Trudeau is cooking up inflation: His GST holiday sets the stage for higher prices
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The Trudeau government has announced a temporary GST/HST holiday on select food purchases, effective from Dec. 14 to Feb. 15. Framed as a measure to help Canadians during the holidays and challenging winter months, the policy appears generous on the surface. However, a closer look reveals that its economic impact may be far less transformative than the political narrative suggests.
While the government touts the policy as meaningful relief, the actual savings for most Canadians are modest. Over two months, the average household could save just $4.51 on grocery taxes and $19.51 on dining out. For a few, particularly those splurging on luxury dining or alcohol, the savings might add up. For the majority, however, this “GST vacation” feels more like a token gesture than significant economic support.
One group stands to gain significantly from this policy: restaurants. Canadians already spend a record $187 per month dining out, and the tax break could encourage even more dining out during the holiday season. For instance, a $29 burger meal through Uber Eats might yield more savings than cooking a homemade holiday dinner. Meanwhile, the cost of grocery staples like ground beef remains unchanged.
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This unintended prioritization raises questions about the policy’s alignment with its intended purpose. Holidays are traditionally a time for home cooking and sharing meaningful meals with loved ones. By making dining out more financially attractive, the measure risks undermining the cultural and economic value of preparing meals at home.
Taxing food, particularly necessities like groceries, has long been controversial. Many argue it’s regressive and even immoral, as food is a basic necessity. While the temporary removal of GST on select grocery items is welcome, its short-term nature introduces confusion and risks unintended inflationary effects.
Retail food pricing operates on razor-thin margins, and grocers may adjust prices upward to offset the perceived tax exemption. A permanent GST exemption, by contrast, would avoid this uncertainty, providing clarity and stability for both consumers and retailers. Instead, the two-month tax holiday risks creating temporary distortions in food pricing that could exacerbate inflation in an already strained food economy.
Adding to the mix is the government’s decision to issue $250 cash transfers to millions of Canadians. While these payments may offer short-term relief, they also inject additional demand into an already overheated economy. Without addressing structural issues in food supply chains, these payments risk driving up prices further, worsening affordability for all Canadians.
The combination of these measures – a temporary tax holiday and direct cash transfers – reflects a pattern of short-term solutions that fail to address the root causes of food inflation.
Another challenge is the lack of clarity surrounding the tax holiday. In most provinces, there is little transparency about which grocery items are taxed. Quebec is the exception, requiring signage to indicate taxed items. Without clear guidelines, Canadians may struggle to understand which items qualify for the exemption and how much they’re actually saving. The temporary nature of the policy only adds to the confusion.
Prime Minister Trudeau’s GST holiday casts him as Canada’s Santa Claus, delivering a modest gift to Canadians just in time for the holidays. While the measure may be appreciated by some, its poorly targeted and short-term nature raises serious concerns. By incentivizing dining out over home cooking, the policy risks undermining family traditions and worsening long-term affordability challenges.
Though well-intentioned, the gesture falls short of addressing Canada’s deeper issues with food affordability and inflation. What Canadians truly need is comprehensive, structural change – such as a permanent GST exemption on all grocery items. This would provide clarity, stability, and meaningful financial relief without the unintended consequences of short-term fixes.
In the end, Canadians deserve more than a holiday season band-aid. Addressing food inflation and affordability requires thoughtful, long-term policies – not a fleeting tax holiday or cash payments that risk fueling higher prices.
Trudeau may play the role of Santa Claus this season, but lasting solutions require leadership that looks beyond the immediate political calendar. A GST exemption on all grocery items would have been a far better gift for Canadians – a permanent measure to support families and stabilize the food economy.
Until then, Canadians are left with a confusing, short-lived policy that does little to ease the burden of rising food costs.
Dr. Sylvain Charlebois, a Canadian professor and researcher specializing in food distribution and policy, is a senior director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast. He is frequently cited in the media for his insights on food prices, agricultural trends, and the global food supply chain.
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