Ottawa proposes holiday season HST relief, along with tax rebate for early 2025

In the wake of the Ford government’s decision to issue $200 tax rebates to most Ontarians in early 2025, Ottawa has decided to take a similar policy approach to assuage Canadians’ cost-of-living anxieties. The Trudeau government yesterday announced plans for a two-month GST/HST holiday on a wide range of consumer goods, along with a new $250 Working Canadians Rebate for qualifying taxpayers.

The latter proposal would deliver a rebate by early next spring to Canadians that earned a net income not exceeding $150,000 in 2023. The government estimates that 18.7 million taxpayers will be eligible for the payment. To qualify, a taxpayer must have:

• Filed their 2023 tax return by December 31^st, 2024, and
  • Claimed the tax credit for Canada Pension Plan or Quebec Pension Plan contributions on employment or self-employment earnings;
  • Claimed the tax credit for Employment Insurance (EI) or Quebec Parental Insurance Plan (QPIP) premiums on employment or self-employment earnings; or
  • Reported income from EI or QPIP benefits
• Been a resident of Canada on March 31^st, 2025
• Not been incarcerated for a period of at least 90 days immediately prior to April 1^st, 2025; and,
• Not been deceased on April 1^st, 2025

The GST/HST holiday will be in effect from December 14^th, 2024, to February 15^th, 2025, providing approximately $1.6 billion in tax relief over that period, according to government estimates. Businesses that sell affected goods will be expected to remove the GST/HST at checkout. In addition, “The GST/HST would also be fully and temporarily relieved on an importation of these same qualifying goods if the goods are imported during the period beginning on December 14^th, 2024, and ending on February 15^th, 2025.”

In the government’s example scenario, a family spending $2,000 on qualifying goods during the break period would save about $100 in GST, whereas in provinces where the HST is in effect, such as Ontario, the savings would amount to around $260.

Qualifying goods under the proposed relief program would include:

• Children’s clothing including garments for babies and baby blankets, children’s clothing up to girls’ size 16 or boys size 20, socks, hats and mittens
• Children’s footwear (excluding footwear used exclusively in sports or recreational activities) designed for babies or children with an insole length of 24.25 centimetres or less

• Children’s diapers
• Children’s car seats
• Print newspapers (excluding magazines, electronic or digital publications)
• Print (and most audio) books
• Artificial and natural Christmas trees
• Food or beverages including:
  • Alcoholic beverages (excluding spirits but including wine, beer, ciders, and spirit coolers up to 7 per cent ABV)
  • Carbonated beverages, non-carbonated fruit juice or fruit flavoured beverages or products that, when added to water, produce one of these beverages
  • Candies; confectionery classed as candy or goods sold as candies (e.g., candy floss, chewing gum, and chocolate); fruits, seeds, nuts or popcorn coated or treated with candy, chocolate, honey, molasses, sugar, syrup, or artificial sweeteners
  • Chips, crisps, puffs, curls, or sticks (e.g., potato chips, corn chips, cheese puffs, potato sticks, bacon crisps, and cheese curls), popcorn, brittle pretzels, and salted nuts or seeds
  • Granola products and snack mixtures that contain cereals, nuts, seeds, dried fruit, or other edible products
  • Ice lollies, juice bars, ice waters, ice cream, ice milk, sherbet, frozen yoghurt or frozen pudding, including non-dairy substitutes
  • Fruit bars, rolls or drops or similar fruit-based snack foods
  • Cakes, muffins, pies, pastries, tarts, cookies, doughnuts, brownies, croissants with sweetened filling or coating (note that many bread products, such as bagels, English muffins, croissants, and bread rolls, are already zero-rated)
  • Pudding, including flavoured gelatine, mousse, flavoured whipped dessert product, or any other products similar to pudding
  • Prepared salads, sandwiches, platters of cheese, cold cuts, fruit or vegetables, and other arrangements of prepared food
  • Food or beverages heated for consumption
  • Beverages dispensed at the place where they are sold
  • Food or beverages sold in conjunction with catering services
  • Food or beverages sold at an establishment where all or substantially all of the food or beverages sold are currently excluded from zero-rating (e.g., a restaurant, coffee shop, take-out outlet, pub, mobile canteen, lunch counter, or concession stand)
  • Bottled water or unbottled water that is dispensed at a permanent establishment of the supplier
• Children’s toys including board games, toys that imitate other items (e.g., a doll house, a toy car or truck, a toy farm set, or an action figure), dolls, stuffed toys and construction toys
• Jigsaw puzzles
• Video-game consoles, controllers or physical game media (e.g., a video-game cartridge or disc)

It’s important to note that these new tax breaks are unfunded and will cost the federal treasury nearly $6.3 billion. They could also present logistical headaches for retailers who must now deduct HST from select items and will likely face reporting and compliance challenges when it comes time to file their annual HST return. What’s more, as many economists have long argued, tax relief measures such as these are typically ineffective tools to alleviate long-term, affordability-related concerns.

But with a minority government, a paralyzed parliament and a federal election looming in the months ahead, the Trudeau Liberals have clearly decided that shelling out cash and sales tax breaks before and after the holidays is sound policy—deficit be damned. Whether taxpayers will agree remains to be seen.

Armando Iannuzzi, Co-Managing Partner

For more information on the federal government’s new affordability measures, contact a member of the KRP LLP team today.