The federal government’s decision to pause the GST and HST over Christmas and early in 2025, and give a majority of Canadians $250 per person in April, will boost consumer spending and benefit retailers, says the Retail Council of Canada.

“We’re expecting it will bring several billions of dollars in federal stimulus in several forms, whether it’s the tax rebate for the goods listed or the $250 cheques going out to most Canadians,” said Matt Poirier, the RCC vice-president of federal government relations, in an interview with Connect Canada CRE.

The RCC called the efforts a welcome step that will help Canadians save money and provide support for the retail sector when it is most needed.

“It’s a pretty massive stimulus that’s targeted almost exclusively towards retail,” said Poirier. “So, we think that it will be very significant in terms of driving sales and whatnot in retail outlets.”

Poirier said the tax waivers will increase foot traffic at retail locations and benefit retailers during traditional good and bad times.

“While now is the busiest time of year for retailers, right after the holidays is the quietest time, and that’s usually when they struggle the most,” he said. “So, the fact that this benefit extends through until mid-February covers that whole lull, so we’re hopeful that that will really drive sales at the most challenging time of the year. Between the money coming in, the foot traffic and that extension of the benefits for that period, we’re thinking that those are all positive.”

The measures include a two-month suspension of the GST and HST on items such as Christmas trees, children’s clothing and toys, beer, wine, and restaurant meals, alongside a $250 tax-free cheque to be issued to most working Canadians in April.

But the RCC is disappointed that the tax relief does not cover a broader range of goods. Poirier said it would have been nice if the benefits applied universally rather than only to holiday-themed items and food.

Still, he added, retailers of other goods will benefit from the distribution of the $250 cheques as consumers use the money to purchase other items not on the tax-free list.

The RCC also would have preferred that retailers received more notice of the tax waivers and $250 cheques, providing additional time to adjust point-of-sale systems and other related administrative processes. The RCC also would have preferred that the tax pause apply to provinces, like B.C., Saskatchewan, Manitoba and Quebec that have their own sales taxes and do not harmonize them with the GST. (Alberta does not have a provincial sales tax.)

Accordingly, the RCC would have liked to see a permanent pause of the GST and HST.

“It’s always better to have permanent, foreseeable circumstances,” said Poirier. “Especially in the tax system at this point, it’s a big challenge for retailers to get ready in three short weeks for these changes. First of all, they have to go through that list to see if their goods are captured.

“They have to make sure they get all the interpretation right, and then they have to change all their point-of-sale systems and back-end accounting and all those processes accordingly. That’s a lot of work to do in three short weeks. That’s three short weeks for two months of benefit.”

But despite the immediate challenge of adjusting, the upside will be more sales.

“So, it’ll be worth it in the end,” said Poirier.

Meanwhile, the Canadian Chamber of Commerce and other industry groups also lauded the federal government’s moves. The chamber praised Ottawa for recognizing the affordability challenges that many Canadians face.

But like the RCC, the chamber called for a more comprehensive approach to tax relief and other economic stimulus.

“The Liberals are still missing a clear plan to revive our economy,” the business group said.

The federal government estimates that 18.7 million Canadians will qualify for the cheques, which are available to individuals who earned up to $150,000 in net income in 2023 and filed their taxes. Together, the measures will cost $6.28 billion—$1.6 billion for the tax break and $4.68 billion for the direct payments.

Bay Street analysts expect the moves to provide a short-term economic boost, but they warned of its impact on monetary policy, the Globe and Mail reported.

“The GST/HST rebate will drive additional spending,” wrote Benjamin Reitzes, managing director at BMO.

However, Royce Mendes of Desjardins Securities said the stimulus would likely prevent the Bank of Canada from making another large larger interest-rate cut in December.

While unveiling the tax waivers and $250 cheques, Prime Minister Justin Trudeau the plan as a way to help Canadians manage the rising cost of living.

“These are things that recognise that people are squeezed, and we’re there to help,” Trudeau said at a news conference. “Our government can’t set prices at checkout, but we can put more money in people’s pockets.”

Pictured: Eaton Centre, Toronto

Photo: Destination Toronto