Madam Speaker, Reformers do not really know how the Liberals can or will deliver on their red book promise to scrap the GST. However, it is their problem, not ours.
I remember vividly discussions about the strategy which Reform should follow during the election campaign. The suggestion came up that the idea of scrapping the GST is very popular; it would gain us lots of votes. However, cooler rational heads prevailed and said we could never deliver on that. It is not responsible to go to the people of Canada during an election campaign and say we will get rid of tax revenue worth $17 billion when the country is going bankrupt. Appropriately, we did the responsible thing and said we would eliminate the GST, as the people of Canada want, once the budget was balanced.
The difficulties in which the Liberals find themselves could not have happened to nicer guys.
I will address a question which has not been raised. The defence on the other side is: "We did not say we would get rid of it; we said we would replace it with something else. We would harmonize it". Harmonizing sounds like a good and interesting idea. However, it does not meet the requirements I believe the people of Canada have for a taxation system.
The general idea of a value added tax is supported widely in academic circles. It is a tax which encourages savings and investment. At a low tax rate it would not be too onerous and it would catch people in the underground economy who do not pay taxes. Whenever they spent their money, they would end up paying taxes.
The political process so destroyed the basic idea of a value added tax that it is appropriate it is not called a VAT like in Europe, but that it is called the GST. It is ironic that the cause for this abomination, the GST, this caricature of a value added tax was caused by the Liberal opposition members who sat on this side of the House. I have heard it told repeatedly how it all came about.
In a heated attack by the rat pack, the Minister of Finance of the day, Michael Wilson, without thinking through what he did, gave in to the incessant demands that at least food should be exempted from the value added tax. All the experts who have studied the history of the tax have told us that from that moment on we ended up not having a good GST, not a good value added tax. We ended up with the current abomination because he opened the floodgates
on exemptions which resulted in all kinds of difficulties which now exist. It is they who made it such a hated tax.
I sat through many, many weeks of hearings. Nearly a thousand witnesses told us what an abomination this tax is. Some episodes of how terrible a tax it is stand out in my mind. These difficulties will not be eliminated by harmonization; they will be aggravated.
The most memorable event was when a gentleman came to testify before the finance committee with a shopping bag full of cancelled receipts from his store. He runs a used goods store in Toronto. His business had shrunk by over one-half. He said: "People see a price of $100 on a used refrigerator. They say that is what they want and to ring up the sale on the cash register. The sales attendant hands a bill of $107 to the individual who says that he wants it for $100. We tell the customer there is GST on it. After a long debate which really irritated and made all the customers in the store mad, the individual gave up and said to cancel the sale and take back the refrigerator".
It was a most dramatic representation. The store owner said it was not an isolated incident. The receipts he had in the bag all had been cancelled within six weeks. He said: "It has been going on like this. My business is being wiped out. Where do these people go? They go next door, to smaller stores, to entrepreneurs who are less honest than I am and they end up not paying the GST". This is just one example.
We remember the difficulties of paying GST when we buy five muffins but not if we buy six. There were representations from restaurant owners who told us they cannot stand the competition. When they sell a pizza they have to charge GST on it. However, someone can go next door to a supermarket where the pizza is all made for them and all they have to do is pop it into an oven and they do not have to pay GST. That is highly unfair.
There are other things that are not very well known. The municipal sector is given special treatment. That sector does not have to pay GST. Fine, but consider that it has been found that some functions carried out by municipal workers can be achieved more efficiently and cheaply by contracting to the private sector. Lo and behold, when municipal employees collect the garbage there is no GST but when it is contracted out, there is GST. There is a tax on privatization. Is this right? This is highly inefficient.
We heard horror stories about the way in which the GST encourages the underground economy. Many conferences have been held and papers have been written on this subject. There are stories.
We hear about people who order a wing built on their house. They are given two prices, one with GST and one without. They
can pay by cheque if they wish or alternatively, they can pay by cash which will cost 7 per cent less. As we heard again and again in the finance committee, the people who offer these dealings not only fail to pay the GST, but they probably do not report the income from their work either.
We heard horrible stories about businesses being affected by a strange ruling. Natives are not subject to the GST. A store located outside the border of a reserve used to be quite profitable selling candy to children from the native reserve. It was doing fine, thank you. Children coming home from playing baseball would buy candy. Now the store is not able to compete any more. Somebody has opened a store on the other side of the border and does not pay any GST.
To summarize my point, the government is holding out the hope that all the difficulties existing with the GST, which the people hate so much and which we heard so much about in the finance committee, can be wiped out by harmonization. That is not going to be possible because of the abomination of having so many different exemptions to the tax. It is a terrible tax that cannot be saved. That is the conviction I have reached.
I therefore move:
That the motion be amended by deleting the word "should".