Mr. Speaker, I know it is hard to have peripheral vision but I too was standing when my hon. colleague was standing, and I thank the hon. member for letting me speak.
I do not want to take up valuable House time with further justification of restructured, harmonized federal-provincial sales tax. The facts have been clearly and convincingly addressed by my colleagues regarding Bill C-70.
The HST will eliminate hidden taxes that inflate prices and hurt exports. It is a simpler, more transparent system for consumers and business. An integrated approach makes possible a lower overall sales tax rate.
What I want to focus on today is an aspect of this legislation that has too often been attacked by those who place partisan politics and narrow regionalisms ahead of clear objective thought.
This issue is a decision by the government to provide a formula for short term adjustment assistance to provinces when they face significant structural costs to participate in the new system. Under this system adjustment assistance becomes available to the provinces that 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 full compensation for the revenue shortfall. That is the shortfall over 5 per cent of the current retail sales tax in one year, the same full compensation for the shortfalls in year two, half the amount of the shortfalls in year three, and 25 per cent of the provincial revenue shortfalls in year four.
This is a short term measure designed for the period of significant transition these provinces will be going through. It will end after four years, providing the provinces with sufficient time to adjust to the harmonized system.
It is important to note this is truly a joint program, not a one way gift. Under this formula there is near equal sharing between the federal government and qualifying provinces of the adjustment costs harmonization will entail over the four years.
Over the four year period the total adjustment assistance under the harmonization agreement with the three Atlantic provinces will be $960 million. I remind the House of what the finance minister has emphasized. This spending has been incorporated into our financial planning and will not jeopardize the federal deficit targets we have set out.
Some Canadians have asked why provinces cannot phase in full harmonization over several years, thereby eliminating the need for assistance. This approach has been tried in Quebec over the last six years. Unfortunately the result runs counter to making the new simpler for business. While it allows the provinces greater fiscal flexibility, the business community, especially small business, has made it clear that it prefers a one step approach to harmonization rather than the approach taken by Quebec.
The Quebec approach resulted in significant complexity and compliance costs for business. It meant adjusting to a new system and new rates in each of the transaction years. This greatly reduced the economic benefits of harmonization for the province as a whole. Because of Quebec's experience the three participating provinces have chosen to move to a single tax system all at once on April 1, 1997.
I am disappointed that some Canadians have attacked the entire concept of this adjustment assistance for a harmonized sales tax. They have a mindset that ignores history, misreads the present and lacks vision for the future.
Canadian history makes clear that government has played an essential role in our economic evolution and adjustments. Some examples of this role are tax and land grant support for the national railway system, negotiation of our Autopact, development of the St. Lawrence Seaway, megaprojects from Lloydminster to Hibernia, special tax conditions for oil and gas, research and development and small businesses. The list is long and honourable.
Many of these government actions and investments respond to opportunities but there is also a long and proud list of federal assistance for sectors and regions that face economic difficulties and dislocations or that must confront core structural change.
Equalization payments are an essential part of our constitutional framework. They recognize that all of Canada is stronger as a society and as a marketplace when we help less affluent provinces provide a basic level of public support and service.
In 1972 when the federal government instituted the income tax reform, every single province received adjustment assistance which totalled more than $2.7 billion over a seven year period. More recently the federal government has provided assistance to
farmers following the collapse of world grain prices. It is now providing compensation for the elimination of the Crow rate.
We have provided bottom line support for the maritime fishers who were confronted with the tragedy of the decimation of fish stocks. We shared equally in the cost of solving the tobacco smuggling problem in Ontario and Quebec.
These actions were neither charity nor partisan politics. These were actions of fairness, equality and the principles this country was built on. They are an essential reflection of the contract Canadians have struck with themselves, a nation building contract that says a critical role for government is to help when help is truly needed and where it can be truly effective. That takes me to the present.
Today we have to manage the commitment to assistance with more vigour, innovation and insight than ever before.
The world of global competition for trade, for investment, business opportunities and jobs demands that government remain constant and conscientious of the bottom line. A government that squanders resources imposed on the nation, the cost of high deficit, high taxes and high interests, these are job killers, future killers, hope destroyers.
It is this same challenging competitive environment that demands government continue to play a role in helping citizens, sectors and regions to meet their global challenge. It has to be a role in applying methods that work with today's resources in ways that will deliver effective, efficient advantage for future success and economic benefit. That is exactly what the government is doing with adjustment assistance for sales tax harmonization.
As a member from the province of Ontario, I believe it is a shame that the Harris government at Queen's Park has missed this opportunity to get onboard with Canada's harmonized sales tax. Let us not forget that on June 7, 1995 during Ontario's election campaign, Premier Harris said he was prepared to work with the Prime Minister and the Minister of Finance toward a simpler unified tax, that it seems ludicrous to have two different taxes, two bureaucracies to collect it and more paperwork.
Regrettably the Ontario Tories are now arguing that harmonization would shift taxes from businesses to consumers. They have also claimed that adjustment assistance is a bribe to other provinces. As I have just shown, it is nothing of that sort, and indeed Ontario regularly benefits from adjustment assistance of various kinds paid to Ontario such as stabilization payments each year.
The door is still open for Ontario to join this new harmonized federal-provincial sales tax. The advantages for business would be tremendous. Ontario is Canada's major manufacturer and exporter and since harmonization means improved competitiveness that means more jobs. I am convinced that no province would benefit more from harmonization than Ontario. The longer Ontario waits to harmonize, the more business and consumer loss will be.
If we work together through the format in the approach our government has set, the result will be a tax system that makes it stronger, that helps deliver more jobs and is fairer to all of us. I support the compensation formula this legislation provides and that is why I urge all hon. members to put aside political grandstanding and join the government in supporting this legislation.