Majority say they’ll cut back on labour in response to sales tax starting July 2010
Fiona Anderson
Sun
More than 90 per cent of restaurant owners in British Columbia who responded to a survey said they would be negatively impacted by the province’s new harmonized sales tax, coming into effect in July 2010.
Seventy-one per cent said they would have to cut back on staff or staff hours, the survey by the Canadian Restaurant and Foodservices Association found.
Labour “is one of the few variable costs that [restaurants] can control, so that’s usually the first thing to take a hit when sales go down,” said Mark von Schellwitz, CRFA’s vice-president for Western Canada.
The problem is that in B.C., food at grocery stories, including prepared foods such as frozen pizzas, are tax-free, von Schellwitz said. But food from a restaurant, including a pizza parlour, is not.
Restaurant food is already taxed because it is subject to the federal goods and services tax of five per cent, he said. With the HST — which will combine the GST with the seven-per-cent provincial sales tax — the tax on the food portion of the bill will increase to 12 per cent, and restaurants will become even less competitive compared to store-bought food.
“We just want all food to be treated equally,” von Schellwitz said.
Tax on alcohol with a restaurant meal is currently 15 per cent, the five-per-cent GST plus a 10-per-cent social services tax. Von Schellwitz said he understands that under the new HST, the tax on alcohol will drop to 12 per cent.
But given that 80 per cent of restaurant receipts are for food and 20 per cent for alcohol, that drop will have only a small effect.
The CRFA was to meet with Finance Minister Colin Hansen today to discuss what can be done to fix what the CRFA is calling “this major tax shift.”
But the provincial government’s hands may be tied, as under its agreement with the federal government, it has only a limited ability to provide point-of-sale rebates to replace exemptions that currently exist. In announcing the HST, the province opted to provide rebates for children’s clothing, books, gas, and to a limited extent, new home sales.
Jock Finlayson, executive vice-president of policy with the B.C. Business Council, agreed that the restaurant sector faces a challenge as the extra tax on restaurant food widens the difference between eating out and eating at home.
But the restaurant industry survived the imposition of the GST in 1991, which when first introduced was seven per cent.
Finlayson believes that while there may be an initial impact on sales, the number of people going out to eat will revert back to its current growth trend.
“I don’t think the consequences are likely to be as severe as they’re fearing,” Finlayson said.
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