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Liberals seek to explain stance on hiking GST as revenue booster

Prime Minister Justin Trudeau has promised in the past not to increase the GST


 
Canada's Finance Minister Bill Morneau at a news conference in Ottawa, Canada, December 7, 2015. The new Canadian government's planned tax hike on the rich will bring in less money than forecast. A government document said the tax hike would bring in C$2.01 billion ($1.49 billion), while the cost of the tax cut would be C$3.44 billion ($2.55 billion). (Chris Wattie/Reuters)

Canada’s Finance Minister Bill Morneau at a news conference in Ottawa, Canada, December 7, 2015. The new Canadian government’s planned tax hike on the rich will bring in less money than forecast. A government document said the tax hike would bring in C$2.01 billion ($1.49 billion), while the cost of the tax cut would be C$3.44 billion ($2.55 billion). (Chris Wattie/Reuters)

OTTAWA — The federal finance minister is seeking to clarify the new Liberal government’s position on the GST.

Bill Morneau was asked directly Tuesday whether he has considered raising the goods and services tax as a way to generate more government revenue.

“You know, one of the things that I’m absolutely sure of is that we should go through our budget process in order to figure out where we’re going to get to,” Morneau told reporters in Ottawa in response to the question.

“In my estimation, we’re going to hear a lot of things from not only my colleagues around the table, but from Canadians about what we should be doing from a budget standpoint. And at the end of that, we’ll present to Canadians a plan for the next year and give them a sense of what’s going to happen over the next five years.

“I’m not at this stage considering any tax issues that haven’t been already put in our campaign platform.”

After his remarks were published, Morneau later tweeted: “Contrary to misleading headlines, we are not considering changes to the GST.”

In the coming weeks, the government will hold consultations to help it prepare for the federal budget. Morneau has also said the government plans to create an advisory council made up of experts from Canada and abroad that will help Ottawa brainstorm on how best to kick-start economic growth.

The previous Conservative government lowered the GST by two percentage points during its decade in office _ a move that eliminated about $14 billion in annual revenues.

The Harper Tories chopped a percentage point in 2006 to drop the GST to six per cent. They trimmed off another point two years later.

Most economists opposed the Conservative move to slash the GST, which was widely viewed as more of a popular political decision rather than a solid economic one.

Prime Minister Justin Trudeau has promised in the past not to increase the GST.

His Liberals, however, are currently staring at considerable fiscal hurdles, as they look to follow through on pricey election pledges.

The party has already backed away from its election vow to cap annual deficits at $10 billion over the next two years, blaming the sluggish economy and a weaker-than-expected fiscal situation they say they inherited from the Tories.

Meanwhile, the party has started highlighting the importance of fulfilling another fiscal goal from its platform, one that’s lesser known but easier to meet: lowering the debt-to-GDP ratio.

The government has promised to keep the ratio, which represents a government’s capacity to pay back debt, on a downward track every year until the next election. Ottawa calculates the ratio by dividing total federal debt by the overall size of the economy, as measured by nominal GDP.

Economists say that by focusing on debt-to-GDP, the Liberals could still lower the ratio even if they run annual deficits of up to $25 billion in the coming years _ as long as the economy records decent growth.

Morneau has also said that along with the debt-to-GDP vow, the government will stick with its other “fiscal anchor”: balancing the federal books by the fourth year of its mandate.

Experts say balancing the budget in four years will be a much tougher task for the government than reducing the debt-to-GDP ratio.

Earlier this month, parliamentary budget office projections suggested the government could be on track to run annual deficits up to $15 billion once the Liberals’ costed, big-ticket election vows are included in calculations. On top of that, the party has also made several uncosted promises.

The Liberals also recently conceded their new tax package _ which raises taxes on the highest earners and lowers the rate on the middle tax bracket _ will actually drain more than $1 billion net from the treasury each year. Initially, the party had projected that the plan would be revenue neutral.

The Harper Tories chopped a percentage point in 2006 to drop the GST to six per cent. They trimmed off another point two years later.

Most economists opposed the Conservative move to slash the GST, which was widely viewed as more of a popular political decision rather than a solid economic one.

Prime Minister Justin Trudeau has promised in the past not to increase the GST.

His Liberals, however, are currently staring at considerable fiscal hurdles, as they look to follow through on pricey election pledges.

The party has already backed away from its election vow to cap annual deficits at $10 billion over the next two years, blaming the sluggish economy and a weaker-than-expected fiscal situation they say they inherited from the Tories.

Meanwhile, the party has started highlighting the importance of fulfilling another fiscal goal from its platform, one that’s lesser known but easier to meet: lowering the debt-to-GDP ratio.

The government has promised to keep the ratio, which represents a government’s capacity to pay back debt, on a downward track every year until the next election. Ottawa calculates the ratio by dividing total federal debt by the overall size of the economy, as measured by nominal GDP.

Economists say that by focusing on debt-to-GDP, the Liberals could still lower the ratio even if they run annual deficits of up to $25 billion in the coming years — as long as the economy records decent growth.

Morneau has also said that along with the debt-to-GDP vow, the government will stick with its other “fiscal anchor”: balancing the federal books by the fourth year of its mandate.

Experts say balancing the budget in four years will be a much tougher task for the government than reducing the debt-to-GDP ratio.

Earlier this month, parliamentary budget office projections suggested the government could be on track to run annual deficits up to $15 billion once the Liberals’ costed, big-ticket election vows are included in calculations. On top of that, the party has also made several uncosted promises.

The Liberals also recently conceded their new tax package — which raises taxes on the highest earners and lowers the rate on the middle tax bracket — will actually drain more than $1 billion net from the treasury each year. Initially, the party had projected that the plan would be revenue neutral.


 

Liberals seek to explain stance on hiking GST as revenue booster

  1. The LPC government should have left income tax rates as they were, and hiked the GST. Might not have sounded as good as “asking the rich to pay a bit more” (as if the “rich” could refuse a higher income tax rate), but it would have been the right thing to do as judged by the vast majority of economists.

    And, for good measure, eliminating the boutique tax expenditures the previous government brought in would be another right thing to do.

    • Trudeau isn’t worried about deficits. Once he brings in his next few budgets, it will most likely have an increase in the GST, as well as some type of national carbon tax, etc.

      don’t worry…..the Liberals always find a way for someone else to pay for their BIG ideas.

      • Funny how your last line is meant as an insult. The Conservatives didn’t find someone to pay for their BIG ideas. Which is why they turned consecutive surpluses to consecutive deficits.

        • Partridge,

          Your ignorance about history is not surprising. Here’s a quick update for you.

          1. Liberal surpluses: The result of the Liberal party lifting the economic policies of the REFORM Party and using them to slay the deficits. The REFORM policies stolen…were written and created by Stephen Harper. Harper may not have been in power at the time, but it was his set of ideas that got rid of the deficit; not Paul martin.

          2. Deficits under Harper: The result of a worldwide recession (that Canada had nothing to do with), as well as the opposition parties forcing the Government (then, a minority) to revert to Keynesian policies to prevent the worst impacts of the recession. It took a while, but Harper put the country back into surplus this year; even though oil prices dropped precipitiously.

          Frankly partridge….if you want to see what can REALLY damage the country’s books…..just look at the first PM Trudeau we had. He is the only who started us down the road of debt and deficit. His son will do the same, and once the economy has tanked so much people give up “their Canadian values” they will again elect a Conservative to fix the mess. And once the “fixing the mess” is underway, people will once again have to listen to the Liberals tell Canadians how “mean spirited” the Conservatives are; simply because they are doing what needs to be done to fix Liberal incompetence/corruption.

          That’s how it’s been for quite a while now.

          • It wasn’t the Liberals who got rid of the deficit, it was Harper!
            Hahahahaha!

          • Tresus wrote:
            “It wasn’t the Liberals who got rid of the deficit, it was Harper!
            Hahahahaha!”

            I’ll grant that harper wasn’t in government at the time, but the FACT is that the policy used to get the books back in order were 100% Stephen Harper’s policies.

            same goes for the CLARITY ACT. that was also Harper.

            Just tell him thanks, and move along.

          • Other than your imagination, where can we find Stephen Harper’s brilliant blueprint that Paul Martin implimented?

  2. Again, why would a government that has grown at a rate that outstrips inflation and population growth for over 40 years, require an increased level of confiscation? There is no need for the federal govt. to take more money. There is a desperate need for the govt. to either practice restraint, or have some form of restraint imposed upon it.
    Increased confiscatory reach will extract a penalty at some point. We WILL lie about our incomes, and we WILL cheat on our taxes, and we WILL resist efforts of the government to make us pay more. Small scale tax avoidance has been increasing at a rate that matches or even exceeds govt. driven aims to make us pay more. Enjoy the decline.

    • You are talking rubbish again Bill.

      None of this is happening.

  3. Good by all means raise the GST again..

    Pennies for me, billions for the government.

      • I should apologize for that response. It occurred to me immediately after posting that you were making the point that you are low income, and therefore the majority of your budget would go to groceries and rent. Therefore, the GST increase would cost you very little. I’m sorry for being an insensitive boor.

        • Walid my dear….

          Rich people don’t worry about pennies, only low income people do.

          Your post explains which one you are.

          • That’s why I was apologizing. It will be a lot more than pennies for me, but I was making the arrogant assumption that you were earning and spending as much as I do. But for a low income person like yourself, most of your money is going for necessities that are GST free. It was an insensitive thing to say, thus my apologies. Some people have trouble making ends meet.

      • Khalid,

        Regardless of what Emily will tell you, she is not worried about increased taxes, as whenever the taxes go up…..she gets a bigger cheque each month. she is a net receiver of taxes, not a giver.

        • LOL yer cute. Not very bright, but cute.

          I was in Reform party years ago, and read the handbook

          Now go play in traffic.

          • Emily,

            I don’t think you would actually expect anyone to believe you were ever in the Reform Party. If you were ever at a REFORM PARTY event, you were probably holding a sign calling them racists or bigots. Frankly, the REFORM party wouldn’t allow someone as dim as you to be a member. Sorry….if you want to belong to a party for low IQ voters…..try the NDP or Greens.

            If you have a criminal record….the Liberals are your only option. Now go take y our government subsidized meds and leave the discussion to folks who pay taxes and have earned the right to have a say.

          • Dear James,
            This is another CON tactic attacking the poster rather than discussing the topic.

            Not interested Jamie my boy.

  4. As long as every penny was channeled back into income tax reductions, this would be a good move. Cancelling the plethora of silly credits and simply raising the basic personal amount would also be a good move. But Trudeau will do neither of these things. He will raise the GST, eliminate some fluff credits, and use the money to increase spending. By the way, “don’t rule out” is the same as saying “planning to increase it”. It’s a done deal. No government would even muse out loud about such an unpopular move unless they were already resigned to doing just that.

    • Walid, it is an old gimmick on here for cons to pretend that I am poor or on welfare…however, I pay more in taxes in a year than your annual income.

      It was Mulroney’s idea to set the GST (which he did) and then lower income tax which he couldn’t do.
      Trudeau has now completed that.

      Now go play “concern troll” elsewhere. You’re not very good at it.

      • Complete what? he hasn’t cut income taxes, just shifted the burden up the ladder. Of course a senior on fixed income wouldn’t worry about that.

  5. Of course Trudeau and his tax the canadians spend the money on the unwashed foreigners throughout his world will eventually cause the GST to be increased. And many other taxes too. That is what Liberals do. Get ready people your rough ride for the next few years will be a nightmare.

    • That’s right! It was that Liberal darling Brian Mulroney who started the GST in the first place. Those Liberals – always finding new taxes.

      And the worst part about those ‘unwashed foreigners’ is that eventually they become Canadians. A name like ‘Underhill’ sounds like you can trace your lineage to this soil pre-European explorers.

      • Partridge,

        The GST was to replace a previous tax that was hidden from consumers before. Bringing it out into the open and giving it a name didn’t change much.

        Like most taxes, it is just another way for politicians to help themselves to something that doesn’t belong to them. Frankly, taxes that are just the legal theft of money from people who have earned it. Governements are taking OUR money, and spending it on THEIR priorities; regardless of the fact we would best know what to do with it. Taxes should be the absolute minimum required to run the country and public service. It should not be a means to buy support by interest groups. IE…….If the Liberals want to save Africa, tell them to give to a charity. Don’t make everyone pay for it.

        • Except if we’re talking about making the world pay for the external costs of our lifestyle, then…that’s cool!

          • Again,

            anyone notice how willing some people who don’t PAY taxes are to have the rest of us foot the bill.

            As before Tresus, just tell us thank you and move along. We’ll keep paying your way without complaint.

          • Sharing your fabricated fantasies about me won’t change the fact that you’re more than happy to share the costs of your lifestyle with the rest of the world, but cry like a baby at the thought of being asked to pay your way.

  6. “Most economists opposed the Conservative move to slash the GST, which was widely viewed as more of a popular political decision rather than a solid economic one.”
    That’s not a correct statement unless the economists concerned are all those employed by Unions and/or other assorted interest groups. I have listened to a few like that who indeed strain themselves a lot counting upside down and laboring a point that wouldn’t make any sense for anyone else. The logic for consumption tax reduction is very simple. A reduction of taxes actually increases the consumer expenditure, especially on consumer durables. An increase in consumer expenditure benefits all around in the economy. It helps marginally profitable enterprises to stabilize and thrive, provides for increased employment, reduces production and marketing costs, and lets the government itself to scoop up what it lost by way of rate reduction through the extra tax collected on the increased consumer spending. Even when the reduction is nominal, it is enough persuade many who sit on the fence due to budget woes to take the plunge. The resultant upward spiraling of consumer spending and the total tax collected provides for a vigorous economy. As far as those economists who count upside down are concerned, nothing matters except for the concessions, outright grants and exemptions afforded to their clientele. These parasitic concerns would be more than sufficient for them to bring down a government that works on logical premises and sensible principles.

    • Anyone who thinks this will result in more or better services is dreaming in Technicolor. The Libranos will use it to expand the civil service payroll, and increase transfers to provincial Liberal govts. that will, in turn, use it to fund projects near and dear to Liberal hearts and minds. The only beneficiaries will be the public service and individuals close to the Librano power structure.
      Again, I am astounded at how the so-called journalistic community of this country fails to examine critically the crime of over-taxation in this country. Scribblers who will go on at length about Canadians being gouged at the gas pumps, while blithely donating half of their income to various levels of government, mystify me to no end.
      Governments do not need more money. They need to rein in spending, and cut the pay and benefits that are doled out to public sector workers. Again, ask yourself why it is that attacking the pay of taxpayers, so that we can funnel 70-80% of it through payroll, is automatically deemed easier than reducing the pay and benefits of a class of people who tend to earn anywhere from 7% to 30% more than the people they work for.

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