Thank you.
My name is Joe Murphy. I'm manager of the P.E.I. Road Builders and Heavy Construction Association. With me is Rick Kennedy. He is president of our major member construction companies.
Thanks for the opportunity to present our brief, and welcome to P.E.I.
The Prince Edward Island Road Builders and Heavy Construction Association is in its 48th year of operation. The P.E.I. Road Builders and Heavy Construction Association's members account for a large amount of the federal, provincial, municipal, and private expenditure in the paving, grading, heavy construction, supply and service, and custom work that is performed on Prince Edward Island. Our members account for a large percentage of employers who employ both full-time and seasonal workers.
The current method of taxation on Prince Edward Island, the 5% refundable goods and services tax and the 10% non-refundable provincial sales tax, puts Island business at a distinct disadvantage when competing with businesses in provinces that have the 13% refundable harmonized sales tax in place. When federal Finance Minister Flaherty brought down this budget, he made special reference to the five provinces, including Prince Edward Island, that do not have a harmonized sales tax, and he said:
Provincial tax systems are outdated and inefficient and end up making business less competitive, reducing employment and lowering the standard of living for Canadians.
Our association agrees with Minister Flaherty's comments. However, the implementation of a harmonized sales tax system would mean a major loss of revenue for the Government of Prince Edward Island. Prince Edward Island Road Builders and Heavy Construction Association members emphatically support the recommendation that this committee advocate that the compensation offered to Prince Edward Island is commensurate to satisfy their revenue shortfall concerns and tax exemption considerations.
Background.
Our association is a non-profit association that represents approximately 100 companies carrying on business in P.E.I. Our industry is a major contributor to the economy of Prince Edward Island. Our industry maintains a large inventory of very expensive equipment. When road building companies purchase equipment at costs between $100,000 and $500,000 per unit, with only a 5% GST rebate, they are at a major disadvantage when out-of-province companies compete for Island work. Our sister Atlantic provinces implemented the HST system on April 1, 1997, which currently provides for a rebate of 13%, whereas businesses in P.E.I. can only claim a rebate of 5% of the GST component.
P.E.I. currently has a provincial retail sales tax with a 10% rate that applies to the GST-included price of the product or service. This effectively makes the rate 10.5%. This has been a source of irritation amongst the public and business. Harmonization would eliminate this practice.
Our concerns.
For businesses, the proposal to harmonize the provincial sales tax with the GST would be a major achievement. It would allow the recovery of sales taxes through input tax credits. Island businesses would be able to compete on a tax competitive basis with our maritime counterparts on projects. The current sales tax regime results in P.E.I. sales tax being hidden in the sales price of our products and services. The HST system would reduce the double tax reporting for business.