Mr. Speaker, thank you for this opportunity to participate in today's debate as we discuss harmonization. I note with some surprise that the Bloc has chosen an economic issue for the subject of its opposition day today as it has been acknowledged by many, in fact, in its own party that the Bloc has not historically had the strongest understanding or position on economic matters.
We all recall the infamous words of Caroline St-Hilaire, the former Bloc MP for Longueuil—Pierre-Boucher, who resigned her seat in the last Parliament: “The economy is constantly a black sheep for us. We are profoundly uncomfortable when it comes to discussing the economy”.
While the Bloc may be profoundly uncomfortable discussing or protecting the economy, our Conservative government is not and we are also not uncomfortable cutting taxes. Lower taxes are part of our Conservative government's ongoing commitment to a smaller tax burden, improving the tax system, and creating an environment where Canadian businesses can flourish to create new jobs today and for tomorrow.
As the Canadian Council of Chief Executives declared:
The federal government clearly has done everything it can to reduce tax rates within the boundaries of prudent fiscal management. The next major steps in forging a more competitive corporate tax system must come at the provincial level. The single most important measure would be the replacement of remaining provincial sales taxes with value-added taxes, preferably harmonized with the Goods and Services Tax.”
While not the most exciting of topics, harmonization is a key economic issue as it has been recognized as tremendously beneficial for job and business growth. As Jonathan Kesselman of the C.D. Howe Institute has stated:
--harmonization would reduce Canada's corporate tax burden, make Canadian firms more internationally competitive and make Canada a more attractive place for foreigners to set up shop, injecting job-creating direct investment into the economy.
The recognized benefits of harmonization include supporting job creation by allowing businesses to save time and money by the move to a simpler more effective tax structure that features: first, a one tax rate, not two; second, one substantially harmonized tax base, not two; and third, one level of tax administration, not two.
Moreover, these efficiencies create cost savings for businesses that will make their way to consumers' wallets. I note that independent academic studies have certainly shown that to be the case when New Brunswick, Nova Scotia and Newfoundland and Labrador became fully harmonized provinces.
As Finn Poschmann, also of the C.D. Howe Institute, recently indicated before the Standing Committee on Finance:
What happened in 1997 when the eastern provinces harmonized...is just a terrific example. The prices of some things that hadn't been taxed before under the provincial tax went up. Other things stayed the same and some other prices went down. Overall the broad price level in the eastern provinces dropped by roughly the amount of the decline in the net tax rate. So the competitive markets delivered a very quick pass-through of the lower tax on consumer prices.
Indeed, that is why our government continues to be committed to working with the other provinces to facilitate the transition to a fully modernized, efficient and harmonized tax system in Canada. We also continue to encourage the provinces to reduce their corporate income taxes, so that Canada can reach the goal of an overall 25% federal-provincial corporate income tax rate by the year 2012.
As the Bloc should be aware, Quebec has not fully harmonized its sales tax. Even the Quebec government has admitted this fact noting in a recent press release that there was a major difference between the QST and the GST and that the province was ready to agree to make the necessary adjustments for full harmonization.
Quebec currently retains full control over the design and application of its provincial sales tax. It also administers Quebec's value added tax as well as the GST, an arrangement dating back decades.
Years ago the Quebec government sought to collect the GST for the federal government. The then government agreed and the province of Quebec has been compensated for that since. In fact, last year alone, Quebec was paid approximately $130 million to do just that. What is more, the federal government has paid Quebec about $1.8 billion to date to administer the GST in that province alone. In addition, I understand the federal government does not charge Quebec for the development of GST-specific rulings which it relies on to administer the GST.
In further respect to the situation in Quebec, the Bloc should be well aware that the province decided to introduce its own Quebec style value added tax, or VAT, something quite different from full harmonization. In contrast with New Brunswick, Nova Scotia, Newfoundland and Labrador, and now Ontario, Quebec did not have to adopt federal HST legislation. It did not have to sign a comprehensive integrated tax coordination agreement, and has kept full control over the design and administration of its value added tax. Ontario and the three existing fully harmonized provinces have joined that federal framework. Quebec has not. That is the arrangement as it exists currently, and that is the arrangement that the province of Quebec has recently suggested it might wish to alter.
We in good faith remain open to discussions with the Government of Quebec, not the Bloc by the way, about changes and any federal assistance that may be appropriate if such an agreement is met. The Government of Quebec clearly appreciates our gestures of good faith, noting that it “welcomed the openness shown by the federal government regarding fair treatment for Quebec with respect to harmonization of sales taxes”.
As I indicated earlier, we encourage all provinces to reduce their business income tax rate as we have done at the federal level so that Canada can be recognized as a lower tax jurisdiction. Reducing the tax burden on Canadians will be important in getting through this global recession and positioning our country for future prosperity.
For those in the Bloc, the Liberal Party, and the NDP who would argue for higher job-killing taxes on businesses large and small, I ask them to listen to the words of a recent OECD report that examined what tax structures best promote economic growth. The OECD concluded that corporate taxes are found to be most harmful for growth, and that high corporate taxes may reduce incentives to invest in innovative activities.
Our Conservative government has long been a champion of lower taxes. Let me list some of the tax reductions that we have brought forward since forming government in 2006.
First of all, we cut over 100 taxes, including the GST from 7% to 6% to 5%. We introduced important tax credits, such as the Canada employment credit, the working income tax benefit, and the child tax credit.
We cut taxes in every way that government collects them, personal, consumption, business, excise taxes, and more. Our government removed almost 950,000 low-income Canadians completely from the tax roll. We reduced the overall tax burden by nearly $220 billion, the lowest level in nearly 50 years. We have built on our legacy tax relief by reducing taxes on savings with our landmark tax free savings account.
What does that mean for a typical hard-working Canadian family? It means a total savings of over $3,000 a year. That is $3,000 in their pockets, where it belongs, instead of feeding big, bloated, do-nothing government bureaucracies in Ottawa.
While that might not mean something to the Bloc, it does to most Quebeckers and most Canadians. Families and individuals want to work for themselves, not government, and they appreciate our actions to lower their tax bill. How so? As a Winnipeg Free Press editorial noted:
Tax Freedom Day this year [referring to 2008] arrived four days earlier than last year and the trend over the last few years has been positive as a result of cuts in personal income taxes and reductions in the GST.
We built on our proud record of tax relief in Canada's economic action plan by leaving even more money in Canadians' pockets, especially low- and middle-income Canadians. Measures introduced in budget 2009 alone will provide $20 billion in new personal income tax relief. We have increased the basic personal amount that all Canadians can earn before paying federal personal income taxes. We have increased the top of the two lowest personal income tax brackets so Canadians can earn more income before being subject to higher tax rates.
We are effectively doubling the tax relief provided by the working income tax benefit to encourage low-income Canadians to find and retain a job. We have provided up to an additional $150 of annual tax savings for low- and middle-income seniors through our $1,000 increase to the age credit amount. We are introducing three tax measures that will provide immediate stimulus and encourage investment in Canada's housing stock. These are: a temporary home renovation tax credit of up to $1,350 per family; a new first-time home buyers' tax credit of up to $750; and an increase in the amount that can be withdrawn without penalty under the home buyers' plan, up to $25,000.
We are also reducing taxes in order to support businesses as they make difficult adjustments in these changing economic times. Tax relief measures for businesses include: a temporary two-year measure that allows businesses to fully expense their investments in computers in the year they were acquired; further assistance for Canada's manufacturing and processing sector by extending the temporary 50% straight line accelerated capital cost allowance rate to investment in manufacturing or processing machinery and equipment undertaken in 2010-11; and increasing the amount of small business income eligible for the reduced federal income tax rate of 11% to $500,000 from the former $400,000 to help small businesses reinvest and grow.
No wonder Canadians, especially in Quebec, were so enthusiastic in their praise of the federal budget. Public interest groups such as the Board of Trade of Metropolitan Montreal heralded it by stating:
The [Conservative] government is on target with measures designed to support companies, including easier access to credit, tax breaks, and tariff relief to stimulate investment....
Reducing the tax burden on individuals and implementing a tax credit for home renovations will encourage Canadians to participate in the recovery.
Listen to what well-respected Montreal Gazette columnist Jay Bryan had to say about the budget:
If you were to mark [the finance minister] on the effectiveness of his budget measures in getting the economy moving again, you'd have to give him a better than passing grade.... [It] will also give a major boost to the economy....
Budget 2009 builds on the previous measures to help the businesses that I alluded to earlier. Most important, businesses will also benefit this year from previously pledged reductions in the general corporate income tax rate to 19% in 2009 and going forward further reductions to 15% by 2012. By next year Canada will have the lowest overall tax rate on new business investment in the entire G7. That is a good thing because we are making Canada a better place to invest and a better place for job creation.
However, do not just take my word for it. Listen to what the influential Forbes publication had to say in its 2009 edition of “Best Countries For Business”:
The economic downturn that's swept the globe has crushed financial markets, exploded unemployment and shaken confidence in the banking system. The disaster isn't shared equally, though. Some countries are in a much better position than others to rebound from the current malaise by attracting entrepreneurs, investors and workers. Who are they? Our fourth annual Best Countries for Business ranking looks at business conditions in 127 economies. Topping the list for 2009: ...Canada is up four spots to No. 3.
Clearly, our Conservative government has taken decisive steps to help Canadians across this great country. This volatile environment means that we have to take the necessary steps to improve the Canadian economy and restore confidence to ensure our country's long-term prosperity. As this government has stated from the outset, lower taxes are an essential part of making that happen.
Quebec for its part chose to operate its own sales tax system and not to adopt a harmonized system. We respect that was its decision and its choice. Should Quebec choose to harmonize its sales tax, like Ontario, New Brunswick, Nova Scotia, or Newfoundland and Labrador, then we will be prepared to talk about that transition and potential transition funding. We will do that in good faith to make that happen for the province of Quebec.
That is something among many other things which the Bloc, after nearly 20 years in perpetual opposition, could never do for Quebec.