GST/HST holiday yields minimal sales boost for small businesses

Limited impact on sales

While there was a bit of a boost with the implementation of the GST break, according to CFIB's data, a mere 4% of retail businesses and 15% of those in the hospitality sector reported sales growth during the tax holiday. The majority (66%), indicated that their sales remained consistent with the same period in the previous year.

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Administrative burdens and confusion

Many small businesses faced significant challenges implementing the tax exemption. Tasks such as reprogramming point-of-sale systems, managing increased administrative workloads, training staff and addressing customer inquiries added to their burdens.

"For many retailers, it was an administrative nightmare to get point-of-sale machines compliant just before Christmas, let alone sort out which LEGO sets the holiday applied to, or how many items in a gift basket had to be tax-free for it to qualify," Dan Kelly, CFIB president, said in a press release.

Cole Thorpe, owner of Saskatoon clothing store Prairie Proud, told CTV News the GST 'holiday' caused more frustration for his customers than relief. “If anything, it just led to more confusing conversations with our customers in-store who thought it applied to everything,” Thorpe said.

Further complicating matters, the Canada Revenue Agency (CRA) and Finance Canada provided conflicting information regarding the mandatory nature of participation in the GST/HST holiday. This inconsistency led to confusion among business owners. In response, CFIB nominated the GST holiday for its Paperweight Award, highlighting it as one of the country's worst examples of red tape during its 16th annual Red Tape Awareness Week.

Call for leniency and support

As businesses transition back to standard GST practices, CFIB urges the CRA to show leniency. They recommend waiving taxes owed, penalties and interest for errors made in good faith during the rushed implementation. Additionally, CFIB suggests that the government provide affected businesses with a $1,000 credit in their GST/HST accounts to offset the programming and administrative costs incurred. Kelly acknolwedged that the GST holiday put extra pressure on small businesses in particular.

"The past few months have been incredibly challenging and filled with uncertainty for many small firms," Kelly said.

Survey methodology

The findings are based on CFIB's "Your Voice – January 2024" online survey, conducted from January 9 to 31, with 2,345 respondents.

Sources

1. CTV News: Did the two-month GST holiday make a difference for Canadian businesses? (Feb 14, 2025)