Harper Ends Year By Cutting GST To 5 Percent

It was a familiar scene at a Mississauga electronics store Monday, as Prime Minister Stephen Harper revisited a campaign stunt in which he promised to slash the GST from seven percent to five percent.

After reducing the tax to six percent months ago, he ended the year by announcing that as of midnight, and the beginning of 2008, the tax would be reduced to its target of five percent. The promise was one of the elements contributing to his election victory, and he visited the same store to show that he’d fulfilled his promise ahead of what could be an election year.

“In 2005, I came to this store and promised that we would cut the GST to five percent and at midnight tonight we will deliver on that promise three years earlier than planned. That’s on top of our first GST cut,” Harper said.

“This cut will save the average working family hundreds per year on day-to-day purchases, hundreds on a new car or thousands on a new home and the GST rebate will be fully maintained for all new Canadians. This is a permanent tax cut for all Canadians, part of our long-term growth for prosperity. Our plan included cuts to sales, income and business taxes. And since taking action we have cut taxes by nearly $200 billion. That’s why Tax Freedom Day, the day you stop working to pay taxes for yourself and your family, arrived four days earlier this year and will arrive earlier again next year.”

However Harper noted that while his government hoped the Canadian economy would stay strong in 2008, he suggested there wouldn’t be any further tax cuts through the year.

“Well, as we’ve said in the fall economic statement, [we’ve done] most of our tax cuts for this year. They’ll continue to roll out over this year, through people’s tax returns and obviously particularly with business taxes over the next five years. We’re not anticipating further reductions to the GST,” he said.

“In the future if we reduce taxes, they may be in a different direction. But I say that’s for the future. We will be extremely cautious in the year to come. We’re not going to undertake any long-run spending or tax reduction initiatives unless we believe they’re affordable on a long-term basis,” added Harper.

According to the minority Conservatives consumers will save $12 billion over the year because of the two-point GST reduction.

Economists have criticized the move, saying it mainly benefits the wealthy who make bigger purchases on things like vehicles and homes. Anyone buying a $500,000 house, for instance, would save $5000. In general and on smaller purchases the cost-saving will seem less significant.

All four parties are looking ahead to a possible election over the government’s next budget, which will likely be unveiled in February or March. Liberal Leader Stephane Dion has said in the past he’d consider rescinding the second GST reduction if his party is elected.