Feeling the tax pinch in Saskatchewan

Restaurants Canada told Saskatchewan’s Finance Minister Kevin Doherty and Minister of the Economy Jeremy Harrison how hard the new 6% meal tax will hit restaurateurs. In a June 1 meeting with them, we shared these results from our Member Survey:

• 84% say the new tax is hurting business;

• 74% say the negative impact on sales will be permanent;

• 73% have been forced to reduce employee hours;

• 50% are laying off staff;

• 28% are reducing operating hours; and

• more than 90% have had customers complain about the new tax.

Why the tax really hurts our industry

Prior to April 1, 2017, restaurant meals in Saskatchewan were exempt from provincial sales tax, putting us on a fair footing with food purchased from grocery stores. We told the Ministers that many of our members feel betrayed by the government for abandoning food tax fairness, and creating winners and losers in the food industry. The new tax punishes the sector of the food industry that creates the most jobs and economic activity. It also comes at a time when restaurateurs in the province are already suffering from declining sales.

According to Statistics Canada, restaurants sales dropped by 2.4% in April following a 3.5% increase in March. Full-service restaurants really felt the pinch, with sales falling 6.9% in April, after a 4.0% increase in March.  This is on a year-over-year basis and includes menu inflation.

Changes that could help

We recommended measures to relieve the sting of the new tax on the province’s restaurant industry:

• Give all licensees equal access to wholesale liquor pricing. The current formula unfairly forces some licensees to buy liquor from competing licensees with off-sale licences.

• Introduce youth/training and liquor server minimum wage differentials, as other provinces have done, to help maintain industry employment the next time minimum wage goes up.

• Introduce a government-funded advertising campaign to encourage Saskatchewanians to support their local restaurants, eat out and celebrate more often in these difficult times.

• Once the economic situation improves, restore the PST exemption for restaurant meals. By exempting all food from PST – and not just already tax-free food sold in grocery stores – we can return to food tax fairness.

The government’s response

The Ministers acknowledged that the new meal tax has hurt Saskatchewan’s hospitality industry. We invited their ideas on helping the restaurant industry through this difficult time. We also asked them to respond to our recommendations by the end of July.

Questions or comments about this issue?

Contact Restaurants Canada’s Paul McKay.