Thank you, Mr. Chair. It is a pleasure to have the opportunity to present to your committee.
I am Vice-President, Finance and Commodity Taxation, with the Canadian Council of Grocery Distributors, hereinafter referred to as CCGD. Our members include Loblaws, Sobeys and Metro as well as smaller family-owned businesses such as Coleman's food centres in Newfoundland.
CCGD is bringing forward two recommendations. The first is to exempt all cut fruit from the application of GST to eliminate confusion, and to improve how government works by adopting a new procedure for issuing GST rulings to the grocery industry, but implementing recently concluded pilot projects with the Canada Revenue Agency, hereinafter referred to as the CRA.
The way cut fruit is treated under the GST is confusing. I'm going to illustrate what we mean by that by giving you some actual examples. If you buy cut pineapple from a grocer, there is no tax, whereas if you buy any other fruit, it will be taxed. In addition, if you buy a fruit salad off the shelf, it won't be taxed, whereas, if you buy mixed fresh fruit, it will be taxed.
Cut fruit should be exempt from GST regardless of whether it is combined with another or not. The system is creating unnecessary consumer confusion and requires the grocer to attempt to explain the complications of the tax system to customers. In addition, the application of GST to these products is not consistent with the guidance provided by Canada's Food Guide to Healthy Eating, which recommends Canadians consume seven to 10 servings of fruits and vegetables a day. By taxing these items it causes inconsistencies between government messages, which must be addressed.
CCGD asks that the Finance Committee recommend in its report that GST consistently not be charged on cut fruit regardless of its state of packaging.
There is also a need to improve the process by which the Canada Revenue Agency issues GST rulings for all grocery products. Our members are challenged with interpreting the application of the tax due to a 16-year-old definition which provides guidance on what is a basic grocery and what is not. When industry is not certain how to apply the tax it can seek a ruling from Canada Revenue Agency to determine the correct application. Despite the Agency's best efforts, there can be significant delays in issuing rulings—sometimes stretching to six months.
While our members are waiting for the ruling: if the product is not successful it may be off the shelf by the time the ruling is received and grocers could be placed in the situation of remitting GST for a product it no longer carries; the GST is interpreted inaccurately and the tax is applied in error. As a result Canadians have either paid too much for this product or the grocer faces a significant liability. There is a better way.
CCGD recently completed a pilot earlier this year with CRA that tested the ruling process employed by the Australian Tax Office. This pilot used the grocery industry database, ECCnet, to analyze product composition and presentation to provide GST direction.
We ask the Committee to recommend that CRA roll out and expand the pilot. In addition, we ask the Committee to recommend that CRA guarantee the industry (as per the Australian Government) that the rulings offered, if applied by the industry, will not be subject to future GST assessments. This guarantee would ensure both government and industry are bound by the rulings issued by CRA.
We believe our recommendations to exempt cut fruit from GST will ensure consistency in government policy. We also believe that there is an opportunity to streamline the business of government and to ensure consistent application of GST by adopting the Australian ruling process.
Thank you.