Prime Minister Mark Carney on Monday announced a 25 per cent hike to the GST credit to help lower-income consumers deal with the high cost of groceries.
Branded as the “Canada Groceries and Essentials Benefit,” the temporary boost takes effect this July and lasts for five years.
The federal government will also issue a one-time payment this year worth 50 per cent of the credit.
The government said a qualifying family of four will receive up to $1,890 this year and roughly $1,400 annually for the next four years. A single person would get up to $950 this year and about $700 for the next four years.
The existing GST credit is paid out quarterly and is targeted at families with low and modest incomes. More than 12 million Canadians are expected to be eligible for the new benefit.
Carney made the announcement at an Ottawa grocery store as MPs returned to the House of Commons after a winter break.
The prime minister said the cost of essentials has been "too high for too long" and many Canadians are feeling daily financial pressure.
Carney attributed the high prices to the after-effects of the pandemic on the economy, supply chain shocks caused by U.S. President Donald Trump’s global trade war and other factors, such as climate change.
He said the GST boost would help to make up for the higher cost of groceries since the pandemic, particularly for lower-income Canadians who spend a larger share of their paycheques on essentials.
"The GST credit has helped to make our tax system fairer by returning a portion of the federal sales tax to Canadians with lower incomes, providing relief for people who feel the extra cost at the checkout most acutely," Carney said.
"The rise in food prices means that a lot of these Canadians need more support right now."
Ottawa pegs the price tag of the GST top-up at $3.1 billion in the first year, with lower but rising costs for the rest of the horizon. An analysis Monday from Desjardins estimates the cost of the top-up at $10.5 billion over five years.
The federal government says it will also put aside $650 million to help businesses address hits to their supply chains to avoid passing those costs onto consumers.
The Liberals are also proposing to help businesses write off the cost of new greenhouse buildings upfront to spur investment in food production.
Ottawa will also provide $20 million to the local food infrastructure fund to relieve pressure on food banks.
Carney said the Liberals plan to implement unit-price labelling — which displays the price of a product according to a standard unit of measure, such as weight — to tackle "shrinkflation" on grocery store shelves, and to provide more power to the Competition Bureau to boost competition in the industry.
Picture Courtesy: THE CANADIAN PRESS/Adrian Wyld
