Massive Tax Break on Holiday Shopping! See What's Exempt from TPS/TVH This Weekend!

The current rate of the Goods and Services Tax (GST) in Canada is 5%. To ease the financial burden on Canadians during the holiday season, a two-month exemption from the federal Goods and Services Tax (TPS) comes into effect this Saturday, lasting until February 15th, 2025. For provinces with harmonized provincial and federal sales taxes, this means a complete exemption from the Harmonized Sales Tax (HST). This temporary measure, announced by Prime Minister Justin Trudeau in a Sharon, Ontario grocery store last November, aims to provide relief to consumers as they navigate rising inflation. The bill passed the House of Commons with 176 votes in favor and 151 against, with the Conservatives and Bloc Québécois opposing it while the NDP supported it but saw it as insufficient, wanting essential products to be permanently exempt from the TPS.

Products Exempt from the TPS/TVH Tax Break

The tax break applies to a variety of products commonly purchased during the holidays, including:

Toys for children
Prepared foods (including vegetable platters, meals, salads, and sandwiches)
Restaurant meals (dine-in, takeout, and delivery)
Snacks (chips, candy, and energy bars)
Beer, wine, cider, and prepared alcoholic beverages containing less than 7% alcohol
Children's clothing and shoes, car seats, and diapers
Children's games (board games, dolls, and video game consoles)
Books, printed newspapers, and puzzles for all ages
Christmas trees

For a detailed list of exempt products and restrictions, consult the Canada Revenue Agency (CRA) website. Ottawa estimates that someone spending $2000 on these exempt products could save between $100 and $260, depending on their province of residence. However, the measure isn't universally lauded; the Parliamentary Budget Officer estimated the cost could reach $2.7 billion if Ottawa compensates all provinces collecting the harmonized sales tax. The government's own estimate is up to $1.6 billion.

Retailer Challenges

This initiative has presented significant challenges for retailers, who faced the task of reprogramming their payment terminals with short notice. They've also had to manually inventory products subject to tax exemption. Louis-Pierre Sourdif of Intermarché Boyer in Montreal, for example, spent approximately 50 hours adapting his tax system, expressing concerns about potential errors and customer frustrations. Jasmin Guénette, vice-president of national affairs at the Canadian Federation of Independent Business (CFIB), acknowledged that retailers might make good-faith errors. In fact, only 4% of CFIB members believe this tax exemption will increase their sales.

Consumer Actions and Skepticism

If a customer notices a tax error on their invoice, they can request a refund from the retailer. In case of refusal, they can submit a refund claim to the CRA via an online form, up to two years after the purchase. While some, like Martin Vézina, vice-president of public and governmental affairs at Restauration Québec, see an opportunity for restaurateurs – anticipating increased sales on desserts, appetizers, or wine – the overall reception is mixed. The measure has been criticized by Conservative leader Pierre Poilievre as irresponsible and inflationary. Even the Senate committee reviewing the bill noted that it inadequately addresses the needs of Canadians struggling to afford necessities like food and shelter.

Holiday Deals and Savings

Despite the skepticism, many consumers are looking forward to this short-term tax break and many retailers are highlighting the tax-free aspect of their offers. Even a 5% reduction on expensive items can make a significant difference. A $1,000 purchase, for example, results in a direct $50 saving. This can be substantial when considering items like children's clothing, branded toys, or everyday products that significantly impact household budgets. Some retailers, such as Amazon and Best Buy, have even created special tax-free sections on their sites.

Deals to Watch Out For

This is a fantastic opportunity to look for deals, especially on electronics, toys, and children's products. Consider the significant savings that can be gained by taking advantage of already discounted prices and factoring in this additional tax savings. This is particularly true for high-value items such as gaming consoles, VR headsets, and premium baby gear. Specific product categories where the TPS/TVH exemption could lead to substantial savings include:

Gaming Consoles & Accessories: Many gaming consoles and their accessories, especially new releases and limited-edition versions, will experience heightened price competitiveness, especially with existing discount programs.
VR/AR Headsets: Virtual Reality and Augmented Reality headsets are often high-priced items and this tax break could influence many people to make a purchase.
Children's Products: Baby gear such as car seats, strollers, diapers, and toys often carry high costs, making the tax break a more significant factor for families.
Board Games: This is a great time to stock up on new family games and board games. This tax exemption makes new releases more affordable.

Making the Most of the Tax Holiday

Plan your purchases strategically during this temporary break to take advantage of the savings. Remember to check individual store policies on tax reductions to avoid any unexpected charges or confusion. It's an opportunity to save on various items and to enjoy the Holiday Season.

Remember that the temporary holiday TPS/TVH tax exemption ends on February 15, 2025. Make your purchases before the end date to take full advantage of this opportunity.