Finance Minister Says Canada's 7% GST To Stay

by Leroy Baker, Tax-News.com, Washington

24 October 2001

Ottawa's Finance Minister Paul Martin is standing firm against pleas to remove the 7 per cent goods and services tax (GST) on sales of new vehicles by insisting this week that it will remain the same.

In an open letter to the Canadian Automobile Dealers Association (CADA) this week, Paul Martin wrote: 'The government's main approach to tax reductions is to focus on personal income tax cuts. Thus we are not considering proposals to eliminate the GST on new vehicle sales.'

Martin described the GST as a 'broad-based tax applying to most goods and services across all sectors of the economy. As such,' he said, 'it is difficult to justify introducing a special exemption for one industry. Furthermore, such a move would be ineffective as consumers would simply accelerate car purchases in the near term. Any upturn in spending would be matched by a downfall once the GST rate was re-established at its original level.'

The Finance Minister also reminded the auto industry that Ottawa has implemented 'the largest tax cuts in Canadian history' via a $17-billion economic stimulus this year which he says 'reflects the needs of the overwhelming majority of Canadians.'

President of Canadian Auto Workers, Buzz Hargrove, has argued that scrapping the GST would help boost this year's sales and Liberal MP Dan McTeague has also urged the government to get rid of the tax. 'It was probably the biggest bump in the road that I've seen in my 10 years with the dealers' association,' said CADA spokesman Huw Williams.

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