Finance Committee on Dec. 8th, 2009

[The Chair, Conservative, James Rajotte]

Thank you.

Go ahead, Monsieur Laforest.

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

Thank you, Mr. Chairman.

I would like to welcome all our witnesses. I am very pleased to have this opportunity to hear from you today.

First of all, I would like to respond to Mr. Matthew, who finds it unacceptable to have been summoned to appear before the committee only one hour before the meeting was to begin. Yesterday, members of Parliament approved a motion that effectively handcuffs the Standing Committee on Finance in terms of its ability to directly oversee the process for reviewing a bill—the one we are discussing today. The Bloc Québécois voted against this motion because we believe it would be a way of restricting the process for reviewing legislation, a process which would normally have allowed you to be better prepared and allowed us to possibly hear from other witnesses. In that regard, I fully support Mr. Matthew's complaint that this is almost undemocratic and that it was very difficult for him to prepare adequately for today's meeting.

However, the Bloc Québécois supports this legislation. We said as much in the House today. This is a bill which will renew or improve the process implemented in 1997, when sales taxes were harmonized with New Brunswick, Newfoundland and Nova Scotia. It is our belief, given that Quebec has yet to be compensated for harmonizing its sales tax in 1992—well before all the other provinces—that this bill will facilitate the process of compensating all the provinces, including Quebec, for their losses. That is the position Bloc Québécois MPs have taken on this bill.

However, I do have to put a couple of questions for the witnesses. Ms. George, you said earlier that harmonizing the tax in these provinces will enhance competitiveness and reduce manufacturing costs, and that some of the money collected will be passed on to consumers. On a number of occasions, we have heard people say that a significant amount will be passed on. But what portion are we talking about? In percentage terms, are you able to assess the benefit, for consumers, of a harmonized tax, in terms of lower costs for the goods affected?

[Shirley-Ann George]

Thank you very much for the question. Merci beaucoup.

Yes, our understanding from a number of reports is that the majority of the tax will be passed back to consumers. Consumers are going to see the full amount of any increase, and the decrease will be in small amounts that will be hard for them to distinguish. Overall, it is estimated, according to a report by TD Economics, that there will be a permanent increase for consumers but that it will be very small. It will be 0.4%, which means that for every hundred dollars spent, there will be an additional 40¢. With a gain of 591,000 jobs estimated by C.D. Howe, that seems to be a very reasonable price.

The amount of the tax that will be returned overall is, of course, impossible to predict upfront. But based on the studies that have been done of what happened in the Atlantic provinces, approximately 80% of the tax savings for businesses will be passed back to the customers.

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

Thank you.

Chief Matthew, you talked about taxes on-reserve and off-reserve. I would like some clarification. You said that first nations people make most of their purchases off-reserve and that, in that case, they are required to pay taxes. However, if they make those purchases on-reserve, they do not pay taxes. Since most of their consumer goods are purchased off-reserve, this measure will have a much greater impact on the first nations. I would like some clarification, because if more goods were sold on-reserve, one can assume that first nations people would pay less tax overall.

Would it not be possible, from a business standpoint, to arrange things so that more goods are sold on-reserve?

[Chief Keith Matthew]

Thank you for the question, Mr. Laforest.

I'd like to explain a little bit about the background of this particular issue and then refer directly to your question, which is about economies in first nations communities. And I'll refer to most of those in British Columbia.

In our estimation, the honour of the crown is at stake when dealing with this particular issue in our communities. I need to state that for the record. We don't feel as if we've been given the opportunity to deal with this particular issue. And I refer to the fact that my organization, the Union of B.C. Indian Chiefs, had $4,500 for our legal advisers to develop a position based on our perspectives. We exhausted that small fund, and our legal adviser is now working pro bono.

In reference to your question about the economies on reserve and the distinction that is made by our people buying goods and services on reserve, very few first nations are in that enviable position. By and large, they have enacted their own first nations GST and first nations PST. But that occurs mostly in the British Columbia area. Most first nations are engaged in the collection of real property tax through the First Nations Tax Commission. But that opportunity isn't available to all first nations across Canada because it's optional.

One thing we refer to up in the Shuswap Nation, where I'm from, is “bungee economics”. Most of our communities don't have infrastructure or secondary industry; most of us are rural-based. And there are a lot of barriers to doing business on reserve.

What we refer to as bungee economics is the money that comes to us as first nations people goes directly into the local non-native communities that have goods and services and infrastructure in place to sell to our people. It doesn't even do one circuit, for the most part.

[The Chair, Conservative, James Rajotte]

Merci, Monsieur Laforest.

Mr. Wallace, please.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chairman.

Thank you to our guests for coming here today. I know it was relatively short notice, so I really appreciate your effort.

I want to start with this because I need a little bit of an education on the tax system for our native Canadians off reserve. Maybe you can just tell me if I'm right or wrong and help explain it to me--it's Mike, by the way.

In Ontario now, if you buy something at Zellers--we'll use that off-reserve example--you pay GST on that item but not PST. Is that correct?

[Grand Chief Randy Phillips]

Currently we enjoy a point-of-sale exemption in a majority of stores. It's a policy, and it's up to the store now as to whether or not they employ that. So there's been an erosion of that over the years. But to characterize your question: fair enough.

[Mike Wallace, Conservative, Burlington, ON]

But you have been paying GST. It's the PST that you've been exempt from at some of the stores. Is that correct?

[Grand Chief Randy Phillips]

Yes.

[Mike Wallace, Conservative, Burlington, ON]

Okay. For British Columbia, for their provincial sales tax, is it exactly the same? When you're off reserve you pay GST, but not the provincial sales tax.

[Chief Keith Matthew]

No. That's incorrect.

[Mike Wallace, Conservative, Burlington, ON]

Okay. I need to know what the answer is.

[Chief Keith Matthew]

I believe we pay for both PST and GST when we're off reserve.

[Mike Wallace, Conservative, Burlington, ON]

Off reserve, at present--

[Chief Keith Matthew]

Yes. We don't have a point-of-sale exemption.

[Mike Wallace, Conservative, Burlington, ON]

At present. Okay.

What other province has a point-of-sale exemption for their provincial sales tax? Are there any other provinces, other than Ontario, that you know of?

[Grand Chief Randy Phillips]

I couldn't answer that. I'm just here with respect to Ontario's position. That's the way we've dealt with it in Ontario. I think they've done it properly, but I couldn't speak on behalf of others.

[Mike Wallace, Conservative, Burlington, ON]

So was that an Ontario decision or a Government of Canada decision?

[Chief Angus Toulouse]

I believe it was an Ontario decision at the time, but what we've also registered here is that the federal government's imposition of GST is something we haven't been consulted on, and we still have issues with that. It is, at this point in time, the Ontario government that has recognized the point-of-sale exemption.

[Mike Wallace, Conservative, Burlington, ON]

Where the other provinces do have harmonized tax.... Let's take New Brunswick, for example. Our native population in New Brunswick has been paying the harmonized tax for about 12 years now. Is that correct?

[Chief Angus Toulouse]

There are some exceptions to the rule in terms of the retailers that the first nations people in Nova Scotia go to on a regular basis. They still recognize the point-of-sale exemption. I'm not sure exactly how that's done, but it is something that is happening--maybe not consistently enough. But I did ask Regional Chief Rick Simon, who is my colleague at the national executive table, about that whole issue, and that is what he responded to me.

[Mike Wallace, Conservative, Burlington, ON]

So those exemptions would have been that the retailers themselves are making those exemptions or that the province has made that decision. It hasn't been a federal decision. Would that be correct?

[Chief Angus Toulouse]

I'm not certain of the details.

[Mike Wallace, Conservative, Burlington, ON]

The other interesting piece I just want clarification on is that the short title for this bill is the Provincial Choice Tax Framework Act. I appreciate you coming and highlighting this issue. I did have the Association of Iroquois and Allied Indians come and see me about this particular issue a few weeks ago.

You talk about treaty rights and so on and so forth. You would be in agreement, then, that what the provinces want to do is within their rights within the Constitution--to harmonize the tax. In my view, the bill here is to enable. It's an enabling act. It's to enable the provinces to harmonize, the ones who haven't already and those who may want to in the future.

I view that as their right as a province. Do you agree that they have the right to do that? As you were saying you have treaty rights, would you agree that they have that same right?