Selective federal tax break leaving some businesses feeling left out

The upcoming tax holiday announced by the federal government is leaving some businesses scrambling ahead of a busy season.

Last month, the federal government announced it would remove the goods and services tax for two months on a large amount of items like toys, clothing and food, with exceptions.

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The tax holiday is set to begin on Dec. 14.

"We all appreciate as a consumer, any kind of tax break," said Juanita Roos, the co-owner of Color De Vino.

"A lot of industries in Alberta will be happy, like restaurants, retail, shopping, but for us, it's a bit confusing."

Alcohol is included, but only items with less than seven per cent alcohol by volume (ABV). However, beer and malt beverages will be included in the tax break, as well as wine, cider, and sake with 22.9 ABV or less.

Color De Vino is a small Edmonton business already in its busiest time of the year, now having to manage this unexpected situation.

"We just don't have the manpower to go around the store and make any kind of mass change," Roos said. "We have an IT person on hold, but so does every other store."

"It's going to be a difficult (time)," Roos added. "If there was legislation now and they'd given us time, we could have prepared, but it's just not the right time."

The rules leave liquor stores included in the break, but not some distilleries.

"It seems strange when you go down the list of what's included in and what isn't," said Geoff Stewart, the president of Rig Hand Distillery.

"Our bottles are bought as gifts a lot and we're going to have pressure as distillers to match this 5 per cent off that's being offered on beer and cider products, and that's going to come out of our bottom line."

Breaks for breweries but not for distilleries happen often, according to Stewart.

"If beer or wine are sold through the AGLC system, there's a lower tax rate for craft producers, and we don't get that advantage," he said. "It's not like we're making a whole bunch more money than breweries are, it's not like we have some kind of competitive advantage.

"We tend to be the black sheep of the liquor industry as spirits guys, for some reason, and it's not really fair."

Rig Hand runs a restaurant as well, so they will have products included in the tax holiday, but that does mean added workload.

"And then we're going to have to spend all the man hours on February 15 and put all the GST back on again," said Stewart.

"Policies get made in Ottawa, but really, who has to do all the work to implement is us, and if we don't implement them, we're going to get offside with the government."

'Double-edged sword'

People have been encouraged to shop at small, local businesses over the holidays, but there is concern this tax break could drive people in the other direction.

"A lot of consumers might hold off spending until the GST holiday comes into effect and then they also might bulk buy," said Heather Thomson, the vice president of economy and engagement of the Edmonton Chamber of Commerce.

"In terms of inventory management, small to medium businesses are just not set up for that."

Spending more money during the tax holiday means more savings, so low-to-medium income Canadians won't reap as much benefit," Thomson added.

"It's a double-edged sword for a lot of Canadians," Thomson said. "Of course, it's going to give us some savings … but at the end of the day, the taxpayers are still going to be paying for this one way or another."

January and February are usually slower months for businesses, and the Chamber of Commerce is hearing that many hope the tax break will at least bring people in during that time.

"It's tricky to predict what consumers are going to do, because while five per cent is substantial, depending on the amount, it may not give us the overall impact that I think might dictate motivation of how people are going to spend their money over the holidays," Thomson said.

The federal government is also working on a second affordability measure, $250 cheques for working Canadians, but it is facing opposition.

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Concern has been raised that the cheques and tax holiday could result in temporary inflation through increased consumer spending, according to Thomson.

"It will be interesting to see how this actually impacts overall interest rates as well as fiscal policies moving forward," she added.

With files from CTV News Edmonton's Evan Kenny