Mr. Speaker, I am pleased to participate in the debate on Bill C-70. I will be sharing my time. I will speak for about 10 minutes. I will begin with a brief summary of the new harmonized sales tax proposal.
Detailed agreements have been reached with three Atlantic provinces to implement the new tax, effective April 1, 1997. The agreements will include the replacement of the current federal GST and the provincial sales tax systems with a single, combined value added tax called the harmonized sales tax. There will be a substantial reduction in the current combined rates in these provinces, which are presently at 17 per cent, 18 per cent and 19 per cent. The rate will decrease to 15 per cent in the three provinces. There will be a single administration of both federal and provincial sales taxes. The national treatment of interprovincial sales will ensure a level playing field for participating provinces.
This is good news for consumers and businesses in these provinces. The new tax system will be simpler, more efficient and
more equitable. It is a practical example of how the federal and provincial governments can work together.
There will also be major benefits for consumers. With tax inclusive pricing the consumer will know the full price of their purchases before they get to the cash register. At the same time, they will know from their receipt how much tax they are paying. Of course the new sales tax rate will be substantially lower than the current rate in those provinces.
The harmonized sales tax will be simple and straightforward for business as well. Business will have to deal with only one tax, not two; one set of forms, not two; and one tax administration, not two.
The previous speaker spent a lot of time talking about some issues. I want to deal with those issues. I was hoping to talk more about the simplicity of the system, but if there is one system, versus two, the efficiencies are evident.
The member spoke at some length about a cover-up and a hidden tax. Today I had the opportunity to tape a cable show for my constituency and I spoke to one of the people at Rogers cable about Bill C-70. I asked her how she felt about it. The young lady said to me: "What I really do not like is when I see the price on the product and I go to the cash register and I have to pay a different price". That is very indicative of the big problem with the current GST system. The price on the shelf is not the price consumers pay at the cash register. Consumers are having difficulty making their purchase decisions because they have to do some mathematics.
By way of history, members should be reminded that the GST was not a brand new tax which somehow created these enormous revenues for the Government of Canada to pay for services and programs. It was a replacement tax for the former manufacturers sales tax, which was a hidden tax. It was never seen at the consumer level. It was applied at the manufacturing and production level. It was included at a rate of some 12.5 per cent or 13 per cent. It changed many times. I believe it started at 9 per cent and actually got up to about 13.5 per cent.
That price was carried through. It was a very unfair tax. It did not share the burden equitably and it was very unfair to the manufacturing and processing sector. That tax generated some $18 billion.
We know that the former government, the Mulroney government, brought in the GST to replace the FST. The current GST, when it was brought it, was actually generating less revenue for the government than the former FST. We have to think about that for a moment. If the GST was generating less revenue for the government than the former FST, that means, effectively, that consumers under the GST are paying less tax than they formerly were. However, they never saw it because the FST was a hidden tax.
I had an opportunity to participate in the finance hearings. We heard from 500 witnesses. We received over 700 reports and submissions. We listened carefully to the numerous alternatives people were coming forward with.
The finance committee reported to this place. It reported to the finance minister about some of the options. When the members of the committee came back with it they said: "We cannot find a better alternative and it is better not to change it just for the sake of change, so let us work with this the best we can".
I remember writing a little piece for my constituents in which I stated that on balance the proposed harmonized sales tax was not ideal but it was the best possible under the circumstances. The Mulroney government was unable to harmonize the federal and provincial sales taxes and opted for a complex GST applied to a base with numerous exceptions. It created a nightmare for business, angered consumers and generated less revenue than its predecessor tax.
I think most Canadians are clear why the GST has the problems it does. It was in fact in your face taxation. I do not think Canadians are opposed to paying taxes to ensure that Canadian programs that we are provided with are properly funded such as health care, seniors care and a whole host of things.
However, to assist the ordinary Canadian, one of the recommendations that came back from all these cross-Canada consultations was that the price on the shelf should be the price that one pays at the cash register so that the purchase decision was not fogged up by what taxes were going to be added. We knew exactly what we were going to pay. We also said that we do not want to hide the tax from the consumers, unlike what the prior speaker said, that we are hiding the tax. No, it is tax included pricing but it clearly states on the invoice that the consumer will see the amount of taxes included therein.
I believe it is very important that the consumer have the information and it is also necessary for accounting purposes. I think the member was a little intellectually dishonest in presenting a so-called cover-up.
The previous speaker also talked about poor Quebec. He also admitted that in 1991 Quebec did harmonize its federal and provincial sales taxes. However, he did not explain why. The reason Quebec did this is that harmonization leads to a better situation for Quebec businesses. I praise Quebec for having the wisdom to harmonize the tax. Now there is an input tax credit on the provincial component included in the combined tax. It means there is a lower selling price that has been passed on to the consumers. On top of that, it means it has a competitive advantage over Ontario which has not harmonized. It also has a competitive advantage in the export marketplace.
The member well knows that although Canada as a whole has had wonderful performance in terms of the export markets, the critical issue is that Quebec has had better than average performance in Canada simply because of the harmonization of the tax. On that basis alone, Quebec should say "we don't want you to know about this because it is such an important adjunct to the economy of Quebec". It is helping Quebec businesses not only in interprovincial trade but in the export business.
The question came up about this cost to the three maritime provinces. I had to think about this one a bit. The previous speaker somehow brought up a billion dollars. I considered that there were no other provinces in this country that have a provincial sales tax rate as high as they have in the three maritime provinces. We are talking about a 12 per cent provincial sales tax. In my province of Ontario it is only 8 per cent.
What do the members think that does to the ability of the consumers to purchase? Their purchasing power has been totally crushed by the burden of the provincial taxes.
The members will also know that the harmonization of the tax at a consistent rate facilitates interprovincial trade and makes the whole situation a good foundation to work with Quebec and Alberta, which has not sales tax, and I am sure Ontario.
I have no hesitation in supporting Bill C-70. This is a move in the right direction to make our tax system simpler, easier to administer and fairer for consumers and businesses.