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Budget 2006: GST

July 1 marks first day of GST reduction

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CTV News: John Vennavally-Rao on the GST cut
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Date: Sat. Jul. 1 2006 9:03 AM ET

Hatred of the GST unifies Canadians from coast to coast. But the tax will become slightly less villainous on Canada Day, when the Conservative government cuts it down from seven per cent to six.

It will be the first time in its 15-year history that the Goods and Services Tax has been lowered.

However, there could be glitches. Retailers must change thousands of cash registers and computer systems to accommodate the cut, and not all will be ready in time.

"I would recommend to consumers to check their receipts to make sure they have gotten the one per cent reduction," said Damian Campbell, a spokesperson for TechnicPOS, which sells point-of-sale systems to businesses.

With so many retailers across the country, it was inevitable that at least one was unaware Canada Day marked the change.

"I'm really surprised to know that it's going to be this Saturday," said one business owner.

Harper spent Friday reminding Canadians about the cut. He visited an Ottawa department store, posing for cameras behind a green sign printed with a six per cent symbol.

"Tomorrow is the big day. Tomorrow is when our taxes go down," said Harper.

Some shoppers were less than enthusiastic, arguing the reduction will be hardly noticed. Others offered only faint praise.

"It's not going to save a lot of money, but every penny counts," said one shopper.

Consure Nathale Bernsden calculated she will save $1.67 on a dress she wants to buy, but argued the savings will help in the long run.

Analysts agree, estimating the GST cut may save the average Canadian a few hundred dollars a year. And for retailers offering expensive goods, the reduction could mean increased sales.

"Definitely, with retailers selling more luxury items, or higher-end items, there's a sense that the one per cent reduction is going to mean more to them," said Derek Nighbor of the Retail Council of Canada.

Meanwhile, some municipalities plan on pocketing the savings themselves, saying it would be too difficult to change signage on tax-included services. Parking meters will likely remain the same.

"We've made the decision we are not going to put the taxpayer to a huge expense in terms of changing over price lists," said John O'Brien of the Halifax Regional Municipality.

Watchdog warns hard liquor may get more expensive

Meanwhile, a tax watchdog warned the reduction may raise the price of hard liquor.

The government's maiden budget on May 2 raised excise taxes on tobacco and alcohol, saying it was necessary to maintain so-called "sin taxes."

"For a government that's trying to present itself as a friend to taxpayers, this is a bad idea," John Williamson of the Canadian Taxpayers Federation told The Canadian Press Friday.

"Because they tried to get cute with spirits, the tax on spirits is going to go up."

Beer and wine are to be taxed on a flat, per litre basis. So, cheap lagers will be taxed the same as expensive imported ales.

But the hard liquor excise tax is based on the retail price per bottle. And because excise taxes are set as a percentage of the federal excise tax, the money becomes a big source of revenue for the provinces. Alberta is the only exception.

With a report by CTV's John Vennavally-Rao and files from The Canadian Press

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The GST reduction, Universal Child Care Benefit and income tax changes will all take effect on July 1.