GST Still on the Books

This submission is offered as a companion to Christopher di Armani’s September 4, 2011 post “Sometimes Politicians Actually Get Something Right” in which he brings to our attention that NDP member of Parliament Peter Stoffer has put forth a proposal to remove the Goods and Services Tax (GST) from reading materials.

Twenty years ago, Canadians were promised that by doing their civic duty and paying taxes on books would help speed up paying down the federal deficit. Meanwhile, the GST has done nothing to put a dent in the federal deficit.

The economic theory of this “simple” tax, a snafu* from the outset, was that while one person collected the tax another person would apply for a rebate, thus keeping money in constant circulation as an economic stimulus.

(* U.S. Army acronym standing for “situation normal, all ‘fouled’ up” )

One of the first problems out of the chute was businesses, especially the big chain stores, had to bring in computer gurus to calibrate cash registers. Knowingly, unknowingly, incompetent or careless, the cash registers were programmed to add up the purchases, add on the provincial sales tax, then, to the subtotal, was added the federal GST.

Although taxing a tax is supposed to be illegal, the practice of shafting customers went on for years before the errors were caught and cash registers were streamlined.

With time, the “simple” tax became extraordinarily complicated as politicians changed the parameters, and rules have been adjusted to give all kinds of exemptions and exceptions to the point that nobody knows for sure who they’re supposed to charge and not charge GST.

Then the rules changed again. Before January, 1997, everybody had to turn in their GST number and apply for a replacement business number (BN) that encompasses all business activities for tax-reporting purposes.

The introduction of this contentious seven-percent Goods and Services Tax was one of the legacies that marked Conservative Brian Mulroney as the most disliked Prime Minister in Canadian history, although some business people did prefer the GST as a transparent replacement to the higher, hidden manufacturing tax.

Then bureaucratic whiz kids came up with the idiotic idea of rolling in provincial sales taxes with the GST as a “harmonized sales tax” (HST), a déjà vu transaction that once again defeats the purpose and hides the GST.

However, the HST, dubbed the Hated Sales Tax in British Columbia, did not wash in that province where the premier lost his job in disgrace for going back on his word. He tried to weasel in the implementation of the HST after promising B.C. residents before an election he wouldn’t…and, in finally keeping a politician accountable for his lies, they replied, “Not so fast, buster.” (See Christopher di Armani’s August 26, 2011 post “BC Public Holds Corrupt Government Accountable for Their Lies and Kills HST Deal” and his June 16, 2011 post “Freedom of Speech? Not Until You Pay The Fee”).

Regardless of how it was sliced, more Canadians disliked the GST than welcomed it. And the three groups who hated it the worst were the booksellers, book consumers and literacy organizations.

As a reminder why, after these 20 years, all parliamentarians of all political persuasions should support Peter Stoffer’s private member’s bill to finally eliminate the GST on books, I share one of my articles.

“Hell for Book Sellers” ran in the Yukon News on June 23, 1993–two days before Prime Minister Mulroney, told his time was up, stepped down from the PM’s office. The date was about four months before the voters participated in the 1993 federal election and resoundingly stripped the Tories of all but two seats in favor of Jean Chretien’s Liberals who did not abolish the GST as promised during the election campaign.

Chretien has come and gone, but the GST is still on the books.

GST Created Bureaucratic Hell for Book Sellers

The goods and service tax (GST), especially as it pertains to books, will be an issue in the next (1993) federal election.

Regardless of the present Conservative government’s policy for subsidies rather than exemptions, the subject arose prior to the June 13 Tory leadership election.

Candidates’ opinions differed.

Jean Charest prefers the tax be removed from books, further complicating administration; while Jim Edwards wants the seven per cent imposed on everything without any exemptions, which might streamline the process. The Yukon Party government does not support the tax exemption on books. And federal Liberal leader Jean Chretien wants the whole GST abolished.

“This year (1993) is critical for the fight,” said Ingrid van Rotterdam, executive director of the Toronto-based Canadian Booksellers Association (CBA).

The “Don’t Tax Reading Coalition”, formed in 1989 by the CBA, has campaigned and lobbied vigorously against the GST, even before it was implemented two and a half years ago.

Ironically, the GST was introduced in 1991 which was designated as “The Year of Literacy,” said Elaine Smart, owner of Mac’s Fireweed Books in Whitehorse.

The five-year $110-million National Literacy Program, announced in 1988, worked in conjunction with provincial and territorial governments, volunteer organizations, business and labor to address the problem of adult literacy.

Then the federal government decided to tax reading and refused to exempt or zero-rate the seven per cent consumer tax from books.

“There is still a high degree of sensitivity among consumers on this subject,” van Rotterdam continued. “Sympathy for the cause abounds everywhere, except in the Finance department.”

Much of the coalition’s funding comes from the 600 CBA membership on a voluntary basis.

The federal government is committed to ensuring that Canadians have the best possible access only to Canadian reading material.

“After a careful review of various options, the government found that providing support directly to Canadian-owned publishers is a far more effective way to meet the objective than zero-rating the GST on reading materials,” said communications minister Perrin Beatty.

Zero-rating means businesses, like the food stores, do not collect GST on goods sold; but the business is eligible to claim back any GST-generated expenses related to the cost of doing business.

The minister defends the government’s position about taxing people on what they read. ”Foreign publications dominate the Canadian market, thus generating a significant amount of tax revenue toward reducing the federal deficit.”

Elaine Smart does not agree. “A book is a book is a book.” In her opinion, it doesn’t matter where it was published. “The government is penalizing people for reading non-Canadian books.”

“The government has recognized the essential role the Canadian-owned sector of the industry plays in Canada in producing over 80 per cent of Canadian-authored books,” said Beatty.

Therefore, the government announced, in January, 1992, that over five years it will spend $140 million, of which $102 million is new resources, to aid the Canadian-owned and controlled sector of the book publishing industry.

“The government is now streamlining the postal subsidy program to focus on Canadian publications. This increase in funding will inevitably flow into the educational and scholarly market for books.”

The government feels this to be a much more effective way to address the questions of literacy in Canada than removing the GST on reading material.

Smart fears the next federal administration will zero-rate Canadian books and not those books published outside of Canada. That would only serve to add to the bureaucratic and business nightmare the government has already created, she said.

“The government has made businesses the collector of taxes. It definitely is very expensive to collect and has added about a half a job to my business by the time the bookkeeper keeps track of the GST.”

Of the 300 suppliers Mac’s deals with almost daily, some are small presses and souvenir suppliers who don’t do a $30,000 volume a year and are not required to charge the GST.

All these special cases have to be segregated for the government. But, when the products are sold at retail, the GST must be collected on all goods, except those items mailed to a point outside of Canada.

The burden of the tax collection of businesses causes an extra cost in doing business which in turn has to be passed on to the consumers.

“But it gets difficult to keep trying to recoup the expenses because a large amount of our stock is pre-priced,” said Smart. “But it is also difficult to continue to try to absorb the cost.”

Another item which increased cost tremendously was Canada Post’s elimination of the Book Rate on March 1 without a replacement program.

“It now costs three times more to get products here,” advised Smart. “The Book Rate was fairly easy to administer. The government sent one cheque to Canada Post.”

The proposed mind-boggling subsidy will be sent directly to the more than 600 booksellers and some 250 book publishers. The government then has to decide which level of subsidy each one deserves. And each company’s qualifications will have to be re-evaluated each year.

“What kind of an administrative nightmare will this one be?” Smart questioned.

If anybody could prove that this country needs the tax, Smart would prefer to see a lower rate and charge the GST on everything to simplify collection and bookkeeping matters.

“It is an invasive tax that gets more complicated as we go along.”

Jane Gaffin, September 7, 2011

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