GST break could cost Ottawa $2.7B if provinces don’t waive compensation

OTTAWA — The parliamentary budget officer says the federal government’s GST holiday could cost as much as $2.7 billion, if provinces don’t waive their entitlement to compensation.

The Liberal government intends to lift the federal sales tax on a slew of items between Dec. 14 and Feb. 15, framing the measure as help with affordability.

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All Canadians will save at least the five per cent GST on purchases like children’s clothing, video games and restaurant meals.

But in Ontario and Atlantic provinces, the provincial and federal sales taxes are blended together into a harmonized sales tax, which means Canadians in those jurisdictions will get a larger break of 13 to 15 per cent.

The PBO estimates the tax break will cost the federal government $1.5 billion, in line with the Liberals’ own estimate of $1.6 billion.

However, the budget watchdog notes that if provinces with a harmonized sales tax don’t waive the compensation requirement in their agreements with Ottawa, it could cost Ottawa $2.7 billion.

This report by The Canadian Press was first published Dec. 9, 2024.

Nojoud Al Mallees, The Canadian Press