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MISSISSAUGA, Ont. — Prime Minister Stephen Harper got an early start trumpeting his own horn Monday by reannouncing a long-anticipated cut to the GST that was to go into effect after he rang in the New Year at his official country retreat at Harrington Lake, Que.
But while revellers across Canada would pay less tax Tuesday when they got their New Year's Eve bill, Mr. Harper said he will be keeping watch on the looming storm on Canada's economic horizon.
”We know there is considerable uncertainty in the world economy, in the American economy, and we've seen very strong performance from our economy so far,” he said Monday.
”So obviously, our wish for the year is we're able to sustain that momentum and shelter as best we can Canadians from any fallout of global economic problems.”
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Mr. Harper's comments marked another year-end warning from the Conservative government that the Canadian economy is headed for a year of turbulence, because of tighter financial markets and the fallout from a slowing U.S. economy.
Mr. Harper, along with Finance Minister Jim Flaherty, took the opportunity Monday to highlight the $60-billion in tax cuts that the Tories will be rolling out over five years, with many of those reductions coming into effect on Tuesday.
One of the jewels in the Conservative tax-cut crown is the much-touted 1-per-cent cut to the GST that will reduce the tax to 5 per cent from 6 per cent, fulfilling a key election promise.
The Prime Minister, who trumpeted the GST cut at the crack of dawn Monday from the same consumer electronics store where he unveiled his campaign pledge two years ago, reaffirmed that he has no plans to trim the tax any further.
”If we reduce taxes, they may be in a different direction,” Mr. Harper said.
”But I say, that's for the future. We will be extremely cautious in the year to come. We're not going to undertake any long-run spending or tax reduction initiatives unless we believe they are affordable on a long-term basis.”
Mr. Harper's campaign promise to reduce the GST – which helped propel him to office in 2006 – was re-enacted for reporters Monday, with the Prime Minister again assuming his position before a wall of televisions, this time bearing a 5-per-cent GST sign.
The Conservatives first trimmed the GST in July, 2006, reducing it to 6 per cent from 7 per cent. The tax, a political hot potato since it was introduced in 1990 by Progressive Conservative prime minister Brian Mulroney, was supposed to be scrapped by the Liberals under Jean Chrétien, who eventually reneged on that promise.
Mr. Harper's repeat performance came as all parties are gearing up for another election. The three opposition parties are threatening to topple the minority Conservative government over its next budget in February or March.
NDP Leader Jack Layton said Mr. Harper's fresh warnings about the Canadian economy show just how badly the Conservatives have managed things.
“He wasn't thinking ahead, he wasn't planning,” Mr. Layton said.
“He certainly should not have given large corporate tax cuts to the biggest profitable corporations — the banks and oil companies in particular — while avoiding any kind of help to the manufacturing sector, the forestry sector, which will not benefit from these tax cuts because they're not making money. They're laying off workers.”
Some economists have criticized GST cuts as costly measures that disproportionately benefit the wealthy, who make more expensive purchases. But the Conservatives defend the move as benefiting all Canadians, regardless of age or income – even those too poor to pay income tax.
”The less money you make, the more of it proportionately you spend on consumption, because you can't afford to save or maybe buy that house, or whatever it may happen to be,” said Catherine Swift, president of the Canadian Federation of Independent Business.
”So proportionately speaking, reducing a consumption tax definitely helps those who consume a greater portion of their income, and that ends up being people of lower income brackets.”
Others argue that the GST is a regressive tax that actually hits low-income Canadians the hardest.
The cut couldn't have come at a better time, as Canadian retailers struggle with a high dollar that's increased the flow of cross-border shopping, she added.
”Obviously, the government has timed it for political reasons more than anything else, I would suspect, but we actually see the economy slowing down right now,” Ms. Swift said.
”It gives consumers a bit of a psychological boost as well, and a lot of retailers naturally will use this as kind of a hook – ‘Another GST cut, come on in!' – in advertising and so on.”
