Debates of March 20th, 1997

Excise Tax Act

[The Deputy Speaker]

Would members of the Reform Party indicate if the hon. member for Calgary Centre is available?

[John Williams, Reform, St. Albert, AB]

Unfortunately, Mr. Speaker, the member for Calgary Centre is not available. Therefore he will relinquish his four minutes.

[Ghislain Lebel, Bloc, Chambly, QC]

Mr. Speaker, I would like some clarification. Will we not be moving on to the rest of the routine proceedings, the tabling of reports and so on?

[An hon. member]

No, no. We have moved on to government orders.

[Ghislain Lebel, Bloc, Chambly, QC]

So we are talking about Bill C-70?

[An hon. member]

Right.

[Ghislain Lebel, Bloc, Chambly, QC]

Mr. Speaker, I am pleased to rise to speak to Bill C-70, which has come back from the Senate with the amendments we had proposed as the elected members of this House forming Her Majesty's official opposition, but that the government had refused to hear.

And so, after a short trip to the Senate, where 104 non elected individuals made recommendations that mirrored the ones proposed by the official opposition and by my friend the member for Saint-Hyacinthe-Bagot, the bill is back, and the inclusion of the GST in the cost of consumer goods is delayed accordingly.

The official opposition contested the provision to include the GST in the price for the simple and valid reason we gave the government: "Face up to your obligations. When you advocate something, at least have the courage to say it was your idea". The fact that the cost of the GST will now be hidden in the price of the product is something public opinion, with the avalanche of information it is buried under, tends to lose track of. This is what the Liberal government was hoping for in starting to include the amount of the GST in the selling price immediately.

What still leaves me a bit perplexed is the fact that, when we in the Bloc proposed this amendment to the bill, nobody listened. And now 104 non elected individuals representing the parties in power more than the Canadian public, these honourable individuals are proposing to the government what we proposed. In a gesture of submission to a non elected authority, the government proposes to pass the bill as returned to this House with a provision for delaying the inclusion of the GST in the selling price.

Let me tell you, Mr. Speaker, and through you, tell the Minister of Finance-who I know understands and approves what I am saying-that it leaves a bitter taste in our mouths because it flies in the face of democracy.

When we go to the people seeking to get elected, we tell them that the House of Commons is where the decisions are made and legislation passed, the show place of democracy where ideas are tossed about in a spirit of camaraderie and unfailing honesty. Now we have a situation where a proposal was rejected out of hand when originally put forward by the official opposition, but reinstated after consideration by the Senate, these 104 non elected representatives who impose their will on this House. The worst of it is that, while number of senators is almost the same as the number of members of the official opposition and the third party combined in the House, the Senate has more influence. That was my comment regarding the fact that the bill was sent back to the House.

This week, my colleague, the hon. member for Saint-Hyacinthe-Bagot, asked the Minister of Finance, who was here at the time, when he would be compensating Quebec for harmonizing the GST. At second and third reading, Bloc members had raised and discussed this issue repeatedly and at great length. In response to another question by my collegue from Saint-Hyacinthe-Bagot at

the beginning of the week, the minister said, again rather evasively, that Quebec had not lost anything by harmonizing and he therefore did not feel the need to compensate Quebec for losses that were not incurred.

The Minister of Finance knows full well that the provinces have the power to levy taxes on commercial activities, on the provision of goods and services, and so on. Within their jurisdictions, the provinces have the power to levy taxes, and it is always up to the provincial government to decide, for example, whether or not to increase personal income tax so that the sales tax can remain somewhat lower, which, in turn, promotes trade and boosts the economy. It is up to the provincial government to decide not to hit the taxpayers with an excessively high sales tax, but rather to draw its revenues from income tax.

In other provinces, like the maritimes, where unemployment is high and the labour force is much smaller than in central provinces like Quebec and Ontario, taxing the income of workers was not producing enough revenue, as opposed to sales tax. They therefore chose to keep income tax relatively low, but to make up it with a very high sales tax.

The minister contends that harmonizing their sales tax with the GST, which involved lowering their sales tax, created a 5 per cent shortfall. That is a totally arbitrary figure. I ask the Minister of Finance: Why 5 per cent? Why not 4 per cent or 8 per cent? Why 5? Because that is what he has agreed to with his friend, Premier MacKenna. They worked out the McKenna formula together and decided on 5 per cent to get a round figure of approximately $1 billion.

This government hit the maritimes hard, more specifically in the fisheries sector and when it reduced personnel on military bases. Since it now wants to make up for this before the upcoming election, it has decided it would be 5 per cent. It could also have set the rate at 4 or 6 per cent. The government never really explained why it opted for 5 per cent. Where did that 5 per cent come from? Did it come out of the blue, or is it the result of some accounting method? We were never able to find out. The minister said to the hon. member for Saint-Hyacinthe-Bagot that God probably told him to set the rate at 5 per cent, and I do not doubt that for one moment.

In any case, this is profoundly unfair to Quebec, which willingly harmonized its tax with the federal GST, but did not get any compensation for doing so. Yet, this Liberal government has made all kinds of cuts in Quebec, just like in the maritime provinces. It did a number on Quebec, notably by closing the military college in Saint-Jean, thus depriving the local economy of millions of dollars. This decision was just as devastating to the residents of Saint-Jean as the downsizing of military bases in Nova Scotia and New Brunswick was to the people in those provinces, but Quebec was not compensated. Quebec is not compensated because it is Quebec. It is the Prime Minister's home province. The Prime Minister can do anything he wants without being accountable to Quebecers. He took for granted not only his riding of Saint-Maurice but also Montreal's West Island, from west of St. Laurent Street all the way to the Ontario border, and that was enough for him.

So, Quebec was never compensated for the blows and the cuts it had to put up with. However, it is a different story for the maritimes. Thirty-two of the 33 seats in these provinces are currently being held by Liberals, and the government wants to keep them. It got a warning last fall when, contrary to all expectations, a Conservative government was elected in a maritime province. This is basically the reason why the Minister of Finance opted for that5 per cent.

Quebecers must understand that. The decision whether to increase income taxes or the sales tax rate is a political one made by the provincial government. Quebec chose to increase income taxes, because it has a much larger workforce than all the maritime provinces put together. Therefore, it had the option of increasing income taxes while keeping its sales tax as low as possible, so as to revitalize the economy. However, this is not what happened.

From this point of view, the official opposition will never ask this government for enough. It is simply a question of justice. I have trouble understanding how a federal finance minister, such as the current one, can back the decision taken by certain maritime provinces to hang on to a separate sales tax and stand in Quebec's way when it prefers to raise income taxes and go with a lower sales tax.

But it amounts to the same total. Arbitrarily, without consulting, arrogantly even, the minister says: "No, Quebec has lost nothing; Quebec is losing nothing by having harmonized, so I owe it nothing". In reality, he wanted to win points with Acadians and Maritimers who were extremely disappointed because of lowered fishing quotas and EI reform. People in the maritimes are the hardest hit by EI reform because they have the highest unemployment rate in Canada.

So he had to do something with the election coming up; he had to be able to tell Maritimers: "It is true, you have lost some ground with respect to UI, because now you will have to work more hours for less UI, and in many cases you will not receive any at all because you will not have accumulated enough hours to qualify for benefits". All this left people pretty frustrated and irritated. I remember seeing the present Minister of National Defence heading off to speak at a public meeting in his riding and having to be escorted by RCMP officers who were armed because they were

worried about a popular uprising in the riding. When a minister has to travel with a quasi-military escort in his own riding, that is proof enough that people are not happy.

I also saw the member for Beauséjour make a speech to people in his riding and get treated to quite a chorus of boos. People were unhappy because they felt they had been taken advantage of, cheated. With an election coming up, the government had to try to turn the public's attention elsewhere and the ingenious solution it came up with was to tell the maritime provinces: "Harmonize your sales tax with our GST and we will give you a cool $961 million that you can dole out to try to pacify a bunch of unhappy people".

This is why I am among those predicting that an election will be called this spring. It is the same with a Christmas present. You remember it on Boxing Day, but come May or June, something you received the previous December 25 may have fled your mind.

In many cases, you can ask someone, even right after the holidays, what he got for Christmas. He will try to recall, but may have forgotten. It is the same with the government: it hands over $961 million-my, but we are generous-and then decides the time is right to call an election.

It is like someone who wants somebody to forgive him for something. I have handled many matrimonial cases in my time and sometimes had to play the role of umpire. For example, I would often see a husband who had treated his wife rather violently, and she would be threatening to leave with the kids, and to demand division of the family assets. Then the guy would suddenly wake up and say to himself "Oops, it is time to do something". So he would send her roses, along with a card asking for forgiveness of course, and then everything would be fine.

That is a bit like the attitude of the present government. I do not wish to be vulgar in this House, but it gave the Maritimers a real kick in the pants, and now it is saying "If I want to be able to go back there and walk unashamed in the streets, I am going to have to buy back favour somehow". That is the explanation for the $961 million.

Quebecers can learn a lesson from this, particularly those who are represented here by Liberal members, from the West Island for the most part: that a vote gained is a vote gained. They have no need to earn that vote, no need to deserve it, no need to gain these people's confidence, it is a given. They do not need to make any promises to them, to be nice to them in any way; they can even thumb their noses at them, for they know they will get their votes anyway.

That is the attitude the present Liberal government has toward those Quebecers who have what I consider the misfortune of having elected Liberal MPs. Madam Speaker, you are indicating that my time is coming to an end, but I still have enough time to tell the Quebecers who voted Liberal out of fear, fear of the threat of secession, fear that the sovereignists were a bit too strong, that they have shot themselves in the foot. Perhaps it is time for them to start thinking that they too are important, that they too ought to be involved, that they too need to be able to have an MP who is up to the challenge of representing and defending them.

Where were the Liberal MPs in October 1994, the Liberals representing the West Island of Montreal, when there was an unprecedented attempt by Ontario members to break the Drug Patent Act regulations? Not a one was visible. They all disappeared into the woodwork. They were no more talkative than the fish in my aquarium: not a single word.

And where were they when raw milk cheese was being discussed this past spring? There was even a cheese tasting here in the rotunda, and the Quebec Liberal MPs were so scared to commit themselves that they would not even show their faces and taste the delicious cheeses the Caron family from my riding had brought in. They were absolutely magnificent cheeses, but what the Liberals would like to see on our tables from now on, as our premium cheese, is Kraft Cheez Whiz.

These attitudes must be spoken out against, but these folks do not make a move, because people will vote for them anyway. We know that people in certain ridings are so scared of the sovereignist threat that they will vote for them. They often add insult to injury by dozing off in their seats. I would ask them to reconsider Quebec's request. You owe us $2 billion, when are we going to get it?

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, first I want to assure the hon. member that Canadians do not treat Quebec with disdain. I am sure most Canadians would agree that Quebec is a very important part of a united Canada and that we all share, enjoy and own a piece of every part of Canada.

In his comments the member, as other Bloc members have, talked significantly about the issue of some sort of a subsidy or the billion dollars. I am wondering whether the member is aware of the facts concerning the three provinces that are harmonizing. Just to refresh his memory, in Newfoundland and Labrador the current provincial rate is 12 per cent. The combined federal-provincial rate is 19.84 per cent and when it is reduced down to 15 per cent it is a savings of 4.84 per cent or a reduction in provincial revenues of 4.84 per cent. Similarly for Nova Scotia it is a 3.77 per cent reduction in provincial revenues. For New Brunswick the reduction is 3.77.

In Quebec the combined rate is 13.96 per cent. The member will quickly appreciate that there was a significant loss of revenue to those three provinces. Quebec harmonized on a voluntary basis in advance of everyone else. The member knows that Quebec has benefited significantly particularly in terms of its exports because of the harmonized sales tax in Quebec of 13.96 per cent.

Is the member aware of the differential in the combined rates? Does he understand that the subsidies are not an indication of disdain for Quebec but rather a reflection of the adjustment or equalization of the revenue realities to the provinces involved?

[Ghislain Lebel, Bloc, Chambly, QC]

Madam Speaker, here we have a fine example of someone who prepared his question yesterday, I suspect, and is putting it anyway.

I have just explained in detail the very thing he just asked me in the form of a question.

[Roger Pomerleau, Bloc, Anjou—Rivière-Des-Prairies, QC]

Absolutely. He did not understand.

[Ghislain Lebel, Bloc, Chambly, QC]

He is doing exactly what is done at other points in the stages of bills before they are sent to the Senate. I have just explained the government's choices, that the Government of Quebec chose to raise income tax and keep its sales tax low, whereas the maritime provinces kept their income tax low and their sales tax high.

With the sales tax lowered, his question is dumb. You did not understand anything. That is the problem. That is what I am doing my darnedest to explain to him. Clearly, however, he prepared his question yesterday or last week and he decided to put it anyway, even though I had just showed him in black and white that they were wrong in this.

Yes, indeed. I repeat, you are in the process of buying the maritimes' vote. That is what you are doing. At least have the courage to say so.

[John Williams, Reform, St. Albert, AB]

Madam Speaker, I was listening with interest to the member's speech. When Bloc members speak, I always wonder what happens to co-operative federalism which is that we all try to work together to create a better country. They always seem to say if everything is flowing toward Quebec they are happy and if it is flowing away to somebody else then they have a problem. I guess that is what they use to support their separatist position.

The point is this idea of the federal government's paying any province or the three Atlantic provinces the better part of a billion dollars to buy into the Minister of Finance's policy is quite repugnant. To think that Quebec would want to tie on to the same type of subsidy is just as repugnant for the separatists who want to get money for their province.

I would have thought that if this policy of a harmonized sales tax was a good policy, the provinces would have bought into it, the people in these provinces would have bought into it and the premiers of these provinces would have bought into it, but they did not. That is why we have had a long debate.

Then of course the Minister of Finance was adamant that it would be tax in pricing. When the other House went down to Atlantic Canada and held these hearings, we found out that the premiers there did not like tax in pricing, the people there did not like tax in pricing and now the other House is asking us to reconsider. In order for the Minister of Finance to accomplish his agenda, he acquiesced to a request from the other House so that it can all be put in place.

The member talked about the harsh period in the province of Quebec. Look around at the growing economies elsewhere. In the province of Ontario it is going to be booming next year. An article in the Globe and Mail this morning stated that the economy in Alberta, where I am from, is going to lead the country in growth. Surely if they would abandon this whole notion of separatism, work toward co-operative federalism where they can take advantage of their unique opportunities in Quebec, work with the rest of the provinces to build prosperity, to create jobs, to ensure government is the smallest we can have, then people can prosper.

Why does the hon. member keep talking about the harsh problems in Quebec when most of us realize that they are caused by the lack of confidence in Quebec, caused by the fact that there are so many separatists sitting here and we have a separatist party in the legislature in Quebec? If they would endorse co-operative federalism things would improve.

[Ghislain Lebel, Bloc, Chambly, QC]

Madam Speaker, I thank the member for St. Albert. He at least prepared his question after my remarks. He did not write it three weeks ago.

On the other hand, when he tells me what constitutes Canada, I agree. There is a Chinese saying: "Feed a man a fish, and you feed him for a day; teach a man to fish and you feed him for a lifetime". That is sort of the way it worked with the provincial transfers the federal government has always made to Quebec. It gave us transfer payments to buy our groceries. Ontario gets the about the same amount, but in the form of industrial infrastructures, things that, as in the case of my Chinese fisherman, help provide a living.

That is the nuance the Liberals make. I see the member for Sault Ste. Marie jumping up. He will never admit it, of course, but that is the essence of the problem in the Canadian federation. Quebecers get a bit of money to stock their fridges, Ontarians get money to

build industries, to get people to work and process raw materials. There lies the injustice at the heart of this federation. What hurts the most is having a francophone who is in the process of losing his status shout at you that you are wrong. I am sorry, but that is Canada's history.

The member for St. Albert may be upset-it is his prerogative-but I say: "Be fair. Start treating Quebecers fairly. It is about time-you are 100 years late. Perhaps Quebecers will change their thinking about you". Perhaps it will be easier to reach agreements.

It will not be by assimilating and frustrating us, as you have done for the past 100 years, especially as concerns Quebec's industrial development, and by setting up little tariff barriers. Free trade hurt you? Why? Because, now to stock my fridge I can buy from you or go elsewhere if you are too expensive. I could not do that before. That hurt you. Think about it.

[John Godfrey, Liberal, Parliamentary Secretary to Minister for International Cooperation]

Madam Speaker, I rise in support of the harmonized sales tax. I see it, as many speakers have said before me, as being part of a more efficient system of national taxation. I see it as being part of the wider construction of an economic foundation for Canada, allied with our efforts on deficit reduction and program review.

To me the real significance of the harmonized sales tax is the message it sends out to Canadians about our ability to work together. The real significance is the progress we have already made with the province of Quebec and with some of the Atlantic provinces in establishing the basis for a national harmonized sales tax.

If we can work together, as we have, on such a thorny question as the harmonized sales tax, what other good things can we achieve in that same spirit? What is the foundation that we are building and what is the future which we will build on top of that foundation?

We have to move beyond these economic foundations to some kind of view of ourselves which is grander and more important than the ones we have been concentrating on to date. We have to realize that out there beyond the harmonized sales tax is a series of greater projects, national projects which will allow us to attain greater goals. In order for that to happen, as we have done with the sales tax, we need to set timelines and priorities. We need to measure progress and outcomes.

Most of all, we have to recapture the spirit of working together in the execution of these projects because it is only by working together that all of us can recover our collective sense of optimism and hope as a country.

In his 1996 budget the finance minister set out a vision of Canada for the new millennium. Successful countries do more than occupy a place on a map. They live in the souls of their people because they are relevant to the betterment of their lives. So for Canada it is time to set goals anchored in our shared values and our shared aspirations.

We have done that throughout our history, in the days when we dared speak of a national dream and then built it, in the days when we aspired to a kinder society and then created it. We have set great national challenges, not small ones, because it is only by reaching as high as we are able that we will discover how far we can go.

Why can we not decide together in the House and in this country that ten years hence Canada will be regarded as a world leader in the new industries of the new economy, in biotechnology and environmental technology, and in the cultural industries of the multi-channel universe? Why not decide that ten years hence increasing child poverty rates will be a thing of the past, that illiteracy will be erased from our communities and that when it comes to international tests our students will not simply do fine work but will be the very best? Why can we not decide together that medicare ten years hence will not simply survive but that it will be the most successful system in the world, a system which will be second to none?

Why not decide that 10 years hence our streets will be the safest they can be, not because we have the largest number of prisons or police but because we have faced squarely the causes of crime? I ask with the finance minister why not indeed.

Moving from that vision and those goals will require what the Prime Minister referred to last year as a domestic Team Canada. It simply means all of us working together. The harmonized sales tax has been an example, a difficult, trying example of us working together with the provinces to achieve a more efficient and fairer Canada.

National goals and national projects are not simply federal, they are national. They require all levels of government, federal, provincial and municipal, to work together. Beyond the kind of co-operation we have had with the harmonized sales tax, national projects require the participation of the public and private sectors, of trade unions and social activists, of professionals and volunteers. Above all, national projects demand the full participation of citizens.

National projects are of a scope and scale that no one sector of society can achieve in isolation. National projects allow us to mobilize all our resources as a country to achieve a great collective purpose. National projects remind us of why we need a country in the first place.

The role of the federal government, as it was in the case of the harmonized sales tax, in promoting national projects, is to think of the interests of all Canadians. The federal government must put before Canadians a series of goals and invite their comments and participation, as we did in 1993 with our red book. The federal government must act as a strategic broker in forming the partnerships that can achieve national projects. The federal government can neither dictate, implement nor fund national projects by itself.

National projects demand that we put aside our differences and see Canada as a collective enterprise, a fate sharing vessel. We have to see ourselves as a society of mutual obligation, not simply a collection of provinces, interest groups and individuals. It requires thinking of ourselves as a national society to reach national goals by creating national projects.

In the 1996 budget the finance minister outlined an ambitious series of goals for the next decade. Our task as a government for the next four years, if we should be re-elected, is to choose four or five of these national projects which will have the strategic effect of fundamentally improving the lives of Canadians.

One such national project would be to set for ourselves the goal of making Canada the best country in the world for the care and nurturing of young children. If we could say of Canadian children from birth to the age of six that Canada has the lowest poverty rate, the lowest rate of child abuse, the best prenatal programs, the best parenting courses, the best child care programs, the best rate of school readiness by the age of six, the positive consequences for Canada would be enormous.

By this single national project we would have gone a long way to achieving many of the goals set out by the finance minister. Not only would we have reduced child poverty, we would have dramatically improved literacy rates and we would create solid base for future academic success and for employment success in the new economy.

If we could produce six year olds with the best coping and learning skills in the world, this would be the single greatest investment in improving subsequent adult health status that any society could make. These same competent six year olds will dramatically lower drop-out rates, delinquency rates and crime rates as they grow older.

What would be required to achieve such a project? Nothing less than a mobilization of all our resources, professional and voluntary, public sector and private, community by community, province by province, coast to coast. By enumerating and configuring all our existing assets, by setting goals, objectives and timelines, by measuring and monitoring our progress, by sharing results nationally through the Internet and by each level of government and each sector of society taking their share, eliminating duplication, co-ordinating efforts and filling gaps, this national project is eminently achievable. Why indeed should we not attempt such things in our next mandate?

The harmonized sales tax creates a climate of working together which makes such national projects possible. It has been difficult but it shows us that such things can be done and that what we have to do is broaden our vision of a better Canada for the 21st century.

[Keith Martin, Reform, Esquimalt—Juan de Fuca, BC]

Madam Speaker, I hold my hon. colleague in high esteem since he always makes very intelligent comments. I would like to hold up some of his comments to some factual statements made by members from the maritimes.

The hon. member mentioned in his speech that Bill C-70 would increase efficiency and provide a climate of working together. I want to take the time to quote some statements from our provincial counterparts.

Ontario finance minister Ernie Eves said that the blended sales tax using the GST base would cost Ontarians over $3 billion in extra taxes and put a kibosh on any other harmonization schemes. In the business community, the Retail Council of Canada said that by forcing stores to bury the new tax in prices, the harmonized tax regime was going to cost retailers at least $100 million a year. The Halifax Chamber of Commerce predicted that the harmonized sales tax would push up new house prices by 5.5 per cent as well as force municipalities to raise property taxes. I have other examples. I am sure this is no news to the hon. member opposite.

In view of the statements I have just made, which contradict what the member said, I would certainly like to know how he can stand in the House and say that Bill C-70 and the harmonization of the tax is actually going to increase efficiency and provide a climate of co-operation. Clearly many members in the business and political communities in the maritimes and the rest of this country are blatantly against it.

[John Godfrey, Liberal, Don Valley West, ON]

Madam Speaker, there are three parts to the answer.

Any system which removes a layer of administration, that is to say so that a tax is put together and collected by only one group of tax administrators, must by definition be more efficient than two separate tax regimes. That is the first answer.

The second answer is that opinions are clearly divided regarding the efficiency and ultimate consequence of this tax because those in other provinces such as New Brunswick, take a totally different view. They see this as a tremendous economic advantage.

The third response is that the government has shown itself to be remarkably flexible in wanting to accommodate the wishes of the individual provinces to overcome the deficiencies that may be present in such a scheme. It is that third element of flexibility,

negotiation, reasonableness and working together which I would wish to emphasize, because it is in that spirit that this country will move forward.

[Keith Martin, Reform, Esquimalt—Juan de Fuca, BC]

Madam Speaker, the hon. member brought forth examples from New Brunswick and said that New Brunswickers are in favour of this. I would like to cite some examples from New Brunswick.

The Canadian Real Estate Association said that the harmonization will increase the cost of a new house by $4,000 in Nova Scotia and by $3,374 in New Brunswick. The GST harmonization will be responsible for the closure of five Greenberg stores and a loss of 79 jobs in Buctouche, Dalhousie, Moncton, Sussex and Saint John. The management of this chain said that there is a 50-50 chance of further store closures and a loss of 71 jobs in such places as Shediac and Moncton. These are very specific examples of what the harmonization will do in the province of New Brunswick.

Again, I would like to ask how the hon. member can say in this House that the harmonization of the GST is actually going to improve efficiency and increase co-operation when provinces in the maritimes are blatantly against it.

I agree with the hon. member that a harmonization with a decreasing tax base would benefit the provinces and individuals but it has to be a substantial decrease in the taxation on individuals.

Furthermore, I would like to bring to the hon. member's attention that the government is actually nibbling around the edges on this issue. Since being elected the government has introduced 36 tax increases. What has been the impact of the 36 tax increases that his government has introduced over the last three years on people not only in the maritimes but also in the rest of Canada?

[John Godfrey, Liberal, Don Valley West, ON]

Madam Speaker, let me turn first to the opening comments in that question which deal with the whole question of efficiency.

The devil is clearly in the details. The purpose of the GST was to replace the manufacturers sales tax and to create a more efficient tax to net out the same amount of money. In harmonizing the sales tax we retained that goal of wishing to have exactly the same amount of money but arrived at in a more efficient way. This will indeed allow us to lower the overall tax rate in the direction which was supported by the hon. member.

As to the hon. member's second point about 36 tax increases-

[The Acting Speaker (Mrs. Ringuette-Maltais)]

I am sorry the time has expired.

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, I am pleased to rise today to speak in support of Bill C-70. Passage of this bill will be a major step forward in our efforts to reform the goods and services tax.

As of April 1, 1997 the harmonized tax will replace the GST and provincial sales taxes in the provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador. This new system will benefit both consumers and businesses in these provinces for the following reasons:

Consumers will have lower tax rates and on many goods will pay lower taxes. Businesses will have to deal with only one tax, one rate, one base, one set of forms and one administration. Businesses will not have to pay taxes on goods which they export from their province. That means more exports and more exports means more jobs. Businesses in the three Atlantic provinces will be able to compete on an equal footing with businesses elsewhere in Canada thanks to a national approach to interprovincial sales.

The detailed agreement between Canada and these provinces means more efficient and less costly government. It will eliminate existing duplication and overlap in the administration of sales taxes in Nova Scotia, New Brunswick and Newfoundland and Labrador.

Let me now outline what harmonization means for consumers. Consumers in the Atlantic provinces who have endorsed this agreement have to pay provincial and federal sales taxes, but the existing system is very cumbersome, costly and complicated. The new harmonized system will be simpler, cheaper and more clear. The detailed agreements announced by the federal government and the governments of the three participating provinces will benefit consumers in a number of different ways.

First, it will mean a lower combined tax rate. To be specific, in Nova Scotia and New Brunswick the new combined rate of 15 per cent-7 per cent federal and 8 per cent provincial-will effectively be four percentage points lower than it is now. In Newfoundland and Labrador the combined rate will effectively be five percentage points lower.

The new system will mean lower prices on most goods not only because the combined rate will be lower, but because hidden provincial sales taxes will be eliminated. Under today's provincial retail sales tax system, businesses are taxed on items they buy to make their products, deliver their services and keep their businesses going. That will no longer be the case as of next month.

It is true that the new system will mean that consumers will pay tax on a broader range of goods and services. At the same time, spreading the tax burden in that way makes it possible to keep the HST rate at a reasonable level. Taxpayers will have the assurance

that their federal and provincial governments are working more effectively by eliminating needless and costly duplication.

What does harmonization mean for business? The new sales tax system will be simpler, less costly and more efficient. It means one tax, one rate, one base and one administration.

A harmonized system will be particularly advantageous for small business which bears disproportionately higher costs today, the costs of dealing on a daily basis with two separate sales tax systems. For example, under the new system small businesses with less than $30,000 in taxable sales will no longer have to register for either the federal or the provincial sales tax.

For all businesses there will be no separate requirement to register for the new harmonized tax. Businesses registered for the GST will automatically be registered for the harmonized tax. In addition, there will be no requirement to report separately tax collected and remitted at the 15 per cent rate or input tax credits claimed at the 15 per cent rate. Tax remittances will be made on the existing GST return.

The new sales tax system will help to make businesses in Nova Scotia, New Brunswick and Newfoundland and Labrador more competitive. That is because exports from these provinces will be free of existing provincial retail sales tax on business inputs. Furthermore, they will be free of that tax when they compete with imported goods.

Because of the amendments proposed by the other House, we will have to postpone tax included pricing until such time as more provinces have harmonized their sales taxes. This delay is very regrettable because Canadians have told us in no uncertain terms that they prefer tax included pricing. However, the more important objective at this time is to implement the harmonized sales tax on April 1 so that the Atlantic provinces can begin to reap the benefits of this new sales tax system.

I should point out that this legislation we are debating today incorporates a vast number of technical amendments to the Excise Tax Act that will benefit all Canadians. It is important to proceed without delay for this reason also.

As I said earlier, businesses will be able to claim back all the sales taxes paid on the goods and services they purchase. Currently they can only get credit for the GST they have paid, not the provincial sales taxes they have paid.

We can be sure that the premiers of the Atlantic provinces understand very well that the harmonized sales tax will allow businesses in those provinces to have a competitive advantage over businesses in those provinces that have not harmonized.

Notwithstanding the comments of my colleague from Esquimalt-Juan de Fuca, sometime ago the premier of Ontario recognized that harmonizing the sales tax in Ontario was the direction Ontario should take. He is on record as having endorsed harmonization. He may have flip-flopped later but we are getting used to that. Frankly, I am not sure what the delay is. By delaying harmonization in Ontario, the province is depriving consumers and businesses in Ontario of the benefits of harmonization.

In terms of construction, some in the construction industry would like to see the GST eliminated. To do that we would have to raise taxes or we would not be able to deal with the deficit. The reason the construction industry is working so hard today and business is up in absolute terms an incredible amount is because of the fiscal policy of this government and the fact that we have been able to reduce interest rates to 40 year lows. To say that the construction industry is not in favour of this tax is really stretching the point.

Businesses in Ontario now pay $2.8 billion in hidden taxes to the Ontario government. Exporters in Ontario will also gain with a harmonized tax because goods produced in Ontario will no longer have these hidden taxes embedded in their price when they are shipped abroad. It is the export sector that has been creating most of the jobs in Ontario over the past few years. In fact, international exports now account for 44.5 per cent of Ontario's economy. That is why it is vitally important to make our exports as competitive as possible: exports create jobs.

Although exports are non-taxable, it is estimated that the value of Ontario exports includes about $825 million a year of embedded provincial sales tax. We better believe that Mr. McKenna in New Brunswick understands that very well.

With these delays, businesses in Ontario, in particular small businesses, are unable to simplify their tax reporting procedures. Independent studies have suggested that Ontario businesses, again notwithstanding the comments earlier of my hon. colleague from Esquimalt-Juan de Fuca, could save between $200 million and $300 million as a result. These are independent studies; this is not the Ontario government speaking. In addition, the Canadian Institute of Chartered Accountants estimates that it costs the Ontario government about $40 million a year to run the provincial sales tax system.

What are the consequences if businesses are not competitive? If businesses in Ontario are not as competitive as companies in the Atlantic provinces and Quebec-because Quebec has harmonized, much to its credit-then over time this will translate into fewer jobs for Ontarians.

The efficiencies that would result from a harmonized sales tax in Ontario could mean that a combined tax could be implemented at a rate of 14 per cent, not a 15 per cent combined rate. This effectively means that the GST could be reduced by a full percentage point right now in Ontario. If the political will existed at Queen's Park,

that could happen. As I said earlier, harmonizing the sales tax in Ontario would provide the opportunity to reduce the GST by one point right now through increased efficiencies.

A number of organizations in Ontario have endorsed harmonization. I will not refer to them all, but some of them are the Canadian Health Care Association, the Association of Universities and Colleges of Canada, the Canadian School Boards Association, the Canadian Institute of Chartered Accountants, the Canadian Manufacturers' Association and a range of other ones. For these reasons I urge members to support the bill.

I would like to turn briefly to general tax reductions because some political parties in Canada are advocating general tax cuts. The government is saying that it would like to move to tax reduction at some time. It has already made some targeted tax cuts for those in need and in important strategic areas.

It would be irresponsible to make general tax cuts now. At the very least we have to wait until the deficit is under control and we have invested in our social programs to the extent needed.

I urge all members to vote in favour of Bill C-70.

[Keith Martin, Reform, Esquimalt—Juan de Fuca, BC]

Madam Speaker, I thank my colleague for his speech and would like to ask him a number of questions on some important issues he addressed, in particular on improving the export potential of Canada.

Our standard of living is largely dependent upon our ability to export. Competitiveness in export markets relies on lower taxes, a strong educational system and a situation that decreases the barriers to trade. Over the last 3.5 years the government has seen fit to pursue a strategic economic course that has increased taxes 37 times. The most recent one is the increase in CPP which basically took $10 billion out of the hands of consumers.

With respect to education, the backbone of our ability to be competitive in the world, the government has chosen to remove $7 billion from transfer payments to the provinces. This has significantly compromised the ability of students in Canada to get the training they will need in the future to compete with students from as far away as Tokyo and Moscow.

Barriers to trade are a significant deterrent to our competitiveness. Why has the government chosen to nibble around the edges of the issue of interprovincial trade barriers to such an extent that today there are fewer barriers north-south than east-west? It is absolutely essential for all companies in the country be able to work in an environment free of egregious government control. Interprovincial trade barriers are probably the greatest deterrent to our companies being competitive.

How can the member can stand in the House and talk about competitiveness when the government has done numerous things to make Canadian companies uncompetitive?

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, I thank the member for Esquimalt-Juan de Fuca for his comments.

I believe firmly that exports are a key to Canada's growth. Our government has done an incredible job in this area. Our exports to the United States have reached record highs.

To accomplish that we have travelled abroad with Team Canada, which resulted in the landing of a huge number of business deals.

In addition, in terms of trade barriers the government has been very active in breaking down trade barriers around the world and in forming regional trading agreements with NAFTA, Chile and Israel. There are more on the way.

The member mentioned a number of points including the CPP. The government is investing in the Canada pension plan to make it actuarially viable in the future. It is not unlike the pension plans of many corporations that are out of date with respect to the age mix and the demographics. The population is getting older.

As a government we are not doing anything different from what many corporations are doing. We see on their balance sheets that their pension plan is actuarially underfunded and they will build up the fund over a number of years. This is the responsible course to take.

With regard to transfer payments, our transfer payments to the provinces after considerable warning have been coming down at the rate of 4 per cent to 5 per cent per year while we have been cutting our own programs by 8 per cent or 9 per cent.

If we look at federal transfers in Ontario they comprise 2 per cent to 3 per cent of total government revenues. If Ontario is having some difficulties in funding health and education, it has nothing to do with federal transfers. It has everything to do with the Conservative government's provincial tax cut. It has made those choices and has set those priorities.

I agree with the member that we need to bring interprovincial trade barriers down but not in the high handed manner proposed by the Progressive Conservative Party. We have to be assertive but we have to work co-operatively with the provinces.

[Keith Martin, Reform, Esquimalt—Juan de Fuca, BC]

Madam Speaker, it is a pleasure to speak on Bill C-70 which deals with the harmonization of the GST.

I would like to discuss a number of issues concerning the competitiveness of Canada's economy and the inability of government to provide small and medium size Canadian businesses, the economic backbone of our nation that employs most people, with the tools to enable them to be competitive not only within the nation but outside the nation.

It has been a great disappointment for me to see the government repeatedly ignore constructive suggestions made by our party and other parties, indeed by backbench MPs of all parties through private members' bills. We have given the government opportunities to make our country greater and stronger. It has repeatedly played politics with the economics of the country. Rather than trying to do the right thing, it has chosen to do the political thing.

Competitiveness relies on a number of issues. It relies on a strong education system. It relies on strong investment in research and development. It relies on a taxation structure that does not hang around the necks of Canadians and corporations like a noose which is pulled progressively tighter and tighter until individuals and companies cannot take any more. It also relies on a structure of rules and regulations that do not inhibit the ability of our private sector to function.

It is unfortunate that over the last 20 years a series of Liberal and Conservative governments have taken it upon themselves to do the exact opposite of what is necessary to make our economy stronger.

The government has chosen to eviscerate education by removing $7 billion in transfer payments to education, health and welfare. That is not the way to build a strong economy.

Our students do not only compete with students in Toronto, Vancouver, Quebec City, Montreal and Moncton. They compete against students in Tokyo, New Delhi, Cape Town, London and New York. The world has a global economy. The traditional nation state borders have virtually disappeared. The globalization that has taken place has made it such that nation states are secondary to the movement of capital and the rules and regulations among different groups of countries.

It is imperative for the government to take a leadership role to maximize the ability of students in secondary and post-secondary institutions and of people in the workplace. They should have access to the skills that will enable them to be competitive. We have to continue to learn to keep our skills up and to ensure that companies are competitive.

It is an unfortunate statistic the money invested in training workers is among the lowest of OECD nations. I believe Canada places 33rd of all OECD nations in its ability to train its workers. That is an absolute embarrassment.

Over the last 15 to 20 years our competitiveness has repeatedly and consistently gone down. Our competitiveness now ranks along with that of Italy. This is an ignominious statistic and not one that we should be proud of.

The solutions to these problems are not rocket science. As I have said before, they have been repeatedly presented by members of the House over the last 3.5 years.

With respect to research and development I congratulate the government for putting $800 million into research. It is the first time that has happened in a long time and I hope it continues. Research is another underpinning of our economy and the ability for us to be competitive.

With respect to taxes the government has done an absolutely appalling job and the HST is but an example. I have demonstrated in my questions that the HST will not provide for tax relief for Canadians or for our companies. It will not do anything of the sort. In many instances it will actually increase taxation levels and the burden upon companies.

The Canadian Federation of Independent Business indicated what it felt was important about harmonization and where the proposal of the government under Bill C-70 actually failed. It indicated that a properly harmonized system of sales taxes was far more preferable to the mess we currently have. However, it continued, properly harmonized is defined by the small business community as having one sales tax system across the country at a lower rate than would occur by simply combining the GST with the respective PST with one set of rules and one set of audit procedures, a single remittance requirement and one tax collector.

That does not occur here at all. That is quite unfortunate. The government has had an opportunity. It must provide a harmonized sales tax and decrease the inefficiencies in the system. We are in favour of doing it in the manner in which the Canadian Federation of Independent Business has put forward to the government and to the finance minister. However it was ignored. It is essential, if the government is to harmonize, to bring taxation levels down.

This again is just nibbling around the edges. If the government were truly interested in eliminating that which compromises the ability of our companies to be competitive, the taxation levels, it would not have increased taxes 37 times since it was elected. It is utterly disingenuous for the government to tell Canadian taxpayers that it has not increased taxes. Just a few weeks ago the Minister of Finance increased the CPP payments by 10 per cent over the next few years. The contributions are akin to a tax increase that removes $10 billion from the hands of companies and individuals. That will cost jobs all over the country.

On the one hand we have the government nibbling away on a harmonized sales tax which will not do anything to increase efficiency and reduce the tax burden. On the other hand, on a much larger scale it has increased the tax burden on Canadians. Every family has had its taxes increased by thousands of dollars since the government was elected.

That is part of the reason we have an underground economy which is growing by leaps and bounds. It is part of the reason why when we talk to small and medium size businesses they say they cannot hire anybody because all they do is work and give their money to the tax man. That is what is happening.

In 1992 the government of the day chose to decrease taxes. What happened? The economy was stimulated. Revenues to the government actually increased. What did the government do then? It started to tax wildly. This does not make any sense.

There are numerous examples from around the world to demonstrate that there are ways in which to decrease our taxation system. It can be done in such a way that government revenues will increase and it will be a stimulus to the economy.

The other object in trying to make our companies more competitive is the government getting its own fiscal and monetary house in order. Three and half years ago we provided the government with a concise, specific, detailed and logical plan to bring our deficit down to zero and produce a surplus budget. Right now we would not have deficit spending if the government had chosen to take up our plans. But the government did not adopt our plans and as a result we have a debt that is $100 billion higher today than before.

We have a situation where instead of spending 25 per cent on the moneys taken in by the government, the government now has to pay 40 per cent, that is 40 cents out of every dollar it takes in just on interest on the debt. That is the single greatest threat to all our social programs. If we liken the situation to a pie, when we were elected in 1993, only a quarter of that pie went toward payment of interest on the debt. Now it is 40 per cent and soon enough it will be 50 per cent. As time time passes, as our debts increase, as our interest payments on those debts increase, less and less money will be available to pay for health care, education, welfare, the guaranteed income supplement, old age security, all of those fine social programs we have. All these programs that protect people who do without, who have not, that are meant to protect them so they do not suffer, are being compromised.

Government members like to claim they are the great white knights, that they are the compassionate ones, that they are the ones who are trying to protect the poor and the underprivileged. However, they are actually doing an absolutely huge disservice to Canadians, in particular the poor, by not getting our fiscal house in order.

Fiscal irresponsibility, not getting our deficit down to zero which would produce a surplus budget and bring down the debt, is the single greatest threat to our social programs and the single greatest threat to the poor and the underprivileged. It is the single greatest threat to our ability to provide health care to Canadians in a timely fashion. However, the government continues to play political football with these issues and not lead from the front. It is leading through polls and focus groups but it is not saying what it is going to do.

Perhaps the flavour of what the government has been doing in the last three and a half years can be summarized by an Italian politician from the 19th century who said something like this: "There go my people. I had better find out where they are going so I can lead them". In effect that is what this government has been doing for the most part over the past three and a half years.

However, the government has done some good things. I commend the government members on their ability to increase free trade, in particular in the new Canada-Chile free trade agreement. I applaud them in trying to establish links with other countries. This is very important and they must continue to pursue that as part of their agenda.

There are other issues the government has failed to do which compromise all provinces. In particular, it has compromised the people of Quebec on the issue of Quebec sovereignty. If we look back at history we find that the issue of Quebec nationalism and Quebec sovereignty is something like a sinusoidal curve with public interest on the y axis and time on the x axis. Public interest and political interest increases to a fervour at referendum time. As soon as the referendum is over interest declines to a nadir.

Unfortunately the premier of Quebec, Mr. Bouchard, and the Parti Quebecois are working very strongly to pursue an agenda for separation. Given this very obvious fact, the government is doing nothing to improve interprovincial relations, devolve some federal powers to all provinces, not just Quebec, in a way that would improve the efficiency services like housing, education, manpower and training, health care, which provinces already have responsibility for but which the government attaches strings to.

These are all issues from which all provinces can benefit. If the government were to take a leadership role, it would sit down with all the provinces and ask them what it does best as a federal government and what they do best as a provincial government and then devolve those responsibilities. The feds should do what they do best and the provinces should do what they do best. This would

increase efficiency and decrease the burden on the taxpayer through decreasing costs.

Instead of taking this initiative, the government has done absolutely nothing since the last referendum on this issue. Despite what some people might say, the threat of separation and the threat of a unilateral declaration of independence is causing great uncertainty and is crushing the economic lifeblood out of Quebec.

It is a sad thing for me to see what a wonderful city Montreal was-it still is-an incredible, lively, vibrant and economically strong Montreal when I lived in Toronto in the 1970s and 1980s, a place everyone looked to as being a magical place which had so much to offer to Canada. Unfortunately the threat of separation has gutted its economic ability and has decreased the moral of people there. It is a very sad thing to see. It is compromising their ability to get on with their lives and build a strong city not only for Quebec but for all of Canada.

Furthermore, it is compromising the ability of all people of Quebec to be socially and economically strong and stable as individuals, families and communities.

I challenge members again to look at the proposals the Reform Party put forward prior to the last election. They are sensible proposals, fair proposals and proposals that are for all Canadians across the country equally. They are not predicated on a distinct society for one province. They are not predicated on providing laws and regulations and privileges for one province over another. They are based on giving an equal hand to all provinces and all Canadians for the betterment of all people.

I encourage everyone to do this because if the government does not take this issue seriously, if it does not address this issue now, when the next referendum comes along the government will be scurrying to put forth a plan and it will be too late. We will help put forward a good plan for all Canadians. We will help build a stronger Canada for all Canadians. However, we ask this government's co-operation.

We also ask for the co-operation of all honest, well meaning people in Quebec that if they are interested in building a stronger province for themselves, their families, their children and their communities, if they are interested in building a stronger nation, they must join with all of us to do this.

It would be interesting for them to know, if this ever gets out to the people of Quebec, that the issues, fears and aspirations that the people of Quebec have, by and large, are very much the same as those shared by Canadians in every single province.

I do not care whether someone lives in Cache Creek, British Columbia or in Nanaimo, Victoria, Baie Comeau, Toronto, North Bay or in Shediac, the aspirations and the fears of having a job, living in a safe environment, having a future for oneself and one's children and having a stronger future for everybody are shared by all Canadians.

It is within that area of communality that we must come together to build a stronger nation. If we continue to divide this country up into areas, the west, central Canada, the maritimes, Quebec, francophones, anglophones, immigrants, hyphenated Canadians, if we continue to do that then we will have a balkanized nation and we will be just but a shadow of what we can be as a nation.

If, however, we lead from that front and come together in an area of common interest, shoulder to shoulder to build a stronger nation, indeed that is what we will have. We will rightly take our place in the international community as one of its leaders.

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, I thank the hon. member for Esquimalt-Juan de Fuca for his very considered comments. I would like to talk to the hon. member's comments with respect to taxation and some of the myths he and his party have been promoting about the government's increasing taxes.

I would like to speak briefly on the question of skills, training, research and development and how that is so important to achieving our competitive position in the world and creating more prosperity for Canadians.

While I would not say that in R and D and training we have and are doing everything that we should as a government, we are providing some leadership in these areas. For example, I attended an award ceremony in my riding for 14 young students who had just come through an internship program.

They had been offered internship positions in companies and they were able to develop their skills on the job at Humber College. They were then in a position to go into these companies full time. The companies took the risk, gave them the chance to development their skills and now they have a job. They have some experience and they are employed. I am sure they will add value to these companies. That is the kind of thing we should be doing more of because young people today are in the dilemma of not being able to find jobs because they lack experience.

In the last budget we introduced there were 19,000 new internship positions created. This will allow young people to enter the work force and create the skill sets that are going to be needed.

I am working on a project in my riding, the telecommunications learning institute, which will create the skills that are going to be needed by the telecommunications industry in the future. These initiatives are very positive. We are doing much but we could be doing more perhaps.

In the area of innovation the hon. member graciously acknowledges the $800 million the government has put into the Canadian foundation for innovation. This is a hugely beneficial initiative that will help to build our technology infrastructure and allow us to be very competitive.

With respect to taxes there is a lot one could get into but without the time I will not do that. I have not looked at the statistics lately but it is my understanding that direct foreign investment into Canada is still very strong and positive. If the tax burdens in Canada were so bad for business why would they not stay away? I find it mischievous to say the least that the hon. member and his party talk about the government's increasing taxes. I do not know how many times I have seen our finance minister stand up with his budget and say the words no new taxes. I did not see the parties opposite challenge him then.

I think they are playing on words with respect to indexing of deductions and personal exemptions which are effectively in their jargon or in their political rhetoric. We have increased taxes to the banks. We have closed loopholes and we have a much larger tax base because of a much stronger economy.

[Keith Martin, Reform, Esquimalt—Juan de Fuca, BC]

Madam Speaker, I commend my colleague from the Liberal Party for his innovation and initiatives in his riding. It is a very important thing to do. Canadian youth are looking for leadership in their political leaders in pursuing that.

However, let us talk about taxes for a moment. There have been 37 tax increases and I will give a couple of examples. The last was the CPP increase which is going to remove $10 billion from the pockets of Canadians and is going to cost jobs, jobs, jobs.

Second, the increased gasoline taxes have spread across to all Canadians. Those who hurt the most are those who are poorest because they are on fixed incomes.

I also raise the cold, hard salient fact that our country has been burdened by the highest, consistent level of unemployment at10 per cent since the government was elected. Those are facts and that is the state of affairs of our economy.

I am sure the hon. member goes into his riding to speak to businessmen. He cannot get a message that is different from what the rest of us hear. They must tell him that their greatest restriction in their ability to be competitive is the taxation levels that are crushing the daylights out of them. The government has done nothing about it.

One need not look any further than at the underground economy which is growing by leaps and bounds. Members do not have to take my word for it. They can go into their own ridings to find out. It is the palpable, factual evidence that we have to demonstrate the economic proposals of the government have not improved our economy but have crushed it.