Finance Committee on Dec. 8th, 2009

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

Mr. Mercille, we met with you last Thursday for a briefing session. You told us that the bill was intended to modernize what is already in place and that it provides a framework for the tax harmonization that took place in the Maritime provinces in 1997.

I am thinking back to the answer you gave earlier with respect to the current legislation and the fact that the suggested amendment I talked about earlier is not necessary, because the legislation does not prevent the provinces from entering into agreements.

Is it the same in the 1997 act or is it because the legislation is being updated that the provinces will now be able to enter into that kind of agreement?

[Louise Levonian]

There is a certain flexibility that did not exist in 1997. The 5% tax exemption for retail outlets did not exist in 1997. However, if the provinces wanted to do something outside the system, they always had that option.

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

Thank you. That is helpful.

[The Chair, Conservative, James Rajotte]

Thank you, Monsieur Laforest.

Colleagues, we have two more members who wish to ask questions. As your chair, I must tell you that we have less than two hours remaining and we do have to address the clauses. I am advised that if someone wishes to move an amendment similar to what the chiefs were recommending, it would have to be done at the end, because they present it as a schedule. That is just advice to committee members in terms of our scheduling for the next two hours.

Next we have Mr. Mulcair, and then Mr. Wallace.

[Thomas Mulcair, NDP, Outremont, QC]

I would not want to address this to the wrong person. Who among you had primary responsibility for this piece of work?

[Louise Levonian]

It was Mr. Pierre Mercille.

[Pierre Mercille]

I was responsible for drafting. I supervised a group that drafted the bill.

[Thomas Mulcair, NDP, Outremont, QC]

There is a related debate to the discussion we just had regarding the possibility of considering the current agreement with Quebec to be part of this legislative framework. However, there is no actual reference to the province of Quebec in the bill, in either the schedules or the body of the text.

Supposing this bill were to pass in its current form, with the differences that Ms. Levonian has just pointed out—in other words that, in Quebec, the responsible authority is not the federal government and that the Quebec sales tax, or QST, is added to the GST, and so on. If this bill were to pass, would it be possible for compensation to be paid and for recognition of the current agreement with Quebec as constituting harmonization pursuant to this legislation? Is it theoretically possible that this could be recognized?

[Pierre Mercille]

Theoretically—and that is what you're asking—this bill allows any other province that signs an agreement similar to the one in Ontario and British Columbia to join the system and become one of the provinces participating in the regime created by this bill. However, in order for that to happen, there must be an agreement pursuant to subsection 8.3(1) of the Federal-Provincial Fiscal Arrangements Act. If an agreement is reached with any province, under this subsection, a province may join and become a participant. Because of the flexibility built into this bill, the name of a province could be added, as well as a tax rate.

[Thomas Mulcair, NDP, Outremont, QC]

Yes, I understand that. That is a simple reading; a preliminary version of the bill. But my question went further than that, and I think you understood what I was getting at. I will ask it a little differently, so that there is no misunderstanding.

What, in the current structure of the agreement between Quebec and Canada, would have to be changed for it to come within the framework of this bill? I am going to describe the context, so that you understand what I am driving at. Since Quebec is not mentioned in here, we, in the NDP, are of the view that it is wrong to claim that this bill would allow Quebec to receive compensation that we, in the NDP, have been demanding for a long time now and that Monique Jérôme-Forget very clearly placed on the agenda recently.

This is my question: as things now stand, what would Quebec have to change in order to be recognized as a participating province?

[Pierre Mercille]

The first thing would be for Quebec to enter into a formal agreement with the federal government. Such an agreement does not exist at the present time—other than the one dealing with the administration of the GST in Quebec.

[Thomas Mulcair, NDP, Outremont, QC]

Perhaps I could rephrase the question. At the present time, Quebec is responsible for tax collection. I am trying to qualify this, so as to not bring in the purely political aspect of this. Based on what has been said so far, this cannot happen if Quebec continues to take responsibility for administering the tax.

Mr. Mercille, can you tell me—yes or no—whether Quebec could continue to take responsibility for administering the tax while still meeting the requirements of this new legislation?

[Pierre Mercille]

It is up to the government to decide whether or not it wants to enter into this kind of agreement with the province.

[Thomas Mulcair, NDP, Outremont, QC]

So, Quebec could continue to look after administration. It would be possible to maintain the status quo in Quebec and still receive compensation. Is that your testimony today?

[Pierre Mercille]

That is not what I said. I said that the first condition—

[Thomas Mulcair, NDP, Outremont, QC]

This is a very important question for us. I am simply trying to get a clear answer to a clear question.

[Pierre Mercille]

The problem is that your question is hypothetical. The fact is that there is no agreement in place with the Government of Quebec at the present time. If there were to be an agreement, we would have to determine whether it can be brought into that section of the legislation that deals with fiscal arrangements between the federal government and the provinces—in other words, whether it meets the conditions of that part of the legislation. If that turns out to be impossible, the legislation will not enable anything of that nature.

[Thomas Mulcair, NDP, Outremont, QC]

I understand. I have one final question. We really need to get an answer to this in order to move forward, Mr. Chairman.

Let's speak frankly, Mr. Mercille. In terms of the status quo, what needs to be changed in order to bring this into the framework, as you so aptly put it? When you gave examples earlier, there are some things that you did not say, and the same goes for Ms. Levonian.

[Pierre Mercille]

The agreements contemplated under this part of the bill provide for a common tax base, a tax collected under federal legislation, federal administration of the tax and the application of the income allocation method currently used by the three Atlantic provinces, Ontario and British Columbia.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you for that clear answer. You have just confirmed that the NDP is right to oppose this bill. Indeed, as things now stand, it will be impossible for Quebec to receive compensation. Thank you.

[Daniel Paillé, Bloc, Hochelaga, QC]

That is not what he said.

[The Chair, Conservative, James Rajotte]

Okay. I'm not sure if he said that.

We'll move on to Mr. Wallace, please.

[Mike Wallace, Conservative, Burlington, ON]

Thank you to the staff for being here tonight.

But my questions are for you, Mr. Rajotte. I just have a question on process. I'm assuming we're going to go to clause-by-clause. Is there any reason why we can't move all of them at once, from clause 2 to clause 44?

[The Chair, Conservative, James Rajotte]

No. A member can, although obviously any member can have a discussion--

[Mike Wallace, Conservative, Burlington, ON]

My next question is, can it be on division? It doesn't really matter, does it, for this?