PepsiCo Canada announced that it will continue charging the GST and HST through the Liberals’ proposed tax break holiday, citing complexities around its billing infrastructure and time constraints.
In a statement sent out to retailers, the food and beverage giant said it will “continue charging GST/HST on qualifying products from Dec. 14, 2024 through Feb. 15, 2025.”
“There will be no changes to our current invoicing processes. Customers can continue to claim input tax credits for any GST/HST paid,” it continued.
A variety of goods are poised to have their federal sales tax removed over the next two months in what the Liberals claim will help Canadians struggling with the high cost of living.
Certain groceries, restaurant meals, drinks, snacks, children’s clothing, and gifts have been selected to qualify for the GST reduction.
Canadians are expected to save 5% or more on selected goods, however, residents in Ontario and Atlantic Canada will save more as their provincial and federal sales taxes are blended into a harmonized sales tax, meaning they will receive a discount of between 13% and 15%.
However, the decision has been met with pushback from a number of small businesses that are confused by how to implement the break, saying they don’t want to reconfigure all their pricing software for the limited time the GST/HST holiday will be in place.
“Still think the GST/HST holiday is a breeze for small business? All companies (including manufacturers and wholesalers) selling products subject to the holiday are to zero-rate the tax starting Dec. 14..” wrote Dan Kelly, president of the Canadian Federation of Independent Businesses in a post to X on Friday.
“Here is a response from @PepsiCo Canada. If large companies can’t do this in time, god help Canada’s small businesses this weekend.”
His organization has been outspoken about the decision, saying the government has created “an administrative nightmare before Christmas” by not providing clear and simple rules.
After conducting a survey the CFIB found that over two-thirds, 68%, of business owners said that finding out which items are temporarily tax-exempt is a difficult task.
“Business owners were given just two weeks to prepare, right in the middle of their busiest season,” said Kelly in a statement on Monday.
“For some small retailers, this has required going through and making judgement calls on thousands of items based on limited guidance from the Canada Revenue Agency. It is going to be a hot mess.”
Additionally, the tax break will cost around $2.7 billion to compensate provinces with a harmonized sales tax, according to the Parliamentary Budget Officer’s latest report.
PBO Yves Giroux released a report earlier this week estimating that the measure will reduce federal revenues by $1.5 billion in 2024-25.
“PBO also examined the potential impact of the Bill on federal compensation to provincial governments that collect the Harmonized Sales Tax (HST) under their respective Comprehensive Integrated Tax Coordination Agreements (that is, Ontario, Newfoundland and Labrador, Prince Edward Island, Nova Scotia, and New Brunswick),” reads the report.
“If these provinces do not waive the compensation required under these agreements, PBO estimates that the federal cost would be $1.3 billion greater.”