Would you trust this man?A lot of you have. Not the majority, but certainly enough to allow him to run Canada. To some people, maybe many, he was the lesser of two evils.
In case you didn't recognize him in this picture because of his sly demeanor, this is the Prime Minister of Canada, Stephen Harper.
The subject of this post? One of his campaign promises: to reduce the GST by 1% immediately, followed by another 1% within five years.
Why am I bringing this up after the election? Because I started working on my taxes and I came to a realization. Actually, I came to this realization during the election campaign, but it really hit home filling in those boxes on the forms I received from the Canada Revenue Agency.
Paul Martin, and his outgoing Liberals pledged an immediate 1% tax reduction on everyone's taxes, for the first $35,000 of income. This applies to your 2005 taxes (you should have received the updated forms by now). That means that if you made $35k or more, an instant $350 in your pocket for this and upcoming years. BUT, Mr. Harper had pledged during the campaign that he would scrap this tax break in favour of reducing the GST. Why? Because he wanted to gain popular vote by reducing an unpopular tax.
Let's look at the big example the Conservatives were touting. Buying a car. If you bought a car for $30k, you would save $300 in one shot. However, nobody buys a car every year, so let's amortize that over say, 5 years. That means $60 per year over this period. In five years with the Liberal's 1% tax break, you would have a total of $1,750. In order to achieve the same savings through a GST reduction, you would have to spend $145,000, or $29,000 per year. Half that with a 2% reduction. Considering people don't have to pay GST on food from the grocery store, or rent (directly), or mortgage payments, or some other items, do you really see yourself spending that much?
StatsCan reports that the average household income of two or more people is $64,900. This average is just $25,600 for unattached individuals. This means that the average household of two or more people would have to spend 44.7% of their income on GST-able items to gain the same benefit. Considering that 20.2% is going to taxes, 19.2% goes to shelter, 10.9% to food, 2.7% to health care, 1.7% for education and 8.7% on other non GST-able items, that leaves about 36.6% of the average Canadian's household income that is actually spent on potentially GST-able items (numbers taken from StatsCan website). Bit of gap, isn't there? A gap of $5,100 in spending to be more precise. I won't even get into the mathematics for a single individual.
The GST was introduced by the Mulroney (Conservative) government in place of the old Manufacturer's Tax that applied 13.5% to big ticket items. This tax was seen as a hindrance to exporting Canadian goods. So it was decided to tax only goods that Canadians buy, in order for our exported goods to compete globally. Was this a good idea? Some economists have said this move, along with Free Trade with the US, have grown the Canadian economy substantially. Whether you're a pundit or not, the reality is, GST is not unique.
The United Kingdom has a VAT (Value Added Tax) of 17.5%. Germany? They pay a VAT of 16%. The French pay 16.38%, and Italians pay 20%, 10% or 4%, depending on what they purchase. The Canadian GST is not looking too bad, even taking into account the PST (Provincial Sales Tax). What do the European taxes have in common? Their VAT is already incorporated into the price. That's right, the sticker price is what you pay. They don't add it on top of your purchase. The psychology of this? You don't complain about what you don't see. How often do you go to the cash register, thinking that you'll be paying $100 for something, only to find out that it's actually $107, plus PST? There's further confusion because some items are GST-ed and PST-ed, some are taxed by either, and still others have no tax at all. How do you keep track?
Why not just add the tax to the sticker price so you know what you're paying? At the end of the receipt, how much tax you actually paid is printed, so you know how much tax you paid. Take a look at your gas receipt the next time you fill up your car! Hey, with all the digital technology around, there shouldn't be any difficulty incorporating this into ALL the registers.
Now back to my point. The GST is a consumer tax. To gain benefit, you have to consume goods. The lower your income, the less you consume on items that are GST-able. The more disposable income a person has, the better benefit there is from this type of tax reduction. Not very fair, is it? Mr. Harper is an economist. He knows this. He also knows that the GST is an unpopular tax. Wake up people! Getting a reduction on your personal income tax is of far greater benefit than reducing the GST. It affects everyone, regardless of the level of income. This money can be used to spend on goods, save for retirement, save for you child's university education, or give to a charity. The point is, it's your choice. You shouldn't be forced to spend money, in order to save money. Think about it.
This is what every tax paying Canadian should do: Write to your MP in Ottawa. Or even better, contact the Prime Minister's Office. E-mail Mr. Harper at pm@pm.gc.ca. Or contact him at:
Office of the Prime Minister
80 Wellington Street
Ottawa
K1A 0A2
Fax: 613-941-6900
Let Mr. Harper know that Canadians want a fair reduction in their personal income tax. Not taxes of lesser benefit where he has to use a lot of hocus pocus to promote. Send a message.
And what should you do with your new found wealth? Something does come to mind....Switzerland has a plethora of nice, secure, discrete banks...and the VAT in Switzerland? ......7.6%.
Watch the queen, watch the queen...
Wings Over The World
(Photo Credit: www.ctv.ca - CP/Tom Hanson)
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