Listen, I’ve known a few government economists, and they’re all pretty bright guys. I therefore wonder: was the prime minister’s bright new idea for a Yuletide federal sales tax exemption on fun stuff run past any of them? The PM announced Thursday morning that the list of non-taxable items under the GST/HST will be expanded for a period of two months beginning on Dec. 14, 2024. There can be no doubt that the temporary exemption is intended to have a Christmas-y pumpkin spice flavour: Santa is lifting the tax specifically on artificial and natural Christmas trees, along with wine and beer (but not spirits), prepared meals, snacks, desserts, board games, children’s clothing and footwear, dolls, jigsaw puzzles, and video game consoles and media.
Of course, it’s now Nov. 21, and the more responsible among you will have completed at least some of your Christmas shopping already. Tough luck, suckers! But if you still have some of your Christmas budget left, the rational thing to do is obviously to wait until the starting gun fires … with nine shopping days to go. Even the most audacious coupon-cutter might well hesitate to leave the buying of a Christmas tree as late as the 14th. But Canada is nothing if not frugal, and one obvious effect of the tax will be to instantly freeze some spending on the listed items. Retailers must have, at best, mixed feelings. Some consumption on taxable and non-taxable items alike will be shifted forward — and indeed backward, from the spring of 2025 — into the two-month grace period.
None of this, the federal government has reassured us, will result in an overall inflation boost, however much it resembles a policy that a mad scientist would devise to increase inflation. The federal government expects to forgo $1.6 billion in revenue from the new GST exemptions. It is also applying the exemptions to the harmonized provincial sales taxes collected on behalf of some provinces, namely Ontario and the Atlantic ones. Santa Trudeau really had no other choice, since having the same base of goods and services is what “harmonized” means.
It’s great news for consumers in those harmonious places — a price break on exempted items adding up to 13 per cent in Ontario and 15 per cent in the Maritimes and Newfoundland — but in the provinces where provincial sales taxes aren’t harmonized (or where they don’t exist) only the break on the 5% GST will be available.
Meanwhile, nobody’s yet saying if the HST provinces will be reimbursed for the revenue that Santa has just decided to relinquish on their behalf — which, as a total amount, must be close to double the $1.6 billion this is costing Ottawa. Of course we’ll all celebrate a tax cut on cider, figgy pudding, and oatmeal cookies (actually, tax those infernal little pucks all you like, fine by me). When the fireworks die down, we’ll find out the administrative costs (to both governments and businesses) of this desperate stunt, which must be significant, and someone will reckon whether it simply ends up as an improvised transfer of funds to Ontario and Atlantic Canada. Then again, maybe Santa will just leave a hole in those provinces’ budgets. Can anyone check the official list and see whether they’ve been naughty or nice in 2024?
— Colby Cosh
