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Encyclopedia > Goods and Services Tax (Canada)

The Canadian Goods and Services Tax (GST) (French: Taxe sur les produits et services, TPS) is a multi-level value-added tax introduced in Canada on January 1, 1991, by Prime Minister Brian Mulroney and finance minister Michael Wilson. The introduction of the GST was very controversial. Value added tax (VAT) is a sales tax levied on the sale of goods and services. ... is the 1st day of the year in the Gregorian calendar. ... Year 1991 (MCMXCI) was a common year starting on Tuesday (link will display the 1991 Gregorian calendar). ... Regions Political culture Foreign relations Other countries Atlas  Politics Portal      The Prime Minister of Canada (French: Premier ministre du Canada), is the Minister of the Crown who is head of the Government of Canada. ... Martin Brian Mulroney, PC, CC, GOQ, LLD (born March 20, 1939), was the eighteenth Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. ... Hon. ...

Contents

Structure

The tax is a 6% charge (previously 7% before July 1, 2006) on the sale of all goods and services, except certain essentials such as groceries, residential rent, and medical services, and services such as financial services. The tax is levied on each sale. Businesses that purchase goods and services as inputs can claim "input tax credits" (i.e., they deduct from the amount of GST they have collected the amount of GST that they have paid). This avoids "cascading" (i.e., the application of the GST on the same good or service several times as it passes from business to business on its way to the final consumer). In this way, the tax is effectively borne by the final consumer. Unfortunately, this system is not completely effective, as shown by criminals who defrauded the system by claiming GST input credits for non-existent sales by a fictional company.[1] Exported goods are exempt, while individuals with low incomes can receive a GST rebate calculated in conjunction with their income tax. Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        An income tax is a tax levied on the financial income...


In 1997, the provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador and the Government of Canada merged their respective sales taxes into the Harmonized Sales Tax (HST). In those provinces, the HST rate is 14% (previously 15% before July 1, 2006). HST is administered by the federal government, with revenues divided among participating governments according to a formula. All other provinces continue to impose a separate sales tax at the retail level only, with the exception of Alberta, which does not have a provincial sales tax. In PEI and Quebec, the provincial taxes include the GST in their base. The three territories of Canada (Yukon, Northwest Territories and Nunavut) do not have territorial sales taxes. The government of Quebec administers both the federal GST and the provincial Quebec Sales Tax (QST). It is the only province to administer the federal tax. Motto: Munit Haec et Altera Vincit(Latin) One defends and the other conquers Capital Halifax Largest city Halifax Regional Municipality Official languages English Government - Lieutenant-Governor Mayann E. Francis - Premier Rodney MacDonald (PC) Federal representation in Canadian Parliament - House seats 11 - Senate seats 10 Confederation July 1, 1867 (1st) Area... Motto: Spem reduxit (Hope restored) Capital Fredericton Largest city Saint John Official languages English, French (the only constitutionally bilingual province in the country) Government - Lieutenant-Governor Herménégilde Chiasson - Premier Shawn Graham (Liberal) Federal representation in Canadian Parliament - House seats 10 - Senate seats 10 Confederation July 1, 1867 (1st... Motto: Quaerite Prime Regnum Dei (Latin: Seek ye first the kingdom of God) Capital St. ... In Canada, the Harmonized Sales Tax (HST) combines the Goods and Services Tax (GST) and Provincial Sales Tax (PST) into a single sales tax. ... Motto: Fortis et liber(Latin) Strong and free Capital Edmonton Largest city Calgary Official languages English (see below) Government - Lieutenant-Governor Norman Kwong - Premier Ed Stelmach (PC) Federal representation in Canadian Parliament - House seats 28 - Senate seats 6 Confederation September 1, 1905 (split from Northwest Territories) (8th [Province]) Area Ranked... This article or section is in need of attention from an expert on the subject. ... Motto: none Capital Yellowknife Largest city Yellowknife Official languages Chipewyan, Cree, English, French, Gwich’in, Inuinnaqtun, Inuktitut, Inuvialuktun, North Slavey, South Slavey, Tłįchǫ [1] Government - Commissioner Tony Whitford - Premier Joe Handley (Consensus government (no party affiliations)) Federal representation in Canadian Parliament - House seats 1 - Senate seats 1 Confederation 1870... Motto: Nunavut Sannginivut (Inuktitut: Nunavut our strength or Our land our strength) Capital Iqaluit Largest city Iqaluit Official languages Inuktitut, Inuinnaqtun, English, French Government - Commissioner Ann Meekitjuk Hanson - Premier Paul Okalik (Consensus government) Federal representation in Canadian Parliament - House seats 1 (Nancy Karetak-Lindell) - Senate seats 1 (Willie Adams) Confederation... In Canada there are three types of sales taxes: provincial sales taxes, the federal GST and the HST in Atlantic Canada. ...


Certain services have the tax added in such a way that the total cost is rounded to the nearest multiple of cents, due to limitations in the collection mechanism; for example, payphone calls are taxed so that the cost is a multiple of 5 cents; calls payable at 35 cents or less are not charged GST as the tax is under 2.5 cents.


Untaxed items

The tax is a 6% charge on all goods and services except certain items that are either "exempt" or "zero-rated":

  • For tax-free — i.e., "zero-rated" — sales, GST is not charged by vendors. However, they are still able to recover any GST paid on purchases used in making the tax-free good or service. This effectively removes all tax from these goods and services.
    • Tax-free items include basic groceries, prescription drugs and medical devices. Exports are also zero-rated.
  • For tax-exempt sales, vendors do not charge tax on their sales. By the same token, however, they are not entitled to credits for the GST paid on inputs bought for the purposes of making the exempt good or service. Tax-exempt items include residential rents, health and dental care, educational services, day-care services, legal aid services and financial services.

Background

In 1989, the Progressive Conservative government of Prime Minister Brian Mulroney proposed the creation of a national sales tax of 9%. At this time, every province in Canada except Alberta already had its own provincial sales tax imposed at the retail level. This article or section does not adequately cite its references or sources. ... Regions Political culture Foreign relations Other countries Atlas  Politics Portal      The Prime Minister of Canada (French: Premier ministre du Canada), is the Minister of the Crown who is head of the Government of Canada. ... Martin Brian Mulroney, PC, CC, GOQ, LLD (born March 20, 1939), was the eighteenth Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. ... Motto: Fortis et liber(Latin) Strong and free Capital Edmonton Largest city Calgary Official languages English (see below) Government - Lieutenant-Governor Norman Kwong - Premier Ed Stelmach (PC) Federal representation in Canadian Parliament - House seats 28 - Senate seats 6 Confederation September 1, 1905 (split from Northwest Territories) (8th [Province]) Area Ranked...


The purpose of the national sales tax was to replace the 13.5% Manufacturers' Sales Tax (MST) that the federal government imposed at the wholesale level on manufactured goods. Manufacturers were concerned that the tax hurt their international competitiveness. The GST also replaced the Federal Telecommunications Tax of 11%.


The proposal was an instant controversy: a large proportion of the Canadian population was irritated and disapproved of the tax. Although the GST was promoted as revenue-neutral in relation to the MST, the shifting of the tax away from exported manufactured goods would make life more costly for Canadians. The other parties in Parliament also attacked the idea as did two Progressive Conservative Members of Parliament, David Kilgour and Alex Kindy, who ended up voting against the GST and were expelled from the Progressive Conservative caucus as a result. A Member of Parliament, or MP, is a representative elected by the voters to a parliament. ... Hon. ... Alex Kindy, M.D. (born January 28, 1930) is a former Canadian politician. ...


The Liberal-dominated Senate refused to pass the tax into law. In an unprecedented move to break the deadlock, Mulroney used a little-known constitutional provision to increase the number of senators by eight temporarily, thus giving the Progressive Conservatives a majority in the upper chamber. In response, the Opposition launched a filibuster and further delayed the legislation. The Liberal Party of Canada (French: ), colloquially known as the Grits (originally Clear Grits), is a Canadian federal political party. ... The Senate of Canada (French: Le Sénat du Canada) is a component of the Parliament of Canada, along with the Sovereign (represented by the Governor General) and the House of Commons. ... A filibuster is a process, typically an extremely long speech, that is used primarily to stall the legislative process and thus derail a particular piece of legislation, rather than to make a particular point in the content of the diversion per se. ...


Despite the tax being lowered to 7% by the time it became enacted, it was controversial. What the tax covered also caused anger. The Government defended the tax, arguing it was merely a replacement for the hidden tax on manufacturers that would, in the long run, make Canada more competitive and help balance the books. However, the fact that prices didn't fall very much with the MST taken away took away the government's footing on the issue[citation needed]. Despite the opposition, the tax was made law.


Aftermath

The high profile and public resentment of the GST led to a partial tax revolt on the part of Canadians. Surveys, anecdotal evidence, and econometric analysis by economists all suggest that there was a substantial increase in the size of the underground economy in Canada as a result of the introduction of the GST.


The political ramifications of the GST were severe. It was one of the leading causes of the decline in popularity of the Mulroney government. The animosity towards Mulroney and his government played a significant role in the defeat of the 1992 referendum on the Charlottetown Accord, a package of proposed constitutional amendments. A strong Liberal Party majority was elected under the leadership of Jean Chrétien in the 1993 election. The Progressive Conservative Party fared very poorly in that election, winning only two seats. Although the party recovered somewhat in subsequent elections, it remained the smallest party in the House of Commons until it disbanded itself permanently in 2004, and merged with the Canadian Alliance to form the Conservative Party of Canada. (Redirected from 1992 Canadian referendum) The Charlottetown Accord was a package of constitutional amendments, proposed by the Canadian federal and provincial governments in 1992. ... Headline on October 27, 1992 Globe and Mail. ... Joseph Jacques Jean Chrétien, usually known as Jean Chrétien, PC, QC, BA, BCL, LLD (h. ... Popular vote map with bar graphs showing seat totals in the provinces and territories. ... The Canadian Alliance, formally the Canadian Reform Conservative Alliance, was a Canadian conservative political party that existed from 2000 to 2003. ... The Conservative Party of Canada (French: Parti conservateur du Canada), colloquially known as the Tories, is a conservative political party in Canada, formed by the merger of the Canadian Alliance and the Progressive Conservative Party of Canada in December 2003. ...


During the election campaign, Chrétien promised to repeal the GST, which the Liberals had denounced so vociferously while they were the Official Opposition, and replace it with a different tax. Instead of repeal, the Chrétien government attempted to restructure the tax and merge it with the provincial sales taxes in each province. They intended to call it the Blended Sales Tax, but when its opponents derisively called it the "B.S. Tax," they changed the name to Harmonized Sales Tax before its introduction. Only three provinces agreed to go along with this plan, however. Nova Scotia, New Brunswick, and Newfoundland and Labrador now have the 14% Harmonized Sales Tax instead of separate GST and PST. Motto: Munit Haec et Altera Vincit(Latin) One defends and the other conquers Capital Halifax Largest city Halifax Regional Municipality Official languages English Government - Lieutenant-Governor Mayann E. Francis - Premier Rodney MacDonald (PC) Federal representation in Canadian Parliament - House seats 11 - Senate seats 10 Confederation July 1, 1867 (1st) Area... Motto: Spem reduxit (Hope restored) Capital Fredericton Largest city Saint John Official languages English, French (the only constitutionally bilingual province in the country) Government - Lieutenant-Governor Herménégilde Chiasson - Premier Shawn Graham (Liberal) Federal representation in Canadian Parliament - House seats 10 - Senate seats 10 Confederation July 1, 1867 (1st... Motto: Quaerite Prime Regnum Dei (Latin: Seek ye first the kingdom of God) Capital St. ... In Canada, the Harmonized Sales Tax (HST) combines the Goods and Services Tax (GST) and Provincial Sales Tax (PST) into a single sales tax. ...


The decision not to abolish or replace the GST caused great controversy, both within the party and without. Liberal Member of Parliament (MP) John Nunziata voted against the Liberal government's first budget and was expelled from the party. Heritage Minister Sheila Copps, who had personally promised to oppose the tax, resigned and sought re-election. She was re-elected with ease in the subsequent by-election, however, as was the Liberal government in the 1997 election. A Member of Parliament, or MP, is a representative elected by the voters to a parliament. ... John Nunziata (born January 4, 1955) is a Canadian politician. ... Hon. ... Sheila Maureen Copps, PC, HBA, LL.D (hc), (born November 27, 1952, in Hamilton, Ontario) is a Canadian journalist and former politician. ... A by-election or bye-election is a special election held to fill a political office when the incumbent has died or resigned. ... 36th Parliament The Canadian federal election of 1997 was held on June 2, 1997, to elect members of the Canadian House of Commons. ...


Current situation

Fiscally, the GST has accounted for 15% to 17% of total federal tax revenues each year since 1999. This is slightly greater than the annual amount of the Canada Health and Social Transfer itself. The Canada Health and Social Transfer (CHST) was a system of block transfer payments from the Canadian federal government to provincial governments to pay for health care, post_secondary education and welfare, in place from the 1996-97 fiscal year until the 2004-05 fiscal year. ...


Many also argue that a switch towards heavier consumption taxes on the European model has helped the Canadian economy become more efficient and competitive with lower-priced goods for the international market. However, the effects of the GST in this realm are quite modest, and are regularly swamped by large changes in the exchange rate. It can also be claimed that the transparent nature of the GST has kept Canadians acutely aware of their taxation. This has led to a major change in political culture so that deficit financing is no longer considered an option by the federal and provincial governments[citation needed]. In economics, consumption refers to the final use of goods and services to provide utility. ... World map showing the location of Europe. ...


The GST once again became an issue, as the Conservative Party of Canada reduced the tax by 1% (to 6%) on July 1, 2006 as part of an election promise, and had also promised to reduce it by another 1% at an unspecified point before the end of its full mandate. The Conservative Party won the federal election on January 23, 2006, but by a narrow margin that gives it a weak minority position in Parliament. This leaves some doubt about its ability to carry out major changes, particularly the second percentage point drop in the GST. The first percentage point drop (from 7% to 6%) was presented in the budget tabled in Parliament on May 2, 2006. The Quebec nationalist opposition party, the Bloc Québécois, supported the budget, giving it passage at the initial vote to approve the budgetary policy. When the legislation enacting the budget was brought forward for final passage, it was accidentally passed by unanimous consent due to parliamentary confusion[1]; neither the Liberal Party nor the New Democratic Party had intended to support the budget. On June 22, the budget was given Royal Assent and made law, meaning the first point reduction in the GST was implemented on July 1, 2006. The Conservative Party of Canada (French: Parti conservateur du Canada), colloquially known as the Tories, is a conservative political party in Canada, formed by the merger of the Canadian Alliance and the Progressive Conservative Party of Canada in December 2003. ... is the 182nd day of the year (183rd in leap years) in the Gregorian calendar. ... For the Manfred Mann album, see 2006 (album). ... Political campaign Part of the Politics series Politics Portal This box:      An election promise is a promise made to the public by a politician who is trying to win an election. ... Rendition of party representation in the 39th Canadian parliament decided by this election. ... January 23 is the 23rd day of the year in the Gregorian calendar. ... For the Manfred Mann album, see 2006 (album). ... The Bloc Québécois is a centre-left federal political party in Canada that is devoted to the promotion of sovereignty for Quebec. ... The Liberal Party of Canada (French: ), colloquially known as the Grits (originally Clear Grits), is a Canadian federal political party. ... The New Democratic Party (NPD; Nouveau Parti démocratique in French) is a political party in Canada with a progressive social democratic philosophy that contests elections at both the federal and provincial levels. ... is the 173rd day of the year (174th in leap years) in the Gregorian calendar. ... // The granting of Royal Assent is the formal method by which a constitutional monarch completes the legislative process of lawmaking by formally assenting to an Act of Parliament. ... is the 182nd day of the year (183rd in leap years) in the Gregorian calendar. ... For the Manfred Mann album, see 2006 (album). ...


Tax-free shopping for visitors

Currently, visitors to Canada may request a tax refund when they leave Canada by filling out a form at a Canadian airport or some duty free stores at border crossings. The visitor must send in original receipts with a stamp by Canadian Customs. Cheques are mailed to the visitor within a few weeks. Recently, the government has announced plans to eliminate this refund program[2], effective April 1, 2007.


See also

The level of Taxation in Canada is about average among Organisation for Economic Co-operation and Development (OECD) countries, but it is higher than the rate in the United States. ... In Canada there are three types of sales taxes: provincial sales taxes, the federal GST and the HST in Atlantic Canada. ...

References

  1. ^ Federal budget passes unopposed on mix-up. CBC (2006-06-06). Retrieved on 2007-05-02.

Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era. ... May 2 is the 122nd day of the year in the Gregorian calendar (123rd in leap years). ...

External links


  Results from FactBites:
 
Encyclopedia4U - Goods and Services Tax (Canada) - Encyclopedia Article (764 words)
The tax is a 7% charge on all goods and services except certain essentials such as food, residential rent, and medical services.
The vast majority of the Canadian population was irate and disapproved of the tax.
She was re-elected with ease, however, as was the Liberal government in the 1997 election.
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