Madam Speaker, first of all, I wish to thank the hon. members for Capilano-Howe Sound and Calgary Centre, who worked very hard with the finance committee in preparing the report on the future of the GST.
We worked very closely together. We travelled across Canada and they really supported our position that the amendments suggested by the committee were valid.
In part of the process we went through we looked at 20 different alternatives to the GST. It would do us well to recall very briefly those tax alternatives we looked at. At the time everybody on the committee, Reform, Bloc and Liberals said that we had to replace that tax. We could not just abolish it because we needed the revenue. So what tax alternatives did we look at? There were probably five different categories.
The first category of tax replacement was that maybe the tax could be abolished without replacing it and three scenarios under that category were looked at.
The first was that maybe the stimulus to the economy from getting rid of the tax would be so enormous that the economy would prosper simply by eliminating the tax. If that worked, why not eliminate more? It was the old supply side, trickle down Reaganomics that does not work. It was rejected unanimously by the committee.
The second alternative was to reduce government expenditures. However, to reduce expenditures by $17 billion in one year would have been too much for even this economy to swallow. We have made tough cuts and have been able to reduce program spending over a four year period by about $14 billion. That would have been even more dramatic and it would have had a terrible effect on the growth of the economy at that time.
The third alternative was to cut transfer payments to the provinces. At that time the transfers in cash were about equal to the net take on the GST. However, look at the implications that would have had on spending programs in the provinces. Look at the implications that it would have had for the programs that members on all sides of the House have asked us to support as a federal national government.
The next category of replacement was income tax alternatives to the GST. We had five of those: a personal income surtax, an exchanging of tax bases with the provinces, a flat tax, an additional flat tax add-on to the personal income tax, and a corporate income tax increase.
In essence, abolishing the GST and putting it all into personal income tax would have meant a 21 per cent increase in federal
personal income tax, which would be unthinkable when the top marginal rate in Ontario is 54 per cent.
There are many who said it could be done with corporate taxes. That would have meant an increase of more than 150 per cent in corporate taxes in that year.
Those are eight of the alternatives at which we looked.
The third category of replacement was revenue taxes. The first of these was a turnover tax. A tax of 1 per cent to 2 per cent could be imposed on every financial transaction, every business transaction, every sale which took place. The trouble is that it had been tried for many years in Europe. Although the rate is low, it cascades. Every time a transfer of goods or services takes place within a corporation it would be added on. It would not take account of efficiencies. That is why every European country which has used it rejected the turnover tax.
Then there was the payroll tax. It would take about a 3.5 per cent payroll tax to replace the GST. Some people advocated it. It would have been simple but who would have been paying it? Only the workers. Only the people who are already taxed by way of payroll levies and income tax. It would not have hit those who were retired. It would not have hit those who were living off enormous incomes which were not earned. It would not have been fair. It would have been a killer of jobs. We had to reject it.
The fourth category involved miscellaneous proposals for replacing the GST. We looked at a wealth transfer tax. We looked at green taxes. We looked at taxing gambling and lottery winnings. However, even if we could get the maximum out of those three different taxes, in their total they would not have accounted for more than about one-fifth of the GST. A lot of these were taxes which had been rejected in the past for very valid reasons.
The fifth category of replacement taxes which was looked at were the consumption based taxes. Six alternatives to the GST were looked at.
The first was the manufacturers' sales tax. Parliaments had unanimously rejected that in the past. It only applied to about 70,000 taxpayers. There were hundreds of thousands of exceptions to it. It was a very narrow base and it hurt manufacturing. It made manufacturers non-competitive.
A wholesale tax was looked at. It would have had somewhat the same impact, although not as bad as the manufacturers' sales tax. However it still had many anti-competitive aspects to it.
Next we looked at going to a straight federal retail tax, a single stage tax. But when we examined all of the provincial retail sales taxes which are single stage, a lot of testimony was given about how unfair these taxes were and how non-competitive they made businesses. Businesses ended up paying all sorts of retail sales taxes when they should not have.
Also there were certificates of exemption so that if a farmer wanted to buy a hammer to fix his barn he did not have to pay the sales tax on it. Many of these sales slipped through the net and businesses were being unfairly penalized. No one suggested that we go to the retail sales tax.
The next one was an addition method value added tax. This is where we started to look at the value added tax concept.
The 18th alternative that we looked at was a theoretical proposition, but only the academics have ever supported it, no one ever said it could work in practice and we rejected it.
The nineteenth alternative was one that had considerable merit potential. It was the business transfer tax. This would have been a value added tax that could have possibly worked in an ideal world where you did not have a federal state but a unitary state, only one level of government, where all governments could come on board at the same time, where you tax all the same base but you had a real problem accounting for imports and exports which are fundamental to our economy.
Universally tax experts, the business groups, the small business groups, the big business groups, the chambers rejected the business transfer tax which had previously looked as if it could have been the panacea.
The next alternative was to keep the GST the way it is. We could not because it imposes such a burden on small business and all Canadian taxpayers because they are supporting 10 different taxes at the retail level which is totally unfair. We could not support it even in terms of big business.
The system in Canada is the only system in the world where there is more than one tax at the retail level. Canada has 10 different taxes. Any party that stands in this House and argues that this is good for consumers, good for business, good for jobs, good for our competitiveness is absolutely insane.
We concluded that this system would not work. The only thing that could work was a national value added tax where the federal GST is eliminated, the nine provincial retail sales taxes are eliminated and they are replaced with one national value added tax under one administration.
This has such benefits for consumers, for ease of compliance by small businesses, for doing business across this country, for making every business, small and large, competitive. This is why we have supported this proposition. This is why we look forward to seeing it come in.
It is why I wish to move an amendment to the amendment put forward by the Reform Party. The motion reads: "That in the opinion of this House the GST be killed, scrapped, abolished".
I ask that the period be removed out after that and include the following words "and be replaced with a system that generates equivalent revenues, is fairer to consumers and small business, minimizes disruption to small business and promotes federal-provincial fiscal co-operation and harmonization".