When was the GST introduced in Canada?
Answer
The Goods and Services Tax (GST) was introduced on January 1, 1991 by Brian Mulroney's Conservative government, replacing the older 13.5 per cent Manufacturers' Sales Tax with a new 7 per cent value-added tax on most goods and services; the GST was deeply unpopular at introduction but is now a central federal revenue source.
Explanation
The Goods and Services Tax (GST) was introduced on January 1, 1991 by Prime Minister Brian Mulroney's Progressive Conservative government. The GST replaced the older 13.5 per cent Manufacturers' Sales Tax (a tax on goods at the wholesale level) with a new 7 per cent value-added tax on most goods and services. The Excise Tax Act, S.C. 1990, c. 45 had received royal assent on December 17, 1990 after extensive debate. The GST was deeply unpopular at introduction but is now a central federal revenue source, raising about 47 billion dollars annually.
The Manufacturers' Sales Tax (MST) had been in place since 1924. By the late 1980s the MST was widely criticised as economically distorting (it taxed Canadian-manufactured goods but not imports, undermining domestic manufacturing competitiveness; it cascaded through the production chain; and it produced uneven effective rates across products). The Mulroney government commissioned major reviews (including the Goods and Services Tax Technical Paper of August 1989) and proposed replacing the MST with a value-added tax modelled on European VAT systems. Finance Minister Michael Wilson led the GST policy development.
The GST was politically toxic. Canadians perceived it as a new tax (although it replaced the largely invisible MST), and the GST appeared on every retail receipt for the first time. The Liberal-controlled Senate delayed the GST legislation in summer 1990, leading Mulroney to take the unprecedented step of using section 26 of the Constitution Act, 1867 to appoint eight additional Senators (September 27, 1990) on the recommendation of Queen Elizabeth II. The expanded Senate passed the GST. Mulroney's popularity collapsed: his Progressive Conservative Party fell from 169 seats in 1988 to 2 seats in the October 25, 1993 federal election. Mulroney had retired in June 1993; his successor Kim Campbell led the PCs in the disastrous election.
Successive governments have retained the GST with modifications. Jean Chrétien's Liberals had promised in the 1993 election to abolish the GST but quickly abandoned the pledge after winning. Sheila Copps resigned and successfully recontested her Hamilton East seat over her personal pledge to abolish the GST (a rare political honourability). The Harmonised Sales Tax (HST), an integration of the GST with provincial sales taxes, was adopted by Newfoundland and Labrador, Nova Scotia, and New Brunswick in 1997; Ontario in 2010; and Prince Edward Island in 2013. Quebec has parallel QST harmonisation. Stephen Harper's Conservative government reduced the GST from 7 per cent to 6 per cent (July 1, 2006) and to 5 per cent (January 1, 2008), where it remains. The GST/HST raises about 47 billion dollars in federal revenue annually and is one of the largest federal revenue sources after personal income tax.
Why this matters for your test
The GST was Mulroney's most politically consequential domestic policy and remains a central federal revenue source. Recognising the January 1, 1991 introduction at 7 per cent and current 5 per cent rate gives candidates two specific anchors.
Source: Department of Finance Canada; Library and Archives Canada
