January 1, 2008 / 12:21 AM / in 10 years

Harper says sales tax cut likely the last

TORONTO (Reuters) - Prime Minister Stephen Harper said on Monday that a New Year’s Day cut to the country’s sales tax will likely be the last.

The one percentage point cut to the federal goods and services tax (GST) will take effect January 1, Harper said, chopping the much-hated tax down to 5 percent.

“We are not anticipating further reductions to the GST. In the future, if we reduce taxes, they may be in a different direction,” the Conservative prime minister told reporters in Mississauga, Ontario.

“We will be extremely cautious in the year to come. We’re not going to undertake any long-run spending or tax reduction initiatives unless we feel they are affordable on a long-term basis.”

Harper said the cut will bring C$6 billion ($6.1 billion) in tax relief for Canadians in 2008.

The GST, which was introduced in 1990 by Brian Mulroney’s Conservative government, was at 7 percent before Harper’s government took power in 2006.

During the election campaign, Harper promised to pare the sales tax by one percentage point immediately, and by a second percentage point within five years.

Economists and opposition political parties have criticized the plan to cut the consumption taxes as regressive and harmful to Canada’s hot economy.

But the move has proved popular with voters, and the Canadian Federation of Independent Business said on Monday the tax reduction will “provide a much-needed boost to the Canadian economy ... at a time when sales are traditionally sluggish in many sectors.”

($1=$0.98 Canadian)

Reporting by Jonathan Spicer; Editing by Rob Wilson

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