Restaurateurs see profit margins eaten away

The numbers vary, but the effects are the same.

Two months removed from the onset of the 12-per-cent harmonized sales tax (HST), a handful of Tri-Cities restaurant owners are noticing a dip in business.

Hogan's Restaurant and Lounge owner Gary Hogan said Tuesday that his business has seen a 25-per-cent drop since the tax came into effect July 1.

"It's been tough. It's been a very slow summer, we're not as busy as we need to be and I hear nothing but bad stories from people I speak to business-wise," said Hogan, who took over the Port Moody-based business in March. "The tips are poor, and the attendance is poor."

Aside from the financial realities of the tax, Hogan said that the trickle down effect of the HST has hit consumers on another level as well.

"People are unhappy and concerned, definitely. Restaurants operate on a fairly slender margin. The margins are slim and you have to be on your game to stay in this business," Hogan said. "It pisses [customers] off philosophically at the same time as pissing them off financially -- it's a pretty compelling duo."

Cory Wright, president of the Wright Hospitality Group, said his three restaurants have seen about a five-per-cent decrease in sales since July 1, though he was hesitant to attribute that drop solely to the HST.

"We have seen a little bit of a pullback because of it -- whether it's the bad economy or the HST, I think it's kind of early to say what's going to happen. But we definitely have seen a bit of a pullback for sure," said Wright, whose company operates Dewy's Pub and Restaurant and the Treehouse Pub in Port Coquitlam.

"I think people are starting to feel the pinch now that we're six to eight weeks out. In the first month, it had a mental affect on people, but now they're feeling the financial affect."

Wright said he expects the real financial implications to settle in sometime in the fall or near Christmas.

That said, in the few months since the harmonized tax has come into effect, Wright has not had to reduce staffing levels.

"Because we operate at three fairly busy locations, it hasn't affected our staffing levels yet. But come the fall, and maybe around Christmas, that's likely when we'll see the true results of this," he said.

"We definitely hear the stories and the complaints about the HST across the board. We absorb some of that in our costs with having tax-in pricing, so our customers see that our prices haven't moved. It affects the company more than it affects the customer right now. But in saying that, when a family goes to Subway for example, that family is paying 12 per cent on a meal that they use to pay five per cent on, so it's across the board."

Elias Boutros, owner of Coquitlam's Skewers Mediterranean Grill, said he's heard the occasional complaint about the HST in recent months, and that the new tax often dissuades customers from ordering more than one item on his menu.

"We do hear some complaints here and there," he said Tuesday. "They look at a $30 bill and they've got an extra $3.60 in tax on that bill. And when they see that, then maybe they don't buy the drink that they would normally get anymore."

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Film industry sees lights, camera, more action

-by Janaya Fuller-Evans

B.C.'s film and TV industry is already benefiting from the introduction of the HST, according to industry representatives.

While other businesses are seeing a drop in sales since the harmonized sales tax was introduced on July 1, film and television studios have noticed an increase in productions.

"Since the HST was introduced, the activity of inquiries and projects landing in B.C. has increased significantly," Ron Hrynuik, general manager of Bridge Studios, wrote in an e-mail.

Because B.C. didn't offer provincial sales tax exemptions to studios like other provinces, productions had to pay PST on set supplies and production equipment before July.

"All of the PST that the productions used to have to pay, from lumber on all the sets, equipment rentals, right to the phone and furniture rentals at our studio, is eliminated," Hrynuik said. "They get the HST back, and that really makes a difference on productions."

While it is not clear whether the tax shift attracted new film and TV business right away, studios and equipment providers noticed a change in July.

"It places us at a more competitive playing field with other North American jurisdictions," he added.

Peter Leitch, chair of the Motion Picture Production Industry Association of B.C. and spokesperson for the industry, could not be reached for comment as he was on vacation.

Leitch, who is the president of Mammoth Studios in Burnaby and North Shore Studios in North Vancouver, submitted a column about the HST to the Vancouver Sun on Aug. 5.

"The HST helps keep the lights on and the cameras rolling at North Shore Studios and Mammoth Studios and other locations across the province," he wrote.

"Our industry succeeds when we are in a competitive place to do business."

Previously, Ontario gave tax credits to the film industry for PST paid, he said, while B.C. did not.

"It's the smart tax for B.C. because it removes the provincial sales tax businesses used to pay at every step of the supply chain," Leitch wrote.

"The paid PST was passed on to the consumer, embedded in the price of goods and services."

Now both provinces are on an even playing field to attract business, he added.

B.C. is the third largest production centre in North America, after Los Angeles and New York, according to Leitch.

"In 2009, there were more than 239 projects shot in B.C., generating more than $1.3 billion in production spending," Leitch wrote. "More than $1 billion of that was from non-Canadian productions that chose to shoot and invest here."

The Lower Mainland is also home to the western division of a major film and television equipment supplier, William F. White.

The company, based in Toronto, is Canada's largest provider of film, TV and theatre production equipment, renting lighting and grip equipment and crystal sync generators to productions.

The company also offers specialty equipment such as cranes and camera cars.

Garin Josey, director of marketing and sales at the Burnaby branch, agreed with Leitch's assessment of the HST.

"We had a number of series start up after July 1," he said. "Whether it was just a matter of timing, I'm not sure."

The industry, which was hit hard by the recession, has responded positively to the new tax, Josey said.

"It makes us more competitive," he said. "Things are picking up."