Finance Committee on Dec. 8th, 2009

[Shirley-Ann George]

I apologize. It was somewhat difficult to hear you. You were asking if the companies--

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

According to the Library of Parliament here, in 2009 it is estimated that Ontario would lose $952 million in provincial sales tax revenue for the first year of harmonization. Would the corporations benefit the most out of that $952 million? The government is going to take $952 million less in revenue. Who is going to benefit?

We heard from the chiefs, and they're saying they're not going to benefit, so who is going to benefit?

[Shirley-Ann George]

There's no doubt that the benefit from this change is going to go to job creators, Canadian companies.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So how do we guarantee that actually happens, and how are we going to guarantee that the consumers are ultimately going to benefit from some of these savings?

[Shirley-Ann George]

If you're looking for an ironclad guarantee, I don't think we can predict into the future, but we can look at what happened in the Atlantic provinces. It was very clear when studies were done afterwards that the vast majority of benefits that companies received from reduced taxation were passed on to their customers.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I have a quick question for the chiefs. How would this affect the businesses that are on reserves? Would this benefit them, or will it be a disadvantage to them?

[Grand Chief Randy Phillips]

Thank you very much for that question. I want to answer in this way. We've already heard who will benefit from this. This will benefit business and government, not people. What we have is small businesses and communities, and those are people. So no, this particular tax regime, or any change in this tax regime, is not going to help anybody within the community. It's going to hurt them. It's going to hurt the people.

It's not going to hurt business. It's not going to hurt government. It's going to hurt the people.

Even with the stimulus plan, that money wasn't directed at people. It was directed at businesses and governments, again to try to get them out of their mismanagement. This is another ploy in terms of supporting business. As you've heard my colleagues here say, there's no guarantee that the people will save from this, and there's no guarantee that those businesses will pass those savings on to the consumers.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Pacetti.

Monsieur Paillé, vous avez cinq minutes.

[Daniel Paillé, Bloc, Hochelaga, QC]

Good afternoon. The point I would like to make is that, unfortunately, consultations occur that do not respect the rights of all concerned and do not give everyone an opportunity to present their views. As far as I am concerned, that is critical. I want my rights to be respected. This evening, however, the colleague to my left did not respect those rights. When someone tables an amendment in English only, even though I understand the language very well, my rights are not respected and I know that you all understand my position.

I would like to put a question to Ms. George and Mr. Laurin. Given my professional background, I am very wary of people who say that everything is absolutely wonderful, that tremendous improvements are on the way, in the form of 591,000 new jobs and $36 billion of new investments in Ontario. I am wary of that kind of claim because, if it will really be that great, how is it that, without the HST, things are not really so bad? I try to see the other side of things. If it is going to be so fantastic afterwards, that must mean that it was not so fantastic beforehand. If I am not mistaken, Mr. Laurin said that we will be more competitive, but compared to whom? British Columbia and Ontario will have the HST. Quebec has had it for 17 years now. But so have three other Maritime provinces. Alberta does not have a tax. That leaves only Saskatchewan, Manitoba and Prince Edward Island.

I am wary of all these great things. Don't get me wrong: I am in favour of this taxation formula, but to then say the end result will be total perfection, I think a little restraint is in order. I would be interested in hearing your comments, because I respect the provinces' fiscal autonomy. As a member of the minority, I am very anxious to see Quebec receive the same treatment and that it be given $2.6 billion as quickly as possible. I would be interested in hearing your comments.

Ms. George, would you care to comment?

[Shirley-Ann George]

Thank you.

You raise an important point, and that is the data that have been put forward. What I would like to stress is that this is a report that has been consistent. It isn't a single economist who has had the perspective that HST is going to benefit Canada as a whole. It is economist after economist after economist, very well respected and independent voices.

You do raise the question about whether this is all rosy and life is wonderful. Without a doubt there are some transition costs associated with this. Businesses have to go and change their systems. Every time there's an exemption, it gets more difficult and more costly for businesses to make that adaptation. We look at what happened in the Atlantic provinces. While there were price reductions, there were some products whose prices actually increased modestly, including clothing and footwear, for example. So it is a transition. There will be costs. We do have members who are not happy about this at all. It is one of those times when it's very difficult for groups like the Canadian Chamber of Commerce, CME, and members of Parliament, when you have to look at what is the right thing to do overall. I would just like to stress that one of the things that is put forward is this 591,000 jobs, and that is a direct and immediate benefit to Canadians.

[The Chair, Conservative, James Rajotte]

Be very brief, please.

[Jean-Michel Laurin]

You were asking compared to whom these provinces would be more competitive. First of all, they would be more competitive in relation to the other provinces. This will definitely improve the tax environment in Ontario and British Columbia for businesses operating in those provinces. I can tell you that, in those two provinces, there are a lot of plants that are competing internally—in other words, Canadian subsidiaries of foreign firms that have to fight to attract investment and retain jobs.

The ability to pay less for business inputs, and substantially less for goods that are purchased locally, will certainly give a boost to businesses. That is why my colleagues in British Columbia and Ontario have been working for years to try and convince the governments of those provinces to harmonize their provincial sales tax. This will be a boost to businesses.

In order to measure the effect of this simple measure on the economy, it would be possible to carry out different studies and arrive at different results. But I think the current economic environment is so challenging that it is difficult to assess the results. However, the impact will certainly be positive. Of all the steps the government could potentially take, this is probably the one that will most help businesses at the present time.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Laurin.

Thank you, Mr. Paillé.

Mr. Menzies, please.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair, and thank you to the witnesses. We do realize this was short notice, so thank you for making the extra effort to come here.

It has been a very interesting debate in the House over the last few days. It did give us an opportunity to hear a maiden speech delivered in the House today. Mr. Paillé, I listened intently to your maiden speech. It was an excellent job. I continue to think you're going to make a great member of this committee, and hopefully you'll stay on here permanently. It's no reflection against Mr. Laforest. He's an excellent member as well, but glad to have you on board.

If I could, I would like to just put something on the record.

We've heard some concerns raised by Grand Chief Phillips and Chief Toulouse. On November 4, 2009—this is referring to the federal Department of Finance—Minister Flaherty responded to Minister Dwight Duncan, the finance minister in Ontario, Revenue Minister Wilkinson, and you, Chief Toulouse, outlining the federal government's position and concerns with maintaining the Ontario point-of-sale exemption under this proposed HST.

He suggested that Ontario may wish to explore other ways to meet the interests of Ontario first nations outside of the HST framework, such as expenditure programs or tax room sharing with first nations. I'm encouraged to see that Minister Flaherty is involved in this, and I understand that in discussions with Ontario, at least--and I know that Ontario is a unique issue. These discussions continue. I would encourage that discussion amongst yourselves.

I also understand that INAC has indicated to first nations that it is willing to enter into agreements for you to impose your own sales tax. I work very closely with five of my first nations—Treaty 7 in southern Alberta—and some of them are pushing very hard to make sure...they're working on home ownership, their involvement in economic development, and those sorts of things. With control over that comes taxation.

Can you give us some thoughts on where you might like to see that go?

[Chief Angus Toulouse]

I have just some quick comments on those communities that you're familiar with. They're probably in the process where they're negotiating what they may feel is their self-determination, their self-government arrangements, which again talks about what they believe is their ability as a government, like any government, to tax. I'm sure they have those kinds of discussions happening, and like anybody involved in any self-government negotiations, there is that agenda item that I'm sure is in front of them to have that kind of discussion.

What we're saying in Ontario is that we have treaties. We've already signed treaties. We already have agreements. What we're asking from the government is to live up to these agreements. You mentioned Minister Flaherty. What we're asking for is to sit down with Minister Flaherty and Minister Duncan and iron this out. That's what we have been asking for since we heard that this harmonized sales tax was being proposed by both parties. They were looking at it and looking at legislation. Right when they were introducing these things, we sent out correspondence saying that we need to talk about our rights, and to ensure that our rights would be protected.

[Ted Menzies, Conservative, Macleod, AB]

How was it dealt with in Newfoundland and Labrador, New Brunswick, and Nova Scotia? Quickly, I guess, since we only have one minute.

[Chief Angus Toulouse]

I can't answer that. I'm sorry. I'm from Ontario.

[Ted Menzies, Conservative, Macleod, AB]

No. I didn't mean to put you on the spot. I was interested to see what the difference was.

Ms. George, Jack Mintz put forward a report talking about 600,000 jobs. He's a pretty credible individual to put that sort of recommendation. Do you concur with that?

[Shirley-Ann George]

Yes. Jack Mintz is one of the most respected economists in Canada, and his work is well-recognized both within government and within the business community of Canada.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Menzies.

Colleagues, I'm going to recommend that, because we have 44 clauses in one schedule, we go to clause-by-clause at this point.

Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

I agree.

I want to take this opportunity to especially thank the representatives of the first nations, Grand Chief Phillips, Chief Toulouse, and Chief Matthew.

You can be assured that we will be presenting your amendment.

[The Chair, Conservative, James Rajotte]

Mr. Mulcair just took the words out of my mouth.

I want to thank you all for being with us.

This is a public meeting, so you're certainly welcome to stay and observe the discussion of the clause-by-clause.

Members, we will suspend for about a minute while we bring officials from the Department of Finance to the table.

Thank you.

[The Chair, Conservative, James Rajotte]

I call the meeting back to order.

Colleagues, before we go to clause-by-clause, I'll have the officials introduce themselves and their role with the Department of Finance, just for members' information, please.

We'll start with Madame Potvin.

[Lise Potvin, Director, Sales Tax Division, Tax Policy Branch, Department of Finance]

My name is Lise Potvin and I am director of the Sales Tax Division at the Department of Finance.

[Louise Levonian, Assistant Deputy Minister, Tax Policy Branch, Department of Finance]

I'm Louise Levonian, Assistant Deputy Minister of Tax Policy for the Department of Finance.