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Restaurant Industry Applauds Conservative's Plan to Cut GST |
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Written by Wire Services
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Thursday, 01 December 2005 |
The Conservative Party plan to reduce the GST from 7% to 5% comes as welcome news to Canada's restaurant operators, who have long protested the unlevel playing field created by this unfair tax. The GST was added to restaurant meals in 1991, but most grocery store purchases remained tax-exempt.
"The GST created an unfair situation in which a product is taxed solely on the basis of where it is purchased," says Douglas Needham, President of the 25,000-member Canadian Restaurant and Foodservices Association (CRFA). "For example, when consumers buy a small carton of milk at a convenience store it's tax-free, but when they purchase a carton of milk at a restaurant it's subject to the 7% GST. The situation worsens each year as more and more prepared, ready-to-eat meals become available tax-free at grocery stores."
The introduction of the GST created the worst year on record for the restaurant industry. Sales fell by nearly 11% and 42,000 Canadians lost their jobs in the restaurant industry that year. An Ernst and Young study concluded that three-quarters of the loss in sales was a direct result of the GST.
"Economists and Finance Department officials love the GST because it's a ruthless tax machine," says Needham. "But it discourages consumer expenditures and punishes the small businesses which dominate the retail and foodservice industries."
In recent years, restaurant operators have been struggling with a series of setbacks, including a drastic drop in tourism. The number of visitors to Canada has plummeted by nearly 25% so far in 2005 compared to 2000, according to Statistics Canada. Over those five years, real foodservice sales in Canada have grown by just 1.6%.
"Some relief from this unfair and regressive tax is long overdue for restaurant operators and their customers," says Needham. |
