Silly Little Country

The Goods and Services Tax

One of the joys of an election campaign is you can never be quite sure what wil pop up on a given day.

Today the Conservative Party proposed to reduce the current level of our Goods and Services Tax (GST). The local Toronto CBC News just purported to provide some background - and what was their potted history? According to this report the GST came from nowhere around 1990, a proposal from the Conservative government of the time led by Brian Mulroney. Entirely elided was the fact that the GST replaced an earlier sort-of-consumption tax, the Manufacturers Sales Tax (MST), whose effects were significantly worse (according to pretty well all the economists I recall hearing from at the time). And apparently this tax change was meant to help Canada adapt better to NAFTA, another initiative of the time.

The secret here is that the MST was invisible, and the GST is visible, which meant one could get hysterical about it, and heaven knows Canadians were led to do so. I recall watching closely around the time of the transition and one thing I did notice was that the walkaway cost of an equivalent television set, the consumer item I cared about most, seemed to me to drop significantly at the time (which is what one would have predicted with a revenue-neutral tax shift of this sort).

I suspect there are two reasons for this poor reporting here:

a) sloppiness, ignorance, and poor editorial standards
b) a continuing distaste among CBC staff for Brian Mulroney, who is the prime minister responsible for NAFTA, and for the replacement of the MST by the GST (both of which appear to have been good for us) - so it is difficult for lazy reporters to tell the full story here as it flies in the face of their core beliefs.

posted by Alan Adamson @ 6:39 PM