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THE HERALD Wednesday August 3D 1989 Page IT IS A MAJOR PART OF THE ONGOING PROGRAM TO REDUCE THE DEFICIT A new Goods and Services Tax GST will rtplace the existing Federal Sales Tax It will be charged at a uniform rate of 9 per cent on the vast majority of goods and services consumed in Canada The existing federal sales tax rate is generally 13A at the manufacturers level The present federal sales tax system has been pushed beyond its limits and can no longer sustain the demands placed upon it The structural weaknesses of the system have given some corporations the opportunity to reduce the amount of tax they would otherwise pay For a tax system with 75 corpora there are 22 special arrangements and administrative interpretations required to keep the system in operation The present federal sales tax system is an increasingly unpredictable and un reliable source of revenue for the federal government It must be replaced Our enormous debt has put pressure on the government s ability to meet other pnonties Canadians know the of not acting to bring the debt under control The size of the debt has left us exposed to increases in interest rates and vulnerable to international economic shocks The reliability and stability of our sources of revenue are all the more important in such an environment The new federal sales tax will secure year by year reductions in the deficit while ensuring we can continue to provide Canadians with a standard of services that is among the best in the world IT Will STRENGTHEN OUR INTERNATIONAL COMPETITIVENESS AND CREATE JOBS IN CANADA Our current federal sales tax favours imports over Canadian made goods We are the only country in the industrialized world that is putting itself at such a advantage The existing system also makes Canada exporters less competitive in the world economy Our present federal sales tax makes our annual economic output about 9bilhon tower than it would be with the new GST in place Under the GST we will be able to completely remove tax from our exports and make Canadian products more competitive abroad And in Canada Canadian made prod ucts will be able to compete more effectively with imports The benefits tp the Canadian economy from sales tax reform will extend across all regions and sectors of the economy The Atlantic and regions for example will benefit significantly because their economies are resource based and export onentedtwosec tors that will benefit the most from sales tax reform The GST will lower the cost of the machines supplies and equipment companies have to buy to produce their products This will lead to higher levels of investment and expand our output Higher output will lead to more jobs IT WILL HELP LOW INCOME CANADIANS Once the GST is in place families earning less than 30 a year will be better off This will be achieved through a combination of income tax changes First low income Canadians will receive the new GST Credit Second the middle personal income tax rate will be reduced from 26 per cent to 25 per cent The GST Credit will be paid every three months and in advance of expenses Eligible Canadian households will receive their first credit cheque in December 1990 before the January 1 GST start update About 9 million Canadians will receive Credit cheques The GST Credit will be calculated on the basis of income tax returns Every income tax return will contain a one page form showing Canadians how to apply for the GST Credit The amount of the Credit will depend on family size and income The basic adult credit will w be 275 Most single adults Will be able to get an additional credit of up to 140 for a total of The child credit will be 100 Single parents will receive an adult Credit of for one of their children Canadian households with incomeb up to about 000 annually will be entitled to the full Credit A family of two adults and two children eligible for die full Credit will for example receive cheques of 18750 four times over the Course of the year for a total of 750 IT WILL ELIMINATE HIDDEN TAXES Right now everywhere in this country every time Canadians buy a good or service made in Canada they are paying federal sales tax For example a substantial amount of sales tax is presently buried in house pnees Under the existing system it is clearly impossible for Canadians to know how much federal sales tax they are paying There are four different rates on a variety of different products and the tax is buried throughout the production process It will be clear to Canadians when they are paying the 9 per cent GST The broad base of the GST means it will apply to almost everything The few exceptions will be widely known Some retailers in Canada will have cash registers that are capable of showing the GST separately at the check out counter while other retailers will not The federal government will provide an incentive to retailers to assist them in acquinng the cash registers to show the GST separately In all cases the federal government will provide retailers with signs for their stores that clearly indicate that the per cent GST is being applied PROPOSED CHANGES For consumers the GST will be similar to a retail sales tax at the rate of 9 per cent on the retail pnee of goods and services The GST will replace the existing federal sales tax which is hidden at the manufacturers level The GST will apply to virtually all goods and sen- ices sold in Canada however Canadians will not be charged tax when the buy the following GOODS basic prescription drugs medical such as eye glasses and wheel chairs residential rents and existing houses 3 Canadians will not be charged tax when they buy the following SERVICES loans mortgages and insurance poliaes health and dental care most education services care services legal aid and municipal transit and passenger fern services a Newly constructed houses will be taxed however most new home buyers will not see a significant increase in the price of a new house resulting from the GST because there ill be a million GST housing rebate In manv parts of the countrv increases will be less than half a per cent Indeed communities should see lower as a result of the GST rebate The main exception will be Toronto where extraordinanK high land prices ma cause pnees of new housing to increase about 1 Because the present federal sales tax will be removed prices will not automatically by 9 per cent when the GST is introduced The pnees of some things will be lower and others higher The of many big ticket items for example that are taxed at 13 5 per cent under the present system ill be lower once the per cent GST is in place The pnee of her items that are not taxed under the present svstem will increase Finally well before the GST is up and running the government will be telling Canadians about the GST and informing them about the kinds of changes can expect for key goods and services when the GST replaces the existing federal sales tax For instance here are a few examples of what consumers might expect ITEM PRE TAX REFORMS Air Condit oner 80 Car 15 Snow Tires Hotel Accommodation 90 POST TAX REFORMs 7 14 70000 9500 For more information about the GST please call 18002676620 18002676650 English Telecommunications device for the heanng impaired