The GST Cut is not so Stupid

Grady, Patrick (2008): The GST Cut is not so Stupid.

Abstract

This paper argues that the two-percentage point cut in the GST to 5 per cent proposed by the Conservatives in the January 2006 Canadian federal election and implemented in the 2007 budget was not “stupid” as suggested by many economists. To the contrary, it fortuitously turned out to provide needed fiscal stimulus of a particularly potent type just as the economy turned down. It also had a progressive impact on the incidence of the tax system. And finally the lower rate would make it easier to harmonize the GST with provincial sales tax.

• Item Type: MPRA Paper
• Language: English
• Keywords: Goods and Sales Tax (GST), tax cut stimulus, income distribution impact of GST cuts, harmonization of sales tax
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession

References

CBC News (2005) “Economists dump on Harper's GST-lowering plan, December 1.

Conservative Party of Canada (2006) Stand Up for Canada, Federal Election Platform.

CTV.ca News Staff, (2007) "Liberals would consider rescinding GST cuts," October 30.

Department of Finance (2007)Economic Statement.

Dion, Stéphane (2007) Speech to the Canadian Club, London, Ontario, October 29.

Fiscal Policy Division, Department of Finance (2009), Papers Presented at a Seminar on Policy Simulations, April 6.

Grant, Tavia (2007) “Plan to cut GST blasted,” Globe and Mail, October 24, p.A2.

OECD (2006) Consumption Tax Trends: VAT/GST and Excise Rates, Trends and Administration Issues.

Statistics Canada (2007) Paper Prepared by Chantal Hicks for 1st General Conference of Internal Microsimulation Association, Vienna, Austria, August 20-22.