Bill C-62 (Historical)

Provincial Choice Tax Framework Act

An Act to amend the Excise Tax Act

This enactment amends the Excise Tax Act (the “Act”) to implement, effective July 1, 2010, the new fully harmonized value-added tax framework in Ontario and British Columbia. It also facilitates the new framework to accommodate any province’s decision to have the provincial component of the harmonized value-added tax under the Act apply in that province by achieving a common understanding with Canada in respect of such a new framework, including the provision of rules and mechanisms to ensure
(a) the proper imposition of the provincial component of the harmonized value-added tax in respect of that province;
(b) the proper application of any element of provincial tax policy flexibility contemplated under the common understanding, including rate flexibility for the provincial component of the harmonized value-added tax, rebate flexibility in respect of the provincial component of the harmonized value-added tax and the temporary recapture of certain input tax credits in respect of the provincial component of the harmonized value-added tax;
(c) the proper functioning and application of the Act in all respects, including provisions flowing from the provincial tax policy flexibility contemplated under the common understanding and the addition of every province that chooses to join the new framework; and
(d) the proper administration and enforcement of, and compliance with, the Act.

Provincial Choice Tax Framework Act

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I thought it was interesting when I heard one of the member's last comments about getting some input on how we could ease the imposition and make some changes on the impacts of the tax on people.

Bill C-62 has nothing to do with that. The legislation that is coming before Ontario and B.C. does. He has contradicted himself and I want to know whether he is aware of anything in Bill C-62, the bill we are debating right now, which would assist solving the question that he has raised, or is he in fact simply going to admit that what he is asking for is what should be handled in the provincial legislatures?

[Thomas Mulcair, NDP, Outremont, QC]

Madam Speaker, it is my turn to speak to Bill C-62, An Act to amend the Excise Tax Act. This bill is the culmination of an operation that the Conservatives began four years ago that has brought about the largest shift in Canadian history of taxes from the corporate sector on to the backs of ordinary hard-working Canadians. That is what the Liberals are supporting. That is what this bill is about.

To understand the scam, it has often been said that for a swindle to work, it requires two dishonest people, the person who is putting the scam together and a dishonest person on the other side who thinks he or she will actually gain from it. That is what we have here. The swindle put together by the Conservatives is the ideological continuation of what they have been doing for the past four years. The dupes in the Liberal Party are supporting them of course, and the numbskull premiers of British Columbia and Ontario think that somehow they are going to be putting money in their pockets, whereas in fact they are just further damaging the economies that have already been undermined by the Conservatives' actions.

Let us look at the genesis of this problem and how it began with the arrival of the Conservatives, shall we? Their ideology is that governments should play no role in the economy, that there is a pristine marketplace that makes all of the right choices, that anyone who thinks that governments or the state has a role in this is trying to pick winners. Let us look at it for what it is.

The Conservatives have decided there is one winner in the Canadian economy and it is the oil sector in Alberta. That is what has been destabilizing an erstwhile balanced economy that was built up in this country since the second world war. Successive governments always understood that to give value to the second largest country in the world with a minor population, today just in the order of 30 million, we required vision. We required the government to play a role in ensuring that we could develop our primary sector, forestry in particular and mining, that we could have a strong manufacturing sector as well, and that we could develop as modern times have allowed us to do, a tertiary sector, the service sector.

A lot of people look at the unemployment created since the fall of 2008 when the current recession began, but what we saw was that as a direct result of the Conservatives' choices, because governing is a reflection of one's choices and one's priorities, as a result of the Conservatives' choices backed every step of the way by their henchmen in the Liberal Party, they have reduced corporate taxes by $60 billion. The effect of that has been to provide that fiscal space of $60 billion to the most profitable corporations. I say the most profitable corporations because it should be obvious, but for some people it is not, that by definition if a company had not made a profit, if it was breaking even or losing money, it did not get any of the money from those tax reductions. Who did? Mostly the very profitable oil sector. Companies like EnCana saw windfall profits of hundreds of millions of dollars, which was totally unexpected and certainly unnecessary for it in terms of its operations, as did Canada's major chartered banks.

Who suffered? The manufacturing sector and the forestry sector centred in Ontario and Quebec for the manufacturing and the forestry sector which included a lot of lost jobs in British Columbia and in New Brunswick on top of those mostly in Ontario and in Quebec. That was a choice. Before the current recession hit, we had already bled off hundreds of thousands of jobs in the manufacturing and forestry sectors in Ontario and Quebec.

One of the primary reasons for that was the high Canadian dollar which was being stoked by the petrodollars coming into Alberta that does not even internalize the environmental and social costs of the exploitation of the tar sands. There are three basic principles of sustainable development that have to apply to any exploitation of that nature. They are internalization of costs, polluter pay and user pay. Of course the Conservatives apply none of it. The Liberals are ill-placed to even discuss the subject. They signed Kyoto, and as Eddie Goldenberg, the former chief of staff for Jean Chrétien correctly pointed out, the only reason they signed it is for public relations purposes. That is why under the Liberals for 13 years Canada had the worst record in the world in terms of greenhouse gas reduction and that has simply become worse under the Conservatives.

The Liberals did nothing, the Conservatives do not want to do anything and the Bloc cannot do anything. It is a good thing that our leader, the leader of the NDP, is heading to Copenhagen. That at least offers some hope. I am told that this very morning, Bill C-311, which scandalously the Liberals have been holding up in committee, was finally allowed to go through, so there is a ray of hope on the horizon being provided by the New Democratic Party.

The $60 billion of tax reductions was only possible by creating a similar fiscal space. How was that fiscal space created? It was created by pillaging $57 billion in the employment insurance account and turning it into general revenues of the government. Again, it was with the culpable complicity of the spineless Liberals who have no principles and no beliefs. They backed the Conservatives every step of the way.

It should be remembered, as one of my colleagues said earlier, that the Bloc Québécois also voted for the first two Conservative budgets. That is something the New Democratic Party of Canada has never done. We have always stood up against the Conservative vision for the economy. We have always resolutely voted against the Conservative budgets and we are very proud of that record.

Some people have said that they may be taking $57 billion from the EI account, but it is a notional amount. They are turning it into general revenue, so who really cares, because it does not change anything; it is all still government money. There is a huge mistake in that analysis. Every single company in Canada, whether it was making money, breaking even or losing money, had to pay into that employment insurance account for every single one of its employees.

That money was paid in by employers and employees for a dedicated purpose, to take care of the cyclical nature of our economy for a day like today in the middle of a recession when there are dramatic job losses. The fund would be there. That is what it was put in for. To add insult to injury, $19 billion is calculated to be missing from the account now, because they have frozen contributions as part of the recession.

That means that the very same companies that were losing money in forestry or manufacturing and had made their compulsory contributions for every single employee into that fund saw that fund turned into a fiscal space that was given in the form of tax reductions for the most profitable corporations in Canada, stimulating even more rapidly the Canadian economy, with regard to the oil sector, at least, and pushing the Canadian dollar higher as those petrodollars came in.

The result, in the clearest possible terms, is that companies that were already losing money in the forestry and manufacturing sectors were directly subsidizing the very petroleum sector that was causing the high dollar and making their exports even more difficult because of the very high Canadian dollar. It is similar to one being asked to pay one's executioner. That is exactly what happened here with regard to the Canadian economy.

That is the Conservatives' way of doing business. That is what they wanted to do. That is what they set out to do. They set out to destroy the manufacturing and forestry sectors at the altar of the expediency of the rapid exploitation of the tar sands. As if that were not enough, projects like Keystone, one of the many pipeline projects that the Conservatives have put in place in the west since they arrived in government, are exporting the rawest form of the production of the tar sands straight to the United States.

We are exporting jobs. Keystone alone represents 18,000 lost jobs for Canada. We are not only stupid enough to send all of this south without any added value here, but we are sending it so fast that we are not even holding on to anything. We are not even internalizing the costs to the environment today and the costs for future generations.

The internalization of costs is a principle that Canadians all understand. When we buy tires for our car, the province adds a $3 fee to take care of the recycling of the tires. That is the environmental cost of the tires being paid by the person who is buying the tires. That is only fair. If people take the metro or the bus to work, or they take their bike or walk and they do not own a car, why should they pay for that recycling out of their general tax obligations? Why should they be paying to recycle their neighbour's tires? Everybody gets that.

It should be the same thing with the tar sands. It is an important resource, but it is not immune from the application of general principles of sustainable development. What one does is internalize the cost on a barrel of petroleum produced out of the tar sands. That would be the equivalent of approximately $3 to $4 a barrel. The internalization of the cost of sequestration of the greenhouse gases or their reduction and the treatment of all the pollution that is now being held back is going to be a problem that we are shovelling forward for future generations.

It is wonderful to watch the Conservatives, those great moralizers, wagging their index fingers under our collective noses, always telling us how to be and allowing the worst pollution on the planet to take place here in Canada in the Athabasca tar sands. Right now, the dykes at the tar ponds are the longest dams in the world. They are holding back what is not seeping right into the underground water. This is the greatest source of pollution right now in Canada.

We are destroying ecosystems. We are destroying groundwater. We are causing cancers that are exceptional, that can only be traced back to the chemical products being produced in the tar sands. At the very least, we should be internalizing the cost of that, instead of sending the bill to future generations.

Contrary to their theoretical position on all these matters, what we are doing with the Conservatives is enjoying ourselves today, taking everything we can for ourselves and letting the future generations of tomorrow fend for themselves. At the very least, a fund could be put aside out of those important revenues.

Both the internalization of costs and the setting aside of that fund would reduce the pressure on the Canadian dollar. This would make it possible to go back to a more balanced economy like the one we had built up since the second world war. It would be easier to export than it is right now with the high Canadian dollar. We could at the same time put in place an infrastructure of green renewables, hydrogen, wind, hydro and others that can be developed in this great country of ours.

However, there is a singular lack of vision among the government benches on this issue. The Conservatives do not care about future generations. They love to pose with future generations. There is nothing easier than to get a Conservative to pose at a hockey rink on a Saturday with a bunch of kids. What about the day when we will no longer be able to play hockey outdoors in Canada because of global warming and because of their incompetence and their negligence? That is the issue that has to be discussed.

We in Canada are in a unique position in the world. We have extraordinary resources that we can and should be developing, but we should be doing it cleanly.

The Conservatives are so much at the beck and call of our American neighbours. They are in such a hurry to get everything through the National Energy Board. They are in such a hurry to get all their approvals for these pipelines straight south, the raw agreement, to export not only our wealth but also jobs. That is the scandal of the Conservative approach. There is $60 billion in tax decreases for the richest corporations. Some $57 billion has been pillaged from the employment insurance account. Businesses that have already subsidized the oil patch are going to be asked to re-contribute in the order of $19 billion.

Right now, the government is saying, “We have a plan. We are going to look at the premiers of Ontario and British Columbia, the provinces which were the hardest hit by our previous plan to destroy the manufacturing and forestry sectors. Now, we are going to bring them to the table. It has been part of the plan since day one”.

The current finance minister said four years ago in his first budget:

The Government invites all provinces that have not yet done so to engage in discussions on the harmonization of their provincial retail sales taxes with the federal GST.

Do not try to convince anyone who has looked at the file that this is not the responsibility of the Conservative government. It is the Conservatives' plan. This has been laid out for the past four years. Without the Liberals, it would not be possible. That is the real problem.

In Ontario and British Columbia, the pusillanimous Liberals, because they have allowed the Conservatives every step of the way to destroy their manufacturing base, to destroy their primary resources, mostly in forestry, are now saying, “We are too broke. We have to give in to their plan”.

A regressive tax is one that hits the poorest hardest. By definition, this HST is a regressive tax. People have no choice. A retired couple living on a modest fixed income in northern Ontario or B.C. who have to buy home heating oil is going to be spending 8% more for that heating oil. That is what the Conservatives are doing.

It has nothing to do with one's revenue. It is not like an income tax, which is progressive: the more one earns, the higher the percentage; that has been accepted and understood in our country for a long time. This is a direct hit on the people who can least afford it.

What is interesting is it is not just those of us who work every day with people and with communities and groups who are saying this. I have a letter that was sent to me by the Canadian Federation of Independent Business. It is really worth noting that it is as opposed as we are to this new HST. This used to be the bailiwick of the Conservatives.

The CFIB says this, and it is worth reading:

While governments did not consult with small firms in either Ontario or British Columbia, I should note that our members continue to have a mixed reaction to sales tax harmonization. Certainly, the expansion of input tax credits to the provincial portion of sales tax administration is a considerable improvement over the current tax-on-tax system we now have...[however, we have] a lack of trust that tax reforms will, in fact, lower the overall tax burden. We have heard many comments from members in Ontario and British Columbia that suggest concern that sales tax harmonization will not end up as revenue neutral or a tax reduction, but lead to an overall increase in the tax burden on Canadians.

What is interesting is it is bringing up one of the points that everyone has raised, and that is what is happening here today. The government has the temerity to use closure without ever holding any consultation or debate on this tax. It is our irresponsible Minister of Finance who said, “It's not me, it's the Liberals in B.C. and Ontario”.

Let us look at what the Canadian Federation of Independent Business says, which is that we have to do five things that are not being done now. It has to be a win for consumers through a lower combined rate.

The CFIB explains, in an interesting manner, how it was able to back the harmonization in the Maritimes and be against this one in B.C. and Ontario. It explains that what was done in the Maritimes actually produced a lower combined rate. What we have here is a tax grab on the backs of those who can least afford it. That is what the Conservatives have concocted this time, with the culpable complicity of the Liberals in both B.C. and Ontario and, of course, their squid in the House.

The validity of the tax and associated revenue stream has to also be one of the important principles, ongoing vendor compensation and introduction of a fairness code. This was said by Dan Kelly, senior vice-president, legislative affairs of the Canadian Federation of Independent Business.

This is the result of choices. The bleeding off of hundreds of thousands of jobs in the manufacturing and forestry sectors is a direct result of what the Conservative government chose to do. We are leaving a debt to future generations in terms of the current deficit structure that we are putting in place, which will be one that we will not be able to get away from for decades. At the very least, we should be leaving something that future generations can use. We should be bequeathing them something in terms of clean renewables. We should be moving to an economy less based on carbon.

As George Monbiot pointed out last week in the Guardian newspaper in the United Kingdom, and has been pointed out in a lot of other countries since then, the once diversified economy of Canada is being destroyed actively by the Conservative government. It is the same mistake that people have already seen.

There have been lots of treatises and papers written about this around the world. What Holland went through after the second world war in a similar petroleum bubble, which killed its manufacturing sector, Canada has not had the wisdom to avoid.

We have always understood in our country that it took a balanced approach to building the economy across our huge country. The Conservatives simply do not believe in Canada. They simply do not believe in the importance of maintaining jobs in diverse sectors like manufacturing and forestry. They think by pumping in petrol dollars from the United States that somehow we will be able to maintain the economy that we have had in the past.

In the time I have left, I would like to express my surprise at the Bloc Québécois' support for Bill C-62.

The bill is available on line for anyone who wants to double-check what I am saying. It includes a schedule that lists the participating provinces, and Quebec is not even mentioned. The whole bill is silent on the subject of reimbursing Quebec for harmonizing its tax. Quebec has been owed $2.6 billion for over 15 years now. Monique Jérôme-Forget deserves to be congratulated for having once again raised the issue in debate. Quebec's decision to harmonize its taxes was historic. The minister was twice mistaken when he referred in the House to Quebec's harmonization.

Those of us on this side are against an unfair tax that will hurt the poor. We strongly condemn the Bloc's decision to support this bill.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, there are no changes in federal legislation as it relates to first nations, pursuant to the agreement between Ontario and the Government of Canada or between B.C. and the Government of Canada. There are no changes there, so I do not know exactly what the member is suggesting we discuss here. If there were changes, certainly they would be discussed.

Regarding the $6 billion, the member is referring to the compensation that the federal government is paying to Ontario and B.C. with regard to all of the things involved with taking two systems of taxation and putting them together. There are obviously a lot of costs involved and they were negotiated with the provinces individually, as were the other three when they came in, and as the province of Quebec negotiated its deal.

This is part of the process that it goes through, but the bottom line, and I do not want to be coy with any of it, is that there is no question that if we were to defeat Bill C-62 and these amendments never passed, then there would be no harmonized sales tax in Ontario or B.C. That is true, but are the members saying that we do not want the provinces to have the tools they need to deal with the economic recovery in their provinces, to create jobs, to create investment?

Those are the fundamentals. The member says that the $6 billion would be better spent on affordable housing. Six billion dollars pales in comparison to the creation of 500,000 to 600,000 jobs in the province of Ontario.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Madam Speaker, what my hon. colleague seems to want to ignore is that he and his party, along with the government, are making the decision along with the provinces. The $6 billion bribe fund is set up explicitly for this. Both provinces, Ontario and British Columbia, have said that without the $6 billion coming from Parliament, with the support of the member, his party and the government, this would not be happening at all. We would not be having this conversation.

In terms of first nations' right to consult, that sits in the Constitution and is constantly ignored. It was ignored by his government when it was in office. It is being ignored again, because this is an effect of Parliament having a direct impact on first nations in Canada, period. The Constitution explicitly states that we then must consult and accommodate first nations. Every court decision that has come down has said so.

Does Bill C-62 have an effect on the lives and the quality of life of first nations in Canada? Yes. Does the federal government have a duty to consult? Yes. Is it consulting? Absolutely not, and that is what is wrong. This will very likely end up in a court, and he should know that if he has been paying any attention to first nations history, law and practice in the last 85 years.

The fact of the matter is that he is helping enable the HST to come in. If he thought it was such a great idea, then certainly he would have campaigned on it in the last election, but not having been in Mississauga, I am going to take a guess. I am going to guess that he did not mention this. It was not in his flyers. It was not a promise. They have no mandate to do this, and this is why the people of Mississauga and all across Ontario and British Columbia are upset with him, his party, and the Conservative Party as well. They feel that these politicians have no mandate to do this.

The mandate is $6 billion. That could be used for other things. He wants to talk about first nations. He should intimately know then that the housing on first nations reserves across this country is in desperate need of help. It is stuck at 1982 funding levels. Surely the $6 billion would be better applied to something like affordable housing in this country.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I have spent a fair bit of time on aboriginal and first nations issues, particularly matrimonial and property rights, which are still with us.

There is nothing in Bill C-62 that affects aboriginal legislation. However, it is kind of interesting to note that if we were to have consultations today with aboriginals with regard to Bill C-62, the only choice would be to defeat it or not, because there is no clause in here that we can even talk about concerning aboriginals.

The consultation for aboriginal persons is with the Province of Ontario, in the legislature of Ontario, with regard to Ontario legislation. That is where the hearings and the representations have to be made. The only representations that would be made here would be if there were amendments proposed to the rules related to the taxation of first nations people.

It is easy to say, but quite frankly, what the member is suggesting is that we should make the decision here as to whether or not we want to allow a province to harmonize its tax. That is not in the best interests of Canadians.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, we have a situation now where the governments of two provinces have committed to harmonizing their taxes effective July 1, 2010.

The Province of Ontario, in conjunction with the legislation it is bringing in to harmonize the sales tax, is also concurrently going to bring in income tax cuts and other credits for residents of Ontario. These cuts are going to be effective on January 1, 2010, six months before the HST in that province would take effect.

For the Ontario government to be able to make that effective January 1, its plans are to pass its legislation on the HST with the other permanent income tax cuts before Christmas. It cannot do that unless Bill C-62 makes the necessary changes to the Excise Tax Act so that Ontario's bill conforms with the laws of Canada.

I wish the finance minister would simply get up in the House and announce to everybody that the government made a deal with the Province of Ontario, which faces a great deal of difficulty in terms of its economy and wants to move forward with these tax cuts and the harmonization. On a projected basis, these tax cuts and the harmonization would create over 500,000 new jobs, create $47 billion in increased capital investment and increase annual incomes by up to 8.8% or some $29.4 billion.

The consequences of this legislation to Ontario are enormous. We have to ask whether the Parliament of Canada feels that it should not pass Bill C-62, thus effectively stopping the Province of Ontario from carrying out its decisions to address its economic crisis and therefore being able to make a contribution towards remedying the economic crisis facing our country as a whole. That is really the big question.

The provinces have a choice about whether or not to do this. I could make a case, as others have, by indicating that a haircut would cost 8% more, but that is not exactly true because the hair salon or the barber shop also incurs provincial sales tax on all the other supplies and services related to its business and they all cascade down. Once we convert, their costs of doing business will go down in a perfect flow-through fashion in a competitive economy. In fact, their prices will go down. Even though the 8% tax will be added for the additional provincial tax component, the overall price really should not change. In fact, it theoretically should go down because of the built-in taxes in the underlying costs of doing business.

Canadians are going to hear a lot of stories, but the best thing they can do is to ask for all of the information on what a harmonized sales tax is and visit the provincial websites to see what the plans are. They will also see a copy of the agreement that outlines all of the details.

In Ontario, for instance, notwithstanding that the harmonization of the tax would affect only about 17% of the goods and services that we purchase, there is going to be a very substantial reduction in personal income taxes for all Ontarians. In the first year, families are going to get a $1,000 transitional credit. There will also be a sales tax credit increase to reflect the fact that the harmonized sales tax has both levels of government tax included in it.

These are offsets. Canadians should know that to the extent that some exemptions will no longer be there, that is pursuant to the agreement. The agreement limited the exemptions to 5% of all of the goods and services that are being offered. Therefore there had to be some streamlining of the benefits. However, to take that into account, some things may be taxed now that were not previously taxed, but there is going to be a permanent offset through income taxes as well as through tax credits and the one-time transitional credit of $1,000 for a family.

There is more for people to know about. In Ontario, for instance, I know some of the members are saying this is a tax grab and asking how we feel about it. In fact, after implementation the provincial sales tax revenues to the Province of Ontario will actually decline. It is not a tax grab. In fact the revenues are decreasing.

If we look at the implications for Ontario, there is the possibility of getting the job creation activity that it drastically needs, as well as business investment. Businesses should be able to pass on the savings to them by investing further through creating jobs. We cannot ignore the job creation issue. It is critical in the economy of Ontario.

The Government of Ontario has made this decision. I am hopeful that Canadians will take the opportunity to inform themselves instead of listening to linear arguments.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, if someone were to tell someone else on the street that there would be an 8% increase in the cost of a number of services not currently charged any tax, and then took a survey of all of those people, asking them if that were a good idea or how they felt about it, I can only assume that most of the people would say that they really did not want to pay any more tax on something, if it is not taxed already. That, indeed, has been the basis of the argument a number of people have made.

Interestingly enough, the conversations that members have had and the discussions and debate have been about income tax issues in the provinces of Ontario and British Columbia at this time. The conversations are not with regard to Bill C-62 specifically, the bill we are presently debating. It is the nature of this place that if a person can make a link to an issue, they can talk about pretty well whatever they want, because politically it may be more advantageous for them to say some things, but not everything.

That is unfortunate, because the constituents I have heard are not exactly sure what is happening and who is in charge of what. So I thought I would try to explain this to them, because most of us have received a lot of emails from people about a harmonized sales tax, and they are not exactly sure what all of the details are, because the bills that will lay out all of the details have not even been presented yet in the Province of Ontario or the Province of B.C. There are some preliminary pieces of information on the websites of those provinces, which their residents can look at.

The Conservative Government of Canada has entered into agreements with the provinces of Ontario and British Columbia to harmonize the federal and provincial taxes into one tax called an HST. Three other provinces have already done it. The fourth province, Quebec, has done a sort of harmonization; it is not complete and, indeed, there are still discussions going on about whether or not Quebec may be entitled to further compensation for having entered into a quasi-harmonization agreement. Now two provinces want to enter into such an agreement as well.

We have to ask ourselves, why would provinces want to do that? Why would they want to harmonize their taxes, knowing that the issue of taxation is not politically popular? They do not do it because they want to somehow agitate people. There must be a reason. Having done enough research and having looked at the economic analyses and to some of the people who have been involved historically in dealing with consumer taxes like GST or PST, the consensus among the analysts I have looked to, the people who appear regularly before the finance committee and, indeed, some other committees, has been that the provincial sales tax system is a very inefficient system.

It is inefficient because provincial sales tax is charged at each stage of the life of producing a product. That means when someone gets the raw materials, for instance, cutting down a tree, that business of cutting down trees and sending trees to the lumber mill is charged provincial sales tax. The lumber mill will have some other expenses and it will process and produce the trees into two by fours and other building materials.

Those are sold to wholesalers and there is a provincial tax added to them, the same provincial tax. Now the product has been hit three times along the way. Ultimately, it goes from there to where the individual consumer can purchase the wood needed for the project, which is again charged. The provincial sales tax has been charged more than once. It is charged all the way along the line. It is tax on tax on tax.

In fact, if we were to look at the analysis of the final selling price of a product that people purchase in the province of Ontario, we would find, notwithstanding that the provincial sales tax rate is currently 8% in Ontario, that the amount of provincial sales tax in the ultimate price we pay is far greater than that, because it has been applied several times and compounds. There is an enormous amount of tax.

Could anyone imagine if that provincial sales tax were treated the same way the GST is treated? The GST is only paid by the end consumer. It is charged at the first point of production, for instance, in the example that I used, but when the product is sold to the next person down the line, maybe the lumber mill, the seller gets back the taxes paid. The seller has just passed on the 7% and it keeps building up.

However, at the end of the day, the total amount of GST charged on the same product is currently 5%. That is the total amount that people would see in the final purchase price of that product compared with something now that is far in excess of the current provincial rate, simply because there are no input tax credits.

Most of the members here are very familiar with that, particularly the member for Hamilton Mountain. She is on the finance committee and we talk about a lot of these things. She and I know the mechanics of the system and know very well that if efficiencies in the tax system save businesses money, these are is not going to help the consumer very much if the businesses decide to hoard the money and keep it themselves rather than passing it on to consumers.

The only way to address that is to have a competitive economy. There has to be enough competition within the system so that if a competitor is going to pass on more or all of the savings from changes in tax policy, another competing business has no choice but to match those or else lose business to the competitor simply because of the economies of lower pricing.

Therefore, it does make some sense to make the provincial system more efficient and fairer, in fact. We are overtaxed at the provincial level.

However, why now? Many of the members have raised the issue of it being good policy but bad timing.

I do not think anybody is going to dispute the fact that the Province of Ontario is in some very serious difficulty in terms of its economic fundamentals. Its projected deficit is some $24 billion. The unemployment rate in most regions is much higher than the national rate.

The Conservative government has boasted about a stimulus plan that it has committed to but has not actually issued cheques for. It is a matter of, “Here is what we have promised to do and we have promised to do it so many times over and over again”. Eventually projects might get the money. However, before we know it, things are going to lapse and the government is going to say that the project did not get done or that it did not manage to get the money out, and it is just going to lapse.

I am sure this is going to happen. Much of the money that should have been spent and the cheques that should have gone out to approved projects are going to lapse. It will never happen and we will never get the benefit of the job creation that was supposed to happen.

Members will know that, because it also happened in the last fiscal year with the infrastructure funding. I think it was somewhere around $3 billion of approved infrastructure funding that lapsed and never got out. It was approved and ready to go and the government just did not issue the cheques. This is one of the reasons that members have to hold the government accountable on things.

It is easy to use this place and to say that the Province of Ontario has decided that it wants to enter into an agreement with the Government of Canada, which they did. There is a copy of it. It is about four pages long and includes a number of details. This was an initiative by the Province of Ontario directly related to what it can do to create jobs and investments in Ontario to deal with the economic crisis in the province.

We have a system of taxation under our Excise Tax Act that permits the harmonization of taxes. As I indicated, we do have three provinces that have formally harmonized their sales taxes, including all of the maritime provinces. Now two other provinces have decided they want to make their system more efficient and do some other things in conjunction with that, as part of their program for economic recovery in their provinces.

As members would know if they looked at Bill C-62, it does not talk about the tax rate we are going to charge on haircuts, etc. That would be in a bill that would appear in the legislatures of Ontario and B.C. Our bill actually has amendments to the Excise Tax Act, and we would have to have the Excise Tax Act sitting beside us to know what some of these clauses mean.

I went through the clauses that were of interest to me last night, and I think I understand the bill a little bit better. However, I am pretty sure that most members have no idea what is in this bill and what it means, what it means for direct sellers for instance, or what it means in terms of non-taxable items and how the system will deal with those to make sure that things do not slip through the cracks.

The bottom line is that this bill is an enabling piece of legislation. What it does is that it makes the necessary amendments to the Excise Tax Act, so that the agreements the Government of Canada has entered into with Ontario and B.C. can be formalized and those provinces will be able to pass the necessary legislation to conform to the agreed framework in the memorandum of agreement and the Excise Tax Act, as amended by this.

I thought it was interesting that most members wanted to debate closure on Motion No. 8, another instrument that prescribed how we are going to deal with Bill C-62. It basically said that we were not going to allow the normal process to take place; in fact we were going to deal with this whole bill in a day. Is that not outrageous?

We have a situation here where the HST memorandum of agreement—

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Madam Speaker, I listened carefully to the member's speech. He indicated that he liked Bill C-62 because it respected provincial jurisdiction, yet another Bloc member indicated that there is nothing in Bill C-62 for Quebec. The member must be hoping by supporting this legislation that the federal government will be in a good mood when it comes to negotiating with Quebec.

The member for Windsor West just pointed out that it made more sense to him that the Bloc would be voting with us against the legislation. In fact, we moved an amendment yesterday, which the Bloc did not support, to have committee hearings and have witnesses appear before the committee. Having watched the Bloc for the last year, I thought that would be something the Bloc members would be supporting. I wonder why the member did not do that.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Mr. Speaker, in supporting Bill C-62, does the Bloc hope that Ottawa will reciprocate and be more favourable to an agreement to compensate Quebec in the future?

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Speaker, I would like to begin by stating that Bloc Québécois members support Bill C-62, which is before us today. Yesterday, some people were wondering whether we opposed the time allocation motion for this bill, given that we did not even see the bill until after the motion was moved. That was completely unacceptable. But now that the motion has been adopted, we agree with the House's decision.

We support this bill, but not for the same reasons as other members, be they Conservative or Liberal. We respect Ontario and British Columbia's decision to harmonize their provincial sales taxes with the GST, because that is what Quebec has been doing for many years now.

We would like to reiterate the request made by Quebec's National Assembly last spring in a unanimous resolution: Quebec must receive fair compensation for having harmonized its sales tax with the federal tax beginning in 1992.

The Bloc Québécois is calling for fair and equal treatment for Quebec in all matters. The federal government changed the rules of the harmonization game. When it compensated the maritime provinces—New Brunswick, Newfoundland and Labrador, and Nova Scotia—it said that Ontario, British Columbia and Quebec would not be eligible for compensation because they stood to lose less than 5% of their tax revenue.

As we have seen, the federal government changed the rules for Ontario and British Columbia. Its latest budget included funds for compensating those two provinces. The Government of Quebec, naturally, passed a unanimous resolution telling the federal government that it makes no sense to change the rules and that it must take into account what Quebec has done in previous years. I will come back to that.

We intend to continue putting pressure on the federal government to resolve this contentious issue that has been around for many years. This is a matter of equality.

I want to put this into context. We know that the Government of Quebec harmonized its sales tax with the federal tax in the early 1990s. At that time, the federal government agreed to allow Quebec to manage the GST within its own jurisdiction.

In 1997, the federal government offered compensation to three provinces—New Brunswick, Newfoundland and Labrador, and Nova Scotia—to harmonize their sales taxes with the federal tax.

Unlike the situation in Quebec, the federal government would manage the federal part as well as the provincial part of the new harmonized tax. As compensation for the loss of revenue caused by harmonization, the federal government paid nearly $1 billion to those three provinces.

Since then, the Government of Quebec has been asking Ottawa for compensation for harmonizing its sales taxes, which it had done five years earlier. However, even though it recognized the Government of Quebec's full harmonization of sales taxes, the federal government refused to compensate Quebec, claiming that the Quebec government's loss of revenue caused by the harmonization was not enough to justify such compensation.

At that time, in order to receive compensation, the loss of revenue caused by the harmonization of the provincial portion of the sales tax had to exceed 5% of the total amount of the provincial tax. At the same time, the federal government said that Ontario and British Columbia were not entitled to this compensation.

But the government is now going back on its word on this lost revenue rule and it has reached an agreement with Ontario and British Columbia. This agreement included significant compensation, to the tune of $4.3 billion for Ontario and $1.6 billion for British Columbia. One might say that, by rejecting the 5% criterion, the federal government has now opened the door for Quebec to qualify for compensation. The rules of the game have been changed for two provinces, so why not change them for Quebec as well and ensure that it, too, is eligible for compensation.

Instead of naturally and fairly compensating Quebec for having harmonized its tax five years earlier, in other words in 1992—or 17 years ago now—the Conservatives, using their legendary bad faith, have started coming up with new excuses not to give Quebec the $2.6 billion it is owed.

In response to their claim, which surprised Quebec's finance minister, Ms. Jérôme-Forget, that the Government of Quebec had not in fact completely harmonized its sales tax with the federal government, Quebec committed to doing one thing right away. There were certain inputs for big companies that were still not exempt from QST. The finance minister announced that the Government of Quebec would proceed with those adjustments. Then, and we heard it here in this House, the Conservatives found new reasons not to compensate Quebec. They said that Quebec should stop charging tax on tax. Through its finance minister, the Government of Quebec promised to so do.

What did the federal government do? It came up with another excuse. From now on, only provinces whose federal and provincial sales taxes are collected by the federal government will be compensated. An agreement was made in 1992 whereby the Government of Quebec would collect the tax on behalf of the federal government. This is just another fine example of the predatory federalism practised by the Conservative government.

As I said earlier, when the two sales taxes were harmonized in 1991, the Government of Quebec entered into an agreement with the federal government whereby the Government of Quebec would collect the tax on behalf of both governments and then pay Ottawa its share. For Quebec, it was and still is a question of autonomy. In exchange, the federal government would pay Quebec $130 million annually. This was not compensation, but payment for services rendered.

The Bloc Québécois respects the decision by Ontario and British Columbia to have the federal government collect their sales taxes. That is their choice and their business. But the Bloc Québécois will support the Government of Quebec in its fight against the federal government, which is trying to take away Quebec's power to collect the GST in Quebec on Ottawa's behalf.

Those are the main reasons why, although we are in favour of the bill, we are still certain that until this dispute between Quebec City and Ottawa is resolved, there will still be an injustice. We are going to work hard to put an end to this injustice and ensure that the federal government provides Quebec with compensation pro-rated to its population and the amount of sales tax collected in Quebec, as it is planning to do for Ontario and British Columbia. Quebec must be compensated fairly for what it has been doing for many years under the sales tax harmonization agreement.

In closing, I would like to say that we will certainly not let this dispute continue. We are not going to let the current government keep on acting unfairly and denying what the Government of Quebec has already done to harmonize its sales tax and even make adjustments. When adjustments have been needed, they have been made quickly.

We are certain that, because of this bill, the provinces will be somewhat more able to create or enter into agreements with the federal government more easily. That is the upside of this bill and that is why we will vote for it.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I have two questions for the parliamentary secretary.

The first has to do with the memorandum of agreement with the Province of Ontario. Near the end of the agreement there is reference to the appointment of a panel that would be put together to deal with potential changes. One of those is a potential change to the revenue allocation framework, such as replacement by a system that would provide distribution of revenue based on actual sales of goods and services.

I wonder if the member could explain to the House why that has not been included in the enabling legislation.

The second question has to do with the question of the haste with which this bill has been dealt with. The parliamentary secretary will know that the Province of Ontario has announced that, as part of its implementation of a harmonized tax, it wants to pass its legislation by Christmas so it can implement a personal income tax cut by January 1. None of that can happen unless this legislation is passed, as I understand it.

Is it part of the deal with the Province of Ontario that the Government of Canada pass Bill C-62 before it rises for Christmas break?

[Vic Toews, Conservative, Provencher, MB]

moved that Bill C-62, An Act to amend the Excise Tax Act, be read the second time and referred to a committee.

Disposition of an act to amend the Excise Tax Act

[Glenn Thibeault, NDP, Sudbury, ON]

Madam Speaker, Bill C-62 is the HST bill. My colleague from Trinity—Spadina has called it the hobbling sales tax or the hated sales tax. There are so many names for it. Sometime in the next 24 hours, it will be presented in the House of Commons. If passed, the federal government will give permission to the governments in B.C. and Ontario to proceed with merging the GST and PST into the HST in July 2010.

A bill normally takes months to pass through Parliament and the Senate. Instead, the Liberals and Conservatives are trying to do this in two days. Two days does not allow for debate on such an important subject. This is why we need to talk about this issue at this point. In this economic downturn, this is the wrong tax in the wrong hands at the wrong time. It is an unfair tax grab.

It continues the pattern, under successive federal Conservative and Liberal governments, of pursuing policies that boost returns to a privileged corporate elite on the flimsy excuse that they will use those returns to benefit the rest of us. Three decades of growing income inequality in the country proves those promises are false.

However, what is the HST? I am getting a lot of calls from my constituents. They know it is going to cost them more, but they really and truly do not understand what it is all about. The HST is blending the provincial sales tax with the federal GST. It applies to a much broader range of goods and services than provincial sales tax normally covers. The provinces are permitted to exclude certain items from the tax. We have heard that Ontario is going to be excluding coffee and donuts, but not home heating fuel.

As I said, the provinces are allowed to exclude these from the tax, but exemptions cannot exceed 5% of the tax base. What will be taxed? The goods and services I am about to outline were not taxed under the provincial sales tax, known as the retail sales tax in Ontario, but will be subject to the HST, making them 8% more expensive.

I need to clear my throat, because there is quite a list here. Included are gasoline and utilities, so heating, hydro and natural gas. In my great riding of Sudbury, throughout northern Ontario and right across our great country, many people have to heat their homes. Their costs are going up, especially in Ontario and B.C., where we are proposing this.

Also included are Internet bills, adult footwear under $30, admissions under $4 to the pools, veterinary care, personal services like haircuts and massage, professional services like legal services, accountants and mutual fund fees and membership fees to the gym. We are trying to promote a healthier lifestyle across our country and now we are going to tax people to go to the gym.

Also included are new homes over $400,000 and real estate commissions, especially if people sell homes over $400,000. They will taxed on that commission. Also included are commercial property rentals, landscaping, vitamins, postal stamps and courier fees. This is my favourite, labour costs related to home renovation are also included. Here is a home renovation tax credit. A person can save $1,350, but guess what? They are going to be taxed on it with this new HST in Ontario and British Columbia.

Dry cleaning, carpet cleaning, funeral costs, motor vehicle service, including towing and car washing and ice rink rentals are also included. Hockey, our national game, will be taxed more. The tax on overnight summer camps is rising from 3% to 8%. Kids going to summer camp will be taxed. Campgrounds and domestic air, rail and commercial bus tickets are also included. I could sit here for the 10 minutes I am allotted just outlining all the things that are going to be increasing.

Finally, unlike the PST, businesses get a refund of their HST payments through the HST tax credit, administered by the federal government. This leaves business inputs free of tax, greatly reducing the corporate tax burden. Businesses add the HST to their sales and revenue. Canada collects the resulting revenue.

Last week, the Conservative government began the first step toward allowing provincial governments to adopt the harmonized sales tax, or the hated sales tax, or the hobbling sales tax. The government has taken the unusual step of declaring this is not a confidence matter.

In March the federal government signed agreements with British Columbia and Ontario to harmonize their provincial sales tax with the federal GST. The Ontario government introduced legislation last week. British Columbia has yet to do so. Therefore, there still is hope.

Federal legislation would also be necessary in order to transfer $4.3 billion to Ontario and roughly $1.6 billion to B.C. to cover transitional costs, as was promised by the federal government in the agreements. What would happen if these two amounts, the $4.3 billion and the $1.6 billion, were not there? We would not even be having this debate, because they would not be moving forward with the HST in these two provinces.

This massive tax shift from corporations to families is unfair. The tax is inherently regressive. It hits those who have no choice but to spend all, or a large part, of their income. It favours those with income to save, but taxes their savings if they are investing in mutual funds or RRSPs. This is doubly true in a recession where less than 50% of the unemployed qualify for EI, where social assistant rates are well below the poverty line and the cost of essentials loom all the larger.

We have heard a few times now that there is going to be a 16% personal income tax break. For most families I know that are struggling to get by, I do not know how a single mother could look to her children at the kitchen table and say that she was sorry she did not have enough money to buy milk this time because her costs were increasing everywhere else, but in May, when she received her tax return, she would have a little more dollars then. It is just not making sense.

The HST extends the sales tax to essentials previously uncovered by the PST and apart from those items exempted, and those differ from province to province, those with the lowest income have no choice but to pay it and sacrifice consumption elsewhere. The HST is hitting those who can least afford it harder than anyone else. The tax is quite simply unfair.

Without significant compensating measures, like the rebate, or significant exemptions of our essential goods and services for low and moderate-income families, the tax remains unfair. Our experience with social support programs does not reassure us. Governments that have demonstrated a callous disregard for the plight of low and moderate-income households cannot be trusted to apply the HST fairly.

If, as argued, a sales tax is bad for investment, compared with a tax on profits, then why is the removal of sales from inputs not matched by an increase in corporate income taxes? In fact, the opposite is true. The HST is accompanied by corporate income tax cuts at both the federal and provincial levels. In other words, the HST is part of a general and indiscriminate shift in the tax burden from corporations to individuals and families without adequate compensation.

Progressive economists argue that if we want to use the tax system to encourage investment, across-the-board cuts are an inefficient way to proceed.

With the economy operating at a two-third capacity, increasing profits by lowering taxes through the HST is not as likely to foster new investment as it might when the economy is booming. The timing of this tax is again wrong.

New Democrats are calling on Liberal and Conservative MPs from Ontario and B.C. to stand up for their constituents.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Madam Speaker, I will be addressing all my points to Motion No. 8, which is before the House at this time. Motion No. 8 drastically and undemocratically reduces the ability of members of the House to deal with a very important issue contained in Bill C-62. We are faced with a motion that is rarely used in the House, rightfully so and quite frankly should not be used this evening and for the next couple of days.

Madam Speaker, I am splitting my time with my colleague, the hon. member for Sudbury.

The motion is rarely used. It is rarely used and it should not be used at all because it is so Draconian. This is what it is going to do. At the end of the day today, at eight o'clock this evening or around that time, we are going to have a vote on two matters before the House: an amendment to Motion No. 8 and Motion No. 8 itself.

If Motion No. 8 passes, we are in effect going to be limited to the entire legislative process in this House over the next two days. After second reading, we are going to have a maximum of four hours of committee deliberations on a bill that is some 32 pages long. It is quite complex. It is a tax bill. We are supposed to digest that as members of Parliament. We are supposed to somehow communicate to our constituents what is in the bill and the details of it, and do that in four hours in committee. Then it comes back to the House for one more day which will be a short day because it will be Wednesday and then it is over. We have a final vote at report stage and third reading, and it is done.

If we add up the hours, there are very few hours for what is a very important bill in terms of the consequences. It is a bill that huge swaths of Ontario and B.C., where it will apply, are overwhelmingly opposed to it. In the last two opinion polls 80% were opposed to it in British Columbia and 75% plus in Ontario were opposed to it.

There is a simple question that we ask. Why is the government doing this and why is it being supported by the Liberal Party? Those percentage numbers in the polls tell us why. We are getting close to the end of the year, to the break, and this is clearly designed to limit the debate so that the Canadians do no get any opportunity to express their opposition.

We, doing our job, as elected representatives are being denied any ability of any realistic kind to represent them in the overwhelming opposition to the bill.

My colleague, the member for Vancouver East, earlier today moved an amendment. That amendment would in fact allow us to put the bill over to the new year and by no later than the end of February we would have hearings that would allow those Canadians, and I would say this, I keep an open mind on this bill, who both are opposed, as we already know in overwhelming numbers, and those in support to come before the finance committee of the House of Commons and tell us what their positions are. Educate us perhaps, as opposed to having to take from the government verbatim what it wants to do.

Who would we expect to hear from? I will tell the House who I would like to hear from. I would like to hear from the first nations. We saw again today the finance minister standing just before question period and there was this big debate over who was responsible as to whether the first nations were entitled to exemptions from this legislation on the HST. He pointed the finger at the provinces. At the end of last week ministers in both B.C. and Ontario were pointing the finger at the federal government.

I would like to hear from the first nations on what their position is. I would like to hear what kind of consultations went on because we are hearing none. What I would like then to do is get some experts in to tell us, as members of Parliament, who is right. Who is supposed to deal with this issue for the first nations? They are one group I would like to hear from.

I would like to hear from retired persons because they are on fixed incomes and because of this legislation they are going to take one of the biggest hits.

I would like to hear from that lady in northern Ontario who wrote to one of my colleagues about the impact the HST is going to have on her home heating bill. She does not have other revenue coming in that would offset the $200 a year it is going to cost her just for her home heating fuel. Members of Parliament should hear from her.

I would like to hear from athletic groups in the country and other associations that are going to be negatively impacted by this tax. How many teams are we going to lose because they will not be able to afford playing any more? We need to hear about that.

I would like to hear from the tourism industry, which has been quite vocal up to this point in an organized way about its opposition to this tax. The industry knows the difficult economic situation it will face. Members of the House should hear what an additional 8% tax on its services would do to the industry. We are not going to hear from this industry in any kind of meaningful way with only four hours of hearings probably late in the afternoon tomorrow or early evening, if this motion goes through.

I would like to hear from those groups in our society that are economically vulnerable because they, like retired persons on fixed incomes, are going to take the biggest hit as far as we can see at this point.

I would like to hear from labour groups. A number of interesting positions have been taken by various federations of labour in terms of the impact this tax would have on their individual economic sectors. They are taking a significantly different position on the impact of the HST than the business community. We need to hear from both of these communities as to how this tax would impact them. If we are going to do our job as parliamentarians, if we are going to make an informed decision, then we need to hear from these groups.

I would like to hear from economists. We are hearing all sorts of things. The member for Mississauga South and members on the government side are touting the same thing, about how this is going to impact the economy, of the savings the business community would get.

We are hearing a different story from other economists. We heard from one business group that this tax would cost Ontario alone 50,000 to 60,000 to as many as 100,000 jobs. This tax would not make jobs. People would lose jobs.

We need to hear all of that information so we can make an informed decision.

When I hear some of the economic arguments, I think back to when the GST was originally brought in by the Conservatives in the Mulroney period. I remember it being a net revenue source for the government. The old manufacturers tax would be replaced with the GST and it would balance itself out. The manufacturing side would give us all those savings. That did not happen. We had a net revenue of about the same amount on the GST side. Within the first two years of the GST, several billion dollars more came in from manufacturers and it has just grown exponentially.

I would like to hear from economists who could give us an analysis, bring us up to date as to what happened when the GST came in, and what is likely to happen if the HST is brought in, in both Ontario and British Columbia.

We are not going to get any of that. We are back to the question: Why are we dealing with this motion? Why are we going to be denied the ability to do our job, the ability to make informed decisions? It is as simple as this. Both the Conservatives and the Liberals are running from the electorate. They are so afraid of what the impact is going to be if the electorate gets even more information on how negative the tax is going to be that they want to bury it as quickly as possible. That is a shame. It is not the way this Parliament or any Parliament should function.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Madam Speaker, what I do know is that we are debating the bill before the House of Commons. Every penny of the $6 billion federal dollars comes from the federal income tax. It is a transfer of federal dollars to the provincial government. If there is no transfer of this $6 billion, the HST would not be happening. If we did not have Bill C-62 before us, the HST would not go through in Ontario or B.C.

So stop hiding behind the provincial governments. The Conservatives should stand up for what they believe in and justify why they are ramming this tax grab into the people of Ontario and British Columbia.,