Close X
Friday, November 29, 2024
ADVT 
National

Boosting GST rebate appropriate: experts

Darpan News Desk The Canadian Press, 14 Sep, 2022 01:03 PM
  • Boosting GST rebate appropriate: experts

OTTAWA - The federal government’s newly announced inflation relief for lower-income Canadians through the GST rebate stacks up as a better policy than some of the cash payments issued by provinces, economists say.

After months of mounting political pressure from the NDP to help low- and modest-income Canadians facing a rising cost of living, the federal government officially announced on Tuesday it will double the GST rebate for six months.

Prime Minister Justin Trudeau also announced the federal government will expand eligibility for the one-time top-up of $500 for the Canada Housing Benefit available to renters.

Both were among a slate of measures the government intended to reveal last week, but the announcement was delayed after the death of Queen Elizabeth II.

Michael Smart, an economics professor at the University of Toronto and the co-director of the Finances of the Nation project, said it makes sense to boost the GST rebate to reflect inflation.

“If we promised people in the past that we're going to give them some support, that amount that we promise should be inflation-adjusted,” Smart said.

The federal government indexes benefits to inflation, but because of a lag in how that is calculated, benefits in 2022 will rise by 2.4 per cent, well below the current inflation rate. In July, the year-over-year inflation rate was 7.6 per cent.

This one-time adjustment provides a temporary fix, Smart said, but a permanent change in how indexation is calculated is necessary.

“There should be a permanent adjustment to the formula (to) make it more responsive to inflation from year to year than it is right now,” he said.

The GST rebate is a means-tested benefit that is phased out based on income and family makeup. For example, the rebate is fully phased out for an individual with no children who makes about $49,200 a year, and at about $58,500 for a couple with two children.

Current recipients of the rebate can expect to receive a lump-sum payment before the end of the year.

Lindsay Tedds, an associate professor of economics at the University of Calgary, said while the new relief is not poorly targeted, it is poorly timed, given that people won't receive the help until later this year.

"It's not helping people in real time afford their bills," Tedds said.

The inflation relief was foreshadowed by former parliamentary budget officer Kevin Page, who earlier this year said the federal government would face mounting pressure coming into the fall to provide help to low-income Canadians.

The federal government, however, is far from being the only government to succumb to this political pressure. Nearly all provincial governments have introduced policies that send aid to Canadians dealing with historically high inflation.

Saskatchewan is giving $500 to all adult residents, for example, while other provinces have sent money to residents below a certain income threshold. In Ontario and Alberta, gas taxes were temporarily slashed.

Economists often caution against providing direct payments to people amid high inflation, especially when sent out indiscriminately, over concern it could feed into even higher prices.

Tedds said any kind of support should aim to maintain consumption levels of low-income Canadians rather than fuel higher consumption.

"(The GST rebate) is targeted to low-income individuals, who are probably the ones most unable to dip into savings or other things to pay for these increased costs. So, it's unlikely to fuel inflation," she said.

Smart said some of the measures introduced by the provinces have been politically rather than economically driven.

“There is no need to hand out cash cheques to middle-class Canadians,” he said.

Smart said giving cash to people and raising the deficit will be counterproductive as the Bank of Canada works on reducing inflation through higher interest rates.

As government revenues rise, governments should resist the urge to send that money back out to people, he said.

“We're all bearing the brunt of inflation. And it's unfortunate, but what the government — what we all need to do now is get focused on reducing inflation."

MORE National ARTICLES

Structure fire in Lynn Valley claims one life: North Vancouver RCMP

Structure fire in Lynn Valley claims one life: North Vancouver RCMP
 District of North Vancouver Fire Rescue Service were already on scene. Flames and smoke were seen coming from the three-story structure, and firefighters quickly brought the fire under control.

Structure fire in Lynn Valley claims one life: North Vancouver RCMP

Vancouver Police identify Naseb Fazil as the victim in Vancouver’s 5th homicide of the year

Vancouver Police identify Naseb Fazil as the victim in Vancouver’s 5th homicide of the year
A 24-year-old man was arrested. The investigation remains active and ongoing.

Vancouver Police identify Naseb Fazil as the victim in Vancouver’s 5th homicide of the year

2.5 grams of hard drugs decriminalized in B.C

2.5 grams of hard drugs decriminalized in B.C
The three-year exemption effective Jan. 31 will apply to drug users 18 and over and include opioids, cocaine, methamphetamine and MDMA, also known as ecstasy.

2.5 grams of hard drugs decriminalized in B.C

3 Vancouver Island men charged for running a cryptocurrency-funded dark web drug trafficking ring

3 Vancouver Island men charged for running a cryptocurrency-funded dark web drug trafficking ring
The RCMP's organized crime division describes the dark web as the internet’s "third hidden layer," below the open web and deep web, and says it is accessed through special browsers that hide the digital footprint of users.

3 Vancouver Island men charged for running a cryptocurrency-funded dark web drug trafficking ring

Hot and stormy summer expected: Weather Network

Hot and stormy summer expected: Weather Network
The westernmost province is expected to gradually emerge from a cool spring and into near-normal temperatures starting in June, which he says will drag out the snow melt and slow the start of wildfire season.    

Hot and stormy summer expected: Weather Network

COVID border measures to stay until June 30

COVID border measures to stay until June 30
Several pandemic restrictions are in place at Canadian airports and land borders, including vaccine mandates, random COVID-19 tests and the requirement that international travellers answer pandemic-related questions on the ArriveCan app.

COVID border measures to stay until June 30