With just one week left until Canada’s GST “holiday” ends, new data suggests it may have had little impact in its first month.
Moneris looked into spending patterns between Dec. 14, 2024, when the tax “holiday” began and Jan. 15. Comparing the data to the same period in 2023-24, the payment processing firm found no year-over-year increases in spending
In fact, the data showed purchasing may have slowed during that time.
Across Canada, the data showed overall spending was down by four per cent, with the transaction count down by one per cent and the transaction size down by three per cent.
“Consumers probably loved that they were paying… less in these categories, but they didn’t love it enough to respond to it by going and doing more of what they just did,” Sean McCormick, director of business development for data services at Moneris, said in an interview.
“If they went for dinner and they saw, ‘Oh wow this was GST-exempt, I forgot about that,’ it wasn’t enough to make them go and reward that merchant or restaurant with another visit.”
Transaction count refers to the number of transactions that occurred during the period Moneris studied, McCormick said, while transaction size refers to the total amount spent when the products were sold.
“If transaction count was down five per cent, that means there were five per cent fewer transactions happening in that province or category in that period versus the period last year,” he said.
McCormick added declines in the transaction size were expected because with GST or HST lowered on items, a bill’s total would go down.
The data also shows even with some provinces, like Ontario, deciding to match the tax “holiday” and remove provincial sales tax from items not covered by provincial rebates, the number of transactions saw a decrease of three per cent.
In Ontario alone, total spending was down eight per cent.
McCormick said he’s not surprised transaction count was down across multiple categories, given that consumers had already endured a “really challenging” 18 months” due to the impact of inflation on prices.
While he noted data from Black Friday saw a 11 per cent increase year-over-year in spending across Canada, it may have left Canadians taking their “foot off the gas” during the first month of the tax holiday.
“Consumers are tapped out right now and you can’t take blood from a stone,” he said.
“If you offer a consumer a 13 per cent discount on something and they’re having a hard time paying for that thing in the first place, it’s not surprising that they didn’t bite at the 13 per cent discount.”
Children’s clothing sees boost, as restaurants drop
Not all businesses saw a decline in sales during the tax holiday, the data notes, with some retail categories seeing modest growth.
Children’s and infant apparel stores were among those that benefitted, with transaction counts rising by eight per cent, although though transaction size stayed the same, likely due to the cost of sales taxes coming off the bill.
Family clothing stores were the only category in the study to see an increase in transaction size, the total bill at checkout.
McCormick suggested the two per cent increase may be because clothing for children and babies was included in tax holiday (adult clothing was not exempt), which may have led parents to spend a bit more on tax-exempt items.
Family clothing stores also saw the transaction count drop by four per cent.
McCormick added while some businesses saw a boost, restaurants did not. According to the Moneris data, restaurants saw a six per cent drop in transaction count, while fast food businesses saw a decline of one per cent.
The transaction sizes for restaurants and fast food establishments, or total bill, fell by five and eight per cent respectively, given the removal of GST or HST on most items sold by the businesses.
Moneris expects to collect more data once the holiday concludes to get more insight into the effectiveness of the tax break.
McCormick said interpreting the success of the program will depend on how success is measured.
“If the success criteria (by the government) was to drive more business to Canadian businesses, small businesses, medium-sized businesses, if that was the objective it appears that that probably didn’t happen,” he said.
“If the objective was to offer a… discount to Canadians in some hand-picked categories, then maybe, maybe a success.”