October 31, 2007

TORONTO – The Canadian Restaurant and Foodservices Association welcomes the broad-based tax relief announced in yesterday’s economic statement by federal Finance Minister Jim Flaherty. 
The GST cut effective Jan. 1, 2008 will mitigate the damage this flawed tax continues to inflict on Canada’s restaurant operators.  The GST is applied to food sold from restaurants, while identical or similar products sold by grocery stores are GST exempt. 
“A reduction in the GST is a step toward fixing the flaw in the GST that results in the same or similar food being taxed differently, depending on where it is purchased,”  says Joyce Reynolds, CRFA Executive Vice President of Government Affairs.  “A carton of milk sold in a cafeteria is subject to GST, but the same product sold at a grocery store is tax-free.”  
Harmonizing the GST with provincial sales taxes would make the situation even worse, by creating a new supertax that would wipe out provincial sales tax exemptions on restaurant meals in British Columbia and Saskatchewan, and on meals under $4.00 in Ontario.
“Tax harmonization would shift a significant tax burden onto consumers, who would pay more for a wide range of goods and services, from children’s clothing and restaurant meals to snow removal and haircuts,” says Reynolds.  “ We are pleased the government has instead opted to provide Canadians in every region of the country with broad-based tax relief.”
Retroactive personal income tax cuts, particularly those directed at low income Canadians through an increase in the personal income tax exemption, are welcome because they reduce the penalties for working.
Much-needed business tax cuts will help restaurant operators who are being squeezed by mandated labour cost increases, rising food costs, and lacklustre sales in many areas of the country due in part to the dramatic decrease in visitors to Canada.  The average profit margin in the foodservice industry is just 3.8% of operating revenue, according to Statistics Canada.  

Joyce Reynolds, Executive Vice President, Government Affairs (416) 649-4219
Jill Holroyd, Vice President, Research and Communications (416) 649-4217

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