On November 21st, Prime Minister Justin Trudeau announced two month-long tax breaks beginning December 14th.
The goods and services tax items will be eliminated from an array of household items.
Harmonized sales taxes may also be removed in the five Canadian provinces with them.
The federal government also plans to give $250 cheques to working Canadians. Those who earned up to $150K in 2023 will receive the financial support in April 2025.
This leaves out Canadians who were not working, received social assistance, and are retired.
The GST break is expected to cost the federal government $1.6 billion. Items such as children’s clothing, toys, diapers, restaurant meals, beer and wine are included in the break (CTV News).
Natural and artificial Christmas trees, video game consoles, snack food times and beverages will also be free of GST.
The Canadian government is expected to deliver cheques to 18.7 billion people, costing approximately $4.7 billion.
Tax breaks vs a broken system?
These decisions have stirred considerable controversy among Canadians and politicians.
Province officials say that the tax break could cost millions and that it’s unclear if provinces will be compensated in any capacity for the lost revenue (CBC).
New Brunswick Premier Susan Holt spoke with CBC about the uncertainty attached to the tax break.
“We’re trying to understand what it is, what it might cost. Is this something where we’re going to be sacrificing provincial tax revenue, so it’s going to be a hit on provincial revenues in this fiscal year?”
Confusion also surrounds the choice to compensate working Canadians with $250 cheques.
On Friday, NDP MP Peter Julian questioned why the government is excluding Canadians with fixed incomes.
He asked: “Why are Liberals excluding seniors and people with disabilities from the real help they need this holiday season? Why won’t Liberals help them, too?”
Trudeau offered the following rationale during a press conference:
“Over the past number of years, we have been extraordinarily present in helping the most vulnerable Canadians. But as I travel across the country, I regularly hear from working Canadians who are having trouble making ends meet, saying, ‘Look, I don’t have kids. I’m not a senior yet, and I’m facing challenges”‘ (CTV News).
How do you think these two choices will impact the Canadian economy? Do the costs outweigh the benefits or vice versa?
Click here to find out how chief economists believe the Bank of Canada will react.
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