GST break could cost Ottawa $2.7B if provinces don't waive compensation: PBO

The Canadian Parliamentary Budget Center says the federal government's GST tax holiday could cost up to $2.7 billion if provinces with a harmonized sales tax (HST) claim compensation. But the decision by some provinces not to seek compensation for their share of lost revenue will significantly reduce the cost of the plan to Ottawa.

The Liberal government plans to waive taxes on items such as children's clothing, video games and restaurant meals from Dec. 14 to Feb. 15 to help people struggling financially.

All Canadians get back at least five percent of the goods and services tax on those purchases. But in the provinces of Ontario and the Atlantic provinces, provincial and federal taxes are combined, which means getting a bigger discount between 13 and 15 percent for people in these provinces.

Estimates from the Parliamentary Budget Center show that the tax holiday will cost the federal government about $1.5 billion, in line with the Liberal government's estimate of $1.6 billion.

However, if the provinces with the HST tax do not seek reimbursement from Ottawa, the cost of the plan will reach $2.7 billion.

Ontario, which lost the most tax revenue, has said it will not seek compensation from Ottawa. The decision will provide about $1 billion in additional aid to Ontario families, according to a spokeswoman for Ontario's finance minister.

Finance Minister Chrystia Freeland has called on all provinces to cut their taxes in the same way, saying the tax holiday will help all Canadians in all provinces.

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