Restaurants disappointed by broken promises on HST
FOR IMMEDIATE RELEASE
March 2, 2010
VICTORIA - British Columbia's restaurant industry has gathered nearly 200,000 signatures opposing the new tax on restaurant meals that will result from the HST, but today's budget ignores the concerns of these business owners, their employees and their customers.
"The province broke a promise to our industry when they introduced the HST, and today they have broken another one by offering nothing in the budget to lessen the impact on our industry," says Mark von Schellwitz, Vice President Western Canada for the Canadian Restaurant and Foodservices Association (CRFA).
During the last election the B.C. government promised the CRFA in writing that they would not introduce the HST or change taxation on food without consultation. Then, September's budget speech included a promise to work with the restaurant industry to mitigate the negative impact of the HST. So far the government has refused to act on any of the industry's recommendations.
British Columbia has always taxed food fairly, but sales tax harmonization requires a new 7% tax on restaurant meals while most of the food sold by grocery stores - which increasingly compete with restaurants - remains 100% tax free.
"We know from the GST experience in 1991 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 consumer habits forever," says von Schellwitz. "This budget does nothing to address the problems the HST creates for restaurants or to protect the thousands of restaurant jobs that are at stake once the new tax is implemented."
While capital-intensive industries will benefit from input tax credits under the HST, restaurants will not because their largest input costs are labour and food.
Related statistics:
- The restaurant and foodservice industry is the fourth-largest employer in British Columbia, providing 163,000 direct jobs in communities across the province.
- A drop in sales led to the loss of 10,500 jobs in the restaurant industry in 2009.
- CRFA estimates that the sudden price hike caused by the HST will cut 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, gross domestic product the same year fell by 2%.
- GST implementation led to a permanent decline in the restaurant industry's share of the food dollar.
CRFA is one of Canada's largest business associations, with 33,000 members representing restaurants, bars, caterers, institutions and other foodservice providers. Canada's foodservice industry employs more than one million people in communities across the country.
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