(1515 )
Hon. John Manley (Minister of Industry, Minister for the Atlantic Canada Opportunities Agency, Minister of Western Economic Diversification and Minister responsible for the Federal Office of Regional Development-Quebec, Lib.): Mr. Speaker, I am very pleased to engage in this debate today on behalf of the government, speaking in support of Bill C-70, the harmonized sales tax. This legislation represents a very important first step for the replacement of the goods and services tax with an integrated federal-provincial sales tax which is going to be a better sales tax system for Canada.
On April 1, 1997, Nova Scotia, New Brunswick and the province of Newfoundland and Labrador will break new ground when the retail sales taxes and the GST in those provinces are replaced with the new harmonized sales tax. The governments of these three provinces are to be commended for their foresight in proceeding with the HST. Rather than waiting for the remaining provinces, they have put aside the political grandstanding and joined in what is a positive initiative for their taxpayers and the consumers in their provinces.
Next April the three participating provinces will have a simpler, less costly and more efficient sales tax system. The bill before us today is a distinct improvement over the GST and will represent for those three provinces a comparative advantage over the other seven provinces.
Sales tax under the new system will be charged at a single rate of 15 per cent on the same tax base as the GST. HST will not apply to goods currently not subject to GST, things like basic groceries, prescription drugs and medical services. The benefits to consumers are very important.
For Nova Scotia and New Brunswick sales tax will drop from a combined rate of 18.77 per cent to 15 per cent. In Newfoundland and Labrador that rate will decrease from 19.84 per cent to 15 per cent.
At present the sales tax system in Nova Scotia, New Brunswick and Newfoundland and Labrador is cumbersome, costly and complicated. The current system inflates prices. Businesses are now taxed by the provinces on the items that they buy to run their companies. Businesses pay a tax on these inputs. However, consumers pay for it in the end because the tax is embedded in the final price. Most consumers do not even know about these hidden taxes. The sales slip, for example, may say that 11 per cent or 12 per cent of the purchase price was provincial sales tax. However, a significantly higher rate may have been paid because of the taxes buried in the final price. About 34 per cent of sales taxes collected by the provincial governments are hidden in the price of the goods. That is over $700 million worth of hidden taxes. I find that unacceptable.
Consumers are also paying in reduced jobs and incomes because hidden sales taxes drive up the prices of provincial exports, thereby making those products less competitive on Canadian and foreign markets. All of this changes under integrated value added tax.
Harmonization will eliminate the $700 million in hidden provincial sales taxes because businesses will be able to claim an input tax credit for tax paid on the goods and services bought to make their products and run their operation. In other words, businesses will no longer pay provincial sales tax during the production and distribution process. That means consumers will no longer pay provincial sales tax on the provincial sales tax already included in the price of goods that they are buying from businesses. Instead, tax will apply once and only once on the final sale price of a good or service.
Consumers will benefit from lower tax rates on most goods, lower prices on many goods and knowing the full price before they get to the cash register.
Consumers will pay tax on a broader range of goods and services but the broader base will make it possible to keep the HST at a lower level. Including services in the tax base will spread the tax burden more evenly across all sectors of the economy. Governments must ensure that revenues keep apace with changes in the economy.
(1520)
Service industries are the fastest growing component of expenditures in Canada. Some critics maintain that expanding the tax base will mean higher prices but consumers will benefit substantially from lower tax rates in each province.
For Nova Scotia and New Brunswick the new rate will effectively be almost four points lower than the current combined rate. For Newfoundland and Labrador the new rate will effectively be almost five points lower than the current combined rate.
[Translation]
As I just said, abolishing the provincial retail sales tax on business inputs will enable businesses to recoup the HST paid on business purchases, and as a result, these costs will no longer be hidden in retail prices.
The price of certain goods and services that were not taxed before might go up, but this increase will generally represent an amount lower than the provincial portion of the HST. Again, this will have been made possible by eliminating hidden taxes.
The HST will also ensure greater tax fairness for individual consumers and families buying various combinations of goods and services.
[English]
Evidence indicates that businesses will pass on tax savings in the form of lower prices. Past studies done in Canada and other countries show that when sales taxes are replaced with value added taxes, savings are passed on to consumers.
After the introduction of the GST in 1991, prices were monitored by the GST consumer information office. Its analysis of changes in the consumer price index showed that after adjustments, the increase in the CPI attributable to the GST was around 1.1 per cent.
The results also showed that overall the old federal sales tax was removed from prices and savings for the removal of that tax were passed on to consumers. The 1.1 per cent increase attributable to the GST was below the estimates the office had made prior to its introduction when the estimate was 1.4 per cent increase in overall prices, assuming that the savings resulting from the removal of the FST were fully passed on to consumers. The increase attributable to the GST was 1.5 per cent over the first three-quarters of 1991.
These figures included adjustments for inflation and other tax changes. After adjustments, prices in 20 out of 46 categories of goods and services surveyed had actually gone down when these prices were compared with pre-GST prices.
Business pass through of tax savings is a direct function of competitive markets. Any business that fails to take advantage of harmonization to improve its price competitiveness will soon find itself priced out of the marketplace. Competition among businesses is intense in today's marketplace. If one business can attract more customers by reducing prices, other businesses will be forced to follow suit in order to stay in business.
Studies of the Canadian experience under the GST and those of other countries that have adopted a value added tax model indicate that market forces ensure that business savings are fully reflected in consumer prices within a very short period of time.
Members should know that 18 other countries have value added taxes so Canada is not venturing into new territory. The longest running value added tax can be found in Australia where it was introduced in 1930. Denmark has had a value added tax since 1967, France and Germany since 1968 and the U.K. since 1973. One might ask: ``Then what is wrong with the GST?'' The answer is very simple. Not one of those countries has two contradictory co-existing levels of retail sales tax.
In introducing the GST, the previous government gave Canada one unique characteristic among countries of the world: two retail level sales taxes applied on different bases to different goods and services, all paid by the consumer on the basis that they have to go to the cash register to figure out whether the good is taxable under the GST and under the PST, under the GST but not the PST, or perhaps not the GST and the PST. Then they must calculate the appropriate rate doing the two different calculations to see whether it is 7 per cent GST and 8 per cent PST, or perhaps it is 9 per cent depending on the province, or if you are fortunate enough to live in Alberta, zero per cent PST.
(1525 )
You can see that this is slightly different from a totally harmonized sales tax where the consumer picks up the good at the counter, goes to the desk and pays the price marked on the good. That is progress.
With businesses now having to apply, collect and remit HST when they sell into a participating province, these goods will not be free of provincial sales tax. This means that consumers buying locally will not pay any more tax than consumers ordering goods from out of province firms.
As I say, a key benefit of the HST to consumers will be tax inclusive pricing. Consumers across the country have clearly indicated their preference to know the full price of an item before they actually make a purchase.
The days of consumers in Nova Scotia, New Brunswick, Newfoundland and Labrador calculating taxes mentally, on the back of an envelope or having to carry a calculator with them before they go to the cash register, will soon be over because the sales tax will be included in the price which is what consumers across Canada want to have. At the same time, the amount or rate of sales tax payable will be visible on receipts and invoices so that consumers will still know how much and what tax they are paying.
[Translation]
The flexibility incorporated in the tax inclusive pricing rules will reduce unfair competition, since businesses will be able to continue posting the before tax price next to the tax inclusive price.
Similarly, participating businesses will not be at a disadvantage vis-à-vis the competition from everywhere else.
In addition, the federal and provincial governments will work together to ensure that consumers are informed of how the tax will be included in prices. Participating governments want this process to be transparent. Under the tax inclusive pricing scheme, the amount paid in tax will be clearly visible on receipts. Consumers will know right off how much the goods and services they buy will cost because the tax will be visible.
[English]
Next April consumers in Nova Scotia, New Brunswick and Newfoundland and Labrador will have substantially lower sales tax rates, a simpler sales tax system and lower prices on most goods. Would that it be true as well in Ontario. They will also know the full price of an item before they get to the cash register. They will pay only one tax and they will know how much tax they are paying. They will know that their federal and provincial governments are working more efficiently by eliminating needless and costly duplication.
Bill C-70 represents a significant step toward the goal of a fully harmonized sales tax system in Canada. I would like to add that the federal government and the governments of the three participating provinces will not generate any more revenue under the HST than they do now under the existing taxes.
Harmonization has many supporters. When the announcement was first made last April, Nova Scotia's finance minister explained this by saying: ``On balance we believe consumers will come out ahead. It may cost you $1 more to fill up your tank, but on a $500 car repair bill you will save more than $20 in tax. You may pay $1 more for a haircut but you will save a buck when you buy shampoo, soap and toothpaste''.
An excerpt last April from a press release issued by the Certified General Accountants Association said: ``There is no question that today's announcement with Newfoundland, Nova Scotia and New Brunswick will be a tremendous shot in the arm for consumers in those provinces''.
Rosalie Daly Todd, Consumers Association executive director had this to say: ``Consumers will no longer have to guess at the total cost of their purchase, a situation which has been the source of frustration for many people. At the same time, listing the amount of tax on the bill or receipt keeps the tax visible and the tax makers accountable to consumers''.
Newfoundland's finance minister is quoted as saying last April: ``Taxpayers would have $105 million more to spend, save or invest and there would be significantly lower after tax prices on a wide range of goods and services, and significantly less tax paid by the people of the province''.
(1530 )
In October, Elizabeth Beale, Atlantic Provinces Economic Council president, was quoted as saying: ``The HST will be an improvement on a number of fronts. Consumers should see relief in the total level of taxation dropping on a whole range of products''.
APEC recently issued a report that was highly supportive of sales tax harmonization. It identified significant economic and administrative efficiency benefits to the harmonizing provinces. That is the reason the premiers of the three Atlantic provinces have bought advertising space in newspapers displaying the Atlantic advantage: no sales tax in Nova Scotia, New Brunswick and Newfoundland and Labrador.
It is time that the other provinces also got on board with the harmonized sales tax. This is the tax of the future. This is a fairer tax. This is an easier tax for business to administer. It is a more understandable tax for consumers. I do not understand why a government of a province in Canada would be unwilling to move forward with a measure that is so much in the interests of its taxpayers.
Mr. Jim Silye (Calgary Centre, Ref.): Mr. Speaker, I would like to congratulate the Minister of Industry on his fine defence of the harmonized sales tax. I will make a few comments and ask a few questions along the way.
I seem to recall that when I served on the Standing Committee on Finance three years ago and we were looking at the GST replacement, I reviewed what the Liberals said when in opposition. I found that the minister was a member of the Standing Committee on Finance at that time, or at least a member of a group that submitted a minority report to the government of the day suggesting a solution to the manufacturers sales tax which was not a goods and services tax. It was not the GST. He opposed the GST. I seem to recall that he supported something completely different which was more along the lines of the single tax that the member for Broadview-Greenwood was proposing.
Mr. Manley: No way.
Mr. Silye: Okay, I need clarification on that but I know there was something different. I do not want to put words in his mouth but I would like to know what it is he recommended at that time. I do know that he was against the GST.
In his speech the minister indicated that this was an improvement over the GST. How is it an improvement when the GST has not changed? All the inherent problems are still there. In fact that party during the election campaign promised to scrap, to kill, to abolish the GST and then tried to weasel its way out of that. But let us say to even replace the GST with something which is revenue neutral, the Liberals have failed on both counts.
On the first count, the Liberals did not scrap or replace the GST. In fact they have entrenched the GST into our lives forever because now they have harmonized it with a provincial sales tax and there will be no future provincial government that will ever want to give up that source of revenue, especially at the high rate of 15 per cent. All the inherent problems of the GST will still exist. Exempt or not exempt, zero rated, all these different rules will still be there and will still cause problems.
Second, during his speech the minister said that the new harmonized tax will not increase revenues for the government. We all know it decreases revenues for the provincial governments because of the drop in their PST. In their red book the Liberals promised they would replace the GST with something that was revenue neutral.
If what he said in his speech is true, that this is revenue neutral, no more revenue to the government, which means no less revenue to the federal government, it is going to cost the federal government $961 million as a payment to the three participating Atlantic provinces. It means that this new tax is not revenue neutral, it is revenue deficient and therefore it is going to cost the taxpayers money.
Finally, I find this to be somewhat like the minister of myth. The finance minister likes to brag about the ads on the Atlantic advantage. How can the provincial premiers say there is no sales tax when there is a GST which represents the goods and services tax of 15 per cent?
Mr. Manley: Mr. Speaker, I thank the hon. member for his questions. Other than confusing my interest in a system of tax which he later supported, he asked good questions. Let me begin at the end of his comments.
(1535)
In order to understand the impact of a retail sales tax such as the provincial retail sales tax on the consumer, one must understand why the Atlantic premiers claim there is no sales tax. What happens with the existing retail sales tax is that not only is it applied to the price of the goods that are purchased, but it is embedded in the cost of every item produced and every service generated by a business in a province with that kind of tax.
Take the classic case of the barber shop which everyone likes to talk about. People say there is no tax on haircuts. Who do they think pays the tax that the barber paid when he bought his barber chairs? Who pays the tax that the barber paid when he bought all his hairdressing equipment? Who pays the tax that the barber paid when he bought all of the other services that are necessary for him to render his hair cutting service? It is embedded in the price of the haircut.
If we take the case of another business that is producing a good, then again the provincial sales tax systems as they exist in Canadian provinces cause a cascading of the tax. Every time in every stage of production tax is paid by the business on inputs, it is embedded in the price of the good that the business sells. Tax is applied to that, which includes tax on the tax previously paid, and so on down the chain.
Under the harmonized sales tax, all of that is eliminated. When a business sells a good to a consumer, the only sales tax is the sales tax that is applied at the retail level. There is no sales tax embedded in the original price of the good. That is why the Atlantic premiers can say with pride that there is no sales tax, because they have managed a system that is clean when the good is finally sold to the consumer. The consumer knows that the sales tax component he pays on that good is 15 per cent. It is demonstrated on the bill. There is no hidden sales tax. There is no hidden tax on a good in the Atlantic provinces.
Once again the member suggests, and the Reform Party has tried to make something out of this for several months, that somehow the red book did not represent this party's election promises in 1993. That of course is something the Reform Party did not try to proclaim at the time. Reformers were given the red book as were other opposition parties. Our promises were plainly made and they have been fulfilled.
If the hon. member wonders why we opposed the GST in 1989 and 1990, then I commend to him the report that we wrote. Circumstances have to be dealt with as they are found at the time. We recommended against implementing this tax for some of the same reasons that we are trying to fix it now.
As I spoke of earlier, with two sales taxes at the retail level, it is the only jurisdiction in the western world that has tried to do that. It was not a good idea. It was confusing. It was predictable that we would have the tax chaos which resulted. But there was no turning back the clock and saying we wished it had never happened and let us go back to the old sales tax and begin with that. Time had moved on.
When the Liberals campaigned in 1993 we made it very clear what we would do. Given the reality that the government of the day had already imposed the GST and that the introduction of the tax had been absorbed in the economy, we said that we would have the finance committee study it in the first year of government and prepare a report on how we might move forward to produce a better tax that would be harmonized with provincial sales taxes.
It is disingenuous of the hon. member to suggest that he can take things out of a 1990 debate in the House of Commons before the law was enacted, before the tax was imposed, before the retail community had to make the adjustments in order to apply the tax, before the manufacturers sales tax had been withdrawn and use them in debate in 1996 when we are trying to make the mess we found liveable for retailers and consumers. It might be good political rhetoric but it is not precisely what the hon. member
would like to be identified with in putting real and substantial choices before the Canadian public as we move on from here.
(1540)
Mr. Myron Thompson (Wild Rose, Ref.): Mr. Speaker, in 1993 in Wild Rose the campaign was hot and heavy. ``We will scrap, we will kill, we will abolish the GST'', were the words I heard.
I am pleased to see a front line minister speaking to this issue. I also noticed that another front line minister, the former minister of revenue who is now the Minister of Transport, made a prediction in a Victoria newspaper where he said that voters will punish any provincial government that fails to merge its sales tax with a revamped goods and services tax. If that be the case, then why in Prince Edward Island, where the Liberals were pushing for this merger of taxes, were they so soundly defeated?
Mr. Manley: Mr. Speaker, I found it a little hard to follow the question since Prince Edward Island is not one of the provinces that adopted the harmonized sales tax. One might argue that had they done so, they would have been re-elected.
I would like to take the opportunity to refer to the comments that were made by hon. members opposite with respect to compensation paid to the Atlantic provinces in order to make this transfer. Any time a transition is made on a very substantive policy issue, transition payments are often considered.
I point out to hon. members opposite that when the government moved to eliminate the transportation subsidy under the Western Grain Transportation Act, popularly known as the Crow rate, a full $1.6 billion was made available to western farmers in order to compensate them for this important transition. It was painful, there is no doubt about it. In the long term it is the correct policy, the best policy for the economy of Canada. It is the best policy for western Canada and the best policy for the western Canadian farmers who are making the adjustment. Never once did that party get up and criticize compensation being paid to western Canada.
How is it when another important change is made which is good for the economy of Canada and good for the economy of Atlantic Canada and has short term cost implications for the provinces involved that a one time transition payment is so offensive to that party? It sounds to me like the petty politics of regional envy.
Mr. Jim Silye (Calgary Centre, Ref.): Mr. Speaker, I rise today to address or undress this government on its proposed legislation for a harmonized sales tax and to streamline the GST under Bill C-70.
First, I have a little humour that might put this in perspective. A good friend of mine in Calgary, Martin Struthers, is a travelling salesman in the clothing line. He told me that he ran into a lot of Liberals over the summertime on the golf course. They were playing with a particularly cute golf ball that had the logo of the current Deputy Prime Minister on it. When he asked the Liberals why they were using this golf ball they said: ``Well if we use this golf ball, we are free to change our lie any time''.
On November 29, 1996 the government boldly issued a press release announcing that three Atlantic provinces, Nova Scotia, New Brunswick and Newfoundland and Labrador, had agreed to harmonize the GST and provincial sales tax effective April 1, 1997. The effective date is important. It is next year, not this year. I will come back to that later on in my speech.
The finance minister is quoted as saying: ``This proposed legislation represents another step toward an integrated national sales tax system for Canada''. I stand before this House to state unequivocally that this comment by the finance minister is misleading, that the steps he has taken to harmonize the GST are hypocritical and that this whole exercise is nothing more than politically self-serving by Liberals at its worst. These are the three arguments I wish to address and I will do so under those titles: misleading, hypocritical and politically self-serving.
Under misleading, it is misleading that the rest of the country will not participate in the harmonized sales tax system even though the finance minister says that this is leading toward it. P.E.I. dropped out. Ontario has said to take a hike. Alberta wants the net effective rate that the Atlantic provinces get, which is 5.5 per cent. His whole claim that he is moving forward contradicts the facts.
(1545)
Take Ontario. Why would Ontario comply when it has already indicated that it would cost Ontario consumers another $2 billion in goods and services with a combined rate? Why would Mike Harris want to punish Ontarians just to play politics with the 99 Liberals who are doing very little for Ontario, other than downloading their problems in health care, education and welfare, increasing taxes through the elimination of certain loopholes and tinkering with the corporate rate structure?
On top of that, the government's share of the billion dollar bribe to entice the three provinces to participate is going to cost $400 million over three to four years.
It is misleading for it to claim it is making progress when only three provinces out of ten are participating.
The finance minister has failed to get the other provinces to participate. Why? It is a tax increase on consumers. Even the department of finance of Nova Scotia, one of the participants, in its analysis of May 1996 revealed that the net effect of the harmonized sales tax burden on consumers would increase by $80 million.
Retailers, especially national retailers in the region, claim that their extra costs to retain a dual system of taxation for those stores within the three provinces and for those outside will cost them $27 million.
The government claims, in defence, that businesses will pass on any portion of their savings achieved through harmonization. Excuse me, based on what prior evidence? There will be a $107 million increase to consumers in Atlantic Canada. That is what will happen through a reflection of price increases. A billion dollars has been taken from the federal coffers, from the rest of Canada, to transfer the system.
It is misleading to state that the Reform Party supports harmonization. In the Standing Committee on Finance, of which I was a member and one of the co-authors of the report, when the government was looking for a GST replacement we indicated quite strongly that if the government was going to harmonize it had to harmonize on a national basis, with all the provinces, at the same time, and make it revenue neutral, with the widest possible base, providing the lowest rate. That has not been achieved. Other provinces will not participate. We clearly stated in our executive summary that harmonization cannot be fully endorsed. Talk about being misquoted and taken out of context.
Therefore we oppose the harmonized sales tax in its present form. If the government would bring us something which is for all of Canada we would consider it.
It is misleading to claim that this will save money when it will cost the rest of the provinces close to $1 billion, $961 million to be exact. We call it a bribe to compensate the provinces for the lost revenue of the lower PST and to entice them to participate.
That is very misleading. Who is going to compensate the other provinces, entice them or bribe them? Where is the money going to come from to provide the lost revenue for the other provinces, such as Saskatchewan, as the member previously mentioned?
This move is also hypocritical. I will touch on this point briefly. When in opposition the finance minister said: ``I would abolish the GST because the manufacturers sales tax is a bad tax, but there is no excuse to repeal one bad thing by bringing in another''. That appeared in the April 4, 1990 edition of the Montreal Gazette.
On March 17, 1990 in an interview with the Calgary Herald the finance minister said that the GST is a tax which discriminates against the regions and that he would get rid of it if possible. However, he said it would be difficult to do that if the federal tax becomes integrated with provincial taxes: ``If it becomes integrated'', which the government is now bragging about, ``with provincial taxes'', which it has just done, ``we will never get rid of the GST. We will never replace the GST''.
He further said that another alternative would be to look at alternative consumption taxes that are not regressive and do not penalize the regions of the country.
We are talking about the hypocrisy of the finance minister's statements. The hypocrisy lies in the fact that he has acted exactly opposite to what he said in opposition and opposite to what his personal beliefs are. He has entrenched the GST instead of getting rid of it. He has also introduced a taxation system which penalizes the non-participating provinces to the tune of $961 million. He is making seven provinces pay for lower tax rates in three provinces and basically penalizing the rest of the country just to integrate a bad tax, which he said he would never do. His deal is with three provinces that have Liberal premiers, three provinces that may soon have three Conservative premiers once this ripples through the economy of those three provinces.
(1550)
We do not need to remind everybody what happened in P.E.I. My colleague from Wild Rose has already pointed that out. That Liberal premier lost his job thanks in great part to the federal Liberal government and its action in this regard.
I believe it is also hypocritical to argue that the Liberals have a pan-Canadian view of Canada because they are taking from the richer provinces and giving to the poor. Is this a new definition now of equalization payments where seven provinces are paying for ten, a complete reversal of the current equalization system where three provinces pay for seven?
It seems to me there is hope for Reform's fresh start platform. We suggest that we should review the equalization payment system and have maybe the top five provinces paying the bottom five and have a little competition in there which would be a better approach to a new vision for a better Canada.
Finally, I also feel that the harmonized sales tax is politically self-serving. We all know the promises from the Deputy Prime Minister, the Prime Minister to the finance minister and a whole bunch of other MPs during the campaign about what they said at the door and also what is in the red book. They have not even kept their red book promise because this is a partial and it is not even revenue neutral and any way you cut it they have broken their promise.
We all know about the member for York South-Weston who has quit over this because of principle. We all know about the member for Broadview-Greenwood. What these people campaigned on and what they delivered are two different things.
In order to limit the damage and in order to continue the myth that they are solving and keeping their red book promises they have introduced this GST harmonization at a huge cost to the country, at a great disservice to the premiers of those three provinces who
were hoodwinked, bribed and misled and where the Atlantic residents will see their cost of living go higher.
The finance minister has admitted that he failed to deliver on his promise to scrap the GST. The Deputy Prime Minister admitted they have not delivered on their promise and quit subsequently. She never promised that she would run again but she did and she got re-elected.
The only person who fails to admit that they failed to deliver on their election promise is the Prime Minister who is off around the countryside taking credit for all the global deals, thanks to businessmen who have been working hard for five years and thanks to the previous government that fought hard and implemented free trade and the North American Free Trade Agreement.
This harmonized sales tax is politically self-serving because they have told the Atlantic MPs to keep quiet. Why are they not speaking out on this and telling us how wonderful it is and how great it is? Why do they not go on the record and tell Atlantic Canadians that this is the best thing since sliced bread and there is no sales tax in the Atlantic provinces? It has disappeared. The ads are there. Defend that. I would like to see them defend that. I would enjoy listening to them defend that there is now no sales tax in these three provinces.
There will be businesses going under in the Minister of National Defence's riding. They have already shut their doors. These Atlantic MPs have been told to stay quiet. Where are they? How can all of them say this is a good deal in light of all the people who have come forward and said this is not a good deal, especially MMG Management Group which runs discount chains under names like Greenberg, Red Apple, MetMart and Metropolitan in New Brunswick where 79 jobs have already been lost due to this harmonization and a 50-50 chance of another 71 jobs being lost according to their own calculations?
The worst example of all that I have of political self-serving is contained in the Public Accounts, volume 1, pages 1.24 to pages 1.26. It talks about the whole financial aspect of accounting and also the auditor general's comments: ``Responsibility for the integrity and objectivity of the financial statements rests with the government. The financial statements are prepared under the joint direction of the President of the Treasury Board, the Minister of Finance and the Receiver General for Canada in compliance with governing legislation''.
The auditor general then gives his comments. Here are some of his startling concerns that he felt should be brought to the House and parliamentarians made aware of: ``The inclusion of transitional assistance'', which is the same debt word as bribe, ``of $961 million in the 1996 deficit and accumulated deficit represents a departure from both sound accounting practice and the government's own accounting rules. In my opinion the transitional assistance of $961 million should be included in the deficit
subsequent to the 1995-96 fiscal year. Failure to comply with generally accepted principles resulted in an overstatement by the annual deficit and accumulated deficit of $961 million''.
(1555 )
Mr. Campbell: Mr. Speaker, on a point of order. The hon. member purports to be quoting from the auditor general's report and he made reference to the word bribe. I would like to know if that is part of what he is quoting from the auditor general. If not, would he excise that and read the quote again without that word in it.
The Acting Speaker (Mr. Milliken): I think the hon. member is raising a question to the member for Calgary Centre. However, if he wishes to clarify the matter, I am sure he would be pleased to do so.
Mr. Silye: Mr. Speaker, I will clarify. I thank the hon. member for the correction. I did kind of ad lib. The word bribe is not in the report.
Here are his startling concerns: ``The inclusion of transitional assistance of $961 million in the 1996 deficit and accumulated deficit represents a departure from both sound accounting practice and the government's own accounting rules. In my opinion the transitional assistance of $961 million should be included in the deficit subsequent to the 1995-96 fiscal year. Failure to comply with generally accepted practices resulted in an overstatement of the annual deficit and accumulated deficit of $961 million''.
The transitional assistance of $961 million has been recorded as a liability at March 31, 1996 and as an expenditure, a resultant increase in the deficit for the 1995-96 fiscal year.
As I said at the outset of my intervention this afternoon, this agreement does not come into effect until April 1, 1997, two fiscal years later, the year ending 1997-98.
Is this bribe or transitional assistance, as the government prefers to refer to it, a liability as of March 31, 1996? Clearly this is not the case because according to generally accepted accounting principles and the government's own rules: ``Financial obligations are recorded as liabilities if the underlying event occurred prior to or at year end''. It did not occur prior to March 31, 1996 and it did not occur at year end March 31, 1996. In fact, it is occurring now. Agreements are being signed now and they will take effect April 1, 1997, which is the next fiscal year, not even in this one ending in 1997.
Also: ``Transfer payments are recorded as expenditures when paid and when the recipient has fulfilled the terms of a contractual transfer agreement''. Clearly this is not the case. They have not fulfilled the terms of the contractual agreement. The auditor general agrees with me because he states in the Public Accounts:
``Eligibility criteria had not been met by the three provinces by March 31, 1996 and, accordingly, the $961 million of compensation should not have been recorded in the accounts at that time. Although the government is committed to compensating the provinces once agreements are signed, the $961 million is not payable until the agreements are signed''.
The government and its officials hung their hats on memorandums of understanding. Mr. Speaker, I know you were an outstanding lawyer when you where practising and know the terms of law very well. You and I both know that letters of agreement, memorandums of understanding have a certain way of sometimes changing. That is why the auditor general is right. That is why generally accepted accounting principles cannot be departed from. Shame.
The integrity of government financial statements is at stake. This action on harmonization impairs the integrity of the process. Shame. Shame on the finance minister, the deputy finance minister, the President of the Treasury Board, the secretary of the Treasury Board and the receiver general and the deputy receiver general, who have all compromised some integrity, walking a fine line on interpreting generally accepted accounting principles and prior government practices, setting a new precedent just to help the Liberals fulfil a self-serving political promise and to help the finance minister bury the high cost of harmonization in a prior year ending in 1996 just because the government had bettered its deficit target and done better than it had projected in that year. Therefore this was a good time to bury it, hide it and then forget about it and we will not have to record this transition cost, this bribe, this enticement, whatever anybody wants to refer to it as. This is nothing more than political self-serving and I say shame.
(1600)
I have given examples and testimony to prove conclusively that this feeble, partial, half-hearted effort of replacing the GST with something that is revenue neutral is not. I quote from the red book. I am trying to interpret legitimately, accurately what the Liberals now say they promised door to door.
Knock, knock. Hi, I am the member for Broadview-Greenwood. I will replace the GST with a tax that is revenue neutral, that will take as much money out of pockets as it does now and then we never worry about the GST again. That is what the Liberals said they promised. I believe with the examples I have given I have pointed out how misleading, hypocritical and self-serving have been their remarks for a period of four years.
This is an important issue. The GST is a bad tax. In and of itself it can be good in terms of consumption taxes. But when it was introduced the Liberals in opposition argued against it, as they should have. Now that they are the government they promised to get rid of it. They have not. They have entrenched it.
Most everyone acknowledges that the GST has been the biggest cause of the growth in the underground economy. How is it then that by entrenching a 15 per cent tax is going to eliminate the growth in that economy and eliminate the activity within that economy?
The Liberals brag about how this is a step in the right direction, how this will replace the GST and be revenue neutral. We will still have the high cost of administration of the GST type of tax that we had. Reformers feel that the government should get out of this domain altogether, leave it to the provinces. The $15 billion net revenue required should be put into a simplified tax system featuring a dual rate. That is how to raise that revenue. That is simplifying it. That is eliminating the GST. That is making it revenue neutral. That is solving the problem.
Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance, Lib.): Mr. Speaker, I will use the same themes that the hon. member opposite used: misleading, hypocritical and self-serving but I will throw them back at him.
The hon. member is misleading the Canadian people. The auditor general did not qualify the financial statements of the Government of Canada. He made an observation. We disagree about that observation. That is entirely permissible and within what is appropriate under generally accepted accounting standards. The hon. member knows that.
The hon. member also said the tax is not revenue neutral. I ask him to prove that. That is untrue, it is revenue neutral.
It is interesting under hypocritical. I had the privilege to work with the hon. member. He worked diligently with other members of his party on the committee that went across the country looking into replacements for the GST. I will tell who is hypocritical. The hon. member supports harmonization. He neglected to tell us that.
Under self-serving, it is interesting. The hon. member attacks the transitional assistance but I have never heard him attack the $1.6 billion paid to western grain farmers when the Crow rate subsidy was removed. Not a word. Here we have a member from one region of the country criticizing transitional assistance going to another area of the country and telling them what is good for them but never rising to criticize similar transitional assistance in his own backyard.
This is a quiz show if you will, Mr. Speaker. I ask the hon. member one further question. Who said the following? ``I want something that works. If we had one value added tax, one base, one bureaucracy to collect it, the manufacturers and businesses in Ontario would save over $1 billion by being able to deduct those costs that cannot be deducted today on the sales tax. It has been one of the areas of a major competitive disadvantage that Ontario manufacturers have had and Ontario businesses have had. I say stop the rhetoric, stop the politics, stop the finger pointing. Get on with harmonization and simplification of the GST or whatever the new initials are, along with the PST''. Who said that? I will give the
hon. member a hint. He is now the premier of the province of Ontario.
Mr. Silye: Mr. Speaker, I thank the hon. member for his intervention. I will try to answer his comments about my misleading the public and that the auditor general did not qualify his observations in his signing off on the financial statements.
(1605 )
I agree with the hon. member. He did not make a reservation on it because he said: ``Substantially the changes and effect that would occur that year might happen but the significance would happen and those looking at the Government of Canada from afar would be able to recognize that that is the intent of the government''. However, he did make it clear and spent a lot of effort in pointing it out to us, notwithstanding that he did not make a reservation on it and signed off.
The point is that if we start allowing politicians to do things with financial statements that go to the edge of generally accepted accounting principles, integrity is at stake. When you go against the history of 126 years in Parliament, which has never been done before, of taking something that has not been consummated, that may lead to a deal down the road and charge it off to prior years-
Ms. Clancy: Gobbledegook.
Mr. Silye: No, that is not poppycock. That is exactly what has happened and that is what the auditor general is making us aware of. We should be aware of it so that this kind of stuff will not be allowed to happen.
I am not misleading. I acknowledge that there was not a reservation. I just did not put it in my speech. Am I misleading by saying it is not revenue neutral? I accept the claim that it will generate the same amount of money as is currently being generated by the GST but there is a cost to setting up this new system.
When the Liberal red book stated that they would replace the GST with something revenue neutral, they did not say at a cost of $1 billion or $2 billion or $100 million. There was no cost to it. I assumed and I think most Canadians assumed that they would replace it with something that does the same. If it was supposed to save money in administration and in efficiency and if it saved money for businesses and governments, it should not cost us a billion dollars. We know why it cost us a billion dollars. It was either a bribe, an enticement or a transitionary cost. Any one of those three can be picked. I know the government will take the transitionary cost.
We have never supported harmonization. He and I were on the committee. The minority report of the Reform Party on replacing the GST clearly stated in its executive summary, right from the beginning to the end, that: ``Harmonization cannot be fully endorsed. While harmonization does simplify the tax system, it makes no sense to do it in a piecemeal, ad hoc fashion because it simply increases the confusion, the cost and the resentment across the country''. That is what the government is doing.
The purpose is to eliminate dual tax regimes but this version retains it for national firms. The Reform Party opposes tax inclusive pricing. This practice violates the principle of open taxation which is essential to efficient functioning of open democracies. The disclosure of taxes paid on cash register receipts preserves an element of openness in taxation but as the experience in Europe has shown, it eventually results in strongly diminished public awareness of the tax.
The Reform Party sees the GST as an unnecessary temporary tax which does not belong in the federal domain, but inasmuch as the tax will exist temporarily, then the Reform Party encourages the government to streamline taxation, remove as many of the significant problems that exist until such time as a much wider tax reform that provides both tax relief and tax simplification can be implemented.
If the government presented a national integrated sales tax with the lowest possible rate on the broadest possible base, the Reform Party would seriously consider looking at such a proposal. However, the government is not doing that. This is a piecemeal, ad hoc presentation. This would be only conditional consideration because the Reform Party's final solution to the GST, as I mentioned earlier, would be to eliminate the GST after the budget is balanced, incorporate the net revenue required into a simplified tax system featuring a dual rate.
I think I have addressed the issues of the hon. member of being misleading and hypocritical. I welcome that. If I challenge them for being misleading and hypocritical they have the right to accuse me of the same. I have, unlike the government, addressed each of those items and have given my answers. I would now like the hon. member, if there is a minute left, to tell me if I am still misleading and hypocritical in light of my answers.
Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance, Lib.): Mr. Speaker, I was pleased to hear the hon. member say that in the minority report they did endorse harmonization, although not without some qualifications. At least we have that much on the record because he neglected to say that they support the principle of harmonization. I thank him for that clarification.
(1610)
Mr. Silye: Mr. Speaker, I would like to further add, so that the member does truly understand, we would eliminate the GST unlike his government. Given, however, that the GST is going to be around for another three years or so, if it is possible to improve the
tax regime and eliminate and simplify and reduce taxes, then we would support the government in measures like that.
But as an overall philosophy this party does not and will not support the harmonized sales tax in the present form that this government has put forward.
Mr. John Murphy (Annapolis Valley-Hants, Lib.): Mr. Speaker, I will be sharing my time with the member for Halifax.
I am pleased to have the opportunity to speak on Bill C-70 respecting the harmonized sales tax agreement. I have listened closely to the debate today and some of the criticisms that members from parties opposite have raised.
Let me take a moment and read a number of quotes from national organizations regarding the need to move on to a harmonized tax system. In June 1994 the president of the Retail Council of Canada stated in an interview: ``Harmonization is abundantly desirable. The provinces cannot ignore forever the pressures that are on us as a nation to get our House in order and getting the sales tax right is an important element of that''.
In the same month the president of the Canadian Chamber of Commerce said: ``They,'' meaning businesses ``could create more jobs if the PST and the GST were integrated by doing more business more efficiently and more effectively''.
Even the members of the third party, and we heard that from debate here, supported harmonization in the minority report on replacement of the GST. In that report they said: ``It is simply unacceptable that Canada remains the only country in the world with 10 different sales tax regimes. We commend the government on its attempt to harmonize the tax with the provinces''. That is exactly what the government is working toward.
As the House is aware, on October 23 three provinces, Nova Scotia, New Brunswick and Newfoundland and Labrador, signed a harmonization deal with the federal government, In doing so, these provinces have taken a bold step forward. It is a step that will help the three Atlantic provinces to become more competitive, more self-sufficient and more attractive for businesses.
In signing this deal, the province of Nova Scotia and its two partners are leading the way to what I believe will be an eventual agreement among the provinces and territories. Let us look at the facts. Over its lifetime the GST has taken an additional $3 billion out of the Atlantic region, a bigger increase in federal sales tax payments than in any other part of Canada. In signing this agreement these three provinces will receive adjustment assistance close to $1 billion over four years.
I have heard the criticisms from members opposite on this element of the deal. I would like to remind my colleagues, however, that this decision is consistent with Canada's long standing principle of providing adjustment assistance to provinces and individuals when they need help adjusting to major policy changes initiated by the federal government.
I want to emphasize quite clearly what the agreement will mean to Nova Scotia. In Nova Scotia the harmonized sales tax agreement will improve its economy and its competitive position vis-à-vis other provinces. The agreement will ensure that $100 million more will be left in the pockets of Nova Scotians. This extra money in the economy will mean a permanent increase in Nova Scotia's gross domestic product of .8 per cent. Over the next few years that will translate into approximately 3,000 new jobs.
A central component of the sales tax reform is that the new system must be both fair and simple to use. The HST meets both of these criteria. Consumers and business people will operate in a marketplace where the rules are clear and where there is less paperwork.
(1615)
For consumers, all Nova Scotians will benefit from a tax rate that is almost four points lower than the current combined rate. The new system will mean lower prices on most goods, not only because the combined rate will be lower, but also because hidden provincial sales taxes will be eliminated.
As well, businesses in Nova Scotia will experience many competitive advantages under this new system. With full input tax credits, operating costs on everything from phone bills to computers will come down. Many other business expenses will also be lower, including hotel and meeting costs. This will provide an opportunity for local businesses to expand and to grow, and that is what this is all about. It also gives businesses an excellent reason to locate in my province of Nova Scotia.
For businesses the HST will mean they will only have to administer one tax instead of two; one collector, one auditor. Businesses have campaigned for a simpler administration system for many years. As of April 1 next year, we will be able to deliver.
I would like to turn for a moment to a number of specific sectors.
Let us look at the issue of tax rebates on books. During the summer months I heard from many businesses and individuals in my constituency of Annapolis Valley-Hants. They were calling for an exemption on the taxation of books. The message I heard was that the continued taxation on books was in effect an impediment to promoting and improving literacy in Canada. This is a view that I brought forward to the Minister of Finance in early August on numerous occasions. I was pleased therefore when the minister responded positively to these concerns.
Under the HST there will be 100 per cent GST rebate on all books purchased by public libraries, schools, universities, colleges, municipalities and qualifying charities and non-profit orga-
nizations. That clearly is the way to go. This rebate will support the important role played by these front line organizations in helping individuals acquire the tools they need to learn to read or to improve their reading ability.
During this time of limited resources the best way to ensure the biggest impact for every dollar spent is to target assistance which will have the most impact on literacy. This decision will have a positive impact in supporting literacy in Nova Scotia.
I also want to speak for a moment about how this agreement will positively affect the housing industry. After all, a strong component in any economy is a strong housing industry. While provincial sales tax does not apply directly to the sales or rental of residential property, a substantial amount of provincial retail tax is still embedded in housing prices. Consumers are paying for unrecoverable tax on materials such as lumber, paint and appliances. As well, contractors pay provincial sales tax on building equipment and other capital goods.
Under the HST, builders will be entitled to input tax credits on inputs used in the building of a home. That is important. In addition to that, in Nova Scotia under the HST there will be a housing rebate for all buyers of new homes to a maximum of $2,250. Coupled with decreased building material costs this will ensure that new homes cost the same or less once the new agreement is in place.
Let us turn to the tourism industry for a moment. In Nova Scotia, as I am sure everyone is well aware, tourism is a billion dollar a year industry. In my riding of Annapolis Valley-Hants, tourism is a growing area and one in which jobs can and will be created.
Under this agreement visitors from outside Canada will get their tax back on hotels, conventions, bed and breakfasts and on the gifts they take home to their families. Even visitors from other provinces will face a lower tax rate for meals and for accommodations. Clearly this agreement will make our tourism sector even more competitive and more successful.
(1620)
As any government whether federal, provincial or municipal can say, tax reform is never an easy process. Any attempt to change and improve the tax system will inevitably lead to criticism and calls to leave things as they are. But I believe the agreement our government has reached with the three Atlantic provinces will improve the economy of Nova Scotia and will free up more money for Nova Scotian families and businesses.
This package will help create jobs and it will help the economy grow over the long term. For those provinces that have taken the lead and signed on to this agreement, they will become more competitive both nationally and globally.
Mr. Myron Thompson (Wild Rose, Ref.): Mr. Speaker, some information has been supplied to me regarding some comments about this whole idea.
The Retail Council of Canada has said that by forcing stores to bury the new tax in prices, the harmonized tax regime will cost retailers at least $100 million a year. A study by Ernst and Young, the government's own accounting firm, estimated that a midsized national chain with 50 stores in the Atlantic provinces would pay up to $3 million in a one-time start up and $1.1 million a year to comply with this new system.
The Halifax Chamber of Commerce has predicted that the harmonized sales tax will push up new house prices by 5.5 per cent and will force municipalities to raise the property taxes. The Canadian Real Estate Association says that harmonization will increase the cost of a new house by $4,000 in Nova Scotia and Newfoundland and by $3,374 in New Brunswick.
GST harmonization is responsible for the closure of five Greenberg stores and the loss of jobs. I thought the issue of jobs was really important to this government. The management of this store has said that there is a 50-50 chance of further store closures and the loss of more jobs.
I am really surprised that the backbenchers from the Atlantic provinces are not in an outrage over losing jobs and raising more taxes. There must be a lot more here than what they are mentioning to the people of Canada including the taxpayers across the Atlantic provinces.
Consumers will pay more for funeral services, children's clothing, books, auto repairs, electricity, gasoline, home fuel heating, haircuts and a whole bunch of things. They will be paying more for these things and many of these families can barely get by now.
I am really confused that members from the Atlantic provinces are willing to accept this job killing situation. That is what is happening. It is killing jobs. Those who are making these statements are high-fluential people.
Ms. Clancy: High-fluential, high-fluential, whoa.
Mr. Thompson: They have some knowledge about what is going on. They are on real estate boards and councils.
Ms. Clancy: High-fluential.
Mr. Thompson: The best thing the member for Halifax can do is yap off at the mouth. She is sitting there heckling somebody else and she does not know what she is talking about. I will direct my questions to the other member who spoke eloquently, and I thank him for that.
These are highly influential people who are making these comments. I am not the one who is making them but people who have the knowledge of what is going on are. I would like the member to respond.
Mr. Murphy: Mr. Speaker, the technology for the changeover is already in place. There will be some changes but the technology is in place and it is not the same as introducing a whole new system.
The member talks about the prices of houses going up. I just indicated in my speech that housing prices will go down because the input costs will go back into the industry and they will bring the prices down.
The member mentioned that jobs are being lost. One of the major features of this tax is that over the long term, over the next few years, jobs will be created. There will be all kinds of input taxes being returned to the different companies in Atlantic Canada and in Nova Scotia in particular. They will have more money to work with. Consequently, they will be able to put that money back into improving and expanding their businesses and obviously creating jobs.
(1625)
About 73 per cent of Nova Scotians who were surveyed prior to this system coming into place wanted a system which provided one price which included the tax in it. Businesses asked for it. That is why we made these agreements with the Atlantic provinces, with the exception of P.E.I. We wanted to create a better situation for the consumers, namely that they would be able to go to the cash register with a $15.95 price tag and pay $15.95.
I am sorry that the member opposite has been misled. Unfortunately, his comments the way he put them are incorrect.
The Acting Speaker (Mr. Milliken): The hon. member for Halifax on debate.
Ms. Mary Clancy (Halifax, Lib.): Mr. Speaker, before I begin my remarks in this debate, may I say that I am delighted to be speaking here today, the first time since you took up your new duties as assistant deputy chairman. May I congratulate you on that appointment, a most worthy appointment. I am delighted to be here but having said that, I am afraid that I am less delighted about several things.
First, I would like to extend my compliments to the hon. member for Wild Rose. I would let him know that the name of Canada's 10th province is Newfoundland, like ``understand''. If you are going to understand a province, you should also know how it is pronounced.
The hon. member for Calgary Centre spoke quite eloquently, if somewhat off the point, a little earlier. I would like to say a few things to him too. I have great respect for that hon. member. I know that his belief in public service and in doing things for Canadians is very strong and I take no exception to that.
However, I will say as a Nova Scotian to the hon. member who comes from Alberta that I do not think Nova Scotia members lectured Albertans or westerners when the grain farmers took a $1.6 billion subsidy from the federal government. They did not say that it was not good for them. On behalf of the members of the three Atlantic provinces who are accepting this deal and who think this is a good deal, I would just say: Keep your lectures at home. We think we know a little bit better what is good for Nova Scotia, what is good for Newfoundland and what is good for New Brunswick.
Does the hon. member really think that premiers such as Brian Tobin, John Savage and Frank McKenna get together and say: ``Let us do something bad for our provinces''? With the greatest of respect to the hon. member, does he really think that people who have barely gotten their feet wet in the salt water of the Atlantic Ocean know better than these people who have led their provinces in good times and in bad? Does the member really think that he knows better what to do for Nova Scotians, New Brunswickers and Newfoundlanders than Frank McKenna, John Savage and Brian Tobin? I do not think so.
With the greatest of respect to members of the third party and possibly others in the official opposition who might oppose this excellent plan for Atlantic Canadians, may I say that in that region they are not even on the radar screen politically and there is a reason for that. They do not comprehend what is good for Nova Scotians. Not even being able to pronounce the name of one of the provinces is a good reason they are not on the radar screen.
Having dealt with that, let me now deal with why the harmonized sales tax is a good thing for the people of Nova Scotia and her sister provinces.
(1630 )
Let me quote a premier I was talking about just a few minutes ago, the hon. Frank McKenna, one of the most successful premiers in Canadian history, I might add. Frank McKenna said on Sunday: ``This is a chance for Atlantic Canada to enjoy the single biggest advantage we have ever had in the last 50 years against the rest of the country. We are now the most competitive area in all of North America for doing business''. That comes from Premier McKenna and from the Atlantic Provinces Economic Council, a most respected organization in our region.
The GST has sucked an additional $3 billion out of our region, a bigger increase in federal sales tax payments than in any other part of Canada, so it is no wonder the three provinces opted for the new tax to replace it, along with the $1 billion in transition funding. It is only appropriate that the region that took it, Atlantic Canada, was the one that was losing the most with the GST.
What is going to happen with this transitional funding? The transitional funding will be used in part by the provinces accepting this to assist those small numbers of consumers who are going to be hurt somewhat by the broader base of the tax, those few things that
will go up in price. Will some things go up in price? Yes, some will. The transitional funding will in part be used to assist those people.
I might also add there is no loss in the low income rebate of the GST that was instituted when the GST came in. It will continue to be paid to those people who qualify in the three Atlantic provinces.
The three Atlantic provinces as of April 1997 will have a simpler, less costly and more effective sales tax system, and that is the bottom line. Clearly members from Alberta have so little knowledge about what is important in Atlantic Canada that his has not managed to penetrate. I am not sure what does manage to penetrate, but then that is another story.
The BST will be the crowning in touch in turning Atlantic Canada into the most attractive business location in all of North America. From the days of wooden ships and iron persons until today this is something that has been long overdue in Nova Scotia, in New Brunswick and in Newfoundland.
I really do think that when members opposite think they can lecture us on what is good for the Atlantic region they should at least be able to say they know something about the region that they are attempting to lecture. We do not take kindly to lectures down there. We know what is good for us and the harmonized sales tax is very good for us.
Consumers will know what the price is before they go to the cash register. How many times has every one of us in this House and the people we represent seen an item that we wanted to buy, taken it to the cash register and by the time it was all added up, whammo, we were paying considerably more than we thought we were going to? Those days are over in Nova Scotia. That will be finished come April 1.
Consumers will have lower tax rates and on many goods will pay lower prices. This message has to be repeated and repeated because when it comes to misleading, and I know the hon. member opposite does not really wish to mislead, or at least I assume he does not wish to mislead, over and over again scare tactics have been used with regard to this plan on the consumers of my province and the two neighbouring provinces, trying to suggest that people will be paying considerably more when the truth is they will be paying less.
Mr. Thompson: You don't know what the truth is.
Ms. Clancy: That snappy comeback from the member for Wild Rose has just made me want to sit down and burst into tears but I will try to control myself.
Businesses will have to deal with only one tax. From the first day that the GST was mentioned in this House, when you and I, Mr. Speaker, were rookie MPs in opposition, I have heard from small business people in Nova Scotia how they needed the simplification of the tax system and, again, this is what this is doing.
(1635)
I will tell a little story about someone I deal with a lot in Halifax. His name is Bob Richards, a cab driver. He is probably the best cab driver in Nova Scotia. This is not to take away from other cab drivers there, but Bob has been driving me to and from the airport since I was elected. Through storm or sleet or dark of night, if I can steal a line from the American post office, he is there. He has a number of clients who know how good and reliable he is and consequently he has a good limousine business in Halifax.
Bob has complained bitterly about the kind of red tape and the bureaucratic detail he as a businessman has been hamstrung by in this tax. This tax is going to be a lot less cumbersome to business people like Bob Richards in the three Atlantic provinces that have taken this deal. That is a good thing. This is something Nova Scotians care about. Am I out of time, Mr. Speaker?
Mr. Thompson: I hope so.
Ms. Clancy: I have one minute. The member for Wild Rose hopes I am out of time. I can only tell the hon. member that I will be here making my point long after he too has joined the pantheon of Reformers leaving this House.
In closing let me say something about books because I have to correct what the hon. member for Wild Rose said. Books will not be more expensive in the province of Nova Scotia. Indeed some books purchased by public libraries, schools, universities, public colleges, municipalities, qualifying charities and non-profit organizations, most particularly those dealing with the literacy problem, will receive a 100 per cent GST rebate. That comes about because the Minister of Finance listened to the Liberal backbench that went to him and told him how important it was to have this movement and this rebate on the GST on books.
We in the backbench of the Liberal Party are proud of what we did. We are proud of the HST. It is good for Nova Scotia, New Brunswick and Newfoundland. I am delighted to have had the opportunity to say so.
Mr. Jim Silye (Calgary Centre, Ref.): Mr. Speaker, I would like to thank the member for Halifax for her intervention on this issue. I am glad to hear somebody from Nova Scotia get up and talk about it and defend it, defend it to the degree and with the passion that she has.
Let me clarify a few things she said in her comments. In no way during my speech was I trying to lecture to Nova Scotians and to tell them what was right for them or what was better for them. In no way was I giving a lecture. I was criticizing the method with which this government is implementing a harmonized sales tax. I was criticizing the government in its implementation.
It is not a question of knowing better. I am not saying I know any better. I am here to give some suggestions and some ideas and that is all I have been trying to do. Doing what is right is important. In the Standing Committee on Finance when we looked at replacements for the GST there were a lot of alternatives looked at. The Liberal government had a lot of options and a lot of choices. It hung its hat on replacing the GST with a harmonized sales tax but it did it piecemeal. It is doing it ad hoc. It is doing it at a high cost.
Let me point out to the hon. member where the high cost is. First of all, to reduce the combined current rate in those three provinces of 19 per cent down to 15 per cent. Obviously it is a loss of revenue to them. Call it a transfer payment. Let us not get into partisan politics for a minute. Let us call it a transition cost from one regime to another of $1 billion. That is $1 billion of expense that need not happen if they would have taken the full report and looked at the Reform recommendations in the minority report.
Reform said it would not solve the problems because this is just entrenching the GST. The Liberal Party wants to replace the GST. In other words, get a system of taxation that is revenue neutral that is not this confusing, complicated, bureaucratic, red tape system of taxation.
Reform said if it were going to do it and look at it, look at an integrated system with those provinces that have provincial sales tax. Given that it wanted to look at it, here are some recommendations Reform has. Make it integrated. Make it the broadest possible base, the widest base. Let us tax everything, groceries, prescription drugs. Tax everything. That way there would be the lowest rate and we would not have this billion dollar cost to make up for lost revenues in certain provinces.
(1640)
Second, for those low income people who are affected, we currently have a system of rebate and this national integrated sales tax could then adjust to the fact that certain people who are the lower income level would get a bigger rebate than they currently get and we have taken care of those in society we have an obligation to take care of.
These were legitimate recommendations. The reason I am so vehemently opposed to the current botched up mess the government has is that it is not doing it right. It is being done wrong. It is not getting all the provinces to agree. The Liberals quote Mike Harris of Ontario. Mike Harris would love to co-operate if everybody else across the country were coming into the deal at the same time, on a level playing field. Okay, so we would have to compensate, but the finance minister did not do that.
I just want to clarify for the member for Halifax and give her enough time to respond that it was never my intention to lecture. It was never my intention to stand here and say that I know better. If the Liberals would just read that full minority report, we did make some recommendations which the government has not listened to. It is being done piecemeal and that is not right. Let us do it right.
Ms. Clancy: Mr. Speaker, I accept the hon. member's comments that he was not lecturing. However, I do not accept some of the things he said. Let me just make a few points in the very short time I have.
First, hanging our hat on a specific program is what government is about. In government we do not have the luxury to gadfly around a pick one policy one day and another policy the next. We pick a policy that we feel is good for our constituents and we go with it. That is what has happened here.
Again, the premiers of New Brunswick, Nova Scotia and Newfoundland realized this was a good policy and they decided to go with. If other provinces have not picked up on it, I can only say that they do not understand the situation as fully as they should.
With regard to what the hon. member said about increasing the GST rebate to the individuals, I think that betrays to some extent two things. First, that the hon. member does not quite understand what the transitional funding is. But more particularly, it betrays the fact that there are chasmic differences between the Reform Party and the Liberal Party because in the Liberal Party we do not necessarily think that the best way to deal with funding to assist a province is to put it directly in the hands of the consumer in all ways. There may be moneys that are better administered through the provincial government. In this case, this is what we have done and what we support.
[Translation]
Mr. Gilbert Fillion (Chicoutimi, BQ): Mr. Speaker, I have just listened to two members from across the way who have told us about all sorts of things that do not, or will not, exist with respect to this bill.
I will naturally take a moment to try to place the effects of Bill C-70 in perspective. Everything we have heard during the last two speeches has been nonsense. Things must therefore be put in perspective.
First of all, Bill C-70 is a collection of amendments that are going to complicate even further what Canadians had to contend with in the previous legislation. Just now, they were trying to tell us that this would make it easier for businesses to collect the GST, but this is not so.
Bill C-70, introduced by the Minister of Finance, is a striking example of what this government can do to make a mockery of democracy.
(1645)
First, there is the manner in which this voluminous bill was tabled, without allowing time for the official opposition to examine
its contents. The official opposition had less than 24 hours to read and examine the complete bill. That is a mockery of democracy.
The Minister of Finance would do well to change his ways, for the benefit of Canadians. A bill as technical as this, with so many amendments, deserves to be examined in greater detail.
This is not the first example of the contempt in which democracy is held by members across the way, nor, I am sure, is it the last we shall see before the coming election. They will be trying to pull some fast ones on Canadians.
This bill is proof of the failure to keep the election promises made in the famous red book by the Prime Minister himself, by the Minister of Finance, by the Liberal government, which has forgotten, without a shadow of a doubt, that it is governing on behalf of the public.
How many times did they promise during the 1993 election campaign to scrap the GST outright? The present Prime Minister said that he was going to scrap it. In 1994, he also said that the Liberals, i.e. his own government, detested this tax and that they were going to get rid of it.
Today, with the tabling of this bill, we have come to the moment of truth. The worst part of all this, however, is that the Liberals used the taxpayers' money, yes the taxpayers' money, to pay for a byelection on this matter. The Deputy Prime Minister treated us to an appalling demonstration of how not to keep one's promise. Yet making the GST disappear was an election promise.
The only disappearance in this bill is that the GST has been made to disappear from view, has been camouflaged. It will be camouflaged, it will be hidden from view. The government ought to know that the people are not fools. The public knows very well that this government does not keep its promises.
In Quebec we have a motto, one which the people of Quebec will put into application when the time is ripe. That motto is ``Je me souviens'', and yes, we will remember. I shall speak shortly on what Quebec has done to harmonize its sales tax.
This brings us to Bill C-70, where the Liberals end up doing exactly what they themselves have criticized. The new GST is a hypocritical tax, and that makes a lot of people's hair stand on end. It is a hypocritical tax, that is true. From now on, it will be hidden within the cost of goods and services.
(1650)
However, in a report of the Standing Committee on Finance which dates back, not to 1990 but to 1994, the Liberal majority, these people sitting in front of us, took a position that was clear and to the point on what the GST should be. They said in the report that it would be improper to hide from Canadians the amounts they paid in taxes to their governments and that making it a hidden tax undermined their ability to make the government accountable for the way these taxes were collected and, to a lesser extent, for the way moneys were spent. This is straight from the report of the Standing Committee on Finance. I repeat, the date is very important. This was in 1994.
What happened since that time? Today, we are hearing a very different message. I think the Liberals, the members of this government, are suffering from amnesia. What does this mean? It means saying one thing today and saying the opposite tomorrow.
Personally, this is an attitude I could not tolerate. We cannot change our minds overnight, just like that, especially when everything we buy nowadays costs Canadians an awful lot of money. Has power made members opposite deaf? Being in power means being hard of hearing, speechless and asleep. That is what is happening now.
Here is another example of the amnesia of members opposite. In 1989, they were in opposition. The position of the Liberals on hiding the GST in the sales price was that if the GST was hidden in the sales price, it would be much easier for the government to increase it later on. That is what they were saying in 1989. Today, they dismiss this out of hand. They have reversed their position. So they say one thing when they are in opposition and something else entirely when they are in power.
Is that what Bill C-70 is all about? Is the Liberal government proposing to hide the tax to make it easier to increase later on? Later on meaning a few months from now, after the election, for instance? Considering the selective memory of members of the current government, we have every right to ask these questions. And there is one I would like to ask especially: What can the public expect now? The Liberals, the people opposite, talked about doing away with the GST, but now they want to hide it. Can we expect any increases in the GST in the months to come?
We also know that 76 per cent of Canadian businesses are against hiding the GST in the price of goods and services, although the opposite was implied just now. Personally, when I pay my bills, I want to know where my money is going. I want to know the price of the product or service. I also want to know how much I will be sending the government and what it will do with it. I want the government to be accountable. I am sure that my constituents agree with me. Some members would do well to return to their riding and talk to those who elected them to see whether they approve of this bill.
(1655)
Rest assured of one thing. I am going back to my riding to talk to the people. Every time I have the opportunity, I tell them that the government reneges on its promises, that the GST will be hidden
and that this government can do what it likes with it. It can do with it what it likes.
I would also like to look at another aspect of this bill, the most undemocratic element and one that, yet again, tramples the rights of Quebecers. We heard endlessly during the referendum campaign, and even afterward, that all Canadians were equal. This bill provides a fine lesson in equality. Just a fine lesson.
Quebecers are denied the compensation paid the maritime provinces. Is this the government's idea of equality among Canadians? Is this what it is? One law for the maritimes, one for Quebec. The Minister of Finance's election promise costs $1 billion. On top of it, they are calling this harmonization. I find this very confusing.
Naturally, someone is going to have to come up with this $1 billion. Although Quebec harmonized the sales tax with the federal government, it is going to have to pay $250 million. All the other Canadians are going to have to make up the difference. Is it in the public's interest to have double standards in government policies? I think not.
When will the Minister of Finance inform us of the criteria applying to his compensation package? This is very important. When will the Minister of Finance show us that Quebec is not entitled to this compensation? There must be a debate on this question. Quebecers are entitled to this debate, because they will be footing the bill.
I am telling you nothing new when I say that Quebec harmonized its tax with that of the federal government. Quebec administers the tax. Quebec acted very responsibly. Why then are Quebecers not entitled to the compensation the federal government is giving to the maritime provinces? I am wondering. The people opposite are hiding behind power.
(1700)
Some day, the government will need to come up with an answer, in terms of equality and not of campaign promises. We have proof that this government's campaign promises are not being kept. They did not keep their promise with this bill, where harmonization of taxes was concerned, just as they did not keep their main promise regarding job creation.
It is all very fine to pitch all sorts of figures at us, but when everything is weighed out, it can be seen that job creation in this country is stalled.
If the maritime provinces have additional costs to pay in harmonizing their sales tax with the federal one, so does Quebec. If the maritimes are entitled to compensation, to the tune of $1 billion, then Quebec too is entitled to compensation. Once again, the Minister of Finance must show some fairness. Good for the maritimes and their co-operation with the federal government, but what about the other provinces?
The maritimes represent 15 per cent of the Canadian population. We cannot, therefore, say that harmonization is in place from sea to sea. The Minister of Finance is proposing a single tax to be administered by a national revenue commission. This commission would, for want of a better word, simply squeeze out the provinces. Once again, and every time a bill is tabled here, provincial rights are getting it in the neck. Here again, provincial autonomy is at stake. As we well know, the people on the other side do not give a hoot about provincial autonomy.
Since I have only a minute left, I would like to talk about the famous tax on books. People will remember the Bloc Quebecois debate here on the book tax. In Quebec, there is no provincial tax on books, whether they are bought by students, self-employed workers or anyone else. The sales tax does not apply to books in Quebec, but here, with this bill, sales tax will apply. There are, however, exceptions for certain institutions.
It is not true that the tax is 100 per cent abolished. Only clearly designated institutions, such as municipalities and libraries, will be entitled to deduct this tax. Canadians must not be taken for people who will swallow just anything. They will not. This bill does not eliminate the sales tax on books; only certain institutions will be exempted. In my opinion, the mere fact of taxing books promotes ignorance.
[English]
Mr. Paul Szabo (Mississauga South, Lib.): Mr. Speaker, I am pleased to participate in the debate on Bill C-70. I will be sharing my time. I will speak for about 10 minutes. I will begin with a brief summary of the new harmonized sales tax proposal.
(1705 )
Detailed agreements have been reached with three Atlantic provinces to implement the new tax, effective April 1, 1997. The agreements will include the replacement of the current federal GST and the provincial sales tax systems with a single, combined value added tax called the harmonized sales tax. There will be a substantial reduction in the current combined rates in these provinces, which are presently at 17 per cent, 18 per cent and 19 per cent. The rate will decrease to 15 per cent in the three provinces. There will be a single administration of both federal and provincial sales taxes. The national treatment of interprovincial sales will ensure a level playing field for participating provinces.
This is good news for consumers and businesses in these provinces. The new tax system will be simpler, more efficient and
more equitable. It is a practical example of how the federal and provincial governments can work together.
There will also be major benefits for consumers. With tax inclusive pricing the consumer will know the full price of their purchases before they get to the cash register. At the same time, they will know from their receipt how much tax they are paying. Of course the new sales tax rate will be substantially lower than the current rate in those provinces.
The harmonized sales tax will be simple and straightforward for business as well. Business will have to deal with only one tax, not two; one set of forms, not two; and one tax administration, not two.
The previous speaker spent a lot of time talking about some issues. I want to deal with those issues. I was hoping to talk more about the simplicity of the system, but if there is one system, versus two, the efficiencies are evident.
The member spoke at some length about a cover-up and a hidden tax. Today I had the opportunity to tape a cable show for my constituency and I spoke to one of the people at Rogers cable about Bill C-70. I asked her how she felt about it. The young lady said to me: ``What I really do not like is when I see the price on the product and I go to the cash register and I have to pay a different price''. That is very indicative of the big problem with the current GST system. The price on the shelf is not the price consumers pay at the cash register. Consumers are having difficulty making their purchase decisions because they have to do some mathematics.
By way of history, members should be reminded that the GST was not a brand new tax which somehow created these enormous revenues for the Government of Canada to pay for services and programs. It was a replacement tax for the former manufacturers sales tax, which was a hidden tax. It was never seen at the consumer level. It was applied at the manufacturing and production level. It was included at a rate of some 12.5 per cent or 13 per cent. It changed many times. I believe it started at 9 per cent and actually got up to about 13.5 per cent.
That price was carried through. It was a very unfair tax. It did not share the burden equitably and it was very unfair to the manufacturing and processing sector. That tax generated some $18 billion.
We know that the former government, the Mulroney government, brought in the GST to replace the FST. The current GST, when it was brought it, was actually generating less revenue for the government than the former FST. We have to think about that for a moment. If the GST was generating less revenue for the government than the former FST, that means, effectively, that consumers under the GST are paying less tax than they formerly were. However, they never saw it because the FST was a hidden tax.
I had an opportunity to participate in the finance hearings. We heard from 500 witnesses. We received over 700 reports and submissions. We listened carefully to the numerous alternatives people were coming forward with.
The finance committee reported to this place. It reported to the finance minister about some of the options. When the members of the committee came back with it they said: ``We cannot find a better alternative and it is better not to change it just for the sake of change, so let us work with this the best we can''.
(1710)
I remember writing a little piece for my constituents in which I stated that on balance the proposed harmonized sales tax was not ideal but it was the best possible under the circumstances. The Mulroney government was unable to harmonize the federal and provincial sales taxes and opted for a complex GST applied to a base with numerous exceptions. It created a nightmare for business, angered consumers and generated less revenue than its predecessor tax.
I think most Canadians are clear why the GST has the problems it does. It was in fact in your face taxation. I do not think Canadians are opposed to paying taxes to ensure that Canadian programs that we are provided with are properly funded such as health care, seniors care and a whole host of things.
However, to assist the ordinary Canadian, one of the recommendations that came back from all these cross-Canada consultations was that the price on the shelf should be the price that one pays at the cash register so that the purchase decision was not fogged up by what taxes were going to be added. We knew exactly what we were going to pay. We also said that we do not want to hide the tax from the consumers, unlike what the prior speaker said, that we are hiding the tax. No, it is tax included pricing but it clearly states on the invoice that the consumer will see the amount of taxes included therein.
I believe it is very important that the consumer have the information and it is also necessary for accounting purposes. I think the member was a little intellectually dishonest in presenting a so-called cover-up.
The previous speaker also talked about poor Quebec. He also admitted that in 1991 Quebec did harmonize its federal and provincial sales taxes. However, he did not explain why. The reason Quebec did this is that harmonization leads to a better situation for Quebec businesses. I praise Quebec for having the wisdom to harmonize the tax. Now there is an input tax credit on the provincial component included in the combined tax. It means there is a lower selling price that has been passed on to the consumers. On top of that, it means it has a competitive advantage over Ontario which has not harmonized. It also has a competitive advantage in the export marketplace.
The member well knows that although Canada as a whole has had wonderful performance in terms of the export markets, the critical issue is that Quebec has had better than average performance in Canada simply because of the harmonization of the tax. On that basis alone, Quebec should say ``we don't want you to know about this because it is such an important adjunct to the economy of Quebec''. It is helping Quebec businesses not only in interprovincial trade but in the export business.
The question came up about this cost to the three maritime provinces. I had to think about this one a bit. The previous speaker somehow brought up a billion dollars. I considered that there were no other provinces in this country that have a provincial sales tax rate as high as they have in the three maritime provinces. We are talking about a 12 per cent provincial sales tax. In my province of Ontario it is only 8 per cent.
What do the members think that does to the ability of the consumers to purchase? Their purchasing power has been totally crushed by the burden of the provincial taxes.
The members will also know that the harmonization of the tax at a consistent rate facilitates interprovincial trade and makes the whole situation a good foundation to work with Quebec and Alberta, which has not sales tax, and I am sure Ontario.
I have no hesitation in supporting Bill C-70. This is a move in the right direction to make our tax system simpler, easier to administer and fairer for consumers and businesses.
(1715 )
The Acting Speaker (Mr. Milliken): Order, please. Before I proceed with questions and comments, it is my duty, pursuant to Standing Order 38, to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for Moncton-Forestry.
[Translation]
Mr. Philippe Paré (Louis-Hébert, BQ): Mr. Speaker, I have listened carefully to the remarks of our colleague across the way. I understood what he was trying to do. Unable to explain the difference between what the red book said and the government's record on the GST, he went into a defence of simplification and harmonization.
There is not a member in the House who has questioned the importance of harmonizing and simplifying taxes to make things easier for business. Our colleague across the way is not contributing to our understanding, because this is not what the debate is about. The Liberals are dragging it in that direction to avoid the real questions that should be asked, which the member for Chicoutimi brought out earlier.
In the red book, they said: ``We hate this tax and we will scrap it''. Now, instead of scrapping it, they are harmonizing it. This
way, things are so much nicer, it is less painful, and it brings in more money. They also said: ``It should not be hidden''. Now they are saying: ``Magicians that we are, we have pulled it out of thin air, we have made it vanish, and now we are going to make it invisible''.
But if simplification and harmonization are as wonderful as all that, why did the Atlantic provinces need to be paid $1 billion to go for the deal? The aim was to hide the tax in the price of food, medicine and books for educational purposes.
[English]
Mr. Szabo: Mr. Speaker, it is very important for the member and for Canadians watching to hear again from page 22 of the red book. Notwithstanding what the member has said, this is what the red book did say and what I ran on in the last election. It said:
In the first session of a new Parliament, a Liberal government will give the all-party Finance Committee of the House of Commons a 12-month mandate to consult fully with Canadians and provincial governments and to report on ways to achieve tax fairness, simplicity, and harmonization. In particular the committee will be mandated to report on all options for alternatives to the current GST. A Liberal government will replace the GST with a system that generates equivalent revenues, is fairer to consumers and to small business, minimizes disruption to small business, and promotes federal-provincial fiscal co-operation and harmonization.That is what was promised and that is exactly what has been delivered.
Mr. Jay Hill (Prince George-Peace River, Ref.): Mr. Speaker, everyone is well aware of what it says in the red book. As I understood it, the question that was put to the hon. member was not what the red book said on page whatever it is, but what the Liberal candidates were saying during the last election.
That is far different than what it says in the red book. They can deny that until they are blue in the face. Reality has caught up with them. They know quite well what was said by a number of them, what was said by their leader about the GST and they certainly were not talking about harmonizing. They were talking, as the hon. member from the Bloc has said, about getting rid of it. They were talking about abolishing it. They were talking about killing the GST. That is what they talked about during the election campaign and Canadians know that. They will remind these candidates of it I am sure in the next election.
What I found particularly interesting about the hon. member's intervention was his stating that somehow he feels Canadians want a hidden tax. When Canadians go to the supermarket or to the department store and are looking at a price tag on some item, they want that to be the total price. That is what I understand he said in his remarks.
I have not found those Canadians. I have found that Canadians are so incensed with the GST, they want to know how much GST they are paying. When they go to the till they want to know that the item costs X and there is so much PST and GST attached to it. They
want to know how much they are contributing to the provincial or the federal government.
(1720)
I would like the hon. member to reiterate, if possible, if he honestly believes that the majority of Canadians want a hidden tax. That is not my understanding.
I have spoken to a lot of Canadians about this issue. They want to know how much tax they are contributing to the two levels of government.
Mr. Szabo: Mr. Speaker, one of the things that should be noted is that the Reform and the Bloc parties have not said what they would do. The role of the opposition is to deliver blows that would tenderize a turtle.
They continue to hurl things like scrap and abolish. But they know very well that $18 billion of revenue to the government cannot be thrown away. It goes straight to the deficit. That would totally destroy jobs.
Focus groups were conducted and Canadians have expressed a strong preference to know the full price of goods and services in advance of their purchase. That is what is proposed in the legislation and that is what will happen. However, they will know what tax is included in their purchases. It will be stated clearly on the bill of sale they receive at the cash register. That is exactly how it will happen.
Mr. George S. Baker (Gander-Grand Falls, Lib.): Mr. Speaker, I have just a few words on this. After the excellent speech by my hon. colleague, I want to add a few words to what my hon. colleague said.
When he quoted from the red book from which the Bloc and the Reform parties keep quoting, the hon. member quoted exactly correct. But he forgot one thing in the middle of his quote. In the middle of the paragraph in the red book it says the committee will be mandated to report on all options for alternatives to the current GST. That committee met and a member of the committee from the Reform Party spoke in the House this afternoon.
It is interesting what the spokesperson for the Reform Party pointed out. He pointed out that the Tories and the Reform members of the committee wanted in their recommendations to tax food. The Reform Party of Canada, according to their spokesperson, according to their report, wanted to tax prescription drugs.
Mr. Thompson: The truth now.
Mr. Baker: Yes, I heard that here in the House this afternoon from the spokesperson for the Reform Party. Of course the Liberal government said: ``Absolutely not. We are not going to do that''. So they carried through with the second portion of what was said in the red book.
Well, members of the Reform Party and the Bloc stand here today, talking about being honest with the Canadian people. It is interesting that Thursday last week, my hon friend from Don Valley North stood in the Chamber and introduced a bill to put some restrictions on the banks. What did the Bloc say? ``Oh, no, we cannot do that. Oh, no, we cannot interfere with the banks''. That is the Bloc for you. Then the Reform Party say: ``Oh no, you can't do that. You can't interfere with the profits of the banks''.
(1725)
Mr. Bodnar: They are not making enough.
Mr. Baker: They are not making enough. Incredible isn't it when each one of the banks are reporting profits over $1 billion. The CEOs are going to get $1 million in performance bonuses. The Reform Party and the Bloc stand in this Chamber as the two opposition parties and what do they say? ``Oh no, we can't agree with members of the backbench'' even though they are performing a function for the people of Canada.
Do you know what they are doing, Mr. Speaker? They are making the government accountable for the ordinary citizens of Canada, something that the official opposition should be doing.
What does the Reform Party want to do with the payroll taxes of Canada? Would everyone like me to read it out?
Mr. Ramsay: Read it.
Mr. Baker: I will read it out. Here is the Reform Party of Canada on payroll taxes. What a dandy one this is. On page 45, for all the employers and employees in Canada, the Reform Party's budget.
Mr. Thompson: Now the truth.
Mr. Baker: The hon. member said ``the truth''. Here is the taxpayers' budget.
The Acting Speaker (Mr. Milliken): Order. I know the House appreciates the enthusiasm of the hon. member for Gander-Grand Falls but he knows also the rules that he must not use documentation as a prop. He is certainly entitled to quote from the material but he should be careful not to wave it around too much. It upsets some members. I appreciate that the hon. member will follow the rule.
Mr. Baker: Absolutely, Mr. Speaker. In other words, I will make sure I quote from it but I certainly will not show it so that anybody will know what I am quoting from.
Here is what the Reform wants to do with payroll taxes. Apart from on page 45 ``having a benefit structure requiring two weeks of work for one week of benefits'' here is what the Reform says. It says that it wants to ``ensure that savings from reform of UI translate into deficit elimination''. The Reform Party recommends ``the establishment of a permanent reserve fund for UI until the budget is balanced. Funds from this reserve would be applied against the deficit. After the budget was balanced this fund would
remain to balance revenue and expenditure fluctuations under UI throughout the economic cycle''.
It goes on to say: ``Any additional savings from the restructuring of UI after the deficit has been satisfied'' after this huge fund has built up, then Reform says: ``savings will be passed on to employees and employers in the form of a reduction''.
Imagine using unemployment insurance premiums not only to completely retire the deficit, not only to satisfy the debt of this country but then to build up an additional fund and somewhere down the road they are going to pass along a saving to an employer or an employee.
A tax is a tax. A tax is a tax is a tax. If it is on the employer, if it is on the employee, a tax is a tax is a tax. Basically what we have here are the opposition parties in this Chamber who do not like the record of this Liberal administration. No-
The Acting Speaker (Mr. Milliken): Order. The hon. member for Prince George-Peace River on a point of order.
Mr. Hill (Prince George-Peace River): Mr. Speaker, I would respectfully request that if the hon. member for Gander-Grand Falls is going to quote from Reform members that he do it accurately.
The Acting Speaker (Mr. Milliken): The hon. member knows that is not a point of order.
Mr. Baker: Mr. Speaker, I was going to go on to something else but the hon. member wants me to quote some more. Let me go back to the situation where they want to drive up the payroll taxes in Canada, where they want to tax food, where they want to tax prescription drugs. We will leave that for a moment and we will go to where they are suggesting they want to save money.
(1730)
Now there is undoubtedly a way of reducing taxes if you save money. How do they propose to save money? The Reform Party of Canada matches the Tory Party of Canada. In their policy statements, both parties tell the Canadian people how they are going to raise some revenues, not just by taxing food and prescription drugs but also in all of their policy statements they are going to attack medicare.
For the record, they are going to say as they do here that medicare is not only intolerably expensive, it is undesirable.
An hon. member: That's garbage.
Mr. Baker: Garbage. I am not supposed to show the taxpayers budget. There it is.
Notice that in their conventions the Tories joined Reformers in saying that the Canada pension plan should be privatized so that people can put money in the bank and then draw their own interest from it. They could have their own plans, as the Government of Canada could afford neither the Canada pension plan nor medicare.
With a record like that, of increasing payroll taxes, of demanding a tax on food and prescription drugs, of doing away with medicare and the Canada pension plan, is it any wonder that the Tories were wiped out and the Reform Party is headed toward a disaster in this next election along with the Bloc?
[Translation]
Mr. Gérard Asselin (Charlevoix, BQ): Mr. Speaker, first of all, I will try to comment and ask a few questions, but perhaps not with the same enthusiasm as the hon. member who just spoke.
This reminds me that the same member was just as eager when the Conservatives adopted the GST here in the House of Commons, but he was eager to vote against the GST. He devoted the same energy to preparing the Liberal government's red book which was supposed to abolish the GST.
The hon. member accuses the Bloc Quebecois of being less than honest. On the contrary, we only want to ask the Liberal Party to abide by its promises, to be transparent about what was said in the red book. You know as well as I do that the Liberals did a lot of wailing and hand wringing here in this House. They voted against the GST, which was proposed by the Conservatives and passed by the House under the Conservative government.
Those same Liberals formed a committee, the finance committee, on which I sat for one year. The finance committee is chaired by a Liberal member, the hon. member for Willowdale. For a number of months, I would say for almost a year, the Liberal government led Canadian citizens from Quebec to Vancouver to believe that there was a possibility the government would abolish the GST.
Of course the government wanted to abolish the GST to bring back the old tax, the hidden tax on goods and services. Today's notion of putting a tax on drugs, health care, food and books-the Minister of Finance will legislate a tax on books-did not come from the Reform Party. It came directly from the Liberal Party.
I sat on the finance committee for one year, and the chairman asked witnesses whether they would accept a tax that was hidden in the price of a product. It is a vicious circle. It is not very honest to give witnesses the impression it would cost less. The aim was to
hide the tax in the price of food, medicine and books for educational purposes.
(1735)
Naturally, the idea does not originate with the Reform Party or the Bloc Quebecois. I have to say before this House that the idea comes from the Liberal Party. Of course, in view of its unpopularity, the Liberal Party backed off. The proof that the Liberal Party failed to meet its obligations, that it was not transparent in what it said in the red book is that the Deputy Prime Minister was forced to resign, because she had made a commitment to abolish the GST within the first year of her mandate. She then spent government money getting re-elected.
Today, the member's knickers are in a twist and he wants us to believe that the Liberal Party is the great defender of the GST, when it never had the option of withdrawing.
The Acting Speaker (Mr. Milliken): Order, please. The period for questions and comments lasts five minutes. As there is only one minute left, the hon. member for Gander-Grand Falls can respond.
[English]
Mr. Baker: Mr. Speaker, Bloc members in this Chamber are on the record of being in favour of the banks' never being restricted. As members of the finance committee they fell over backwards, tripped over themselves, bent over backwards and said come on with some more tax cuts for the wealthiest people in this country as proposed by the Senate. The hon. member was at the finance committee. On the bifurcation of trademarks, imagine a 50 per cent reduction to American companies doing business in Canada. Why did Bloc members put forward that position? I will refresh their memories. They said ``you know, we have a great many people who are interested and we are in favour of anything that involves tax reductions for the biggest corporations in this country as long as they are from the United States''.
There were three separate tax measures in Bill S-9 and this hon. member stood up in this Chamber and said ``come on, let's have some more tax breaks for the biggest corporations in this country''.
[Translation]
The Acting Speaker (Mr. Milliken): The period for questions and comments having expired, we now resume debate.
Mr. Asselin: Mr. Speaker, I rise on a point of order.
It is entirely dishonest on the part of the member, who knew he would be the last to speak, to invent and say just anything in this House.
The Acting Speaker (Mr. Milliken): The hon. member knows he is simply prolonging the debate, which is not permitted as a point of order. Resuming debate.
[English]
Mr. Myron Thompson (Wild Rose, Ref.): Mr. Speaker, I understand I have about 10 minutes.
I would like to make sure that everybody understands that the member from Gander-Grand Falls twice earlier today said he was not speaking. About 15 minutes ago he also told me he was not going to speak to this issue, but he did. I guess that goes to show how much we can trust what he says. He does not tell a lot of the truth and he certainly missed out on a lot of it in his speech.
I would also like to point out that on some of the points that were brought forth earlier today by me, there were some questions as to how come I would be making such statements. I note that some of these comments that were made earlier are based on the Retail Council of Canada, a study from Ernst & Young which I understand was put to work by this government. It estimated that a mid-size national chain with 50 stores in the Atlantic provinces would pay up to $3 million in one time cost starts and $1 million a year to comply with this tax that we are talking about.
This information also comes from the Halifax Chamber of Commerce, the Canadian Real Estate Association, the Greenberg Stores management and company. All of these that are objecting strongly to this particular legislation I think are very reputable.
(1740 )
During the 1993 campaign in the riding of Wild Rose, the words scrap, kill, get rid of the GST were stated loud and clear by the Liberals. I think that was true all across the land. There might have been a couple of ridings that were missed but it was pretty broad.
Of course, since the election we have all been asked to memorize page 22 from the dead book which is supposed to represent what the Liberals meant and not what they said. We have heard all kinds of comments regarding their campaign, for example, ``sometimes I shoot from the lip'' and ``gee, we made a mistake''. However, that does not overlook how the campaign went.
Let us look at page 22. One paragraph states:
The GST has lengthened and deepened the recession. It is costly for small business to administer and very expensive for the government to collect. And the GST has fallen far short of its promised revenue potential-I think they have corrected that revenue potential. The amount of extra taxes they are going to grab after this change will make up for that loss.
-partly because it has stimulated the underground cash economy-.
I really wonder if any Liberal member on that side of the House could stand up today and say Bill C-70 is really going to address the underground cash economy. It will not touch it. In fact, it will probably get far worse.
The red book goes on to state:
A Liberal government will replace the GST with a system that generates equivalent revenues-It will not be equivalent. It will be quite a bit more.
-is fairer to consumers-Consumers are not agreeing with that. I understand there is a petition with 16,000 names attached to it from consumers in the Atlantic provinces who are opposed to this whole idea.
-minimizes disruption to small business, and promotes federal-provincial fiscal co-operation and harmonization.Let us take a look at one statement regarding small business in this Liberal dead book: ``It is costly for small business to administer and very expensive to collect''. Will this harmonization answer this statement? What do businesses say? First, it says this new idea will be a nightmare to administer. Three major retailers in Atlantic Canada have stated that their net annual retail deficit will total $27 million once harmonization is implemented.
One private retailer in the Atlantic region was contemplating opening two new stores in 1997 but has decided against it as a result of the increased costs associated with this harmonization.
The Halifax Chamber of Commerce predicts that the harmonization will push up new house prices by 5.5 per cent. As well, it is going to force municipalities to raise the property taxes.
The GST is responsible for the closure of five Greenberg stores and the loss of many jobs in five major cities in the Atlantic region. They say that if this harmonization comes in they are contemplating that there is a 50-50 chance that it is going to close a lot more stores because of that. This is what the businesses are saying, not what Reform members are saying.
When businesses are saying this and we have 16,000 names on a petition, I wonder why there is not outrage by these Liberal backbenchers from the Atlantic provinces, or does that mean they are approving the loss of jobs? I find that strange because there is a bit of an integrity problem here. I remember when the Liberals ran on the promise of jobs, jobs, jobs. Harmonizing the GST in New Brunswick, Newfoundland and Labrador and Nova Scotia will kill jobs, jobs, jobs. That is what a lot of businesses are claiming. In fact, the stores that are closing, those that are contemplating closing and the ones that would not open up are killing jobs.
If the Liberals want to maintain their integrity which east coast MP is going to resign and run in a byelection? Which east coast MP will defend their failure to honour their promise by taking it back to the people at a cost of $500,000? Which MP has the integrity? Our guess is none.
(1745)
The Fraser Institute states that tax burdens on the Canadian economy remain the single most significant barrier to economic acceleration and job growth, the single most significant barrier. The harmonization of the GST will increase the tax burden on the people of three Atlantic provinces.
In the first nine months of 1996 Statistics Canada stated that retail sales increased only 1.4 per cent. Every economist states that in order to create jobs domestic retail sales must increase, yet this legislation will reduce retail sales in the Atlantic provinces which sign the agreement.
Statistics Canada shows that retail sales in Newfoundland dropped 3.8 per cent. In Nova Scotia they dropped 3.2 per cent and in New Brunswick they dropped 1.4 per cent, yet the Liberal government wants to further harm retail sales at a time when retail sales, according to economists, could create jobs.
The one Atlantic province which refused to harmonize, Prince Edward Island, is showing an increase in retail sales and a 7.5 per cent drop in employment insurance payments. Newfoundland had a 13.2 per cent increase in employment insurance payments and will be hard hit by the increased tax grab. Is the economic growth in P.E.I. not telling the Liberals anything about harmonization? Did the recent provincial election not tell them anything? Their Liberal counterparts, most of whom were anxious to come on board on harmonization, went bye-bye. When the election was over, those who opposed harmonization were victorious.
A Fraser Institute study shows that Canada has the worst tax record of any G-7 country. Taxes are a real problem for this country and the Liberals are a major problem behind the taxes.
How many families must starve, must feel the anguish of break-up and disintegration? The Liberals know that economic destruction of the family unit causes the greatest injury to families, yet they carry on with a policy which will harm families. Even families that through good fortune, not Liberal logic, can keep jobs will suffer under this legislation.
The price of children's clothing will increase during the coldest months of the year. The price of electricity and home heating fuel will increase. The cost of transportation for workers to get to work will increase because the price of gas will increase. Can the Liberals not give the taxpayers a break?
Property owners in the Atlantic provinces signing on to the harmonization plan have all stated that renters will have to pay
higher rents. Does the Liberal government enjoy putting mothers, fathers and children into the snow because of a broken promise?
Increased costs mean that private sector investment in the Atlantic provinces signing on to harmonization will be curtailed. Why would someone invest when they know that their direct costs will increase, when consumers will restrict purchases and when there will be less in retail sales?
Ernst & Young, the government's accounting firm, stated that national chain stores of 50 branches will pay $3 million in set-up costs and $1.1 million per year more than stores in provinces without harmonization. If you were going to set up a business, where would you go?
I wish all the people of the Atlantic provinces a Merry Christmas this year. Because of harmonization, next year they may have no job or no money to enjoy the season.
I would like to put out a Pinocchio alert to all Canadians: be careful when a Liberal opens his mouth.
The Acting Speaker (Mr. Milliken): When Bill C-70 is considered again the hon. member will have eight minutes remaining in his time.
It being 5.49 p.m., the House will now proceed to the consideration of Private Members' Business, as listed on today's Order Paper.