25 years ago the Conservative dominant House of Commons passed the Goods and Services Tax (GST) bill despite huge opposition from both political rivals and the public. But the GST is now one of the major sources of revenues for the Canadian government.
In the fiscal year 2013-14, the total amount of revenues collected from the GST was 29.9 billion dollars, which constitutes 1.6 per cent of the total gross domestic product (GDP). The amount is projected to have a steady increase in coming years.
Tax consultant and lawyer Amin Miah said, “The government won’t be able to implement its budget without the GST. People don’t like to pay taxes but now Canadians understand that the GST is crucial for running social programs”.
The Progressive Conservative government led by Stephen Harper cut down the seven per cent GST by one point on July 1, 2006, and a further percentage point on Jan. 1, 2008. The measure was welcomed by the public, consumer groups while critics said it benefitted the high income people only.
University of Ottawa Professor Jean Bernard said that lowering the GST was a bad decision. He said, “The GST cut does not make a huge difference for the average income households but imposes certain extra costs on businesses.”
“The revenue losses caused by the reduction in the GST mean cutting back funds for social welfare and development programs”, Bernard added.
The GST is harder for the people to evade, as they have to pay the federal sales tax whenever they buy something.
Former Liberal MP Sheila Copps who fought against the GST during her political career said in an e-mail, “Governments like it because it is impossible to avoid the GST if you purchase consumer goods, as everyone does. It generates revenues that some corporate taxpayers would not otherwise pay”.
Sales tax revenue is more recession-resistant and government-friendly than corporate or personal income tax payments.
In December 1990, after eight months’ debate, amid the cries of protestors in the gallery, members of Parliament voted on the highly controversial Goods and Services Tax bill.
Liberal and NDP members jeered at the Tories and raised protest cards against the proposed seven per cent tax saying it would be hard on lower income Canadians.
On the other hand, the Conservatives defended the tax as a deficit-busting tool and the then Prime Minister Brian Mulroney was adamant to get the bill passed. On its third and last reading, the House of Commons voted to pass the bill 144 to 114, which went into effect on Jan. 1, 1991.
Earlier in September 1990, Mulroney used the little known and highly complicated constitutional provision to stack upper chamber with eight more Tories to evade Liberal opposition to the GST in the Senate.
“At the time, there was already a manufacturers’ sales tax, and the GST was designed to replace that but covered many essentials, including home heating, books etc.,” Copps mentioned.
Copps resigned from the Parliament in 1996 in protest of the Liberal government’s policy of retaining the GST though she was reelected in subsequent by-election.
Prior to the federal election in 1993, the Liberals pledged to eliminate the GST once they were elected.
Documentation:
The Goods and Services Tax: Overview and History