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Province To Screw Restaurant Business In Broad Daylight…

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Premier Gordon Campbell and Minister of Finance Colin Hansen announcing their plan to engineer a projected $750 million drop in restaurant sales with their Harmonized Sales Tax (HST).

By now our readers in the restaurant trade have likely heard about the provincial government’s promise-breaking plan to institute an HST, or “Harmonized Sales Tax”. For restaurant owners, it’s the taxing equivalent of a hard punch in the throat, translating to a new and absolutely absurd 7% levy on all restaurant meals. That means, come July 2010, customers will have to pay (with GST) a crippling 12% tax on restaurant food. And nevermind the liquor taxes…

The Canadian Restaurant and Foodservices Association responds:

The harmonized sales tax announced today will deliver another blow to British Columbia’s struggling tourism industry.  The tax on restaurant meals will jump from 5% to 12%, hitting families in the wallet and discouraging international tourists.

“This government made a promise less than three months ago to the people of British Columbia that there would be no new taxes,” says Mark von Schellwitz, Vice President Western Canada for the Canadian Restaurant and Foodservices Association (CRFA).  “Harmonization will result in a permanent tax shift of hundreds of millions of dollars to our customers.”

To make matters worse, a 12% tax will likely accelerate the sharp decline in international tourists visiting British Columbia. “U.S. tourists are already shocked by the 5% GST when they dine out in B.C.,” says von Schellwitz.

The HST will also discourage local restaurant customers, who can buy the same or similar food tax-free at grocery stores.  Grocery stores now offer frozen, heat-and-eat versions of just about every item on a restaurant menu — from lasagne to samosas — and all tax free.

It’s already a hot topic over at the local restaurant industry forum, ChefsTableTalk.com. Here’s James Iranzad (owner of Hell’s Kitchen, Abigail’s Party, and The Flying Tiger) weighing in:

It’s bad enough import wines are taxed at 117% before we can purchase them, it’s bad enough liquor is (double) taxed another 15% to be purchased in our establishments, and it’s bad enough commercial property taxes are so high that such costs need to be passed in some way on to our guests, the consumer. Having to pay an additional 7% on top of their bill is yet another slap to diners, and ultimately to us. Get both of the included petitions signed and faxed in to give the CRFA the support they need to put a stop to this bullshit.

And Jamie Maw (food writer, co-founder of the Chefs’ Table Society):

I think that this is a vexatious tax, especially in light of recent occurences:

1. Interestingly, the restaurant industry was financially supportive of the BC Liberals;
2. Limping into the Olympics, our restaurant industry, due to the constriction of credit and revenues, is weakening, with revenues off by some 15% year-over-year and margins being squeezed;
3. Unlike other Canadian provinces, such as Alberta and even Wantario, there remains an absolute disharmony between liqour licensees — i.e. BC’s ‘Food Primary’ and ‘Liquor Primary’ licenses that continue to bedevil what should be ‘Hospitality Primary’ — Why not one liquor license for all, and may the best customer win?
4. Before others argue that the proposed HST is lower than, say, the UK’s VAT, please consider that BC’s existing taxation on alcohol is punitive; and
5. For several reasons, including their own recession, the strength of the Canadian dollar, and new passport requirements, the US customer has all but disappeared from BC restaurants. Only five years ago, our restaurants were priced about 30% less than comparable restaurants in Seattle. We are now at par or more expensive, with wine prices considerably more. This tax will further curtail the American visitor.

For these reasons I will be both signing Mark’s petition and vigorously encouraging others to consider doing so: The one-time-only Fed Kool-Aid offset package looks like a very short term solution (sweet but deep purple), and a bad idea. And as for the timing?

Jamie then provides a letter that I encourage all of you to copy, paste, sign and send:

Dear Minister of Finance,

As a restaurant operator in British Columbia, I am very concerned about the threat of a harmonized sales tax.

This would force my customers to pay a new 7% tax on restaurant meals, on top of the 5% GST they must already pay.

It’s unfair that my customers should have to pay a 12% tax when they buy food at my restaurant, when grocery store owners can sell the same or similar food tax free.

If you harmonize the GST and PST you will hurt my customers, my employees and my business.

When the GST was added to restaurant meals in 1991, this move had the single greatest negative impact on my industry. Foodservice sales fell by more than 10% that year and, according to a report by Ernst and Young, most of the decline was due to the GST. That year, 42,000 foodservice jobs were also lost.

Policy-makers need to learn from this experience, not repeat it.

We should also be concerned about the impact of a tax hike on tourism. In the U.S. there is no national sales tax so the 5% GST is a bit of a shock to U.S. visitors to my restaurant. Tourism is extremely important to this province and my business. More than doubling the tax on restaurant meals will only accelerate an already sharp decline in international tourists.

Finally, British Columbians have been promised no new taxes. Harmonization would result in a shift of $750 millions to restaurant customers. My customers can’t afford a regressive new sales tax.

In the current economic downturn, my sales are already suffering. As Minister of Finance, I need you to refuse to allow my business, my employees and my customers to be collateral damage under a harmonized tax system.

Sincerely,

[YOUR NAME HERE]
A concerned Canadian restaurant operator’

If you value local, independent restaurants or are one of the 173,000 British Columbians employed in the industry, please consider making Jamie’s letter your own and sending it in a personal email to Colin Hansen, the Minister of Finance. He’s at Colin.Hansen[email protected].

You can also call his office directly at (250) 387-3751, (250) 387-5594, or 1-877-388-4440 to let your feelings be known, but be sure to arm yourself with the relevant information/talking points first so as to avoid the completely understandable descent into irate screams of unhelpful incoherence. The government’s own “spin” on the HST is here, and you can find the Canadian Restaurant and Foodservices Association’s intial rebuttal here. Remember that decisions are made by those who show up. This is a fight worth showing up for.

Thanks.

PS. You can also read and sign the CRFA’s petitions to the government here and here.

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There are 5 comments

  1. People don’t *need* to eat out. It’s an option (and, arguably, a luxury.) Adding a consumption tax to a luxury good/service/product is hardly “screwing” the industry.

    Restaurants are going to be able to claim a rebate on any HST they pay. In the current structure, they get no rebate for any PST they pay (though they are exempt from paying PST in some cases.) There should be some price adjustments as a result.

    I’m not happy to be paying PST on books, or bicycle parts…but again there should be some price adjustments. They’re not likely to happen, they should.

    Yes, taxes on liquor in British Columbia (and, in fact, in all of Canada) are heinous and should be adjusted. It’s a classic sin tax though: it’s just a sin that’s more socially accepted, per se. (I’m not a teetotaller by an stretch, and consider those who are to be only hurting themselves.) I’d like to see them adjusted, in part because I’d like to be producing alcohol and it’s incredibly difficult in this context.

    There should be a single liquor licence, but it’s hard to take seriously someone with a maturity level that feels it either necessary or appropriate to mock the largest province by calling it Wantario.

  2. How about a pre-written letter from consumers explaining how this will discourage the public from dining out?

  3. Ontario is a ‘have not’ province, in matters both economic and hockey.

  4. Oh, and I would also protest Mr. McGee’s remark: Tourists visiting British Columbia do in fact have to eat out and have no recompense for their lost money.