Madam Speaker, I am going to speak about improvements to Canada's federal goods and services tax. There are over 130 improvements and the government is introducing them to simplify the GST and to increase its fairness. These changes do go a considerable way toward replacing the GST as we know it with a better system.
The GST as we know has been a source of much controversy. There is nothing as topical as something everyone dislikes and no one likes taxes. That is not surprising.
It was not long ago in this country that nobody paid taxes because there were none. At the turn of this century there were no national income, corporate or sales taxes for anyone to pay, rich or poor. Believe it or not, in 1900 Ottawa got most of its revenues from customs duties. I suspect that this could be the reason our political ancestors promoted Canada as a great trading nation.
But we live in a different time and in many ways a much different country, a country cited as one of the finest in the world in which to live. One of the distinguishing features that makes this country of ours the envy of others is the priority we place on quality of life. We are known the world over for social programs we have devised to ensure a decent quality of life for everyone.
Taxes unfortunately are the duties and dues that we pay for the privilege of membership in this country and this society. The taxes we pay ensure a common richness. And let us face it, the GST is a tax that brings in $18 billion a year, or 13 per cent of the total federal revenues. Without a tax like it, our social programs would be in jeopardy, our debt problems would be deadly, and our national advantage as an international economy would be at risk.
Having said all this, I want to say also that the government has been correct to criticize the GST as it was. In so doing, we were responding to what Canadians told us. Canadians told us that the GST was poorly conceived. They told us it was an outrageous example of overlap and duplication that came out of bureaucracies. They told us that the GST was cumbersome and that in particular it cost small business too much time, too much energy and too much money.
The legislation being introduced now both simplifies and clarifies the application of the GST and also streamlines the administration. In doing this it introduces a greater fairness in the system and lays the foundation for a national harmonized sales tax. Taken together, the measures that we see in the bill represent a major step toward replacing the GST as we have known it. They respond to what Canadians have been telling us.
In looking at alternatives to the GST, the all-party finance committee of the House went to Canadians for advice. It listened to nearly 500 witnesses and read more than 700 briefs from consumers, professionals, businesses and individuals. What did the Canadian people tell us?
Canadians told us to do what is sensible. They told us to fix the problems that were there. They told us not to run off and create some other new or strange scheme to adjust to, to do the same job as the GST and risk the same complexities. They said: "We need the $18 billion, we understand that. The thing is in place now so fix the problems and get rid of the irritants. Fix the duplication and create sales tax harmonization. Fix the headaches that we have by
clarifying the rules and making it simpler and fairer". This is precisely what this legislation starts doing. In so doing, it shows what can be accomplished by simply responding to what Canadians have told us to do.
Our other colleagues in the House will speak to the issue of sales tax harmonization which is in the legislation respecting three of the maritime provinces. Today I do want to comment more on the measures that address the headaches that affect all Canadians in this legislation and which are also being dealt with at the same time.
In developing the changes, many of which are technical and sector specific, this government went straight to many of the groups, organizations, sector leaders and professional associations affected by the tax. We told them we had the tax and asked them what we could do with it to make their life somewhat easier. We wanted to know what we could do to fix their problems with this legislation.
What we heard in response resulted in this legislation with about 130 different changes affecting multiple sectors of our society. The package introduces measures to simplify the operation of the tax for many businesses and non-profit organizations. It introduces measures that make compliance easier and clarify confusing aspects of the tax. It also introduces measures to improve the fairness of the tax both for the consumers and for businesses.
I wish to elaborate on a few points. First, well over one-third of these proposed modifications are aimed specifically at simplification. These include streamlining the tax treatment of charities and non-profit organizations. They include a simplified calculation of employee and shareholder benefits for Canadian businesses. Businesses can now make a one step tax calculation using the same information they use for their income tax purposes. The modifications include measures which simplify transactions related to used or second hand goods, which have become a significant part of the economic activity in this country.
The package also includes proposals to clarify the application of the tax and, in particular, to ease the burden of compliance for small businesses. These changes were done to ensure that there is more precision in the application of the GST and that it does not complicate administration unnecessarily.
They clarify certain educational services such as those provided and what we are now defining as public colleges and vocational schools as well as universities. They involve streamlining the administration of tourist rebates, something that is very important in this country as an industry, and extend the eligibility to these rebates to non-resident businesses.
There is also the much needed clarification of the GST in areas relating to financial services, to trusts and estates and changes to existing partnership rules.
Finally, this package of measures restructures the GST to make it fairer for all Canadians. This is accomplished by ensuring competitive equity among businesses and applying the tax equally to all consumers. A variety of modifications restores the international competitiveness of Canadian service providers, equalizes the tax treatment of health care services and introduces a fairer application of the GST to housing rebates.
The themes are simplification, clarification and greater fairness. These have all been the guiding principles in developing these changes. Many of these measures being proposed are technical and strategically aimed to deal with specific problems in certain sectors.
In the amount of time I have here today it would be impossible for me to review each adequately or in sufficient detail. I know all the members have access to that material. Consequently, I would like to draw the attention of the House to some general examples of the improvements which are in this legislation.
I should first remind the House and its various members of the invaluable contribution being made to the well-being of our Canadian society by Canadians and Canada's charitable organizations. However, when the GST was established the rules were developed to address the activities of the largest charities. Many smaller charities have found these rules to be too onerous for their use. Yet combined together these small charities, precisely the smaller charities, do much of the charitable work in the country.
This legislation proposes new and simpler rules for all charities but, in addition, new rules were specifically designed for smaller charities which will simplify compliance for the GST for the smaller charitable group. As a result of these changes significantly fewer charities, about 10,000 fewer to be exact, will have to register for the GST at all. For those that do remain registered, 10 to 12 per cent of all charities, the rules will be simpler, particularly for fundraising activities, for filing returns and for claiming rebates. I think that is very important and very positive. This will help our charity sector increase the range of its activities in a time that fiscal restraint is forcing many to become more dependent on the network of goodwill that exists among our volunteers and our community based organizations.
Further, a number of changes are proposed to make the federal sales tax system fairer in its application in the health care sector. We all know especially with our aging population how important
the health care sector is to Canadian society and how much more important it will be in the future.
There will be changes to the treatment of services provided by health care practitioners who are not medical doctors or dentists. A greater degree of fairness is being introduced to exempt from GST the services these practitioners provide. For example, the list of exempt health care practitioners will be extended to include dietitians who meet the criteria for health care professionals in five provinces. As a result, using that example, dietitians will be able to provide their services exempt from federal sales tax to individuals, health care facilities and public sector bodies starting January 1, 1997.
An added advantage of this measure is that it increases professional regulation of health care practitioners who are requesting an exemption. This makes their services more financially accessible to the public.
A number of changes are also proposed to extend or clarify the zero rating provisions as they apply to certain medical devices and associated services. For example, the zero rating of hospital beds will be extended to purchases by all health care facilities, including long term health care facilities. Currently the sale of hospital beds is zero rated only when purchased by a hospital or by an individual with a written order from a medical practitioner. I think we can see that there are positive elements in the legislation.
The zero rating of the cost of modifying a car, for instance, to meet the needs of an individual using a wheel chair will also be expanded. Orthopaedic devices will be zero rated when they are made to order for an individual or when they are supplied under prescription.
These are sensible changes which are being introduced at an appropriate time, as I said before, when the needs of an aging population are increasing. I do not think there would be any argument in this House that these are beneficial to certain segments of Canadian society.
I go to another sector, the municipal sector. We used to have various complications concerning the GST, for instance, garbage collection. These will be alleviated under this new legislation. The collection of garbage will now be exempt from GST when it is provided by a municipality or by a government.
Similarly, services to remove snow, ice and water, maintain water distribution, sewage or drainage systems or repair and maintain roads and streets and sidewalks, these all will now be exempt from GST when they are supplied by the municipality. This government proposes also that the collection of recyclable materials be included in the exempt provision for the collection of garbage. That is important when we are trying to help our environment in this country. These efforts, simplification and clarification in the application of GST, will have a beneficial effect for the environment and for different levels of government, namely the municipal level.
There is another sector this provision has a beneficial effect on, the agricultural sector. Here again the list of zero rated supplies is being expanded to include automated and computerized feeding systems, specified mulchers, crop shredders, transportable conveyers and elevators, and certain wagons and trailers.
It is always important when we develop legislation that we treat all the sectors across this country, whether it is industrial, agriculture, municipal levels of governments or health care sectors, that there is something that is going to help a number of the organizations in this land.
There are changes to the existing rules for the benefit of builders of subsidized residential complexes to ensure that they also have equitable treatment for themselves as builders, together with non-subsidized housing.
There is a broader range of goods and services relating to international transportation which can and will also be zero rated, as will services provided by purchasing representatives to non-resident businesses.
These things are technical. I do not think they are the most exciting but I know to the people who are concerned with this legislation they are important changes. They will have a benefit in areas where people were complaining to us before. I know the members of the finance committee heard these complaints, and this legislation is the response.
There are many other proposed changes to the tax treatment of international transactions that will improve the administrative efficiency and the competitive advantages of Canadian businesses. I could go on with more examples but these changes address the inequities, the complexities and the unnecessary obstructions that have made the GST so unpalatable to Canadian citizens, Canadian businesses and different levels of governments.
They bring needed simplicity, clarity and fairness where issues sometimes were cloudy. In making these changes, this government has responded in large measure to not what a government wanted, or the government side of this House wanted, but what Canadians told us were problems.
In addressing these technical amendments to the GST, we are not talking only about the harmonized provinces. We are talking about across Canada. It is a response to the irritants in a system of a badly designed tax and we are trying to improve it. This is not a perfect world. There is no legislation that is perfection that I have ever seen in this House any former House or probably any future House. But we are moving forward with improvements.
That is what legislation does. That is our job as responsible people trying to administer fair taxes, simpler taxes and equitable taxes in a country.