GST holiday ends soon. Whether it worked depends on who you ask

The GST tax holiday is almost over after giving many shoppers and diners a little break on their bills for the past two months.

But a new report casts doubt on whether there has been any real economic boost from the federal initiative, which temporarily eliminated the Goods and Services Tax on certain items, including groceries, beverages, and restaurant meals from Dec. 14, 2024, to Feb. 15, 2025.

Payment system provider Moneris says spending patterns it tracked during the first half of the tax break show a slight decline in overall spending, transaction count, and transaction size from Dec. 14 to Jan. 15 compared to the same period a year ago.

“While the tax break aimed to spur spending, Moneris’ data shows it may have unintentionally slowed it down. With a three per cent decline in overall transaction sizes year-over-year, the data suggests that the break may not have had its anticipated effect,” said Sean McCormick, Moneris’ director of business development.

However, Moneris says there were some exceptions.

“While the tax holiday didn’t lead to a broad consumer spending surge, it did spark growth in certain retail categories, such as children’s apparel, where transaction count rose by eight per cent. This shows that while the policy’s impact was limited, it did create some opportunities for targeted growth,” McCormick added.

The results of the Moneris report are not a surprise to Ryan Mallough, vice president of legislative affairs with the Canadian Federation of Independent Business.

He says an ongoing CFIB survey suggests their members have seen little benefit from the GST break.

“The reality is, only five per cent of them found that it did give them a spending boost of two per cent or more, year over year. And 70 per cent saw no change,” he told 1130 NewsRadio.

“Our view on this is that it was a big headache to get it going and it seems it was for very little return,” he said. “It didn’t really seem to get more people into the store. If anything, it may have shifted when they bought but it did not shift how much they bought.”

The Moneris report also suggests spending on dining out was down through the first half of the GST holiday, with its data showing a six per cent decrease for restaurants and a one per cent drop for fast food places.

“Our data shows a decline in both transaction count and average spend, likely reflecting post-holiday budget tightening. This is a good reminder that consumer behaviour varies widely by category, and tax exemptions may not deliver a universal lift,” said McCormick.

However, this contradicts assertions from Restaurants Canada that there was a boost in dining and traffic in B.C. and Alberta during the first weeks of the tax break.

“Seeing Albertans and British Columbians embrace the tax relief and treat themselves to a meal out is really encouraging, especially as we navigate a climate of economic uncertainty,” said Mark von Schellwitz, vice president for western Canada at Restaurants Canada, in a Jan. 20 statement.

“We urge the federal government to make the GST and HST tax break on prepared food permanent.”

Moneris’ report says the decline it tracked in spending may be the result of “broader economic factors” while also suggesting the GST holiday may have been poorly timed.

“The mixed results possibly highlight that timing plays a key role. With the tax break coinciding with the latter half of the holiday shopping season, many consumers may have already made their purchases, leaving limited opportunity for a significant impact on spending,” said McCormick.

“Its short two-month window likely further curbed the opportunity for consumers to plan and make meaningful purchases.”