The opposition parties keep nattering on about how much of a mistake it was for the Stephen Harper government to cut the GST. They have blamed the current shortfall in federal revenues squarely on the 2 per cent reduction of the unpopular consumption tax. And recently on TV’s Power Play, former PM Paul Martin repeated the criticism to Tom Clark. Twenty years ago, however, the Grits sung a different tune—if their squawking back then could be characterized as a “tune”.
In 1989, then Prime Minister Brian Mulroney’s Progressive Conservative government proposed a national sales tax of 9 per cent to replace the 13.5 per cent Federal Sales Tax (FST) and an 11 per cent Federal Telecommunications Tax. The FST was generally believed to be detrimental to our international competitiveness. Back then, the Liberal Party lost no time fanning flames of controversy over the proposal, vociferously denouncing it at every opportunity.
So vehement was Grit opposition, the Liberal-dominated Senate refused to pass the tax into law, forcing PM Mulroney to increase the number of senators to give the Progressive Conservatives a majority in the upper chamber. Even then, the Liberals resisted the new tax, launching a filibuster to further delay the legislation.
During the next federal election campaign, chief Grit Jean Chrétien promised to repeal the GST, but in typical Liberal fashion, never did.
Inexplicably, in the twenty years since the GST was introduced the Liberals’ position on the tax has gone from totally opposing it to considering it at the foundation of our federal tax system. To Grit politicians, lowering the tax is akin to cutting healthcare funding.
In 2005, The Canadian Press claimed in an article that the Conservatives did a political back flip because their predecessors imposed the GST and then wanted to cut it. This is faulty reasoning. Increasing and decreasing the rates of tax is a common practice among governments of all stripes. Over past decades, there have been several changes to income tax rates, and in 2006, the government considered it was time to cut the GST—no back flip there at all.
To be fair, the GST is widely considered by economists to be an effective form of taxation, believing that the GST is a more efficient tax source than the income tax.
All true, I’m sure. But it didn’t just recently become true; it was true 20 years ago when Grits wanted to have nothing to do with it and even risked a constitutional crisis in the Senate over its adoption.
Over time, every type of tax should be re-examined. The federal consumption tax rate had been the same for almost 20 years, its time had come.
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© 2009 Russell G. Campbell
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