There's no HST on chips this Christmas, but if you want a Pepsi, be prepared to pay the sugar tax

The two-month tax holiday for shoppers in Newfoundland and Labrador includes a break on temptation goods like booze and junk food — but paradoxically, the province's hotly contested sugar tax will remain in place.

The Sugar Sweetened Beverage Tax will still apply to sugary drinks from Dec. 14 to Feb. 15, even as the province matches Ottawa's decision to drop sales taxes from common consumer items such as non-essential grocery items, toys, books and alcohol, the Department of Finance confirmed Monday.

"I think this is a poorly thought out announcement," said PC Leader Tony Wakeham in a phone interview Monday.

"It doesn't help people. It's a very temporary thing…. We're taking HST off of potato chips, but we're still going to have a sugar tax. And I think people will see right through this, that this is nothing more than a political ploy."

The sugar tax — $0.20 for every litre of sweetened beverage — was introduced in 2022. It generated $6.1 million in revenue in the 2022-23 fiscal year, and is estimated to bring in $12.2 million for 2023-24, according to a 2023 financial report.

Wakeham says the fact revenue was expected to double is clear evidence the policy isn't discouraging people from buying sodas.

"The revenue has not gone down, it's actually gone up. And so it's hurting people, not helping people," Wakeham said.

"If we're really going to impact people, let's focus on the education side of this, not on the taxation side of it."

The province is losing $48 million in HST revenue over the two-month tax holiday. Wakeham says it would have made more sense to apply the tax break to essentials, such as home heating fuel and electricity.

A spokesperson with the Department of Finance said in a statement that Ottawa selected the items set to receive the tax break, and the province followed suit.

"Newfoundland and Labrador opted to match the measure, intended to offer temporary relief to residents at a time of the year that often presents more financial pressures than others," the statement said.

The sugar tax remains in place "to support the health and well-being of residents as we strive to make Newfoundland and Labrador one of Canada's healthiest provinces by 2031," the statement continued, noting its revenue funds several healthy living tax credits and programs.

All about the message, prof says

Rachel Prowse, a registered dietitian and assistant professor of medicine at Memorial University, says sugar tax policies in Mexico, California and Philadelphia have been shown to reduce sugar consumption.

"[There's] lots of evidence to suggest that they do work," she said.

"They signal to the consumer that these beverages aren't the best choice for health. They signal to the industry that maybe they should consider changing the profile of beverages they sell so that some of them are healthier."

Prowse speculates the province may have kept the sugar tax intact over the holiday tax break to double down on that signalling and reinforce the political messaging behind it.

"It can clarify this stand, that we need to discourage those choices," she said.

Maintaining the sugar tax while cutting standard sales taxes on junk food might seem contradictory, she added, but the general tax break is sending a different message — one focused on the high cost of living rather than long-term health outcomes.

"They might seem like [the tax policies are] working against one another, but I understand why the sugar tax would stay there, as a signal that we should discourage sugar-sweetened beverage intake," she said. 

"Its purpose was to generate revenue and to signal to consumers in the industry that this isn't the best product."

But, Prowse says, sugar taxes work best when paired with a subsidy — something to encourage consumers to buy healthier options such as fruits and vegetables.

"That is a different way of looking at how to reduce sugar intake than, you know, banning or restricting things," she said.

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