Roh Looks to Canada for Tax Precedent

The logic behind President Roh Moo-hyun’s assessment on former Canadian Prime Minister Brian Mulroney’s determination on tax is simple.

In 1991, when Prime Minister Mulroney introduced the goods and services tax (GST) which was imposed on every industry, the Canadian government’s annual deficit was about 30 to 40 trillion won. The general election was scheduled to be held in 1993. The introduction of GST was sure to lead to a crushing defeat of the prime minister’s party. Yet Mulroney made the decision for the interest of the nation.

The election outcome was grim. It was as crushing a defeat as the ruling Uri Party suffered in recent local elections. Mulroney’s party won only two out of 169 seats that it retained. What is worse is that Canada has the parliamentary government system. However, GST was the right choice. The Liberal Party’s Jean Chrétien who took power, pledging the abolition of GST, could not but maintain the GST. In 1997, the government budget was in the black again.

Shin Myung-soon, professor at the political science of Yonsei University, who was the first president of the Korean Association for Canadian Studies, said on June 5, “It is the norm in developed countries that when the economy turns bad, administrations change. Therefore, at issue is not a single taxation but overall economic conditions.” President Roh might say that the Mulroney administration failed because of GST, but it is hard to simplify the event.

Shin also said that it is not that GST alone that eased the government budget deficit but that other economic policies played a bigger role. It is all the more true considering that the Chrétien government that had won general elections in 1993 remained in power in the next elections without repealing the Mulroney administration’s GST.

Ho-Gab Lee gdt@donga.com