Manitoba rejects proposed meal tax

(Dec. 3/08) The threat of new taxes on restaurant meals in Manitoba municipalities has been put on ice by the provincial government.

Earlier this year, the city of Thompson in northern Manitoba proposed four new tax bylaws – 2% taxes to be levied on restaurant meals, liquor sales in licensed establishments, and hotel room rental.  An additional 0.5% tax was proposed for all land transfers within the city limits.

Despite vigorous opposition from CRFA, the Manitoba Restaurant and Foodservices Association (MRFA), local hotel and foodservice operators and the more than 5,500 citizens who signed a petition, Thompson’s city council moved ahead and approved the taxes in mid-October.  Under the guidelines set out in the Municipal Revenue (Grants and Taxation) Act, the municipality was then required to forward the bylaws to the province for formal order-in-council approval. 

On Nov. 24, the province announced it would not approve the 2% restaurant meal and liquor taxes, nor the 0.5% land transfer tax.  Only the 2% hotel tax would be permitted.

The province’s decision represents a significant victory for the hospitality industry and its customers.  While the city argued that a 2% tax on restaurant meals would hardly be noticed by customers, CRFA and MRFA reminded the province that if the bylaws were approved, restaurant meals would be subject to a 14% tax (2% municipal sales tax, 5% GST, 7% PST) while ready-to-eat meals purchased from grocery stores would be tax-free.

CRFA is pleased that the government listened to the business concerns of operators and rejected the city’s proposal, which unfairly targeted the hospitality industry and would have had a devastating impact on local investment and job creation.