Open Letter: Restaurant industry urges parties to ensure food tax fairness in BC before passing HST Ways and Means Motion
December 1, 2009
TO: The Right Honourable Stephen Harper, Prime Minister
Michael Ignatieff, Leader of the Official Opposition
Jack Layton, Leader of the NDP
Gilles Duceppe, Leader of the Bloc Québécois
Members of Parliament
On behalf of the Canadian Restaurant and Foodservices Association and the over 12,000 restaurants, bars, and caterers in the province of British Columbia – as well as their employees and customers – I strongly urge you to withhold support for the HST Ways and Means Motion, until the significant concerns of a key sector of the economy are addressed.
The province of B.C. has always taxed food fairly, but sales tax harmonization requires a new 7% tax on restaurant meals. In a recent survey of our members in British Columbia, 91% said a harmonized sales tax will have a negative impact on their business. Ninety per cent of respondents said their customers will cut back on spending and 71% said they will have to cut back on staff or staff hours.
Restaurant operators are very concerned that the sticker shock of a new 7% tax on restaurant meals will chase more customers to tax-free alternatives in grocery stores and change some customer habits forever. This will mean job losses and a decrease in economic activity in the province if the government pursues harmonization without addressing the problems it creates for restaurants.
We estimate that this sudden price hike will decrease restaurant sales in British Columbia by $750 million per year, or $50,000 a year for the average restaurant. In 1991 when GST was introduced real foodservice industry sales dropped by 10.6% and average unit volume declined by 22.7%. An Ernst and Young report attributed 75% of the sales decline to the impact of the GST. By way of contrast, GDP the same year fell by 2%. By making the political decision to deviate away from a pure value-added tax, the government has done significant harm to restaurants across the country. Pursuing harmonization in B.C., where there is no tax on restaurant meals, makes matters worse.
While capital-intensive industries will benefit from significant input tax credits under the GST, restaurants will not because our largest input costs are labour and food. This means that there will be a significant tax shift towards our industry with almost no tax breaks to compensate for it. At a time when consumers already have lower disposable incomes due to economic conditions, further increasing the cost of dining out by layering on additional taxes will be devastating to our industry.
The restaurant and foodservice industry makes a significant contribution to the economy:
- Canada’s $60 billion foodservice industry ($10 billion in B.C.) represents 4% of GDP.
- The diverse nature of the industry means its employment spin-offs and economic benefits are felt in every community, not just in major centres.
- With over one million employees, foodservice operators employ more people in Canada than agriculture, forestry, automotive manufacturing and mining, oil and gas extraction combined, and they do so without government hand-outs, bailouts or subsidies.
We ask that government leaders ensure that meaningful solutions are in place for a key sector of the Canadian economy before Parliament agrees to any HST agreement.
Sincerely,
Garth Whyte
President and CEO, Canadian Restaurant and Foodservices Association
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