Benefits of harmonization for restaurant industry tempered by tax increases

CHARLOTTETOWN, March 27, 2013 /CNW/ - The restaurant industry's enthusiasm for the long anticipated benefits of harmonization have been tempered by a slew of tax increases announced today in P.E.I.'s budget. The advantage of a lower tax rate for restaurant customers and full input tax credits for operators will be offset by a hike in the Small Business Tax rate and an increase in hidden beverage alcohol mark-ups.

"Harmonization means lower prices for restaurant customers and greater sales and investment in the restaurant industry," says Luc Erjavec, Atlantic Canada Vice President for the Canadian Restaurant and Foodservices Association (CRFA). "That said, it's unfortunate restaurants and our customers will not realize the full benefits because government has chosen to increase taxes for restaurant owners and pocket the savings that P.E.I. Liquor Control Commission (PEILCC) customers should have seen on their alcohol purchases."

What the changes mean
P.E.I. restaurant customers will see the tax on meals reduced from 15.5% to 14% and operators will now receive input tax credits for the PST portion of their taxes. The Small Business Tax rate will jump from 1% to 4.5%. PEILCC will not see the anticipated decrease in liquor prices because of a hike to the hidden mark-ups on alcohol.

As P.E.I.'s third-largest private-sector employer, the restaurant industry directly employs nearly 5,100 Islanders at more than 320 establishments. Twenty-two per cent of Canadians were first employed by the restaurant industry, making it the number one source of first jobs.

CRFA is one of Canada's largest business associations, with more than 30,000 members representing restaurants, bars, caterers, institutions and other foodservice providers. Canada's restaurant industry generates $65 billion annually in economic activity and employs more than one million people in communities across the country.

SOURCE: Canadian Restaurant and Foodservices Association

Luc Erjavec, 902-209-0804 (cell) or [email protected]; Prasanthi Vasanthakumar, Communications Specialist, 1-800-387-5649, ext. 4254 or [email protected].