The pros and cons of the federal budget

Published March 24, 2017

(Mar 24/17) The federal budget contained a mix of good and bad news for the restaurant industry. We’ve broken down what you need to know:

The bad news

  • The excise tax on alcohol goes up 2%, effective immediately, and will automatically adjust for inflation each year. (The increase doesn’t apply to inventoried stock.) This will cost restaurateurs who buy alcohol $30 million this year, and $470 million over the next five years. The cost will be compounded by provincial taxes and liquor board monopoly markups.

We were blindsided by this announcement, as this tax hasn’t been touched since the mid-80s.

  • No EI Youth Hires tax credit, despite election promises and other spending initiatives on youth.

New EI benefits broaden caregiver and parental leave benefits, which will add $691 million and $152 million in costs, respectively. Now employees can extend their EI parental benefits over an 18-month period. Employer premiums are projected to increase from $2.28/ $100 to $2.35/$100 payroll next year, which is a key concern.

  • The small business tax rate didn’t fall from 10.5% to 9%, despite the government’s election promise to make that reduction.

 

  • No new initiatives to improve the Temporary Foreign Worker Program. The budget reiterated commitments to improve the program, with a promise to keep working with businesses to make sure the program meets employer and employee needs.

 

  • Nothing to deal with high cost of credit card acceptance fees. Interchange fees are five times higher in Canada than in the EU and UK. They boost the healthy bottom line of financial institutions, while eroding the skinny margins of restaurant merchants. However, the Finance Department is studying the credit card market in Canada and internationally.

 

The good news

  • No capital gains tax.

 

  • A promise to strengthen trade within Canada. The budget calls out an agreement for future trade liberalization in areas like interprovincial trade and alcohol beverages. Addressing interprovincial non-tariff barriers on alcohol was a key Restaurants Canada ask.

 

  • A permanent $37.5 million per year granted for tourism marketing. In addition, an extra $2.7 million is budgeted to improve tourism information and make more detailed data available at the provincial and territorial level.

 

  • A promise to study the income tax implications of transferring a business to a family member.

Read our press release on the federal budget.

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