A GOODS AND SERVICES TAX (GST) AND THE SMALL BUSINESS SECTOR: SOME CANADIAN REFLECTIONS

Abstract: In recent years, several Pacific Rim nations have introduced a goods and services tax (GST), similar (in some respects) to European value-added tax (VAT). Countries with GST include New Zealand, Western Samoa and Canada. In the 1993 Australian federal elections, a major issue was whether or not to introduce GST.
New taxes are seldom popular, but particularly in Canada the introduction of GST caused extraordinary concern in the small business sector which was faced with compliance costs exceeding $1 billion. This article is a case study of the Canadian experience, with some comparisons made with some features of other systems. Findings suggest that, in Canada, the smaller businesses which are registered for GST are burdened by an unproportional share of the burden. Managerial time of entrepreneurs is being used for increased accounting and paperwork requirements.
An understanding of GST and its difficulties may assist the small business sector in Australia and elsewhere in the Pacific Rim to be better prepared for GST-type taxation. It may also assist the sector in voicing its concerns to government, such that the policy-makers responsible for taxation matters may be responsive to the needs of the small business sector.