Mr. Speaker, I am pleased to participate in the debate of Bill C-70, particularly the Group No. 3 report stage motions. The parliamentary secretary has nicely laid out the rationale for those particular motions. As a result of where we have gone with this debate I would like to recap a
couple of the things we are talking about with regard to the so-called harmonized sales tax.
Members will know that before the goods and services tax, there was a federal sales tax which was included in the pricing of manufactured goods. It generated some $18 billion in revenue for the government in its last year of operation.
The Mulroney government made some changes and introduced the goods and services tax. Interestingly enough, in the first year of operation the goods and services tax generated for the government some $16 billion in revenue, which was actually $2 billion less.
In essence, what happened is that Canadians got a $2 billion tax break right off the bat because of the introduction of the GST, but they were angry about it. They were angry about the GST. It really is ironic that Canadians were given a $2 billion tax break about which they were angry.
Canadians were justified in a sense because it was a change. It was visible. Not only that, it was visible on each and every purchase that Canadians made.
When I went to the shelf I saw an item and the price was there. I made a purchase decision and I went to the cash register, but at the cash register the price I had to pay was different. It was more. It was significantly more. That, I believe, is the reason Canadians do not like the goods and services tax. It was a change. It was visible to them at the cash register but not when they made their purchase decision. There is a bit of irony in that.
Then came the election. Before the election the Liberal Party was in opposition. The role of the opposition is to be the opposition and to deliver blows that would tenderize a turtle, as someone once said. Liberals in opposition said "we do not like this tax because Canadians said they did not like the tax". They did not like the optics of it. However, after a number of years there was not much to be done about it. All of a sudden it was generating $18 billion in revenue to the government.
The question becomes is there anybody who supports a policy, as the Reform Party has been outlining, that would simply eliminate the tax. Is there someone who would say let us have no more GST ever again, it is over, gone and done? That is what the Reform Party has been suggesting that the government promised in the last election campaign. Just get rid of it. Add the $18 billion to the deficit.
Nobody in this place would want to do that if they were the government of the day. We cannot afford to add $18 billion to the deficit. That is clear to all Canadians. All Canadians know that it was not just to get rid of the GST, it was to replace it with a revenue neutral system. That means that we will have to collect the same dollars, but we will look to see if there is a better way to do it. In fact, the red book said, as well as many of us in our speeches and literature, we will, through the finance committee, with all parties, have an opportunity to look and see what is the best way to deal with this.
As it turns out, the best replacement for the GST is the GST. That is what it really comes down to. It is unfortunate in a political sense, but in a fiscally responsible sense we have to do the right thing.
The finance committee studied the issue. During its 35 days of hearings I was there. I heard what business and industry were saying to the finance committee. They did not want two systems of consumption tax at both the federal and provincial levels. They did not want to have two sets of forms. They did not want to have two different bases. If the tax was going to be kept in its general form as a consumption tax, what they wanted was to have the federal and provincial taxes harmonized. They wanted to have it applied to the same base. They wanted one return. That would be more efficient and more cost effective for business.
In fact, if we bring the provincial component into the GST system, that means that provincial taxes will be eligible for an input tax credit the same as the GST. Members will know that provincial taxes which are charged on top of each other through the process of production, et cetera, account for about 30 per cent of provincial revenues. That means that Canadians have been paying tax on tax. In fact, harmonizing the taxes will save businesses 30 per cent of the provincial taxes which they would otherwise have to pay. That money will be available for businesses to pass on to consumers through lower pricing. That is extremely important.
The proof is in Quebec. Quebec has had the best of all worlds. It did not wait for the federal government to harmonize and to come forward with this bill. It made its own deal and harmonized itself.
There is a harmonized tax system in Quebec and it is taking advantage of a lower tax base, of lower pricing so that its exports have out performed other competitors in Canada.
Its exports have performed much better. Even though Canadian exports are at record levels, Quebec exports have been much better. Quebec is a model to follow. It has proved it. The consumers have accepted it and the system has worked. That is what we really have to look at.
One final point I would like to make has to do with the underground economy. Everyone knows that whenever a tax is introduced into a purchase scheme, there will be people who say "Gee, 7 per cent GST. If I don't do this, if I do this economic activity under the table, I can reduce my price to the consumers by
7 per cent. I won't remit it to the government". We have underground economic activity.
Ontario, for example, where the tax is 8 per cent, has 15 per cent combined cost. Businesses looking at this will not forego the opportunity to recover 15 cents on the dollar by doing its business under the table. In fact, by streamlining the system, by harmonizing those taxes, there will be a major disincentive to operate underground. These are other benefits that will come.
I would simply like to raise that we have, with the three provinces in the maritimes which have combined rates of some 17, 18, and 19 per cent, will have real rate reductions, will have price reductions and will have a more efficient tax mechanism to operate with, which will be in the best interests of consumers in the maritimes.
I am sure when the other provinces come on side with the HST that Canadians will all benefit from the initiatives that this government has brought forth in Bill C-70.