Dear Senator Colston:

I have just received an e-mail from a member of the Geelong Community Forum requesting that I pass along to you my impression of the Canadian experience with this tax.

In my opinion the GST is a thoroughly bad tax. When it was being considered in Canada I tried my best to persuade our then Prime Minister Brian Mulroney not to introduce it but he was influenced by advisers who have subscribed to the globalization (corporatization) trend which has as one of it's objectives to shift the burden of taxes from the rich to the poor worldwide. Consumption taxes are part of that plan and I was interested to note that IMF president Michel Camdessus had recommended it for Australia more than a year ago. He is undoubtedly one of the villains in this piece.

(a) When the GST was introduced in Canada it created more inflation than the government had predicted - or at least admitted.

(b) In Canada between 4,000 and 4,500 additional tax auditors had to be hired by the Department of National Revenue to administer the tax.

(c) Consumers find the tax irritating and annoying.

(d) The price you see on an item is not the price you pay.

(e) Tourists find the tax a real nuisance. They are exempt but have to file forms in order to recover what they have paid. It is just the kind of complication that tourists remember when they are talking to their friends about their vacation.

(f) In Canada the GST has led to a very, very, substantial black market. The vast majority of house repairs and minor construction is now done on a cash basis. This means that (i) the tax is not collected, (ii) that income taxes are evaded on the profit from the jobs, (iii) it is grossly unfair to legitimate contractors who pay taxes and union wages

(g) The GST is a real nuisance for small business. I speak with some conviction because I have three or four little companies which have to cope with it. The amount of bookkeeping involved is out of all proportion to the money being handled and whenever surveys of small businessmen and women are taken the elimination of the GST is one of the top suggestions for streamlining and facilitating small business.

As for alternatives to this tax there are at least three.

(1) I didn't have time to look at your present tax thoroughly when I was there but it would appear to me that it would be preferable to the GST and more flexible as well.

(2) You could impose a financial transaction tax. That would raise as much money as the GST. The advantage would be that it is a progressive tax rather than regressive. The rich members of society would wind up paying more rather than less which they will do with the imposition of a consumption tax.

(3) If Australia re-imposes cash reserve requirements for the banks, instead of adopting the rather silly notion that banks have a God-given right to create all of the money, the government's portion of the new money created each year would be enough to offset the loss from the GST. I know this is rather complicated and takes some study but it is essentially the suggestion that the money-creation function be shared between

governments and private banks as was done to escape the Great Depression, help finance the war, and help build the post-war infrastructure and the welfare state. It was tried and it worked well. The system was abandoned about 1974 when the central banks of the world adopted the views of Milton Friedman and his colleagues and gave the private banks back a virtual monopoly to create (print) money. In effect it was a reversion to the pre-depression boom-bust system and didn't make any sense at all. It is not viable in the long run and the sooner governments face up to the challenge of doing something about it the better for us all.

I hope you won't think me presumptuous for sending these few comments but when I was in Australia I was disappointed to find that you are making all of the same mistakes that we have and I wish it were otherwise.

With every best wish.

Yours sincerely,

Hon. Paul T. Hellyer

Leader
Canadian Action Party

 

Disclaimer: Mr Hellyer has given us permission to distribute this letter to the Geelong Community Forum membership and the press. Normally Mr. Hellyer would not comment on issues being debated in another country but when he learned that Mr. Michel Camdessus, President of the International Monetary Fund, had suggested that Australia should adopt a GST he felt at liberty, as well as a responsibility, to express a contrary view.