Awash in cash, Tories expected to cut GST to 5 per cent


The Harper government is expected to announce plans to cut the GST to 5 per cent when it updates Canadians this afternoon on Ottawa’s swelling budget surplus. The timing of the fall economic statement has been moved up, sources say, to give the Conservatives one last chance to goad opposition Liberals into triggering an election.

Today’s move also helps the Harper government drown out anger expected to surface tomorrow, the first anniversary of its controversial income trust tax, when the Tories broke an election pledge to protect trusts.

Ottawa is awash with cash because a commodity price boom for resources such as oil is swelling its coffers with corporate and personal income tax revenue. Toronto-Dominion Bank chief economist Don Drummond now forecasts Ottawa is headed for a surplus of $14.5-billion this year, before any measures announced today – up from the $3.3-billion the Tories forecast in March.

Mr. Drummond, who met with Finance Minister Jim Flaherty on the fiscal outlook last Friday, said he expects tax measures because the Tories are anxious to unload an embarrassment of riches. They attacked the former Liberal government for hoarding surpluses and do not want to be painted as hypocrites. n fact, Mr. Drummond says, Ottawa has enough surplus cash in years ahead to afford to cut the GST to 5 per cent from 6 per cent, and still have room for an across-the-board one-percentage-point cut to personal income tax rates, as well as a one-point reduction in the corporate tax rate.

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