Tuesday, November 03, 2009
The lowering of the GST from its previous 7% to 6% and then 5% was a campaign promise by the Conservatives, but now that the country has been running a deficit for a while it's time to rethink this strategy as only tax hikes or spending cuts will be able to deal with the deficit. Spending cuts can't really be accomplished at this time since it was only a year ago that the opposition attempted to take power through a coalition - the real reason for the coalition of course was the taking of power itself, but the reason given at the time was that the country needed a new economic approach including a lot of stimulus spending, and that's what the country got. Spending cuts at roughly the same time would be an odd counterbalance to this.
The GST needs to be raised again and kept at a higher level until the debt is paid off (though one proposed plan only recommends raising it to 6% over 2 years, perhaps to make it a bit more politically palatable). Only then should the government begin looking at lowering it again. The savings on interest payments alone when debt is paid off is phenomenal.