“Every time you make tough decisions, you lose friends … Whether one agrees with our solutions or not, none will accuse us, I think, of having chosen to evade our responsibilities by side stepping the most controversial questions of our time. From free trade, NAFTA, tax reform, the GST, privatizations, deficit reduction, fighting inflation, and lowering interest rates, we have made the decisions that are now strengthening Canada’s competitive position.” — Brian Mulroney, toward the end of his tenure as prime minister
One of those tough decisions, the implementation of the Goods and Services Tax on January 1, 1991, lost Brian Mulroney’s Progressive Conservative government many friends. Introduced during an economic recession, it’s been considered one of the many factors that caused Mulroney’s popularity ratings to plummet, leading the Tories to a catastrophic defeat in 1993.
The 7 per cent GST was a replacement for the federal Manufacturers’ Sales Tax, which was introduced in 1924. Set at a rate of 13.5 per cent, the MST had been applied to manufactured goods at the wholesale level and was a hidden cost that the public was generally unaware of. For more than three decades, successive federal governments, encouraged by business leaders and economists, contemplated reforming or eliminating it. Following the PCs’ re-election in 1988, Finance Minister Michael Wilson encouraged the development of a value-added tax inspired by those that had been implemented in parts of Europe. Economists felt that, in the long run, a lower commodity tax would make Canadian products more competitive and create more jobs.
During the GST’s first year, the tax was expected to raise $20.8 billion, with $2.4 billion in rebates for low- to middle-income Canadians. But it quickly faced opposition from both provincial politicians and labour organizations.
Prime Minister Brian Mulroney and Finance Minister Michael Wilson go over the federal budget in the PM's office in Ottawa, Tuesday Feb. 26, 1991. (Ron Poling/CP)
The GST became an issue in the 1990 Ontario provincial-election campaign. Premier David Peterson said he opposed the GST but would accept it and not harmonize it if it were passed. NDP leader Bob Rae vowed to lead a national revolt against it and said he would refuse to work with Ottawa to impose or collect it. He declared he’d get the other premiers on board to make the GST “the shortest-lived tax in Canadian history.”
Following his election as premier, Rae called on the Liberal majority in the Senate to kill the tax. Attempts to block the bill there ran into trouble when, in September 1990, Mulroney took advantage of an unused section of the British North America Act to gain permission to appoint eight new senators, giving the PCs a working majority. The move prompted Rae to demand a first ministers’ meeting. The Senate Liberals attempted several stalling tactics, including filibusters, but their efforts failed. The GST passed into law on December 14 and came into effect just over two weeks later, on January 1. Ontario and Alberta unsuccessfully challenged the federal government’s right to enact a retail-sales tax.
Ad that ran in the December 19, 1990, edition of the Financial Post.
With polls suggesting that around 75 per cent of Canadians opposed the GST, some observers felt that, despite the necessity of the tax reforms and their potential long-term benefits, the Tories had doomed themselves. Historian Michael Bliss believed that the party was “committing suicide” by going ahead with the GST amid a deepening recession. “You layer on another tax, a tax passed by politicians who are despised by voters in a way they have never been in the history of the country.” Bliss also said that the federal government’s habit of screwing up policy implementation meant that “the adjustment pains of the GST are going to be much longer than they forecast.”
With little lead time before the tax was implemented, panic and confusion reigned. The lists of what was and wasn’t covered were complex, especially where food was involved. An Ottawa-based federal telephone hotline handled up to 15,000 calls per day. Most calls were from puzzled businesspeople, but some callers were less than cordial — one operator told the Ottawa Citizen said that their moral integrity had been questioned, as “they want to know how I could possibly work for such a horrible tax system.” Call topics ranged from deposits on soda bottles to layaway plans; many questioned why one had to pay tax on one baked good or yoghourt cup but not on six. One caller wondered whether their membership in a “Polar Bear Club” was taxable (it was).
Left to right: Editorial cartoon from the January 1, 1991, edition of the Toronto Star; editorial cartoon from the December 31, 1990, edition of the Windsor Star.
Stores advertised different ways they were planning to incorporate the GST into their prices. The Zehrs division of Loblaws promised shelf labels to identify which products would be taxed at the checkout and said it would help shoppers “cope with the GST by passing any resulting savings on to you, our valued customers.” Woolco took out full-page ads declaring it would incorporate the GST into its sticker prices. Some business promised to temporarily absorb the tax until things had settled down.
Cash-register technicians became the most highly valued tradespeople in the province. Many businesses — including those who had hoped that the legislation would fail in the Senate — waited until the GST had become law to upgrade their machines. “It’s a horror show,” cash-register business owner Harry Mitchell told the Hamilton Spectator.
From left to right: Photo of a Toronto tax being serviced from the January 2, 1991, edition of the Toronto Star; photo of man servicing a cash register from the December 31, 1990, edition of the Windsor Star.
Panicky businesses were scrambling to have their machines reprogrammed, but there was no way everyone could be serviced by January 1. “Many of those will be lucky to get the work done or a new unit by the end of the first quarter of next year,” Mitchell observed. Those that couldn’t be serviced had to manually calculate and record the GST they collected in the interim. While Mitchell sympathized with the plight of those who would be forced to buy new registers, “often they wanted a cheap model in the first place.”
Among those irritated about having to buy new registers was Picton snack-bar owner Ronald MacDonald, who was also irritated about having GST charged on his rent. “The government is forcing small people out of business,” he told the Kingston Whig-Standard. “They even have their hands in our pocket we die,” which may have referred to the GST being charged for funeral services.
Restaurateurs also worried about their future. Sam Cino, who owned two eateries in Hamilton, believed industry sales would fall by 10 per cent over the first six months of the GST, then rebound as people got used to it and, hopefully, the recession faded. “I think people who can afford to go out will still go out but not as often and they’ll be picky,” he told the Spectator. “They’ll go out if it’s an occasion, but they’ll be more selective of the occasion.” Cino also suspected tipping would decrease. In border cities like Windsor, restaurateurs worried that American customers would be scared off by higher bills.
From left to right: Editorial cartoon depicting federal finance minister Michael Wilson from the December 19, 1990, edition of the Financial Post; editorial cartoon from the January 5, 1991, edition of the North Bay Nuggest.
The cab industry found several ways to deal with the GST. In Kingston, local rates were increased by 20 per cent to 30 per cent in fall 1990 to prepare for the tax alongside rising fuel, insurance, and maintenance costs. In Toronto, cabs queued for up to two hours to have their meters adjusted before heading to Exhibition Place to allow Metro Toronto officials to check their accuracy. Dozens were sent back to the shop, although technicians at one repair facility believed the problem was the emergency staff hired to test the meters. In Hamilton, there were delays in receiving new program chips for the meters.
Businesses that catered to New Year’s revellers were concerned they’d have to start charging the GST at 12:01 a.m. Federal revenue minister Otto Jelinek indicated that restaurants didn’t have to hike their prices that night and that there wouldn’t be a horde of auditors out on the prowl; the cabs taking people home, however, would have to apply the tax.
“When you have a bar full of people demanding drinks, you can’t put your cash registers out of action to adjust them,” Don Eastcott, managing director of the Canadian Organization of Small Business told the Toronto Star. “And no one would want to listen to your explanations about why their drinks suddenly cost more.”
The COSB had several tips for consumers on how to cope with the GST, including, be patient, give yourself plenty of time to shop, keep calm, keep receipts, ask questions, complain if you feel ripped off, don’t expect major price reductions, and do expect higher costs for taxi rides and restaurant meals.
“Don’t worry if trying to understand the workings of the GST leaves you with a headache,” the Toronto Star observed on New Year’s Day. “We’re all in the same boat. Besides, there’s this funny new tax on non-prescription painkillers.” Its editorial that day criticized the GST as being “rooted in a mean-spirited, right-wing ideology that says people should pay tax on most of what they consume in Canada, regardless of ability to pay.”
Crankiness reigned during the first days of the tax. Frustration mounted as people struggled to work new machines and apply the GST correctly.
Photo from the January 2, 1991, edition of the Kitchener- Waterloo Record.
In downtown Toronto, a croissant-shop owner was yelled at by angry customers, including one who became agitated when he discovered his bill for two coffees had risen by 11 cents. Some store owners expressed their displeasure through sales, such as Toronto’s Edwards Books and Art chain, which said it would discount all items by 7 per cent until the federal government had provided “the appropriate response.”
A Kitchener gas-station owner put up a sign protesting the tax: “Amid the recession why a raise for Mulroney and Co? Happy New Year?” A common complaint that echoed throughout newspaper stories was the timing: Why introduce the GST in the midst of a recession, when pocketbooks were already eeling the strain?
Among those most upset by the GST was Kitchener printer Carl Sinding. Though he would benefit from lower taxes with the elimination of the MST, he believed the move was an imposition on Canadians. He took out a series of ads across the country, starting with the Calgary Herald and the Windsor Star, under the banner of Voter Fund Inc., hoping to get feedback from anyone he believed was as angry as he was. Sinding asked the public to demand a federal election, participate in a May 1 general strike if that demand was not met, and donate $2 so that he could buy more ads across the country.
Back in Ottawa, Jelinek ignored the public perceptions of chaos and thought everything was going well, believing Canadians would soon embrace the GST as a needed tax. He told the press on January 3 that he had eaten at a surf-and-turf restaurant the night before and hadn’t noticed that the GST had been applied to the bill. The federal deadline of January 1 for businesses to apply for a GST rebate was extended. Local colleges offered workshops on how to handle the tax
Article from the March 28, 1991, edition of the Ottawa Citizen.
Anger soon gave way to resignation. “There’s griping but what can you complain about? It’s there,” observed Becky Mitchell, the owner of Whittington’s newsstand in Windsor. “Nobody’s refused to buy anything.” There was a sense people had other concerns, such as the First Gulf War, and that life was rolling along as usual.
Sinding continued his crusade against the GST but found fewer takers. One March 1991 weekend, he went to Windsor’s Jackson Park, hoping to gather at least 1,000 signatures for a poll asking whether people would be willing to withhold the GST on heating and hydro bills — he got only 165 names. The feds made adjustments to what was taxed; in March, they removed single yoghourt containers, Remembrance Day poppies, and human sperm donations.
GST | Look Back
Though a large-scale national revolt against the GST never materialized, continuing resentment played a role in the ultra-low popularity ratings Mulroney received at the end of his tenure — and in the demise of the PCs in the 1993 federal election. In 2010, Ontario harmonized it with the PST, leading to today’s HST.
As journalist Jim Coyle observed following the GST’s passage in December 1990, Canadians didn’t hate it because they didn’t like paying more taxes or because they didn’t see flaws in the existing taxation system. They didn’t oppose a VAT just on principle. “Simply put, when it comes to the Goods and Services Tax, Canadians can’t stand Brian Mulroney. They dislike almost everything the prime minister does, almost everything he stands for.”
Sources: Blue Thunder by Bob Plamondon (Toronto, Key Porter Books, 2009); the December 26, 1990, December 29, 1990, and January 4, 1991, editions of the Brantford Expositor; the December 14, 1990, and December 27, 1990, editions of the Financial Post; the December 26, 1990, December 27, 1990, and January 26, 1991, editions of the Hamilton Spectator; the December 29, 1990, and December 31, 1990, editions of the Kingston Whig-Standard; the December 17, 1990, December 19, 1990, and January 2, 1991, editions of the Kitchener-Waterloo Record; the January 3, 1991, and March 28, 1991, editions of the Ottawa Citizen; the December 31, 1990, January 1, 1991, January 2, 1991, January 3, 1991, and January 4, 1991, editions of the TorontoStar; and the August 17, 1990, September 22, 1990, September 28, 1990, January 2, 1991, January 3, 1991, and March 25, 1991, editions of the Windsor Star.
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