Ontario Government to Match Federal 2-Month Tax Break

Ontario Finance Minister Peter Bethlenfalvy speaks to the media at Queen's Park in Toronto on August 9, 2022. The Canadian Press/Andrew Lahodynskyj

Ontario’s finance minister says the province will match Ottawa’s tax holiday by removing its provincial sales tax on products excluded from existing provincial rebates.

Prime Minister Justin Trudeau announced his government’s plan last week to implement a GST break on items like groceries, children’s clothing, restaurant meals, and alcohol in a bid to “put more money in people’s pockets” during the upcoming holiday season.

The two-month tax break, which is to run between Dec. 14 and Feb. 15, includes the provincial sales taxes in Ontario and Canada’s four Atlantic provinces as those provinces have harmonized their sales taxes (HST) with the federal government.

Premier Doug Ford has previously said he was in favour of the tax break and Finance Minister Peter Bethlenfalvy has now confirmed Ontario will be supporting the HST holiday.

Ontario has historically excluded the provincial portion of the harmonized sales tax from some of the items listed by Ottawa for its GST holiday, such as children’s clothes and grocery staples, but has traditionally charged tax on alcohol and restaurant bills.

The provincial portion of the HST tax break will provide “nearly $1 billion in additional relief for Ontario families,” Bethlenfalvy said in an emailed statement.

“The provincial government will match the federal government’s two-month GST holiday by removing our portion of the HST from items not currently covered by existing provincial rebates,”  Bethlenfalvy said.

The decision was made after engaging in “extensive discussions” with the federal government about “how we can continue to work together to advance Ontario’s priorities,” the minister added.

HST in Ontario is 13 percent and 15 percent for the Maritime provinces.

New Brunswick and Prince Edward Island have asked for compensation from Ottawa to cover their lost revenues from the tax break, while Newfoundland and Labrador has not. Nova Scotia was in the midst of an election when the GST measure was floated, which concluded Nov. 26.

Deputy Prime Minister Chrystia Freeland has not said if Ottawa will offer financial compensation to provinces with HST, but she has urged other provinces without HST to eliminate their own sales taxes over the same timeframe to lower the cost of the items Ottawa plans to exempt.

Affordability Measures

Items exempt during the proposed tax holiday include groceries, restaurant meals, beer, wine, and certain pre-mixed alcoholic beverages, and items for children such as clothing, footwear, diapers, toys, books, and certain electronics like video game consoles. Christmas trees will also be tax-free.

Removing GST from these goods for a two-month period would save $100 for a family that spends $2,000 on those goods during that time, the federal government said in a press release.

Canadians in provinces with HST would see more savings, Ottawa said. Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island families that spend $2,000 would save $260.

The Liberal government introduced a stand-alone bill to implement its proposed GST holiday Nov. 27. The proposed legislation must be passed in the House of Commons before it can become a reality.

Ottawa has also promised to send a $250 cheque in the spring to working Canadians earning up to $150,000 per year as part of the same affordability measures. It was not introduced as part of the bill because the NDP threatened not to support the legislation if the rebate was included. The NDP has said it wants the rebates to be made available to non-working seniors and people who rely on disability benefits who did not have a working income in 2023.

Ottawa’s rebate announcement comes shortly after Ontario pledged to send a $200 rebate cheque next year to all taxpayers in the province.

An estimated 12.5 million adults and 2.5 million children are eligible, according to an Oct. 29 government press release. The rebate is expected to cost Ontario approximately $3 billion.

Bethlenfalvy has previously suggested Trudeau borrowed the rebate idea from its provincial counterpart.

The Canadian Press contributed to this report.