A 10 per cent GST … and that's just the beginning folks … 

By Walter Robinson
web posted September 23, 2002

The goods and services tax (GST), pollsters tell us, is the most
hated tax in recent Canadian history. Yet the pollsters also tell us
that Canadians would be willing to pay more taxes for health
care and Kyoto commitments. Herein lies the reason why
Canadians should not dismiss the rumours of a hike in the GST
(going from its present 7 per cent to 10 per cent) in the near
future.
 
According to the December 2001 budget documents, the GST
presently nets Ottawa some $27.1 billion. So do the math, divide
by seven, carry the one and count on your big toe and voila, with
each percentage point of the GST, Ottawa rakes in $3.87 billion.

Following along, a 3 per cent hike would mean an extra $11.61
billion in additional revenues for Ottawa. This would definitely be
enough for Ottawa to respond to demands for federal cash
infusions for health care – expected from both the Kirby Senate
Committee (late October) and the Romanow Commission (mid-
to late November).

Billions of tax dollars would also be left over to fund Kyoto
transition commitments, the cities agenda, aboriginal initiatives
and a host of other 'social engineering' schemes expected in the
Throne Speech on September 30.

There are five major reasons why Canadians should be
concerned.

1) This could be more than a trial balloon. It is a certainty that
both the Kirby and Romanow health care commissions will
demand that Ottawa play a larger funding role in health care.
And we've already seen that the federal government is not
prepared to re-allocate within existing budget envelopes (ex: cut
corporate welfare and regional development by $4 billion) to
meet such demands. Combine this with the TD Bank's recent
forecasts showing Ottawa will run little to no surplus and it's
clear that tax hikes are definitely being considered to meet a
variety of health care, Kyoto and as yet unknown Throne
Speech promises.

2) 10 per cent is the first political option for the feds. Moving to
an 8 per cent GST doesn't yield enough revenue. Nine percent is
a non-starter given the Liberals opposition to this amount back in
1989 and 1990. And Ottawa knows they will take some heat
over increasing the GST regardless of the amount, so why limit it
to just one percentage point? The political price tag would be the
same for 10 per cent as it would be for 8 per cent.

3) Successfully hiking the GST sets a dangerous precedent. If
the government can successfully hike the GST under the pretense
of funding healthcare, then look out. How about another 1 per
cent for the cities agenda, .8 per cent for aboriginal funding
priorities, 2 per cent for the innovation agenda … and on and on
it goes.

Not only would the price of goods and services be higher due to
the tax hike, but businesses would also pass along the costs of
compliance (changing billing systems, registers, etc.) to
consumers in the form of higher prices or diminished service
offerings.

4) It could create space for provincial sales tax hikes. A 10 per
cent GST then allows provinces with single digit sales taxes to
raise their own sales tax rates close to 10 per cent. And we've
already seen health care premiums skyrocket in Alberta and BC
under the cover of protecting health care.

5) There is no guarantee any GST proceeds will go to health
care. Time and time again, Ottawa has refused to dedicate gas
taxes back to road and highway construction citing an aversion
to dedicated taxation. It's improbable that the federal
government would change its tune when it comes the GST and
health care funding. Welcome to the world of green peas and
alfalfa sprouts taxation – think the flying tax or the EI ripoff ….
you may not like it, but mom (read: the government) says its
good for you.

Walter Robinson is the federal director of the Canadian
Taxpayer's Association (http://www.taxpayer.com/).

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