How the end of the HST will affect restaurants

Our harmonized sales tax will soon get the boot, but while some restaurant insiders believe it hurt business, others feel it’s not so simple

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      When B.C.’s harmonized sales tax is phased out on April 1, one of the first places people might notice a change is their restaurant bills. Diners can expect the cost of meals to drop, as they will only be charged the five-percent federal goods-and-services tax instead of the 12-percent HST.

      Making it cheaper to dine out might seem like good news for restaurants in Vancouver, but there are mixed opinions in the industry about how the tax change will affect business.

      For the Canadian Restaurant and Foodservices Association (CRFA), an industry group that lobbied against the HST, the tax transition is cause for celebration. The association predicts that lower food prices will translate into higher sales.

      “Our meals will become seven-percent cheaper, so we’re very optimistic that after April 1 this will actually be very good news for the restaurant industry,” Mark von Schellwitz, the association’s Western Canada vice president, told the Georgia Straight in an interview.

      Critics have argued that the higher meal prices due to the HST—which went into effect in July 2010—hurt the restaurant business by driving away customers. The CRFA has said sales in B.C. dropped by 2.3 percent in 2011.

      “We wouldn’t have fought this issue as aggressively as we did if we didn’t have the experience of what happened to our industry when GST was implemented and when provincial sales taxes on restaurant meals were implemented in other jurisdictions,” von Schellwitz said.

      The opposition from the restaurant industry was part of a larger public revolt against the HST. During the backlash, many British Columbians expressed anger over how the province introduced the tax, which voters officially dumped in a 2011 referendum. For its part, the government has apologized for its handling of the affair but maintains the HST is preferable to the PST as a tax policy.

      Neil Ingram, co-owner of Boneta, a fine-dining establishment in Gastown, is among those who won’t be sad to see the HST disappear. Business took a hit under the tax, he claimed, and customers complained about the higher cost for meals.

      “People did get used to it after a while. We’re human beings; we’re very adaptable. We can get used to just about anything,” Ingram told the Straight in a phone interview. “But there was definitely an initial sticker shock in seeing the tax.”

      However, chef Andrey Durbach tells a different story. The owner of La Buca, Pied-à-Terre, and the Sardine Can said his customers voiced few concerns about the HST.

      “I don’t think customers…would be influenced by what they thought about that tax one way or the other because of the number that they saw at the bottom of their bill in the tax column,” he told the Straight by phone.

      Durbach is skeptical the HST is entirely responsible for any downturn in the restaurant industry. He cited new restaurant openings, a poor overall economy, and the increasing cost of living as likely culprits.

      “It would be very easy to say, ‘Oh, well, you know, things haven’t been fantastic since the HST was introduced,’ ” he said. “But I think just blaming a general malaise in the restaurant industry on the HST is sort of a simplistic way of looking at things.”

      Unlike the CRFA, Justin Ault supported the HST. The Hapa Izakaya owner doesn’t think the tax had a major impact on his Japanese restaurants.

      “My experience was that it had very little effect on us, to the point where I voted, myself, to keep the HST. I think that’s telling in itself,” he told the Straight by phone.

      Ault doubts the post–HST dip in meal prices will be big enough to change people’s dining habits. “I don’t think it’s really affecting us now,” he said of the HST. “Are we going to get a bump up once it’s gone? I don’t think so.”

      The same goes for Mike Jeffs, co-owner of Italian eateries Nook and Tavola. In his opinion, the switch back to the provincial-sales-tax system is more of an inconvenience than anything. He doesn’t expect to see a boost to his business once the HST is gone, describing the potential savings on meals for customers as marginal.

      “I didn’t see any bump when it came out, and I expect nothing different,” Jeffs told the Straight by phone. “We’re a restaurant that people make an effort to come down to, and we’re busy all the time. It’s going to make no difference at all.”

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      5 Comments

      JN

      Mar 14, 2013 at 11:09am

      Don't forget that alcoholic drinks are subject to 10% Alcohol Tax + 5% GST instead of the previous 12% HST. The result is all drinks in a restaurant (or even out of a restaurant for that matter) will cost you more.

      Peter Ritchie

      Mar 16, 2013 at 10:25pm

      It is going to be a sad wake up for those who voted against the HST when they see the price of many things actually increasing when the eternal headache that was the PST returns to haunt the province for an undetermined amount of time.
      Lobby groups like the CRFA are only partly to blame for this. "Journalists" like Bill Tieleman, and political ghosts like Vanderzalm were out to hurt the Liberals at any cost, even if it meant hurting the entire province of BC while they were at it.

      Raphael

      Mar 19, 2013 at 4:01pm

      @Peter Ritchie

      Sorry Peter while your attempt at spin is commendable British Columbians will remember that the Liberals while promising no new taxes during the last election were working out the details of the new HST. Once this became public the HST was toast. The only one to "blame" is the Liberals and their clumsy lies.

      Birdman

      Mar 19, 2013 at 4:05pm

      Whatever the financial outcome is, the rejection of the HST by the citizens was an excellent exercise in democracy. Politicians will always swindle us one way or another, but a message was sent that there limits to that behaviour

      just the facts

      Mar 29, 2013 at 9:52am

      the restaurant industry is never happy unless they
      have $5 per hour servers, chain smoking at all tables,
      patrons consuming gallons of alcohol and no tax, just
      tips. If the industry concentrated more on service
      and product they may get more business.