The temporary goods and services tax (GST) holiday could leave the federal government footing a much larger bill if provinces with harmonized sales tax (HST) demand compensation. The Parliamentary Budget Officer (PBO) has warned the initiative could cost up to $2.7 billion under such circumstances.
From December 14 to February 15, the Liberal government’s tax break will remove the 5% federal GST from purchases like children’s clothing, video games, and restaurant meals. In provinces with HST—where federal and provincial sales taxes are combined—the measure would result in a larger discount of 13% to 15%
According to the PBO, the measure is expected to cost the federal government $1.5 billion if no compensation is requested, a figure closely aligned with the government’s estimate of $1.6 billion. However, if provinces with HST exercise their right to compensation, the cost could rise significantly.