----- Original Message -----
From: John Hermann <[EMAIL PROTECTED]>
To: John Hermann <[EMAIL PROTECTED]>
Sent: Friday, 10 December 1999 8:29 PM
Subject: Deep Silences Descending From On High
Economic Reform Australia
ERA EMAIL NETWORK
Date: Thu, 09 Dec 1999
From: COMER <[EMAIL PROTECTED]>
Organization: Committee on Monetary and Economic Reform
"Since the Canadian Liberal Party in 1993 rode to power promising to do
away with the GST, its repeal would, among much else help diminish the
growing cynicism about politicians and their promises"
DEEP SILENCES DESCENDING FROM ON HIGH
by William Krehm
Editor-Publisher, Economic Reform
(mailto: [EMAIL PROTECTED])
One of the most intriguing aspects of our public life is the way which deep
silences suddenly descend, one knows not whence, to enshroud key issues
that only recently have occupied the centre of the stage. On whose
initiative does this happen? And with so much left to the anonymous
puppet-masters behind the scenes, what remains of our democracy?
There is no better instance than the Goods and Services Tax
(GST), Canada's version of the Value Added Tax. This adds 7% at every stage
of the production and distribution of goods and services, certain foods
excepted. Marginal enterprises like music lessons, art, publication of
non-commercial writing, are ruthlessly GSTed. Still worse, fledgling
businesses that are likely to be stuck for longer than planned with
inventory -- or even forever -- may never recoup part of the GST they have
paid for their purchases of intermediate goods. That means a tax on some of
their losses as well as on their profits. On the other hand, the tax weighs
heavily on the most vulnerable who spend more or all their income on
indispensable goods and services, and none on financial items which are
exempted from the GST.
It is also famously easy for tradesmen to swap their client's
liability for GST for the income tax they would have to pay on the
undeclared revenue. Our government thus loses twice -- in the name of what?
Like the deals of the scofflaw tradesman, that is also undeclared: to load
the most vulnerable portion of our people with the maximum amount of
taxation, to assure greater opportunity for the most privileged to gamble
their heads off on the stock market.
And the gambles of financial institutions -- if they are big
enough -- are guaranteed against bankruptcy, as the long record of bailouts
throughout the world proves. For some time after the GST was brought in the
Bank of Canada treated the resulting bump in the end prices as a reason for
raising interest rates still higher "to lick inflation". It is true COMER,
along other organizations, eventually set the BoC straight on that. But how
does one really know when the present governor Gordon Thiessen, native of
Saskatchewan though he is, having let the word "deflation" slip out of his
lips, within a weeks was pledging publicly never to mention the word again.1
Who knows what goes on in the mind of a Governor of the Bank of
Canada? The same man Thiessen early in December in a public speech in
depressed Vancouver was stressing the dangers of an overheated economy that
had run out of spare capacity. Can we then rely on him making the nice
distinction between rising prices because of the GST rather than net of the
GST? Any more than we can rely on him dealing with stock market
inflation.
That, of course, more than ever is underwritten by Ottawa while
exempted not only from the 7% GST, but from the broadly advocated Tobin
tax. The latter would involve a tax on financial transactions of a small
fraction of a single percent and would have cooled the stock market
hyper-boom that has -- in Internet stocks and mergers -- reached the point
of the grotesque. The Tobin tax, moreover, would come complete with the
paper trail that makes tax collection efficient and inexpensive. Since the
Liberal Party in 1993 rode to power promising to do away with the GST, its
repeal would, among much else help diminish the growing cynicism about
politicians and their promises.
So much for the background. But background, as it is wont to when
buried too deep, has a way of resurfacing as foreground. The Globe and Mail
(9/12 'Provinces put pressure on Martin to slash taxes') reports "Finance
Minister Paul Martin last night faced a united front from his provincial
colleagues, who are urging him to slash taxes and target his spending to
provincial transfers that support health and post-secondary education".
We are heartily in agreement with that as far as it goes. But it
doesn't go far enough. The shift to capital budgeting will bring to light
some $100 billion of federal assets that were hidden under the table,
exactly like those unscrupulous tradesmen do with the GST. The talk is of a
federal surplus of $100 billion over the next five years.
Significant is the failure of the provinces to even mention the
GST. It is a tax, after all, and the most unjust of taxes on several counts.
Thus the British Columbia Finance Minister Paul Ramsay said "some
of the huge surpluses Ottawa is accumulating should be given straight back
into Canadians' pockets in tax cuts". Is there any doubt that the repeal of
GST would add cash to more Canadian pockets than any income-tax cut? The
impoverished will spend every last penny of it. And that spending will
broaden the tax base, bring more revenue back to the federal government. It
will also cut the costs of the provincial and municipal governments, the
universities and school boards substantially, since they pay GST on all
their purchases.
Quebec Finance Minister Bernard Landry said Ottawa is practising
a policy of fiscal "strangulation" against the provinces. Given the
depressed areas of Quebec the end of the GST would have more than average
effect in Quebec, and thus would fit nicely into the current debate on the
secession of the province. It would also be an important item in a parcel
to save farming in Saskatchewan where the wheat farmers, faced with
extinction, are banging at Ottawa's doors for good cause. Ditto the
fishermen of both coasts.
The G&M piece observes, "The provinces want Mr. Martin to ensure
that the federal tax cuts don't give Canadians an automatic provincial
reduction. All provinces except Quebec base their tax levies on the federal
system". The GST repeal would in no way involve provincial taxes. Nothing
to be disentangled there. Still it occurred to no provincial minister to
mention it.
Worse still, too many of COMER's allies in the campaign against
the enactment of the GST in the early nineties have not been heard from. We
are too discreet to name names. But those who fill the bill will hopefully
search their souls. Does the agenda for opposition movements always have to
follow what is being done in pin-striped circles? This conforms alarmingly
to what we have witnessed in the deep silence that descended from on high
when the same federal government with a delay of some decades finally
adopted capital budgeting in stealth. If the provinces raised that
question, and introduced capital budgeting in their own accounts (some
including Ontario do not have it) it would become still more obvious"that
there was never reason for slashing our social programs.
Write your MP and MPP on this indecent silence on two issues that
are at the root of the grand scam of the past quarter of a century. And
attach a copy of your letter to your trade union or other organisation.
1 See Meltdown, COMER Publications, 1999, p. 211. Unbelievably, the same
Mr. Thiessen is a native of Saskatchewan, which currently is deflated to
the point where -- unless succour comes -- the entire province might as
well be declared a national park.
References:
http://www.globeandmail.com/gam/National/19991209/UMINIM.html
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Copyright (C) 1999 COMER. May be reproduced with proper acknowledgement.
COMER Publications
Suite 107
245 Carlaw Avenue
Toronto ON M4M 2S6
Telephone (416) 466-2642
Fax 466-5827
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