GST, Deficit and Revenue

Stephen Harper has always been a man of strategy. In an attempt to further the conservative agenda, and to make the case for austerity, part of this strategy seems to have been to rob the government of revenue (through tax reductions), so that new spending promises will require tax increases or deficit spending. One of the least beneficial tax reductions was the lowering of the GST rate from 7% to 5%.

Canadian’s aren’t stupid. Let’s make the case to them.

Returning the GST rate to 7% would result in about $11 billion in additional tax revenue, without discouraging business because GST is paid by the end user, not business. It is true that business is responsible for the collection and reporting of GST, but a change in the rate makes little difference to them. The administration involved is the same regardless of the rate.

Liberals have previously argued the case for increased taxes on corporations, but this is ultimately paid by consumers too, and can actually have detrimental effects on the economy and revenue, more than a GST hike would. We do want to convince multinational corporations to report their profits in Canada, not overseas.

Think about it though: If corporations are paying tax on profits, and those profits are earned by selling consumers goods and services, then it is really consumers that are paying the tax at the end of the day, not the corporation. It is just diverted away from the consumers immediate attention. If the corporation feels that it isn’t making the profit it should because of the corporate taxes it pays, then the corporate may increase prices for consumers, and how would that increase  be any different than a GST hike?

Luckily, with GST, we have credits already available for lower income families that can offset the costs of an increased GST rate so that it doesn’t hurt those already struggling to make ends meet. If we increase corporate taxes, however, and corporations raise costs on consumers, then we are limited in what we can do. The increase in corporate tax rates could actually hurt those that need our help.

Consumption taxes end up being a tax on the rich because those that spend more will pay more. It is also something that isn’t forced as a consumer can choose to spend less in order to pay less. The $11 billion or so in revenue that we could gain from an increase could help slashing our deficit, and could be applied to our debt so that the nation is in a more secure financial position. Once the fundamentals are solid, we will be in a better position to expand our social programs.

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