The numbers are in, and for the eighth straight year, Canada has run a surplus. For the fiscal year ended March 31, 2006, the surplus was $13.2 billion. As is usual the money was applied on the debt, bringing it down to $486.5 billion -- or 39.2% of GDP. When one considers it hit a peak of 73.9% in fiscal 1996, it's a truly remarkable achievement. As a portion of the economy, our federal debt burden has actually dropped by 47%. This is an incredible, and a smackdown at our American friends who have eliminated balanced budget from their vocabulary as being an "unpatriotic" concept.
Of course, this all happened as the result of the policies of a Liberal Administration. The Conservatives came into government in February and did not sit a Parliament until April, the month after the year ended. So from here on in, everything we're going to hear about our fiscal situation will be in the lap of Stephen Harper and Jim Flaherty. Some of the tax policies announced are actually quite irresponsible and will bear fruit down the road, especially if we're headed into a recession. Yes, taxes are too high, but tax cuts should only be funded by interest savings until the debt becomes self-financing -- this would be at about 25% of GDP.
A couple of things happened yesterday, though, that raise some questions. First of all, the government said they were cutting about a billion dollars in what they called "non-priority" spending, including; $4 million for research into medical marijuana; $5 million from a reduction of the budget of Status of Women Canada; and another $4 million from the elimination of the Court Challenges Program. I do think private researchers can figure out for themselves whether vitamin THC has medicinal purposes; but ending the CCP is misguided. It exists for the same reason why provinces with class action laws have a Class Proceedings Fund: To ensure cases that would not normally get public attention, do. It's not like they just handed out the money willy-nilly, there had to a reasonable basis for funding and the expectation that there could be a win.
Besides, courts are what keep overzealous executives and legislatures in line. Someone has to police the powers that be.
Second, the government introduced a Ways and Means Motion (the tool that, if the House of Commons consents, allows a government to enforce tax policy before a budget is actually passed) that would tinker a little bit with the GST. Actually, not just tinker, but it is signficant enough that the tourism business should take notice. Effective March 31, 2007, the GST Visitor Rebate Program is going to be eliminated. In effect, this means that tourists will be paying 7% more on the goods and services they purchase here, since the GST is meant to be paid by Canadians and Canadians alone. Moreover, conventions that have at least 75% delegates who are non-Canadian will no longer be able to claim the credit either.
This is simply insane. It may be reflective of the fact that most if not all US states have no similar rebate program and it may be an attempt to level the playing field. But it doesn't reflect the reality that there's a huge difference in the way tax regimes operate in the two countries. In the States, most cities are dependent on sales tax revenue, traffic offence tickets and transient accomodation levies (the dreaded "hotel tax.") Property taxes are not that much of a factor in most major cities although it is still levied. They do this to help pay the interest costs on municipal bonds.
By contrast, Canadian cities are almost entirely reliant on property taxes. All provinces ban local sales tax levies, and most ban the hotel tax. Even those which allow it (Québec is one) puts a cap on it. While our sales taxes are way too high, it's the fact there is little or no accomodation tax that gives us a huge advantage when it comes to drawing tourists and convention business. Offering a rebate on a portion of what they consume is often pure gravy.
So basically, the Harper Government is telling the tourism and convention business to go screw themselves. I wonder if they even consulted with the rebate brokers, who take a commission (usually 10 %) off the top to speed up the rebate process which can often take weeks.
Most European Union countries refund their Value Added Tax, or VAT, to non EU residents; which is one reason why so many Canadians and Americans travel there. If they see us doing this, they might figure, what the heck, and eliminate their rebate program as well. Travel is about opening bridges and understanding other cultures better; getting rid of this program is burning those bridges -- and promoting self-centredness and intolerance.
This is going to "save" the Government $78.8 million dollars over the next two years. I believe it will cost way more in lost tourist dollars. If Harper wants to save some money, he should look elsewhere. Maybe by eliminating the Finance Department and Treasury Board all together, and letting the Canada Revenue Agency do the job. At least then, there'd be only one department to scream at come tax time -- not three.
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