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With some of the political parties vying for Canada's October 2008 election having Green plans, some of which replace existing taxes with Green taxes, here--unedited--is an essay of April 12, 1990. I sent it to both the then Government (Progressive Conservative), Lucien Bouchard, then Minister of the Environment, and Official Opposition (Liberal), Allan J. MacEachen, a former Cabinet Minister.


SET aside the GST

by Jonathan Berry

The Goods and Services Tax (GST) is flawed. The Services part of the tax
will bring social and environmental detriment. The Goods part of the tax
is an improvement on the Manufacturers' (MST) Sales Tax and is a good
piece of legislation--for 1960. With the Goods Tax, the Conservative
government will, at long last, right an inequity. However, the state of
the world in 1990 makes that inequity look small.

The planet upon which we live is under attack. The engine which is
battering Mother Earth is not so much the internal combustion engine, as
the smoky engine of Economics. That engine needs to be fine-tuned.

I propose to replace the GST with a Social-Environment Tax (SET). The SET
would be based on the social and environmental effects of any product,
by-product or service. For most goods sold, SET might simply default to a
7% additive (or 8% subtractive) tax, unless the goods are particularly
environment-friendly (lower rate for insulation and solar-heating
equipment) or particularly environment-destructive (higher rate for
gasoline, coal, beef from Brazil, clear-cut timber over sustainably
managed timber, any goods produced in a state which burns coal for
electricity without adequate pollution controls). Sometimes the tax would
be based not on value, but on quantity, like many of our present excise
taxes.

The SET would replace federal fines for pollution. Pollution would now be
taxed. For example, the SET on producing mercury could be $2 per
kilogram. However, the tax for unaccounted mercury (e.g., releasing it
into a river) could be $20,000 per kilogram. The $19,998 difference would
produce corporate action where today we have corporate full-page ads in
glossy magazines. It would also spur independent recovery companies to
make Canada a leader in green technology. Because the SET is a tax, its
application would be automatic and less likely to end up in the courts.
In today's world, fines are often merited, but rarely meted out.

Factories, common carriers, and ocean vessels would be required to have
SET Liability Insurance to pay the tax on major spills. Companies would
now pollute on a "pay-as-you-go" basis. To lend further stability to
industry, a limit, albeit a high one, should be set on liability
settlements. The limit would reduce the resources wasted on costly
litigation. It would also reduce the squeeze on Canadian companies due to
mushrooming premiums for liability insurance, a squeeze that under present
conditions can only get worse.

The SET could take into account social conditions of foreign states and
countries. While accepting that wages and social conditions in other
countries will not match Canada's, the tax could assess a higher rate for
goods from a country which practices apartheid, or which abuses the human
rights of its citizens, or from a country where wages are simply too low
to meet its citizens' reasonable needs. Aside from protecting Human
Rights, it would also protect Canadian business.

Granted, SET will be more difficult to administer. It would require even
more government employees than the GST. However, it is possible to
replace with the SET almost any government program which offers an
incentive or applies a deterrent. That said, the enabling legislation
would limit the government's leeway in tinkering with a
generally-applicable SET rate.

In fact, the SET would be too flexible and powerful a tool to leave wholly
in the hands of politicians and bureaucrats. The Ontario Law Reform
Commission recently suggested allowing private citizens to press pollution
charges. Under the SET, private citizens and companies would also be
allowed to apply to a quasi-judicial commission whose job would be to
review, and change, rates established by the government.

The SET would be only a little more difficult for sellers than is the GST.

If the SET is implemented as a subtractive tax, it would, in general, be
invisible to consumers.

The SET may be so successful in decreasing pollution that rates will need
to be increased later to raise sufficient funds for the government's
general revenues. We can only hope to have such a problem.

The SET would be more popular than the GST. The GST has no rationale,
except that the government needs money, and the retail economy is an easy
target. The Social-Environment Tax is a brave attempt to tackle difficult
problems. The better image will improve compliance (which not only means
more money directly, but less money spent prosecuting non-compliers). It
may also manifest itself at the polls in the next election.

Since the SET would apply to all goods, both domestic and imported,
Canadian business would no longer risk going broke by spending money to be
more friendly to the environment.

The SET would provide more employment. Environmentally-safer processes
are usually more labour-intensive.

The SET could become an instrument of policy. Instead of having to, in
effect, beg Ohio to reduce its acid rain emissions, you can put it to them
as a paying proposition. Reduce pollution, or find your exports to Canada
at a competitive disadvantage.

Services would not be taxed unless they have a direct influence on the
environment.

The federal government would have to spend part of the money on the
Environment. Some on cleanup, some on Research and Development. With
pollution reduction now profitable, the private sector would take up some
slack in R & D.

Finally, one might ask: why would the Social-Environment Tax be
philosophically acceptable to a Progressive Conservative government?

The idea of Progress is now constrained not by markets or by capital, but
by the limitations of the planet. If it continues to develop in its
present environmentally-unfriendly way, Progress will soon reach its
limit, at which point it will have to be stopped. Or, natural forces will
cause a calamity which may claim hundreds of millions of lives. By
fine-tuning our processes, we allow more breathing space before that point
is reached.

It is the Conservative tradition that ownership breeds responsibility.
Under the SET, we become owners of the environment, we pay when we degrade
it, and so conserve that environment.

In replacing the old MST, our government has a historic opportunity. In
the year 2040, will our grandchildren look out over green forests and
remember us as brave pioneers? Or will they look out over cinders and
curse us? SET aside the GST.
Send email to:
Jonathan Berry, web-butler jberry@islandnet.com

URL: This web page is: http://members.shaw.ca/berry5868/setgst.htm
Last modified October 1, 2008