How Political Party Names Can Be Misleading

May 26th, 2011 • No Comments

When elections come around people want to elect candidates whose ideals directly reflect their own. One of the ways candidates try to signify their beliefs is through the name of the party they are affiliated with. They hope that by labelling themselves a Liberal or Conservative that they will win liberal and conservative voters to their campaign. While this trick works, it does not necessarily mean that a liberal voter is voting for a liberal candidate. This phenomenon is not limited to liberalism, or to any specific country. All candidates and parties try to win votes through strategic naming. The difference between a Liberal and a liberal can be staggering, and many are unwittingly fooled by the mere capitalization of a letter. One must be vigilant in assessing parties and candidates claims to ideologies rather than taking their word for it.

Canada has perhaps one of the hardest ideological landscapes to unmask, as the three major parties all have similar platforms. As Pierre Elliot Trudeau once said of the Canadian Liberals, “We are the extreme centre, the radical middle.” True liberals believe in small government, laissez-faire economics and oppose any measures which unnecessarily limit the freedom of the people. Liberalism was supposed to advocate for the rights of the individual to act as they see fit, and to protect the autonomy of the person. If you look at the Liberal Party of Canada, which has implemented measures such as universal health care and student loans, among other things. I am not saying these are not good programs, but they are definitely not liberal. In fact, they are more socialist than anything.

The Chinese Communist Party falls into much the same boat. While they masquerade as communist, the Chinese economy has become increasingly capitalist. Capitalist activities are supposed to be anathema to communism, and yet the Chinese think they have found a way to balance both worlds. What they have really created leans more towards a warped version of fascism than anything else. Everything is controlled by the state and some people are mandated by the state to do certain jobs, but there are also those who are able to operate with limited amounts of freedom economically. This has made China the powerhouse it is today, but makes it increasingly difficult to fit its ideology into a specific box.

Germany lived through a bout of this, with the National Socialist German Workers Party, otherwise known as the Nazi party. Rather than being socialist this party was in fact one of the models of a fascist regime. Instead of improving life for Germans through social programming and income distribution the Nazis gave money to the wealthy that they took from those that they imprisoned. Most Germans saw little to no change in their lives other than an increase in currency stability. The party was concentrated on the war effort for most of its existence, and ended up worsening people’s conditions of living as an expense of its agenda rather than making them better.

The moral of the story is always investigate the tenets that a party builds its platform on, rather than relying on the name they choose to market themselves with.

The 1837-1838 Rebellions: A Comparison

May 19th, 2011 • No Comments

When two events happen so close together in time and space one can only wonder about if and how they are linked. It is easy to assume that the relative similarity of the rebellions of Upper and Lower Canada in 1837-38 would mean that they were linked in their cause and execution. This is especially true because of the communications between the leaders of each movement, as well as some common grievances put forward by both sides. However, looks can be deceiving, as there are aspects of each rebellion that make them distinct from each other. Lower Canada had a different standing with the British, and were concerned with their language and culture, as well as discrimination that was not present in Upper Canada. To lump these two rebellions together as a single entity does not do justice to the complexities of each situation. While some of the reasons for rebelling were similar in both colonies, the rebellions in Upper Canada and Lower Canada had little in common except for timing.

The citizens of Upper Canada had many reasons to rebel against the British. The British had tried to create a conservative society with as many safeguards as possible against popular democracy. There were concerns from government officials in Upper Canada and in Britain were worried about the attitude and number of Americans coming into the colony. The Alien Question, arising after the War of 1812 alienated many American settlers as colonial officers were determined to deny American immigrants land and the right to hold public office. The Family Compact, a close-knit group of people, held a large portion of the public offices in Upper Canada. The Family Compact also controlled a large portion of the Crown reserves of land, making it hard for people to settle in the countryside. The Anglican clergy controlled another large portion of the reserves, but other protestant clergies were not granted the same rights. The favorites that were granted large tracts of land were often free from taxes and regulations, while real settlers were subject to many restrictions and fees. These reserves also meant that people could not settle in groups, making the farms isolated and less efficient than if they were closer together. There was a pressing need for roads in the countryside of Upper Canada, but the resources of the colony went instead to the construction of the St. Lawrence and Welland canals, which helped to raise the profits of the merchants of York and Kingston. The non-Anglican ministries could not gain funding to set up schools, could not solemnize marriages or keep civil registries. During elections land patents, which conferred the right to vote, were only distributed to sympathetic voters so to guarantee Tory candidates winning. Government officials also tried to influence elections by demanding proof of citizenship from men well known to authorities as well as by offering sympathetic voters free alcohol. These were not the only matters pressing on the Upper Canadian population, but they are some of the more noteworthy.

Although they shared some of the same grievances, there were many more concerns at stake in Lower Canada. Many of these reasons were made public in the 92 Resolutions, which were issued in 1834. The Resolutions were aimed against the inadequacies of the Constitutional Act, namely the way that it structured power in Lower Canada. The leaders did not agree with the fact that this act allowed the Crown to select an entire branch of the legislature, which is the Legislative Council. There were also grievances against the Executive Council, which was secret from even the Parliament in not only its function, but in whom the members were. They were also against the fact that although there were 525,000 persons of French descent and only 75,000 of English or other origin, 157 public servants were of English or other descent and only 47 were of French descent. These positions were also concentrated in the hands of the Chateau Clique, an oligarchic group similar to the Family Compact in Upper Canada. They used these positions to extract large and illegal fees for public services, including but not limited to the judiciary. There were also a set of complaints directed at the elections of the Assembly, in which members of the Legislative Council as well as the army interfered with the voting process of citizens by force and by giving land to those who would vote the way that they were told. The final issue at stake was the appropriation of wastelands of the province by “Governors, Legislative and Executive Councilors, Judges and subordinate officers”. This was made possible by the way that the Constitutional Act allowed for the faulty systems which were followed in granting land (and thereby voting rights), and meant that many people were unable to settle in the countryside. These are most but not all of the grievances that were put forward by the Lower Canadian leaders. The rejection of the 92 Resolutions by Russell’s 10 resolutions solidified the fact in their minds that they had to use force if they wanted to see anything change.

There were also grievances amongst the habitants of the seigneurial system unique to Lower Canada as well as young professionals, which lent popular support to Papineau’s cause. Many of the wealthy British merchants bought out the French seigneurs as the price of wheat rose, and by 1837 nearly one half of all seigneuries were in British hands. These merchants, along with the French landowners who had come to resemble the British, viewed their new lands in terms of speculation. On new seigneuries they raised the rents, enforced half forgotten feudal obligations, introduced new methods of farming, and with their control of the court system the merchants were able to reduce the habitants to little more than day laborers. This left the tenants with little to feed themselves, while it made the predominantly British merchants tidy little sums. The young professionals trained from or immigrating to Lower Canada also found it difficult to scrap together a living. The medical and legal professions were dominated by old and powerful societies which were favored by the Crown and recruited sparingly from graduates from schools in London. This left little room for the learned sons of French habitants, who would join the rebellion in their frustration and idleness.

The citizens of Lower Canada also had to struggle more against the tides of immigrants, being the port which ships sailed in to, than Upper Canada did. With these immigrants came many diseases such as cholera, dysentery and typhus. A quarantine station was set up in 1832 at Grosse Ile, but it hardly stemmed the tide of disease as captains dropped passengers on riverbanks to avoid paying immigration head taxes and waiting to unload the sick. 52,000 immigrants landed at Grosse Ile with 24,000 reported sick, and over the summer of 1832 3,800 died in Quebec, 4,000 in Montreal, and 2,500 in York along with thousands of others along the banks of the St. Lawrence and on Grosse Ile itself. Cholera would return two years later with agricultural problems on the seigneuries. Poor farming practices paired with success by newer farmers with newer technologies and failed harvests in 1833 and 1836 left many hungry, sick and too poor to do anything about it.

Although each rebellion stemmed from a different set of grievances, they were enflamed by a similar set of events, that is, the economic downturn of 1837. The first quarter of the 19th century saw the beginnings of a struggle between agriculture and commerce, two areas that were dominated by very different groups of people. The Napoleonic Wars had put a premium on wheat, and British North America had been primed to supply Europe. There were slumps in its importance, but the growing dominance of farming was not matched by an increase in political power. These farmers were more than likely new settlers from either Britain or the United States, or in Lower Canada the French. The older plots of land were exhausted, since the French Canadians did not know to rotate their crops. In 1833 crop harvests in the area below Quebec failed completely, adding to the hardship that already existed with immigrants bringing diseases to the colony. This, and the lack of money flowing into the merchants’ hands, agitated the population. Shortages of food in the spring and summer of 1837 affected the townsfolk, newer farmers, and those in particularly hard hit areas. Commerce was controlled by the early settlers, the Family Compact or Chateau Clique, and prosperous American immigrants.

It then came in 1837 that the American economy took a downturn. This in its course greatly affected the British colonies who had been widely engaged in exporting raw materials such as timber and wheat to Britain. There had also been wild speculation and borrowing in the United States for roads, canals and railways, which pushed many into bankruptcy. As well, even as construction of these public works ceased and unemployment rose, costs continued as much of the work had been financed on borrowed money. The provincial banks asked and were granted permission to suspend specie payments in order to prevent the banks from losing all of their reserve currency. The shortage of hard currency made it difficult to conduct business throughout the colony. Many of the reformers felt that the bank crisis, deficient crops, and rising interest rates were all connected, coming from the policies of the Family Compact. The economic downturn exacerbated the underlying tensions in the colonies, pushing them individually towards rebellion.
The reform movements in Upper and Lower Canada were composed very differently. The Upper Canadian movement was mainly made up of tradesmen, teachers, lawyers, doctors, merchants, artists and two preachers. There were also many farmers and laborers involved, but the leadership of the rebellion was mainly from the Radical Reformers who had been part of the Assembly, such as Mackenzie. Most of the Upper Canadian reform movement rejected Mackenzie’s call to arms, and saw him as a disgrace to the movement itself. The people in Upper Canada did not respond as favorably as Mackenzie had thought they would, and the movement in that colony was powered by his steam and not that of the population. The Partie Patriote was more of a grassroots movement, with many people from the rural parts of Lower Canada becoming involved in the rebellion. The habitants and other agriculturalists could no longer support their families with their lands and efforts. These farmers, along with the educated sons of habitants, provided much of the support and bodies in the Lower Canadian movement. In a way it seems like the patriotes pushed the armed rebellion forwards, much farther than Papineau ever wanted it to go.

Before the rebellions started in Lower Canada the reformers attempted every way they could conceive to bring about changes through due process. This led to the Assembly coming to a standstill many times in the years preceding the rebellions. From 1810 on the Civil List, the fund that paid the salaries of officials, and the King’s Prerogative, the revenue from Crown lands, were both under attack from the Assembly. The Assembly wanted to control every source of revenue for the government. They won some of these points, although a much whittled down Civil List remained out of their grasp. As the stagnation went on, the Assembly refused to vote funds for public works such as those being built in Upper Canada. Thus there were no canals or roads built to aid the growing commerce of the colony. The Tories tried to appeal to the British, but were blocked by the majority. Because of these advancements made through due process, Papineau wanted to stick to working through the Assembly to make changes, even if it took many years to accomplish the goals of the reformers.

The reformers of Upper Canada grouped together in a political party during the 1828 elections, and made up the majority elected to the Assembly that year. After years of slapdash politics, small victories in 1828-1830 and 1834-1836, and a split in the reform party, the Radical Reformers (i.e. Mackenzie) felt that they had run out of peaceful options. Mass rallies were attempted to be held throughout the province during the summer and fall of 1837, along with small societies that had been set up secretly by William Lyon Mackenzie, although it did not work out well. When all of the British troops went to Lower Canada to deal with the insurrection there, they left a huge store of new muskets undefended. However, Mackenzie could not rally the reformers to take up arms at this golden opportunity. He would rally them at another meeting a short time later in preparation for the Battle of Toronto which took place in December 1837. Mackenzie’s men were less than subtle, and by the time they had mustered at Montegomery’s Tavern the authorities had been warned about the rebels’ actions. The lieutenant-governor paid little heed, and when the first shots were fired the militias and troops were in as much disarray as the rebels. The rebels tried to march on Toronto but were scared off by what they thought was a cannon, and negotiations came to a halt between the parties when Head realized the true lack of strength behind the rebels. Dr. Charles Duncombe had intended to incite rebellion, and by December 13th he had gathered approximately 500 men. Anticipating a rising in the West after Mackenzie’s in Toronto, Allan MacNab’s troops were deployed to quell the Duncombe’s forces, and did so with few shots fired. Duncombe’s uprising was over almost before it began. Mackenzie, Duncombe and other leaders fled to the United States, although some were captured. The action in Upper Canada was smaller and short lived in comparison to the uprising that occurred in Lower Canada at the same time.

In Lower Canada there were two distinct and widespread rebellions, which mark the difference from Upper Canada. These rebellions stretched from below Montreal at Chateauguay to Quebec City (281kms), as far east as St. Benoit, and down the Richelieu river through Saint-Ours, St.-Denis, St.-Charles, and St.-Hyacinthe. In addition to the confrontations at the end of 1837 there was also an armed invasion from the United States in the fall of 1838 supported by another popular uprising. Continuously enflamed by the actions of Governor Gosford at the behest of the Colonial Office in Britain propaganda meetings were held first at Saint-Ours and then Saint-Laurent, Saint-Marc, Sainte-Scholastique, Saint-Hyacinthe, Sainte-Rose and elsewhere. Some newspapers also took up the cause, publicizing the Russell Resolutions and lamenting on the lack of justice coming from Britain. Organizers pushed a boycott of British goods that were subject to customs to lower revenues for the government, as well as tried to establish steering committees for each county and a convention of elected officials and sympathetic members of the Legislative Council. Military drills were held by the Fils de la Liberte, and public rallies continued despite government orders to militias and justices of the peace to maintain order and deal severely with political agitators. After street fights broke out on 6 November 1837 in Montreal the Governor allowed groups of armed loyal volunteers to drill with army commander Sir John Colborne, alongside the establishment of the Royal Montreal Calvary. Many of the leaders of the Patriotes, fearing the warrants out for their arrest, fled into the surrounding countryside or to the United States. Armed conflict occurred for the first time as Colonel Charles Gore’s troops marched on Saint-Denis, where they were defeated. The rebels’ luck did not hold and before long they were dispersed, captured or killed by the movements of the army and armed government supporters. Many fled to the United States where, as political refugees, they attempted to drum up support, money and arms. The rebel camp split, as some preferred border raids and immediate armed action to diplomatic lobbying. Raids continued, but the rebels could not get official support from American officials. With the arrival of more British troops from the Maritimes and Great Britain the Patriotes continued to plan for an armed insurrection in the fall of 1838.

There were some things that were similar about both rebellions, which are underscored by the fact that the leaders of each movement were in communication both before and after the fighting took place. There was also some thought put toward uniting the two causes to weaken the British, and had the Upper Canadian rebels acted when the British troops all went to suppress the movement in Lower Canada it is possible that they would have succeeded in doing so. It is possible that if they had worked together, even if they were working for different ends, that the rebellions would have been larger and more successful. Mackenzie wanted an armed rebellion and had trouble mustering and committing forces to such. His charisma was the driving force behind the armed rebellion – the population was not fueled by as much anger as they were in Lower Canada. Papineau did not want an armed rebellion, and yet the people of Lower Canada seemed determined to march in his name.

The repercussions of the rebellion in Upper Canada were varied, depending on who was caught and when. Samuel Lount and Peter Matthews were both hanged after they were caught trying to escape the country, with a total of 20 people being hanged in connection with the rebellion. There was a price put on Mackenzie’s head of 1,000 pounds, although it was never claimed. In total 885 people were arrested or sought on charges connected to the rebellion, and those found were housed in horrible conditions pending trials. They were jammed together, given little food and some took sick, only for over 600 of them to be acquitted and more than 150 of them to be pardoned. 92 people were sent to penal colonies in Australia. Groups of government supporters, whether official or not, broke into houses, harassing people and stealing property in retaliation for the rebellion. Many people, fearing these reprisals, emigrated to the United States. As many as 25,000 people left, which was a massive drain on the small number of people present in the colony. Despite the small size of the rebellion in Upper Canada the repression of it was very severe, and not at all proportionate to the disturbance it caused.

In the wake of the rebellions in Lower Canada the reprisals were very similar to those in Upper Canada. 500 people were imprisoned following the activities in 1837 and 800 more were captured after the second rebellion in 1838. 66 rebels were exiled to Bermuda and Australia, with 12 being hanged in Montreal. As well, approximately 500 people sought refuge in the United States to evade arrest. Families were obligated to provide accommodation to soldiers free of charge, even as the troops looted and burned the houses of their neighbors who had led or fought in the rebellions. The Constitution Act, 1791 was suspended which resulted in the dismissal of the Assembly, and the army commander who had replaced Governor Gosford after he left the colony ruled by way of an enlarged Legislative Council and decrees. This was how the colony was left until Lord Durham arrived from Britain as both the Governor General of British North America and the President of the Commission of Inquiry on the situation in the North American colonies. Although the rebellions in Lower Canada were far more severe than that in Upper Canada, they were reacted to in a similar fashion and at a similar level, which makes the reaction in Upper Canada seem even more disproportionate.

Of course, the most lasting repercussion of the rebellions was the joining of the two Canadas at the insistence of Lord Durham in 1840. The Durham Report addressed some of the issues that were raised by the rebels, such as the need for responsible government in the colonies and for complete control of laws that pertain strictly to the colonies themselves. Durham recommended that responsible government be given to the British North American colonies with the governor general being a figurehead and an elected Assembly having a great deal of power concerning matters that strictly concerned the colonies. This of course was rejected by the British Parliament. Durham also thought that repealing the Royal Proclamation of 1763 and the Quebec Act of 1774 would create a more even field for both French and English throughout a united province. Worried that the Canadians were looking with envy at the freedom of government exercised in the United States, the British sought to keep any more colonies from going the way of America. By joining the two colonies the British would gain a slight advantage in numbers overall to deal with the growing French nationalism and increased immigration from Britain would also help to overwhelm the French. Durham also felt that many of the problems that arose in Upper Canada due to lack of money from financing canals could be remedied in the amalgamation by the surplus of unused monies that resided in Lower Canada. He also believed that the disputes about revenue sharing between the colonies would cease as they would have but one great state apparatus and the colonies would have more usable money as they would only have one state bureaucracy to pay for. Durham’s report made it seem like the causes of the rebellions were simply deficits that would be made up by pooling the resources of each colony together.

The real test to determine if these rebellions were a single entity or simply had in common timing and proximity is to consider if one half was missing, would the other remain. That is, if the rebellion had not occurred in Lower Canada, would one still have happened in Upper Canada, and vice versa? If the economic downturn had only affected one of the colonies, it is not guaranteed that the other would have been sufficiently agitated to offer armed rebellion. There was some communication between the two movements, but it does not appear that anything of significance was shared such as arms, men, information or advice. No planning was common between the rebellions. Each set of grievances, although stemming from similar places, was arrived at independently in each province. It is doubtful that the habitants of Lower Canada knew much about the political scene acting out in Upper Canada. Given the chance to coordinate their movements the rebellion in Lower Canada chose to ignore the actions of Mackenzie and continue on the path they had set themselves. The rebels in Lower Canada became an unstoppable tide that not even Papineau could stem. Mackenzie might have simply chosen to act at the same time hoping that it would fragment the British troops. It is possible that these rebellions occurred in the same way that the revolutions in the Middle East are today – close in proximity and reasoning, but organic in each case.
Although they were two separate rebellions the British Crown reacted to them as one. Lord Durham was sent to the colonies to figure out why the rebellions had occurred and what the British had to do to prevent another war of independence in North America. Because of the simplification of the rebellions in history books it is difficult to distinguish the nuances that separate the movements in Upper and Lower Canada. The rebellions of 1837-1838 occurred at the same time and in close proximity, that is true. They also erupted out of many similar grievances and circumstances. However, the two origins of rebellion along with the fact that each rebellion would have occurred regardless of the other leads one to believe that there were two separate rebellions in British North America in 1837.

A Brief History of Sales Taxes in Canada

May 16th, 2011 • 1 Comment

There is no one alive who was born in Canada today that remembers a time without sales taxes. Canada has had a continuous stream of different sales taxes, from the Manufacturer’s Sales Tax to the Goods and Service Tax, to now in many provinces the Harmonized Sales Tax. It started in 1920, when a general sales tax was levied for the first time, to make up for the inadequacy of the other sources of taxes at the time to cover the costs of war expenditures during World War One. This tax was a turn over tax, which means that it was applied to all transactions except for the final sale by a retailer. This was replaced quickly in 1924 with the Manufacturer’s Sales Tax, which was then replaced in 1991 by the Goods and Services Tax, which in turn is slowly being integrated with provincial sales taxes into Harmonized Sales Tax systems. As research has discovered over time, many different kinds of taxation are inefficient and costly, and as a result what is considered a good tax has also changed. Thus, sales taxation has evolved to become more efficient. While taxes are subject to numerous exemptions over time, there are points where the exemptions are so extensive and complex that it only makes sense to completely redefine the taxes, as has happened with both the GST and HST. VATs like the HST that are charged all at once are more effective than cascading taxes such as the MST and the PST.

There is a difference between value-added taxes and sales taxes. Value-added taxes are indirect, and levied different stages of production. They are levied against manufactured goods and imported goods alike. This method of taxation is more transparent than most others, and is closer to being revenue neutral than most other taxes, such as sales taxes. Sales taxes are levied as a percentage of a purchase at the point of retail to the consumer. This means that sales taxes can have a cascading effect on the price of the good, which means that there are points in production where taxes are levied on things that have already been taxed, essentially taxing taxes. Sales taxes are also regressive, that they are a tax on consumption, so they tax the poor the same as the wealthy, even though the poor are less equipped to bear the essentially the same tax burden. Because VATs are dependant on good accounting practices to work, the same tax is levied on each producer, irrelevant to their position in the chain of production. They are also less likely to be avoided by retailers doing transactions in cash and having no record, or consumers purchasing things over the internet or through wholesalers. In many ways value-added taxes are more efficient than conventional sales taxes, which is why there has been a shift towards them over the course of the last twenty years.

The first value-added tax in Canada, the Manufacturer’s Sales Tax, was implemented in 1924. The MST is a single stage tax, which is applied to the manufacturer’s sales price in Canada and to the value of imports plus the duty paid on such. This means that all services were excluded from this tax, as well as any value that is added by wholesalers or retailers which narrows the tax base considerably. It was also a hidden tax, in that the consumer could not actually see how much they were paying was actual costs and how much was taxes. By the time the MST was abolished, there were hundreds upon hundreds of exemptions for things such as food, books, health products, heating fuels, clothing, most machinery and equipment just to name a few. These exemptions made the tax itself hard to administer. Another problem with the MST was the fact that industry is not neatly divided manufacturing, wholesale, and retail sectors, so it is hard to know who exactly the tax applies to. As well, manufacturers were able to charge different prices based on their position in the chain of production. This meant that the more that a company was vertically integrated the less taxes they had to pay and subsequently the cheaper they could offer their product. Of course the MST was opposed by industry, which was led in its protest by the Canadian Manufacturer’s Association. They worried that the costs of complying with the law, discrimination through uneven application of the tax, potential for imports to cost less, as well as about if the tax incidence would fall on producers and cut into their profits. The actual rate of taxation has changed over years as first the government sought to phase out the tax, but reversed this decision when a series of needs (the Great Depression, WWII) demanded higher tax revenues to operate social welfare programs.

Another kind of sales tax that exists sporadically across Canada is the concept of Provincial Sales Tax. These are conventional sales taxes that occur in British Columbia, Manitoba, Ontario, Saskatchewan, and Prince Edward Island. Quebec has a provincial tax, called the QST, but it is a value-added tax and not a sales tax like the others. The territories do not have any form of provincial sales taxes. There is no uniformity over these sales taxes across Canada, and each of the provinces has its own rate of taxation, and even then the rates of taxation within each province are not always constant. Sales taxes are generally calculated on the retail price before the GST is applied. For example, in British Columbia there is a general 7% PST tax, but the tax on alcohol consumption is 10% and passenger vehicles are taxed between 7-10% depending on their price. In Ontario there is the Retail Sales Tax, which is 8% for most goods. Alcohol is taxed at either 10 or 12% depending on the source, 5% for accommodations of less than one month and 10% for admission to amusement parks of more than $4. In Saskatchewan the general sales tax is 5%, which is applied to both goods and services, including telecommunications services, real estate commissions, legal services, accounting services and all goods unless they are exempt. Manitoba has a Retail Sales Tax of 7%, which is applied to everything that is not exempt, including electricity, piped gas and coal. Currently both British Columbia and Ontario are in the process of changing their provincial taxation system to a Harmonized Sales Tax system.

In 1991 the Manufacturer’s Sales Tax was replaced with the Goods and Services Tax, but not without much controversy. At the time that the change was made the MST was levied at 13.5%, while the GST came in at a rate of 7%. In contrast to the MST, GST is a multi-stage value-added tax, under which businesses can apply for refunds for GST paid on inputs into production so that the only person who is really paying the tax is the final consumer. This means that for every purchase GST is paid and businesses are required to apply for refunds, which may impede entry into industry for some businesses and make the economy less competitive. This also places the legal incidence of the tax on the tax payer. The GST system makes vendors responsible for taking the time to calculate how much they need to hand over in taxes to the government. GST also has many of the same exemptions that the MST had on zero-rated items, such as food, medical supplies, prescription drugs and residential rents. The GST applies to imported goods, but does not apply to Canadian exports, which makes exports more competitive on the world market. The GST applies to more items than the MST did, but many of the zero-rated items, such as basic groceries, medications and medical devices. This way the GST tries to take the best parts of the MST for lower incomes and combine it with a shift from sales taxes to value-added taxes.

There are many problems that arise from both the GST and the PST. Consumption taxes are by nature regressive taxes, which mean they burden the poor more than they burden the rich because it makes up more of total expenditures for the poor who are unable to elect to save their disposable income. One of the ways that the government makes up for this is the GST tax rebate, which is given to people who make less than a certain of income. The credit received depends on the structure of the household, as well as how many dependants there are living in the household. When it was introduced, the GST was not revenue neutral, and in fact increased tax revenues by almost $5 billion in 1991. There has been movement away from sales taxes levied this way, because they create a cascading effect of tax on taxes. This happens especially in places like Prince Edward Island, where the PST is charged on the GST inclusive price. They are also costly to administer because the rules are different than those for the GST. Provincial sales taxes require a separate public system to collect the tax as well, which means that the actual revenue that the government receives from the tax goes down. As well, the provincial sales taxes have different rules for compliance as well as differences in input tax credits for businesses. Currently there are items which are charged any combination of just federal taxes, just provincial taxes, both taxes and neither tax. This makes it very hard for businesses, especially small businesses to comply with all the different tax laws in place. While they have their individual flaws, the combination of both PSTs and GST make consumption taxes in Canada too complex and unruly for many businesses and consumers.

There has been an increasing push over the last ten years to move away from the split GST/PST system and use a more integrated system such as the Harmonized Sales Tax. The HST is based on the idea that having two separate tax structures and sets of rules to comply to is wasteful and inefficient. The goal of the HST is to combine the provincial sales tax present with the GST, creating one tax rate. HST is therefore administered strictly by the federal government in all provinces that have an HST, with the exception of Quebec where Revenu Quebec collects their HST and hands over the GST portion to the federal government. The federal government then redistributes the provincial sales taxes back to the provincial governments. There was an attempt to create an HST in Saskatchewan as soon as the GST was introduced in 1991 to make tax collection easier for merchants, but it was almost immediately the public backlash killed the idea. The HST often covers more items than the separate systems do, as it will tax each item at the dual rate instead of at either the GST or PST rates if they were subject to only one tax. This increase in tax base is generally followed by a decreased in overall tax rates, such as occurred in the Atlantic Provinces in 1997. The HST also has a goal of trying to get rid of embedded taxes, thus preventing the cascading effect from occurring during manufacturing where consumers cannot see it. Overall, HST represents a complete overhaul of the current two-track system used in most provinces.

There are two provinces, Ontario and British Columbia, who are currently moving to the HST system, which has sparked a lot of debate and many objections to the shift. The first thing that many opponents of HST cite is the fact that there are some items that are currently PST exempt, and these items will go up in price as they would now fall under the HST system. There is also worry that increasing the tax rate on almost everything will drive small to medium sized businesses to relocate to places, such as Alberta which does not charge any sort of provincial sales tax, that have lower tax rates. Another reason it is opposed by many individuals is that while businesses can submit their expenses to the government and apply for a refund of the HST that they have paid, individuals cannot do that. These same opponents insist that they are stuck with the burden of the tax, which is not fair. It was also suggested that the data collected on HST was in fact skewed, too recent to show regional trends and did not take into consideration other factors outside of the tax change itself. While valid concerns, these worries are easily addressed by economic principles and better journalism.

In response to the objections about the HST, one must simply look to the Atlantic Provinces, who implemented the HST system in 1997. In a study done by Michael Smart, which was utilized by both the Ontario and British Columbian governments in making their decisions to move to the HST system, there is a purely economic argument for the implementation of the HST. The HST makes production cheaper for manufacturers, because they can now apply for their HST refund, which they could not for things that had PSTs on them, instead of just getting the GST back. This would give businesses more cash flow to work with, and more room to make or increase investments. The level of investment spiked soon after the reforms because of an effectively lower tax, but has not continued to rise. However, it did lead to a permanent rise in capital per unit of output. In an analysis of prices before and after the HST reforms in the Atlantic Provinces it was shown that for most items (food, household operations and furniture, health and personal care, recreation, education, reading, alcohol and tobacco) the prices actually dropped. The only items which went up in price were on shelter, clothing and footwear, and transportation. The conclusion of the report states that balancing out these costs for a low income family the tax itself is mildly regressive, but by only 0.24%. If reports were able to read and understand economic findings they would not feel like they could report on any particular portion of research and incite public panic over things they know little about.

The shift to Harmonized Sales Taxes is more efficient, and therefore making the most out of the tax system. The movement from MST to GST and PST to HST has been one of constant effort to make compliance simpler and increase the return from every tax dollar for the government. The MST, GST and PST systems are very ineffectual, and are riddled with complexities and problems. The history of the evolution of the sales tax systems in Canada is important for understanding how the current system came about through the trials and errors of past structures. While value-added taxes are less regressive than conventional sales taxes, both take a toll on the poor and on smaller businesses, especially those which have complicated methods of deduction. The movement towards the HST is good for the efficiency of the tax system, as well as simpler for all those involved in the process.

Ignatieff Addresses Quebec

March 23rd, 2009 • No Comments

Michael Ignatieff addressed members of the Liberal Party in Quebec on March 22, 2009 for the first time since being elected as leader of the Party almost four months ago. The speech, conducted wholly in French, aimed to revitalize the party; the Liberals suffered heavily in the most recent election Continue reading ‘Ignatieff Addresses Quebec.’