Harper vows to reduce GST

A reduction in the GST would come immediately if Conservatives win, Leader Stephen Harper promises.

Conservative Leader Stephen Harper has promised to reduce the GST if his party wins the federal election.

At a campaign stop in the Toronto area, Harper announced his intention to lower the seven per cent goods and services tax by one percentage point immediately, then by another point within five years.

That would mean reducing the tax to six per cent in 2006, and then to five per cent.

Canadians would have $4.5 billion put back in their pockets with the first reduction, said Harper. An average family of four earning $60,000 a year would pay about $400 less in taxes. The GST reduction would be a "tax cut you see every time you shop. No politician will be able to take it away without you noticing."

The Tories have long been contemplating a cut in the sales tax as a campaign plank. Harper said a reduction would be "more effective in stimulating consumption than anything the government's proposing."

The controversial GST was introduced by then-Conservative prime minister Brian Mulroney in 1991. It applies to most goods and services but not basic groceries, most medical services and devices, prescription drugs, residential rents and exports.

Liberal promises already include billions of dollars in income and corporate tax cuts, but the party went into the campaign rejecting the idea of lowering the GST.

"I believe we should cut personal income taxes," Liberal Leader Paul Martin said on Thursday after Harper's announcement. "Canadians should keep more of their paycheque."

Martin said voters will be able to compare the parties' two plans for cutting taxes.

"I believe mine is more fair, especially for the Canadian middle class," he said, but conceded that the GST tax cut is affordable.

But back in 1993, it was the Liberals who promised to abolish the GST. Indeed, Martin co-authored the election Red Book that promised to scrap the tax, referring to the tax as "unfair, regressive, stupid" drain on the economy.

Then-prime minister Jean Chretien declared in 1994: "We hate it and we will kill it."

Finance Minister Ralph Goodale said reducing the GST favours the rich on Thursday.

In an interview with CBC Newsworld, Goodale said lowering consumption taxes such as the GST is good for people who spend a lot of money. "The biggest savings will go to the biggest spenders," he said.

"Everybody that looks at this... says that this approach to the GST may be good politics, but it's stupid economics."

Trimming personal income taxes is the way to help people in the lower- and middle-income brackets, said Goodale.

NDP Leader Jack Layton said Harper has the wrong priorities.

"Deep tax cuts right now are not what Canadians are looking for."

Bloc Quecois Leader Gilles Duceppe agreed that changes should be made to the GST but his party would do it differently.

"What we've said is that we have to abolish the GST on certain products for young kids. And also not impose it on books."

Pointing out on Thursday that he himself is an economist, Harper said: "I believe that all taxes are bad. It's always good to keep taxes down."

He noted that while the Liberals were in power, the amount of GST taken from Canadians has doubled, from $15.9 billion to $31.8 billion.

"Canadians have a right to ask where the doubled GST revenue is being spent," he said.

"The government has money to waste, the government has money to steal, the government has money to spend on benefits for a few .... It's time for benefits for mainstream Canadians, hard-working people who pay their taxes, who play by the rules."