Article content

Importantly, to address the inherently regressive nature of consumption taxes that can hit lower-income households harder, the GST included carefully crafted exemptions and zero-rated items for basic living essentials such as groceries, residential rents, health and dental, financial services and other amounts.

Article content

That helped, but the government also introduced the GST credit: a refundable, income-tested benefit for low- and modest-income Canadians to reduce the net impact of the tax.

Article content

As a package, the GST was well-structured, fair and relatively efficient. Yes, the carve-outs created complexity, but the GST remains a much more efficient tax than the income tax. So much so that there should be an expanded role for the GST.

Article content

However, it’s been politically toxic from day one. Shortly after the introduction of the GST, the Conservatives were punished at the ballot box in 1993. The 1993 Jean Chrétien Liberals famously campaigned on a promise to scrap the GST entirely, only to reverse course once in government. Stephen Harper’s Conservatives later reduced the GST rate to five per cent from seven per cent because it was politically popular.

Article content

Article content

The Justin Trudeau Liberals joined the party during COVID-19 by paying out numerous one-time “GST top-up” payments and, more recently, tried their hand at retail populism by implementing a GST “holiday” on certain items between December 2024 and February 2025 — a policy that had all the sophistication of a grocery flyer.

Article content

And now the latest instalment: the rebranding of the GST credit into the Canada Groceries and Essentials Benefit.

Article content

Article content

So, how is this being paid for? As economist Jack Mintz said last week, either increased taxes, reduced government spending or increased government debt will be needed to pay for this political promise. With warnings from the Parliamentary Budget Officer that federal finances are on an unsustainable path, tacking on another $12.4 billion of debt is irresponsible.

Article content

It’s unfortunate that a well-designed tax like the GST — with its neutral base, targeted exemptions and income-tested credits — gets hijacked for political ends. First, we slash the rate to curry favour. Then we pile on rebates during crises and add populist “holidays.” A year later, that holiday is repackaged as cash handouts and a rebranding to make them sound like gifts.

Article content

Article content

I’m not opposed to targeted transfers for those who need help. But if the goal is affordability, we need serious structural solutions, not more political marketing campaigns disguised as good policy that distorts a well-designed system and undermines public confidence in fiscal management.

Article content

The next time I visit the grocery store, I won’t be thinking about the so-called Groceries and Essentials Benefit. Instead, I’ll be thinking about how much damage is done when sound tax design gets hijacked for short-term political gain and a simple marketing ploy, one that Canadians will end up paying for in debt, interest costs, distrust and diminished confidence in tax policy.

Article content

Canadians should reject this thinly veiled vote-buying scheme.

Article content

Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

Article content

_____________________________________________________________

Article content

If you like this story, sign up for the FP Investor Newsletter.

Article content

_____________________________________________________________

Article content

Article content