OTTAWA — Farmer and consumer visions about the wisdom of a food tax clashed as the Liberal government tries to figure out how the goods and services tax (GST) should be revamped.
Farm spokesmen told a Commons committee studying the issue that food should not be taxed.
The Consumers Association of Canada said it should, so that the overall rate could be lowered from its current seven percent.
The Commons finance committee has until June to reconcile different visions on a food tax and other issues and get a report to government on how the GST should be changed.
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The CFA urged that the tax, unpopular as it is, be left alone. Businesses have become accustomed to it and changes would add costs and create confusion.
In particular, there should be no attempt to remove the existing tax exemption for basic groceries, the farm lobby said in a March 23 appearance. “The CFA and its members strongly oppose the inclusion of food.”
CFA president Jack Wilkinson said any move to tax food would end farmer input exemptions and that would hurt farmer cash flow because the tax would have to be paid up-front and farmers would have to carry the costs until the tax rebate cheque arrived.
“As an agriculture industry, if the government chooses to put a tax on food, it is going to create an awful lot of problems for our sector,” he said.
Moments later, Consumers’ Association of Canada spokesman Robert Kerton told MPs any new tax must have a broader base with no exemptions, such as food and farm inputs.
He said the rebate system should be improved to compensate low-income consumers for all their added costs but there should be no special-interest exemptions that raise the basic rate for others.
The CFA “spoke eloquently for agricultural producers,” he said. “I admire them for that.” But the consumer point of view is different.
Favors high-income bracket
Kerton, an economics professor at the University of Waterloo, said those who would exclude food are giving high-income Canadians a break.
He said consumers’ association figures show that families earning $75,000 per year spend twice as much on food as a family earning $15,000. By exempting food, the low-income family is saved $480, which could be rebated, and the high-income family saves $960.
“It’s unclear if you are doing anyone a favor other than the high-income consumer,” said Kerton.
The CAC representatives at the committee March 23 argued that an end to exemptions would allow the tax to be lowered to five percent, reduce the complexity and make the tax more acceptable to Canadians.
MPs on the finance committee heard the same message from a former influential Conservative MP.
Don Blenkarn, until last fall’s election defeat the chair of the committee, said a four percent tax would be possible if there were no exemptions. He said excluding food created confusion, complexity and unfairness.
Blenkarn, once a loyal Tory defender of the tax, told MPs the GST had been poorly designed and poorly implemented.
The new tax should be hidden in the sales price rather than calculated separately as a constant reminder to consumers, he said.
