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Canada’s Most Hated Tax Takes Center Stage

September 26, 1990

TORONTO (AP) _ An unprecedented constitutional battle over a hated tax is shaping up between Prime Minister Brian Mulroney’s Conservative-controlled House of Commons and the Liberal majority in the usually somnolent Senate.

The object of the revilement: the Goods and Services Tax.

Polls indicate 75 percent to 85 percent of Canadians oppose the 7 percent tax. It will be imposed on nearly all merchandise and services beginning Jan. 1 - on top of the existing provincial sales taxes, which range from 8 percent to 10 percent.

That is, if the Senate doesn’t kill it off.

The confrontation pits the elected House of Commons against the unelected Senate, which Canadians refer to with a snicker as Parliament’s chamber of sober second thought.

Senate seats long have been used as payoffs for political service rendered and the chamber rarely has roused itself to do battle over burning issues of the day.

The so-called GST tax bill was approved by the House in March. The government then proceeded with plans for collecting the tax as if its passage was a foregone conclusion, ignoring claims that it is bafflingly complex.

One letter to the editor of the Toronto Globe and Mail said the government’s GST Guide Book for accountants is a nightmare, ″400 pages and growing.″

But suddenly, last week, Liberal opposition leader Jean Chretien announced that his party would try to kill the measure in the Senate. On Monday, Banking Committee Chairman Sidney Buckwold recommended that the Senate kill the bill.

″It’s a very bad piece of legislation that Canadians by the millions asked the Senate to reject and we’ve acted accordingly,″ said Buckwold.

″We want to have a quick vote to kill the GST,″ Chretien said Tuesday.

Sensing growing resentment against the tax, Mulroney filled 15 vacant Senate seats with Conservatives over the past month, but that wasn’t enough.

The Liberals hold 52 seats in the 104-seat chamber and the Conservatives 46. The remaining seats are held by one Reform Party member and five independents.

The prime minister said he would not hesitate to resort to an obscure, never-used section of the constitution which would allow him to ask the queen to appoint up to eight extra senators. That still would not guarantee success. It would leave the fate of the GST in the hands of the independents.

″What is at stake here is infintely fundamental,″ Mulroney said in a speech Tuesday night.″ The issue is about parliamentary democracy and responsible government.″

″I do not particularly look forward to the appointment of additional senators, but if the only way to break the deadlock caused by the opposition were to use Section 26 of the British North America Act to add eight senators, I would not hesitate to do so.″

The 7 percent tax would replace the 13.5 percent Manufacturers Sales Tax, which raises about $10 billion a year but is considered inefficient and levied on a very narrow base.

″The argument is that it (the Manufacturers Sales Tax) discriminates heavily against manufacturing industries in Canada and against Canadian firms vis-a-vis imports,″ said Dr. Robin Boadway, a professor of economics at Queen’s University and an expert on taxation.

″The GST is essentially the same as the value-added tax that the Europeans use,″ said Boadway.

But consumers, already paying 8 percent to 10 percent in provincial sales taxes, are horrified at the prospect of seeing 15 percent to 17 percent tacked on their purchases, plumbing bills, haircuts and music lessons.

Manufacturers love it.

″Dismantling the existing federal sales tax would remove a longstanding source of competitive disadvantage for Canadian manufacturers, exporters, and all businesses that compete with imports in the domestic Canadian market,″ said Thomas d’Aquino, president of the Canadian Business Council.

One of the main fears of the tax-paying public, however, is that once the tax has been implemented, governments will be very tempted to hike the rate.

″It has such a broad base, it can raise a lot of revenue with small rate increases,″ said Boadway.

Out in the tiny Saskatchewan village of Elstow, population 140, Mayor Brad Cabana’s town council has voted not to collect or pay the GST, come what may.

″It’s another example of government not listening to the people,″ he said. ″It’s not a fair tax and it’s quite inflationary.″

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