The Speaker: Before we get into the daily routine of business, I will hear a point of order from the hon. member for Kindersley-Lloydminister.
Mr. Hermanson: Mr. Speaker, it is not a point of order. It is a request for an emergency debate. Is it appropriate at this time in routine business?
The Speaker: I will hear him at the end of the daily routine of business.
The first petition is signed by 84 people from my riding. The petitioners call on Parliament to urge the federal government to join with the provincial governments to make a national highway system upgrading possible beginning in 1997.
The petitioners feel that education and literacy are critical to the development of our country and call on the House to urge all levels of government to eliminate the sales tax, including the GST, on all reading materials.
Mr. Chuck Strahl (Fraser Valley East, Ref.): Mr. Speaker, I have a petition to present signed by 233 people from my area and from British Columbia generally.
The petitioners are concerned about the GST, particularly on reading materials. They ask that this regressive tax on newspapers, reading materials and magazines be removed when any harmonization takes place. They request that the GST be removed from any reading material.
The Speaker: Is it agreed?
Some hon. members: Agreed.
Current estimates are that it is costing the Canadian economy at least $65 million. The matter requires immediate attention. Perhaps, more important, the minister of agriculture is scheduled to meet with the parties involved. Therefore, it is incumbent on Parliament to meet to debate the issue before he meets with the parties involved with regard to the delay in shipments to the west coast.
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It is on that basis and according to the standing orders that I move:
That this House now adjourn to give urgent consideration to the important matter of delays in grain shipments from Canada's west coast ports.The Speaker: The hon. member for Kindersley-Lloydminster was good enough to send me notice of his application for an emergency debate earlier today.
I have had an opportunity to look over the reasons for an emergency debate and the adjournment of the House and, in my view, this does not meet the exigencies of what we have set up as criteria for an emergency debate at this time. However, I thank the hon. member for raising the matter in the House.
Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance, Lib.): Mr. Speaker, I am pleased to open third reading debate on Bill C-70. This is landmark legislation. It will implement the harmonized sales tax in the provinces of Nova Scotia, New Brunswick and Newfoundland and Labrador.
As of April 1, 1997 the harmonized tax will replace the GST and provincial retail sales taxes in those provinces. This legislation also proposes over 100 technical amendments to the Excise Tax Act. These technical improvements will serve the dual purpose of paving the way for harmonization while making the GST run more smoothly in those provinces that have not yet agreed to harmonization.
Why do I say that Bill C-70 is landmark legislation? That is because harmonization marks a bold and creative development in the field of federal-provincial relations. The bill is a tangible sign of the progress that can be made when different jurisdictions work together and resolve to end overlap and duplication. The significance of four governments agreeing to move forward on harmonization of retail sales taxes cannot be overstated.
Once this bill is in place, businesses in the participating provinces will no longer have to follow two sets of sales tax rules and regulations. They will no longer have to deal with two different bureaucracies nor file two sales tax returns for every appropriate and different period under both regimes, the federal and provincial. Under the harmonized system there will only be one set of rules and one tax administration, and registrants will only have to file one sales tax return.
Harmonization will make life simpler for companies of all sizes. They will spend less time doing the books and filling out forms and more time doing business.
As my hon. friends will recall, the structure of the harmonized sales tax will parallel that of the goods and services tax. The tax will apply at the harmonized rate of 15 per cent to the same goods and services that are already taxed under the federal GST. The new combined tax rate will be almost five percentage points less than is currently the case of the combined rates in Newfoundland and Labrador and 4 per cent less than it currently is in New Brunswick and Nova Scotia. This will be a major cost saving for consumers in those provinces.
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The rules for registering, filing returns and claiming input tax credits will be the same as those to which registrants across Canada have already grown accustomed.
As we moved to this system we were very conscious of the need not to saddle businesses with a whole new system, a whole new set of forms, a whole new set of rules to deal with a new tax administration, but rather, to the extent possible in moving to harmonization, to use forms and procedures, rules and regulations that businesses are already accustomed to and comfortable with.
One thing was clear as we travelled the country with the finance committee. When people in the country, consumers and retailers, said end this ridiculous anomaly of duplication, of double sales taxes, of ten sales taxes across this country and harmonize, they said ``please, when you do that do not saddle us with an entirely new system. We have adjusted to the ways of dealing with the existing GST. When you harmonize, to the extent possible, let us use the same forms, the same rules and regulations'', and we have responded.
In the participating provinces businesses will finally be able to recover all sales taxes they pay on inventory and other expenses. By contrast, in non-harmonized systems businesses have no way of recovering provincial retail sales taxes they pay. Any of us with experience in the complicated area of retail sales tax know that it is indeed costly to pay tax on those inputs and it is indeed complex to know whether or not particular inputs are subject to exemption certificates or whether tax is payable.
In the harmonized system this added cost will not be there. In the non-harmonized provinces, tax on those business inputs will continue to be passed on to consumers, both domestic and foreign.
Unrecoverable provincial sales taxes are buried at all stages as products move through the chain from manufacturer to wholesaler
to retailer. Those hidden taxes on inputs undermine the competitive vitality of Canadian firms. Clearly this works at cross purposes with our efforts to promote trade in this country, reduce deficit and foster a more competitive environment.
The integration of overlapping sales taxes with a single, value added tax structure will bring our tax system into line with other policies that promote competitiveness.
A key element of the harmonization agreement is tax included pricing. The pricing requirements will allow a shopper to be certain of the full cost of what he or she is buying before the cashier rings up the sale. To keep the tax visible to consumers, the amount or rate of sales tax payable will be disclosed on receipts. The suggestion that tax in pricing is just a convenient way for government to sneak in tax increases is simply and absolutely untrue. The tax will be clearly displayed on sales receipts and invoices for everyone to see.
Indeed, while members of the House have spoken about this issue and their concerns about hidden taxes, not one of them has complained about the current situation which prevails at the gas pump, where the tax is indicated on the receipt. As I have pointed out to the House on earlier occasions, in much of the rest of the world we do not see legislators or individuals standing up and railing against governments for hiding a tax which is clearly visible on receipts. We could choose any country in Europe and we will see taxes clearly indicated on sales receipts. Whether it is the VAT at a certain rate or the VAT at a certain amount, it is there for the world to see.
The fact that the taxes will be indicated on receipts in the harmonizing provinces clearly puts the lie to the suggestion that taxes are being buried or hidden.
Tax inclusive pricing will address a longstanding consumer irritant. It is something which the finance committee heard a great deal about as it travelled the country studying this matter. Consumers are always on the hook for a sum of money that is different from and greater than the price that is posted or marked. It does not matter if the person is buying a restaurant meal or a refrigerator. The point is that almost every time a cash register rings in this country we can be sure that a consumer is caught short, surprised, inconvenienced or embarrassed.
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I stress that Canadians overwhelmingly related stories to us, as did retailers, of awkward moments at the cash register when they were confused as to the price of items because tax had to be added. In testimony before the finance committee of this House, a retailer said this to us when commenting on the prices of goods in his shop: ``I cannot sell shoes in my store for $11.49, but I can sell them for $9.99''. But the reality is that a consumer cannot buy those shoes for $9.99; they really cost $11.49.
While we may have some sympathy for the marketing needs of retailers and, as I will explain later we have gone a great distance in responding to their concerns about tax inclusive pricing with flexible guidelines, we have had very much in mind the need for consumers to know what things really cost, what they will really have to pay. The marketplace place will function better because consumers have that information.
Public opinion research has shown conclusively that tax inclusive pricing is favoured by the overwhelming majority of consumers. An Ekos Research Associates survey conducted this past month found that consumers in Nova Scotia, New Brunswick, Newfoundland and Labrador strongly support tax in pricing. When respondents were given a choice between tax included and tax excluded pricing, 80 per cent of consumers preferred tax included pricing, a finding that is consistent across all three provinces.
When asked about their intensity of support or opposition to tax in pricing, 42 per cent of consumers said they supported it and 37 per cent said they strongly supported it. Over 65 per cent of respondents said that it is extremely important to know the full price before reaching the cash.
The reasons stated by consumers for preferring tax inclusive pricing are compelling. Eighty per cent agreed that taxes should be included in the price so that the total price of a good is known before getting to the cash. Seventy-six per cent of respondents said that including sales taxes in the price displayed on the product is a more honest way of showing prices to consumers. Sixty per cent of respondents did not think that adding sales taxes to the display price would make things more complicated for consumers, an assertion we have heard from certain people.
While 69 per cent of respondents said that they pretty much know the total price of an item before reaching the cash, 64 per cent of respondents said that they are often unpleasantly surprised at differences between sticker price and total price at the cash. Remember my example of the $9.99 item that the retailer says he can move at that price but also the $11.49 actual price under the new system.
Participating governments in consultation with affected businesses have developed guidelines for tax included pricing. We have made and participate along with the other participating governments a concerted effort to ensure that the pricing requirements that accommodate the wishes and needs of consumers do not do so in a way that imposes an undue compliance burden on vendors. In this spirit of a fair and practical approach, the participating governments are continuing to refine the pricing guidelines which were released some weeks ago with a particular emphasis on the issue of price advertising in the harmonizing provinces.
The guidelines issued a number of weeks ago go a long way toward addressing retailer concerns about cost and inconvenience in moving to the new tax inclusive system. I note just two options that exist for retailers pursuant to the guidelines, namely shelf pricing or bin pricing. There will not be a need to go through and reticket every individual item. There are options to shelf price, to bin price items, to dual price so that price points can be advertised as long as the full tax inclusive pricing is also available. So there is a great deal of flexibility in accommodating vendor concerns.
The government has listened and has responded but it has never forsaken the desire of consumers in this country to know once and for all the real cost of items they wish to purchase.
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During the finance committee's recent study of this legislation one of the main criticisms was that it might criminalize offences under the pricing requirements. The participating governments are certainly eager to encourage compliance with the new system. Consumers would expect no less of us, but I can assure the hon. members that failure to comply with tax inclusive pricing is not a criminal offence but a regulatory one. In addition to clarifying this point I would like to make the more general comment that the government intends to take a flexible approach to monitoring compliance with the pricing requirements.
While it is true that the new system will come into place in April of this year, monitoring, education and assistance will be available and compliance will only be effectively looked at six months later. In August, as the pricing guidelines indicate, is the time by which it is expected that vendors will have made the transition, with all the help that the guidelines provide and other help which relevant departments in the participating provinces will provide; a full six months to adjust to the new scheme once it is implement. That is in addition to the time which retailers have had and have spent consulting with government which has resulted in the very effective response to the pricing guidelines.
The goal is to make sure that businesses have plenty of time to become more informed of their obligations and fully apprised to the various options available to them in fulfilling their obligations.
Tax included pricing is not the only benefit that will accrue to consumers under harmonization. They will pay lower prices on many items. For the sake of argument, let us forget for a moment about the layers of provincial retail sales taxes that are absorbed in business costs, the tax on tax, the tax cascading that consumers pay the price for, and consider only the nominal rate of tax that consumers pay directly. Even with this assumption Nova Scotia and New Brunswick consumers now pay a combined rate of 18.77 per cent on most goods that they buy. In Newfoundland and Labrador the combined rate is almost 20 per cent.
Under the harmonized sales tax consumers will pay only 15 per cent. This may mean a higher rate of tax on some services, as we move to the GST base, but in the rate debate the bottom line is what really matters. When all is said and done, I want to reiterate what we have said in this House before, the overall tax burden on consumers in the harmonizing provinces will decrease under the harmonized system. How could it be otherwise as the rate moves from 20 per cent in Newfoundland and Labrador to 15 per cent and from almost 19 per cent in Nova Scotia and New Brunswick to 15 per cent?
The bottom line is overall tax will go down and consumers will see that as they reflect back on their overall purchases over the course of any year in the new system. This is a benefit that will be felt across all sectors of the economy.
I would now like to move away from the consumer related aspects of Bill C-70 and mention that several technical motions were adopted by the finance committee earlier. These were motions that have addressed witnesses' specific concerns.
I want to pause for a moment on behalf of the government to thank the finance committee for the very fine work it did in the hearings that were held here in Ottawa where it heard from dozens and dozens of individuals, interest groups, interested parties who came to speak to Bill C-70. In addition to that I would like to thank the individual members of Parliament on all sides of this House who held consultations in their ridings, town hall meetings, and reflected comments back to the government with respect to Bill C-70.
As the chairman of the finance committee said during the hearings here in Ottawa, there is not one witness who came forward to the clerk of the committee asking to be heard who was not heard, who could not be provided for if they wished to be heard here in Ottawa. In addition, members held individual hearings and town hall meetings in their ridings and there was a tremendous amount of input. In addition to the witnesses who appeared here in Ottawa, dozens of other witnesses provided written briefs to the committee and to individual members.
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As a result of that consultation held by the committee, a number of motions were brought forward by the government to bring amendments to Bill C-70 at that stage which reflected concerns that had come to the government's attention. By pausing to speak about that process, it is to say that the system works. The committee deliberations resulted in very specific responses to precise problems that certain groups brought to our attention.
For instance, one group brought to our attention certain cash flow problems that they would have as a result of the new system. We responded to that. Individuals asked for clarification with
respect to the suggestion that failure to comply might amount to a criminal breach. That is not the case. Clarifications came forward. There were other examples as well.
I spoke about the cash flow issue to give an example. Under the proposed simplification measures originally reviewed by the committee, auctioneers would have been responsible at all times for remitting the tax collected on auction sales to the government rather than passing the tax back to a registered principal.
In response to concerns raised at the committee stage, these rules are being amended further to alleviate the cash flow burden that this measure would otherwise create for wholesalers selling large lots of goods through auctioneers. This will be accomplished by giving auctioneers and certain principals the option of making an election that would allow the auctioneer to pass the tax back to the principal.
I have been speaking about the process in responding to witnesses to debunk those who stand in this House and say that to propose amendments at the committee stage, or indeed at this stage in the House, is to suggest that the government has not done its homework or that there is something wrong with the legislation. This is how the system works in this House and in this country. If a government fails to listen to witnesses who come forward with compelling reasons why legislation should be amended to respond to particular inequities or to clear up certain anomalies or confusions, then it is a sad day indeed.
I find it somewhat remarkable to have people stand in this House and criticize that process when, if we presented a bill and entertained no amendments whatsoever at committee stage or here in the House, we would be accused of some sort of dictatorship. The system works. It works effectively and it works well.
The arguments in favour of sales tax harmonization are too compelling to refute. All stakeholders stand to gain from it. The participating governments have developed a framework for harmonization that is balanced and reasonable. Bill C-70 will reduce the tax burden on individuals in the harmonizing provinces. What could be wrong with that?
We have responded favourably to Canadians' desire to know the full cost of something before paying for it at the cash register. What could be wrong with that? We have responded to consumers who were afraid of not being able to know the tax if they need to know it. It will be there on the receipt for all to see. What could be wrong with that?
Harmonization represents a fundamental restructuring of the way in which sales taxes are levied and administered. It eliminates overlap and duplication. It is simplified in administration, it is simplified for retailers in compliance. What could be wrong with that?
There will be minimal potential for disruption and confusion during the transition period because of the pricing guidelines and the delays allowed to retailers to get on side. What could be wrong with that?
The legislation shows innovation and foresight for it leaves the door open to any province that may wish to harmonize in the future. What could be wrong with that?
In this country we cannot wait to move forward with important changes, for every province to sign on. Indeed it is the structure of this federation that often opportunities are presented for provinces to go their own way for a time. But the wisdom of this harmonization now being embraced by three provinces will be understood soon by other provinces because their consumers will demand it, their retailers understand it.
With the exception of one witness, every witness who appeared before the finance committee supported harmonization across this country and urged the government not to give up on trying to effect harmonization with the rest of the provinces. I might point out at this time that the province of Quebec is currently harmonized with the federal GST. The province of Quebec understands the benefits of harmonization. What could be wrong with harmonization? If it is good enough for Quebec, why is it not good enough for the Atlantic provinces?
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Before closing, I would like to focus on an aspect of harmonization which has been much discussed and some might say yelled about in this House as it was a moment ago. It is the decision by the government to provide a formula for short term adjustment assistance to qualifying participating provinces when they face significant structural costs to enter the new integrated sales tax regime.
Under this legislation, this move to a harmonized sales tax, adjustment assistance becomes available to provinces that experience a revenue shortfall in excess of 5 per cent of their current retail sales tax because of moving to the single harmonized sales tax system. I repeat the formula is that adjustment assistance becomes available to provinces that experience a revenue shortfall in excess of 5 per cent of their current retail sales tax revenue because of moving to a single harmonized system.
This is the case for Newfoundland and Labrador. This is the case for Nova Scotia. This is the case for New Brunswick. Under this formula, Quebec would not have qualified for adjustment assistance when it harmonized, nor would British Columbia or Ontario if they harmonized right now.
In fact, while my friends opposite rail against this adjustment assistance, Quebec did not experience a loss of revenue when it
harmonized because of the way in which it harmonized over a period of time, not all at once as the participating provinces are. Quebec ran two parallel systems and experienced an increase in revenue, not a decrease.
There is another aspect of this adjustment assistance debate which needs to be repeated in this House. Our history is rife with examples where such assistance has been offered to provinces or regions. I hear little from members opposite about those other examples when they benefited their provinces. However they rail against this adjustment assistance to Atlantic Canada which some of them would not qualify for.
When the Crow rate which helped the farmers of the west respond to the challenge of distant markets was abolished, over $1 billion in adjustment assistance was provided to grain farmers. I did not hear any complaints from the members of the third party such as we are hearing with respect to adjustment assistance for Atlantic Canada in moving to the harmonized system.
In 1972 when the federal government instituted income tax reform, every single province received adjustment assistance, a total of $2.7 billion over a seven-year period. I did not hear anyone say: ``No, do not give our province any of that''.
When subsidies were scaled back for the agricultural sector, compensation was also provided. I did not hear members of the official opposition or the third party stand up and say: ``No, we are not entitled to that. Do not do that''.
It is curious. Those examples, the Crow rate and agricultural subsidies benefited particular regions and provinces and not Atlantic Canada. This adjustment assistance which is justifiable, which is justified, which is appropriate because of revenue losses in those provinces, is being criticized by people who stood silent in this House when adjustment assistance went their way. I think that says it all.
What I find disappointing is that there are Canadians who have attacked the entire concept of this adjustment assistance, but that is a mindset which ignores history, misreads the present, misunderstands the past and lacks vision for the future.
The assistance we have developed applies equally to all. There is no discrimination, no favouritism and no bribery. The participating provinces are joining in the harmonized system because it will make their economies more efficient, more effective, more competitive and consumers will benefit.
Some critics may view this bill as an easy target if their ambition in life is to grab headlines and score cheap political points in the short term. However, the legacy of this government is sound management, not sound bites.
[Translation]
As I just said in English, Bloc members are against harmonization, which is very surprising, because Quebec already has harmonization. Is it because they want to keep the benefits of harmonization for themselves, their companies and their consumers?
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[English]
Could that be the reason? Do they want to keep a comparative advantage for themselves? Atlantic Canada wants that same comparative advantage. Its governments have decided that they shall have it and indeed they will.
As an economic policy and as a model of federal-provincial co-operation, the merit of this legislation is unassailable. Therefore in closing, I urge hon. members of the House to support Bill C-70.
[Translation]
Mr. Yvan Loubier (Saint-Hyacinthe-Bagot, BQ): Mr. Speaker, it is a pleasure to speak on third reading of Bill C-70. This is a very important bill. It is certainly not routine. This bill will have crucial consequences for the maritimes but also for all citizens in Quebec and Canada. In my view, this bill is highly controversial, concerning as it does a measure that the members of this government fiercely opposed when they were in opposition.
Hon. members will recall, and especially my colleague from Sorel, the battle of epic proportions which the Liberal Party of Canada waged against the GST. Later on I will share with you some quotes from the Liberal opposition's report when the GST was introduced and from the debates that preceded its introduction. The position taken in this report was the exact opposite of the position taken today by the Liberal government, the opposition at the time.
Bill C-70 provides that in three Atlantic provinces, provincial sales tax will be merged with the GST, so there will be only one tax, referred to as it the ``HST'', the harmonized sales tax, which will be 15 per cent. Basically, this agreement compensates three maritime provinces for harmonizing their sales tax with the GST. In fact, this compensation will be paid for by the people of Quebec and other Canadian provinces outside the maritimes and is expected to amount to nearly one billion dollars.
The government has not provided any solutions. If the government wanted to achieve anything at all with respect to the GST, it certainly did not do so with this bill. We will comment on the government's commitments later on. The harmonization that was much vaunted by the other side for many months has not come through. It is only being done in a specific geographic area, in three maritime provinces. Harmonization should mean harmony, but that is certainly not the case.
During the three days of public hearings held by the Standing Committee on Finance, even representatives from the maritimes disagreed with the government's proposal and, meanwhile, the government did not have a clue how to get out of this mess.
Before getting to the crux of the matter, I would like to make two comments regarding the procedures followed for this bill and the conduct of the government's representatives. First of all, the government's representatives behaved in a manner I would call undemocratic, ever since we started examining this bill.
At the second reading stage, we received the bill 24 hours before hand. Twenty-four hours to examine a bill that is more than 300 pages long, plus explanatory notes. We were told to do our job. We must explain to the public that certain parts of the bill could cause problems and should be debated in the House.
It is unheard of to receive a bill as important as this one, with so many clauses and having so many potential consequences, only 24 hours ahead of time. It is hard to explain why, unless we realize that the Liberals want to talk about GST as little as possible. They want to give us as little ammunition as possible with which to attack the GST because their own arguments are so weak. From the very beginning, their approach has been very much ad hoc.
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Quite simply, I wish to point out two things in connection with the attendance of the witnesses over three days in early January and the way the Liberals presented things.
First of all, right from the word go, right from the start of these hearings, the Liberals arrived at the finance committee with 16 amendments to their own bill. Imagine how unsure of themselves they must have been to have seen problems in the bill they had tabled themselves, to start off by giving the committee 16 amendments.
We saw those amendments at the same time everyone else did, even though our role as official opposition would require us to have access to them in advance so we could assess their scope. And that is not all.
On the third day of the hearings, because hearings on such an important matter were restricted to three days, the Liberals tabled 113 amendments on the very evening that the bill was being analyzed clause by clause. Yes, 113 amendments to a government bill introduced by representatives of the government-there is some incongruity to that.
Mr. Lebel: They were bewitched by a magic potion.
Mr. Loubier: Exactly. So, for a bill of approximately 272 pages, there were 113 amendments. You can see that both the process and the bill itself can be described as an improvisation right from the start. Proposing 113 amendments to 272 clauses is a neat trick.
Not only did they table these amendments, which is ridiculous enough in itself coming from a government that claims to be serious, but at the same time, those amendments to the bill were provided to us two hours in advance, and involved modifications and outright deletions.
I get the feeling the government is so anxious to conceal things about the GST that it wants to prevent us from doing our job as the official opposition. And despite our asking continually during the three days of hearings in January that they be extended, because people from the maritimes wanted to take part in the finance committee hearings in order to explain that the government was making a mistake, with its perpetual improvisation, with its game of pretending to do something about the GST, whereas it had promised to scrap the GST, to abolish the GST, our request was refused. As a result, the bill is riddled with inconsistencies, even practical barriers for businesses. We shall return to that point later.
As for the improvisation I referred to, even this week when we undertook examination of Bill C-70 at the report stage, we did not even have the bill as amended by the committee available to us when we started our examination. That takes the cake. This is a solemn institution, with a government that claims to be responsible, and, when Bill C-70 is studied at report stage, we do not even get the latest amended version of it. I think Liberal members are so stricken by pre-election fever that they forget to do their work properly. Lucky for them they have an official opposition that looks after the interests of Quebecers and Canadians while this fever rages.
Not only is the government continually improvising, it is diverting taxpayers' attention in this bill. Why? Because the bill talks about harmonizing in a small part of the country: three maritime provinces at a cost of $1 billion, we must not forget. It is too awful for us to keep silent on this political compensation.
They are hiding the truth. It is not the truth to say that harmonizing is necessary in the maritimes, and this will provide an example for the future. The truth is that the government made a commitment to abolish the GST. The commitment was not made by the rank and file of the Liberal Party. The Deputy Prime Minister, who made a big production of her resignation and re-election at the cost of half a million dollars, had promised her government would abolish the GST. So did the Prime Minister. We must not let this be forgotten, because we will soon be going to the polls, and the people will remember that, when the Prime Minister makes a promise, he will not necessarily keep it, because he can say whatever he likes and do the complete opposite once he is in power.
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The people will remember. They will remember that, during the election campaign, the current Prime Minister said, and I quote: ``We will scrap the GST''. Scrapping does not mean harmonizing and it certainly does not mean paying $1 billion in payoff to the maritime provinces in order to come out smelling like a rose in the matter of the GST.
The people of Canada and Quebec will remember as well that the Prime Minister said on May 2, 1994: ``We hate this tax and we are going to eliminate it''. They will remember each time the Prime Minister opens his mouth to make a solemn commitment, as we have seen regularly since that famous evening in Verdun, the first referendum evening when he made a slew of commitments he did not keep either. People will know that the Prime Minister's commitments are not worth the microphones he utters them into.
The Liberals, the government, the Liberal Party of Canada have a very selective memory on the subject of Bill C-70, and the comments I heard earlier from my colleagues prove it. First, when they were in opposition, the Liberals got themselves in a great state. My colleague from Sorel remembers that, because he was a member of the Conservative Party, which was in government and which set up the GST.
In their minority report, a report dated November 1989, when they were in opposition, the Liberal members of the Standing Committee on Finance stated, and I quote: ``It is the position of the Liberal members of the finance committee that the Conservative goods and services tax proposal is flawed and cannot be ``patched up'' in a way that would it fair for Canadian taxpayers''. This is a quote from page 262.
What have the Liberals done with Bill C-70? A patch-up job. In the three Atlantic provinces, the existing GST and provincial sales taxes are being replaced with a single tax called HST, or harmonized sales tax. But the fact of the matter is that it is the same tax. It is the GST with a different name, with approximately $1 billion in bonus for the maritimes. They have done a patch-up job to meet their election objectives. They have made a partisan patch-up job at public expense, at the taxpayers' expense, with the taxes paid to the federal government every year.
Here is another quote from the Liberal minority report, at page 277, regarding the fact that the new harmonized sales tax would be included in the sales price. I may have failed to mention this detail. The maritimes tax harmonization scheme provides for the new 15 per cent tax to be included in sales prices.
Coming back to the minority report tabled by the Liberals in 1989, at the time when the goods and services tax was established and the Liberals were in opposition, let me quote from page 277 of the minority report, which stated: ``The great danger of making the GST a hidden tax is that it would be much easier for the government to raise the rate in the future''. In those days, the Liberals opposed tax inclusive pricing, arguing that the Conservatives would do everything they could to raise the tax without anyone noticing. The Liberals are doing that very thing. That is incredible.
I would like to bring to the attention of the public another quote from the report of the Liberal minority, which was in opposition at the time. They were sitting then exactly where we are sitting today. Regarding tax reform, the Liberals said, and I quote from page 300 of their report to the finance committee: ``Sales tax reform cannot be undertaken independent from income tax reform, corporate tax reform, social welfare reform or independently of the other levels of government. Canada is in need of an overall tax reform that encompasses all forms of taxation and all levels of government''.
Not only did the Liberals not abolish the GST, but they have not undertaken any overall income and corporate tax review.
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We had to nip at the heels of this government for three and years, and we had to submit ideas and analyses ourselves to reform individual and corporate taxation, as was done in November for businesses and just recently for individuals. The official opposition had to do the government's job as regards tax reform, because the government is not doing its job. It even goes against its own vision, doing exactly the opposite of what it claimed it would do when it sat in opposition. As for the participation of other levels of government, we know what to make of it.
Officials representing the governments of Quebec, Ontario, Manitoba, Saskatchewan, Alberta and British Columbia were literally pushed aside. Why? Because this is a bill providing $1 billion in compensation, something which is unacceptable to officials representing Canadian provinces other than the maritimes, including those from Quebec. It is unacceptable because the government takes money paid by the taxpayers from all these provinces to compensate the maritimes through a local harmonization process. This is unprecedented. It is obviously a political and partisan measure that makes no sense at all. We have now reached the point where, in order to make local tax changes in the maritimes, the federal government takes the taxpayers' money to compensate the provinces concerned. It makes no sense.
The result is a bill that is in total contradiction with what the Liberals claimed to defend before they took office. It has nothing to do with the tax reform they claimed to support at the time, particularly as regards the GST, a tax which they then claimed to hate. The Liberals said they hated the GST. At the time, they pointed their fingers at the Conservative government and relentlessly attacked its members on the GST issue. All the Liberal members who were there at the time said the GST had to be abolished, that it had to be scrapped, because nobody wanted that tax in Canada. Once they took office, there was no problem any
more. Not only did they keep the GST, but they are also tinkering with it, something to which they had been opposed at the time.
In addition, with respect to the process surrounding the debate on Bill C-70, we added our voice to that of the Government of Quebec and the governments of certain Canadian provinces and urged the federal government to make public the details of the calculations that prompted it to hand over $1 billion, or close to $1 billion, in compensation to the maritime provinces.
Each time, we came up against a blank wall. The government is refusing to make public the criteria behind this compensation, how it was calculated and the figures available for the three maritime provinces. Their refusal to release this information means that there is something to hide. Could it be that the $1 billion in compensation is not justified? Could it be that a request from the governments of these three Atlantic provinces was thrown on the table and the Minister of Finance responded with this $960 million subsidy? Could it be that this is nothing more than a partisan agreement, something to show Quebecers and Canadians that the government is working to reform the GST, that it is doing something? Because, by doing something, they are giving the impression that the Liberals are gradually starting to deliver on their promise.
It is not right that $1 billion of our money has been spent and no details are available about how this amount was arrived at.
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I again ask the Minister of Finance, on behalf of the Government of Quebec and the provincial governments who have been asking for this information since the early summer, to make it public. I remind him of this request that he make public the criteria and the method used to calculate this $1 billion in compensation to the maritimes.
This is not the only bill Quebecers and Canadians will be stuck with as a result of this agreement between the federal government and three maritime governments. Three, five, ten, fifteen, twenty or one hundred years down the road, taxpayers outside the maritimes will also be hit with the ongoing costs of equalization payments.
With your permission, I am going to give a little explanation of the equalization process for the benefit of the public. A province gets an equalization payment if it is determined that its tax base, in other words its ability to collect taxes from taxpayers, is not sufficient to enable it to provide public services equivalent to those available elsewhere in Canada. There is a very complex formula. I would urge you, Mr. Speaker, since you sometimes seem to enjoy the complexity of things, to read a lengthy but very interesting document put out by the Minister of Finance explaining all the calculations in detail; the technical wizardry is something else.
So when we analyse the tax base and are faced with the fact that in the maritimes the Liberal government purposely made the suggestion, which was accepted, to reduce the sales tax base, we see that equalization will play a greater role in the future than it already does in the three maritime provinces. Let me explain.
In the three maritime provinces, sales tax plus the federal tax on goods and services, the GST, added up to around 19 per cent: provincial sales tax plus GST equalled a tax of 19 per cent on goods purchased in those provinces. In the agreement with the maritimes, this tax is reduced from 19 per cent to 15 per cent. In other words, 4 per cent of potential tax revenue was eliminated.
Eliminating this 4 per cent of potential sales tax revenue of the three maritime provinces will necessarily mean that equalization will play a more important role.
To finish my exposé, in the future, after paying one billion dollars in compensation to the government's three maritime provinces, Quebecers and Canadians will continue to pay through equalization, Quebecers perhaps to a lesser extent because they will be asked to vote in a future referendum on the sovereignty of Quebec, but other Canadians will have to pay in perpetuity for the sales tax forgone by the maritime provinces as a result of reducing total consumer taxes from 19 per cent to 15 per cent.
The Minister of Finance is not advertising the fact. When we asked him about this in the House, he was vague to say the least. He was confident about the positive impact on economic growth and said that the tax revenues connected with his fantastic harmonization agreement with the maritimes would ensure that equalization would not be a major problem.
It is totally unrealistic to say that equalization would not be a major problem and that taxpayers will not pay in perpetuity for this very costly agreement with the maritimes.
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According to Bill C-70, the agreement with the three Atlantic provinces could be used as a model for implementing the new harmonized sales tax system, which is nothing more than the GST in disguise. It is just as heinous as the previous tax. They say this could serve as a model for a new consumption tax system in other provinces in Canada. If this is the model, then, as we say, things must be pretty rough.
Even in the maritimes, they are rejecting this new system. This new tax system is going to be a fiasco. In the maritimes, they fear it
will bring total chaos. If this is the model they want to implement elsewhere, it is not worth much, and the government has problems.
Since the Liberals set aside only three days for finance committee hearings, witnesses from the maritimes willing to come to Ottawa to testify on this bad piece of legislation had to be turned away. As some of them told me, the Liberals thought that, during those three days, the representatives of the three maritime provinces would praise the government, tell them what a good job they had done, and say that they were happy to have the $1 billion in compensation paid by the people of the other provinces and proud of the agreement and of being used as a model for the implementation of a new tax system elsewhere in Canada.
The Liberals, however, got a great surprise-so did we for that matter. According to the Minister of Finance, this agreement appeared to be well received in the maritimes, and we believed him. We did not take his word, as usual, but we did think there was an element of truth. He believed what he said. He had met representatives of the maritimes, and everything was fine. Even the members from the maritimes said the agreement was a wonderful thing.
During the three days of finance committee hearings, the representatives of the maritimes told us that the bill had to be done over from scratch. The bill could not be used in the maritimes, because of the minister's endless changes. I myself would not do this bill over from scratch. I would pitch it in the garbage.
Why. The answer is simple. The aim of the bill was to improve opportunities for economic growth by promoting consumer spending, which would create thousands of jobs in the maritimes. According to some representatives from the maritimes, the new harmonized sales tax would create so many jobs the affected provinces would not have enough room for them all.
In fact, this tax may threaten rather than create jobs. There are very high costs associated with setting up and managing a new sales tax system. Representatives of large businesses operating in the three Atlantic provinces as well as in other Canadian provinces cautioned us not to proceed. Not only will setting up this new system cost approximately $100 million, but businesses operating in the maritimes will have to pay between $90 and $100 million per year in recurring management costs.
There are no savings. Harmonization may well prove to be a monumental fiasco. Representatives of major organizations like the Retail Council of Canada, whose members are responsible for 65 per cent of the retail trade, told us tax inclusive pricing was a bad idea. According to them, it will confuse consumers and result in additional management costs for retail operations, regardless of their size.
Sears Canada, Woolworth Canada and Canadian Tire-not exactly small businesses-also told us not to implement this system. They asked that the implementation of the system be deferred because of the incredible difficulties inherent to its setting up and management.
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Businesses like Canadian Tire, Woolworth and so on are in the habit-and I think this is normal-of seeking the highest possible rate of return, so they centralize in huge warehouses the goods that will be sold through their many stores across Canada.
Goods are shipped from these large warehouses to the retail stores operated by Canadian Tire, Woolworth and other companies. But before they are shipped, the goods are tagged or labelled. At present, there is centralized tagging for all of Canada, which means that the procedure is the same throughout the country. The tags indicating the retail price are the same in Ontario, Quebec and the maritimes.
But the new system and the inclusion of the new harmonized sales tax in the sales price for the three maritime provinces will change all that. Large chains that warehouse and tag their goods themselves will be forced to put, on one side, goods for sale in the three maritime provinces and, on the other, the goods for sale in the other Canadian provinces and Quebec.
Why? Because the price will not be the same. The retail price of goods sold in these chain stores in Quebec, Ontario, Manitoba and so on, will not include the sales tax, while the price of goods sold in the maritimes will. So, these are two different systems.
They require different accounting processes and different inventory management systems. This means not only a different inventory management system, but also a different management system for the taxes to be paid by these businesses. The stock value is based on the costs of buying goods and on resale costs. Imagine the mess. All this to help but a fraction of the Canadian population. This will result in an increase in overall costs and in a terrible mess.
And the Minister boasts about having set up an extraordinary model. Extraordinary indeed. It is a model that is costing us $1 billion, that will cost us even more in equalization payments, that will trigger implementation costs of $100 million for businesses in the maritimes, that will result in yearly recurrent expenses of 90 to 100 million dollars in additional management costs, because managing stocks, prices and the movement of goods in the Canadian provinces will be a terrible nightmare for these businesses.
This is serious. It is no wonder that, on the third evening of January, when the snow was falling and it was really nice outside, the Liberals tabled 113 amendments to their own bill. They do not know what to do. They do not want the charming Minister of Finance, who is a very credible person, to lose face. He could indeed lose face with a bill such as this one. It makes no sense. If, even with a $1 billion gift to the maritime provinces, the federal
government is still not able to sell this unenforceable bill, then there is a problem.
I personally told the chairman of the Standing Committee on Finance that it made no sense to table such a bill. I did not get a clear answer from him. I have the feeling that he too is beginning to think the days are long when dealing with Bill C-70.
It came as no surprise when, yesterday, the government displayed an undemocratic attitude that has become something of a tradition in the past three and a half years by imposing closure on this bill. The more we talk about the GST, the more it hurts the government. There is a difference between harmonizing, particularly if it is done improperly as in the maritimes, and abolishing the GST, which is what the government pledged to do.
The more we talk about this bill, the more we analyze it. After all, the government only gave us 24 hours to review this legislation, including its explanatory notes, to make sure the interests of taxpayers are protected.
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The closer we look at this bill and the more people we consult, even in the maritimes, the more we are left with the conclusion that you have to be a little strange, to have a brand of logic that perhaps only they understand, to bring in a system of taxation like this one. It makes no sense.
I ask the Minister of Finance, who is listening attentively, to delay implementation of this bill, to listen to the arguments put forward by the maritimes and by the official opposition and the other opposition. It makes no sense to implement a bill like this, that is costly for everyone, just so that he will look like he is doing something about the GST. It is unbelievable, but this is what often happens, more often than not. We therefore formally ask him to postpone this bill.
We agree that politics have changed. A politician can make mistakes. And a politician who makes a mistake and admits it can be forgiven. The Minister of Finance made a mistake; the Prime Minister also made a mistake. He made a mistake with this bill. He has made many since we have known him, but this bill takes the cake.
If the Minister of Finance admits that he made a mistake with this bill, that it is costly, that it is a fiasco, we will probably forgive him, because to err is human, but he must stop feeding us this nonsense. He must stop telling us how wonderful this bill is, when he cannot even convince the people in the maritimes that he is right.
Having given my views on Bill C-70, I would like to take a moment to look at taxes on books.
The government is proudly telling anyone who will listen, and I heard a Liberal colleague crowing about it just recently, that it has lifted the tax on books. It is true that it has lifted the tax on certain books, but not all. Furthermore, when the Finance Minister tabled his bill, I congratulated him on this aspect of it, but asked him to chuck the rest. I congratulated the Finance Minister on taking a first step by removing the GST on books. But he did not go far enough. He is exempting books bought by institutions of learning. This represents only a small percentage of the books bought in Quebec and in Canada.
We are asking, as we have for years, that the GST on books be eliminated. Even before the last election, my seven colleagues who founded the Bloc Quebecois-and I acknowledge the presence of the hon. member for Sorel-battled to get the GST taken off books. They joined forces with the entire literary community of Quebec and Canada to demand that culture not be taxed, that books not be taxed, and that steps be taken to make culture more accessible.
The first seven representatives of the Bloc Quebecois-Bloc Quebecois: the first generation, they might be called-were the first to rise up in defence of Quebec literary culture, and Canadian literary culture as well. This is somewhat incongruous, but there is something rather incongruous about the Bloc Quebecois too. It does, however, fit in well with history until Quebec decides to take charge of itself and declare its sovereignty.
Yet it is somewhat peculiar for sovereignists to be defending Canadian culture, by demanding that the GST be removed from all books and fighting a minister for international trade who is prepared to put it up for grabs by the Americans or anyone else in the world. And it is somewhat peculiar for sovereignists like my colleague for Richmond-Wolfe, the culture critic, to rise in the House and demand that the CBC and the major cultural institutions be given back all the money they have been robbed of in the past three years. All this devastation is caused by the same person: the finance minister, who looks good, winks nicely and just oozes charm, but he can sure wreak havoc.
What we are doing may be peculiar, but we are doing it nonetheless. We are standing up proudly in defence of culture, and we are asking the Minister of Finance-and this is the second time the official opposition is asking him this-to abolish the GST on books, thus giving a boost to the culture he claims to be defending.
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[English]
Mr. Monte Solberg (Medicine Hat, Ref.): Mr. Speaker, I rise to speak to Bill C-70. The first thing we need to do when speaking to this legislation is to talk about it in context. To do that, we need to go back, believe it or not, about eight years to the time when the current finance minister was seeking the leadership of the Liberal Party.
At that time if I remember right-I have a newspaper clipping somewhere from the Calgary Herald-the finance minister came out four square against harmonization. The reason he was so opposed to harmonization at that point was that he foresaw, quite correctly, that harmonization would make it extremely difficult to ever lower taxes once it was in place.
That is what he said in 1989. I truly believe that what he said is true. What has happened since then demonstrates in a way that I cannot say with words, that the government cannot be trusted on these issues, that it will say one thing and do quite another. The Liberals are more interested in staying in power than in serving the people.
Between 1989 and the election of 1993, we heard over and over members of the opposition, people who currently hold positions of responsibility in the government, people like the defence minister, the Prime Minister, the finance minister and the Deputy Prime Minister, say in one form or another that they were going to axe the GST, they were going to scrap the GST, they were going to abolish the GST.
People who are currently prominent Liberal backbenchers-if that is not an oxymoron-said over and over again that they would get rid of the GST. Many of them had it in their campaign literature. We pointed out in the House who those people are. The member for Niagara had it in his campaign literature. The member for Vancouver South had it in his campaign literature. The hon. member across the way is challenging me on this. I have given him some names and I trust that he will check this out so that he knows how he is being duped by his own party.
We all recall a few days before the last election campaign-I do not think the member across the way will deny this-that the Deputy Prime Minister appeared on national television and said that if the GST was not scrapped, axed and abolished, she would resign. She said it on national television.
In the days following the election campaign, all of a sudden the government did a complete 180 degree turn on those types of promises. Members across the way will say that on page 22 of the red book it states that the Liberals were only going to replace the GST.
The Liberals said one thing in the red book, of which approximately 70,000 copies were distributed. They were saying something completely different when they got on national television where millions of people were watching. It was probably the only information most people got on the Liberal platform because that document had so little circulation for very good reasons. On the one hand the current government was saying one thing and on the other hand it was doing another thing.
Let us fast forward a little. It was well into the government's mandate when it started to finally feel the pressure of all the promises Liberals had made and had used to lever themselves into power. They had made a ton of promises about these things. I see my friend from Broadview-Greenwood is here. He remembers this very well. Those promises were catching up to them.
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Finally, after an embarrassing situation here in the House where government members had to vote against scrapping the GST, even though that was the promise many of them had made on doorsteps across the country during the election campaign, the Deputy Prime Minister, after polling her riding, saw that it was safe for her to resign because she knew she could be re-elected again, and resigned. It cost the country half a million dollars or something like that, but finally she did resign. She was subsequently re-elected. We all know that. I think that was a disappointment to Canadians who felt that if she resigned she should not run again.
While all that was happening, the government was going through all kinds of machinations to make a deal with Atlantic Canadian premiers. It offered them a backroom deal of $1 billion if they would come on board to be part of a harmonization deal.
People will remember that the provinces were not exactly lining up to come on board and sign a harmonization deal. The government did talk about a harmonization deal but all of the provinces said that there was no way they wanted to be part of it. That was until the government put $1 billion on the table. Is it not funny how $1 billion will change attitudes, especially when that $1 billion is designed for Liberal premiers in Atlantic Canada?
That was the second time in this sorry saga that the people of Canada had been let down. They had been let down initially when they were told that the GST would be scrapped and it was not. The second time was when a backroom deal was cut with Atlantic Canada premiers and people were left out in the cold. Despite the fact that in Atlantic Canada this deal was going to fundamentally affect their lives they had no say. It was $1 billion, and the people of Atlantic Canada were left out.
That is not where this tale ends. We wish it did but it goes on. The government said it was going to introduce HST legislation or as it is euphemistically called in Atlantic Canada BS tax legislation. That was done on December 2, 1996. It was only days after that when the Prime Minister appeared at a town hall meeting and he was still in denial. I guess the Prime Minister is so cocooned, so distant, so disconnected from reality he still cannot get it through his head that what he said in the days leading up to the election campaign were words that people had actually counted on him fulfilling.
He appeared at the town hall meeting. He actually chided a young woman from Montreal, Johanne Savoie, for having the nerve to try to hold him accountable for his promise. He said to her: ``Tell me when you heard me say that I would scrap the GST''. Much to his chagrin she did exactly that. She told him that she had seen him on television. She told him that she had heard him on the
radio. He denied it but the CBC reported seconds later on a newscast that indeed he had said those things.
The Prime Minister was caught. He was hung on his own words. Again the Prime Minister was in denial. He was trying to tell people that he had not said those things when in fact he had. I wish I could say that the Prime Minister saw the error of his ways, apologized and said that he would not do that again and it was wrong for him to do that, but he did not. The whole thing continues on. The sorry mess continues.
After that the government in its wisdom decided that not only was it not going to allow people the chance to be involved in having a discussion about the $1 billion that went to Atlantic Canadian premiers, and people were not going to be allowed to hold the government accountable on breaking a promise to get rid of the GST, the government was not going to even allow people from Atlantic Canada to come to hearings on the GST.
During hearings in January, I moved a motion that hearings be extended and moved to Atlantic Canada so that the people there could have a say on this issue. I would say that unless people have that opportunity, we have at least taxation without consultation if not taxation without representation.
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I know there were some hon. members opposite, and at least one from Atlantic Canada, who said ``I am sensitive to the fact that people in my region should have a say in this. I am going to advertise and we will fly them from Atlantic Canada to Ottawa''. In other words, in her situation, because I guess she felt that she could only push her luck so far with her colleagues, she was trying to do what she could.
Certainly that flies in the face of all logic. The finance committee should go to Atlantic Canada to talk to people about a taxation system which will affect their lives in a fundamental way.
We had all kinds of people come forward from business. Provincial politicians came forward. We had people come forward representing groups such as chambers of commerce who said that there were flaws in the legislation. There were things that were wrong with it. They had to come to Ottawa because Ottawa was simply too arrogant to go to them.
Ottawa could not be bothered to go to Atlantic Canada, despite the fact that this legislation is going to have a profound impact on the economic future of Atlantic Canada. That is wrong. It is fundamentally against everything which every member in the House believes in, even if some cannot bring themselves to say it. Just about every member of the House knows that if we are going into a region to say ``we are going to change your tax system completely'', then those people should have the right to have their say before a committee which has some influence on how the legislation will be implemented. It is common courtesy. It is common sense. It is something that should happen as a matter of course in a democracy.
Unfortunately Liberal members voted it down. It is shameful. It is ridiculous. I hope that when those members return to their ridings in Atlantic Canada they will come up with an explanation to justify how they could deny their constituents what should be a basic right.
I have talked about the lack of process in inviting input, but that does not mean there were not people who were raising their voices, speaking out against many aspects of the harmonization legislation.
One of the biggest problems people have with the HST legislation is the tax in pricing component. I talked to dozens and dozens of business organizations and people who had grave concerns about the impact it would have on their businesses in Atlantic Canada and, as a consequence of the impact on those businesses, on the people of Atlantic Canada.
People came forward from Carleton Cards who said they will close 19 stores in Atlantic Canada if this legislation goes through. There was no caveat on the comment. They said they will do this.
Woolworth's has 125 stores in Atlantic Canada. Those stores fall under a number of different names. It might close as many as 25 per cent of them. Over 30 stores in Atlantic Canada will be closed because of this legislation. It said that some of the things in the legislation and the tax in pricing component will mean extra costs to business. That will mean that all the stores which are marginal, which are barely making a profit, will all of a sudden become unprofitable. Many stores will be facing new leases in the near future and given the choice between signing a new lease or closing the store, knowing that the legislation will mean they are destined to be unprofitable, those businesses will be closed. Obviously the people working in those stores will lose their jobs.
In Atlantic Canada those jobs are precious. People need those jobs in Atlantic Canada. For crying out loud, the unemployment statistics which came out on Friday told us that unemployment in Newfoundland is at 20 per cent. That is a human tragedy of unbelievable scope. However, the government entertains to let businesses close because of its legislation and a part of it is not even necessary to carry forward the great bulk of the legislation to achieve any good that could come from the legislation, according to these businesses.
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I have not even mentioned the other businesses that closed down. MMG Management closed a number of stores in New Brunswick, and I believe 72 or 75 jobs were lost as a result. This is not an abstract piece of legislation that has no effect in the real world. I
can guarantee that the effect is quite profound and I would say for those people who have lost their jobs it is a great tragedy.
That is one aspect of the legislation that people were speaking out against, but again they had no voice in Atlantic Canada, first because there were no hearings in Atlantic Canada and second, I would argue, because a bare few MPs from Atlantic Canada have even bothered to speak to the legislation. I have yet to see one of them stand in question period and go after their own minister, asking why they are not listening to the people of Atlantic Canada on concerns they have with this legislation.
However, it does not end there. There are other concerns that people have. One is that the legislation will mean that a disproportionate impact of the tax changes will fall on the poor in Atlantic Canada. For years the government and Liberals have talked about how they care more. They have tried to assume the superior air. They have tried to take the moral high ground on the issue of compassion and they have tried to tell Canadians they care more. But it is indisputable that this legislation will mean that the people of Atlantic Canada who can least afford it will bear the brunt of the cost of this legislation.
Let me give an example. Children's clothing will go up in cost in Nova Scotia, heating fuel for homes will go up in cost, utilities of various kinds will go up in price, gasoline for cars will go up in price. People who can least afford it will be trapped by this new legislation because they are on a fixed income and do not have the means to make it up.
Contrarily, ironically, a fur coat will cost less; a yacht will cost less. But did we hear members from Atlantic Canada raising this in question period? No. They are absolutely mute on this point. Did the people of Atlantic Canada have a chance to raise this before the finance committee in their home towns in Atlantic Canada? Absolutely not. Again I think the government has let the poorest of the poor in Atlantic Canada down.
There are other problems with this legislation, not what is in the legislation but what is not in the legislation, which is the fulfilment of the promise the government made to end the GST on reading materials. It would be bad enough if it simply did not fulfil the promise, but when it ends up doubling the GST on reading materials, I think that simply mocks the people to whom the promise was originally made.
The don't tax reading coalition wrote to the Prime Minister in the lead-up to the 1993 election and asked him if he would remove the GST on reading materials. ``Oh, my, yes'', the Prime Minister said. ``Yes, we will get rid of the GST on reading materials. After all, we passed that sort of policy at our policy convention''. Subsequent to the Liberals' policy convention in 1993 they also passed another policy in 1995 to get rid of the GST on reading materials. But the GST remains on reading materials.
I know some will argue that they have removed it in some ways for university and libraries. I want to be fair. They have done that, but they have come nowhere near fulfilling their promise. In fact, by introducing the harmonized sales tax in Atlantic Canada they have doubled the GST on books.
Once again we have the Liberal myth versus the reality. The myth being ``we are going to get rid of the GST''. The myth being ``we care about the poor''. The myth being ``we are going to listen to people''. The reality was they did not get rid of the GST, they did not remove it from reading materials. The reality is they raised prices for the poorest of the poor in Atlantic Canada. The reality is people did not have a voice because there were no hearings in Atlantic Canada.
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There is even more, and I must comment on these things. One of the things we have heard from the government over and over again is what the finance minister spoke to the other day. He said ``we believe in tax fairness''. He talked about the tax fairness measures he and his government have introduced since they have been in power.
If you are a taxpayer, when you look at these so-called tax fairness measures, you will be bound to say that this is not tax fairness but a tax grab. In so many cases the finance minister removed legitimate deductions simply so more revenue could be raised. If it were tax fairness the Liberals would have given the money back to Canadians in the form of a lower rate. That would have been fair. But they kept the revenue.
They had a chance to demonstrate that they really believed in tax fairness when members of the medical community, private ambulance services and physicians, said to the government that when the legislation came into place, many people like farmers and pharmacists were able to zero rate GST because they could not pass it on to the people who ultimately consumed the services which in their case would be the provincial governments. They asked to be treated in the same way as others who were zero rated.
There were some wonderfully warm words from the other side that this is important, we need to be fair to everyone, the tax system should treat everyone fairly. But what did the Liberals do? They said no. They said ``tax fairness only means that we get more money. We close loopholes'', as they call them, ``so we can get more money. It does not mean that we would ever give money back to anybody. That would not be fair. We would not want to treat everybody the same, especially if it meant giving taxpayers a break''.
Again the government let people down. It says on the one hand that it believes in tax fairness but on the other hand it does something quite different.
People raised some other concerns with respect to tax in pricing. One of the first people we had before us in our Ottawa hearings three weeks ago was a gentleman who raised a concern about a provision in the legislation that would allow the government to send someone to jail if they inadvertently did not put a tax inclusive price on a chocolate bar or whatever. When he raised this issue the finance committee was in an uproar and everyone said ``we will fix this. We will not allow that to happen. That is ridiculous. What happened here? How did this happen? We are going to fix this''.
To its credit, the government will no longer send anybody to jail if they inadvertently do not put the proper price on a chocolate bar. What bothers me is the fact that this provision was in a press release that came from the finance department betrays an attitude. It tells us that the finance department and by extension the finance minister are so disdainful of the public on these sorts of issues that they will put things in a press release that they want to be widely disseminated by the media to the public. It speaks of an arrogance in the government that in the past has been the downfall of other governments.
When people raised this, politicians on the finance committee immediately saw this was wrong. They protested against it and it was changed. But my question is how did this get in there in the first place. Why did they have that type of language in the legislation?
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At every stage over the last three years we have seen the finance department become more and more aggressive with respect to people who are trying to do their own books. All of a sudden an official from finance or revenue shows up says: ``We are going to squeeze every nickel out of you and if you do not give us every nickel, we are going to camp on your doorstep and make life miserable for you''. Everybody knows. The government has hired more auditors and tax collectors. It has made life generally more miserable for people who are simply trying to get by and run a business out there, the people who create real jobs.
I think the government went over the line in the harmonized sales tax legislation when it publicized in a press release that a person will go to jail for 30 days if he does not put the proper price on a chocolate bar. It bespeaks an attitude, one I do not think Canadians like. It is an attitude we saw coming from the Prime Minister in the town hall meeting. It is an attitude we saw coming from the Prime Minister in an interview in the Toronto Star on the weekend. Frankly, I think Canadians are a little sick and tired of that type of arrogance and that kind of disdain for regular rank and file Canadians who are simply trying to get by.
I want to say a word about the tremendous bureaucracy the government is putting in place in introducing harmonized sales tax legislation. Tax in pricing is something that simply does not have to be in the legislation in order for the government to carry forward with the bulk of its changes but it has insisted on it being in there. The government has said it has to have it despite the protest from businesses which said it is going to cost jobs in Atlantic Canada.
Businesses said they are going to end up passing on costs of $100 million a year to Atlantic Canadian consumers and the government does not care. The government said not to worry about it, that it will set up a regulatory regime to make it a little easier for them and it will not be such a big deal.
The government has even come down with guidelines saying to those who want to have catalogues in Atlantic Canada that in their catalogues they must say in type which is one thirty-second of the page in size that the prices do not include provincial sales taxes. Are we now going to see an army of bureaucrats come out with pocket protectors, rulers and magnifying glasses? Are they going to come into Atlantic Canada and sit down and measure the type in catalogues? Are they going to be measuring signs in stores?
The government came up with 20 or 25 different ways of allowing people in Atlantic Canada to comply with the legislation before the government would come down on them for not being in compliance. The end result is we are going to have 20 or 25 different systems.
Consumers are going to be hopelessly confused. What started out as tax simplification is now going to be tax complication. It completely defeats the whole purpose of the legislation. It is ridiculous to be doing it this way but the government, never to be swayed by common sense or logic, decides to boldly go ahead and damn the torpedoes.
I have talked about the process and I have pointed out that initially the government said it was going to scrap the GST and it did not. Then it went ahead with the backroom deal and left the Canadian people out. It gave Atlantic premiers $1 billion to go ahead with the legislation. Then it refused to have hearings in Atlantic Canada.
I think it is appropriate that this has been topped off with the government now invoking closure on this legislation. Once again it is shutting the Canadian people out of the process. It is saying to the people that elected representatives cannot stand up for the people of Atlantic Canada to point out the flaws in this legislation, to try to get the government to change its mind when so many people have indicated they have grave concerns with the legislation. And here we are debating this legislation for the last time.
This government has used closure more often than any other previous government. Twenty per cent of the legislation that passes through this House is subject to closure. In other words the government says it is going to shut down debate here in the Parliament of Canada. This is the place where democracy should reign supreme, and the government routinely denies members of Parliament the right to freely express themselves. I think that is wrong.
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It was wrong when hearings were not held in Atlantic Canada. It was wrong when the premiers of Atlantic Canada cut a deal with the Prime Minister for a billion dollars and left Canadians out of the process. It was also wrong when the government deceived Canadians about its intentions with respect to the GST.
This movement to introduce closure simply punctuates the sentence. It puts a period on a sentence of anti-democratic behaviour and behaviour that simply does not become mature men and women.
We have arrived back at where we began. I want to make the argument for why this whole idea of harmonization is a bad idea. At the beginning of my speech I pointed out that the current finance minister, the member for LaSalle-Émard, when he was in opposition in 1989 and running for the leadership of the Liberal Party, pointed out that harmonization would make it very hard to lower taxes in Canada. He was prescient. He was dead on. He knew exactly of what he spoke. Political convenience made him change his mind over the years.
There is no denying that harmonization will make it virtually impossible to lower taxes in this country. Let me explain why. There are two major reasons.
The first reason exists in the agreement itself. The agreement states that in order to raise the rate of the harmonized sales tax, it requires only a simple majority of provinces and the federal government to agree and then they can go ahead and raise the rate. However to lower the rate requires absolute unanimity. It requires everybody to get on board and say that they agree to lower the GST, or the harmonized sales tax, or the BST, or whatever you want to call it.
When was the last time we had complete agreement on anything in this country? For crying out loud, we have had the Charlottetown and Meech Lake accords. It is fairly obvious that in a country this big and this diverse it is going to be virtually impossible to get 10 provinces, two territories and the federal government to ever agree on anything let alone lowering taxes which almost never happens in this country.
The finance minister was right in 1989. He was right when he said that harmonization would make it impossible to lower taxes.
I want to make another point with respect to the difficulty this poses in coming up with ways to lower taxes. One of the arguments I would make for not introducing harmonization is that when we have a single rate of tax across the country we eliminate competition between jurisdictions.
One of the great advantages of my province of Alberta is that we do not have a sales tax. Frankly, I think it is because Alberta does not have a sales tax that Saskatchewan's sales tax is not higher than it already is. The same would apply to B.C. People already come across the border to shop in Alberta because we do not have a sales tax. If we go to a single rate across the country, we will not have the type of competition that puts downward pressure on taxes. We need that in this country of all countries. In the G-7 we need it.
I looked at a graph the other day and granted, it was of income taxes. In this particular case it showed the increase in income taxes in Canada compared to the G-7 average. Without a word of a lie, our income taxes between 1965 and 1994 have gone up 1,000 per cent higher than the G-7 average.
No one can tell me that we do not need every mechanism possible to keep downward pressure on taxes in this country. We have had 35 surreptitious, sneaky tax increases by this government alone. We had 71 by the Tories before it. Every year because of what is called bracket creep, the government raises taxes in effect. Any time inflation is below 3 per cent, none of that is indexed. We end up paying probably close to $2 billion more in new taxes every year.
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We have some of the highest taxes in the industrialized world and we need every mechanism, every tool we can find to push taxes down. That is why our party has argued that it is time to have a debate about taxes in this country.
Some people have said: ``Let us look at the deficit problem and the debt problem''. We agree with that. That has been the Reform Party mantra for 10 years. We have been saying let's balance the budget. But balancing the budget is not the end. It is the means. We have to shrink government and balance budgets so we can have lower taxes which creates all kinds of wealth in this country. That creates jobs, permanent jobs, well paying jobs. That is what it is all about.
We need to have the tools in this country to lower taxes. We do not want to give any government some kind of veto power to keep taxes high. That is what the government is proposing to do not only with this legislation but with future legislation that would have to deal with the harmonized sales tax.
That is wrong. We cannot afford to have higher taxes. Do people in this Chamber realize that in 1996 we had record high taxation which led to record high personal indebtedness, which led to record bankruptcies? There were more bankruptcies in 1996 than in any previous year. For 76 months in a row, as a result of all that
taxation, we have had unemployment over 9 per cent in this country.
Can there be any question that taxes kill jobs. By now we must have learned that message. If people doubt it, I invite members to look just south of the border to the state of Michigan. Look to Michigan, a state that was part of the rust belt only a few years ago. It elected a new governor in 1990. He introduced 15 tax cuts. Michigan produced 450,000 new jobs between 1990 and 1995. That is more jobs in one state than the entire country of Canada produced in that five-year period. That is 450,000 in a state of what, six or eight million? In a country of 30 million, we could not produce that same amount of jobs.
That is unbelievable to me. It is unbelievable that we have not learned that lesson. The lesson is that taxes kill jobs. If we ever are going to deal with the problem of unemployment, we must learn this lesson. We must get our tax rates down. It is time that members in this place learned that lesson.
I must point out for a moment that our party has introduced a plan that will offer Canadians a way to get to the point where we have lower taxes. We will give people the tool that the government is denying with this GST legislation.
We have said that we will shrink the government. We will get rid of some of the wonky subsidies. We will not hand out money to Bombardier any more. That would not be done under a Reform government. We will not give money to some of the weird and wacky special interest groups who love to grace the halls of Parliament at budget time to cry for more money. They will not get money from the Reform Party. People are just a little sick and tired of giving money to those sorts of people.
We will cut spending for all those departments that more properly belong at the provincial level. We will not have those any more. We will provide Canadians with a government that does about 10 things and does them well. We want a government that focuses on getting the justice system right. Instead of doing 20 or 25 things and doing them all poorly, let us do 10 and do them right. Let us fix the justice system.
Let us fix national defence. It has become a national embarrassment the way the government cannot get a handle on fixing national defence. There is a rot at the top of national defence and we cannot fix it. If we would focus on fixing it instead of spending money on flags or whatever it is we are doing, we could actually do these things. We would be doing the country a great service.
Let us do those 10 things well. Let us get out of certain areas that we are in right now which more properly belong to the provinces. Like welfare. The provinces and lower levels of government have the solutions to things like the welfare problem. They are much more capable of dealing with it than bureaucrats 2,000 miles away. Let us let the provinces deal with those things.
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If we shrink government we can balance the budget and give a dividend back to Canadians in the form of lower taxes, $2,000 by the year 2000. That is what Reformers propose to do. That is the way to help people in Atlantic Canada, in central Canada and in the western part of the country. That is how Reform is going to help people. We will not go around raising taxes or removing the mechanisms to lower taxes. That is what the government has done. That is not our plan at all.
I will summarize by saying that the finance minister was right in 1989. He foresaw that harmonization meant higher taxes. He foresaw that this legislation would simply mean that at some point in the future, when the deficit had been dealt with, it would be impossible to lower the GST to give Canadians the benefit of their hard work.
I conclude by saying that we are opposed to this legislation. I hope that hon. members, in particular those from Atlantic Canada, will see the folly of this legislation and will vote against it.
Mr. Ronald J. Duhamel (St. Boniface, Lib.): Mr. Speaker, initially there had been an accord that I would be sharing my time, but that has now been changed and I will not be doing so.
I am pleased to have the opportunity to address the House today in support of this bill, which makes amendments to the GST and harmonizes the HST in the Atlantic provinces. I am pleased to do so because I want to try to bring forward some of the more positive features while recognizing that there are difficulties. A model has been put forward that is applicable to other provinces, with the same advantages to other provinces.
No special deal has been set up, as some colleagues would pretend, in order to try to make politics. It is rather interesting when one talks about the Reform Party these days. There are a lot of articles about how much difficulty it is having. It is not unusual to notice why. We have just heard from one of their more moderate members who spent much of his time talking about going to jail for putting a sticker at the wrong place on a chocolate bar. Let us get serious. Would that really happen?
He talked about the arrogance of the Prime Minister. What nonsense. We have one of the most gentle, kind, down to earth prime ministers we have ever had. There is no arrogance. That is the kind of sentiment that Reform wants to put out in order to gain political points.
He talked about Bombardier, which is one of the large, prosperous and significant companies in Canada, and within a few seconds was talking about weird, wacky interest groups and somehow put them together. If you are an interest group, does that make you weird and wacky? No, I think not. I know of a lot of interest groups whose members are extremely well educated and knowledgeable who have specific and important objectives. Just because they
come to Parliament and to governments to share information and seek assistance does not mean that it is inappropriate, but there goes the Reform philosophy. It puts Bombardier and weird and wacky interest groups all together. That comes from one of their more moderate members.
Is anybody surprised that Reform is having difficulty trying to convince Canadians that it is a serious political party? It does not surprise me.
I recognize that the scrap versus replace debate is ongoing. I understand the position of both groups. I made it my job to do so. However, I think any fair-minded person would recognize, if they took the time to look at it, that this legislation is a big step toward the accomplishment of another of the government's red book promises, as imperfect as it may be.
I want to quote what was in the red book as opposed to what the opposition parties that are trying to make political hay are saying. They recognize that taxes are not popular. They recognize that when a tax is changed, that is the time to try to embarrass the government. There is no serious criticism in trying to make what is happening better, simpler, easier, more acceptable to businesses and consumers. There is none of that. There is simply an attempt to exaggerate items, but they exaggerate to the point where no one really believes them.
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I will return to the quote.
[Translation]
A Liberal government will replace the GST with a system that generates equivalent revenues, is fair to consumers and to small business, minimizes disruption to small business, and promotes federal-provincial fiscal co-operation and harmonization.That is what we said. I realize that in the course of the debate, there are a number of things people may have said. And unfortunately, they may have caused some people to jump to conclusions. That is really too bad.
Suppose we look at what we said officially.
[English]
The broad elements of the final agreement with the Atlantic provinces included-it is important to understand that because therein lies a model which could be applicable to other provinces-a substantial reduction from current combined rates down to 15 per cent in the three participating provinces; a single administration for both federal and provincial sales taxes; tax inclusive pricing so consumers will know in advance of their purchase the exact price they will pay. For transparency purposes, the tax or rate of tax will be shown separately on the sales slip.
A national approach to interprovincial sales will ensure a level playing field for businesses in the participating provinces. Federal rebates and the GST low income tax receipt will continue to apply under the harmonization agreement.
A key element of the new system is a single set of rules and forms, as well as a single administration. Tax relief for charities and public sector bodies will continue. Participating provinces will provide rebates for the provincial component of the HST to charities and qualifying non-profit organizations.
In each province, municipalities, hospitals, schools, public colleges and universities will receive a partial rebate of their tax.
I believe that businesses in participating provinces will become more competitive at home and abroad. Some have indicated exactly that, recognizing that some people have disagreed with them.
Furthermore, businesses will collect and remit the HST on sales in the participating provinces. This approach ensures that sales tax is collected and remitted in a more effective and efficient manner. Surely we have a commitment to be more effective and efficient. Perhaps the Reform Party does not want that.
Simply put, the harmonized sales tax means a simpler tax system for both consumers and businesses which is more efficient to govern.
I would like to address an issue about which I am pleased with the direction taken. I have always supported and continue to support the removal of the GST from all reading materials. It is a position which I took a long time ago and I have not wavered from it.
I was extremely pleased with the announcement made by the Minister of Finance on October 23, 1996. At that time the minister announced the government's intention to implement a 100 per cent GST rebate on all books purchased by public libraries, schools, universities, public colleges, municipalities, qualifying charities and non-profit organizations across Canada, effective immediately. I have not heard the opposition talk a lot about that.
This change includes all classroom books distributed freely to students by educational authorities. As a result, all books purchased by these bodies will not be subject to the federal sales tax anywhere in Canada.
This rebate affirms the federal government's commitment to support literacy. However, I must confess that I consider the measure to be a partial sucess as opposed to a total success. This special rebate recognizes the important role played by public
libraries, educational institutions and other community organizations in helping people learn how to read and improve their reading skills, something which has become increasingly critically important in today's society.
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Finally, I have received numerous representations from physicians in my riding and from across Canada. The physicians have made what I consider to be an effective case concerning the application of the GST to their practices. Although physicians are treated for income tax purposes as small businesses, they are unable to claim a GST refund on the medical supplies used in the delivery of health care.
I am told that the recent agreement between the federal government and the Atlantic provinces will make matters even worse than they were. I believe that doctors deserve to be treated the same way as any other self-employed Canadian or small business.
As I said at the finance committee meetings which reviewed Bill C-70, I have concerns with respect to the GST and physicians. Officials acknowledged that such difficulties need to be addressed. It continues to be my hope that an equitable solution can be found. Surely there is a solution that is acceptable to both physicians and government. I am seeking a solution that is acceptable to the government and to the doctors. I will continue to play a role to that end if I am requested to do so.
[Translation]
Finally, I would like to sum up the benefits of harmonizing the GST. This is not to say there are no obstacles to overcome, no problems. Obviously, the system is changing, and when we change something, we know there will be problems. We cannot anticipate everything, but the benefits are there, and I will mention a few. It is one of the most effective measures for supporting job creation and economic growth in that region.
Some people say we should remove the GST altogether. We would love to be able to do that, and if it were at all possible, that is what we would do. However, we cannot forego the revenue. The Prime Minister and the Minister of Finance have said many times it would be impossible to abolish, to shelve this tax, without replacing it with a tax increase to keep revenues at the same level.
I also wanted to talk about tax cuts, something not often mentioned by my opposition colleagues. For consumers in the three provinces where the tax is being harmonized, this new system will mean a tax cut and eliminating the tax on the tax. That was not mentioned.
The new tax will be better for consumers, business and governments-that is what harmonization is all about-and it will be easier for the consumer, because tax will be included in the sales price. What consumers see on the price tag is what they will pay at the cash, but retailers will indicate the tax clearly on the sales slip. Those are the advantages.
Businesses in harmonizing provinces will have only one sales tax administration to deal with and not two; a single group of auditors and not two.
It is a better system for the economy, because the harmonized tax will be more effective from an economic standpoint. It is a national strategy for interprovincial sales to ensure the rules of the game are fair for businesses in participating provinces. Furthermore, federal refunds and the GST credit for low income earners will continue to apply under the harmonization agreement.
[English]
I believe that the government is taking a big step forward with this bill, as imperfect as it is. It is a complex bill. It was complex before, it is complex still today and it will continue to be. Clearly there will continue to be challenges and difficulties to surmount. Surely if we are what we pretend to be in this House, we ought to be identifying not only the problems, not only the hurdles, not only the challenges, not only the insensitivities if they exist, but also the solutions to correct it. I have not heard that.
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I have heard gross exaggerations that they will remove the tax and they will do this and they will do that and then they will do this and that and this and that, knowing full well there will never be an opportunity for them to do it. It is very easy to promise everything when you know you are not going to have to do it. But where is your responsible behaviour when you look at a piece of legislation and you are unable to look at not only the difficulties but the merits; when you are able to identify not only the problems but to suggest corrective measures as opposed to empty exaggerated rhetoric that attempts to aid a drowning party and somehow lift it up? That is what is happening here.
I personally look forward to the signing of agreements of this nature across the provinces. I am hopeful my colleagues will use their resources, their knowledge, their insights in order to make this legislation even better than it is. If they were to do that, they would be helping consumers across Canada. If they were to do that, they would be helping business men and women across Canada. If they were to do that, they would be helping our country, which is already number one on a number of measures, become even better, stronger, more united, more oriented toward helping each other as opposed to being pecky and picky and attempting to destroy the very fabric that holds us together.
[Translation]
Mr. Nunez: Mr. Speaker, I rise today to speak at third reading of Bill C-70 concerning the so-called replacement of the GST, the goods and services tax.
[English]
Mr. Silye: Point of order, Mr. Speaker.
The Deputy Speaker: The hon. member for Calgary Centre is going to say that the Bloc just spoke and therefore it should be him.
Mr. Silye: No, Mr. Speaker, I just wanted to ask a question. Are we not under questions and comments? When does that kick in?
The Deputy Speaker: It does not. At this stage of the debate there is not 10 minutes for questions or comments.
Mr. Silye: Mr. Speaker, under orders of the day it says that after three speakers, one from each party, we go to questions and comments after 20 minute interventions.
The Deputy Speaker: Thank you very much my hon. colleague. Just give me a moment and I will check that.
I am most grateful to my hon. colleague for Calgary Centre. There was an error by the Chair and in fact the hon. member for Calgary Centre is quite correct. There is a 10 minute questions and comments period. I call on the hon. member for Calgary Centre.
Mr. Jim Silye (Calgary Centre, Ref.): Mr. Speaker, I do not mean to interfere in the debate but the member will get his chance and so will we.
I would like to ask the hon. member from the Liberal Party who just gave his speech to comment on a couple of things within his speech.
First, I would like to comment that members of the Liberal government, including the Prime Minister, always say that they are number one and that by a number of different lists they are number one. Do you not think, Mr. Speaker, that anybody could be number one in any profession, in any business, if they could borrow for 30 years and just let that debt continue to grow and invest anywhere in the world and let that debt continue to grow and be number one in anything?
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The government fails to recognize that the real problem is the debt which we are not making any payments toward. This government is adding to the problem a little more slowly than the previous government, but it is still adding to the problem. That is what I have to say about this number one issue.
Back to the debate on Bill C-70. The member referred to two things, one was that this bill is imperfect. I would like him to outline where he feels this bill is imperfect. It is his responsibility to tell the people of Canada where he as a member of the government side thinks this bill is imperfect.
I would also like him to comment on the justification for already spending a billion dollars on this movement. The bill does not even come into effect until April 1, 1997, yet this government with last year's revenues has already dished out, paid under the guise of transitional costs although it has not even transitionalized-if that is a word-close to a billion dollars.
I would like the member to comment on where this bill is imperfect and the transitional cost of a billion dollars.
Mr. Duhamel: Mr. Speaker, I welcome the question. I thank my colleague for making the intervention to the Chair and subsequently to me because it gives me an opportunity to respond to the questions that were raised.
For that member or any member, particularly a member of the Reform Party to suggest that we are number one on any number of measures because we have borrowed is virtually scandalous. We are number one because we are Canada. We are number one because we are Canadians. We are number one because our aboriginal peoples from the beginning of this country have contributed to its greatness, because the English and the French and Canadians from virtually every single country in the world have come to contribute their talents, their energy and their efforts to make this country the country that it is.
He suggested that we have become number one because of previous governments with which he is very sympathetic and if my memory serves me correctly, he wanted to run for a particular government that had the same label as the one that preceded this one which doubled the debt. To suggest for one moment that we are number one because we borrowed is scandalous. I am surprised and disappointed because I have a lot of respect for that member. Frankly as I see some of the more moderate members making some of those grossly exaggerated, insensitive inaccurate comments, I know where they are going: down, down, down.
With respect to the imperfect bill, there are a number of imperfections. There are difficulties with respect to advertising. There are difficulties. For example, a particular item might cost $9.99 and with the tax it would be beyond that. People have in their minds that they are buying a $9.99 item. There are many others. My colleague probably read-I hope he did-the various testimonies from the literally hundreds of groups that drew various points to our attention and that wanted them corrected. These are in the process of being corrected.
There is virtually no piece of legislation that does not improve after men and women of sound mind and good intentions have looked at it in a co-operative way in order to make it better for the people they represent and serve. Is that astonishing? It would be extremely astonishing if legislation of that magnitude and impact did not undergo refinement. In fact it would never happen. My
colleague knows that and he knows it full well. It is an attempt to try to embarrass the government, but it is not going to work.
We are talking about all of these dollars that have supposedly been spent. Does my colleague suggest they have been spent for naught? Does my colleague suggest that we spent that to have fun? Does my colleague suggest that we spent that irresponsibly? Where is the proof? Of course not. Changing any system is expensive and he knows that. He knows that changing any system is expensive but he will not acknowledge it. I find that most unfortunate, most most unfortunate. It is to help with the transition and he knows it.
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Mr. Silye: Mr. Speaker, the hon. member refers to this billion dollar payment, or $961 million, as supposedly spent. The proof is that it is in the public accounts for last year. The money has been spent. The finance minister included it, against generally accepted accounting principles I might add, in last year's expenditures. It is there. The money has been given to those three provinces. For what? Why? The bill does not even come into effect until April 1. The finance minister is borderline on breaking conventional accounting practices and that is my proof.
Mr. Duhamel: Mr. Speaker, I find it shocking that my colleague would suggest the Minister of Finance is breaking rules and regulations that have been established. I do not believe that. Canadians do not believe that. The Minister of Finance is one of the finest Ministers of Finance we have ever had. He is one of the people whom I admire the most because he does toe the line. He is aware of the rules and regulations. He follows them.
For my colleague to suggest that because a bill comes into effect on a certain day and there are no expenditures before shows a lack of understanding of the political process, of the implementation process. I thought he was a business person, I would even add of business principles. That is shocking, absolutely, totally, completely shocking.
Mr. Silye: Mr. Speaker, as a business man it would be improper for anybody to load up front a billion dollars in any business venture before the whole deal takes place.
This has cost the Canadian taxpayers one billion dollars already. Now it is going to cost corporations the transitional cost for their computers, their point of sale equipment. I am glad he is getting coached by the member from the finance committee because he is going to need it.
The business aspect of this deal is that now that the taxpayers have paid up front, front end loaded a billion dollars, the retailers and the businesses will have to pay to change their computers and to change all this mixed up tax included pricing. After that is all in place, then guess who will have to pay some more after that in a year or two, starting in April. The consumers will have to pay more on goods and services that the GST never applied to. There will be three people paying a lot.
As a business person I would never have entered into this kind of arrangement. It is piecemeal, ad hoc and irresponsible.
Mr. Duhamel: Mr. Speaker, I wish we could continue this exchange because the more questions my colleague asks, the more he and his party are falling at this point in time.
I cannot believe my colleague would not recognize that we had an agreement signed much before April 1. He forgets that. He conveniently forgets it I suspect, because he is quite a bright fellow actually.
With respect to the way he suggests we have spent the money, front end loaded, he uses expressions. I wonder if he could define them for us. It would be very helpful to Canadians because most of them do not know what he is talking about.
He knows that that money was needed. He knows that that money was spent responsibly. He knows that we had an agreement well before April 1. He knows that the Minister of Finance and his colleagues have done a tremendous job on an extremely complex issue.
If he will recant, I hope he will give an address and do nothing but point out some of the positives of this piece of legislation. At the same time he should indicate what he might do in order to prove it as opposed to making grossly exaggerated, insensitive and wildly inaccurate statements.
[Translation]
Mr. Osvaldo Nunez (Bourassa, BQ): Mr. Speaker, I hope I will not lose my temper like the previous speaker. I am pleased to speak to Bill C-70 concerning the GST. This bill proposes a so-called replacement of the GST by the HST, or harmonized sales tax.
This is basically the same tax, in the same amount. Nothing is changed, really. I would like to draw your attention, however, to the attitude of this government that does not fulfil its promises.
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We have here a glaring example of a promise unfulfilled by this government. They had made an election commitment to eliminate, kill, abolish the GST. ``We will scrap the GST'', said the current Prime Minister on television when he was running in the election. ``We hate this tax and we will kill it''.
In a minority report dated November 1989, the Liberals, then in opposition, stated: ``It is the position of the Liberal members of the finance committee that the Conservative goods and services tax
proposal is flawed and cannot be `patched up' in a way that would it fair for Canadian taxpayers''.
The Prime Minister has tried to make the public believe that he had never made any promise of the sort. But the evidence is there, television was there. He was forced to recognize it, after a waitress questioned him about this toward the end of last year and after being taken to task in an editorial published in the Globe and Mail.
The Minister of Canadian Heritage was forced to resign her position as a member of Parliament over this, and this has cost the taxpayers $500,000. The hon. member for York South-Weston, who is an honest man, left the Liberal Party of Canada, accusing it, that is the government, of not having fulfilled its commitments. Indeed, it is the members opposite, government members, particularly those who hold ministerial responsibilities, including the Solicitor General, the Minister of Health and the Minister of Public Works, who fought this tax when it was introduced in Parliament by the Mulroney government.
Voters will not forget what this government did. They will not forget that it has not kept its word in this case, but also regarding other issues, including job creation. This is one of the most negative things about this government, which was elected under the slogan ``jobs, jobs, jobs''. There is also another issue concerning which the government did not keep its word: the funding of the CBC.
Today, with Bill C-70, the government is seeking to harmonize the GST with provincial taxes. However, it is already costing the federal government $1 billion to harmonize the GST in the Atlantic provinces. The government refuses to provide the same financial assistance to the Government of Quebec, which is in the process of spending $1.9 billion to harmonize its tax with the federal one.
Like others in the Bloc Quebecois, I would like to say and to repeat this: there can be no sales tax reform without an in depth review of personal and corporate income tax, and without the participation of the other levels of government.
It is imperative that Canada undertake a tax reform that will include all forms of taxation, at all levels of government. For three years now, the Bloc Quebecois has constantly been raising the issue of taxation. Two reports proposing excellent recommendations were tabled.
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The first, which was tabled last November, examines corporate taxes. The second looks at individual taxes and was tabled in this House a few days ago.
The Bloc Quebecois firmly opposes family trusts and tax havens. We also defend the interests of Canadian and Quebec taxpayers. We proposed an overhaul of the corporate tax system. The federal government could recover up to $3 billion annually by eliminating certain outmoded, ineffective and unfair tax expenditures. This money could then be used to help businesses create jobs.
Tax expenditures allow businesses, particularly large ones, to reduce the taxes they pay to Revenue Canada by quite a bit, sometimes to eliminate them entirely. The cost of these tax expenditures is estimated at over $9 billion annually, according to the latest figures from the finance department.
These billions of dollars in uncollected taxes represent an additional tax burden for taxpayers and other businesses that do not benefit from these tax deductions.
It is useful to point out that the percentage of federal tax revenue from corporate income tax has fallen considerably over the last 30 years. It dropped from 23 per cent in 1961 to 9 per cent in 1995. Canada is one of the G-7 countries with the lowest corporate taxes. It has also ranked well below the average for OECD countries consistently since 1965.
Given the current job market difficulties, the goal of corporate taxation should be to maximize the creation of sustainable and meaningful employment, while ensuring that financing of public services is shared equitably by corporations and individuals.
The tax system must encourage businesses, particularly SMBs, to create jobs. It is important to emphasize at this point that it would still take over 800,000 more jobs in Canada to match the situation in 1989, before the recession.
Official unemployment rates are still scandalously high, 9.7 per cent in Canada and 12.2 per cent in Quebec, according to Statistics Canada figures released a few days ago. Why is Canada unable to lower its unemployment to 5.4 per cent, as the U.S. has done? It must be pointed out that, in the public sector alone, 200,000 federal and provincial public servants have lost their jobs in the past two years. This is unbelievable.
The government lacks control over intercorporate dividends, which means that some companies with branches in tax havens such as Barbados are able to minimize the tax they have to pay by doing some tax planning. They maximize their profits via means that are unproductive to both the government and society.
According to the auditor general, this tax loophole appears to have cost the taxpayers the modest sum of $240 million in 1992 alone. The Bloc Quebecois recently tabled its second report on personal income tax, a system which currently favours the most advantaged people in the country.
The federal government currently pays out $77 billion in tax expenditures to individuals annually. By introducing greater progressivity, the Bloc Quebecois has identified $2.5 billion that could be recovered by doing away with, or tightening up, tax expenditures that are deemed unfair. Obviously, it would be the low and middle income taxpayers who would benefit from this revision.
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The federal government has been in power for over three years. The actions it has taken to make the taxation system fairer and more progressive are lamentable. The Minister of Finance is holding up corporate tax reform unduly. What is more, he is refusing to undertake any serious study of the personal income tax system. He does not dare attack tax advantages which run the risk of upsetting the friends of the Liberal Party.
The Bloc Quebecois is addressing the federal tax system in a concrete manner in order to make it more equitable, more progressive and more focussed on job creation.
For instance, one concrete measure would be to abolish outright a privilege that is now obsolete: the tax free salary and other remuneration paid to the Governor General by the federal government. This is an anachronism, because today, even the Queen of England has to pay income tax.
The Bloc Quebecois suggested that part of the resources in RRSPs be spent on fighting unemployment. An RRSP-employment program would allow a person who is unemployed to withdraw part of his RRSP without penalty for the purpose of starting up a business. Now that is a great suggestion by the official opposition, the Bloc Quebecois, that would create jobs. The Minister of Finance should include it in the budget he will bring down in this House on February 18.
We also suggest raising the maximum for investments in a labour sponsored fund. The Liberals reduced this maximum from $5,000 to $3,500 in the 1996 budget. However, these funds have had a positive impact on economic development and job creation. The maximum should therefore be raised to $5,000.
Last October, I attended a meeting of the finance committee which heard submissions from representatives of venture capital corporations. These included Fernand Daoust and Pierre Laflamme, for the Fonds de solidarité de la FTQ; Jim Cambly for Working Ventures Canadian Fund; Earl Storie, for Vengrowth Investment Fund; David Levi, for Working Opportunity Fund of British Columbia, and Jim Delaney for First Ontario Labour Sponsored Investment Fund.
Labour sponsored venture capital corporations administer a total of $3 billion. They exist in practically every region in Canada.
These investment funds are sponsored by the labour movement. Capitalization is provided by a vast number of shareholders, mostly workers. The federal and provincial governments give tax credits. The purpose is to protect and create jobs, stimulate regional economic development, and provide training for workers and shares in the company supported by their money. We all know that unemployment and job insecurity have become a fact of life in our economy.
The Fonds de solidarité of the FTQ is the oldest labour sponsored investment fund in Canada. It was set up in 1983 and for 14 years injected one billion dollars into small businesses in Quebec, thus helping to save or create about 45,000 jobs. These funds warded off a final shutdown at the Kenworth company in Ste. Thérèse, Quebec, and protected hundreds of jobs held by members of the CAW.
I want to take this opportunity to pay tribute to the FTQ, the labour organization where I worked for 19 years, on this its 40th anniversary. In fact, it was on February 16, 1957, in Quebec City, that delegates of the Fédération provinciale du travail du Québec and the Fédération des unions industrielles du Québec founded the FTQ. This merger brought together trade unions and industrial unions.
At the time, the labour movement was very active and fought the Duplessis government which since 1944 had been actively anti-union.
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It must be pointed out that, in actual fact, the FTQ is far more than 40 years old. Its origins go back to the end of the nineteenth century. It builds on the old traditions of a combination of European and North American trade unionism, and is the heir of the rich history of the international labour movement.
Today, the FTQ represents 480,000 people working in all sectors and all regions of Quebec. In addition to doggedly defending the interests of wage-earners of all backgrounds, the FTQ also battles for the sovereignty of Quebec and for its membership's right to work and to live in French. On behalf of the House of Commons, I wish the FTQ, my labour congress, all the best on its 40th anniversary.
My colleague from Saint-Hyacinthe-Bagot was saying just now that the government is ramming this bill through and taking an undemocratic attitude by preventing discussion on this highly complex bill. It is close to 300 pages in length, and thrown together any old way.
He also referred to the pre-election fever the government is trying to turn to its advantage, particularly in Quebec. According to the latest surveys, the Bloc Quebecois has 49 per cent of public support, and the Liberal Party of Canada only 39 per cent.
I would like to touch on the meeting held in my riding of Bourassa this past Sunday. It confirmed the nomination of my long time opponent Denis Coderre as the next candidate for the Liberal Party of Canada in my riding. I defeated him in 1993, and will have no trouble doing so again in the next federal election.
The riding's provincial representative, Yvon Charbonneau, was present at this meeting. I would remind you that he used to be a trade unionist like myself, but he renounced those convictions somewhat by joining the Quebec Liberal Party, which had imprisoned him and other union leaders in 1972. Mr. Charbonneau was quoted as saying: ``In this riding, we have a Bloc Quebecois member, Osvaldo Nunez, and we want to get him out of here''. Such arrogance!
With all due respect to my provincial counterpart, I wish to tell him that it is neither he nor his party who will push me out of my riding. These words do not scare me, nor do the racist attacks against me by my former and current Liberal opponent in Bourassa, Mr. Coderre, and by the former federal Minister of Human Resources Development, now the Minister of National Defence.
The three provincial Liberals supporting the Liberal candidate on Sunday were called to order by Jonathan Sauvé, president of the Quebec young Liberals. He wanted to remind them that the Liberal Party of Quebec had to remain neutral in the next federal election campaign. Mr. Sauvé also said that the provincial Liberals must not team up with any federal political party.
The Quebec Liberal Party youth commission revealed its intention not to campaign for the Liberal Party of Canada. Mr. Charbonneau thus appears at odds with the calls for neutrality issued by his leader, Daniel Johnson.
Jonathan Sauvé added yesterday that they had spent much of the past year explaining to Quebecers that the QLP was not a branch office of any other political party.
Bill C-70 is not acceptable to the people of Canada, to the people of Quebec and, especially, to the people of Bourassa. It is unfair. It is a bad bill. It is a half baked bill, and I will vote against it.
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[English]
Mr. Jim Silye (Calgary Centre, Ref.): Mr. Speaker, I would like to ask the hon. member from the Bloc to tell the House what he thinks about the comment of the member for St. Paul's who also wants to ask a question. Earlier today and also yesterday, in defence of the harmonization or blended sales tax, BST, the member for St. Paul's used Quebec as an example and said that if it is good enough for Quebec it should be good enough for the rest of Canada.
I would like to know what is the Bloc's response to that kind of justification for the rest of Canada and all taxpayers to spend a billion dollars just in three provinces. How and in what way would he react?
[Translation]
Mr. Nunez: Mr. Speaker, as the hon. member has just said, Quebec harmonized its tax in 1991 and asked nothing of the federal government.
Today, we realize that harmonization cost nearly $2 billion. We say that, if the federal government is prepared to pay $1 billion to the Atlantic provinces to harmonize the federal tax with the sales tax of these three provinces, why would it not pay Quebec the amount it is asking for?
This takes nothing away from our statement as representatives of the Bloc Quebecois or the speech I made to the effect that this bill was hastily thrown together, is bad and unfair, and is one we will vote against.
[English]
Mr. Silye: Mr. Speaker, I have a brief question for the hon. member of the Bloc. If the Government of Canada were to offer Quebec a billion dollars would it then agree to drop its plans to secede from the union and stay in Confederation?
[Translation]
Mr. Nunez: Mr. Speaker, the question is totally irrelevant. In any case, I can tell you that the sovereignty project in Quebec cannot be bought. We would not drop it, even if the government gave us $2 billion. I must add that we send $30 billion every year to Ottawa.
The sovereignist project is a political project, a social project that arises from the hearts of Quebecers in response to the deep aspirations of the people of Quebec. It will go on until Quebec becomes a sovereign country.
[English]
Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance, Lib.): Mr. Speaker, I am very pleased that the hon. member for Calgary Centre actually asked a question about this bill because prior to that it was very confusing. The member for the Block appeared to be talking about the Quebec provincial election. I have to remind him that this is the Parliament of Canada and we are debating federal legislation here not the situation in his riding for the provincial election.
The hon. member talks a lot about tax rates. Does he think it is at all important to have in mind how personal and corporate tax rates in this country compare to other jurisdictions? Does that have any impact on the prosperity of this country and is that a legitimate thing? Does he know what our position is and our tax rate is versus
our major trading partner or anyone else for that matter? I would like to hear a comment from him about comparative tax rates and the importance of that.
I also wonder whether he might comment on some of his colleagues in Quebec City who said, during the last referendum, that if Quebec were to separate it would become a tax haven with extremely low tax rates to attract investment, both corporate and individual.
While the member rails against the government, I suspect he may not know much about comparative tax rates and certainly not much about what is in store from some of his colleagues in his own home province of Quebec City who talk about Quebec becoming a tax haven.
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[Translation]
Mr. Nunez: Mr. Speaker, everyone knows that it is very difficult to compare tax systems internationally. On the whole in Canada and Quebec, the tax system favours business. Corporate taxes are much higher in some countries than they are in Canada, and in Quebec naturally.
In a sovereign Quebec, I think it will be much easier to set up a much fairer tax system, one that is much fairer for individuals and corporations, one that stimulates job creation.
For example, as I mentioned earlier, the labour sponsored investment fund has contributed hugely to job creation in Canada and, particularly, in Quebec, and we will promote this fund in a sovereign Quebec. Right now, all the federal government is doing is cutting some of the credits to these funds, which runs counter to its job creation policy.
Mr. Yvan Loubier (Saint-Hyacinthe-Bagot, BQ): I congratulate the hon. member for doing such a good job of explaining the Bloc's analysis of Bill C-70 and answering our colleague's question on taxation in a sovereign Quebec.
Perhaps he should have added-it was an omission on his part, I am sure-that the federal government started by offering its own vision of taxation, of how to make it fairer and more equitable. I think the Liberal Party should take a good look at itself before talking about what the tax system should be like in a sovereign Quebec.
I have a question for the hon. member for Bourassa. How does he explain that, when Quebec harmonized its sales tax with the federal sales tax in 1991, no compensation was paid to Quebec, while it should have been entitled to $2 billion? In his opinion, what was the finance minister's motivation for giving the maritimes $1 billion just like that?
Mr. Nunez: Mr. Speaker, in a nutshell, there is no justification for paying huge amounts to three Atlantic provinces to harmonize their taxes. All taxpayers in Canada and Quebec will have to foot the bill, at a time when this government is telling us that the deficit must be tackled. It seems unreasonable to me to grant this $1 billion subsidy to the three Atlantic provinces.
[English]
Mr. Jim Silye (Calgary Centre, Ref.): Mr. Speaker, I am surprised that the Liberal member for St. Boniface, who has proven to be very aware, intelligent and with it, was not on the issue that the government has already given $1 billion to three of the Atlantic provinces for harmonization. In fact, the payment was made out of last year's funds. The payment was criticized by no less than the auditor general because a final agreement had not been signed. It was only a letter of intent. The auditor general said it was a very dangerous precedent to be set by a finance minister for future years. It is on the borderline and is construed and believed by a lot of people to be against generally accepted accounting principles.
The member for St. Boniface just proved by his speech and lack of knowledge what the first speaker from our party, the member for Medicine Hat, pointed out earlier, that the Liberal members of Parliament are being duped by the government and by the finance minister on this issue.
Here we have the situation in Atlantic Canada. Canadian taxpayers have already spent $1 billion to get rid of this GST. To help the Liberals keep their promise we have now paid $1 billion to three Atlantic provinces. Retailers and businesses estimate they are going to spend upwards of $100 million. They presented these numbers to the Standing Committee on Finance. This is not a number I am making up, nor am I exaggerating, it is their number.
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Third, starting April 1, 1997 the consumers of Atlantic Canada are going to see how this affects their pocketbook. I do hope the Prime Minister does call an election for June because after three months of paying at the tills and seeing how this whole fiasco affects them, there will be a groundswell against the Liberal Party. It will have overestimated its popularity in the polls. There will be a new groundswell for a party that does offer a true alternative, a true choice and a fresh start for Canadians.
With that introduction let me get into some of the main elements of Bill C-70 at third reading. In direct contradiction of Liberal Party members who have their speeches written by spin doctors that we support this harmonized sales tax, let me point out that the minority report of the Reform Party on replacing the GST clearly stated otherwise in its executive summary.
On page 113, for the record, accurately, in context it states:
The majority finance committee report on the replacement of the GST cannot be fully endorsed by the Reform Party. While the replacement goes part of the way in
responding to concerns presented to the committee, many of the concerns will only be addressed by future negotiations with the provinces.I did not realize at the time that meant bribing them.
The majority report recommendation merely tinkers with the current GST and does not live up to the Liberal promise to ``Scrap the GST''.After all, this is what it is all about.
We are of the view that value added taxes are incapable of responding to a significant portion of the concerns raised during our hearings.
The Reform Party recommends that spending cuts be the government's first priority. As well the entire current system personal, corporate and value added taxes should be replaced by a simple, visible and proportional system of taxation that incorporates the principles of fairness and the lowest rate possible. In the interim, the party will support reforms to the current regime that move in this direction.After all, we do want what is in the best interests of all Canadians.
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.
Liberal members yesterday and today said they do not understand why the costs are going to go up. The costs are going to go down because the provincial sales tax will be treated like the GST. There will be input cost recoveries by the businesses lowering the costs. Let me tell these members why the cost goes up.
It goes up because the base on which this new combined tax will be applied has become broader. It will be applied to more goods and services. Previous speakers have pointed out, from clothes to housing, where this tax will apply. Because of that broader base the new harmonized sales tax or blended sales tax, HST or BST, will cost consumers more money.
In the ninth report of the Standing Committee on Finance the government wrote:
The GST is collected at each stage of the production and distribution process. However, since each business collecting the tax also receives input tax credits for the GST it has paid out, it is the final consumer who ultimately pays the tax.It is the final consumer who ultimately pays the tax. As Liberal members try to defend this HST in terms of cost savings, they must not forget that yes, it is a savings for businesses after they pay the initial outlay of $100 million to conform their point of sale material, but it is the consumer who will ultimately pay a higher tax.
This is why other provinces like Ontario, Saskatchewan and British Columbia which have provincial sales tax are against it. It will shift the tax burden from businesses to consumers and that is what is bad about this particular bill. In effect it is an 8 per cent increase on those particular goods and services that were strictly on the PST and not on the GST. The GST has a broader base than the PST. That is a simple fact and simple arithmetic and should be enough proof for the Liberal members as to why this will be an increase in costs to consumers.
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The purpose should be to eliminate dual tax regimes, but this version retains it for national firms. Somebody operating outside those three Atlantic provinces will have to have tax included pricing there, not tax included pricing elsewhere.
Therefore when they report their taxable income, they will need two different forms. This is an increased cost for businesses which then, in turn, looking at the bottom line, eventually will pass along this cost to the consumer. Once again it hits the consumer where it hurts the most, right in the pocketbook.
This billion dollar bribe or transitional payment to the three provinces, the cost of reducing the sales taxes in the harmonized provinces, is being paid for by all the taxpayers.
The deal will increase the complexity of the tax system for all businesses in Canada with operations in the Atlantic provinces. It does not just affect those three provinces. It is not just a deal for those three provinces.
National retailers have said that tax inclusive pricing in a partially harmonized system will lead to increased cost. If done nationally it would be a much simpler solution due to separate packaging requirements for harmonized provinces.
In response to these concerns, the federal government and the participating governments announced changes on January 17, 1997-
Mr. Campbell: Mr. Speaker, I rise on a point of order. I am sorry to interrupt my friend, the hon. member for Calgary Centre, but I am sure he would want me to point out that he used a word in his speech that you have asked in this House just yesterday not be used in this debate, the word bribe. I would ask that he withdraw that word.
The Deputy Speaker: I do not know that the hon. member for Calgary Centre was here yesterday when that word came up. There was some discussion about it. The hon. member's colleague did agree to replace that word with a more palatable word in the House.
The Chair suggested that the word bribe in the dictionary probably has something about a payment or an inducement for an illegal purpose. If the hon. member has a dictionary that suggests otherwise or if he wishes to look at a dictionary and finds that the Chair is mistaken on that, fine. Otherwise I wonder if he would be kind enough to rephrase that term.
Mr. Silye: Mr. Speaker, in the rest of my speech there is no reference to any form of inducement. I will not be using that word any more.
An hon. member: No withdrawal?
Mr. Silye: People can ask for what they want. The Canadian taxpayer knows what is going on here. We know what is happening. Everybody knows what is happening. Whether or not we withdraw a word is not the issue.
The issue is we have now made a large payment prior to the enactment of the bill itself to three provinces. The government calls it a transition cost. There has been nothing in transition yet, but that money has been paid. I call that an inducement. I call that an encouragement. I call that a lot of things. It may come close to the word that I am not supposed to use, and so I will not use that word if they find it offensive. But the Canadian public knows if it smells like a-, it is a-.
Mr. Campbell: Mr. Speaker, on a point of order, the hon. member for Calgary Centre, whom I have great respect for, would notice that when he stood up and said initially that he did not intend to use that word any more, I sat down and did not rise to my feet.
He has now gone on for another two minutes suggesting that is precisely what he intended to say, ending in his last comments a moment ago. I would renew, through you Mr. Speaker, my request that he withdraw the initial use of that word. I was prepared to leave it be, but not in light of his later comments. I renew that request through you, Mr. Speaker.
The Deputy Speaker: The hon. member, to the Chair, did not use the word in the last two minutes, but I would ask the hon. member if he would be kind enough to withdraw the word of two minutes ago and to please avoid using that word again.
Mr. Silye: Mr. Speaker, I will not withdraw that word and I will tell you why. You gave me an opening and said if I find a dictionary where the definition of my use of the word bribe is acceptable then I can use it.
I will give a definition of the word bribe: ``Money offered to procure action in favour of the giver''. This is money given to three provinces, that favours the federal government, for them to comply with the harmonized sales tax.
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I would like to proceed. There have been already three or four minutes taken out of my speech. May I continue?
The Deputy Speaker: The hon. member's colleague yesterday did withdraw the word. The Chair did not rule that the word bribe was an unparliamentary word. It leaves the Speaker in an awkward position if the member is going to take the view that it is a parliamentary word.
The Oxford Concise Dictionary, page 161, defines ``bribe'' as a verb: ``to act especially illegally or dishonestly in one's favour by gift of money, services, et cetera''. Bribed the guard to release the suspect is given as an example. Second, a noun: ``money or services offered in the process of bribing''.
It seems to me that, as was suggested earlier, this dictionary at least suggests there is an illegal purpose involved. It is correct that Beauchesne's does not appear to put ``bribe'' on its list of unparliamentary words, at least what I can see quickly.
I would invite my colleague, in view of what has been stated in the dictionary, to agree to withdraw the word in the interests of amicable, open debate.
Mr. Silye: Mr. Speaker, I do like to be amicable and I like open debate. In no way when I used the word bribe did I mean that it was illegal. Nor do I mean that the government is being dishonest, even though that definition is hinted at in your definition .
My definition basically says ``money offered to procure action in favour of the giver''. A further definition below that is ``pervert by gifts or other inducements the action or judgment of'' whomever. It is a matter of interpretation. I do not mean that what is being done here is illegal, but it is something being done that the Canadian taxpayer should be aware of. Three provinces will have their costs lowered because of this particular payment than the other provinces at the cost of all taxpayers. I would just like to proceed with the debate.
The Deputy Speaker: The hon. member did not give a source for his definition. I hope it was not ``Levinson's Unafraid Dictionary'' or something like that. I wonder if he would be kind enough to give us the precise and complete definition he has and from what dictionary.
Mr. Silye: Mr. Speaker, the definition I have is a xerox copy of page 147 from the Concise Oxford Dictionary 1973. Is that the same one you have?
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The Deputy Speaker: Actually this one is from 1995 and I think I gave the entirety of the definition. I think somebody was looking at earlier editions and we are now living in 1997.
I appreciate exactly what the member is saying and I would again invite him to withdraw that word so that we can get on with other issues other than spending all morning on this issue.
Mr. Silye: Out of respect to you and the Chair, Mr. Speaker, I will withdraw the word bribe.
With respect to harmonization, businesses located outside the harmonized provinces will also be required to collect both the federal and provincial portions of the blended sales tax on purchases made by residents of the harmonized provinces. That means businesses in seven other provinces will have to act as tax collection agents for the provinces of New Brunswick, Nova Scotia
and Newfoundland and they will have to carry the associated costs. That is another reason the bill is not well thought out and should not be proceeded with.
The Reform Party opposes tax inclusive pricing. This practice violates the principle of open taxation which is essential to the efficient functioning of open democracies. Disclosures 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. Eventually governments simply increase the rate when they need more money.
We are heading toward a $700 billion debt. We are going to crack $600 billion sometime this year. Our interest costs are rising notwithstanding the lower interest rate. The economy always goes in cycles. Economists tell us that. The government continues to add to the debt. It is doing so less than the previous government, but it is still adding to it. It added $17 billion or $18 billion last year. That is a lot of money. It is a deficit. It is adding to the problem. As those interest costs go up, the government will have no other choice but to raise taxes. It will raise the HST/BST from 15 per cent to 20 per cent to 25 per cent. It will raise personal taxes and corporate taxes. It will be forced to raise taxes in order to make the payments on the debt.
The standing committee listened to a lot of complaints from a lot of people who came to the hearings and it claims to have solved them. I am not sure that it has. Some of the issues were highlighted in a story by John Geddes of the Financial Post. He used Carlton Card's representation which was made by Shannon Hallett, who expressed her firm's frustration with the Liberal members of the Commons finance committee. She warned that a policy the government plans to impose will force Carlton to close 19 of its 37 shops in the economically fragile Atlantic provinces. Is that not of concern to a party which ran on jobs, jobs, jobs?
At issue is the proposal to force retailers to bury the new 15 per cent harmonized sales tax in prices rather than adding on the HST at the cash register. To retain that support, why not just drop the tax inclusive pricing?
Tax in pricing would cost Carlton $84,000 in one-time expenses such as programming computer inventory systems. It would add $63,000 a year in continuing costs such as putting new prices on cars bound for the east coast. Furthermore, tax in pricing would cost stores in the three provinces about $90 million. Winsbys Shoes told the committee how hard it would be to sell a $99 pair of pumps if it had to put a $115 tax in price tag on them.
Shoppers Drug Mart vented annoyance at the prospect of having to comply by putting up tax in price conversion charts beside racks of magazines which come printed with the tax out price. Re-ticketing thousands of items in a store and trying to cram the tax in price
and tax out price along with the bar code on small labels will be a problem.
These are all problems that the bill has not solved, even though the Standing Committee on Finance said it would look after all of them.
Why is Ottawa so determined to keep this contentious tax included pricing rule when the rest of the harmonization of two taxes into one could be sold much better and could be accepted by Canadians all across Canada?
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Mr. Kirkby: Because you told us to.
Mr. Silye: I already covered the topic of what the Reform Party said and what it did in its minority report in context, not out of context as the Liberals are trying to do again.
Ottawa is proceeding with this because this is its idea of keeping its election promise. This is it folks, Canadian taxpayers. This is how the Liberal Party has kept its promise. Liberal members went door to door and said that they would get rid of, abolish and kill this tax. They said that they hated it. This is what they did. They got rid of it by blending it with the provincial sales taxes in three provinces. They feel they have now kept their promise. What they have really done is they have entrenched the GST forever.
When the Minister of Finance was on this side of the House he said that if you ever harmonize a GST with a PST, you entrench the GST forever, and he has done it. The member from Toronto also stated that the committee looked at a lot of options for the GST and the final solution was that there was no better tax than the GST. The Liberals have entrenched it. This is their way of keeping their promise of getting rid of the GST.
Look at their promise in the red book that they would replace the GST with a system of taxation that was simple and more fair. All the evidence I have given today is to the contrary. It is unfair. It favours one region over another. It subsidizes one over another at the expense of the other. Businesses are yelling out saying that they could go broke. Is that fair?
It is so complicated that there are definitions for tax in and tax out pricing. There will be four items on the shelves in the stores which people are pointing out. Is that simpler or is that more confusing? The definitions of all these rules and the white book required to implement all these rules will add about another 300 pages to the Income Tax Act. That is not simplifying it. A harmonized tax can make sense, and I will get to that soon.
The Reform Party sees the GST as an unnecessary and temporary tax that does not belong in the federal domain. Inasmuch as the tax
will exist temporarily, the Reform Party encourages the government to streamline taxation, remove as many of the significant problems that exist until such time as we can implement much wider tax reforms that provide both tax relief and tax simplification.
If the government presented a national solution to this problem, a national solution to fulfil its promise to get rid of the GST or to replace the GST with something that was revenue neutral, then we could support it. We have given the government some suggestions but it has chosen not to listen. The government said that it listened to over 20 proposals but the one proposal the government did not listen to is the proposal in our fresh start.
It is a proposal to simplify the tax system and generate the replacement revenues required so we can eliminate the GST. It would operate on the basis of a simplified tax system. We could get rid of this convoluted, complex, confusing income tax system we have now and replace it with a more effective, fair, simplified, harmonized system, harmonized with the Canadian taxpayers. Get in tune with the people who pay the final price. It is the person at the cash register, not the person who produces the goods, not the person who sells them. It is the person who buys them.
Why not have a system where we increase our personal exemptions, as we say in our fresh start? We could increase spousal exemptions, remove the federal and provincial surtaxes, reduce the UI premiums not by five cents per hundred as this finance minister would do, but reduce them every year by 10 cents until we get to 28 cents or 30 cents, or 60 per cent as some people are asking for.
We need to do something for the Canadian taxpayers, for the people who have to foot the bill to run government. Why do we have to spend $108 billion? Why not just spend $90 billion to run a government as we suggest in our fresh start platform? We could pass along those spending savings to the taxpayer in terms of tax breaks and tax cuts.
The difference between the Reform Party that would only spend $90 billion and the Liberal Party that spends $108 billion is that we would give the people the money to look after themselves right at the source before they send it here to Ottawa where Ottawa takes 30 per cent to 40 per cent off and sends it back to them in terms of child care and child tax credits et cetera. Why not leave the money in parents' hands in the first place to take care of their children? They will have more money for clothes and food right when they earn their money. Create the incentive for people to work and earn more so they pay less in taxes, not more in taxes. Why punish incentive? Why not create incentive and help these people look after their families?
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It is ridiculous that we tax people who make $12,000. It is absolutely shameful. Yet this government is planning to reduce child poverty by increasing payments. This is admirable and it is one way of doing it, but a better way of doing it, a less expensive way of doing it is to leave the money in their hands in the first place.
In conclusion, the Liberals' are attempting to keep their promise to replace, to harmonize, and it is not even harmonized. It is not even harmonized in the Atlantic provinces. They could not convince Prince Edward Island to come on board. There is no unification there. It has not worked. It is not going to work. It is going to be a big embarrassment to this government.
Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance, Lib.): Mr. Speaker, I much prefer the discourse of the hon. member for Calgary Centre when he leaves the explosive words behind and gets back to the substance which he does very well.
I want to ask him one question on the substance of what is being done and the change that is taking place in Atlantic Canada. I wonder if he had any idea and would share with this House the amount of tax that is currently on business inputs in the Atlantic provinces.
Because I may run out of time and not have a chance to find out if he knows, I would like to share with the House the fact that businesses in Atlantic Canada spend $700 million paying retail sales tax on their business inputs. Interestingly enough, that will be returned to business, and will be available to business to pass on to consumers in lower prices and to offset any of the costs that some businesses may incur in moving to the new tax inclusive pricing system. Out of that, approximately 20 per cent or $140 million is tax on business inputs that is paid by retailers in Atlantic Canada.
I did hear the member opposite speak earlier about the cost to retailers in Atlantic Canada but I wonder if he knew about the $140 million in inputs that they are not going to have to pay and the $700 million the business sector in Atlantic Canada will be saving and passing on to consumers.
Mr. Silye: Mr. Speaker, I appreciate the question. I will try to answer it in the following way.
There is no question that if businesses are allowed to get credit for their input costs amounting to $700 million, as the hon. member put it himself, this savings is available for businesses to pass along to consumers. It is available but that does not mean they will pass it along. Let us assume that they do. There is $700 million that will then be passed along to the consumers. That is revenue neutral. There is no increase in costs, there is no decrease and everybody is happy.
What about this close to $1 billion payment to the three Atlantic provinces? Why was it made? It was made because theoretically-and this is all theoretical; we are in the realm of theory here-these three provinces would receive that much less in revenue by moving
over to a lower combined rate from their 18 to 20 per cent down to 15 per cent to make up for that loss in revenue which they would have received from their provincial sales tax. Because of this input system through the GST, because it is a different form of a tax, they have to be compensated.
To compensate three provinces at the expense of all Canadian taxpayers is something I certainly object to when it is not necessary to do so. Then there is the fact that it is a 15 per cent combined rate. This tax goes on goods and services that the GST did not go on before. This will have a dramatic effect and impact on the consumers of Atlantic Canada. It has an impact on those businesses which deal with Atlantic Canada that are located outside of Atlantic Canada because they have to sustain dual packaging, dual pricing. It adds a lot of complications and a lot of cost.
There is this argument that this is just like a GST. Instead of getting rid of or replacing the GST, I still argue and maintain that the government has entrenched the GST and has, in effect, introduced in those three provinces a 15 per cent GST. Remember when the Conservatives first introduced this tax and the Liberals on this side said they would have to get this rate and that rate down and make all these exemptions, which they did? However, the biggest argument against this was that once the bill was passed the government would be able to raise it and raise it.
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I humbly submit that this could very well be the first step by a government, maybe inadvertently, actually increasing the GST from 7 per cent, which was originally supposed to be 9 per cent, to 15 per cent.
I understand and agree with the merits of the GST system and its advantages to business and how the tax does not cascade. It does make sense. However, when we look at the impact on the range of goods and services that Atlantic Canadians will now have to pay 15 per cent on rather than the previous 9 per cent, their costs will go up. Their out of pocket, disposable income will go down. They will find that they have less money for goods and services.
That is my argument in terms of the counter balance and the higher cost to consumers which offsets this $700 million in input costs, which does makes sense, which should help businesses and it should be passed along. There is also the fact that the provincial governments make less revenue and need to be compensated.
What happens at the end of four years? This billion dollar payment to the three provinces is supposed to be just for the three or four years. What if those three provincial governments still have not balanced their books and are still running deficits? What if they need more money for whatever they want to provide their citizens? What are they going to do? They are going to have to raise the tax. Now they have a convenient one tax they can raise, which is our other argument against this tax.
I am only trying to be fair in pointing out the criticisms of this tax. I think our party has been very good, even in the standing committee, of offering solutions. The members of the standing committee know that we tried very hard to work with the government to come up with a system to replace the GST. We looked at a lot of things but this piecemeal, partial harmonization will do more harm and create more confusion at a higher cost than if the government would have taken its time and done it right with all the provinces complying and co-operating rather than just trying to save the Deputy Prime Minister's political career.
Mr. Alex Shepherd (Durham, Lib.): Mr. Speaker, I listened with interest to the member for Calgary Centre. There is just one aspect of the harmonized GST that the hon. member possibly did not touch on and that is the whole concept of the ability to remove provincial sales tax from export sales.
Members will know that Canada is a major exporting country. Indeed, a big section of our job growth has been related to the export sector. Much of the financial recovery that we are going through right now is related to exports. The maritime provinces, in particular, need to rebuild their economy so that they move into the 21st century. Exporting will be a big feature of that.
For example, in my riding General Motors manufactures cars and sells them on the U.S. market. Every car that is shipped into the United States from plants in Oshawa will have a certain degree of provincial sales tax embedded in the selling price. That makes our exports less competitive with some of the other competitors that are involved, such as OECD countries and southeast Asia. One of the main aspects of the GST was its ability to remove taxes from export sales.
We have provided these three provinces in particular-and the province of Quebec already has a harmonized GST-with a tool to rebuild their economy and a tool to enter into the 21st century with a more dynamic economy zeroed in on export sales.
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Why would the member and his party try to frustrate the whole concept of building a new and better economy for the people of the maritimes to create jobs in the future?
Mr. Silye: Mr. Speaker, I welcome the question from the hon. member. I agree that a goods and services tax, that a consumption tax along the lines of the GST does eliminate tax cascading and does allow us to produce and manufacture products, and export goods at a lower cost.
That still does not justify what the government is doing with this partial harmonization in three provinces. That is a tax theory, a tax question, and I agree with the member's point of view on it.
How long will it take the savings from this Oshawa plant to recover a billion dollars of taxpayers' money to help three provinces to recover the $100 million minimum that some of these businesses have said it will cost them to conform to this new bill? Yes, it is good for business. Yes, products can be sold cheaper. However, in the end the very philosophy of a GST is that the consumer pays the tax. The hon. member knows that.
What we have done here is make it more fair for business. There is no question about that. However, we have now increased taxes. Harmonization helps. Instead of having two taxes, federal and provincial we have one. All those arguments make sense.
When the consumers find out how much more it will cost them, I predict there will be a lot more complaints and a lot more people crying about it than there is now. Everybody will be affected. At first they support the theory and the concept. Then, as they find out more about it, it becomes like the tax inclusive pricing which is causing a nightmare. That is what is really creating a cost for businesses.
The government would have them on side if it just dumped it. I do not know why the geniuses in cabinet do not go for it. They are stubborn. They will force it. The MPs will have to explain it. That is fine. Handle it. That is their job. They brought this in.
In the end, wait until the consumers get a hold of it. Wait until they see how it affects them. That is when it will be really of concern to members of Parliament, especially the Atlantic provinces. They will hear about it in their constituency offices. I predict that.
Mr. John Maloney (Erie, Lib.): Mr. Speaker, it is a privilege for me to rise today to speak on Bill C-70, the harmonized sales tax bill.
A great deal has been said in this debate about harmonization, what it will mean for Nova Scotia, New Brunswick, Newfoundland and Labrador. For the benefit of this House I want to take a moment to review some of these benefits. I would remind hon. members that the HST and its ensuing benefits will impact positively on the three participating provinces.
Clearly there could be additional benefits for the other provinces as well. I hope people are listening carefully to this debate today, especially in my home province of Ontario. It has been repeated several times in this debate that Bill C-70 represents a significant step toward a fully harmonized sales tax system, one of the government's goals.
The end result for the three participating provinces will be a system that is fair to consumers and small businesses residing and operating there. The new system will also promote fiscal co-operation and harmonization among the federal government and those three provinces. Hon. members know why harmonization will result in a simpler, fairer and more economically efficient sales tax system.
First, consumers in those three provinces will benefit. Removing the provincial retail sales tax from the business inputs, together with a lower 15 per cent rate and reduced compliance costs for businesses will mean lower consumer prices on many goods. Consumers will also know the full price of what they are buying before they get to the cash register because of tax inclusive pricing. At the same time, the rate of sales tax payable will be visible on their receipts.
Second, under the HST, businesses will be dealing with only one set of sales tax forms and operating rules. There will be one tax administration instead of the two sets of everything they do now. Not only will they have reduced compliance costs, but the competitiveness of businesses will be promoted. That is because the HST payable on business inputs will be recoverable, especially for businesses located in the participating provinces.
There will also be lower administrative costs under the HST because overlap and duplication will be eliminated. Of course, the single lower rate of 15 per cent is significantly lower than the rates currently in place in the three participating provinces.
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It is important to note that the harmonization in the participating Atlantic provinces will mean a drop in their combined sales tax rates from just under 20 per cent to 15 per cent in Newfoundland and Labrador and from just under 19 per cent to 15 per cent in both Nova Scotia and New Brunswick.
To ensure a smooth transition, the HST base will be the same as the GST base. The rules governing the new system will generally be the same as those for the GST.
Economic benefits will also flow from the removal of tax on business inputs. In addition to eliminating the tax cascading that is inherent in existing provincial retail sales tax systems, the harmonization of sales taxes will minimize distortions in investment decisions.
I refer to businesses being able to recover the tax on business inputs in the new system. Keep in mind that the current provincial retail sales taxes are applied on the price of purchase, including the GST. Since the existing provincial retail sales taxes do not have a mechanism for removing taxes paid on purchases by businesses in the course of producing the goods and services that they sell, these taxes become embedded in the prices that businesses charge for the goods and services they produce.
A key advantage of the HST will be removal of the embedded taxes. This will make the tax payable on goods and services more transparent to consumers. In addition, companies and the participating provinces will be able to price their goods more competitively. This will be particularly advantageous for exported goods which will be completely relieved of tax. Along with promoting the international competitiveness of businesses in the participating provinces by removing tax from exports, steps will be taken to ensure that they and their competitors and non-participating provinces are treated equitably.
The design of the tax will ensure that goods and services sold into a harmonized province from outside the province for consumption or use in the participating province are subject to the same level of tax as goods or services sold within the province.
Registrants across Canada will be required to collect HST on goods or services sold in a participating province or shipped to that province. At the same time they will be eligible for input tax credits for HST paid on inputs into their commercial activities. Under current provincial sales tax rules in both participating and non-participating provinces, consumers are required to pay tax on any taxable purchase consumed in their home province.
If a purchase is made from a business in another province, consumers are required to self-assess the applicable provincial sales tax. The requirement to collect tax on interprovincial sales will ensure the application of a provincial tax is continued under harmonization in an administratively efficient manner.
In order to ensure a consistent and simple approach for businesses required to collect HST on interprovincial sales, a single set of rules will be provided in the Excise Tax Act. The federal government will apply this approach on behalf of any province that adopts a similar system.
As hon. members know, the registrants will be able to recover tax payable at the HST rate of 15 per cent on goods and services to the extent that they are acquired for consumption use or supply in a commercial activity. This will eliminate the tax cascading inherent in existing retail sales taxes in participating provinces.
We know too that the removal of tax on business inputs will enhance the competitive position of businesses operating in those provinces. Similarly, special rebate mechanisms will apply where property or services are acquired in participating provinces and the property is removed, or the services are for use outside these provinces by people who are unable to claim input tax credits.
Let me emphasize that registrants regardless of where they are located will be able to claim input tax credits in respect of tax paid or payable either at the 7 per cent GST rate or 15 per cent HST rate on property and services they acquire or import into Canada as inputs into their commercial activities.
By allowing registrants located in participating or non-participating provinces to claim input tax credits for tax paid or payable regardless of whether it was charged at the 7 per cent GST rate or at the 15 per cent HST rate, the dual objectives of eliminating tax cascading and maintaining competitive equity can be achieved in a way that is both simple and effective.
Businesses engaged in commercial activities anywhere in Canada that purchase goods and services in participating provinces that are taxed at the harmonized rate will be entitled to recover tax payable at the HST rate. Another result is that when reporting tax collected or claiming input tax credits, registrants will not have to separately identify the federal and provincial components of the HST at the 15 per cent rate or tax collected or payable at the 7 per cent GST rate.
Furthermore, most registrants will continue to use the current GST return to calculate net tax remittances. This aspect of harmonization will make a difference between the participating provinces and the remaining non-harmonized provinces.
Let me reiterate that at present in all provinces except Alberta, consumers pay provincial sales tax on all taxable purchases consumed in their home province. If they buy something outside the province they are required to self-assess the provincial tax applicable. Businesses generally apply only the GST on sales to other provinces but they are still required to indicate where PST does not apply, for example by destination. The PST does not apply out side the province.
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Under the HST there will be no hidden taxes because of the input tax credits that businesses can claim to recover the tax on goods bought to run their operation and make products. Equity and competitiveness for Atlantic businesses dictate that all goods and services consumed in participating provinces should be subject to the same level of sales tax. This includes goods supplied by businesses in non-participating provinces for final consumption in Atlantic Canada.
Introducing a national measure for collecting tax on interprovincial sales will establish a stable, fair and predictable set of rules for businesses selling into the harmonized provinces. As we know, businesses in the non-participating provinces will have to apply the 15 per cent HST on all sales into a harmonized province.
I should point out here that frequent changes will not be required as other provinces harmonize. This is not a new sales tax on goods and services sold in the participating provinces. Sales tax on interprovincial sales has always been applicable. Many national businesses involved in interprovincial transactions already collect
and remit provincial taxes on a province of destination basis. This new approach merely ensures that sales tax is collected and remitted more efficiently and effectively.
As long as collection of tax on interprovincial sales is based on a single set of rules, collecting the 15 per cent HST will not involve a significant change for these businesses.
Some consumers shop to purchase items free of provincial sales tax in other provinces. While consumers are required to self-assess the applicable provincial sales tax on these purchases, as I mentioned before, this is not the most effective way to ensure that the tax is paid.
With businesses now having to collect and remit the HST when they sell into a participating province, consumers will no longer be able to purchase these goods free of provincial sales tax. Consequently, the same tax savings incentive to buy out of province will no longer exist. This approach is more equitable for businesses and consumers alike. Retailers in participating provinces will no longer be at a disadvantage compared out of province vendors. Both will be required to charge the full rate of tax on their sales.
Collection of tax on interprovincial sales requires two basic elements, a common base and referencing of federal legislation. The national approach to interprovincial sales establishes an efficient and effective system for collection of tax on interprovincial sales which can benefit all provinces by facilitating the collection of the provincial sales tax on all sales into the province.
We already know the HST treatment of interprovincial sales benefiting participating provinces. For example, through additional sales tax revenues and by providing a level playing field for all businesses selling in or into participating provinces.
We know too that there will be no incentive for businesses in any province to avoid paying tax on their inputs as they can claim input tax credits for the full amount of tax paid.
As I said at the beginning, this bill puts into law the first step toward replacing the GST with a truly national sales tax system. Perhaps, when the non-participating provinces see the benefits of harmonization, they too will join in and reap the benefits. After all, the consumers and businesses in those provinces deserve the same breaks as residents in Nova Scotia, New Brunswick and Newfoundland and Labrador.
No doubt the HST will be a better sales tax system when it is a national system. But this is a start, an important, valuable start that will truly benefit the economies of the Atlantic provinces. That is why I urge all hon. members to support this bill.
[Translation]
Mr. Jean-Marc Jacob (Charlesbourg, BQ): Mr. Speaker, I am pleased to participate in this debate on Bill C-70 for various reasons. Several of my colleagues and members of the Reform Party have pointed out that, through this bill, the Liberal Party has completely reneged on an election promise.
I was listening to the hon. member for St. Boniface, who mentioned the added bonuses of the so-called harmonization of the GST. All the hon. members will remember the statements made by the Prime Minister, the Deputy Prime Minister and even the Minister of Finance to the effect that the GST was an unfair, regressive tax which hurt the economy and, in some respects, encouraged work for cash when the tax is applied to services.
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We have realized that, after undertaking to abolish this unfair and intolerable tax, the government is now diverting attention by saying that it has been successfully harmonized and that the Prime Minister's promise to eliminate the tax had been misunderstood.
It will be remembered that, in the late 1970s, the Liberal Party guru, former Prime Minister Trudeau, had taken very similar action regarding the gasoline tax. At the time, when former Prime Minister Joe Clark was briefly in office, Mr. Trudeau described the gasoline tax introduced by the Conservatives as an unacceptable, intolerable and unfair tax that would be abolished as soon as the Liberals were in office.
And we all know that Mr. Trudeau became Prime Minister of Canada and that the gas tax was not abolished. Quite the contrary, it was increased. This bears a strange resemblance to the promises made by Mr. Trudeau's disciple, the current Prime Minister, who said he would abolish the GST because it was unfair, regressive and bad for the economy. Again, the promises made were not fulfilled and the government has now found a roundabout means, the so-called harmonization, which it touts as an outstanding solution.
We will never stress often enough what I would call the inconsistent, farfetched promises made over a period of decades by the Liberal Party, a party that makes all kinds of promises but never fulfils them. Such was the case with the gas tax and such is now the case with the GST.
The government talks about harmonizing the GST but, to my knowledge, the GST is still at 7 per cent, under the agreement reached with the maritime provinces. What was harmonized is the provincial tax, which was lowered in Newfoundland, New Brunswick and Nova Scotia. In other words, the provincial tax was harmonized, thus reducing the total tax, a loss the federal government will quickly compensate through equalization payments.
But the government also gave these three provinces $961 million in compensation, to help them integrate the GST and implement the so-called harmonization. Strangely enough, Quebec was a harmonization pioneer, as mentioned earlier by a Liberal member, who said that having an harmonized tax was good for trade and exports. Again, one wonders what principles of justice and fairness are used by a government that subsidizes and compensates the
three maritime provinces that agreed to ``harmonize'' their taxes, while Quebec did the same at its own expense.
I was in the private sector when that process took place and I remember that all the costs, such as the acquisition of software to integrate the GST with the provincial sales tax, were supported by small and medium size businesses in Quebec. As for the provincial government, it trained some of its employees and integrated its computer system so as to achieve harmonization with the GST.
Did Quebec get any compensation? Let me use the words of the Minister of Human Resources Development in reference to culture: ``Not a bloody cent''. We did not get any compensation from the federal government. Now Quebec is asking to be compensated for having harmonized its tax with the federal GST, but this government is turning a deaf ear so that the province might not get anything.
Meanwhile, the maritimes, where, as the government says, the tax has been harmonized, are being subsidized or compensated to the tune of $961 million.
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With such compensation, New Brunswick can now be competitive and attract some Quebec and Ontario businesses, by stressing the fact that taxes will be lower in that province, given the kind of subsidy granted by the federal government, through the compensation paid to maritime provinces.
This is a rather curious system when you look at it: the federal government provides a kind of competitive tool to three provinces by harmonizing its tax, to the point that it becomes unfair, since these provinces will benefit from such a substantial subsidy or compensation. How then can we believe that the Canadian federation, with bills such as this one-
The Speaker: I am sorry to interrupt the hon. member. I know you are in the middle of your speech, but you will have 14 minutes left. You will have the floor again after question period.
It being almost 2 p. m., we now move to members' statements.