No More "Flat GST"?

I don't know about the rest of you, but I totally didn't see this coming:

"By the Canadian Press (CP)

2009/04/01

OTTAWA - In a surprise announcement just moments ago, Prime Minister Stephen Harper and Finance Minister Jim Flaherty unveiled plans to revamp the Goods and Services Tax (GST). Mr Harper kicked off the impromptu press conference by saying, "For too long, the GST has imposed undue hardship upon those who can least afford to bear it. Therefore it's time for a change! We're here today to announce a bold new direction for the GST."

At that point, Mr Flaherty took over. He said, "All Canadians are familiar with the graduated tax plan that's used in calculating your Federal Income Tax each year. Mr Harper and I are proud to announce to you today that we will soon be moving to a very similar system for the Goods and Services Tax.

"Specifically," Mr Flaherty continued, "the current 5% flat tax will be abolished. In its place, we'll have a step-wise calculation that is based on the size of the purchase, since that's a clear indication of wealth. For example, the tax rate for purchases of 99 cents and less will be zero. Now let me repeat that: any purchase that you complete for less than a dollar will soon be GST-free! That 25-cent comic book that you buy your child on impulse, even when combined with your 65-cent battery replacement for your smoke detector? No GST!

"For purchases of between $1.00 and $9.99, the rate will be 3.5%, except when printed reading material with advertisements in it are included,in which case 3.75% will be used. When you complete a transaction totaling between $10.00 and $999.99, the rate on that portion of the purchase will be 4%, along with the 3.5% - or 3.75%, as appropriate - on the lower portion. And finally, for purchases of $1,000.00 or more, the rate will be 6% on the amount above that thousand dollar mark, plus the applicable lower rates on the amount below $1,000.00.

"Now, I know this may sound a little confusing at first, but let me provide an example so that you can all see how straight forward it actually is. Suppose you were buying a new personal computer for your home use. Let's say that it cost $3,000.00, and you were also picking up $20.00 worth of floppy discs for it. In the current system, you'd be taxed 5% on that $3,020.00 purchase. Under our new, more fair structure, there actually wouldn't be any GST applied at all to the first dollar of that purchase! You would, however, pay 3.5% on the next $9.00 of the purchase, followed by 4% on the next $990.00 and finally a 6% charge on the $2,020.00 above the thousand dollar mark."

"Don't forget the digital media surtax," Mr Harper offered at that point.

Mr Flaherty continued, "Oh, did I forget to mention that earlier? Yes, I think I must have! OK, well, for purchases involving digital media, there will be a 10% Fair Use Surtax on each of the individual GST rates. So, for example, in this case, that would mean that, instead of using 3.5%, 4% and 6%, respectively, in that previous calculation, the applicable rates would be... let's see now... doing a little off-the-cuff arithmetic in my head here... um, 3.85%, 4.4% and 6.6%, respectively, after the 10% F. U. Tax is accounted for."

"So as you can see," Mr Harper summarized for the stunned group of reporters, "this new system is not really all that complicated, but it certainly is a whole lot more fair. Those who can afford luxury items like computers for their home, vacations to Europe, or cars, will now bear more of the GST burden, as they should. And those struggling to get by will benefit greatly from this initiative."

Mr Harper and Mr Flaherty then announced the change would be effective one year from today, on April 1st, 2010, before quickly leaving without taking any questions."

Weird!

I've also just read that Dalton McGuinty is considering a change to Ontario's Provincial Sales Tax in response to this GST announcement. There don't seem to be any concrete details out there yet, but rumour has it that he's talking about allowing deductions on your PST at the cash register based on how much you donated to charity or put into your RRSP in the previous year. Geez... I hope that doesn't mean that I have to start carrying all of my charity receipts around in my wallet every time I go out shopping! That sounds like a real pain.