okay so you heard there's a GST holiday coming up no federal tax for two months on a whole bunch of stuff from Ice Cream to dollhouses to Christmas trees and you're wondering okay but how much money am I actually going to save because one guy tells you this we're going to remove the GST HST from groceries 100% of groceries all groceries and the other guy tells you this today what we have is a TW Monon temporary tax trick and you just love for someone to do the math for you well I did and I found
there's something very important that the government isn't mentioning about this tax break that undercuts how much you may actually get back at the cash register let me explain so to understand where the government's promise might fall short of expectations you first have to understand how the promise even works for 2 months Canadians are going to get a real break on everything they do starting December 14th and running until February 15th so that's two full months the federal government is removing the GST on a whole basket of goodies so that's 5% off prepared foods that you
might buy in a grocery store like salads and sandwiches snacks like chips candy chocolate fresh baked goods beer wine and premixed drinks under 7% alcohol all restaurant meals uh kids clothes shoes hats gloves toys like dolls Lego stuffed animals board games video games books newspapers Christmas trees car seats diapers these are things that recognize that people are squeezed and we're there to help I think this list that they've drawn up is designed to appeal to middle class people they're trying to throw them a bone and say hey save a little bit of money this holiday
season but it's too big a list to describe exhaustively because every category also has kind of weird exceptions like you wouldn't think kids clothing would include baby bibs but it does for shoes there's a hard limit on how big they're allowed to be to qualify you think books is a pretty simple category but it's not and the food section well let's just say it gets very specific even video games only count if you're buying the physical media not if you're buying the game online so like I said it's a big list but you can think
of it in two broad categories food virtually all food and a bunch of kids stuff clothes toys diapers car seats and then Christmas trees just because and it comes just in time for the holidays when people are going to want to be entertaining and wait it gets better because while the GST applies across the country so that's a five % federal tax that will disappear for two months there's a bonus reduction in five provinces all taxfree removing the GST and HST yes in Ontario and all of Atlanta Canada where the GST is already combined with
the provincial sales tax you get that HST removed so in Ontario's case that's 133% when you combine the two and in Atlanta Canada the hsd is even higher at 15% the government estimates that people in provinces with the HST will have like a doubled savings right so there's quite a disparity between what Canadians in those HST provinces will be saving in the two-month period between December and February and what people in the other provinces will be saving now this is where we kind of want to be really cleari about what the government is promising here
because politically these five provinces matter you can't win an election if you don't win Ontario and the Liberals are seeing support slip away in Atlantic Canada and I'm not sure it's super obvious that this bonus isn't quite as big as advertized and I'll show you why so my wife and I live in Ontario and she bought shoes for the kids recently here's the receipt note The Cost $32.9 Plus 608 in shipping if I was already paying 13% in HS so 3296 + 608 equal 3904 times 133% I should be paying $58 in tax but I
didn't pay that I only paid 195 why is that because and I'll show you the map so 195 divided by 394 time 100 that shows me that I paid almost exactly 5% in tax so I pay the GST but not the full HST because in Ontario you already don't pay any provincial tax on kid shoes or diapers I bought these last night and here's the receipt $15.99 and the HST was 80 that's 5% tax not 133% and then I bought this bean salad and it says right here on the receipt that I paid 5% tax
that's all I paid in Ontario it was already the case that things like books kids clothing and Footwear car seats booster seats diapers newspapers they were all already exempt from the provincial portion of the HST and so far as I can tell this is also true to varying degrees in different parts of Atlantic Canada as well in New Brunswick books for example are already exempt from the provincial part of the HS the federal GST is already the only tax you pay in PEI it's been true for years that you don't pay the provincial part of
the HST on children's clothing footwear and books and we can do a side-by-side comparison of the Pei exemptions from 10 plus years ago with the brand new GST holiday announcement notice any similarities the language is tailor written basically copied to mirror what has already been in place to a te so the 13 to 15% Savings in some provinces that the government is advertising isn't quite that high but to be fair the proposed GST holiday does expand tax exemptions in every Province even the ones I've listed for example I don't know of a single province that
has a tax exemption on Nintendo switches but there will be one at least on the GST portion come next month so let's figure out how much money you are likely to save once this kicks [Music] in so let's start with food because this is where I think most of us feel the biggest daily pitch according to one research lab's annual food report a typical family of four is likely to spend just over $116,000 a year on groceries I will say that feels a little high to me I spend a few thousand doar less than that
but my kids are young young and maybe they don't eat as much so let's work with this figure $116,000 a year according to statistics Canada of that amount about a quarter is spent on foods that are taxable to begin with because and you know I think we all know this already basic groceries like eggs milk fruits vegetables meat there's already zero tax on that stuff so let's set that chunk of food aside if we figure the average family spends 25% of 16,000 which is let's say about $4,000 a year on the kinds of things that
you do pay tax on so you know we're talking pop uh junk food ice cream granola bars the prepared ready to eat food getting a 5% discount on that works out to around $200 annually more than that sometimes if you live in a province with HST but remember that this tax holiday only runs for 2 months so on groceries you're saving 16th that amount which works out to $33 that's it that's the grocery savings but let's add restaurants if you spend a 100 bucks on a meal once a week that's $5 of savings a week
for eight weeks that's $40 more in savings do you spend 20 bucks a week on alcohol let's add another dollar a week off $8 total Christmas gifts and let's go all out we're going to buy one kid $100 Lego set for another $5 off and we're going to spend $500 on a PS5 which adds another $25 of savings and then what the hell we're going to spend 100 bucks buying a new fake Christmas tree just because we can that's another $5 in savings so what are we up to now $116 in savings and there's still
more that we could add now I need to really stress this point all anyone can do here is estimate because maybe you don't buy any of those things so you save less or maybe you live in Nova Scotia where you save 15% not 5% so you will save triple our estimate or maybe you've got a newborn you go through 10 diapers a day and you're planning on stocking up so you're going to buy ,000 worth of diapers in one go you live in PEI so you're getting 15% off and that saves you $150 without even
blinking an eye everyone's mileage will vary fair but let's make one last point before we wrap this up we've already gone through a lot so I don't want to tack on too much here at the end but there are a few things that we do have to mention because they're a part of the story this is really about saying to Canadians things have been hard one criticism of this plan from the bla is that this tax relief feels transparent the Liberals have shown that when they need billions of dollars in order to literally buy votes
they find it a lot of critics are saying the government is just trying to buy your vote right now they're trying to get you back on side with the Liberal Party they're trying to get you back in the fold a perhaps bigger picture question though is whether injecting all of this stimulus money into the economy just drives inflation higher because we know more spending equals more economic activity equals higher prices and on that point we don't really know how most retailers are going to react yes prices go down effectively 5% on December 14th but maybe
the grocery store Jacks them up 1 or 2% and captures part of that reduction in GST in corporate profits Mr Harper in 20072 2008 actually reduced the GST by 1% two consecutive years inflation went up not down food inflation went up not down and ultimately no matter who Pockets most of the savings there is an opportunity cost when you don't charge tax the federal government's own estimate is that they'll be foregoing $1.6 billion in tax revenue by giving Canadians this tax break that's either a good thing if you think we already get taxed too much
or it's a bad thing if you ask yourself what the government could have spent that money on as it expects to run a deficit of $40 billion this fiscal year [Music]
