Madam Speaker, after listening to the member for Calgary Centre I have decided to change my speech somewhat to include a discussion of consumption taxes.
I also served on the committee that travelled across the country. We talked to not just every day Canadians, but businesses and people in policy administration.
It was interesting when we got to the maritime provinces. I discovered the problems those governments were having in dealing with the revenues that were being generated through their provincial sales tax systems and what they were doing with them. When we talk about money being transferred through taxation systems it is important to not only consider taxation itself, but to also consider the other side, what does it do?
In Newfoundland much of that money went toward supporting its health care system. In your province of New Brunswick, Madam Speaker, the health care system and the educational system are among the systems for which province uses the money.
Industrialization has brought a changes over the years, indeed some will say over the centuries. The maritime provinces have seen a reduction in their industrial base. This has put great strains on their financial resources to maintain services which are similar to those in the rest of Canada.
The change in rates from 19 per cent to 12 or 13 per cent in some provinces is positive in a number of aspects. We must consider that through the process of equalization payments the wealthier provinces are already transferring moneys to poorer provinces. Whether they are given a subsidy or an implementation or a structural change which allows those provinces to change those rates for a brief period of time or whether it is transferred by way of equalization payments, it is all the same.
This is a better system. It allows those provinces to reduce the retail sales tax. It also allows them to move toward a more efficient tax. What do I mean by that? A retail sales tax by its very nature taxes business inputs. To put it simply, in my own riding, General Motors is a big manufacturer. The automotive sector accounts for approximately 6 per cent of our GDP. Because the province of Ontario levies a retail sales tax, General Motors will pay that tax on some of its input costs. For example, if it buys stationery and adding machines for its offices, it is paying retail sales tax as it is an end user.
As businesses are not social institutions, they transfer those costs on to consumers. The people who buy automobiles manufactured in the province of Ontario pay retail sales tax. They are paying a portion of that retail sales tax when they buy the automobile.
The province of Quebec has already harmonized its retail sales tax system. It does not have a retail sales tax, it has a value added tax, the GST. Through the administration of that tax, those companies which export their products worldwide are able to take the tax off those products. To show how ridiculous it is, within Canada there are nine retail sales taxes and one federal sales tax.
In the province of Quebec, General Motors in its plant at Sainte-Thérèse is able to take the retail sales tax out of that product. In other words, it can ship cars from Sainte-Thérèse, Quebec into the American market cheaper than a similar plant in Oshawa if only the retail sales tax is considered. Therefore, retail sales taxes have a very negative effect on exports. The export sector accounts for something like 30 per cent of Canada's GDP.
The government's move to harmonize taxes is very positive. A plethora of people are in the tax collection business. There is tremendous duplication. The governments in Fredericton and Charlottetown, and others, collect their own retail sales taxes. Some are having great difficulty. The administration of the retail sales taxes in those provinces has great inefficiencies in collecting taxes. Some fully admit that a lot people in those provinces have been able to escape the retail sales tax system.
It is very easy to escape the retail sales tax because it is a single stage tax. If you do not pay it once you sneak away from it entirely. The value added tax is a lot more difficult to escape simply because every stage of production adds a tax. If I buy something from one person I get a credit for the GST that has to be paid if I use it in my business. This is not so in the retail sales tax area. A lot of those provinces have had difficulty in the simple administration of the
tax. There is no question the retail sales tax, compared to a value added tax, is a lot less efficient tax.
What I really want to discuss today is the whole area of consumption. That is what this budget implementation bill is really all about. Everyone is very concerned to make the Canadian economy more efficient and to create a degree of harmonization across Canada.
Next Tuesday is the deadline for people to file their income tax returns. If there is one thing that unites us as a nation, although we might have a common dislike of the event, is the once a year requirement to file a federal income tax return. Generally speaking, the rules and regulations in the Income Tax Act are the same whether you live in British Columbia, the Yukon, Quebec or in Prince Edward Island. It is a commonality that happens across the country.
I have encouraged the Minister of Finance and I believe he has taken it somewhat to heart that what has to be achieved through the harmonization process is a consistent rate across Canada of the GST. Why would I say that? When I was in Newfoundland I was surprised and shocked to discover that there is a tremendous business in mail order sales. People buy things through the mail from Ontario rather than going to downtown St. John's or Cornerbrook to buy from a local retailer because the retail sales tax in Ontario is 3 or 4 percentage points lower than in Newfoundland.
In other words it was a negative for the people in Newfoundland. People were not buying their products from the local retailers but from Ontario solely because Ontario had a lower retail sales tax. The province of Alberta would gain the most because it has no retail sales tax.
It shows how the country gets into these ridiculous economic situations. It should be the end objective of the GST legislation that all provinces come onside so the rates are the same across the country. Then there will not be the problem of products moving between jurisdictions or how the rates are adjusted. This is just a ridiculous situation. People say a consumption tax is a lot fairer tax.
I heard the member for Calgary Centre talk about how we should have a flat tax. I say that a flat tax is not an efficient or fair tax. With a flat tax interest would not be taxable. The banks of the country must really embrace the Reform Party because any interest earned on revenues under a flat tax system would not taxable.
A flat tax would take the tax burden from the wealthiest and shift it to the middle income earner, those people making $65,000 or $70,000. In the Reform Party's magical world those people would be paying more taxes than wealthy people.
The President of the United States said: "I do not understand a flat tax. Everybody over $200,000 is going to be paying less taxes and those people in the middle income brackets will be paying significantly more". That says a lot about the Reform Party and who it represents.
As members will recall, Steve Forbes advocated a flat tax when he ran for the Republic nomination for president. I read an interesting comment which I will paraphrase because I do not have the article in front of me. It pertains to Steve Forbes.
The magazine said that the companies that Mr. Forbes owns, Forbes magazine and others, stood to gain $3 billion from the implementation of a flat tax. The magazine went on to say that it is not a fair tax and is not something America wants. I was not reading a leftist magazine. It was called Money magazine.
People who deal in this area know that the flat tax is not a fair tax. I can only suggest that the Reform Party is representing those who are not the common people of the country.
A lot of people think a consumption tax is a fair tax. It is a discretionary tax. If we do not buy that new car, we do not pay the tax.
The reason I want to talk about it is because I am personally very concerned about the level of consumer credit in the country. The government is also concerned about it. If we look at the budget and the dedication to reducing the debt and deficit, it is part of the process of getting the economy back on its feet again.
There has been an alarming growth in consumer credit. I talk about disposable incomes. Ninety-two per cent of disposable income in the country is now committed to fixed debt payments. That is the cheque taken home every week. In looking at the financial statements of the banks it does not take long to realize how that has changed. There has been a tremendous growth in consumer debt with our financial institutions.
Is that healthy for our country? There are some other interesting statistics coming from Stats Canada telling us that personal bankruptcies are at an all time high in the country. The banks will tell us that the reason they have to keep credit card interest rates so high, 18 per cent when interest rates have been declining, is because of personal bankruptcies.
Which is the cause and which is the effect? Are there personal bankruptcies because the banks have loaned all these people money to finance personal consumption? Or is it the other way around? I suggest that we have an alarming problem in the growth of consumer debt.
It is not unusual for the banks to send out credit cards to all university students, people who do not have a way to pay them. They are getting into debt at very early stages of their lives. I was alarmed the other day when I saw an ad which read: "Go to Costa
Rica for $85 a month". That was the end of the message. For $85 a month, someone can go to Costa Rica and have a good time on the beach. That is $85 a month for another year of their life. Many people are susceptible to that. A lot of people who are under stress and strain today are susceptible to such escape mechanisms.
What we are doing is compounding people's debt problems and they will never get out of these situations. Many of our young people think they are never going to be able to own a home because they are entrapped with consumer debt.
Governments try to help people such as ours has done with RRSPs in the last budget. We have recognized that a lot of people are not able to utilize those RRSPs. In their younger years they may be doing other things and are not able to save that money. We allow them to transfer those credits and eligibility for RRSP deductions. We allow them a second crack at it.
When I talked about 92 per cent of disposable income going into supporting fixed debt repayments, that is across this country. If we look at it intergenerationally and at people under 45 years of age, we will find they actually have negative consumer income.
Why is this a bad thing? It is bad because most recoveries in the economy have been driven to some degree by a prior mandate of savings. In other words, people save money to buy big ticket items, such as a car or refrigerator. We have allowed our financial institutions to so eradicate the concept of savings that people can no longer afford to buy anything.
I was interested to hear some of the statements of one of the manufacturers in my riding, General Motors. It said that in Canada the actual sales of automobiles is declining. The types of sales that are occurring are for smaller vehicles which cost less money.
People are holding on to their cars much longer than they have ever done before. The average age of a car is something like eight years now because people do not have any money. They have spent not only all the money they had but they also went into debt to financial institutions to finance an automobile, a house and now consumption.
How many times have we gone to a liquor store and watched somebody slip a card through the credit machine? In Canada, the average debt held on a credit card is something like $1,500. Think about that when we say 25 per cent of the people pay it off every month. The real average of those people who do not pay off their cards is astronomical.
We have developed a whole culture of debt. That has not happened before in Canada. These are alarming figures. I had an opportunity to discuss this with the Governor of the Bank of Canada. He too questioned whether these were not alarming statistics.
I am bringing it here to the House of Commons because I would like to alert parliamentarians of the real concern that not only I but many other people are starting to have about the growth of credit in this country. We should think about curtailing it. How do we curtail it?
Financial institutions are regulated through the Bank Act. We have had discussions about whether they should be selling insurance. Now they tell us they want to lease cars. Do we want our financial institutions to have such a hold on our economy that we cannot create growth?
People do not have the savings in order to gain stability, and stability is another big feature of this. People do not feel stable any more in their own environments. They are not even sure whether they will have their jobs next week. That is compounded by the huge debts they have built up.
Watching the bankruptcy statistics will only give further proof that we are pushing a lot of people into financial situations they cannot handle. Governments have problems with debts and deficits. An important thing we are forgetting is that generally people also have significant debt and deficit problems.
In conclusion, I am very supportive of the budget implementation legislation. I am very supportive of what we are doing here in Ottawa to get the government's fiscal and financial house in order. I believe as our debt and deficit come down, disposable income will start to rise. Hopefully in three or four years we will start to see reductions in tax rates occur in this country to free up more disposable income for the average Canadian. Then not only will Canadians be able to save for their future but they will also be able to invest in items to support our manufacturing sector.