Harper's Conservatives vow to cut GST to 5%

[Foz]

MISSISSAUGA, Ontario/MONTREAL (Reuters) - Canada's Conservative Party boldly pledged on Thursday to slash a hated consumption tax if it wins the January federal election.

Party leader Stephen Harper promised to cut the federal goods and services tax (GST) to 5 percent from 7 percent over five years. The unpopular tax was introduced in 1991 by the then Conservative government in a bid to curb budget deficits.

Cutting the GST is an idea that could well resonate with voters, especially since the Liberals promised in the 1993 election campaign they would scrap it. Once in power, however, they changed their minds.

"I've never supported the GST myself. I believe all taxes are bad. Lower taxes are good," Conservative leader Stephen Harper said on the third day of an election campaign triggered when the Liberals were brought down by a corruption scandal.

Harper said the rate at which Ottawa collects the GST is outstripping growth in people's earnings. The GST brings in close to C$30 billion a year.

He said that, if elected on January 23, the Conservatives would immediately cut the GST to 6 percent from 7 percent, forgoing about C$4.5 billion in annual tax revenues.

The proposal -- the main plank of the Conservatives' economic platform -- seemed to catch Liberal Prime Minister Paul Martin off guard.

Asked whether the plan was affordable, he told reporters in Montreal: "Well, I guess it depends what they intend to do. It may well be. What other plans do they happen to have?"

Martin's response contrasted with his approach in the June 2004 election campaign, when he charged that the Conservatives' tax cut proposals would leave a "C$50 billion black hole" in the government's finances.

Martin said the Liberals would instead cut middle-class personal income taxes. Last month federal Finance Minister Ralph Goodale promised C$5.3 billion in immediate tax cuts and proposed C$25 billion more in the coming five years.

"(Harper's) approach to the GST may be good politics but it's stupid economics," Goodale told CBC television, saying he doubted the C$4.5 billion in lost tax revenues would fully translate into increased spending by consumers.

Martin -- who as finance minister in the 1990s eliminated a huge budget deficit by cutting spending -- wants to campaign on the Liberals' economic record. The economy is booming and unemployment is at a 30-year low.

But Britain's Financial Times newspaper sounded the alarm on Thursday over the tens of billions of dollars in new spending the Martin government announced in the run-up to the campaign.

"His free-spending actions begin to belie the fiscal rectitude of his words," the newspaper said in an editorial.

Canada is the only member of the Group of Seven rich industrialized nations to be in fiscal surplus and Harper said his proposal would not put Ottawa in the red.

But it is unclear whether an economy already running at full capacity can absorb such a tax cut without speeding up the pace of inflation.

The Bank of Canada is set to hike interest rates next week to head off a jump in consumer prices. The Organization for Economic Co-operation and Development said on Tuesday that Canada should avoid any additional fiscal stimulus.

===========

Nice sales pitch. Chretien did it with the Liberals for his election and got in. 'No more GST'.

Yeah right.. ain't falling for that. Go try selling ice to another eskimo.

[sputnik]

Originally posted by Foz
Nice sales pitch. Chretien did it with the Liberals for his election and got in. 'No more GST'.

Yeah right.. ain't falling for that. Go try selling ice to another eskimo.

Considering that one of the main arguements have with the Liberal Red Book was that they promised to remove the GST and never did. I dont think the Conservatives would lie about reducing the GST by 2 percent as it would certainly kill all of their credibility.

With the HUGE surpluses that Canada has had lately it doesnt seem like that difficult of a task, not to mention the fact that it will boost consumer spending.

Remeber that the Conservatives imposed the GST as a measure to balance the budget and remove deficit spending. Once we started running a massive surplus each year the Liberals should have reduced taxes. Unforunately the Liberals decided to use the GST income (and resulting massive surpluses) to funnel money to lobby groups that would end up voting for them.

[2002civic]

Originally posted by sputnik


Considering that one of the main arguements have with the Liberal Red Book was that they promised to remove the GST and never did. I dont think the Conservatives would lie about reducing the GST by 2 percent as it would certainly kill all of their credibility.

With the HUGE surpluses that Canada has had lately it doesnt seem like that difficult of a task, not to mention the fact that it will boost consumer spending.

Remeber that the Conservatives imposed the GST as a measure to balance the budget and remove deficit spending. Once we started running a massive surplus each year the Liberals should have reduced taxes. Unforunately the Liberals decided to use the GST income (and resulting massive surpluses) to funnel money to lobby groups that would end up voting for them.

couldnt say it better myself

[mac_82]

Originally posted by sputnik

I dont think the Conservatives would lie about reducing the GST by 2 percent as it would certainly kill all of their credibility.

Well since the Liberal's have been in power since 1993, I don't think it did much to their credibility if people continue to vote them in.

[retro-steve]

Originally posted by mac_82


Well since the Liberal's have been in power since 1993, I don't think it did much to their credibility if people continue to vote them in.

they know how to win the eastern vote and that's all you need to win in canada.

[Xtrema]

Sold.

[Altezza]

Vote buying has gone the way of ebay. I'll sit back and see how high the bid goes

[davidI]

Originally posted by sputnik


Considering that one of the main arguements have with the Liberal Red Book was that they promised to remove the GST and never did. I dont think the Conservatives would lie about reducing the GST by 2 percent as it would certainly kill all of their credibility.

With the HUGE surpluses that Canada has had lately it doesnt seem like that difficult of a task, not to mention the fact that it will boost consumer spending.

Remeber that the Conservatives imposed the GST as a measure to balance the budget and remove deficit spending. Once we started running a massive surplus each year the Liberals should have reduced taxes. Unforunately the Liberals decided to use the GST income (and resulting massive surpluses) to funnel money to lobby groups that would end up voting for them.

I agree wtih you, only thing is that our balanced budget has a lot to do wtih the extremely low interest rates over the last few years. We crunched some numbers in a business class and I think it ended up being something like for every 1% the interest rate went up Canada lost $6 billion in debt interest payments. The same way, for every 1% the interest rate went down Canada gained $6 billion over the last decade...thus the surplusses. I'd prefer the GST stayed in place until the debt was completely wiped out....otherwise....if interest rates surpass 10% again the budget will be way back in the red. Unfortunately, most Canadians prefer to have their taxes cut NOW NOW NOW and don't look towards what will hapen in the future if we save that 2% now.

[mac_82]

Originally posted by retro-steve


they know how to win the eastern vote and that's all you need to win in canada.

but im sure if the conservatives won, and then didn't cut back the GST they would still have western canada's vote. funny how that works.

to polititians in general. i think im voting green.

[TurboMedic]

How about eliminate the GST entirely

[A_3]

Originally posted by mac_82


but im sure if the conservatives won, and then didn't cut back the GST they would still have western canada's vote. funny how that works.

to polititians in general. i think im voting green.

I'm also doing the Green thing. It a least sends a message to the winning government to pay more attention to our environment. Sure this conservative GST break would get us personally ahead for the time being. Really though, how much does this cost us down the road, what programs will have to be cut due to the loss of billions of dollars. I've been scanning alot of posts surrounding the vote lately and I hear alot of people complaining about not having this or not having funding for that (such as our army). This will only perpetuate that. This is just another cheap move in an attempt to buy us off.

[Xtrema]

Originally posted by davidI
..if interest rates surpass 10% again the budget will be way back in the red. Unfortunately, most Canadians prefer to have their taxes cut NOW NOW NOW and don't look towards what will hapen in the future if we save that 2% now.

Interest rate would NOT be 10% again because Canada has valuable natural resources that the world deperately needs.

Bank of Canada will also keep interested low, the only way we'll see 10% is everyone suddenly becoming millionaires.

2% cut is definitely possible on such strong economy. Low tax will only stimulate economy more and in the end, which end up more tax revenues.

[davidI]

Originally posted by Xtrema


Interest rate would NOT be 10% again because Canada has valuable natural resources that the world deperately needs.

Bank of Canada will also keep interested low, the only way we'll see 10% is everyone suddenly becoming millionaires.

2% cut is definitely possible on such strong economy. Low tax will only stimulate economy more and in the end, which end up more tax revenues.

We had those same valuable resources in the 1980's when interest rates were above 20%....

Just last week Alan Greenspan was talking about how U.S. bank policy can no longer be solely national and the world markets dictate what happens.

Also, correct me if I'm wrong but haven't the interest rates increased over the past several months despite the high price of oil? I hate to say it but New Brunswick, the province that has the highest energy revenues is still under 20% meaning 80% of the rest of industry.....a lot of which depends on these resources...aren't doing as well.

[davidI]

funny, just after making that post I was reading the national post and on page fp3 the first sentence reads

'Canada posted its biggest surege in prices in 22 years in the third quarter - thanks to soaring energy prices - and underlying economic output was soilid, cementing expectations for further interest rate hikes'

and in bold in the middle of hte page 'bank of canada likely to notch up interest rates yet again'

Extrema, you might want to take some more econ classes...

[Xtrema]

^
Raising interest rate is too cool the overheating market and to fight inflation. Yes interest has risen from 2% to 3% in this year. And probably up to 4% by end of next year. That's a far cry from your 10% prediction.

Unlike old days, Bank of Canada does put an effort to keep interest low. Remember the high interest days where unemployment is over 10%? They will not want to repeat that again.

A interest rate of 10% will basically stop all investments and have a majority of cash sitting in bank accounts. So once economy stablize or may be cool again, interest rate will drop again.

[Xtrema]

Back to the GST topics, have you seen all the bias coverage in the new yesterday?

All these reports/reporters are saying that 2% is useless, only pennies a day, yada, yada, yada.

The liberal supporting media should STFU, any tax cut is a good tax cut. A 2% cut will save me $800 a year and at least $600 if I decided to buy a new car.

[sputnik]

Originally posted by davidI
We had those same valuable resources in the 1980's when interest rates were above 20%....

When do you predict the sky to start falling?

The Bank of Canada raises rates to keep inflation around 2%. Unless we start seeing the economy go nuts we arent going to see double digit interest rates any time soon. With the US in a recession right now it will be a while before the Bank of Canada will agressively need to raise rates as you predict.

[sputnik]

Originally posted by Xtrema
Back to the GST topics, have you seen all the bias coverage in the new yesterday?

All these reports/reporters are saying that 2% is useless, only pennies a day, yada, yada, yada.

The liberal supporting media should STFU, any tax cut is a good tax cut. A 2% cut will save me $800 a year and at least $600 if I decided to buy a new car.

Its quite funny to watch Martin complain about the GST tax cut when removing the GST was/is part of the Liberal mandate since 1993. Kinda hard to criticize something that you suggested.

At the end of the day the Liberal media should be for the GST tax cut because on of the primary complaints about rich people is that they write off most of their GST by "hiding" behind a company and using tax loopholes that the working classes are unable to take advantage of. However the Liberal media would never be able to admit that because that would mean they would have to openly support the Conservatives in something that they have wanted and demanded for a long time. Interesting how politics makes liars out of more than just politicians.

However to sit on the other side of the fence for a moment. The Conservatives have promised to lower the GST to 5% in 5 years. It doesnt take an idiot to notice that the change wouldnt happen until after the following election. I wonder how long it will take for the Liberals and their media sheep to latch onto that.

[benyl]

Originally posted by sputnik


When do you predict the sky to start falling?

The Bank of Canada raises rates to keep inflation around 2%. Unless we start seeing the economy go nuts we arent going to see double digit interest rates any time soon. With the US in a recession right now it will be a while before the Bank of Canada will agressively need to raise rates as you predict.

Histroy has always been a predictor of the future. Don't ever count out that we won't see double digit interest rates. It happened once, and can happen again.

[D. Dub]

To the guys voting "green"

are you selling your cars then???