HomeMy WebLinkAboutThe Citizen, 1989-08-30, Page 12PAGE 12. THE CITIZEN, WEDNESDAY, AUGUST 30, 1989.THE CITIZEN, WEDNESDAY, AUGUST 30, 1989. PAGE 13.
ON JANUARY 1,1991,
CANADA’S
FEDERALSALESTAX
SYSTEM WILL
CHANGE.
PLEASE SAVE THIS
NOTICE.
IT EXPLAINS THE
CHANGESAND
THE REASONS FOR
THEM.
IT IS A MAJOR PART OF THE ONGOING
PROGRAM TO REDUCE THE DEFICIT.
A new Goods and Services Tax (GST) will replace the existing Federal Sales Tax. It
will be charged at a uniform rate of 9 per cent on the vast majority of goods
and services consumed in Canada. The existing federal sales tax rate is generally
W/o at the manufacturer’s level.
The present federal sales tax system has been pushed beyond its limits and
can no longer sustain the demands placed upon it. The structural weaknesses
of the system have given some corporations the opportunity to reduce the amount
of tax they would otherwise pay. For a tax system with 75,000 taxpaying corpora
tions, there are 22,000 special arrangements and .administrative interpretations
required to keep the system in operation.
The present federal sales tax system is an increasingly unpredictable and un
reliable source of revenue for the federal government. It must be replaced.
Our enormous debt has put pressure on the government’s ability to meet
other priorities. Canadians know the risks of not acting to bring the debt under
control. The size of the debt has left us exposed to increases in interest rates,
and vulnerable to international economic shocks. The reliability and stability of
our sources of revenue are all the more important in such an environment. The
new federal sales tax will secure year by year reductions in the deficit, while
ensuring we can continue to provide Canadians with a standard of services that is
among the best in the world.
IT WILL ELIMINATE HIDDEN TAXES.
Right now, everywhere in this country every time Canadians buy a good or service
made in Canada, they are paying federal sales tax. For example, a substantial
amount of sales tax is presently buried in house prices. Under the existing system,
it is clearly impossible for Canadians to know how much federal sales tax they
are paying. There are four different rates on a variety of different products and the
tax is buried throughout the production process.
It will be clear to Canadians when they are paying the 9 per cent GST The broad
base of the GST means it will apply to almost everything. The few exceptions will
be widely known.
Some retailers in Canada will have cash registers that are capable of showing
the GST separately at the check-out counter, while other retailers will not. The
federal government will provide an incentive to retailers to assist them in acquiring
the cash registers to show the GST separately.
In all cases, the federal government will provide retailers with signs for their
stores that clearly indicate that the 9 per cent GST is being applied.
PROPOSED CHANGES.
IT WILL STRENGTHEN OUR INTERNATIONAL
COMPETITIVENESS AND CREATE JOBS
IN CANADA.
Our current federal sales tax favours imports over Canadian made goods. We are
the only country in the industrialized world that is putting itself at such a dis
advantage. The existing system also makes Canada’s exporters less competitive in
the world economy. Our present federal sales tax makes our annual economic
output about $9 billion lower than it would be with the new GST in place.
Under the GST, we will be able to completely remove tax from our exports
and make Canadian products more competitive
abroad. And in Canada, Canadian-made prod
ucts will be able to compete more effectively
with imports.
The benefits to the Canadian economy from
sales tax reform will extend across all regions
and sectors of the economy. The Atlantic
and Prairie regions for example, will benefit
significantly because their economies are
resource-based and export-oriented - two sec
tors that will benefit the most from sales tax
reform.
The GST will lower the cost of the
machines, supplies and equipment companies
have to buy to produce their products. This
will lead to higher levels of investment and
expand our output. Higher output will lead
to more jobs.
Long-Run Regional Output Gains
From Sales Tax Reform
rr WILL HELP LOW INCOME CANADIANS.
Once the GST is in place, families earning less than $30,000 a year will be better
off. This will be achieved through a combination of income tax changes. First, low
income Canadians will receive the new GST Credit. Second, the middle personal
income tax rate will be reduced from 26 per cent to 25 per cent.
The GST Credit will be paid every three months and in advance of expenses.
Eligible Canadian households will receive their first credit cheque in December
1990, before the January 1,1991 GST start-up date. About 9 million Canadians will
receive Credit cheques. The GST Credit will be calculated on the basis of income
tax returns. Every income tax return will contain a one-page form showing Canadians
how to apply for the GST Credit.
The amount of the Credit will depend on
family size and income. The basic adult credit will
be $275. Most single adults will be able to get an
additional credit of up to $140, for a total of $415.
The child credit will be $100. Single parents
will receive an adult Credit of $275 for one of their
children. Canadian households with incomes
up to about $25,000 annually will be entitled to the
full Credit.
A family of two adults and two children,
eligible for the full Credit, will for example receive
cheques of $187.50, four times over the course
of the year, for a total of $750.
Fairer System
Families with Children
1. For consumers, the GST will be similar to a retail sales tax, at the
rate of 9 per cent on the retail price of goods and services. The
GST will replace the existing federal sales tax, which is hidden at the
manufacturer’s level.
2. The GST will apply to virtually all goods and services sold in Canada;
however, Canadians will not be charged tax when they buy the
following GOODS: basic groceries; prescription drugs; medical appli
ances such as eye-glasses and wheel chairs; residential rents and
existing houses.
3. Canadians will not be charged tax when they buy the following
SERVICES: loans, mortgages, securities and insurance policies; health
and dental care; most education services; daycare services; legal
aid; and municipal transit and passenger ferry services.
4. Newly constructed houses will be taxed, however, most new home
buyers will not see a significant increase in the price of a new house
resulting from the GST, because there will be a $900 million GST
housing rebate. In many parts of the country price increases will be
less than half a per cent. Indeed, many communities should see
lower prices as a result of the GST rebate. The main exception will
be Toronto, where extraordinarily high land prices may cause prices
of new housing to increase by about IO).
5. Because the present federal sales tax will be removed, prices will
not automatically rise by 9 per cent when the GST is introduced.
The prices of some things will be lower, and others higher. The prices
of many big-ticket items for example, that are taxed at 13.5 per
cent under the present system, will be lower once the 9 per cent GST
is in place. The price of other items that are hot taxed under the
present system will increase.
Finally, well before the GST is up and running, the government
will be telling Canadians about the GST and informing them about
the kinds of price changes they can expect for key goods and services
when the GST replaces the existing federal sales tax.
For instance, here are a few examples of what consumers might
expect:
ITEM PRE-TAX REFORM($)POST-TAX REFORMS)
Air Conditioner 780.00 770.00
Car 15,000.00 14,700.00
Snow Tires 200.00 203.00
Hotel Accommodation 90.00 95.00
For more information about the GST, please call:
1-800-267-6620 1-800-267-6640 1-800-267-6650
(English) (French) (Telecommunications device for the hearing impaired)
■ ■ Department of Finance
■ ■ Canada
Ministere des Finances
Canada