Mr. Speaker, my colleague caught me a bit by surprise. He usually takes a lot more time to explain things. With all the nonsense he said in the last part of his speech on Bill C-31, about us, separatists, acting in bad faith, I was hoping his speech was going to take much longer. However, I have to admit that he caught me by surprise.
I am pleased to take part in the third reading stage debate on Bill C-31, a piece of legislation the official opposition considers very important, especially-and here is what I want to focus on-the part dealing with the compensation paid to three maritime provinces within the partisan initiative launched by the Minister of Finance to harmonize the GST in that region of Canada.
Before tackling head on this compensation issue, I want to go over some historical facts about the GST, although this part of our history is recent, well, maybe not so recent, since it only dates back to the time the Liberals were in the opposition, but that is still a part of our history which is, in my view, full of contradictions and cover-ups about the commitments made by the Liberals concerning the GST. When addressing such an issue, I think it is always important to remind the people of Quebec and of Canada of the many commitments made by the current government.
First of all, let me remind the House that, when the Liberal Party of Canada was in the opposition, when its representatives were sitting on this side of the House, they energetically decried the new goods and services tax introduced by the Conservative government. At the time, how many Liberal members made a big fuss and even raised quite an uproar just to condemn this Conservative policy? Even during the election campaign, at the end of which 54 members of the Bloc Quebecois were elected and now sit in the official opposition, the current Prime Minister made some pretty clear commitments concerning the GST. He said that it was out of the question for him to keep the GST if he ever was elected head of government.
I remember that, four or five months after he was elected, the Prime Minister even said, I think it was on May 2, 1994: "We hate it and we will kill it". There are people in Quebec as well as in Canada who voted for the Liberal Party because they hated this tax, because they believed in the commitments of Liberal members, because they believed that the Liberals, then in the opposition, were going to fight this tax with all their might and eventually, as the Prime Minister and many officials had promised-including the Deputy Prime Minister who was forced to resign lately because of this promise-because they believed that the Liberals were going to abolish the GST as promised. Instead, the government is resorting to the usual smoke screens and introducing the first phase of an in depth reform of the GST signed by the three maritime provinces, that is, New Brunswick, Nova Scotia and Newfoundland.
Not only is this in complete violation of the Liberal election promise but this agreement, this vague attempt at a reform of the commodity tax will be extremely costly for all Quebecers and all Canadians. Why? Because the agreement announced approximately one month ago but the technical details of which have not been released yet provides for the payment to the three maritime
provinces of a $961 million compensation over the next four years, that is, almost $1 billion.
This is $1 billion that all Quebecers and all Canadians outside the three maritime provinces will have to pay to compensate for a loss of revenue due to the harmonization of the GST, to this vague attempt at a reform, to this mockery of an attempt at keeping their words by the Liberal Party of Canada, when they had in fact promised to kill the GST.
The government is spending $1 billion to make us believe that it is doing something about the GST. One billion dollars to make the GST disappear, not disappear in the true meaning of the word, but to hypocritically bury it in the price of products in the three maritime provinces. Frankly, it is unacceptable.
That is not what Quebecers and Canadians had understood during the election campaign. In fact, two government members resigned recently precisely to show that the Liberal government did not fulfil its promise, its campaign commitment to abolish the GST. These two Liberal members had the courage of their convictions and decided to inform the public that they could not live with the fact that their party did not fulfil its promise when it signed that agreement with the three maritime provinces.
What precisely are the terms of this agreement? Just like the Government of Quebec, the Government of Alberta and the Government of Ontario, we tried to know the exact terms of the agreement the federal government concluded with New Brunswick, Nova Scotia and Newfoundland. We tried to get the details, but all our efforts have been fruitless. Why is the Minister of Finance hiding the exact terms of this agreement from the people of Canada?
We know, in general terms, that the compensation principle applied by the federal government is as follows: the federal government decided, unilaterally, that the provincial sales tax and the federal GST together could not be more than 15 per cent. It has also decided unilaterally, without any consultation, that it would compensate the maritime provinces if the provincial sales tax and the GST combined exceeded 15 per cent. If you look at the three maritime provinces, you will see that the PST and GST combined are just over 19 per cent.
So the federal government has decided unilaterally that the new harmonized sales tax would not exceed 15 per cent and that it would compensate the provinces for the difference between 15 per cent and 19 per cent. The federal government has decided to compensate the governments of the three maritime provinces for this loss of four percentage points in sales tax, even though it represents tax relief for consumers in these provinces.
How did the government estimate this loss? We do not know. We do not know where it got the figures with regard to tax revenues and to the cost of this harmonization exercise, but the finance minister is asking us to trust him, to give him a free hand, just like he does every time he makes deals behind closed doors and then imposes these things upon us, begging us not to ask too many questions. He is telling us to trust him.
The government is giving close to $1 billion to three maritime provinces for a partisan policy, a policy whose sole purpose is to show that the government is doing something about the GST. Do you not think it is a bit expensive? Do you not think it is expensive for Canadian taxpayers outside these three maritime provinces and also for Quebec taxpayers? Between $200 and $250 million of that sum will come from Quebecers. And the remaining $700 million will come from taxpayers from the rest of Canada.
If, in the opinion of several government representatives according to a member of the Liberal Party, we have to pay such a price every time we need to harmonize policies, every time we need to improve the economic and commercial operation of the federation, I wonder what is the value of the federalism these people have been defending desperately since we have come to this place. I wonder what it is worth if a part of the population of Quebec and Canada have to pay such a price every time people on the other side of the House want to improve the tax system.
I will quote someone I do not quote often because our ideas rarely coincide, particularly on constitutional matters. However, I want to quote the chief editorial writer of La Presse , Mr. Dubuc, who, of course, supported our point of view last week-end when he wrote: ``The federal government and its Minister of Finance made a huge blunder when, in order to convince them to harmonize their sales tax with the federal GST, they promised the Atlantic provinces to give them $960 million''. That was written by Alain Dubuc.
He added: "The Chrétien government had to buy them to convince them to adopt the GST system because he absolutely needed their support to be able to claim that he replaced the GST with an harmonized tax of 15 per cent. In other words-and I am still quoting Alain Dubuc from La Presse -$1 billion in public funds were spent in a partisan way for the sole purpose of allowing the Liberal government to claim that it was fulfilling its promise''.
Seeing the official opposition in agreement with Alain Dubuc is like, in Quebec, seeing Gérald Larose in agreement with Ghislain Dufour. Suffice it to say that opposition to the Liberal government's ridiculous GST policy is pretty much unanimous.
More and more Canadians are saying no to this sort of short sighted policy, this one step at a time strategy of claiming successes at various levels. I would say the Liberal Party is a past master at this game.
Quebec harmonized its provincial sales tax with the GST in 1991 and has had one system since then. The two systems of taxation were combined, with one administrative body, the Government of Quebec, administering its own sales tax in addition to the goods and services tax for the federal government. It did not cost the federal government one red cent, except, of course, what it understandably pays for relying on the services of the Government of Quebec to administer the federal goods and services tax.
There was never any question of the sort of compensation that is part of the agreement between the three maritime provinces and the federal government. Why was that? Because in Quebec, everyone recognized-business and the public alike-that some degree of harmonization was necessary in order to facilitate commercial transactions and the operation of the economy. We understood that and we did not need a $1 billion nudge from the federal government. We understood that and we did not need to be bribed to improve the Government of Quebec's system of collecting and administering taxes.
Why must there now be compensation of close to $1 billion for three provinces that are very cosy with the federal government? Why must Canadians in other provinces and Quebecers be made to pay for this local agreement between the federal government and the three maritime provinces? There is something not right about this policy.
Quebecers and Canadians need to understand what the federal government might do for these three provinces further down the road. Not only is there compensation of close to $1 billion paid for nothing-partisan compensation from federalists who normally support this government-but, furthermore, four years from now when the federal compensation comes to an end, it is not impossible, and it is even probable, that equalization payments will take over where the federal government's subsidy leaves off.
Why is this likely to happen? Why must Quebecers and Canadians alike see hundreds of millions of dollars more added on to this bad and partisan contract between the federal government and the three maritime provinces in the next few years? For a number of reasons.
I shall not go into the complex details of the equalization formula, but allow me to give an overview of how it works.
There is an equalization system in Canada, which affects certain provinces, including Quebec, in order to ensure that the poorest provinces, the ones which cannot raise sufficient tax revenues to ensure equivalent levels of services from east to west in Canada, can provide those services. When a complex formula is applied to calculate the taxation base for each province, the ability to collect taxes, this is where equalization payments come in for the poorest provinces.
One of the criteria for applying equalization payments is the tax base. In other words, if a province or provinces-in this case the three maritime provinces-have their tax base reduced by a federal policy related to the changes in the GST, equalization kicks in automatically to replace this reduction in the tax base.
In other words-returning to what was said at the beginning-at this time, when you take the average of the sales taxes in the three maritime provinces and add the GST, you get a taxation rate of over 19 per cent. The Minister of Finance decided it would be 15 per cent in future, so he is lowering the three maritime provinces' tax base by more than 4 points, more than 4 per cent. By doing so, however, by voluntarily reducing consumption taxes by 4 or 5 points, under a partisan agreement that hits all taxpayers in the pocket book, the equalization formula will necessarily kick in because the tax base has been lowered.
Once the $961 million are paid to New Brunswick, Newfoundland and Nova Scotia, there is a mechanism which will force all Canadians and Quebecers, with the exception of the Atlantic provinces, to continue to pay this average compensation, hundreds of millions of dollars through equalization payments, because the Finance Minister has decided, in the name of the government, to show off. By doing this he wanted to prove that his government is going ahead with the tax reform, that it has begun to hold its promises on the GST. In fact, the government is doing no such thing since it had actually promised to abolish the GST once in power.
This agreement is getting costly. First of all, it settles nothing, in terms of sales tax harmonisation. There is still going to be a sales tax and there is no single system for the consumption tax in Canada. Second, equalization will come into play in the coming years to add to the first billion dollars paid by the federal government. Third, there is this whole mess created by the finance minister and the government through this agreement.
As if the constitutional muddle he created was not enough, the Prime Minister added to it, through the finance minister, by signing secretly, behind closed doors, this agreement on the GST with three Atlantic provinces, knowing full well that Quebec had harmonized its tax in 1991, at no cost. They did not boast about it. When Quebec costs nothing and Quebec is the most efficient and even one of the most effective partners in the Canadian federation in
trade and economic terms, they try to keep it under wraps, because the nasty separatists do not make good trading partners in this federation.
We are trying to find out more about this agreement. We are trying to find out more about the subject of our remarks this morning, that is, the part of Bill C-31 on the $961 million in compensation paid to the maritime provinces. What is distressing, however, is that we have had no response from the government. We asked for the detailed agreement between the federal government and the three maritime provinces. And we, the Bloc Quebecois, the official opposition, are not the only ones to ask for it. The Government of Quebec asked for it, as did the governments of Ontario and Alberta. Instead of responding, making things clear and revealing the details of the agreement, the Minister of Finance hid behind terms that needed tidying up, saying it would have to wait until next year, perhaps.
This is unacceptable. The Minister of Finance signs an agreement with some members of the Canadian federation that costs us $1 billion, and he refuses to tell us how he reached the figure of $1 billion. This is not normal. He will say: "You know the details. Sales taxes are at approximately 19 per cent in the maritimes at the moment. I have decided unilaterally that the combined tax, the new GST, will be no higher than 15 per cent, and I have decided to make up the difference".
There are a number of other questions the Minister of Finance is refusing to answer. The first one that comes to mind, which I mentioned earlier, concerns the real cost of the agreement. We are not talking simply about $961 million. There are other implications in terms of equalization payments.
The second question is: "How were the calculations made?" Any figure can be arrived at, it is only a matter of working from solid assumptions. But on what basis, on what assumptions was this deal with the maritimes reached, and how was the famous figure of $961 million arrived at?
For example, what is the anticipated revenue from the new goods and services tax in the three maritime provinces for the coming years? Do we at least have projected revenue for 1997-98, 1998-99, 1999-2000 and the following years? It is essential to know this. It is essential because, in addition to reducing the rate in the maritimes from 19 per cent to 15 per cent on average, the tax base has been extended, the new tax has been extended and will from now on apply to services in New Brunswick, in Nova Scotia and in Newfoundland. What more will this bring in, in terms of revenue? Is the extension to services of a 15 per cent tax-which was not applicable to services before-going to generate so much revenue that it will compensate for the reduction of the present tax on goods from 19 per cent to 15 per cent?
It is important to know this. If this extension generates extra revenue, could it be, this is the third question, that the compensation of nearly $1 billion-$250 million and $700 million of which are paid respectively by Quebecers and people in other Canadian provinces-is not necessary? The Minister of Finance said that it was necessary. This is not the way to govern a country. This is not the way to inform the public about the activities of a government, about justified actions of a government.
People need to be given explanations, they need to know this kind of detail to be able to judge the appropriateness of this deal. For the moment, the impression we have-not only us but people like Alain Dubuc, who are not necessarily and even rarely on the side of the official opposition or the Bloc Quebecois-is that it looks suspicious. Not only does it seem partisan, we have indications that it really is, according to the consensus reached outside the maritimes, in particular in Quebec, Ontario and Alberta.
Another question deserves an answer from the Minister of Finance, namely: "What were the alternatives?" Considering what happened in Quebec, where both taxes were harmonized without it costing the rest of the country a single cent, where Quebec succeeded in balancing its tax base and found different ways of managing its taxation system effectively, how is it that no alternative was considered to the agreement reached between the Minister of Finance and the three maritime provinces?
Could it be that, if the Minister of Finance had done his homework, if it had not been only a partisan matter for the federal government, there could have been other ways of compensating for lost revenues in the three maritime provinces within their own taxation systems?
If the finance minister had acted properly, and had wisely and competently analyzed the evolution of the tax burden as well as the present tax burden of taxpayers in Nova Scotia, New Brunswick, and Newfoundland, he would have easily realized-it does not take a rocket scientist for that-that, by lowering the consumption tax from 19 per cent to 15 per cent with his new policy, he was doing them a favour.
However certain adjustments to the provincial income tax in these three provinces might have been necessary. Without increasing the total tax burden of people in these three maritime provinces, personal and corporate income taxes could have been slightly increased in these three provinces in order to offset the loss in revenue from the consumption tax. It would have been legitimate, efficient and normal since taxpayers in these three provinces will see their consumption tax reduced by four to five points over the next few years and, unless it is decided otherwise, forever.
Would it not have been more logical to find a local solution to a local problem of tax harmonization and efficiency? I think so, and I believe it does not take much figuring out to reach this conclusion. I believe that if the finance minister had really wanted to contribute to improved taxation and to the harmonization of a new tax across Canada, he would have gone about it differently. It would not have been difficult.
I am extremely disappointed by the government's handling of this issue. As I said before, until now we have not succeeded, just as the Quebec government and other provincial governments have not succeeded in obtaining details of this agreement.
Today, in this House, I would like to present the government with a formal request. Would it be possible to shortly obtain all the documents, not only the press releases and the media documentation, but also the technical data at the basis of the $961 million figure, the technical data which would support some sound projections on tax revenues in the maritimes and a cost projection for the harmonization?
When we spend $1 billion, it seems only reasonable that people know what they are paying for. Until now the finance minister's attitude has been outrageous. This scandalous decision comes after others like the $2 billion invested in family trusts which crossed over to the United States without a penny being paid in taxes on capital gains.
For two and a half years now, we have been asking the government to act on that issue. For two and a half years, we have been saying it is inadmissible, but the government does nothing; they sit there and say family trusts are unimportant. That is why $2 billion from two family trusts were transferred south of the border tax free. Today, the government realizes the problem and says maybe we should review the taxation system. For two and a half years, we have been saying that the taxation system makes no sense. Now the government is asking the finance committee to find a solution. It was high time.
To avoid repeating the mistakes due to its incompetence, why is the government not listening to the official opposition, the Government of Quebec, the governments of Ontario and Alberta, Canadians and Quebecers who are asking that it suspend the process leading to the payment of a billion dollars in compensation to three maritime provinces, and that the whole question of harmonization of the GST be submitted to the next meeting of finance ministers which is to be held around June 18?
It seems to me that the process would be somewhat more open if the government were to table all the relevant data relating to the GST and make them available to all representatives of the Canadian provinces and Quebec, so they could talk about it and find ways to improve the federal tax system and the provincial tax systems.
It seems to me that, for once, it would be nice to have the Minister of Finance follow his own logic. We are talking about harmony, not just harmonization, between the federal government and the provinces, but when the time comes to make concrete decisions, goodbye harmony. As my colleague from Rimouski-Témiscouata would say: poof! harmony.
It seems to me it is high time that, for such important questions regarding taxation of consumer goods and services, the Minister of Finance be more open, that he table the technical documents we request and, moreover, that he discuss this question of harmonization of the GST and provincial sales taxes with his provincial counterparts at the next conference. In the meantime, he should stop implementing processes like this one which involves payment of $1 billion in compensation.
I think that most Quebecers and Canadians would be better off if the Minister of Finance were to listen to us, for once, and stopped acting that way. For all these reasons, on top of asking for suspension of the payment of $961 million, I urge all my colleagues in the official opposition, in the Bloc Quebecois, to vote against this bill.