A group of twelve senators is calling for an increase in the GST by two percentage points in order to reduce the federal debt.
In a report released today, the Senate Prosperity Working Group noted that Canada has been one of the G7’s biggest spenders during the pandemic.
But unlike its partners, the Canadian economy creates less wealth. Therefore, there are “more and more concerns about how the country will manage this huge debt,” the senators wrote.
Hence the need to find new sources of income through increasing taxes on goods and services, while adjusting tax credits to mitigate the impact on low-income people.
This would be the “most advanced” way to get money, economist Robert Aslin, former director of policy and budget for the finance minister, agrees today at the Canadian Business Council.
However, Asselin warns that taxes cannot be relied on to rescue public finances from a cliff. Only creating wealth will replenish the coffers.
That’s why senators are urging the Trudeau government to come up with a more credible plan to manage the mounting debt and to call on Ottawa and the provinces to develop a national strategy for economic growth.
In a 70-page report contributed by about 70 domestic and international experts, senators laid out a long list of duties for the Trudeau government:
Vocational training, university-company links, investment in research and development and digital infrastructure, removal of obstacles to inter-provincial trade, increased business investment here, search for new markets, etc.
“Inaction or delay in taking action has generated economic and social costs. In a post-pandemic world, Canada cannot afford to repeat these mistakes,” the report said.
Senators are particularly concerned about the declining standard of living for Canadians due to low productivity:
In 1970, Canada’s per capita GDP was $21,656, the second highest in the G7 countries, and only $3,600 less than that of the United States. In 2019, Canada slipped to third place ($45,850), far behind Germany ($50,004) and the United States ($60,709).
The report warns that without a serious push, Canada will not be able to achieve a low-carbon economy and could even see its democracy undermined.
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