| This is interesting, but after further research, the history looks a bit more complicated. From an article published in the Canadian Tax Journal, written by an attorney [1]: "The GST was introduced in 1991 as a 7 percent VAT, replacing the federal sales tax (FST). The FST was a manufacturers’ sales tax, which applied at 13.5 percent at the wholesale level to a limited number of goods and which was almost entirely invisible to consumers. "The GST applies to most supplies of property and services in Canada, and is imposed on the purchaser. The key feature that makes it a VAT is that most businesses can claim refunds, by way of input tax credit, for most or all of the GST that they pay on purchases." In addition, a Government of Canada publication also explains that GST does not apply to exports, in contrast to its predecessor [2]: "The GST is a sales tax which applies to final consumption at a fixed rate of 7%. Whereas the former FST was a hidden tax on the manufacture of goods, including those exported for foreign consumption, the GST is a visible tax on the value added at each stage of production and distribution of goods and services – which makes it a multi-stage tax – and applies only to consumption within Canada." ~~ In summary, there were other differences between GST and its predecessor. GST has applied to only consumption within Canada, whereas the former FST also applied to exports. Also, GST was paid directly by customers, rather than by companies (who had the option of making customers pay). It's possible that in many cases, customers ended up paying the same total amount after GST's introduction—in cases where companies may have lowered their prices to offset the new final total price due to the GST. But in other cases, it's plausible that companies kept their prices the same or didn't lower prices completely offset the tax, leading to increased prices on necessary goods and services for customers. In the end, according to analysts and newspaper columnists years later [3] [4], people with backgrounds in economics concluded that GST was good for Canada's economy, as the change provided a simplification of the taxation system that encouraged investment. But this positive effect is a bit different, though related to your comment: it looks like the positive effects of GST were largely based on encouraging investment, rather than based on the principle of transparency to consumers. These were interesting reads, though; thanks for raising the discussion. ~~ Sources: [1] Canadian Tax Journal: https://ctf.ca//ctfweb/Documents/PDF/2009ctj/09ctj4-policy.p... [2] Government of Canada: https://publications.gc.ca/Collection-R/LoPBdP/BP/prb0003-e..... [3] The Globe and Mail: https://www.theglobeandmail.com/opinion/the-gst-hated-by-man... [4] CBC News: https://www.cbc.ca/news/business/gst-not-all-that-bad-say-ta... |
There was also a significant lag in the price of goods that were no longer subject to the Manufacturer's Tax. Perhaps the legislation could have included a segment that forced companies to adjust prices similar to how a dividend automatically reduces the market cap of the company that issued it.
Most economists agree it was very good legislation but politically the Conservative Party never recovered.
Wikipedia has a solid summary within https://en.wikipedia.org/wiki/Goods_and_services_tax_(Canada...