BUSINESS

Fighting the opposition

Michael Wilson defends the new sales tax

September 25 1989
BUSINESS

Fighting the opposition

Michael Wilson defends the new sales tax

September 25 1989

Fighting the opposition

BUSINESS

Michael Wilson defends the new sales tax

Since Finance Minister Michael Wilson introduced his proposal on Aug. 8 to legislate a nineper-cent tax on almost every product and service in Canada, criticism of the Goods and Services Tax (GST) has emerged from nearly every quarter—■from labor to small business. Although most economists have expressed agreement that the tax will ultimately expand the Canadian economy, Wilson now will have to convince ordinary Canadians that they are not being taxed unfairly. He appeared confident that he can do just that when Maclean’s editors interviewed him on the GST and other issues during a meeting at the magazine last week:

Maclean’s: When do you expect interest rates to come down?

Wilson: I think it would be healthier for the economy to have lower interest rates than higher interest rates, but we know we have inflationary problems. We know we have to deal with them. We know if we don’t deal with them, we’ll get back into the problems that we had in the late 1970s, which led directly to the huge recession of the early 1980s. You can be sure that as soon as we see that the time is right to ease up, we’ll do so. Maclean’s: The GST has a large and united opposition. Is there enough of a consensus to gain acceptance for it?

Wilson: Taxes are things that people just instinctively react against when there is a change in the tax system. I think the important thing for us to do is get the facts out. Make sure that people understand the different tradeoffs that we have to accept in a proposal such as this.

Maclean’s: What about the inflationary impact of the GST?

Wilson: If Maclean’s magazine and everybody else says there is going to be an inflationary impact and everybody talks up the inflationary impact, then, yes, there will be that inflationary impact. We’ll talk ourselves into it. And that is why I am trying very hard to make sure that people understand that that is not necessary. Our assessment is that those economic benefits will generate 35,000 new jobs in Year 1, 60,000 in Year 2.

Maclean’s: Will you implement the GST no matter what?

Wilson: We have established a Jan. 1, 1991, implementation date and we’re absolutely committed to that. We have said that the fundamental elements, the basic elements of the tax, are very firm. But there are a number

of elements that we might be able to improve upon to make it simpler for companies to comply with—and fairer for people to comply with. We’re quite open to suggestions there. Maclean’s: Would you be prepared to look at a rate lower than nine per cent if enough of the provinces thought that would be palatable?

Wilson: I’d like to lower the rate too, but I also want to have such things as a GST credit, a middle-income rate and the housing rebate. I don’t want to tax basic groceries. So when you accept all that, and you don’t want to increase the deficit, and those are all very firm elements in your thinking, then that translates into a very firm nine-per-cent rate.

Maclean’s: Can you guarantee that, when the exiting federal sales tax comes off, there is going to be a break for consumers?

Wilson: The car companies say the price of the car will go down. We put in the paper in the April budget that the price of a $15,000 car will go down about $300.

Maclean’s: If you found that industry or

business used the tax as an excuse to raise prices, would you take action against that practice?

Wilson: We have an office that we will be establishing in Consumer and Corporate Affairs that has a number of roles. We have empowered it to get information from companies to see whether they are passing through the savings. I think that organizations that are seen to be gouging the customer will suffer. Maclean’s: On another point, Parti Québécois Leader Jacques Parizeau is saying that Ottawa is broke and that Quebec would be better off on its own.

Wilson: A party leader who is absolutely and fundamentally committed to separatism is going to use various arguments that he can, however stretched, to make his point. He’s in an election campaign, and I would expect he would draw on those arguments to make his point. Maclean’s: Does it disturb you that the legacy of all of these changes that you are bringing in may be a more polarized Canada, Canada with a smaller middle class and perhaps a wealthier top class?

Wilson: I think that the record doesn’t support that. Let’s look at the GST. The direct result of the GST is that there will be a shift in the burden of taxation that favors people of low income, and obviously the balance shifts against people in upper incomes. People have done studies showing that upper-income people spend more money on services which will now be taxed than people in lower incomes, so that the GST will go counter to the direction that you’re suggesting that the country will go. We’ve seen fewer people on poverty under our administration. We’ve seen more people working. The youth unemployment rate has dropped seven percentage g points since we came in. New jobs, I a think it’s 57 per cent, have been taken I by women. So the record clearly consi tradicts what you have just said.

I Maclean’s: That has not been the 1 record in Britain.

~ Wilson: But this is Canada. I mean, let’s give credit where credit is due. We can do things differently in Cana-

da. You may put the labels on it, or the political opposition may put the labels on it, but let’s look at what had happened and what we’re trying to do. Britain didn’t do the GST with a big tax credit. Most other countries haven’t done what we’ve done. They certainly haven’t done it to the extent that we have. I mean, one of my disappointments to date in the debate on sales tax is a lack of recognition of that. We did it in Canada. They haven’t done it in the United States and they haven’t done it in Britain. And surely we should be taking credit for that as a country, not the government, but as a country, because it’s a fairer tax system and all people have to participate in making that a fair tax system. □