The goods and services tax (GST), pollsters tell us, is the most hated
tax in recent Canadian history. Yet the pollsters also tell us that
Canadians would be willing to pay more taxes for health care and Kyoto
commitments. Herein lies the reason why Canadians should not dismiss the
rumours of a hike in the GST (going from its present 7% to 10%) in the
near future.

According to the December 2001 budget documents, the GST presently nets
Ottawa some $27.1 billion. So do the math, divide by seven, carry the
one and count on your big toe and voila, with each percentage point of
the GST, Ottawa rakes in $3.87 billion.

Following along, a 3% hike would mean an extra $11.61 billion in
additional revenues for Ottawa. This would definitely be enough for
Ottawa to respond to demands for federal cash infusions for health care
- expected from both the Kirby Senate Committee (late October) and the
Romanow Commission (mid to late November).

Billions of tax dollars would also be left over to fund Kyoto transition
commitments, the cities agenda, aboriginal initiatives and a host of
other 'social engineering' schemes expected in the Throne Speech on
Sept. 30.

There are five major reasons why Canadians should be concerned.

1) This could be more than a trial balloon. It is a certainty that both
the Kirby and Romanow health care commissions will demand that Ottawa
play a larger funding role in health care. And we've already seen that
the federal government is not prepared to re-allocate within existing
budget envelopes to meet such demands.

Combine this with the TD Bank's recent forecasts showing Ottawa will run
little to no surplus and it's clear that tax hikes are definitely being
considered to meet a variety of health care, Kyoto and as yet unknown
Throne Speech promises.

2) A 10% hike is the first political option for the feds. Moving to an
8% GST doesn't yield enough revenue. Nine percent is a non-starter given
the Liberals opposition to this amount back in 1989 and 1990. And Ottawa
knows they will take some heat over increasing the GST regardless of the
amount, so why limit it to just one percentage point? The political
price tag would be the same for 10% as it would be for 8%.

3) Successfully hiking the GST sets a dangerous precedent. If the
government can successfully hike the GST under the pretense of funding
healthcare, then look out. How about another 1% for the cities agenda,
.8% for aboriginal funding priorities, 2% for the innovation agenda and
on it goes.

Not only would the price of goods and services be higher due to the tax
hike, but businesses would also pass along the costs of compliance
(changing billing systems, registers, etc.) to consumers in the form of
higher prices or diminished service offerings.

4) It could create space for provincial sales tax hikes. A 10% GST then
allows provinces with single digit sales taxes to raise their own sales
tax rates close to 10%. And we've already seen health care premiums
skyrocket in Alberta and BC under the cover of protecting health care.

5) There is no guarantee any GST proceeds will go to health care. Time
and time again, Ottawa has refused to dedicate gas taxes back to road
and highway construction citing an aversion to dedicated taxation.

It's improbable that the federal government would change its tune when
it comes the GST and health care.