Canada’s GST Holiday and Rebate Cheques: Economic Relief or Inflation Risk?

OTTAWA, Canada, November 22, 2024 – The Government of Canada has provided ​$6.3 billion in overall assistance to alleviate citizen pressures on the cost of living. A temporary suspension of the Goods and Services Tax (GST) ​on certain items and the issuance of 250 discount cheques to ​approximately 18.7 million Canadians early in 2025 ​are essential to ​this initiative.

The ​GST ​holiday, scheduled for December 14 to February ​15, will exempt items such as toys, diapers, snacks, restaurant meals and alcoholic beverages from federal sales tax. This measure is expected to provide ​$1.6 billion in tax relief. In addition, Canadians who worked in 2023 and earned ​up to $150,000 are eligible for the $250 rebate, collectively adding $4.7 billion in direct ​payments.

Economists have expressed mixed reactions to these measures. Doug Porter, Chief Economist of the Bank of Montreal, highlighted ​the substantial nature of ​the rebate cheques, suggesting that they may have a greater impact on consumer spending than on GST leave. He noted that while these initiatives could increase revenues and expenditures, they reached a time when inflation had been moderate, which ​could complicate the Bank of Canada’s monetary policy decisions.

Provincial leaders expressed concern about the impact of the GST suspension ​on their income. The first in New Brunswick, ​Prince Edward Island and Quebec highlighted potential ​losses of sales tax revenues and sought compensation ​from ​the federal ​government. Quebec’s Finance Minister, Eric Girard, said that without the federal rebate, the province ​would not be in line with the tax reduction, highlighting ​the ​financial challenges posed by the federal initiative.

Critics argue that ​relief ​measures may not adequately address the needs of vulnerable populations. ​Older people and people with fixed incomes, who are not eligible for billing checks, have expressed a sense of ​exclusion. Neil Pierce, a 69-year-old Edmonton resident, described cheques as a ​”political payment,” fearing that retirees would be ​neglected in government relief efforts.

As the federal government moves forward with these measures, the balance between immediate economic relief and long-term financial health management remains a point of discussion between policy makers and stakeholders.