GST/PST Direct Payment: Instantaneous Electronic Transfer of Taxes
A Proposal for Federal Government Program
DUE 1992-11-20
02 | Description of the Activity to be Restructured
This proposal calls for an establishment of a mechanism to allow instantaneous on-the-spot payment of Goods and Services Tax (GST) and Provincial Sales Tax (PST) at the time of every purchase of goods and services. The GST/PST will get transferred electronically from businesses to the appropriate Departments of Revenue using the Electronic Data Interchange (EDI) technology.
Thus, merchants, vendors and service providers will no longer have to prepare and submit detailed GST/PST reports. The governments will not lose any interest between the time of purchase and the receipt of GST/PST from businesses. Tax administration will be greatly simplified, and no rebate to the businesses for the hours spent collecting the taxes will have to be paid by the governments. As far as the end consumers are concerned, the direct GST/PST payment scheme will be transparent.
The basic philosophy behind this proposal is "absolute simplicity and consistency", eliminating any intermediate process and automating the procedures. Such an approach to achieve total quality and global optimisation is a long-term solution requiring careful planning, but allows gradual implementation with voluntary participation at the start-up stage.
03 | The Restructuring Plan
Phase 1 (2 years)
Revenue Canada to set up a GST account for EDI access.
Revenue Canada to authorise a few experimental stores.
Revenue Canada to authorise proper computing and communications software provided by the private industry.
The authorised stores to arrange an ISDN telephone line and EDI access.
No change in political/legal system is required.
Phase 2 (2 years)
Solicit provincial governments for participation of PST payment.
No change in political/legal system is required.
Phase 3 (2 years)
Implement "individual sales tax" to be directed to the consumer's province of residence.
Some changes in political/legal system are required.
04 | Rationale for Restructuring
As shown in the newspaper article attached, manual preparation and submission of both GST and PST contribute to lost productivity for businesses since the activity itself produces no real benefits.
The governments, on the other hand, have had to increase its staff, training and education of the businesses on the collection methods through numerous mailings, seminars and visits.
With this proposal, businesses will not have to do any more GST/PST filing. Instead, they simply pass the GST/PST paid by the consumers directly to the Departments of Revenue. The major task for the Departments of Revenue becomes simple monitoring which could further be automated using emerging Artificial Intelligence software. Error-prone manual processing of any sort will quickly become a thing of the past.
In terms of technological limits, businesses could subscribe to the emerging ISDN (Integrated Services Digital Network) telephone line such as Bell Canada's MicroLink service to transmit data at 64K bits per second, data communication speed many times as high as the present analog modem system.
Revenue Canada introduced the EFILE project to allow all-electronic filing of income taxes. It also started accepting Direct Deposit of a tax refund into an individual tax payer's bank account. This proposal could be considered a natural progression of the government's thrust for higher efficiency through computing and communications technology instead of relying on paper and human labour.
The debit-card experiment in the Ottawa-Hull region was quite successful, and the INTERAC system is now available in Quebec and British Columbia. These provinces should be the first candidates for the direct GST/PST payment scheme. However, the proposal is compatible with cash payment as long as proper software is installed at the cashier.
Ideally, the sales tax should be paid to the consumer's province of residence. The present provincial sales tax system based on the location of purchase is quite ineffective and unfair, especially at border towns where an individual could reside in one province but does most of his/her purchases in another, paying sales taxes to the province which does not provide services to him/her.
The "individual sales tax" to be directed to the consumer's province of residence will become possible with the introduction of "carte Canada card" (presently Citizenship card) indicating the individual's province of residence. The following section is a part of my proposal to The Special Joint Committee On a Renewed Canada.
