Debates of Dec. 3rd, 1996

Excise Tax Act

[Jim Silye, Reform, Calgary Centre, AB]

Okay, I need clarification on that but I know there was something different. I do not want to put words in his mouth but I would like to know what it is he recommended at that time. I do know that he was against the GST.

In his speech the minister indicated that this was an improvement over the GST. How is it an improvement when the GST has not changed? All the inherent problems are still there. In fact that party during the election campaign promised to scrap, to kill, to abolish the GST and then tried to weasel its way out of that. But let us say to even replace the GST with something which is revenue neutral, the Liberals have failed on both counts.

On the first count, the Liberals did not scrap or replace the GST. In fact they have entrenched the GST into our lives forever because now they have harmonized it with a provincial sales tax and there will be no future provincial government that will ever want to give up that source of revenue, especially at the high rate of 15 per cent. All the inherent problems of the GST will still exist. Exempt or not exempt, zero rated, all these different rules will still be there and will still cause problems.

Second, during his speech the minister said that the new harmonized tax will not increase revenues for the government. We all know it decreases revenues for the provincial governments because of the drop in their PST. In their red book the Liberals promised they would replace the GST with something that was revenue neutral.

If what he said in his speech is true, that this is revenue neutral, no more revenue to the government, which means no less revenue to the federal government, it is going to cost the federal government $961 million as a payment to the three participating Atlantic provinces. It means that this new tax is not revenue neutral, it is revenue deficient and therefore it is going to cost the taxpayers money.

Finally, I find this to be somewhat like the minister of myth. The finance minister likes to brag about the ads on the Atlantic advantage. How can the provincial premiers say there is no sales tax when there is a GST which represents the goods and services tax of 15 per cent?

[John Manley, Liberal, Ottawa South, ON]

Mr. Speaker, I thank the hon. member for his questions. Other than confusing my interest in a system of tax which he later supported, he asked good questions. Let me begin at the end of his comments.

In order to understand the impact of a retail sales tax such as the provincial retail sales tax on the consumer, one must understand why the Atlantic premiers claim there is no sales tax. What happens with the existing retail sales tax is that not only is it applied to the price of the goods that are purchased, but it is embedded in the cost of every item produced and every service generated by a business in a province with that kind of tax.

Take the classic case of the barber shop which everyone likes to talk about. People say there is no tax on haircuts. Who do they think pays the tax that the barber paid when he bought his barber chairs? Who pays the tax that the barber paid when he bought all his hairdressing equipment? Who pays the tax that the barber paid when he bought all of the other services that are necessary for him to render his hair cutting service? It is embedded in the price of the haircut.

If we take the case of another business that is producing a good, then again the provincial sales tax systems as they exist in Canadian provinces cause a cascading of the tax. Every time in every stage of production tax is paid by the business on inputs, it is embedded in the price of the good that the business sells. Tax is applied to that, which includes tax on the tax previously paid, and so on down the chain.

Under the harmonized sales tax, all of that is eliminated. When a business sells a good to a consumer, the only sales tax is the sales tax that is applied at the retail level. There is no sales tax embedded in the original price of the good. That is why the Atlantic premiers can say with pride that there is no sales tax, because they have managed a system that is clean when the good is finally sold to the consumer. The consumer knows that the sales tax component he pays on that good is 15 per cent. It is demonstrated on the bill. There is no hidden sales tax. There is no hidden tax on a good in the Atlantic provinces.

Once again the member suggests, and the Reform Party has tried to make something out of this for several months, that somehow the red book did not represent this party's election promises in 1993. That of course is something the Reform Party did not try to proclaim at the time. Reformers were given the red book as were other opposition parties. Our promises were plainly made and they have been fulfilled.

If the hon. member wonders why we opposed the GST in 1989 and 1990, then I commend to him the report that we wrote. Circumstances have to be dealt with as they are found at the time. We recommended against implementing this tax for some of the same reasons that we are trying to fix it now.

As I spoke of earlier, with two sales taxes at the retail level, it is the only jurisdiction in the western world that has tried to do that. It was not a good idea. It was confusing. It was predictable that we would have the tax chaos which resulted. But there was no turning back the clock and saying we wished it had never happened and let us go back to the old sales tax and begin with that. Time had moved on.

When the Liberals campaigned in 1993 we made it very clear what we would do. Given the reality that the government of the day had already imposed the GST and that the introduction of the tax had been absorbed in the economy, we said that we would have the finance committee study it in the first year of government and prepare a report on how we might move forward to produce a better tax that would be harmonized with provincial sales taxes.

It is disingenuous of the hon. member to suggest that he can take things out of a 1990 debate in the House of Commons before the law was enacted, before the tax was imposed, before the retail community had to make the adjustments in order to apply the tax, before the manufacturers sales tax had been withdrawn and use them in debate in 1996 when we are trying to make the mess we found liveable for retailers and consumers. It might be good political rhetoric but it is not precisely what the hon. member

would like to be identified with in putting real and substantial choices before the Canadian public as we move on from here.

[Myron Thompson, Reform, Wild Rose, AB]

Mr. Speaker, in 1993 in Wild Rose the campaign was hot and heavy. "We will scrap, we will kill, we will abolish the GST", were the words I heard.

I am pleased to see a front line minister speaking to this issue. I also noticed that another front line minister, the former minister of revenue who is now the Minister of Transport, made a prediction in a Victoria newspaper where he said that voters will punish any provincial government that fails to merge its sales tax with a revamped goods and services tax. If that be the case, then why in Prince Edward Island, where the Liberals were pushing for this merger of taxes, were they so soundly defeated?

[John Manley, Liberal, Ottawa South, ON]

Mr. Speaker, I found it a little hard to follow the question since Prince Edward Island is not one of the provinces that adopted the harmonized sales tax. One might argue that had they done so, they would have been re-elected.

I would like to take the opportunity to refer to the comments that were made by hon. members opposite with respect to compensation paid to the Atlantic provinces in order to make this transfer. Any time a transition is made on a very substantive policy issue, transition payments are often considered.

I point out to hon. members opposite that when the government moved to eliminate the transportation subsidy under the Western Grain Transportation Act, popularly known as the Crow rate, a full $1.6 billion was made available to western farmers in order to compensate them for this important transition. It was painful, there is no doubt about it. In the long term it is the correct policy, the best policy for the economy of Canada. It is the best policy for western Canada and the best policy for the western Canadian farmers who are making the adjustment. Never once did that party get up and criticize compensation being paid to western Canada.

How is it when another important change is made which is good for the economy of Canada and good for the economy of Atlantic Canada and has short term cost implications for the provinces involved that a one time transition payment is so offensive to that party? It sounds to me like the petty politics of regional envy.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I rise today to address or undress this government on its proposed legislation for a harmonized sales tax and to streamline the GST under Bill C-70.

First, I have a little humour that might put this in perspective. A good friend of mine in Calgary, Martin Struthers, is a travelling salesman in the clothing line. He told me that he ran into a lot of Liberals over the summertime on the golf course. They were playing with a particularly cute golf ball that had the logo of the current Deputy Prime Minister on it. When he asked the Liberals why they were using this golf ball they said: "Well if we use this golf ball, we are free to change our lie any time".

On November 29, 1996 the government boldly issued a press release announcing that three Atlantic provinces, Nova Scotia, New Brunswick and Newfoundland and Labrador, had agreed to harmonize the GST and provincial sales tax effective April 1, 1997. The effective date is important. It is next year, not this year. I will come back to that later on in my speech.

The finance minister is quoted as saying: "This proposed legislation represents another step toward an integrated national sales tax system for Canada". I stand before this House to state unequivocally that this comment by the finance minister is misleading, that the steps he has taken to harmonize the GST are hypocritical and that this whole exercise is nothing more than politically self-serving by Liberals at its worst. These are the three arguments I wish to address and I will do so under those titles: misleading, hypocritical and politically self-serving.

Under misleading, it is misleading that the rest of the country will not participate in the harmonized sales tax system even though the finance minister says that this is leading toward it. P.E.I. dropped out. Ontario has said to take a hike. Alberta wants the net effective rate that the Atlantic provinces get, which is 5.5 per cent. His whole claim that he is moving forward contradicts the facts.

Take Ontario. Why would Ontario comply when it has already indicated that it would cost Ontario consumers another $2 billion in goods and services with a combined rate? Why would Mike Harris want to punish Ontarians just to play politics with the 99 Liberals who are doing very little for Ontario, other than downloading their problems in health care, education and welfare, increasing taxes through the elimination of certain loopholes and tinkering with the corporate rate structure?

On top of that, the government's share of the billion dollar bribe to entice the three provinces to participate is going to cost $400 million over three to four years.

It is misleading for it to claim it is making progress when only three provinces out of ten are participating.

The finance minister has failed to get the other provinces to participate. Why? It is a tax increase on consumers. Even the department of finance of Nova Scotia, one of the participants, in its analysis of May 1996 revealed that the net effect of the harmonized sales tax burden on consumers would increase by $80 million.

Retailers, especially national retailers in the region, claim that their extra costs to retain a dual system of taxation for those stores within the three provinces and for those outside will cost them $27 million.

The government claims, in defence, that businesses will pass on any portion of their savings achieved through harmonization. Excuse me, based on what prior evidence? There will be a $107 million increase to consumers in Atlantic Canada. That is what will happen through a reflection of price increases. A billion dollars has been taken from the federal coffers, from the rest of Canada, to transfer the system.

It is misleading to state that the Reform Party supports harmonization. In the Standing Committee on Finance, of which I was a member and one of the co-authors of the report, when the government was looking for a GST replacement we indicated quite strongly that if the government was going to harmonize it had to harmonize on a national basis, with all the provinces, at the same time, and make it revenue neutral, with the widest possible base, providing the lowest rate. That has not been achieved. Other provinces will not participate. We clearly stated in our executive summary that harmonization cannot be fully endorsed. Talk about being misquoted and taken out of context.

Therefore we oppose the harmonized sales tax in its present form. If the government would bring us something which is for all of Canada we would consider it.

It is misleading to claim that this will save money when it will cost the rest of the provinces close to $1 billion, $961 million to be exact. We call it a bribe to compensate the provinces for the lost revenue of the lower PST and to entice them to participate.

That is very misleading. Who is going to compensate the other provinces, entice them or bribe them? Where is the money going to come from to provide the lost revenue for the other provinces, such as Saskatchewan, as the member previously mentioned?

This move is also hypocritical. I will touch on this point briefly. When in opposition the finance minister said: "I would abolish the GST because the manufacturers sales tax is a bad tax, but there is no excuse to repeal one bad thing by bringing in another". That appeared in the April 4, 1990 edition of the Montreal Gazette .

On March 17, 1990 in an interview with the Calgary Herald the finance minister said that the GST is a tax which discriminates against the regions and that he would get rid of it if possible. However, he said it would be difficult to do that if the federal tax becomes integrated with provincial taxes: If it becomes integrated'', which the government is now bragging about,with provincial taxes'', which it has just done, ``we will never get rid of the GST. We will never replace the GST''.

He further said that another alternative would be to look at alternative consumption taxes that are not regressive and do not penalize the regions of the country.

We are talking about the hypocrisy of the finance minister's statements. The hypocrisy lies in the fact that he has acted exactly opposite to what he said in opposition and opposite to what his personal beliefs are. He has entrenched the GST instead of getting rid of it. He has also introduced a taxation system which penalizes the non-participating provinces to the tune of $961 million. He is making seven provinces pay for lower tax rates in three provinces and basically penalizing the rest of the country just to integrate a bad tax, which he said he would never do. His deal is with three provinces that have Liberal premiers, three provinces that may soon have three Conservative premiers once this ripples through the economy of those three provinces.

We do not need to remind everybody what happened in P.E.I. My colleague from Wild Rose has already pointed that out. That Liberal premier lost his job thanks in great part to the federal Liberal government and its action in this regard.

I believe it is also hypocritical to argue that the Liberals have a pan-Canadian view of Canada because they are taking from the richer provinces and giving to the poor. Is this a new definition now of equalization payments where seven provinces are paying for ten, a complete reversal of the current equalization system where three provinces pay for seven?

It seems to me there is hope for Reform's fresh start platform. We suggest that we should review the equalization payment system and have maybe the top five provinces paying the bottom five and have a little competition in there which would be a better approach to a new vision for a better Canada.

Finally, I also feel that the harmonized sales tax is politically self-serving. We all know the promises from the Deputy Prime Minister, the Prime Minister to the finance minister and a whole bunch of other MPs during the campaign about what they said at the door and also what is in the red book. They have not even kept their red book promise because this is a partial and it is not even revenue neutral and any way you cut it they have broken their promise.

We all know about the member for York South-Weston who has quit over this because of principle. We all know about the member for Broadview-Greenwood. What these people campaigned on and what they delivered are two different things.

In order to limit the damage and in order to continue the myth that they are solving and keeping their red book promises they have introduced this GST harmonization at a huge cost to the country, at a great disservice to the premiers of those three provinces who

were hoodwinked, bribed and misled and where the Atlantic residents will see their cost of living go higher.

The finance minister has admitted that he failed to deliver on his promise to scrap the GST. The Deputy Prime Minister admitted they have not delivered on their promise and quit subsequently. She never promised that she would run again but she did and she got re-elected.

The only person who fails to admit that they failed to deliver on their election promise is the Prime Minister who is off around the countryside taking credit for all the global deals, thanks to businessmen who have been working hard for five years and thanks to the previous government that fought hard and implemented free trade and the North American Free Trade Agreement.

This harmonized sales tax is politically self-serving because they have told the Atlantic MPs to keep quiet. Why are they not speaking out on this and telling us how wonderful it is and how great it is? Why do they not go on the record and tell Atlantic Canadians that this is the best thing since sliced bread and there is no sales tax in the Atlantic provinces? It has disappeared. The ads are there. Defend that. I would like to see them defend that. I would enjoy listening to them defend that there is now no sales tax in these three provinces.

There will be businesses going under in the Minister of National Defence's riding. They have already shut their doors. These Atlantic MPs have been told to stay quiet. Where are they? How can all of them say this is a good deal in light of all the people who have come forward and said this is not a good deal, especially MMG Management Group which runs discount chains under names like Greenberg, Red Apple, MetMart and Metropolitan in New Brunswick where 79 jobs have already been lost due to this harmonization and a 50-50 chance of another 71 jobs being lost according to their own calculations?

The worst example of all that I have of political self-serving is contained in the Public Accounts, volume 1, pages 1.24 to pages 1.26. It talks about the whole financial aspect of accounting and also the auditor general's comments: "Responsibility for the integrity and objectivity of the financial statements rests with the government. The financial statements are prepared under the joint direction of the President of the Treasury Board, the Minister of Finance and the Receiver General for Canada in compliance with governing legislation".

The auditor general then gives his comments. Here are some of his startling concerns that he felt should be brought to the House and parliamentarians made aware of: "The inclusion of transitional assistance", which is the same debt word as bribe, "of $961 million in the 1996 deficit and accumulated deficit represents a departure from both sound accounting practice and the government's own accounting rules. In my opinion the transitional assistance of $961 million should be included in the deficit

subsequent to the 1995-96 fiscal year. Failure to comply with generally accepted principles resulted in an overstatement by the annual deficit and accumulated deficit of $961 million".

[Barry Campbell, Liberal, St. Paul's, ON]

Mr. Speaker, on a point of order. The hon. member purports to be quoting from the auditor general's report and he made reference to the word bribe. I would like to know if that is part of what he is quoting from the auditor general. If not, would he excise that and read the quote again without that word in it.

[The Acting Speaker (Mr. Milliken)]

I think the hon. member is raising a question to the member for Calgary Centre. However, if he wishes to clarify the matter, I am sure he would be pleased to do so.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I will clarify. I thank the hon. member for the correction. I did kind of ad lib. The word bribe is not in the report.

Here are his startling concerns: "The inclusion of transitional assistance of $961 million in the 1996 deficit and accumulated deficit represents a departure from both sound accounting practice and the government's own accounting rules. In my opinion the transitional assistance of $961 million should be included in the deficit subsequent to the 1995-96 fiscal year. Failure to comply with generally accepted practices resulted in an overstatement of the annual deficit and accumulated deficit of $961 million".

The transitional assistance of $961 million has been recorded as a liability at March 31, 1996 and as an expenditure, a resultant increase in the deficit for the 1995-96 fiscal year.

As I said at the outset of my intervention this afternoon, this agreement does not come into effect until April 1, 1997, two fiscal years later, the year ending 1997-98.

Is this bribe or transitional assistance, as the government prefers to refer to it, a liability as of March 31, 1996? Clearly this is not the case because according to generally accepted accounting principles and the government's own rules: "Financial obligations are recorded as liabilities if the underlying event occurred prior to or at year end". It did not occur prior to March 31, 1996 and it did not occur at year end March 31, 1996. In fact, it is occurring now. Agreements are being signed now and they will take effect April 1, 1997, which is the next fiscal year, not even in this one ending in 1997.

Also: "Transfer payments are recorded as expenditures when paid and when the recipient has fulfilled the terms of a contractual transfer agreement". Clearly this is not the case. They have not fulfilled the terms of the contractual agreement. The auditor general agrees with me because he states in the Public Accounts:

"Eligibility criteria had not been met by the three provinces by March 31, 1996 and, accordingly, the $961 million of compensation should not have been recorded in the accounts at that time. Although the government is committed to compensating the provinces once agreements are signed, the $961 million is not payable until the agreements are signed".

The government and its officials hung their hats on memorandums of understanding. Mr. Speaker, I know you were an outstanding lawyer when you where practising and know the terms of law very well. You and I both know that letters of agreement, memorandums of understanding have a certain way of sometimes changing. That is why the auditor general is right. That is why generally accepted accounting principles cannot be departed from. Shame.

The integrity of government financial statements is at stake. This action on harmonization impairs the integrity of the process. Shame. Shame on the finance minister, the deputy finance minister, the President of the Treasury Board, the secretary of the Treasury Board and the receiver general and the deputy receiver general, who have all compromised some integrity, walking a fine line on interpreting generally accepted accounting principles and prior government practices, setting a new precedent just to help the Liberals fulfil a self-serving political promise and to help the finance minister bury the high cost of harmonization in a prior year ending in 1996 just because the government had bettered its deficit target and done better than it had projected in that year. Therefore this was a good time to bury it, hide it and then forget about it and we will not have to record this transition cost, this bribe, this enticement, whatever anybody wants to refer to it as. This is nothing more than political self-serving and I say shame.

I have given examples and testimony to prove conclusively that this feeble, partial, half-hearted effort of replacing the GST with something that is revenue neutral is not. I quote from the red book. I am trying to interpret legitimately, accurately what the Liberals now say they promised door to door.

Knock, knock. Hi, I am the member for Broadview-Greenwood. I will replace the GST with a tax that is revenue neutral, that will take as much money out of pockets as it does now and then we never worry about the GST again. That is what the Liberals said they promised. I believe with the examples I have given I have pointed out how misleading, hypocritical and self-serving have been their remarks for a period of four years.

This is an important issue. The GST is a bad tax. In and of itself it can be good in terms of consumption taxes. But when it was introduced the Liberals in opposition argued against it, as they should have. Now that they are the government they promised to get rid of it. They have not. They have entrenched it.

Most everyone acknowledges that the GST has been the biggest cause of the growth in the underground economy. How is it then that by entrenching a 15 per cent tax is going to eliminate the growth in that economy and eliminate the activity within that economy?

The Liberals brag about how this is a step in the right direction, how this will replace the GST and be revenue neutral. We will still have the high cost of administration of the GST type of tax that we had. Reformers feel that the government should get out of this domain altogether, leave it to the provinces. The $15 billion net revenue required should be put into a simplified tax system featuring a dual rate. That is how to raise that revenue. That is simplifying it. That is eliminating the GST. That is making it revenue neutral. That is solving the problem.

[Barry Campbell, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I will use the same themes that the hon. member opposite used: misleading, hypocritical and self-serving but I will throw them back at him.

The hon. member is misleading the Canadian people. The auditor general did not qualify the financial statements of the Government of Canada. He made an observation. We disagree about that observation. That is entirely permissible and within what is appropriate under generally accepted accounting standards. The hon. member knows that.

The hon. member also said the tax is not revenue neutral. I ask him to prove that. That is untrue, it is revenue neutral.

It is interesting under hypocritical. I had the privilege to work with the hon. member. He worked diligently with other members of his party on the committee that went across the country looking into replacements for the GST. I will tell who is hypocritical. The hon. member supports harmonization. He neglected to tell us that.

Under self-serving, it is interesting. The hon. member attacks the transitional assistance but I have never heard him attack the $1.6 billion paid to western grain farmers when the Crow rate subsidy was removed. Not a word. Here we have a member from one region of the country criticizing transitional assistance going to another area of the country and telling them what is good for them but never rising to criticize similar transitional assistance in his own backyard.

This is a quiz show if you will, Mr. Speaker. I ask the hon. member one further question. Who said the following? "I want something that works. If we had one value added tax, one base, one bureaucracy to collect it, the manufacturers and businesses in Ontario would save over $1 billion by being able to deduct those costs that cannot be deducted today on the sales tax. It has been one of the areas of a major competitive disadvantage that Ontario manufacturers have had and Ontario businesses have had. I say stop the rhetoric, stop the politics, stop the finger pointing. Get on with harmonization and simplification of the GST or whatever the new initials are, along with the PST". Who said that? I will give the

hon. member a hint. He is now the premier of the province of Ontario.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I thank the hon. member for his intervention. I will try to answer his comments about my misleading the public and that the auditor general did not qualify his observations in his signing off on the financial statements.

I agree with the hon. member. He did not make a reservation on it because he said: "Substantially the changes and effect that would occur that year might happen but the significance would happen and those looking at the Government of Canada from afar would be able to recognize that that is the intent of the government". However, he did make it clear and spent a lot of effort in pointing it out to us, notwithstanding that he did not make a reservation on it and signed off.

The point is that if we start allowing politicians to do things with financial statements that go to the edge of generally accepted accounting principles, integrity is at stake. When you go against the history of 126 years in Parliament, which has never been done before, of taking something that has not been consummated, that may lead to a deal down the road and charge it off to prior years-

[Mary Clancy, Liberal, Halifax, NS]

Gobbledegook.

[Jim Silye, Reform, Calgary Centre, AB]

No, that is not poppycock. That is exactly what has happened and that is what the auditor general is making us aware of. We should be aware of it so that this kind of stuff will not be allowed to happen.

I am not misleading. I acknowledge that there was not a reservation. I just did not put it in my speech. Am I misleading by saying it is not revenue neutral? I accept the claim that it will generate the same amount of money as is currently being generated by the GST but there is a cost to setting up this new system.

When the Liberal red book stated that they would replace the GST with something revenue neutral, they did not say at a cost of $1 billion or $2 billion or $100 million. There was no cost to it. I assumed and I think most Canadians assumed that they would replace it with something that does the same. If it was supposed to save money in administration and in efficiency and if it saved money for businesses and governments, it should not cost us a billion dollars. We know why it cost us a billion dollars. It was either a bribe, an enticement or a transitionary cost. Any one of those three can be picked. I know the government will take the transitionary cost.

We have never supported harmonization. He and I were on the committee. The minority report of the Reform Party on replacing the GST clearly stated in its executive summary, right from the beginning to the end, that: "Harmonization cannot be fully endorsed. While harmonization does simplify the tax system, it makes no sense to do it in a piecemeal, ad hoc fashion because it simply increases the confusion, the cost and the resentment across the country". That is what the government is doing.

The purpose is to eliminate dual tax regimes but this version retains it for national firms. The Reform Party opposes tax inclusive pricing. This practice violates the principle of open taxation which is essential to efficient functioning of open democracies. The disclosure of taxes paid on cash register receipts preserves an element of openness in taxation but as the experience in Europe has shown, it eventually results in strongly diminished public awareness of the tax.

The Reform Party sees the GST as an unnecessary temporary tax which does not belong in the federal domain, but inasmuch as the tax will exist temporarily, then the Reform Party encourages the government to streamline taxation, remove as many of the significant problems that exist until such time as a much wider tax reform that provides both tax relief and tax simplification can be implemented.

If the government presented a national integrated sales tax with the lowest possible rate on the broadest possible base, the Reform Party would seriously consider looking at such a proposal. However, the government is not doing that. This is a piecemeal, ad hoc presentation. This would be only conditional consideration because the Reform Party's final solution to the GST, as I mentioned earlier, would be to eliminate the GST after the budget is balanced, incorporate the net revenue required into a simplified tax system featuring a dual rate.

I think I have addressed the issues of the hon. member of being misleading and hypocritical. I welcome that. If I challenge them for being misleading and hypocritical they have the right to accuse me of the same. I have, unlike the government, addressed each of those items and have given my answers. I would now like the hon. member, if there is a minute left, to tell me if I am still misleading and hypocritical in light of my answers.

[Barry Campbell, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I was pleased to hear the hon. member say that in the minority report they did endorse harmonization, although not without some qualifications. At least we have that much on the record because he neglected to say that they support the principle of harmonization. I thank him for that clarification.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I would like to further add, so that the member does truly understand, we would eliminate the GST unlike his government. Given, however, that the GST is going to be around for another three years or so, if it is possible to improve the

tax regime and eliminate and simplify and reduce taxes, then we would support the government in measures like that.

But as an overall philosophy this party does not and will not support the harmonized sales tax in the present form that this government has put forward.

[John Murphy, Liberal, Annapolis Valley—Hants, NS]

Mr. Speaker, I will be sharing my time with the member for Halifax.

I am pleased to have the opportunity to speak on Bill C-70 respecting the harmonized sales tax agreement. I have listened closely to the debate today and some of the criticisms that members from parties opposite have raised.

Let me take a moment and read a number of quotes from national organizations regarding the need to move on to a harmonized tax system. In June 1994 the president of the Retail Council of Canada stated in an interview: "Harmonization is abundantly desirable. The provinces cannot ignore forever the pressures that are on us as a nation to get our House in order and getting the sales tax right is an important element of that".

In the same month the president of the Canadian Chamber of Commerce said: "They," meaning businesses "could create more jobs if the PST and the GST were integrated by doing more business more efficiently and more effectively".

Even the members of the third party, and we heard that from debate here, supported harmonization in the minority report on replacement of the GST. In that report they said: "It is simply unacceptable that Canada remains the only country in the world with 10 different sales tax regimes. We commend the government on its attempt to harmonize the tax with the provinces". That is exactly what the government is working toward.

As the House is aware, on October 23 three provinces, Nova Scotia, New Brunswick and Newfoundland and Labrador, signed a harmonization deal with the federal government, In doing so, these provinces have taken a bold step forward. It is a step that will help the three Atlantic provinces to become more competitive, more self-sufficient and more attractive for businesses.

In signing this deal, the province of Nova Scotia and its two partners are leading the way to what I believe will be an eventual agreement among the provinces and territories. Let us look at the facts. Over its lifetime the GST has taken an additional $3 billion out of the Atlantic region, a bigger increase in federal sales tax payments than in any other part of Canada. In signing this agreement these three provinces will receive adjustment assistance close to $1 billion over four years.

I have heard the criticisms from members opposite on this element of the deal. I would like to remind my colleagues, however, that this decision is consistent with Canada's long standing principle of providing adjustment assistance to provinces and individuals when they need help adjusting to major policy changes initiated by the federal government.

I want to emphasize quite clearly what the agreement will mean to Nova Scotia. In Nova Scotia the harmonized sales tax agreement will improve its economy and its competitive position vis-à-vis other provinces. The agreement will ensure that $100 million more will be left in the pockets of Nova Scotians. This extra money in the economy will mean a permanent increase in Nova Scotia's gross domestic product of .8 per cent. Over the next few years that will translate into approximately 3,000 new jobs.

A central component of the sales tax reform is that the new system must be both fair and simple to use. The HST meets both of these criteria. Consumers and business people will operate in a marketplace where the rules are clear and where there is less paperwork.

For consumers, all Nova Scotians will benefit from a tax rate that is almost four points lower than the current combined rate. The new system will mean lower prices on most goods, not only because the combined rate will be lower, but also because hidden provincial sales taxes will be eliminated.

As well, businesses in Nova Scotia will experience many competitive advantages under this new system. With full input tax credits, operating costs on everything from phone bills to computers will come down. Many other business expenses will also be lower, including hotel and meeting costs. This will provide an opportunity for local businesses to expand and to grow, and that is what this is all about. It also gives businesses an excellent reason to locate in my province of Nova Scotia.

For businesses the HST will mean they will only have to administer one tax instead of two; one collector, one auditor. Businesses have campaigned for a simpler administration system for many years. As of April 1 next year, we will be able to deliver.

I would like to turn for a moment to a number of specific sectors.

Let us look at the issue of tax rebates on books. During the summer months I heard from many businesses and individuals in my constituency of Annapolis Valley-Hants. They were calling for an exemption on the taxation of books. The message I heard was that the continued taxation on books was in effect an impediment to promoting and improving literacy in Canada. This is a view that I brought forward to the Minister of Finance in early August on numerous occasions. I was pleased therefore when the minister responded positively to these concerns.

Under the HST there will be 100 per cent GST rebate on all books purchased by public libraries, schools, universities, colleges, municipalities and qualifying charities and non-profit orga-

nizations. That clearly is the way to go. This rebate will support the important role played by these front line organizations in helping individuals acquire the tools they need to learn to read or to improve their reading ability.

During this time of limited resources the best way to ensure the biggest impact for every dollar spent is to target assistance which will have the most impact on literacy. This decision will have a positive impact in supporting literacy in Nova Scotia.

I also want to speak for a moment about how this agreement will positively affect the housing industry. After all, a strong component in any economy is a strong housing industry. While provincial sales tax does not apply directly to the sales or rental of residential property, a substantial amount of provincial retail tax is still embedded in housing prices. Consumers are paying for unrecoverable tax on materials such as lumber, paint and appliances. As well, contractors pay provincial sales tax on building equipment and other capital goods.

Under the HST, builders will be entitled to input tax credits on inputs used in the building of a home. That is important. In addition to that, in Nova Scotia under the HST there will be a housing rebate for all buyers of new homes to a maximum of $2,250. Coupled with decreased building material costs this will ensure that new homes cost the same or less once the new agreement is in place.

Let us turn to the tourism industry for a moment. In Nova Scotia, as I am sure everyone is well aware, tourism is a billion dollar a year industry. In my riding of Annapolis Valley-Hants, tourism is a growing area and one in which jobs can and will be created.

Under this agreement visitors from outside Canada will get their tax back on hotels, conventions, bed and breakfasts and on the gifts they take home to their families. Even visitors from other provinces will face a lower tax rate for meals and for accommodations. Clearly this agreement will make our tourism sector even more competitive and more successful.

As any government whether federal, provincial or municipal can say, tax reform is never an easy process. Any attempt to change and improve the tax system will inevitably lead to criticism and calls to leave things as they are. But I believe the agreement our government has reached with the three Atlantic provinces will improve the economy of Nova Scotia and will free up more money for Nova Scotian families and businesses.

This package will help create jobs and it will help the economy grow over the long term. For those provinces that have taken the lead and signed on to this agreement, they will become more competitive both nationally and globally.

[Myron Thompson, Reform, Wild Rose, AB]

Mr. Speaker, some information has been supplied to me regarding some comments about this whole idea.

The Retail Council of Canada has said that by forcing stores to bury the new tax in prices, the harmonized tax regime will cost retailers at least $100 million a year. A study by Ernst and Young, the government's own accounting firm, estimated that a midsized national chain with 50 stores in the Atlantic provinces would pay up to $3 million in a one-time start up and $1.1 million a year to comply with this new system.

The Halifax Chamber of Commerce has predicted that the harmonized sales tax will push up new house prices by 5.5 per cent and will force municipalities to raise the property taxes. The Canadian Real Estate Association says that harmonization will increase the cost of a new house by $4,000 in Nova Scotia and Newfoundland and by $3,374 in New Brunswick.

GST harmonization is responsible for the closure of five Greenberg stores and the loss of jobs. I thought the issue of jobs was really important to this government. The management of this store has said that there is a 50-50 chance of further store closures and the loss of more jobs.

I am really surprised that the backbenchers from the Atlantic provinces are not in an outrage over losing jobs and raising more taxes. There must be a lot more here than what they are mentioning to the people of Canada including the taxpayers across the Atlantic provinces.

Consumers will pay more for funeral services, children's clothing, books, auto repairs, electricity, gasoline, home fuel heating, haircuts and a whole bunch of things. They will be paying more for these things and many of these families can barely get by now.

I am really confused that members from the Atlantic provinces are willing to accept this job killing situation. That is what is happening. It is killing jobs. Those who are making these statements are high-fluential people.

[Mary Clancy, Liberal, Halifax, NS]

High-fluential, high-fluential, whoa.

[Myron Thompson, Reform, Wild Rose, AB]

They have some knowledge about what is going on. They are on real estate boards and councils.

[Mary Clancy, Liberal, Halifax, NS]

High-fluential.

[Myron Thompson, Reform, Wild Rose, AB]

The best thing the member for Halifax can do is yap off at the mouth. She is sitting there heckling somebody else and she does not know what she is talking about. I will direct my questions to the other member who spoke eloquently, and I thank him for that.

These are highly influential people who are making these comments. I am not the one who is making them but people who have the knowledge of what is going on are. I would like the member to respond.

[John Murphy, Liberal, Annapolis Valley—Hants, NS]

Mr. Speaker, the technology for the changeover is already in place. There will be some changes but the technology is in place and it is not the same as introducing a whole new system.

The member talks about the prices of houses going up. I just indicated in my speech that housing prices will go down because the input costs will go back into the industry and they will bring the prices down.

The member mentioned that jobs are being lost. One of the major features of this tax is that over the long term, over the next few years, jobs will be created. There will be all kinds of input taxes being returned to the different companies in Atlantic Canada and in Nova Scotia in particular. They will have more money to work with. Consequently, they will be able to put that money back into improving and expanding their businesses and obviously creating jobs.

About 73 per cent of Nova Scotians who were surveyed prior to this system coming into place wanted a system which provided one price which included the tax in it. Businesses asked for it. That is why we made these agreements with the Atlantic provinces, with the exception of P.E.I. We wanted to create a better situation for the consumers, namely that they would be able to go to the cash register with a $15.95 price tag and pay $15.95.

I am sorry that the member opposite has been misled. Unfortunately, his comments the way he put them are incorrect.

[The Acting Speaker (Mr. Milliken)]

The hon. member for Halifax on debate.

[Mary Clancy, Liberal, Halifax, NS]

Mr. Speaker, before I begin my remarks in this debate, may I say that I am delighted to be speaking here today, the first time since you took up your new duties as assistant deputy chairman. May I congratulate you on that appointment, a most worthy appointment. I am delighted to be here but having said that, I am afraid that I am less delighted about several things.

First, I would like to extend my compliments to the hon. member for Wild Rose. I would let him know that the name of Canada's 10th province is Newfoundland, like "understand". If you are going to understand a province, you should also know how it is pronounced.

The hon. member for Calgary Centre spoke quite eloquently, if somewhat off the point, a little earlier. I would like to say a few things to him too. I have great respect for that hon. member. I know that his belief in public service and in doing things for Canadians is very strong and I take no exception to that.

However, I will say as a Nova Scotian to the hon. member who comes from Alberta that I do not think Nova Scotia members lectured Albertans or westerners when the grain farmers took a $1.6 billion subsidy from the federal government. They did not say that it was not good for them. On behalf of the members of the three Atlantic provinces who are accepting this deal and who think this is a good deal, I would just say: Keep your lectures at home. We think we know a little bit better what is good for Nova Scotia, what is good for Newfoundland and what is good for New Brunswick.

Does the hon. member really think that premiers such as Brian Tobin, John Savage and Frank McKenna get together and say: "Let us do something bad for our provinces"? With the greatest of respect to the hon. member, does he really think that people who have barely gotten their feet wet in the salt water of the Atlantic Ocean know better than these people who have led their provinces in good times and in bad? Does the member really think that he knows better what to do for Nova Scotians, New Brunswickers and Newfoundlanders than Frank McKenna, John Savage and Brian Tobin? I do not think so.

With the greatest of respect to members of the third party and possibly others in the official opposition who might oppose this excellent plan for Atlantic Canadians, may I say that in that region they are not even on the radar screen politically and there is a reason for that. They do not comprehend what is good for Nova Scotians. Not even being able to pronounce the name of one of the provinces is a good reason they are not on the radar screen.

Having dealt with that, let me now deal with why the harmonized sales tax is a good thing for the people of Nova Scotia and her sister provinces.

Let me quote a premier I was talking about just a few minutes ago, the hon. Frank McKenna, one of the most successful premiers in Canadian history, I might add. Frank McKenna said on Sunday: "This is a chance for Atlantic Canada to enjoy the single biggest advantage we have ever had in the last 50 years against the rest of the country. We are now the most competitive area in all of North America for doing business". That comes from Premier McKenna and from the Atlantic Provinces Economic Council, a most respected organization in our region.

The GST has sucked an additional $3 billion out of our region, a bigger increase in federal sales tax payments than in any other part of Canada, so it is no wonder the three provinces opted for the new tax to replace it, along with the $1 billion in transition funding. It is only appropriate that the region that took it, Atlantic Canada, was the one that was losing the most with the GST.

What is going to happen with this transitional funding? The transitional funding will be used in part by the provinces accepting this to assist those small numbers of consumers who are going to be hurt somewhat by the broader base of the tax, those few things that

will go up in price. Will some things go up in price? Yes, some will. The transitional funding will in part be used to assist those people.

I might also add there is no loss in the low income rebate of the GST that was instituted when the GST came in. It will continue to be paid to those people who qualify in the three Atlantic provinces.

The three Atlantic provinces as of April 1997 will have a simpler, less costly and more effective sales tax system, and that is the bottom line. Clearly members from Alberta have so little knowledge about what is important in Atlantic Canada that his has not managed to penetrate. I am not sure what does manage to penetrate, but then that is another story.

The BST will be the crowning in touch in turning Atlantic Canada into the most attractive business location in all of North America. From the days of wooden ships and iron persons until today this is something that has been long overdue in Nova Scotia, in New Brunswick and in Newfoundland.

I really do think that when members opposite think they can lecture us on what is good for the Atlantic region they should at least be able to say they know something about the region that they are attempting to lecture. We do not take kindly to lectures down there. We know what is good for us and the harmonized sales tax is very good for us.

Consumers will know what the price is before they go to the cash register. How many times has every one of us in this House and the people we represent seen an item that we wanted to buy, taken it to the cash register and by the time it was all added up, whammo, we were paying considerably more than we thought we were going to? Those days are over in Nova Scotia. That will be finished come April 1.

Consumers will have lower tax rates and on many goods will pay lower prices. This message has to be repeated and repeated because when it comes to misleading, and I know the hon. member opposite does not really wish to mislead, or at least I assume he does not wish to mislead, over and over again scare tactics have been used with regard to this plan on the consumers of my province and the two neighbouring provinces, trying to suggest that people will be paying considerably more when the truth is they will be paying less.

[Myron Thompson, Reform, Wild Rose, AB]

You don't know what the truth is.

[Mary Clancy, Liberal, Halifax, NS]

That snappy comeback from the member for Wild Rose has just made me want to sit down and burst into tears but I will try to control myself.

Businesses will have to deal with only one tax. From the first day that the GST was mentioned in this House, when you and I, Mr. Speaker, were rookie MPs in opposition, I have heard from small business people in Nova Scotia how they needed the simplification of the tax system and, again, this is what this is doing.

I will tell a little story about someone I deal with a lot in Halifax. His name is Bob Richards, a cab driver. He is probably the best cab driver in Nova Scotia. This is not to take away from other cab drivers there, but Bob has been driving me to and from the airport since I was elected. Through storm or sleet or dark of night, if I can steal a line from the American post office, he is there. He has a number of clients who know how good and reliable he is and consequently he has a good limousine business in Halifax.

Bob has complained bitterly about the kind of red tape and the bureaucratic detail he as a businessman has been hamstrung by in this tax. This tax is going to be a lot less cumbersome to business people like Bob Richards in the three Atlantic provinces that have taken this deal. That is a good thing. This is something Nova Scotians care about. Am I out of time, Mr. Speaker?