Some provinces say they could lose millions of dollars to federal tax break

A federally-imposed "tax holiday" could end up being costly for some provinces, and officials from two provincial governments said they were "blindsided" by the prime minister's announcement Thursday that the federal government is suspending the sales tax for some goods.

On Thursday, Prime Minister Justin Trudeau said he would seek to lift the GST and HST from some goods until mid-February in a bid to alleviate some of the affordability pressures people have been experiencing in the post-pandemic era.

Five Canadian provinces have a harmonized sales tax — a combination of provincial and federal taxes on goods and services administered by the federal government. Ottawa sends the provincial portion of the sales tax back to the respective provinces.

A spokesperson for Finance Minister Chrystia Freeland confirmed that if the tax break plan goes ahead, the entire HST would be removed in the provinces that harmonize the sales tax — the Atlantic provinces and Ontario.

But officials from two provinces say they were given less than 24 hours' notice that the entire sales tax would be removed.

They also said it's not clear whether they'll receive any compensation from the federal government for the lost tax revenue.

Representatives of two provincial governments with HSTs spoke to CBC News on the condition that neither they nor their provinces be identified because of the sensitivity of the issue.

Responses vary by province

Newfoundland and Labrador Premier Andrew Furey endorsed the federal plan for the "tax vacation" out of the gates.  

Furey, who is one of just two Liberal premiers in the country, said on the social media platform X he welcomed the proposal to remove the HST from many goods and services for two months.

New Brunswick Premier Susan Holt was more circumspect.

"We're trying to understand what it is, what it might cost," Holt said Thursday. "Is this something where we're going to be sacrificing provincial tax revenue, so it's going to be a hit on provincial revenues in this fiscal year?"

Ontario already has eliminated the provincial portion of the HST from some of the goods proposed for the federal tax vacation, including children's clothing, shoes, diapers, books and newspapers.

In a media statement, Premier Doug Ford's office said "the best thing the Liberal government can do right now is ditch, or at the very least pause, any hike in the carbon tax which is set to increase for the sixth time on April 1."

Nova Scotia is currently in an election campaign so its provincial government is in caretaker mode.

Prince Edward Island did not immediately respond to a request for comment.