A controversial tax on virtually every commercial transaction in Canada passed, 55-49, Thursday in the Senate and now needs only the ceremonial assent of the nation's governor-general to become law before it takes effect Jan. 1.
After the vote Thursday night, Lowell Murray, leader of the government faction in the Senate, said royal assent could come as early as today.
The 7 percent goods and services tax, modeled after European value-added taxes, is scheduled to replace the 13.5 percent federal sales tax, a hidden levy on manufacturing.
According to a finance department spokesman, the new tax will collect $20.8 billion in 1991-92 and $21.9 billion in 1992-93. The previous tax was projected to collect $19 billion in 1991-92 and $20.4 billion in 1992-93. But some private sources believe it may collect as much as $24.5 billion. With all forms of tax, the Canadian government collects about $120 billion.
The new tax is the second phase of reforms pledged in 1986 by Prime Minister Brian Mulroney's government. The first one, completed before the 1988 election, revamped the income tax system.
Les Macdonald, a tax expert, explained that tax reform in the United States spurred the drive to reform Canada's tax system.
"Extensive tax reform under way in the U.S. prompted Ottawa's initiative in order to keep the tax system competitive with that of the U.S.," he said.
The general service tax was introduced in the House of Commons in January after initial debate lowered the rate from 9 percent to 7 percent. After vigorous debate, it was sent to the Senate in April. A Senate committee recommended killing the proposal. The Progressive Conservative Party government, faced with a minority in the Senate, added eight Senators to the 104-seat Chamber, giving the government the slim majority it needed to pass the legislation.