The Saskatchewan hospitality industry says it is bracing for a $140-million blow to restaurant sales after Wednesday's provincial budget enforced a six per cent tax on restaurant meals.
Until yesterday, food served at restaurants was exempt from the Provincial Sales Tax, which also rose from five to six per cent in the government's austerity budget. The restaurant tax comes into effect April 1.
The government said it had been forced to raise taxes and lift exemptions to balance a $685-million deficit it blames on declining resource revenues.
"We're going to take this opportunity to begin to move away from a dependency on resource revenue," said Premier Brad Wall at the legislature on Wednesday.
"It's not something I take any pleasure in, obviously," he said of the tax increases.
A 'bitter pill'
Saskatchewan Hotel and Hospital Association chief executive Jim Bence said the cuts would hit restaurants hard at a time when revenues were at record lows in some parts of the province.
"This is going to be a particularly bitter pill for us to swallow, it makes it really tough for us," he said.
"Whether it's on the liquor side or whether it's on the meal side, now families that might have gone out once a month or once every couple of months, that might be every half year [now]."
He questioned how much the government would gain from the PST expansion, suggesting the loss of sales could cancel out any gain.
Bence was confident the cuts would lead to job losses.
"The trickle down to this — it's not just a trickle, this will be a cascade and it will have ... in particular in some parts of the province, a devastating effect on sales."
Restaurant industry estimates $140M impact
Restaurants Canada vice-president for western Canada Mark von Schellwitz estimates the change will cost his industry about $140 million in sales.
Von Schellwitz said it also strips away fairness in the food industry by taxing some foods and not others.
"It will actually pick winners and losers in the food industry and our members are perplexed," he said.
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"What they are doing is actually helping big corporate grocery stores at the expense of thousands of small businesses that make up the hospitality industry."
PST in the past
In 2005, the Saskatchewan NDP government decided not to expand the PST to include restaurant meals, among other goods, after about 130,000 people signed a petition against it. The restaurant industry also pushed hard to stop the tax being introduced.
Von Schellwitz said that showed the public had "no appetite" for a meal tax, adding that he did not believe attitudes would be different today.
He also pointed to a B.C. referendum that ended an HST, which included restaurant meals, after public outcry in 2011.
Industry already struggling, says Saskatoon business owner
Heddy Trapler, who owns 2nd Ave Grill in Saskatoon, said the local industry was already facing tough times.
She believes the change will make it harder for small business owners like herself to compete with franchises, which she said had economy of scale to soften the impact.
"It's not like our economy is super strong, we're seeing places close left, right and centre in Saskatoon," she said.
"To do this, you're just going to see more and more people, the people that are already struggling are also going to be hurting even more."