“I came to this very store and promised Canadians that a new Conservative government would cut the GST from seven to six to five per cent and at midnight tonight we will deliver on that promise, three years ahead of schedule,” he said at a photo opportunity in a Mississauga store Monday.
Harper said this latest cut will result in an additional $6 billion in tax relief for Canadian consumers in 2008.
But NDP Leader Jack Layton said the GST announcement and other Conservative tax cuts will do little to increase wealth in Canada. In an end-of-year interview, Layton noted that the tax cuts could widen the gap between rich and poor, while the average family could see higher property taxes, post-secondary education fees and other bills.
“Those with the highest salaries – the millionaires, the big banks, the (profitable) corporations… The ones that don’t need the help – are going to get the most help; the oil and gas companies in the tar sands, continuing to get subsidies as well as a big boost from the corporate tax cuts,” Layton said.
Patti Croft, chief economist with the investment firm Phillips, Hager and North, said anyone making big-ticket purchases will benefit from the consumption tax reduction. But, she said: “In general most economists would prefer a cut in income taxes. It’s a more efficient way to reduce the tax burden. By cutting the GST, hopefully it causes Canadians to spend more.”
Ottawa realtor Duane Leon, however, predicted that even though the cut could shave thousands of dollars off the price of a newly built home, there would be little impact on the real estate market. Many builders have already announced that price increases in the thousands of dollars for new construction that will take effect early in the new year, he said, adding this will offset any benefits to buyers from the GST reduction.
The only buyers who will see an actual one per cent price drop in the purchase price of a newly built home are those who bought in 2007 and take possession in 2008, said Leon, an agent with RE/MAX Metro-City Realty. GST is not charged on resales of existing properties.
The director of the Canadian Taxpayers Federation, however, defended this second trim in the GST, saying it will save the average household between $150 and $200 annually.
“While some have criticized cutting the GST, it is a broad-based tax cut that puts $5 billion back in the pockets of over-taxed Canadians,” John Williamson said in a statement. Noting that this is the second GST cut that the Tories have made since July 1, 2006, he added: “This is good news particularly since $10 billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash.”
The president of the Canadian Federation of Independent Business agreed.
“The one percentage point cut puts over $5 billion dollars back into the national economy, at a time when sales are traditionally sluggish in many sectors,” said Catherine Swift.
“Our members’ No. 1 priority is tax reduction of all kinds,” she said. “They want to see more money left in Canadians’ pockets.”
The Goods and Services Tax was introduced by the Conservatives in 1992. All 10 premiers opposed the tax, lobby groups railed against it and one poll showed 80 per cent of Canadians objected
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