and newspapers; and Christmas trees. CBC News has a full breakdown here.
For the small businesses selling those items, the tax break could be a holiday season boon — but some think it’s more trouble than it’s worth, with retailers preparing to reprogram their cash registers and sale systems, and trying to make sense of which goods are eligible.
Jennifer Leblond, the owner of Calgary shop Steeling Home, describes her business as a modern general store, one that sells everything from pet supplies and cookware to rugs, toys and jewelry. She says she let out “a big sigh” when the GST break was announced.
She, her store manager, and a technician will make the changes to her point-of-sale system on Friday night. She has already had some trouble deciphering whether the tax break will apply to products that don’t easily fit into a single category.
“We’re trying hard. We’re not throwing our hands up in the air. We’re going to make a valiant attempt, but there’s going to be some errors,” said Leblond.
“It’s hard, because I do appreciate the gesture,” she said. “I just don’t think they understand how much work it is to do it.”
Headaches ‘far outweigh’ sales benefit for some retailers
Small business lobby groups are also concerned that the policy will cause chaos and confusion, both for retailers and customers. Dan Kelly, president of the Canadian Federation of Independent Business, told CBC News that the lead-up to the GST break has been “a giant mess.”
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“Tax reductions generally are a wonderful thing. They arm consumers with more dollars. Those dollars can be spent in small and medium-sized firms,” said Kelly.
But he stressed that small businesses have been given only a two-week window to implement the changes. Some are trying to make sense of which products are exempt from the tax break (“A LEGO set oriented at children is GST/HST exempt, but a LEGO set oriented at adults is not,” Kelly notes) and others still are struggling with compliance costs.
The tax change is also not just as simple as clicking a button, explains Kelly. Point-of-sale systems have to be updated, computers and registers need to be reprogrammed — and those changes must be made by a professional after closing time on Friday and before stores open the next morning.
“They can’t do it before. They can’t do it too late. It’s one evening across the country and everybody is going to be looking for the same technicians to be able to make this happen,” he said.
Kelly also has concerns that customers will try to return items they’ve already bought to repurchase them and qualify for the tax break.
“For the most part, retailers believe that the headaches far outweigh any incremental sales benefit that they might get as a result of this holiday,” he said.
‘Worst-designed’ tax policy in a decade, says economist
Ottawa-based economist Mike Moffatt called the GST holiday “probably the worst-designed tax policy or tax initiative we’ve seen in a decade.”
“There’s hundreds and hundreds of items like this where [you have] two very similar items. One gets a tax break and one doesn’t,” he said.
Moffatt and Kelly share the concern that some businesses will make mistakes in implementing the tax break and then find themselves in front of the Canada Revenue Agency in the spring.
The GST break will also likely cause some inflationary pressures, according to Moffatt — but “that doesn’t necessarily mean it’s not worth doing.”
“A lot of the extra spending we’ll see from this tax cut is not a new spending, but it’s just basically people pushing forward spending,” he said.
“Inflation isn’t all that high right now, but that is a kind of concern as well — that extra consumer spending could give the ability for retailers to jack up their prices and try and capture some of this tax cut,” he said.