Mr. Speaker, I am pleased to speak on Bill C-70.
The hon. member for Fraser Valley West conveniently forgot about the fact that the Atlantic premiers right now are going across Canada telling Canadians that because of the harmonized sales tax they have created a competitive advantage for companies which are located in Atlantic Canada. The harmonized sales tax will reduce or eliminate the embedded provincial sales tax which is already part of the cost structure of companies in provinces other than those which have harmonized their sales tax.
It is curious that the hon. member for Fraser Valley West also ignored that Canadians are saying they want the tax included when
they go to the cash register. They want it included because they are tired of going to the cash register, having the tax added and not knowing what price they are going to pay. Again the Reform Party is just not listening.
Until now the GST has had a bewildering array of complicated and sometimes contradictory rules for complying with the federal sales tax system in this country. Bill C-70, with its 130 or more amendments to the federal GST, goes a long way toward sorting out the confusion and easing the compliance burden. This bill responds to the views of Canadians across the country. Their message is very simple: Keep it simple and make the rules clear. I am very pleased to support the bill in the House today.
We have already heard why a value added tax is needed in Canada. Again the Atlantic provinces are taking full advantage of harmonizing their sales tax. It is creating a competitive disadvantage for companies in provinces like Ontario and other provinces which have higher costs. Over the medium and long run, companies in provinces that have not harmonized their sales tax will be competitively disadvantaged. I too have some concerns that the GST creates some anxiety for consumers, but in the medium and long run we will be more competitive if we harmonize our tax.
Others have spoken about the efforts made to implement the value added tax to make its rules more fair and simple. I would like to take this a step further by emphasizing some of the specific steps we have taken to clarify the more confusing aspects of the federal sales tax system in Canada. In many respects clarity is the source of simplicity and fairness. Once the rules, procedures and rationale are clear, Canadians will have a better understanding of both how and when the value added tax system applies to them. In the short history of the GST this has not always been the case.
We have heard how confusing the current tax legislation is regarding municipal services, with some services being exempt but similar services being taxable, depending on the circumstances. This situation has led to confusion and a perception of unfairness. By making most municipal services tax exempt, the government will clarify the situation and create a more level playing field. The compliance burden will be eased since municipalities and their appointed bodies will no longer be confused about when and if a service is taxable.
Specifically the situation regarding recyclable products will be cleared up. Under existing legislation there is confusion about the appropriate tax treatment for collecting these products. Are they garbage and therefore tax exempt, or are they not? Bill C-70 clarifies that the collection of recyclable materials and their delivery to a recycling facility is included in the exempting provision for garbage collection.
The treatment of public utilities has also been a source of befuddlement. Under current rules, services provided by a utility to a municipal government are tax exempt if the utility is owned by the government but taxable if it is not. This no longer will be the case.
Bill C-70 stipulates that the sale of gas, electricity, steam or telecommunications services by a public utility will always be taxable, even if the municipality receiving the service owns or controls the utility. This consistency across the board will make complying easier for municipalities. It may not please everybody, but on balance I think it is fair. Those municipalities that have their own utilities hopefully will be provided a transition period so they can provide for these costs in their budgeting procedures in advance.
In telecommunications services, this sector will also benefit from the measures we have taken to clarify the sales tax legislation as it applies to this sector. We will remove the confusion by defining more clearly what a telecommunications service is and when this service is defined as being performed in Canada.
This ease of compliance is reflected in other steps we have taken, steps that apply to the business community as a whole in Canada. We have heard about new rules that simplify the treatment of used goods and employee and shareholder benefits. These rules will benefit consumers and businesses alike.
Businesses will also find it easier to comply due to changes in the way GST registrants report and pay GST on some purchases of real property. Starting in 1997, registrants who have to self assess GST on a taxable purchase of real property that is primarily for commercial use will not have to complete a separate return to report the GST on that transaction. Instead they will report the GST on their normal GST returns. Anything we can do to reduce the paper burden and reduce the complexity for businesses is a very positive step forward.
Similarly this bill will clarify the rules for export services by Canadian services. As the current legislation is structured, Canadian businesses have a hard time determining if services they provide to non-residents qualify for zero rating. This is because the general zero rating provision includes a test that is often difficult to apply. That test asks the question: Where is the service primarily consumed, used or employed?
For example, what is the answer for a collection agency that provides services to a non-resident client? Where are the agent's services being used or consumed by the client? Or training services provided by Canadian businesses to employees in Canada of non-resident businesses. Where are these services consumed or used, inside Canada or outside when the employee returns to work at home? By clarifying when these services qualify for a zero
rating, we will make it easier for Canadian businesses to comply with the rules for export services.
The amendments we are proposing will also make business in Canada more competitive in both domestic and international markets. I touched on that earlier. While the current legislation does provide a favourable environment for domestic suppliers of goods and services, there is room for improvement.
We propose to make improvements in a number of ways. First services provided by Canadian sales and purchasing representatives through non-resident or foreign businesses will be zero rated. Second, a rebate will be provided for GST charged on installation services supplied in some non-resident businesses. Third, a broader range of goods and services relating to international transportation will be zero rated. Fourth, a zero rating provision for goods delivered abroad will be expanded.
These and other provisions will make Canadian business suppliers more competitive with non-resident suppliers who do not pay GST on their business inputs. These provisions are complemented by the steps we have taken to make Canada a better and more attractive place to do business. For example, we have extended the visitors' GST rebate beyond tourists to include non-resident businesses with employees who travel to Canada. These businesses will now be able to claim a rebate for GST they paid on short term accommodations. While these changes may not ease compliance for businesses directly, they will make the tax easier to bear.
We have taken steps with charities that will simplify the situation for them and also ease the weight of compliance. This is especially true for the smaller registered charities that only have basic accounting systems. For those organizations the current requirement that they apportion inputs between taxable and exempt supplies has proven onerous. It forces them to review all the rules and determine whether each of their activities is taxable or exempt. In some cases the judgment is purely arbitrary. Bill C-70 introduces a new streamlined method for charities to collect and remit tax on their taxable supplies.
We have heard from my hon. colleague about the amendments that apply to education. These changes too are designed to ensure that the GST is clear and less complicated in this area. The changes address inconsistencies in the eligibility criteria that apply to schools, universities and public colleges for claiming rebates. They make the definition of vocational schools more specific to exclude those institutions which do not primarily offer educational training.
It is fair to say that the amendments we are proposing to the value added sales tax system in Canada will make it easier for everyone to comply with their GST obligations. This lack of clarity in the current legislation has been among the biggest complaints from those Canadian citizens who honestly are trying to meet their sales tax obligations. We have heard these complaints and we have responded by introducing the amendments I have mentioned along with scores of others.
We have designed a sales tax system that is more user friendly, if I may use that term. It is a system that is easier to comply with and at the same time increases compliance and much needed revenues.