We’re less than two weeks away from GST going live, so it might be appropriate to look at the economic arguments in favour of it.
On the WCI blog, Frances Woolley reviews the textbook arguments (excerpt):
Economists frequently argue that taxing basic groceries is a good idea - for example, see these papers/posts making the case for taxing food in the US, Canada, and New Zealand.
The equity argument for taxing groceries is straightforward. Suppose everyone spends $500 a month on groceries. If groceries were taxed at 10 percent, everyone would pay about $50 in tax (or slightly less, if people cut back on their food expenditures when the tax is introduced). If part of the revenue raised by taxing groceries was used to give every low income individual a $60 tax credit, the tax on groceries would actually increase the well-being of the worst off members of society. Any additional revenues raised could be used either to decrease other taxes, leading to greater economic efficiency, or to provide needed social or infrastructure programs, further enhancing efficiency and/or equity.