TORONTO — That bottle of beer in your hand could look half full, or half empty come July 1 as bar owners nervously wait to see what will happen when the new Harmonized Sales Tax is tacked onto bills in British Columbia and Ontario.
While the HST is meant to pass along savings to businesses and, in turn, customers, proprietors of local watering holes in Toronto have said they may have their hands tied when trying to offer the so-called harmonized tax savings.
“The savings is kind of hidden in the price. But it might be a short lived savings,” said Gavin Quinn, the owner of Quinn’s Steakhouse and Irish Bar in Toronto, as he tried to explain the absurdity of giving with one hand and taking away with the other.
In B.C., restaurateurs are also drinking in a bitter reality.
“They don’t pay PST on restaurant meals in B.C. so by harmonizing, all of a sudden there will be a seven per cent increase in meal costs, which is huge,” said Garth Whyte, a spokesman from the Canadian Restaurant and Foodservices Association.
As drinkers flock to sunny patios or belly up to bars this summer, restaurant owners may be compelled to increase prices.
Quinn said pub operators in Ontario may be forced to readjust the cost of a drink for a variety of reasons. He said owners will try to ensure flat pricing to make it easier on servers. There could also be an indirect impact on prices as costs go up for other attractions, such as theatre and concerts.
And the Liquor Control Board of Ontario has said some prices of booze in the liquor store will also increase. Reports have suggested liquor stores will raise their markup by more than seven per cent.
In Ontario, the single value added 13 per cent tax (made up of a five per cent federal component and an eight per cent provincial component) will be charged to consumers.
That replaces current alcohol taxes of five per cent GST and a liquor tax of 12 per cent at retail and 10 per cent at licensed bars and restaurants.
Theoretically, these breaks should be reflected on the consumer’s bill.
“It’s a two per cent difference and a lot of restaurants will pass that on to the consumer… if their liquor prices don’t increase,” Quinn said tentatively.
“But if their liquor prices increase, naturally restaurant operators will need to increase their selling price,” said Quinn.
So, while the business-friendly HST will actually lower tax rates on booze at the bar, bar owners will be paying 13 per cent tax up front for their supply of liquor. That’s a big bump up from the five per cent GST they currently pay. The silver lining to that is that they can recoup all of those upfront taxes later, through input tax credits.
Steve Erwin, spokesman for the LCBO, confirmed that only a few products will increase in price.
“From the store level, at least, 88 per cent of our products are not changing in price or having a price decrease,” Erwin said.
“What we’ve been getting from an early indication is a few cents either way on some products. Now obviously that might make a difference if a product is higher in value.”
Of course that means the other 12 per cent of products are going up in price — about 10 cents on a bottle of wine or beer, Erwin said.
The liquor board said it always makes an effort to keep prices around the same range, no higher or lower. It cites studies that suggest lower prices could lead to higher alcohol consumption.
Owners of C’est What, a popular bar in downtown Toronto, have said they will have to eat any extra costs the HST brings.
“We’re priced to sell. If we have to make changes to our offering, if we see that the consumer is starting to run from that extra couple of percentage points, then we’ll do something,” said Brenda Atkinson, the bar’s general manager.
In B.C., restaurant owners may not have the same flexibility.
More than 90 per cent of Canadian Restaurant and Foodservices Association members have said the HST will have a negative impact on their business.
“A lot of business sectors like it (the HST) because you can deduct the input tax credits, but in the restaurant sector, there aren’t many to deduct, because labour and food are exempt,” said Whyte.