Goods and Services Tax (Canada)
Encyclopedia
The Goods and Services Tax (GST) is a multi-level value added tax
introduced in Canada on January 1, 1991, by then Prime Minister
Brian Mulroney
and his finance minister Michael Wilson
. The GST replaced a hidden 13.5% Manufacturers' Sales Tax (MST); Mulroney claimed the GST was implemented because the MST was hindering the manufacturing sector's ability to export competitively. The introduction of the GST was very controversial. The GST rate is 5%, effective January 1, 2008.
The Goods and Services Tax is defined in law at Part IX of the Excise Tax Act. GST is levied on supplies of goods or services purchased in Canada and includes most products, except certain politically sensitive essentials such as groceries, residential rent, and medical services, and services such as financial services. Businesses that purchase goods and services that are consumed, used or supplied in the course of their "commercial activities" can claim "input tax credits" subject to prescribed documentation requirements (i.e., when they remit to the Canada Revenue Agency the GST they have collected in any given period of time, they are allowed to deduct the amount of GST they paid during that period). This avoids "cascading" (i.e., the application of the GST on the same good or service several times as it passes from business to business on its way to the final consumer). In this way, the tax is essentially borne by the final consumer. Unfortunately, this system is not completely effective, as shown by criminals who defrauded the system by claiming GST input credits for non-existent sales by a fictional company. Exported goods are exempt ("zero-rated"), while individuals with low incomes can receive a GST rebate calculated in conjunction with their income tax
.
In 1997, the provinces of Nova Scotia
, New Brunswick
and Newfoundland (now Newfoundland and Labrador
) and the Government of Canada merged their respective sales taxes into the Harmonized Sales Tax
(HST). In New Brunswick, and Newfoundland and Labrador, the current HST rate is 13%, while in Nova Scotia it was raised from 13% to 15%, effective July 1, 2010. HST is administered by the Canada Revenue Agency, with revenues divided among participating governments according to a formula. Ontario
and British Columbia
both harmonized the GST with their provincial sales tax (PST) effective July 1, 2010. The current HST rate in BC is 12%. In Ontario, the HST totals 13%, however many of the pre-HST exemptions remain affecting only the provincial portion of the HST (for example, prepared food under $4.00 is not subject to the provincial portion of HST and is only taxed at 5%). On the other hand, some items that were only subjected to the PST were now charged the full HST (i.e., 13%). Although the Government of Ontario has made efforts to provide documentation as to what items are affected and how, this causes some confusion for consumers as they are often not sure what taxes to expect at the checkout. To accommodate these exemptions, many retailers simply display each tax individually as HST 1 and HST 2 (or some variant). The move to HST came about as part of Ontario's 2009 provincial budget. Only three provinces (PEI, Manitoba
, Saskatchewan
) continue to impose a separate sales tax at the retail level only. Alberta
is the exception not imposing a provincial sales tax.
In PEI and Quebec, the provincial taxes include the GST in their base. The three territories of Canada (Yukon
, Northwest Territories
and Nunavut
) do not have territorial sales taxes. The government of Quebec administers both the federal GST and the provincial Quebec Sales Tax (QST). It is the only province to administer the federal tax.
government of Prime Minister
Brian Mulroney
proposed the creation of a national sales tax of 9%. At this time, every province in Canada except Alberta
already had its own provincial sales tax imposed at the retail level.
The purpose of the national sales tax was to replace the 13.5% Manufacturers' Sales Tax (MST) that the federal government imposed at the wholesale level on manufactured goods. Manufacturers were concerned that the tax hurt their international competitiveness. The GST also replaced the Federal Telecommunications Tax of 11%.
Although the GST was promoted as revenue-neutral in relation to the MST, a large proportion of the Canadian population disapproved of the tax. The other parties in Parliament also attacked the idea as did three Progressive Conservative Members of Parliament
, David Kilgour
, Pat Nowlan
, and Alex Kindy
, who ended up leaving the Progressive Conservative caucus as a result.
The Liberal
-dominated Senate
refused to pass the tax into law. In an unprecedented move to break the deadlock, Mulroney used a little-known constitutional provision to increase the number of senators by eight temporarily, thus giving the Progressive Conservatives a majority in the upper chamber. In response, the Opposition launched a filibuster and further delayed the legislation.
Despite the tax being lowered to 7% by the time it became enacted, it remained controversial. What the tax covered also caused anger. The Government defended the tax as a replacement for a tax unseen by consumers because it was placed on manufacturers, and in the long run it was posited that removing the MST would make Canada more competitive. Once the MST was replaced with the GST prices did not initially fall by the level some thought appropriate immediately; however, proponents have argued that in Canada's market economy
the MST's replacement could only be expected to influence prices over time and not on a stroke.
Despite the opposition, the tax came into force on January 1, 1991.
in the 1993 election
. The Progressive Conservative Party fared very poorly in that election, winning only two seats. Although the party recovered somewhat in subsequent elections, it remained the smallest party in the House of Commons until it disbanded itself permanently in 2004, and merged with the Canadian Alliance
to form the Conservative Party of Canada
.
During the election campaign, Chrétien promised to repeal the GST, which the Liberals had denounced so vociferously while they were the Official Opposition, and replace it with a different tax. Instead of repeal, the Chrétien government attempted to restructure the tax and merge it with the provincial sales taxes in each province. They intended to call it the "Blended Sales Tax", but opponents quickly came to derisively call this proposal the "B.S.
Tax", and the name was changed to Harmonized Sales Tax
before its introduction. However, only three Atlantic
provinces (Nova Scotia
, New Brunswick
and Newfoundland and Labrador
) agreed to go along with this plan, joined by British Columbia
and Ontario
, in 2010.
The decision not to abolish or replace the GST caused great controversy, both within the party and out. Liberal Member of Parliament
(MP) John Nunziata
voted against the Liberal government's first budget and was expelled from the party. Heritage Minister
Sheila Copps
, who had personally promised to oppose the tax, resigned and sought re-election. She was re-elected with ease in the subsequent by-election
, however, as was the Liberal government in the 1997 election
.
taxes, as seen in the Europe
an model, has helped the Canadian economy become more efficient and competitive with lower-priced goods for the international market. However, the effects of the GST in this realm are quite modest, and are regularly swamped by large changes in the exchange rate. It can also be claimed that the transparent nature of the GST has kept Canadians acutely aware of their taxation.
In 2005, the Conservative Party reduced the tax by 1% (to 6%) on July 1, 2006 as part of an election promise. They again lowered it to 5%, effective January 1, 2008. This reduction was included in the Final 2007 Budget Implementation Bill (Bill C-28), which received Royal Assent on December 14, 2007. This change has been estimated to have decreased government revenues by approximately $6 billion. Opponents of these tax decreases cited that sales taxes target those who spend more and therefore such reductions disproportionately benefit Canadians giving those who have the most and spend the most the largest tax decrease.
Much of the reason for the notoriety of the GST in Canada is for reasons of an obscure Constitutional provision. Other countries with a Value Added Tax legislate that posted prices include the tax; thus, consumers are vaguely aware of it but "what they see is what they pay". Canada cannot do this because jurisdiction over most advertising and price-posting is in the domain of the provinces under the Constitution Act, 1867
. The provinces have chosen not to require prices to include the GST, similar to their provincial sales taxes. As a result, virtually all prices (except for fuel pump prices, taxi meters and a few other things) are shown "pre-GST", at the merchant's choice.
Value added tax
A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
introduced in Canada on January 1, 1991, by then Prime Minister
Prime Minister of Canada
The Prime Minister of Canada is the primary minister of the Crown, chairman of the Cabinet, and thus head of government for Canada, charged with advising the Canadian monarch or viceroy on the exercise of the executive powers vested in them by the constitution...
Brian Mulroney
Brian Mulroney
Martin Brian Mulroney, was the 18th Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. His tenure as Prime Minister was marked by the introduction of major economic reforms, such as the Canada-U.S...
and his finance minister Michael Wilson
Michael Wilson (politician)
Michael Holcombe Wilson, PC, CC is a Canadian diplomat, politician and business leader.Born in Toronto, Ontario, Wilson attended Upper Canada College, Trinity College at the University of Toronto where he joined The Kappa Alpha Society...
. The GST replaced a hidden 13.5% Manufacturers' Sales Tax (MST); Mulroney claimed the GST was implemented because the MST was hindering the manufacturing sector's ability to export competitively. The introduction of the GST was very controversial. The GST rate is 5%, effective January 1, 2008.
The Goods and Services Tax is defined in law at Part IX of the Excise Tax Act. GST is levied on supplies of goods or services purchased in Canada and includes most products, except certain politically sensitive essentials such as groceries, residential rent, and medical services, and services such as financial services. Businesses that purchase goods and services that are consumed, used or supplied in the course of their "commercial activities" can claim "input tax credits" subject to prescribed documentation requirements (i.e., when they remit to the Canada Revenue Agency the GST they have collected in any given period of time, they are allowed to deduct the amount of GST they paid during that period). This avoids "cascading" (i.e., the application of the GST on the same good or service several times as it passes from business to business on its way to the final consumer). In this way, the tax is essentially borne by the final consumer. Unfortunately, this system is not completely effective, as shown by criminals who defrauded the system by claiming GST input credits for non-existent sales by a fictional company. Exported goods are exempt ("zero-rated"), while individuals with low incomes can receive a GST rebate calculated in conjunction with their income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
.
In 1997, the provinces of Nova Scotia
Nova Scotia
Nova Scotia is one of Canada's three Maritime provinces and is the most populous province in Atlantic Canada. The name of the province is Latin for "New Scotland," but "Nova Scotia" is the recognized, English-language name of the province. The provincial capital is Halifax. Nova Scotia is the...
, New Brunswick
New Brunswick
New Brunswick is one of Canada's three Maritime provinces and is the only province in the federation that is constitutionally bilingual . The provincial capital is Fredericton and Saint John is the most populous city. Greater Moncton is the largest Census Metropolitan Area...
and Newfoundland (now Newfoundland and Labrador
Newfoundland and Labrador
Newfoundland and Labrador is the easternmost province of Canada. Situated in the country's Atlantic region, it incorporates the island of Newfoundland and mainland Labrador with a combined area of . As of April 2011, the province's estimated population is 508,400...
) and the Government of Canada merged their respective sales taxes into the Harmonized Sales Tax
Harmonized Sales Tax
The Harmonized Sales Tax is the name used in Canada to describe the combination of the federal Goods and Services Tax and the regional Provincial Sales Tax into a single value added sales tax in five of the ten Canadian provinces: Ontario, New Brunswick, Newfoundland and Labrador, British...
(HST). In New Brunswick, and Newfoundland and Labrador, the current HST rate is 13%, while in Nova Scotia it was raised from 13% to 15%, effective July 1, 2010. HST is administered by the Canada Revenue Agency, with revenues divided among participating governments according to a formula. Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
and British Columbia
British Columbia
British Columbia is the westernmost of Canada's provinces and is known for its natural beauty, as reflected in its Latin motto, Splendor sine occasu . Its name was chosen by Queen Victoria in 1858...
both harmonized the GST with their provincial sales tax (PST) effective July 1, 2010. The current HST rate in BC is 12%. In Ontario, the HST totals 13%, however many of the pre-HST exemptions remain affecting only the provincial portion of the HST (for example, prepared food under $4.00 is not subject to the provincial portion of HST and is only taxed at 5%). On the other hand, some items that were only subjected to the PST were now charged the full HST (i.e., 13%). Although the Government of Ontario has made efforts to provide documentation as to what items are affected and how, this causes some confusion for consumers as they are often not sure what taxes to expect at the checkout. To accommodate these exemptions, many retailers simply display each tax individually as HST 1 and HST 2 (or some variant). The move to HST came about as part of Ontario's 2009 provincial budget. Only three provinces (PEI, Manitoba
Manitoba
Manitoba is a Canadian prairie province with an area of . The province has over 110,000 lakes and has a largely continental climate because of its flat topography. Agriculture, mostly concentrated in the fertile southern and western parts of the province, is vital to the province's economy; other...
, Saskatchewan
Saskatchewan
Saskatchewan is a prairie province in Canada, which has an area of . Saskatchewan is bordered on the west by Alberta, on the north by the Northwest Territories, on the east by Manitoba, and on the south by the U.S. states of Montana and North Dakota....
) continue to impose a separate sales tax at the retail level only. Alberta
Alberta
Alberta is a province of Canada. It had an estimated population of 3.7 million in 2010 making it the most populous of Canada's three prairie provinces...
is the exception not imposing a provincial sales tax.
In PEI and Quebec, the provincial taxes include the GST in their base. The three territories of Canada (Yukon
Yukon
Yukon is the westernmost and smallest of Canada's three federal territories. It was named after the Yukon River. The word Yukon means "Great River" in Gwich’in....
, Northwest Territories
Northwest Territories
The Northwest Territories is a federal territory of Canada.Located in northern Canada, the territory borders Canada's two other territories, Yukon to the west and Nunavut to the east, and three provinces: British Columbia to the southwest, and Alberta and Saskatchewan to the south...
and Nunavut
Nunavut
Nunavut is the largest and newest federal territory of Canada; it was separated officially from the Northwest Territories on April 1, 1999, via the Nunavut Act and the Nunavut Land Claims Agreement Act, though the actual boundaries had been established in 1993...
) do not have territorial sales taxes. The government of Quebec administers both the federal GST and the provincial Quebec Sales Tax (QST). It is the only province to administer the federal tax.
Untaxed items
The tax is a 5% tax imposed on the supply of goods and services that are purchased in Canada, except certain items that are either "exempt" or "zero-rated":- For tax-free — i.e., "zero-rated" — sales, GST is charged by suppliers at a rate of 0% so effectively there is no GST collected. However when a supplier makes a zero-rated supplyZero-rated supplyIn economics, zero-rated supply refers to items that are taxable, but the rate of tax is nil on their input supplies. The term is applied to items that would normally be taxed under valued-added systems such as Europe's Value Added Tax or Canada's Goods and Services Tax...
, it is eligible to recover any GST paid on purchases used in producing the particular supply or service. This effectively removes the cascading tax from these particular goods and services.- Common zero-rated items include basic groceries, prescription drugs, inward/outbound transportation and medical devices (GST/HST Memoranda Series ME-04-02-9801-E 4.2 Medical and Assistive Devices). Certain exports of goods and services are also zero-rated.
- For tax-exempt supplies, the supply is not subject to GST and suppliers do not charge tax on their exempt supplies. Furthermore, suppliers that make exempt supplies are not entitled to recover GST paid on inputs acquired for the purposes of making the exempt good or service. Tax-exempt items include long term residential rents, health and dental care, educational services, day-care services, legal aid services, and financial services.
Background
In 1989, the Progressive ConservativeProgressive Conservative Party of Canada
The Progressive Conservative Party of Canada was a Canadian political party with a centre-right stance on economic issues and, after the 1970s, a centrist stance on social issues....
government of Prime Minister
Prime Minister of Canada
The Prime Minister of Canada is the primary minister of the Crown, chairman of the Cabinet, and thus head of government for Canada, charged with advising the Canadian monarch or viceroy on the exercise of the executive powers vested in them by the constitution...
Brian Mulroney
Brian Mulroney
Martin Brian Mulroney, was the 18th Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. His tenure as Prime Minister was marked by the introduction of major economic reforms, such as the Canada-U.S...
proposed the creation of a national sales tax of 9%. At this time, every province in Canada except Alberta
Alberta
Alberta is a province of Canada. It had an estimated population of 3.7 million in 2010 making it the most populous of Canada's three prairie provinces...
already had its own provincial sales tax imposed at the retail level.
The purpose of the national sales tax was to replace the 13.5% Manufacturers' Sales Tax (MST) that the federal government imposed at the wholesale level on manufactured goods. Manufacturers were concerned that the tax hurt their international competitiveness. The GST also replaced the Federal Telecommunications Tax of 11%.
Although the GST was promoted as revenue-neutral in relation to the MST, a large proportion of the Canadian population disapproved of the tax. The other parties in Parliament also attacked the idea as did three Progressive Conservative Members of Parliament
Member of Parliament
A Member of Parliament is a representative of the voters to a :parliament. In many countries with bicameral parliaments, the term applies specifically to members of the lower house, as upper houses often have a different title, such as senate, and thus also have different titles for its members,...
, David Kilgour
David Kilgour
David Kilgour, PC is a former Canadian politician.Kilgour graduated from the University of Manitoba in economics in 1962 and the University of Toronto law school in 1966. From crown attorney in northern Alberta to Canadian Cabinet minister, Kilgour ended his 27 year tenure in the Canadian House of...
, Pat Nowlan
Pat Nowlan
John Patrick Nowlan is a retired Canadian parliamentarian and son of Diefenbaker-era Minister of Finance George Nowlan...
, and Alex Kindy
Alex Kindy
Alex Kindy, M.D. is a former Canadian politician. Kindy was born in Warsaw, Poland.His first attempt at entering federal politics was in the 1962 federal election when he ran as an "Independent Liberal" in the Quebec riding of Maisonneuve—Rosemont...
, who ended up leaving the Progressive Conservative caucus as a result.
The Liberal
Liberal Party of Canada
The Liberal Party of Canada , colloquially known as the Grits, is the oldest federally registered party in Canada. In the conventional political spectrum, the party sits between the centre and the centre-left. Historically the Liberal Party has positioned itself to the left of the Conservative...
-dominated Senate
Canadian Senate
The Senate of Canada is a component of the Parliament of Canada, along with the House of Commons, and the monarch . The Senate consists of 105 members appointed by the governor general on the advice of the prime minister...
refused to pass the tax into law. In an unprecedented move to break the deadlock, Mulroney used a little-known constitutional provision to increase the number of senators by eight temporarily, thus giving the Progressive Conservatives a majority in the upper chamber. In response, the Opposition launched a filibuster and further delayed the legislation.
Despite the tax being lowered to 7% by the time it became enacted, it remained controversial. What the tax covered also caused anger. The Government defended the tax as a replacement for a tax unseen by consumers because it was placed on manufacturers, and in the long run it was posited that removing the MST would make Canada more competitive. Once the MST was replaced with the GST prices did not initially fall by the level some thought appropriate immediately; however, proponents have argued that in Canada's market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
the MST's replacement could only be expected to influence prices over time and not on a stroke.
Despite the opposition, the tax came into force on January 1, 1991.
Reactions
A strong Liberal Party majority was elected under the leadership of Jean ChrétienJean Chrétien
Joseph Jacques Jean Chrétien , known commonly as Jean Chrétien is a former Canadian politician who was the 20th Prime Minister of Canada. He served in the position for over ten years, from November 4, 1993 to December 12, 2003....
in the 1993 election
Canadian federal election, 1993
The Canadian federal election of 1993 was held on October 25 of that year to elect members to the Canadian House of Commons of the 35th Parliament of Canada. Fourteen parties competed for the 295 seats in the House at that time...
. The Progressive Conservative Party fared very poorly in that election, winning only two seats. Although the party recovered somewhat in subsequent elections, it remained the smallest party in the House of Commons until it disbanded itself permanently in 2004, and merged with the Canadian Alliance
Canadian Alliance
The Canadian Alliance , formally the Canadian Reform Conservative Alliance , was a Canadian conservative political party that existed from 2000 to 2003. The party was the successor to the Reform Party of Canada and inherited its position as the Official Opposition in the House of Commons and held...
to form the Conservative Party of Canada
Conservative Party of Canada
The Conservative Party of Canada , is a political party in Canada which was formed by the merger of the Canadian Alliance and the Progressive Conservative Party of Canada in 2003. It is positioned on the right of the Canadian political spectrum...
.
During the election campaign, Chrétien promised to repeal the GST, which the Liberals had denounced so vociferously while they were the Official Opposition, and replace it with a different tax. Instead of repeal, the Chrétien government attempted to restructure the tax and merge it with the provincial sales taxes in each province. They intended to call it the "Blended Sales Tax", but opponents quickly came to derisively call this proposal the "B.S.
Bullshit
Bullshit is a common English expletive which may be shortened to the euphemism bull or the initialism B.S. In British English, "bollocks" is a comparable expletive, although bullshit is commonly used in British English...
Tax", and the name was changed to Harmonized Sales Tax
Harmonized Sales Tax
The Harmonized Sales Tax is the name used in Canada to describe the combination of the federal Goods and Services Tax and the regional Provincial Sales Tax into a single value added sales tax in five of the ten Canadian provinces: Ontario, New Brunswick, Newfoundland and Labrador, British...
before its introduction. However, only three Atlantic
Atlantic Canada
Atlantic Canada is the region of Canada comprising the four provinces located on the Atlantic coast, excluding Quebec: the three Maritime provinces – New Brunswick, Prince Edward Island, and Nova Scotia – and Newfoundland and Labrador...
provinces (Nova Scotia
Nova Scotia
Nova Scotia is one of Canada's three Maritime provinces and is the most populous province in Atlantic Canada. The name of the province is Latin for "New Scotland," but "Nova Scotia" is the recognized, English-language name of the province. The provincial capital is Halifax. Nova Scotia is the...
, New Brunswick
New Brunswick
New Brunswick is one of Canada's three Maritime provinces and is the only province in the federation that is constitutionally bilingual . The provincial capital is Fredericton and Saint John is the most populous city. Greater Moncton is the largest Census Metropolitan Area...
and Newfoundland and Labrador
Newfoundland and Labrador
Newfoundland and Labrador is the easternmost province of Canada. Situated in the country's Atlantic region, it incorporates the island of Newfoundland and mainland Labrador with a combined area of . As of April 2011, the province's estimated population is 508,400...
) agreed to go along with this plan, joined by British Columbia
British Columbia
British Columbia is the westernmost of Canada's provinces and is known for its natural beauty, as reflected in its Latin motto, Splendor sine occasu . Its name was chosen by Queen Victoria in 1858...
and Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
, in 2010.
The decision not to abolish or replace the GST caused great controversy, both within the party and out. Liberal Member of Parliament
Member of Parliament
A Member of Parliament is a representative of the voters to a :parliament. In many countries with bicameral parliaments, the term applies specifically to members of the lower house, as upper houses often have a different title, such as senate, and thus also have different titles for its members,...
(MP) John Nunziata
John Nunziata
John Nunziata is a Canadian politician. He served in the Canadian House of Commons from 1984 to 2000, initially as a Liberal and later as an independent member.-Background:...
voted against the Liberal government's first budget and was expelled from the party. Heritage Minister
Minister of Canadian Heritage
The Minister of Canadian Heritage is the Minister of the Crown in the Canadian Cabinet who heads the Department of Canadian Heritage, the federal government department responsible for Canada's Arts, Culture, Media, Communications network, and Sport....
Sheila Copps
Sheila Copps
Sheila Maureen Copps, PC is a former Canadian politician who also served as Deputy Prime Minister of Canada from November 4, 1993 to April 30, 1996 and June 19, 1996 to June 11, 1997....
, who had personally promised to oppose the tax, resigned and sought re-election. She was re-elected with ease in the subsequent by-election
By-election
A by-election is an election held to fill a political office that has become vacant between regularly scheduled elections....
, however, as was the Liberal government in the 1997 election
Canadian federal election, 1997
The Canadian federal election of 1997 was held on June 2, 1997, to elect members of the Canadian House of Commons of the 36th Parliament of Canada. Prime Minister Jean Chrétien's Liberal Party of Canada won a second majority government...
.
Current situation
An argument can be made that the switch towards heavier consumptionConsumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
taxes, as seen in the Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
an model, has helped the Canadian economy become more efficient and competitive with lower-priced goods for the international market. However, the effects of the GST in this realm are quite modest, and are regularly swamped by large changes in the exchange rate. It can also be claimed that the transparent nature of the GST has kept Canadians acutely aware of their taxation.
In 2005, the Conservative Party reduced the tax by 1% (to 6%) on July 1, 2006 as part of an election promise. They again lowered it to 5%, effective January 1, 2008. This reduction was included in the Final 2007 Budget Implementation Bill (Bill C-28), which received Royal Assent on December 14, 2007. This change has been estimated to have decreased government revenues by approximately $6 billion. Opponents of these tax decreases cited that sales taxes target those who spend more and therefore such reductions disproportionately benefit Canadians giving those who have the most and spend the most the largest tax decrease.
Much of the reason for the notoriety of the GST in Canada is for reasons of an obscure Constitutional provision. Other countries with a Value Added Tax legislate that posted prices include the tax; thus, consumers are vaguely aware of it but "what they see is what they pay". Canada cannot do this because jurisdiction over most advertising and price-posting is in the domain of the provinces under the Constitution Act, 1867
Constitution Act, 1867
The Constitution Act, 1867 , is a major part of Canada's Constitution. The Act created a federal dominion and defines much of the operation of the Government of Canada, including its federal structure, the House of Commons, the Senate, the justice system, and the taxation system...
. The provinces have chosen not to require prices to include the GST, similar to their provincial sales taxes. As a result, virtually all prices (except for fuel pump prices, taxi meters and a few other things) are shown "pre-GST", at the merchant's choice.
Tax-free shopping for visitors
For purchases before April 1, 2007, visitors to Canada could request a tax refund when they left Canada by filling out a form at a Canadian airport or some duty free stores at border crossings. Under that regime, the visitor sent in original receipts with a stamp by Canadian Customs. Cheques are mailed to the visitor within a few weeks. This refund was eliminated, except for business purchases, as announced September 25, 2006, in effect April 1, 2007. Legislation implementing the change (Bill C-52) received Royal Assent on June 22, 2007 (S.C. 2007, c. 29). The rebate remains available for purchasers "other than consumers" who export the goods within 60 days of purchasing them in Canada.See also
- Harmonized Sales TaxHarmonized Sales TaxThe Harmonized Sales Tax is the name used in Canada to describe the combination of the federal Goods and Services Tax and the regional Provincial Sales Tax into a single value added sales tax in five of the ten Canadian provinces: Ontario, New Brunswick, Newfoundland and Labrador, British...
- Goods and Services Tax (Australia)Goods and Services Tax (Australia)The GST is a broad sales tax of 10% on most goods and services transactions in Australia. It is a value added tax, not a sales tax, in that it is refunded to all parties in the chain of production other than the final consumer....
- Goods and Services Tax (Hong Kong)Goods and Services Tax (Hong Kong)Goods and Services Tax was a proposed Value Added Tax in Hong Kong. Consultation over a period of nine months was launched on 2006-07-19 and stirred considerable controversy....
- Goods and Services Tax (New Zealand)Goods and Services Tax (New Zealand)Goods and Services Tax is a value added tax introduced in New Zealand on 1 October 1986 at 10%. It later increased to 12.5% on 1 July 1989 and was further increased to 15% on 1 October 2010....
- Goods and Services Tax (Singapore)Goods and Services Tax (Singapore)Goods and Services Tax in Singapore is a broad-based value added tax levied on import of goods, as well as nearly all supplies of goods and services. The only exemptions are for the sales and leases of residential properties and most financial services...
- Sales taxes in CanadaSales taxes in CanadaIn Canada, three types of sales taxes are levied. These are as follows:*Provincial sales taxes , levied by the provinces*Goods and Services Tax , a value-added tax levied by the federal government...
- Taxation in CanadaTaxation in CanadaThe level of Taxation in Canada is average among Organisation for Economic Co-operation and Development countries.-Administration:...
External links
- Excise Tax Act (see "PART IX : GOODS AND SERVICES TAX")
- Excise Tax Act (PDF) (see "PART IX : GOODS AND SERVICES TAX")
- Canada Business Tax Information - Goods and Services Tax/Harmonized Sales Tax (GST/HST)
- Canada Revenue Agency: Goods and Services Tax/Harmonized Sales Tax (GST/HST)
- Goods and Services Tax/Harmonized Sales Tax (GST/HST) calculator
- Rev.gov.on.ca