Mr. Speaker, I appreciate the question. I will try to answer it in the following way.
There is no question that if businesses are allowed to get credit for their input costs amounting to $700 million, as the hon. member put it himself, this savings is available for businesses to pass along to consumers. It is available but that does not mean they will pass it along. Let us assume that they do. There is $700 million that will then be passed along to the consumers. That is revenue neutral. There is no increase in costs, there is no decrease and everybody is happy.
What about this close to $1 billion payment to the three Atlantic provinces? Why was it made? It was made because theoretically-and this is all theoretical; we are in the realm of theory here-these three provinces would receive that much less in revenue by moving
over to a lower combined rate from their 18 to 20 per cent down to 15 per cent to make up for that loss in revenue which they would have received from their provincial sales tax. Because of this input system through the GST, because it is a different form of a tax, they have to be compensated.
To compensate three provinces at the expense of all Canadian taxpayers is something I certainly object to when it is not necessary to do so. Then there is the fact that it is a 15 per cent combined rate. This tax goes on goods and services that the GST did not go on before. This will have a dramatic effect and impact on the consumers of Atlantic Canada. It has an impact on those businesses which deal with Atlantic Canada that are located outside of Atlantic Canada because they have to sustain dual packaging, dual pricing. It adds a lot of complications and a lot of cost.
There is this argument that this is just like a GST. Instead of getting rid of or replacing the GST, I still argue and maintain that the government has entrenched the GST and has, in effect, introduced in those three provinces a 15 per cent GST. Remember when the Conservatives first introduced this tax and the Liberals on this side said they would have to get this rate and that rate down and make all these exemptions, which they did? However, the biggest argument against this was that once the bill was passed the government would be able to raise it and raise it.
I humbly submit that this could very well be the first step by a government, maybe inadvertently, actually increasing the GST from 7 per cent, which was originally supposed to be 9 per cent, to 15 per cent.
I understand and agree with the merits of the GST system and its advantages to business and how the tax does not cascade. It does make sense. However, when we look at the impact on the range of goods and services that Atlantic Canadians will now have to pay 15 per cent on rather than the previous 9 per cent, their costs will go up. Their out of pocket, disposable income will go down. They will find that they have less money for goods and services.
That is my argument in terms of the counter balance and the higher cost to consumers which offsets this $700 million in input costs, which does makes sense, which should help businesses and it should be passed along. There is also the fact that the provincial governments make less revenue and need to be compensated.
What happens at the end of four years? This billion dollar payment to the three provinces is supposed to be just for the three or four years. What if those three provincial governments still have not balanced their books and are still running deficits? What if they need more money for whatever they want to provide their citizens? What are they going to do? They are going to have to raise the tax. Now they have a convenient one tax they can raise, which is our other argument against this tax.
I am only trying to be fair in pointing out the criticisms of this tax. I think our party has been very good, even in the standing committee, of offering solutions. The members of the standing committee know that we tried very hard to work with the government to come up with a system to replace the GST. We looked at a lot of things but this piecemeal, partial harmonization will do more harm and create more confusion at a higher cost than if the government would have taken its time and done it right with all the provinces complying and co-operating rather than just trying to save the Deputy Prime Minister's political career.