Restaurant owner can't swallow HST

Columbia Valley Pioneer
January 18, 2010

Dear Editor:

I write this letter as an individual and a restaurant owner.

The proposed HST, and the addition of seven percent tax on all items sold in restaurants, is bad for everyone.

The extra tax and the instant inflation it will create, is bad for restaurant customers. The decrease in sales and the increased pressures to cut costs, will be bad for restaurant employees and owners. Customers are only willing to pay a certain amount for a cup of coffee, an ice cream cone, or a sandwich.

The additional seven percent tax pushes many of these items into a price range where there will be resistance, and people will either decrease how often they buy these items or stop buying them altogether.

This will be further exaggerated in our area because of our proximity to Alberta, which will continue to only have five percent tax on restaurant meals.

Our provincial government tells us that the prices of items will go down because businesses will be saving so much money from all of the “embedded” PST they currently pay, and that these savings will be passed onto the consumer.

For my restaurant, less then $600 a year is paid directly in PST, and it is highly unlikely that any of my suppliers will be decreasing their prices because of their “embedded” savings. The savings my business will have (all $600), will do little to offset the additional $30,000+ in tax I will have to collect from my customers. 

Our provincial government tells us that the forestry, mining, and construction industries will be so much stronger because of the “tax savings” and that those workers will spend more money in restaurants.

The chances of any tax savings trickling down to the employees is small, but even if it were, all of the extra tax being paid on previously PST exempt items (like food from restaurants) will eat up this money several times over. 

What makes the HST an extra bitter pill for the restaurant industry is that most food sold in grocery stores has zero percent tax, while food from a restaurant will soon see 12 percent tax.

Much of the food from restaurants is prepared locally from scratch, and in increasing cases with local ingredients.

The restaurant industry is an extremely labour intensive industry, employing the people who live and work in your community. It is estimated that for every $1.00 spent in a restaurant, it results in $1.85 in spending in the economy, which is above the average for most industries. 

In many industries, the “value-added” component of the GST or HST (the amount which is remitted to government) is very small. For the restaurant industry almost the entire amount of tax collected is considered “value-added”.

With the implementation of the HST, restaurant customers will be paying in excess of $490 million in additional tax, and almost all of this money will flow directly to the governments, and this is at the cost of an industry which operates on extremely tight margins and with low profits.

There could not be a worse industry to shift such a huge tax burden onto. I have yet to hear of a valid reason why the restaurant industry should be taxed more, and other industries less.

The vast majority of restaurants are independent small businesses, owned and operated by the people within your community, and the earnings and profits are reinvested locally.

Many of the owners and shareholders of the large timber and mining companies do not live in your community, and the earnings and profits are not reinvested locally.

The implementation of the extra seven percent tax on restaurants is not fair, it is not economically sound, and it is a case of the provincial government helping certain industries, at the direct cost of restaurant customers, employees, and owners.

You can sign a petition and contact your MLA by visiting www.nomealtax.ca 

Gerry Taft, Owner

Gerry’s Gelati, Invermere