Madam Speaker, we support harmonization with the provinces provided they are all treated equitably.
Because the Government of Quebec benefited from harmonization at the time, there was no discussion about compensation. Now that the eastern provinces have followed the same path of harmonization at a loss of more than 5% of their revenue, the provincial Liberals negotiated with the federal Liberals for a compensation of $1 billion total.
In retrospect Quebec thinks it should be compensated. However it is not the only province that will not receive compensation upon harmonization. Ontario will not, Alberta will not and also B.C. will not. These provinces pay substantially to those provinces that are being compensated.
In 1993 the Liberal government verbally promised to eliminate, scrap and abolish the GST. The Liberal red book itself was much more vague however. It only promised to replace the GST with another tax, a vague system that was supposed to generate revenue, claimed to be fairer to consumers and small businesses, promised to minimize disruption to small businesses and promised to promote federal-provincial fiscal co-operation and harmonization.
The Liberal red book pledged “Give the all-party finance committee of the House of Commons a 12-month mandate to consult fully with Canadians and provincial governments and to report on ways to achieve tax fairness, simplicity and harmonization. In particular, the committee will be mandated to report on all options and alternatives to the current GST”.
The Liberals led voters to believe that they would scrap the GST, not hide it in the price in three provinces which they have tried to do.
The Liberals used to think the GST was not visible enough. As the former member of Acadie—Bathurst and Liberal finance critic once said “The whole idea of visibility was seen by many Canadians as being a deterrent to free spending governments which would just raise the tax, get the money it needs at election time for promises, spend it foolishly and then all of a sudden be in extremely difficult times”. Even the Liberal MP for Kenora—Rainy River said “To keep the GST hidden from Canadians is despicable”.
The Liberals said that harmonization is a step toward replacing the GST. The Minister of Finance said “There is some possibility that when we take power in 1992 the provinces will entrench the GST in their sales tax regimes—It would be extremely difficult to undo in that instance, but I would consider removing it nonetheless, and in all other scenarios I am committed to scrapping the GST and replacing it with an alternative”. The minister also called the GST a regressive and unfair tax on living.
The Minister of Finance promised to do away with the tax and replace it with an alternative method of collecting moneys. Why has he not done so? Why has he not honoured these promises? Because the GST is, in fact, a fair and equitable method of collecting tax for this country. It was a well thought out plan on the part of the Tory government.
In April 1996 the federal government along with Nova Scotia, New Brunswick and Newfoundland agreed to harmonize their sales taxes and to bury them in the price. It was no surprise that all governments involved were Liberals. To entice the three provinces to participate, the Liberal government paid almost $1 billion in compensation according to negotiations struck. This allowed the participating provinces to reduce their sales tax for a combined federal-provincial rate of 15%.
However, they failed to realize, or maybe they did, that far more goods and services would now be taxed. Those living in the three Atlantic provinces have been hardest hit. The HST attacks low and low middle income Canadians the most. Instead of paying only the GST, now they must pay the GST and HST, an increase of 8%, on electricity, fuel, oil, food, children's clothing, gasoline, telephone, haircuts and school books. Those items that saw a decline in tax applied were those items high income Canadians can more often afford to purchase. Examples would be cars, stereos, home appliances and boats.
As Senator Robertson so eloquently put it “What is more equitable about a tax that makes it cheaper to buy a fur coat and more expensive to buy a jacket for a child, or more expensive to pay for electricity and less expensive to purchase a new car?”
Canadian taxpayers are footing the bill for this agreement. One billion dollars went from the pockets of taxpayers to the three maritime provinces to compensate them for lost revenues. Those provinces are receiving more than twice the money of their anticipated shortfall. In total the three provinces would have a revenue shortfall of $395 million but in fact they are receiving total compensation of $971 million.
Why was it necessary to overpay these provinces by more than $570 million? Was this a good business decision or just an incentive to get the provinces to sign for a bad deal?
All this money was paid up front. However, the provinces may end up raising other taxes to make up the shortfall in future years.
We have heard from the provinces. It is clear that citizens are not pleased that the three provinces are being compensated through tax dollars. The government has gone so far as to offer those provinces that did not collect enough revenue, namely, P.E.I., Saskatchewan and Manitoba, their share of compensation if they decide to harmonize.
Although the agreement was not announced until the 1996-97 fiscal year, and even though the payments are meant to cover a four-year period, Ottawa booked the entire amount to the 1995-96 fiscal year. That lets Ottawa play a shell game with its deficit numbers. The finance minister said he can do this because he said before the end of the 1995-96 fiscal year that he would seek such an agreement. The auditor general has slammed this accounting trick.
The Liberal government has broken its promises over and over again. The manner in which it harmonized the sales tax in the Atlantic provinces is evidence of this. Canadians have been deceived over and over by the Liberal government. First it opposed the proposed GST and now it takes credit for it. Example, the Prime Minister in London just a couple weeks ago.
The harmonized sales tax does not even come close to matching the red book's fine print. The GST is still here. It is the three provinces which are replacing their sales tax, not Ottawa.
The red book promised a tax system that minimizes disruption to small businesses. Retailers make it quite clear that tax included pricing would have caused major disruptions. Businesses selling in these three provinces from elsewhere in Canada will be required to collect and remit both taxes. No such burden will be faced by merchants in the three harmonized provinces when they sell to the rest of the country. This is both another cost to business and yet another barrier to interprovincial trade.
We applaud our PC senators who were successful in amending the harmonized bill. They were able to postpone tax included pricing until a time that provinces representing a majority of the population agreed. Tax included pricing in only three provinces would have driven up the cost of doing business. As a result there would have been added costs for everything from national advertising to the cost of reticketing items that are normally shipped from elsewhere with the price already included.
In closing, allow me to quote the hon. member for Saint-Hyacinthe—Bagot “The Liberals have done a patch-up job. In the three Atlantic provinces the existing GST and the provincial sales tax are being replaced with a single tax, called HST. But the fact of the matter is that it is the same tax. It is the same GST with a different name, with approximately $1 billion in bonuses for the maritimes. They have done a patch-up job to meet their election objectives. They have made a partisan patch-up job at public expense and at the taxpayers expense with the taxes paid to the federal government every year.”