How many Canadians cannot afford to eat? The Liberal government wants to tax the food industry. Will that work? Let’s look at that as it is the facts that matter.
Prime Minister Trudeau’s solution is to threaten to raise food taxes. He believes that taxing the food industry is the best way to solve the food price crisis. Has anyone ever seen anything as stupid as that work?
Trudeau is trying to play tough with the grocery chains that have seen their profits blossom more than 40%. Let’s spit it right out: that is gouging at its finest. But is threatening to add taxes the right approach?
I argue NOT. If we had a competitive food industry, we would not have this problem. Before anyone gets bent out of shape, let’s look at this. Prices have increased due to increases in the cost of goods sold, and on top of that, increased profits – now increased by up to 40%.
No one can argue that the increase in profits is due to costs. Costs are fixed, and profits are variable – they can go up or down depending upon how much competition will allow the company to take. With no competition, they can take as much as they want to take. We bought and paid for a non-competitive market a long time ago and are now reaping what we have sowed.
An example of profit gouging: An item one year ago cost a company $10. They wanted a 15% profit, giving a total cost of $11.50. Now, the cost of the product is $14. They leave their profit margin at 15%, which raises the total cost to $16.10. Their profit has increased by $0.60 or 40%.
If the company was in a competitive market, the price of the product should have been $15.50, still giving them their $1.50. We take the hit of inflation and the hit from the increased profit to the food company without them doing anything.
Of course, we will hear more rationalization by the food industry, but look at how we fared with the bread fixing. After eight years of study, finally, one company gets a $50 million fine, and others get off scot-free. They made millions, the Liberal government took a kid-glove approach, and for years, the companies were allowed to continue to do what they were doing. Gouging us with bread pricing.
Does anyone really think that the companies don’t talk to each other on other food costs? Just compare weekly food flyers. Ever wonder how the companies all seem to have the same thing at the same price on sale?
Where do we go from Here?
There are two parts that the Liberal government must address. The first is the cost of the goods sold – the cost to the industry purchasing what they have on their shelves. Here we are in a high inflationary period, and thanks, Trudeau, for making it worse. Gas tax, gas tax and more taxes have affected every facet of the industry, from the farm to our tables. Does anyone really believe that food costs have not gone up because of added taxes?
I work mostly in the far north with First Nation communities, and we have seen their food prices increase by up to 30%. How would anyone like to pay about $14 for a two-litre package of milk? Every facet of their lives is being horrendously affected, just like everyone “down south.”
Get rid of the gas taxes and other taxes, which will lower the cost of the goods purchased by the food industry from the farm to the table.
The second is competition; We have Kleenex, which has exited Canada, and Nestle is not far behind. Did you know that most of the food industry is controlled by five companies? Costco, Loblaws, Metro, Empire, and Walmart.
We have not pushed the government to bring in more competition; we are now paying for it.
The Bottom Line
Liberal government, raising taxes will not work. Look at the impact of the carbon taxes. They have not reduced C02 emissions and have had a huge impact on raising costs.
Second, open the food industry to competition. Removing taxes can have an almost immediate impact and opening up the food industry to competition will have long-term impacts.
Best wishes from all of us at Facts that Matter
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