Restore GST rate to pay for government agenda

Posted on November 21, 2015 in Governance Debates – opinion/letter-to-the-editor – Re: Harper’s legacy is less than stellar — Nov. 6
November 21, 2015.   Charles Stuart

In her letter to the editor, Celeste Walker takes on Luisa D’Amato for her column in defence of the Harper government’s legacy.

Not being a fan of many of the Conservatives’ policies, I largely share this rebuttal of D’Amato’s apologia. However, I take issue with Walker’s suggestion that the Harper government did not offer Canadians tax relief.

Such relief was realized through cutting the Goods and Services Tax (GST) from seven per cent to five per cent.

When the Progressive Conservative government of Brian Mulroney first introduced the GST, it was intended to replace the hidden Manufacturer’s Sales Tax of 13.5 per cent.

It was a bold move meant to improve national competitiveness and underscore transparency, but it was hugely controversial. And although the Liberals campaigned against the GST, once in office they recognized its value and fairness and retained it.

It took the election of the Harper Conservatives to diminish the GST.

By Jan. 1, 2008, they had shaved two percentage points off the tax, to five per cent. This move was driven by populism and ideology, and most economists derided it as an unwise decision.

At seven per cent, the GST rate was already comparably low: Australia’s is 10 per cent, New Zealand’s 15 per cent, and the U.K.’s comparable VAT (value-added tax) at 20 per cent. (The United States has no similar federal tax.)

Also, the GST is a progressive tax that targets consumption, not income; if you don’t make purchases subject to the GST, you don’t pay it. And most basic purchases, such as groceries and medicines, are exempt.

D’Amato is correct that with the cuts to the GST there is more money in the pockets of consumers. But it also means that many tens of billions of dollars in government revenue have been forfeited over the past eight years as a result of the cuts.

This is money that could have gone toward reducing the national debt, or alleviating poverty on native reserves, or funding infrastructure, or relocating refugees.

Nobody looks forward to tax increases. And there are valid concerns over the effects of high taxation on productivity and competitiveness.

That said, the restoration of two percentage points to the GST to bring the rate back to seven per cent would cause little pain to consumers, i.e., those with the means to make purchases.

It would be far from a radical policy, and it would make a significant contribution to the current federal government’s ambitious agenda.

Charles Stuart, Kitchener

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