Madam Speaker, the purpose of our debate today is to take a serious look at this bill, to stay away from the political partisanship that arises from time to time when discussing these issues and to make a thorough analysis based on the following: does this bill provide more benefits for business, yes or no?
I think our comments should aim to improve instead of simply to attack, criticize, denigrate and crush this bill.
I do not want to take up valuable time with further justification of a restructured harmonized federal-provincial sales tax. The facts have been clearly and convincingly addressed by my colleagues.
The facts are there. What we have to do now is improve this bill if we can.
As we all know, the harmonized sales tax will eliminate hidden taxes that inflate prices and hurt exports. It is simpler, more transparent for consumers and for business, and an integrated approach makes possible a lower overall sales tax rate. We know that, those are realities. If people do not agree with the facts they should attack them and show us why.
We know perfectly well this is a better, more straightforward and less costly approach that will help meet the needs of people in a far more flexible way.
Today I want to focus on an aspect of this legislation that has too often been attacked by those who place partisan politics and narrow regionalism ahead of clear objective thought.
The issue of course is a decision by the government to provide a formula for short term adjustment assistance to provinces when they face significant structural cost to participate in the new integrated system. That is the prime issue I want to address today.
There will be assistance when assistance is necessary. There will be a formula that will indicate clearly, fairly and objectively the type and amount of assistance the government will provide.
Under this legislation adjustment assistance becomes available to provinces which experience a revenue shortfall in excess of 5 per cent of their current retail sales tax receipts because they moved to a single harmonized sales tax system.
For qualifying provinces, in this case Newfoundland, New Brunswick and Nova Scotia, the formula means that the federal government will provide, and this is very important, first of all, full compensation for the revenue shortfall, that is the shortfall over 5 per cent of the current retail sales tax in year one; that same full compensation for the shortfalls in year two; half the amount of the shortfall in year three; 25 per cent of the provincial revenue shortfall in year four.
Now we have measures that are concrete, specific and fair.
This assistance is a necessary investment in making Canada stronger through helping disadvantaged regions move to a modern tax to meet modern challenges. It is a 21st century type of investment reflecting the fact that government must change how it involves itself in economic development.
We see profound changes taking place aross the country.
Businesses have made it clear that the best role for government is to give firms and workers the environment to compete and that is what it is doing with sales tax harmonization, and that is what responsible government and leadership means.
The assistance formula developed applies equally to all. There is no discrimination, no favouritism, no bribery. It is clear, concrete and objective. It applies equally to all. Any province that faces a transitional revenue loss exceeding 5 per cent because of harmonization qualifies for assistance over that amount on a 50-50 basis. After four years those provinces are on their own.
That means that B.C., Alberta and Ontario would not meet the threshold. They will not lose money on harmonization, just as Quebec did not when it harmonized. In fact, I am told that Quebec
made money through its staged harmonization approach, that it was clever in doing so and it should be commended for that.
Not every province has the economic size and scale to become instant winners under harmonization. For the three Atlantic provinces, with their less developed economies and such problems as the fish stocks, harmonization does carry a painful near term cost. That is why this government has developed a compensation formula and why those governments will receive about $960 million in assistance.
Under the same formula Saskatchewan and Manitoba will also deserve assistance. They would be entitled to over $550 million for the four year period when they decide to harmonize, a fact that is not propagated loudly or widely by either of those governments. I want to mention that under the same formula Saskatchewan and Manitoba would also deserve assistance. They would be entitled to over $550 million for the four year period when they decide to harmonize.
It is surprising and to some frustrating that this government's approach has been turned into a political football. There is a tragic cynicism at work, the type of cynicism that knows the price of everything and the value of nothing. "Let's do what we can in order to enhance our popularity which is plummeting, and let's do whatever in order to noticed".
Who can argue the value of helping provinces provide the environment to industry that would help them fly? It is not just one or two sectors but all businesses in a region. This is particularly true for the Atlantic region which is why it has moved to accept the harmonized approach.
By what illogical leap can it be suggested that because the Atlantic provinces or Manitoba or Saskatchewan qualify for assistance, equal financial benefits should be provided by provinces that do not suffer major losses?
How can anyone rationalize such an approach? What kind of approach do they want when they say we should not distribute wealth according to the needs of a province or a region?
That is not a prescription for fairness. If we do not share in a way that responds to needs and loss it is a premise for selfishness. Statistical uniformity in no way builds economic futures or preserves a vibrant Canadian society. One size does not fit all in a nation as diverse as Canada. It never has and I do not think any provincial politician in their heart of hearts believes any different.
For example, Quebec and Ontario are the major beneficiaries of our federal tax regime for research and development, the most beneficial in the G-7. Do those governments want these credits to be proportioned on the basis of geography rather than economic reality? I think not.
No, certainly not. So why, when we are looking at another program, do they want the same? Is this not a contradiction? Is it not unfair and insensitive? I think so.
That is the heart of the issue and the key to fairness. Government assistance should be determined by the principles of need and performance. That is the way to be effective. That is the way to be cost efficient and that is the way to build a 21st century economy.
Let me repeat this is not a political issue, or it need not be. It is not an accounting debate. Rather, it is a question of Canada's economy today and into the next century. Sales tax harmonization is a solution that gives Canada's affected provinces an effective, more fair and competitive tax.
Our challenges are too pressing, our opportunities too real to squander on petty partisan politics. Let us get on with looking at the issues clearly rather than applying emotional blinkers or dog in the manger logic or simply saying something in order to help the party's flagging popularity.
Yes, our approach and assistance will make the maritimes more competitive. Any province can seize a clear and concrete solution to the problem by getting onboard themselves. The solution does not involve a dramatic fiscal cost. They will benefit quickly and surely through greater competitiveness and real cost savings to their businesses. That should be carrot enough and reward in full.
There are provinces like those in the Atlantic region. They want to make the transformation but face a tough short term downside. That is a barrier they cannot overcome by themselves so we have developed a cost shared short term solution to help them over the hump. That is the essence of partnership and of real national leadership.
Different players bring to the table different problems and different resources. By working together, drawing on our strengths and compensating for our weaknesses we all emerge stronger. The strength of a value added sales tax regime is that it is a better tax for today's economy.
For Canada's place in that economy we face the problem that its advantages have not been fully harmonized with provincial-federal taxes. If we work together through the format and approach our government has set up, the result will be a tax system that makes us stronger, that helps deliver more jobs and that is fairer to us all.
This is the end of my remarks, but I could have gone on for hours, because at last we have an approach that makes sense.