Debates of Dec. 3rd, 1996

Taxation

[Monte Solberg, Reform, Medicine Hat, AB]

Mr. Speaker, 70 per cent of women are in the workforce today. Only 30 per cent want to be there.

[Some hon. members]

Oh, oh.

[Monte Solberg, Reform, Medicine Hat, AB]

The reason they cannot is because of this government's tax policy, and I remind hon. members across the way to check out the latest Angus Reid and Decima polls.

The average Canadian family pays 36 per cent of its income to provide food, shelter and clothing. The tax burden takes up another

whopping 46 per cent. That leaves Canadians with 18 per cent of their income to purchase all those luxuries out there, things like a car to go to work, a telephone and a bed to sleep in.

When will the government realize that this tax burden is crushing Canadians and eliminating their options to live a decent life? When will the government cut taxes?

[Paul Martin, Liberal, Minister of Finance]

Mr. Speaker, the Canada pension plan, which the Reform Party would seek to destroy, is depended on by more women than men. It is an essential part of their retirement. The Reform Party would take it away.

Health care, which the Reform Party will cut, is important to Canadian women. Why is the Reform Party threatening to take it away? Equalization payments in Atlantic Canada, Manitoba and Saskatchewan are important for the public services that they supply to women.

The Reform Party has the nerve to stand up here and say that they would defend the basic public services on which women depend. The facts speak for themselves. This party is a 14th century party raising headlines in the 8th century. That is what we are dealing with.

Parliament Hill

[Marlene Catterall, Liberal, Ottawa West, ON]

Mr. Speaker, my question is for the Minister of Canadian Heritage.

Earlier this year, for the first time, a minister allowed the lowering to half mast of the flag on the Peace Tower to honour police officers killed in the line of duty.

Is the minister prepared to allow the lowering of the Peace Tower flag for other events of mourning such as the national day of mourning for workers killed and injured on the job or, more imminently, this Friday for the national day of remembrance and action on violence against women?

[Sheila Copps, Liberal, Deputy Prime Minister and Minister of Canadian Heritage]

Mr. Speaker, the member who has involved herself very much in this issue will know that in 1966 cabinet adopted specific protocol rules for flags.

However, as a result of the intervention of the member and others when the day of mourning for police across the country was brought to our attention we were able to revisit the protocol. Indeed, we are developing a new system where the flag can be flown at half mast to share the nation's sense of collective grief around issues like the deaths of workers. On the national day of remembrance and action on violence against women the flag will be flying at half mast this Friday.

Canadian Space Agency

[Pierrette Venne, Bloc, Saint-Hubert, QC]

Mr. Speaker, my question is for the Minister of Industry.

Last Friday, the Minister of Industry blindly defended the space agency's chairman, although the information commissioner had clearly reprimanded him for allowing documents to be destroyed by a secretary.

How can the minister explain the fact that the space agency's chairman authorized the destruction of documents after they had been specifically requested?

[John Manley, Liberal, Minister of Industry]

Mr. Speaker, this is simply not true. A letter did refer to the fact that a secretary had destroyed some documents. Do these documents no longer exist? No, these are handwritten notes she had taken down and later typed and filed. They still exist. It is only a typewritten draft that was destroyed.

I should also point out to the hon. member that these false accusations fly in the face of the outstanding job the space agency's chairman did for the Government of Canada with the agency, which is located in the hon. member's riding.

Propane Prices

[Jay Hill, Reform, Prince George—Peace River, BC]

Mr. Speaker, rural Canadians dependent on propane to heat their homes and dry their grain have seen prices double since August. In the red book the Liberals promised lower input costs for farmers. Clearly this promise is another broken promise.

Many seniors on fixed incomes also rely on propane to heat their homes. Now those seniors are facing a long cold winter, unable to absorb massive increases in their heating bill.

My question is for the Minister of Industry. Given the doubling of propane prices in the last few months, has the minister asked his industry competition bureau to investigate this matter to assure Canadians that there is no price fixing?

[John Manley, Liberal, Minister of Industry]

Mr. Speaker, I want to share the hon. member's concern for the effect of these high prices of propane on many consumers.

He will know that the provisions of the Competition Act give the director power to investigate situations of alleged price fixing. I remind him that citizens themselves can request that the director investigate a situation by simply providing the director with the information required by the statute.

Canada Post

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, most members of Parliament will have been approached by the men and women who are still working for Canada Post delivering ad mail who will lose their jobs six days after Christmas.

My question if for the Deputy Prime Minister. Since this was the only recommendation that the government decided to move on of the many recommendations coming out of changes to Canada Post, and considering that 10,000 families will suffer because people will lose their jobs as a result of this decision, will the Deputy Prime Minister explain to the House why the government is moving on such a cruel and tasteless act that will wreak havoc with 10,000 families across this country six days after Christmas. Will she reconsider this decision?

[Diane Marleau, Liberal, Minister of Public Works and Government Services]

Mr. Speaker, there are a number of provisions that we have asked Canada Post to implement from the Radwanski report; among others, the moratorium on the closure of rural post offices. We have said that we would not privatize Canada Post as long as it served a public purpose.

Perhaps in return for his question, I am just wondering if the hon. member of Parliament would know where these part time jobs were six or seven years ago before Canada Post got into this business.

Employment Insurance

[Jean Charest, Progressive Conservative, Sherbrooke, QC]

Mr. Speaker, my question is for the Minister of Finance and it is a very simple question. It is a question that I asked him last week, a question the minister did not answer. Instead, I got some warmed over rhetoric.

I would like to ask the Minister of Finance whether he and his Liberal government believe that the employment insurance account should be used, yes or no, for the purpose of reducing the deficit.

[Paul Martin, Liberal, Minister of Finance]

Mr. Speaker, the unemployment insurance account is being treated by this government exactly as it was under the previous government. In fact, the innovations brought in by the previous government were the recommendations of the auditor general.

As the hon. member knows, since we have taken office we have in each and every year brought unemployment insurance premiums down. In fact, in the last two years we have brought them down by $1.8 billion. Also, as the hon. member knows, the fact is that when the Conservative government was in power each and every year that it took office it increased those premiums.

The real question that the whole country wants to know is how is the Progressive Conservative Party going to pay for the massive tax cut it has recommended. Is the Conservative Party going to do as Reform and cut health care? Is it going to do as Reform and cut equalization payments?

What social programs is the Conservative Party going to cut in order to pay for its tax reduction? The leader of the Conservative Party owes the Canadian people an answer. When is he going to have the courage to provide it?

[The Speaker]

Colleagues, we had a question of privilege a few days ago and one of the members mentioned in it was not in the House.

I have been approached by the hon. member for Delta, as it was his question of privilege. We will hear a very brief statement from the hon. member for Delta and then we will go to the other member to hear what he has to say.

Privilege

[John Cummins, Reform, Delta, BC]

Mr. Speaker, last week I did rise on a question of privilege protesting a directive of the Minister of Fisheries and Oceans to department staff members ordering them to track all calls from MPs.

It is my contention that the directive to track calls from MPs will have a chilling effect on communication between MPs and public servants. This will cause particular hardship for members' staff members who contact public servants on a regular basis to seek help as they respond to calls from constituents.

As an example, last Friday DFO staff members in Vancouver were reminding my staff that they would have to record the fact that they had spoken to my staff member.

To resolve the matter, I would propose that the minister voluntarily withdraw the directive.

[The Speaker]

Colleagues, that was where the matter stood, if I might use that term, when we broke the last time. At that time I said to the House that I would return to the question of privilege, which I am now, and that I wanted perhaps to clarify the record or at least to put on the record his side of the story, the hon. Minister of Fisheries and Oceans, who is with us now.

[Fred Mifflin, Liberal, Minister of Fisheries and Oceans]

Mr. Speaker, quite frankly I am surprise by the question of privilege that has been raised by the hon. member for Delta. Very

little surprises me after a few years in this House but I am really at a loss to understand why this is considered to be a loss of privilege.

I think there is a suggestion made that there was an attempt to deny information to members of Parliament. I am not sure whether that is what he is implying. In fact, if that is the implication I think it is totally absurd.

I want to state clearly, unequivocally and emphatically that there is no attempt by me, my staff or my department to deny answers or inquiries from any hon. member.

I have a great respect for this institution, for Parliament, and in particular for my colleagues in the House of Commons on all sides of the House. Anyone who knows me would attest to that. It is in that spirit that I have directed my department to respond quickly and rapidly to members of Parliament on all sides of the House.

[Some hon. members]

Oh, oh.

[Fred Mifflin, Liberal, Bonavista—Trinity—Conception, NL]

Mr. Speaker, could I ask the hon. members to listen? They have had their say and I would like to have mine. Could I have the courtesy that I accorded to them?

On a technicality, I want to make sure you are very clear on this, Mr. Speaker. Actually I did not write the directive. The directive to which the hon. member for Delta refers was not a directive issued from my office but a memo from one of my regional senior officials in response to a question of my office. There is no question it did come from my office at my request, but I just want to make sure the technicalities were clear.

The intent of the request was to ensure that members of Parliament, and Senators of course who are also members of Parliament, receive the information that they need in a timely manner. I also wanted to ensure that the departmental officials with whom they are dealing are the most qualified and the most appropriate people to answer their questions.

Sometimes these questions are very difficult. Sometimes the questions are complex and deal with complex issues. I wanted to ensure, with respect to the supervision of my staff, that the most appropriate officials at a senior enough level would direct attention to these questions from hon. members.

Far from discouraging public servants from speaking to members of Parliament, the request was to ensure that members of Parliament receive the best possible advice.

As the hon. member is well aware, through his many dealings with my department, his access to departmental information I believe is generous. It is generous, indeed, as it should be. His future access to information should in no way be stifled or diminished. There is absolutely no intent to do that. As I said earlier, it is quite the reverse.

I am not, as the member implies, in the business of doing things that are not in the interests of this House, whether it is in the House during question period, whether it is in discussions or whether it is at meetings with hon. members on all sides of the House to answer questions they may have. I make myself available and I do not think there is a member here who could say otherwise.

The hon. member strikes at the heart of the democratic process, in my mind, and the business of governance. For a minister to do his or her job properly that minister has a responsibility to be aware of what people communicate to anybody associated with the portfolio. I have a responsibility to the hon. member, to this House and to all our constituents to make sure that my department responds to these questions in a proper fashion. How would I know that has been happening unless I know what is happening with respect to the number of queries that have been posed by hon. members of this House?

I have a reputation for openness. I have no reason to hide anything. I have an open department. It has a very close interface with the public. It is a very operational department. The request from my office, I say in all sincerity and in all seriousness, was indeed to ensure that members are accommodated; it was not to inhibit them.

I am committed and I will continue to be committed to providing the best possible service to my colleagues, the elected officials of this House.

By way of wrapping up the thoughts that I have put forward in the last few minutes, the intention when issuing this request to my senior officials was to ensure that members of Parliament are the recipients of the best, most knowledgeable and most timely information when they take the trouble to contact my department. I assure all hon. members that their requests will continue to be handled in a timely, expert and professional fashion.

I can only promise the House that I will continue to keep an open ear to all the voices communicating with me or my department, including the hon. member and each and every one of his colleagues.

[The Speaker]

We are not dealing with a point of order but a point of privilege. This is the situation, as I understand it.

We have a letter that was issued which the hon. member, I believe, has tabled in this House. The hon. member for Delta has read the letter and he has interpreted it in one way.

We have now the source, if you will, of the letter; if not the letter itself, where the idea came from, the Minister of Fisheries and Oceans who, today in the House in front of all of us has told us what the intent of the letter was and why the letter was sent.

Now we have an interpretation on one side and an explanation on the other.

Colleagues, I do not want to be trite, but is the glass half full or half empty?

This, surely, is a matter of looking at things differently, but in my view it is not a point of privilege. For this particular matter, with this letter at this time, for the hon. member for Delta and for the Minister of Fisheries and Oceans, so that they will know and this House will know, I find that this is not a matter of privilege.

The House resumed consideration of the motion that Bill C-70, an act to amend the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the Income Tax Act, the Debt Servicing and Reduction Account Act and related acts, be read the second time and referred to a committee; and of the amendment.

Excise Tax Act

[John Manley, Liberal, Minister of Industry]

Mr. Speaker, I am very pleased to engage in this debate today on behalf of the government, speaking in support of Bill C-70, the harmonized sales tax. This legislation represents a very important first step for the replacement of the goods and services tax with an integrated federal-provincial sales tax which is going to be a better sales tax system for Canada.

On April 1, 1997, Nova Scotia, New Brunswick and the province of Newfoundland and Labrador will break new ground when the retail sales taxes and the GST in those provinces are replaced with the new harmonized sales tax. The governments of these three provinces are to be commended for their foresight in proceeding with the HST. Rather than waiting for the remaining provinces, they have put aside the political grandstanding and joined in what is a positive initiative for their taxpayers and the consumers in their provinces.

Next April the three participating provinces will have a simpler, less costly and more efficient sales tax system. The bill before us today is a distinct improvement over the GST and will represent for those three provinces a comparative advantage over the other seven provinces.

Sales tax under the new system will be charged at a single rate of 15 per cent on the same tax base as the GST. HST will not apply to goods currently not subject to GST, things like basic groceries, prescription drugs and medical services. The benefits to consumers are very important.

For Nova Scotia and New Brunswick sales tax will drop from a combined rate of 18.77 per cent to 15 per cent. In Newfoundland and Labrador that rate will decrease from 19.84 per cent to 15 per cent.

At present the sales tax system in Nova Scotia, New Brunswick and Newfoundland and Labrador is cumbersome, costly and complicated. The current system inflates prices. Businesses are now taxed by the provinces on the items that they buy to run their companies. Businesses pay a tax on these inputs. However, consumers pay for it in the end because the tax is embedded in the final price. Most consumers do not even know about these hidden taxes. The sales slip, for example, may say that 11 per cent or 12 per cent of the purchase price was provincial sales tax. However, a significantly higher rate may have been paid because of the taxes buried in the final price. About 34 per cent of sales taxes collected by the provincial governments are hidden in the price of the goods. That is over $700 million worth of hidden taxes. I find that unacceptable.

Consumers are also paying in reduced jobs and incomes because hidden sales taxes drive up the prices of provincial exports, thereby making those products less competitive on Canadian and foreign markets. All of this changes under integrated value added tax.

Harmonization will eliminate the $700 million in hidden provincial sales taxes because businesses will be able to claim an input tax credit for tax paid on the goods and services bought to make their products and run their operation. In other words, businesses will no longer pay provincial sales tax during the production and distribution process. That means consumers will no longer pay provincial sales tax on the provincial sales tax already included in the price of goods that they are buying from businesses. Instead, tax will apply once and only once on the final sale price of a good or service.

Consumers will benefit from lower tax rates on most goods, lower prices on many goods and knowing the full price before they get to the cash register.

Consumers will pay tax on a broader range of goods and services but the broader base will make it possible to keep the HST at a lower level. Including services in the tax base will spread the tax burden more evenly across all sectors of the economy. Governments must ensure that revenues keep apace with changes in the economy.

Service industries are the fastest growing component of expenditures in Canada. Some critics maintain that expanding the tax base will mean higher prices but consumers will benefit substantially from lower tax rates in each province.

For Nova Scotia and New Brunswick the new rate will effectively be almost four points lower than the current combined rate. For Newfoundland and Labrador the new rate will effectively be almost five points lower than the current combined rate.

As I just said, abolishing the provincial retail sales tax on business inputs will enable businesses to recoup the HST paid on business purchases, and as a result, these costs will no longer be hidden in retail prices.

The price of certain goods and services that were not taxed before might go up, but this increase will generally represent an amount lower than the provincial portion of the HST. Again, this will have been made possible by eliminating hidden taxes.

The HST will also ensure greater tax fairness for individual consumers and families buying various combinations of goods and services.

Evidence indicates that businesses will pass on tax savings in the form of lower prices. Past studies done in Canada and other countries show that when sales taxes are replaced with value added taxes, savings are passed on to consumers.

After the introduction of the GST in 1991, prices were monitored by the GST consumer information office. Its analysis of changes in the consumer price index showed that after adjustments, the increase in the CPI attributable to the GST was around 1.1 per cent.

The results also showed that overall the old federal sales tax was removed from prices and savings for the removal of that tax were passed on to consumers. The 1.1 per cent increase attributable to the GST was below the estimates the office had made prior to its introduction when the estimate was 1.4 per cent increase in overall prices, assuming that the savings resulting from the removal of the FST were fully passed on to consumers. The increase attributable to the GST was 1.5 per cent over the first three-quarters of 1991.

These figures included adjustments for inflation and other tax changes. After adjustments, prices in 20 out of 46 categories of goods and services surveyed had actually gone down when these prices were compared with pre-GST prices.

Business pass through of tax savings is a direct function of competitive markets. Any business that fails to take advantage of harmonization to improve its price competitiveness will soon find itself priced out of the marketplace. Competition among businesses is intense in today's marketplace. If one business can attract more customers by reducing prices, other businesses will be forced to follow suit in order to stay in business.

Studies of the Canadian experience under the GST and those of other countries that have adopted a value added tax model indicate that market forces ensure that business savings are fully reflected in consumer prices within a very short period of time.

Members should know that 18 other countries have value added taxes so Canada is not venturing into new territory. The longest running value added tax can be found in Australia where it was introduced in 1930. Denmark has had a value added tax since 1967, France and Germany since 1968 and the U.K. since 1973. One might ask: "Then what is wrong with the GST?" The answer is very simple. Not one of those countries has two contradictory co-existing levels of retail sales tax.

In introducing the GST, the previous government gave Canada one unique characteristic among countries of the world: two retail level sales taxes applied on different bases to different goods and services, all paid by the consumer on the basis that they have to go to the cash register to figure out whether the good is taxable under the GST and under the PST, under the GST but not the PST, or perhaps not the GST and the PST. Then they must calculate the appropriate rate doing the two different calculations to see whether it is 7 per cent GST and 8 per cent PST, or perhaps it is 9 per cent depending on the province, or if you are fortunate enough to live in Alberta, zero per cent PST.

You can see that this is slightly different from a totally harmonized sales tax where the consumer picks up the good at the counter, goes to the desk and pays the price marked on the good. That is progress.

With businesses now having to apply, collect and remit HST when they sell into a participating province, these goods will not be free of provincial sales tax. This means that consumers buying locally will not pay any more tax than consumers ordering goods from out of province firms.

As I say, a key benefit of the HST to consumers will be tax inclusive pricing. Consumers across the country have clearly indicated their preference to know the full price of an item before they actually make a purchase.

The days of consumers in Nova Scotia, New Brunswick, Newfoundland and Labrador calculating taxes mentally, on the back of an envelope or having to carry a calculator with them before they go to the cash register, will soon be over because the sales tax will be included in the price which is what consumers across Canada want to have. At the same time, the amount or rate of sales tax payable will be visible on receipts and invoices so that consumers will still know how much and what tax they are paying.

The flexibility incorporated in the tax inclusive pricing rules will reduce unfair competition, since businesses will be able to continue posting the before tax price next to the tax inclusive price.

Similarly, participating businesses will not be at a disadvantage vis-à-vis the competition from everywhere else.

In addition, the federal and provincial governments will work together to ensure that consumers are informed of how the tax will be included in prices. Participating governments want this process to be transparent. Under the tax inclusive pricing scheme, the amount paid in tax will be clearly visible on receipts. Consumers will know right off how much the goods and services they buy will cost because the tax will be visible.

Next April consumers in Nova Scotia, New Brunswick and Newfoundland and Labrador will have substantially lower sales tax rates, a simpler sales tax system and lower prices on most goods. Would that it be true as well in Ontario. They will also know the full price of an item before they get to the cash register. They will pay only one tax and they will know how much tax they are paying. They will know that their federal and provincial governments are working more efficiently by eliminating needless and costly duplication.

Bill C-70 represents a significant step toward the goal of a fully harmonized sales tax system in Canada. I would like to add that the federal government and the governments of the three participating provinces will not generate any more revenue under the HST than they do now under the existing taxes.

Harmonization has many supporters. When the announcement was first made last April, Nova Scotia's finance minister explained this by saying: "On balance we believe consumers will come out ahead. It may cost you $1 more to fill up your tank, but on a $500 car repair bill you will save more than $20 in tax. You may pay $1 more for a haircut but you will save a buck when you buy shampoo, soap and toothpaste".

An excerpt last April from a press release issued by the Certified General Accountants Association said: "There is no question that today's announcement with Newfoundland, Nova Scotia and New Brunswick will be a tremendous shot in the arm for consumers in those provinces".

Rosalie Daly Todd, Consumers Association executive director had this to say: "Consumers will no longer have to guess at the total cost of their purchase, a situation which has been the source of frustration for many people. At the same time, listing the amount of tax on the bill or receipt keeps the tax visible and the tax makers accountable to consumers".

Newfoundland's finance minister is quoted as saying last April: "Taxpayers would have $105 million more to spend, save or invest and there would be significantly lower after tax prices on a wide range of goods and services, and significantly less tax paid by the people of the province".

In October, Elizabeth Beale, Atlantic Provinces Economic Council president, was quoted as saying: "The HST will be an improvement on a number of fronts. Consumers should see relief in the total level of taxation dropping on a whole range of products".

APEC recently issued a report that was highly supportive of sales tax harmonization. It identified significant economic and administrative efficiency benefits to the harmonizing provinces. That is the reason the premiers of the three Atlantic provinces have bought advertising space in newspapers displaying the Atlantic advantage: no sales tax in Nova Scotia, New Brunswick and Newfoundland and Labrador.

It is time that the other provinces also got on board with the harmonized sales tax. This is the tax of the future. This is a fairer tax. This is an easier tax for business to administer. It is a more understandable tax for consumers. I do not understand why a government of a province in Canada would be unwilling to move forward with a measure that is so much in the interests of its taxpayers.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I would like to congratulate the Minister of Industry on his fine defence of the harmonized sales tax. I will make a few comments and ask a few questions along the way.

I seem to recall that when I served on the Standing Committee on Finance three years ago and we were looking at the GST replacement, I reviewed what the Liberals said when in opposition. I found that the minister was a member of the Standing Committee on Finance at that time, or at least a member of a group that submitted a minority report to the government of the day suggesting a solution to the manufacturers sales tax which was not a goods and services tax. It was not the GST. He opposed the GST. I seem to recall that he supported something completely different which was more along the lines of the single tax that the member for Broadview-Greenwood was proposing.

[John Manley, Liberal, Ottawa South, ON]

No way.