CRFA: Food tax fairness missing from budget

March 30, 2009, TORONTO – The budget announced last week shows that the Ontario government is committed to making the transition to a single sales tax as painful as possible for the province’s foodservice industry and its customers, says the Canadian Restaurant and Foodservices Association.

CRFA says the budget will:

• increase taxes on basic restaurant meals under $4.00;
• deny consumers the savings they should receive when the tax on beverage alcohol purchased from restaurants is cut from 10 per cent to eight per cent;
• delay access to input tax credits on food and beverages for five to eight years for many businesses, and withhold other key input tax credits such as energy for some foodservice operators;
• eliminate the $1,500 processor credit businesses receive each year for collecting the provincial sales tax.

“It’s death by a thousand cuts for Ontario’s restaurant operators,”
says CRFA vice president Stephanie Jones. “Our costs are going
through the roof, sales are slowing dramatically, and this budget will
only worsen the situation for foodservice operators and their
customers.”

In this tough economic climate, the average restaurant owner in Ontario survives on a profit margin of less than three per cent of revenue – the lowest in the country. Annual revenues at the average Ontario restaurant are 13 per cent lower in real terms today than they were in 2000. At the same time, the Ontario government has mandated a wage increase that will cost the industry $265 million.
 
“Sales tax harmonization presents a perfect opportunity to restore tax fairness when it comes to food purchases,” Jones says.
 
“We are disappointed that the government has not consulted with Ontarians on this issue and that they have not embraced this opportunity to critically review the unfair application of the GST before simply embedding these flaws in a new blended tax.”
 
Until that happens, there will be little relief from the economic storm for Ontario’s 32,000 restaurant owners and the millions of people they serve each day.
 
Ontario’s 32,600 foodservice establishments generate $22.7 billion in annual sales and directly employ more than 406,000 people.