Canada Liberals say they might hike sales taxes

Canada's new opposition leader, Michael Ignatieff, said in a television interview that if he took power he would consider hiking the controversial federal sales tax at some point to eliminate future budget deficits.

The Goods and Services Tax has been an explosive issue over the past two decades, and cutting it to 5 percent from 7 percent figured prominently in the platform of Conservative Stephen Harper when he was first elected prime minister in 2006. The tax covers a wide range of products and services.

Ignatieff, who last week replaced Stephane Dion as Liberal leader after the party's disastrous performance in October's federal election, said he would not hike the GST now because of the tough economic times, but that it might be necessary after a couple of years of budget deficits.

Canada is expected to start running deficits next fiscal year, which starts April 1.

"Let me be clear here. If we are in a deep deficit in year three or four, you can't exclude tax increases to get us out. Canadians understand how bad deficits are," he said.

"So I'm not going to take a GST hike off the table later. I just think it'd be a bad idea now in a recession."
Ignatieff was speaking in an interview on Thursday with CityNews television. The interview did not win wide play initially but the Conservatives called attention to it on Friday.

The Conservative government holds only a minority of seats in Parliament and could be brought down in late January or early February over their budget. But Ignatieff has urged caution in toppling a government that was just re-elected.

If the Conservatives fall, they would be replaced by an opposition coalition led by Ignatieff or head into an election in which they would be certain to highlight the possibility of Liberal tax hikes.

A previous Conservative government introduced the sales tax in 1991. The Liberals pledged in their victorious 1993 campaign to scrap the GST, but have since become its champion, arguing it is better to cut income taxes than sales taxes.

Harper cut the tax after winning the 2006 election, and although the Liberals criticized that move, they pledged in the 2008 campaign not to reverse it.

Canada's large budget deficits were a potent political issue in the early 1990s. Harper said on Thursday he might have to run a C$30 billion ($25 billion) deficit to boost the economy but has promised to get back to surplus soon.