I don’t know about you, but I am desensitized to sales tax. Between goods and services tax (GST), provincial sales tax (PST), and, where applicable, the harmonized sales tax (HST), I have become used to mentally adding a few cents to the sticker prices of my purchases. In response to their everyday nature, Manitoba is planning to remove at least the PST from grocery and prepared foods beginning July 2026 (depending on bill ascension through the house prior to summer break). On paper, this looks exciting. So, let’s discuss the taxes on our food, their role in affordability, and what needs to happen for Manitoba to see long-term food price relief off the back of this policy.
Canadians have been acutely aware of rising food prices, nefarious competition practices, and the worsening cost of living for years. Specifically, the low concentration of our grocery store brands, the number of food business exits outpacing business entry, anticompetitive property control clauses, and price altering based on demographics or purchase history are very real examples of poor grocery practice that the federal government is attempting to curb with the Canada Grocery Code of Conduct (fully implemented January 2026).
The height of the COVID-19 pandemic in 2020 pushed food out of budget for many Canadians who were already struggling against inflation, and we haven’t seen much food price relief since. The aforementioned grocery concentration can impact the floor price of staple food products, and long-term price reduction on categories of foods can strongly influence purchasing decisions going forward. Realistically, meaningful change to food prices can only come from a variety of policies, which is why both federal and provincial governments are now responding. One of the quickest solutions explored has to do with food-related taxes although the tax rates as well as the tax systems employed for everyday purchases varies by province. As a result, federal policies such as the July 2026 quarterly GST rebate increase under the Groceries and Essentials Benefit for Canadians across the country tend to be temporary and short sighted. Such necessitates provinces to also look at which policies of theirs can be amended.
To begin this segment, we need to remember that consumption and sales taxes both serve to generate government revenue, the difference is in who holds the administrative burden. There are exemptions as to what can be taxed but as a general observation, if the federal government is charging sales tax on a good (GST), then PST likely also applies. So, when it comes to revenue-building on everyday purchases, provinces employ one of two systems: GST and PST or HST.
Tax Type | Description | Collection Burden | Recovered? | Participation | |
|---|---|---|---|---|---|
Goods and Services Tax (GST) | (Value-added) Consumption | Cost of supplies passed on to consumer | Federal | Yes | Alberta; British Columbia; Manitoba; Northwest Territories; Nunavut; Québec; Saskatchewan; Yukon |
Provincial Sales Tax (PST) | Retail | Charge on final good for being brought into a province | Provincial/ Territorial | No | British Columbia; Manitoba; Québec*; Saskatchewan |
Harmonized Sales Tax (HST) | Consumption | Combined GST and PST rates, applied at time of sale | Federal, Provincial | Yes | New Brunswick; Newfoundland and Labrador; Nova Scotia; Ontario; Prince Edward Island |
* Québec does not use PST, instead using a Québec Sales Tax (QST) for domestic sales and exports | |||||
There is no ‘correct’ way to tax goods which is why each province differs slightly in the ways they generate revenue. What matters most is that the after-tax return is enough to encourage investment. Changing the taxation scheme (either federally or provincially), however, is politically motivated, with the timing and emphases of announcements incredibly important for shaping public opinion. Historically, when provinces have moved into an HST system, the scheme incentivized by the reduction in PST (which typically exceeds federal GST rates) and viewed more positively if used as a tool to combat economic crisis. To clarify, if the combination of GST and PST equates to about 15%, a government that moves into the harmonized system would set and advertise the single HST rate as, say, 14.5% to keep public favour. The villain is almost always PSTs, despite being the more stable source of government revenue.
GST | PST | HST | |
|---|---|---|---|
AB | 5% | 0% | - |
BC | 5% | 7% | - |
MB | 5% | 7% | - |
NB | - | 15% | |
NL | - | 15% | |
NT | 5% | 0% | - |
NS | - | 14% | |
NU | 5% | 0% | - |
ON | - | 13% | |
PE | - | 15% | |
QC | 5% | 9.975%* | - |
SK | 5% | 6% | - |
YT | 5% | 0% | - |
*QST | |||
Since PSTs are retail taxes on a good’s entry into the province, they act as barriers to interprovincial trade when tax systems between neighbouring provinces differ. If my neighbours would be taxed more (costs more) for a product, why would I put in the effort to sell to them when I know they won’t buy it? PSTs also contribute to a concept called tax cascading. This is when you are taxed on the costs to produce a given good or give a certain service (GST or HST), and again during retail to generate revenue from a finished product (PST or QST). A province without PST does not face this tax burden but also forfeits the revenue. To avoid these shortfalls, PST is largely exempt from necessities.
Consumption taxes (i.e. tax levied on a purchased good/service) are regressive since they take a larger percentage from low-income households than the impact felt by high-income households. To partially combat this disproportionality, basic groceries and agricultural commodities like grain are set as zero-rated supplies: their tax rate is set at zero even though they fit all the criteria for consumption tax. The keyword in that sentence is “basic” as prepared foods (i.e. those products you, in theory, could open the package and gobble down in the aisle) are taxable at rates above zero. That’s why you pay GST on the slice of pizza you can get at the deli counter but don’t on frozen pizzas that have to be cooked at home.
Manitobans spend, on average, 18% of their income on food – one of the highest rates among provinces. On the other end of the spectrum, Manitobans has some of the lowest purchasing power in Canada. The affordability concern seems rather obvious when both those conditions are laid out. In an effort to combat food affordability, Manitoba’s provincial government is looking to do-away with PST charged on all food, in addition to pre-existing basic grocery exemptions. This would move purchases like cooked rotisserie chicken, pre-made sandwiches, quick-grab salads, and even cans of pop into the zero-rated supplies category. Some comments have gone so far as to suggest that long term implementation of this policy could increase healthy food consumption (a food security consideration beyond price) and could improve rates of food waste. The reality of these statements depends on what foods are purchased; increased spending on immediately consumed foods are more likely to be eaten in their entirety than bulk purchases of ingredients, but perhaps at the trade-off of health or quality. Posting this blog before the change comes into effect let alone is voted on provides very little insight into the success of the policy however, what we can comment on are the limitations to meaningful food affordability, and why this change is a good first step (though, hopefully not the only step).
Consider the term ‘affordability.’ When you use affordability as a political driver, you force the public’s attention to what they pay rather than why the product is priced the way it is. Reducing the cost paid on the final good does nothing to address the worsening cost of production in a variety of agriculture sectors. This was the primary critique when Québec announced this week a similar impending QST removal from grocery items; sales tax removal only scratches the surface of rising food prices. Generated revenue from tax schemes could be reinvested back into food supply chains to address some of the cost of production concerns, however that revenue is lost in these PST/QST changes. Between forgone income and transition costs, this policy is expected to cost the Manitoba government over $30 million in the first year alone.
Which businesses are applicable to this change is also a point of contention. The way the bill is written, which businesses can access the PST exemption varies and does not apply for businesses who list tobacco as one of their many products for sale. Doing so unintentionally excludes local quick service restaurants and certain small independent businesses who serve similar products as grocery stores, but with the guarantee that their business will be overlooked in favour of stores where the PST exemption applies. In a grocery landscape already unaccommodating of small, local, and independent businesses, creating additional barriers to their success is unhelpful. Thankfully, an expansion of the policy to include these businesses is being considered
It is exciting to see provincial governments targeting direct food costs, even if we have to hesitate before making conclusions about the long term impact. It signals awareness at a change-making level and, for Canadians who have been asking for help with food prices, that is welcome. If Manitoba decides to use this change in a suite of programs, then perhaps food affordability truly is an accomplishable goal. What is clear is that food affordability extends outside of what consumers take home, and our policies need to start reflecting intelligent, holistic solutions opposed to public-facing buzzwords.
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