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With Canada’s restaurant sector bracing for an economic contraction, Restaurants Canada urges the federal government to permanently remove the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) from food.
The advocacy comes amid forecasts showing that foodservice sales are expected to decline between 0.4% and 1.5% in 2025 and 0.6% to 1.4% in 2026. Much of the decline is attributed to ongoing trade tensions with the United States, which create uncertainty for Canadian businesses.
GST Holiday Boosted Sales and Jobs
Restaurants Canada President Kelly Higginson emphasized that a permanent GST/HST exemption on food would help ease pressure on both businesses and consumers.
“We now have definite proof that the GST/HST holiday boosted sales and created jobs in the foodservice sector,” said Higginson, referring to a temporary tax relief implemented earlier by the Trudeau administration.
During that GST break, foodservice sales rose by 7.5% in January, marking the highest real growth since April 2023 even after adjusting for inflation.
Sector Struggling with Costs, Price Hikes
Despite this temporary boost, high operating costs and supply chain instability threaten the industry’s recovery. The report warns that if the current tariff uncertainty persists into 2026:
- 71% of restaurant chains plan to cut spending
- 63% anticipate raising prices
- Nearly 50% may delay key capital investments
These moves could ripple beyond the restaurant industry, affecting employment, real estate, and food suppliers across the country.
Taxing Food: A Policy Under Fire
Higginson argues that taxing an essential good like food is fundamentally flawed:
“Taxing a necessity like food is a bad approach to taxation,” she stated. “The new federal government can protect Canadian jobs and improve affordability by permanently removing sales tax on food.”
With commercial foodservice sales now forecast between $98 billion and $99 billion in 2025, down from the earlier $100 billion estimate, the organization believes immediate action is needed to prevent a deeper slump.
Looking Ahead
Restaurants Canada has expressed willingness to collaborate with Prime Minister Mark Carney’s administration on tax and economic policies aimed at job creation, sector growth, and consumer relief.
For now, the industry waits to see whether the government will act and whether food, a daily essential, will finally be untaxed at the register.
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