Windfall Tax on Grocery Chains Gaining Steam

There’s a persistent resilience to inflation rates, and increasing interest rates have done little to cool the economy. The cost of groceries have been a significant challenge for Canadians over the past year and a half in particular, as unlike many other consumer items, food is essential.

While grocery chain CEOs have consistently maintained that they have had no choice but to raise prices for consumers, those same chains have managed to rake in record profits at a time when many Canadians are finding it harder and harder to keep food in their fridges and cupboards. Major grocery chains like Loblaws and Metro account for 80 percent of all grocery sales in Canada, and no relief in costs appear to be in sight.

However, recent developments seem to be once again shining a light on the potential that grocery costs aren’t just the result of increased food production and delivery costs, but that they may be padding profit margins on the backs of Canadians. On June 21^st, Canada Bread Co. plead guilty to four counts of price-fixing under the Competition Act and have been fined $50 million for its role in a years-long scheme to fix the price of bread. The Competition Bureau has stated that it is the highest price-fixing fine ever imposed in Canada. Weston Foods and Loblaws, which are both subsidiaries of George Weston Ltd., have already admitted to their role in the price fixing scandal, and have received immunity from prosecution as a result.

If grocers have been illegally fixing the price of bread for decades, it does not seem out of the realm of possibility that anti-competitive practices for other food items may be resulting in Canadians paying higher prices for food items than they should be.

The House of Commons Standing Committee on Agriculture and Agri-food has been examining the issue of food prices in grocery stores since last year. Month after month, the committee has heard witness testimony, from grocery chain CEOs to food bank directors, and have compiled an extensive report on their findings. Among those findings is a list of 13 recommendations designed to help determine how we can bring food costs down.

Those recommendations to the government include: collecting and making public data on costs throughout the Canadian agri-food supply chain; providing additional funding to Indigenous-led initiatives in remote and Northern areas to improve food security; and reimbursing farmers and retailers who have paid a 35 percent tariff on their imports of Russian fertilizer, among other key recommendations. However, one recommendation from the committee which, as a reminder, is comprised of MPs from all parties in the House of Commons, stood out.

“The Committee recommends that, if the Competition Bureau finds evidence in its upcoming market study that large grocery chains are generating excess profits on food items, the Government of Canada should consider introducing a windfall profits tax on large, price-setting corporations to disincentivize excess hikes in their profit margins for these items,” states Recommendation 9 of the report.

This has been a consistent message the government has heard loud and clear since inflationary pressure began hitting people’s pocketbooks a year-and-a-half ago that they have yet to act on. The purpose is to incentivize grocery CEOs and executives to keep prices low and ensure that customers are not being gouged by these corporations under the cover of standard inflationary pressure.

While the Competition Bureau’s investigation into massive grocery retailers’ profits is ongoing, it’s clear that putting any options on the table to help drive down the costs of something so fundamental to human existence as food is necessary. An effective windfall tax would not harm those companies who are keeping their products at a reasonable rate, but would certainly impact those attempting to gouge consumers.