MONTREAL - Canada should tackle its deficit and growing debt by increasing the GST to nine per cent and cutting program spending, says the co-president of the DBRS rating service.
While politicians are loathe to raise taxes, dramatic action is required to prevent the country's debt from spiralling out of control, Peter Bethlenfalvy said in an interview.
The Conservative government reduced the Goods and Services Tax to five per cent from seven per cent a few years ago.
Bethlenfalvy said raising the consumption task is probably the "smartest" tax to increase.
The country will hit a "brick wall" that will require major spending cuts unless expenditures are reduced and revenues increased without choking off the economic recovery.
Faced with a deep recession, the government initiated stimulus spending packages totalling $61 billion.
While Canada's deficit is relatively small, it's still about the eighth largest among G20 countries.
Low fertility rates and growing demand by baby boomers for health-care and other services will increasingly pressure the government to increase immigration to attract skilled labour, Bethlenfalvy said after presenting DBRS' views on Canada's economic position following the global financial crisis.
Government officials couldn't be immediately reached for comment.
