3 Unmistakable Signs That The Canada GST Tax Could Be On The Rise
June 16, 2022 Andrew AdolphAudits
The Canada GST tax could be increasing whether we like it or not. But why?
1. The Deficit
In plain English, Canada will undoubtedly be hamstrung by deficits in the coming years, limiting its competitiveness, especially when it comes to taxes.
Some hold the view that increasing the Canada GST tax will create the revenue needed to reduce other forms of taxes, such as income and capital gains tax. Will it work? That’s yet to be seen, but one thing is for sure, higher deficits almost always equal higher taxes.
2. Our Government Loves to Spend Money
I’m sure everyone has heard the line “money doesn’t grow on trees.” Well, everyone except perhaps the Canadian government. There is a debate about whether Canada has a revenue problem or a spending problem.
Allow me to clear that up…
We most definitely have a spending problem. The proof is in the deficit. Overspending always leads to a larger deficit. They may not have proposed a Canada GST tax increase as of now, but if the deficit keeps growing, it’s almost inevitable. Government spending has increased by around 3% over the past few years. If that trend continues, expect a higher Canada GST tax.
3.A Higher Canada GST Tax Could Benefit the Working Class
At this point, you might be under the impression that I’m against a GST tax increase. That’s the furthest thing from the truth I’m just simply stating the facts!
One positive thing that could come out of this is that increasing the Canada GST tax could benefit the middle class. Canada wants to be competitive, but the current income tax rate for high skilled workers makes that hard.
Canada has high personal income tax rates for middle and upper-income. The problem is that their incomes are relatively low. For example, Canada maintains among the highest marginal personal income tax rates on middle and upper-income earners among the G7 countries.
Income taxes have proven to be much more economically damaging than the GST because they act as a penalty on productive activities such as work effort, savings, investment, risk-taking, and entrepreneurship
By raising the Canada GST tax rate by around 5-7%, the government could almost make 15 billion dollars in extra revenue. That could lead to the lowering of income taxes for middle-class workers. Lower personal taxes would also provide greater rewards and incentives for middle-and high-income Canadians to work, save and invest.
4. The Economy
The government doesn’t like it when they can’t take a lot of income tax money from you. Take it from someone who used to work at the CRA, what I just said is absolutely true. Try to look at things from the government’s perspective. If the economy is bad, that means Canadians aren’t making that much money. That means the government can’t collect as much income tax as they would like to.
So what’s their solution?
Get it from somewhere else of course! And implementing a Canadian GST tax increase can help them do just that. Just look at the unemployment rates, and you’ll see what I’m talking about. A GST tax increase is coming. In my opinion, it’s only a matter of time.
What All This Means
While all taxes are economically damaging, economic research is clear that consumption taxes like the GST are among the least damaging. The key to improving Canada’s competitiveness is either to reduce damaging types of taxes or to change the tax mix to rely less on damaging taxes.
Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.