The income tax and the goods and servicesharmonized tax (gsthst)

As of right now, the COVID-19 epidemic has been under control,
people's lives and health are being looked after, and these outcomes positively
impact global campaigns for epidemic prevention. However, the severe global
economic downturn that will last from 2019 to 2021 and the economic
measures taken to lessen the effects of the Covid-19 pandemic have raised
debt levels globally as well as in individual nations. both in developed and
emerging/developing markets. Some governments are considering raising
taxes in the upcoming years to balance their budgets in light of their heavy
debt loads. However, this is not a particularly effective measure from an
economic standpoint.

Global government debt increased by 99 percent of GDP in 2020, the
fastest annual increase in 50 years and the highest level recorded. Government
debt in EMDE increased to its highest level since 1987, representing 63
percent of GDP. More than half of low-income countries are distressed or at
high risk of entering debt; some have already experienced debt default, and
some have already completed or are currently undergoing debt restructuring.
Figure 1: Government debt 1970-2020

Source: Kose et al. (2021); World Bank.


The Covid-19 pandemic may just be the spark that ignites and
exacerbates debt risks in emerging economies.
Different types of taxes exist today. The income tax and the Goods and
Services/Harmonized Tax (GST/HST) are today's two most common taxes
(Cheng. et al., 2019, p.5). Although the government benefits from both of
these taxes, the taxation policies differ significantly. Individuals and families
with low and modest incomes can use the GST/HST credit, a tax-free
quarterly payment, to offset the GST or HST they have to pay. Additionally,
payments from territorial and provincial programs might be included. When

filing their taxes, low-income individuals are automatically eligible for the
GST/HST credit(Gamarra. et al., 2009). The government levies income tax on
income. It is one of the significant sources of revenue for the federal
government. The revenue from taxes is invested in the growth of the nation.
The tax percentage is directly inversely correlated to an individual's income,
so the more money they make, the more they must pay in taxes.
Raising the personal income tax is less effective, especially for those
who face high marginal rates and have the choice of how many hours they
work (earners at both ends of the income spectrum). Furthermore, bracket
creep will cause an increase in these financial costs over time. In contrast, it
might be anticipated that a broad-based consumption tax would cause less
behavior distortion. This is because many people may have less discretion
regarding their consumption. This applies to other types of consumption, such
as dining out, but it is most relevant to "necessities" in household budgets.
Instead, GST/HST encourages saving and investment and improves the
economy, whereas income taxes penalize savers and reward spenders. Lowerincome households would still need to be compensated for any GST increase.
Furthermore, taxing people on what they take from the finite resource pool


through consumption rather than what they add to the pool through income is
only fair.
Global government debt increased by 99 percent of GDP in 2020, the
fastest annual increase in 50 years and the highest level recorded. Some
governments are considering raising taxes in the upcoming years to balance
their budgets. Raising the personal income tax is less effective because it is
unfair to those who face high marginal rates. Increasing GST/HST is least
detrimental to long-term economic growth because low-income individuals
are automatically eligible for the GST/HST credit when filing their taxes.
However, lower-income households still need to be compensated for any GST
increase. The tax percentage is directly inversely correlated to an individual's

income.


REFERENCE
1. Cheng, G., J. Diaz-Cassou, and A. Erce. 2019. “The
Macroeconomic Effects of Official Debt Restructuring: Evidence from the
Paris Club.” Oxford Economic Papers 5.
2. Gamarra, B., , C. Braga and M. Pollock. 2009. "Debt Relief to
Low Income Countries: A Retrospective." In Debt Relief and Beyond, edited
by C. Braga and D. Dömeland, 2-3. World Bank: Washington, DC.
3. Kose, M. A, P. Nagle, F. Ohnsorge, and N. Sugawara. 2021.
Global Waves of Debt: Causes and Consequences. Washington, DC: World
Bank.
4. World Bank. 2021. Global Economic Prospects. October. World
Bank: Washington, DC.