John Manley

[Canadian Space Agency, December 10th, 1996]

Mr. Speaker, it is very unfortunate that this member seems to be manipulated by information being spun out by a former employee of the space agency whose position was terminated in a reorganization, who is in the process of suing the agency and who thinks that the official opposition can be a medium for trying to prosecute his lawsuit.

[Canadian Space Agency, December 9th, 1996]

Mr. Speaker, I take a great pride in my responsibilities as minister responsible for the Canadian Space Agency. It is something of which all Canadians should be proud.

What I find most often is an issue about pride in the Canadian Space Agency raised to me is the notion that it is located in the riding of someone who wants to break up the country that it represents.

[Canadian Space Agency, December 9th, 1996]

Mr. Speaker, the serious allegations referred to by the hon. member were about the fact that a secretary destroyed handwritten notes before they had been typed. That is all. I do not think it is that serious.

[Communications, December 6th, 1996]

Mr. Speaker, the hon. member will be pleased to know that at least one

Canadian provider expects to be offering a service in the very near future.

In addition, the hon. member will know that we launched a request for submissions to the private sector in the hope that on a fast track we will have a proposal by December 15 to establish a Canadian direct to home satellite service in the Canadian satellite slot.

The hon. member will also know that if we are to have a Canadian service we need to be able to ensure that the service is up and running. To do that it is necessary for us to ensure that there is respect for the law and that the licensing laws in Canada are applied.

He will know that a Canadian service provider would not be licensed to provide direct to home service in the United States. I am sure for that reason he would not encourage us to permit U.S. service providers to provide service in Canada.

[Communications, December 6th, 1996]

Mr. Speaker, I thank the member for his question. I think he understands that it is very important that we distinguish between the black market in this trade and the grey market.

It is an offence to tamper with the equipment that enables people to acquire signals from satellites without paying for them. That is the black market. In the cases that have been reported in the newspapers it has been a case of the RCMP endeavouring to enforce the law in respect of the black market.

With respect to the grey market generally speaking, consumers will acquire a system through an intermediary that orders the direct to home service from an address in the United States and they pay indirectly for that service. It is not our intention to take any legal action against those subscribers.

I would like to make sure that they understand that they do not have the ability to ensure that the service will continue to be delivered to them. In fact, they may be at peril of losing a fairly substantial investment of $1,000 to $1,500 in the equipment because there is no way to ensure that the American service provider will continue to provide them with service.

[Excise Tax Act, December 3rd, 1996]

Mr. Speaker, I found it a little hard to follow the question since Prince Edward Island is not one of the provinces that adopted the harmonized sales tax. One might argue that had they done so, they would have been re-elected.

I would like to take the opportunity to refer to the comments that were made by hon. members opposite with respect to compensation paid to the Atlantic provinces in order to make this transfer. Any time a transition is made on a very substantive policy issue, transition payments are often considered.

I point out to hon. members opposite that when the government moved to eliminate the transportation subsidy under the Western Grain Transportation Act, popularly known as the Crow rate, a full $1.6 billion was made available to western farmers in order to compensate them for this important transition. It was painful, there is no doubt about it. In the long term it is the correct policy, the best policy for the economy of Canada. It is the best policy for western Canada and the best policy for the western Canadian farmers who are making the adjustment. Never once did that party get up and criticize compensation being paid to western Canada.

How is it when another important change is made which is good for the economy of Canada and good for the economy of Atlantic Canada and has short term cost implications for the provinces involved that a one time transition payment is so offensive to that party? It sounds to me like the petty politics of regional envy.

[Excise Tax Act, December 3rd, 1996]

Mr. Speaker, I thank the hon. member for his questions. Other than confusing my interest in a system of tax which he later supported, he asked good questions. Let me begin at the end of his comments.

In order to understand the impact of a retail sales tax such as the provincial retail sales tax on the consumer, one must understand why the Atlantic premiers claim there is no sales tax. What happens with the existing retail sales tax is that not only is it applied to the price of the goods that are purchased, but it is embedded in the cost of every item produced and every service generated by a business in a province with that kind of tax.

Take the classic case of the barber shop which everyone likes to talk about. People say there is no tax on haircuts. Who do they think pays the tax that the barber paid when he bought his barber chairs? Who pays the tax that the barber paid when he bought all his hairdressing equipment? Who pays the tax that the barber paid when he bought all of the other services that are necessary for him to render his hair cutting service? It is embedded in the price of the haircut.

If we take the case of another business that is producing a good, then again the provincial sales tax systems as they exist in Canadian provinces cause a cascading of the tax. Every time in every stage of production tax is paid by the business on inputs, it is embedded in the price of the good that the business sells. Tax is applied to that, which includes tax on the tax previously paid, and so on down the chain.

Under the harmonized sales tax, all of that is eliminated. When a business sells a good to a consumer, the only sales tax is the sales tax that is applied at the retail level. There is no sales tax embedded in the original price of the good. That is why the Atlantic premiers can say with pride that there is no sales tax, because they have managed a system that is clean when the good is finally sold to the consumer. The consumer knows that the sales tax component he pays on that good is 15 per cent. It is demonstrated on the bill. There is no hidden sales tax. There is no hidden tax on a good in the Atlantic provinces.

Once again the member suggests, and the Reform Party has tried to make something out of this for several months, that somehow the red book did not represent this party's election promises in 1993. That of course is something the Reform Party did not try to proclaim at the time. Reformers were given the red book as were other opposition parties. Our promises were plainly made and they have been fulfilled.

If the hon. member wonders why we opposed the GST in 1989 and 1990, then I commend to him the report that we wrote. Circumstances have to be dealt with as they are found at the time. We recommended against implementing this tax for some of the same reasons that we are trying to fix it now.

As I spoke of earlier, with two sales taxes at the retail level, it is the only jurisdiction in the western world that has tried to do that. It was not a good idea. It was confusing. It was predictable that we would have the tax chaos which resulted. But there was no turning back the clock and saying we wished it had never happened and let us go back to the old sales tax and begin with that. Time had moved on.

When the Liberals campaigned in 1993 we made it very clear what we would do. Given the reality that the government of the day had already imposed the GST and that the introduction of the tax had been absorbed in the economy, we said that we would have the finance committee study it in the first year of government and prepare a report on how we might move forward to produce a better tax that would be harmonized with provincial sales taxes.

It is disingenuous of the hon. member to suggest that he can take things out of a 1990 debate in the House of Commons before the law was enacted, before the tax was imposed, before the retail community had to make the adjustments in order to apply the tax, before the manufacturers sales tax had been withdrawn and use them in debate in 1996 when we are trying to make the mess we found liveable for retailers and consumers. It might be good political rhetoric but it is not precisely what the hon. member

would like to be identified with in putting real and substantial choices before the Canadian public as we move on from here.

[Excise Tax Act, December 3rd, 1996]

No way.

[Excise Tax Act, December 3rd, 1996]

Mr. Speaker, I am very pleased to engage in this debate today on behalf of the government, speaking in support of Bill C-70, the harmonized sales tax. This legislation represents a very important first step for the replacement of the goods and services tax with an integrated federal-provincial sales tax which is going to be a better sales tax system for Canada.

On April 1, 1997, Nova Scotia, New Brunswick and the province of Newfoundland and Labrador will break new ground when the retail sales taxes and the GST in those provinces are replaced with the new harmonized sales tax. The governments of these three provinces are to be commended for their foresight in proceeding with the HST. Rather than waiting for the remaining provinces, they have put aside the political grandstanding and joined in what is a positive initiative for their taxpayers and the consumers in their provinces.

Next April the three participating provinces will have a simpler, less costly and more efficient sales tax system. The bill before us today is a distinct improvement over the GST and will represent for those three provinces a comparative advantage over the other seven provinces.

Sales tax under the new system will be charged at a single rate of 15 per cent on the same tax base as the GST. HST will not apply to goods currently not subject to GST, things like basic groceries, prescription drugs and medical services. The benefits to consumers are very important.

For Nova Scotia and New Brunswick sales tax will drop from a combined rate of 18.77 per cent to 15 per cent. In Newfoundland and Labrador that rate will decrease from 19.84 per cent to 15 per cent.

At present the sales tax system in Nova Scotia, New Brunswick and Newfoundland and Labrador is cumbersome, costly and complicated. The current system inflates prices. Businesses are now taxed by the provinces on the items that they buy to run their companies. Businesses pay a tax on these inputs. However, consumers pay for it in the end because the tax is embedded in the final price. Most consumers do not even know about these hidden taxes. The sales slip, for example, may say that 11 per cent or 12 per cent of the purchase price was provincial sales tax. However, a significantly higher rate may have been paid because of the taxes buried in the final price. About 34 per cent of sales taxes collected by the provincial governments are hidden in the price of the goods. That is over $700 million worth of hidden taxes. I find that unacceptable.

Consumers are also paying in reduced jobs and incomes because hidden sales taxes drive up the prices of provincial exports, thereby making those products less competitive on Canadian and foreign markets. All of this changes under integrated value added tax.

Harmonization will eliminate the $700 million in hidden provincial sales taxes because businesses will be able to claim an input tax credit for tax paid on the goods and services bought to make their products and run their operation. In other words, businesses will no longer pay provincial sales tax during the production and distribution process. That means consumers will no longer pay provincial sales tax on the provincial sales tax already included in the price of goods that they are buying from businesses. Instead, tax will apply once and only once on the final sale price of a good or service.

Consumers will benefit from lower tax rates on most goods, lower prices on many goods and knowing the full price before they get to the cash register.

Consumers will pay tax on a broader range of goods and services but the broader base will make it possible to keep the HST at a lower level. Including services in the tax base will spread the tax burden more evenly across all sectors of the economy. Governments must ensure that revenues keep apace with changes in the economy.

Service industries are the fastest growing component of expenditures in Canada. Some critics maintain that expanding the tax base will mean higher prices but consumers will benefit substantially from lower tax rates in each province.

For Nova Scotia and New Brunswick the new rate will effectively be almost four points lower than the current combined rate. For Newfoundland and Labrador the new rate will effectively be almost five points lower than the current combined rate.

As I just said, abolishing the provincial retail sales tax on business inputs will enable businesses to recoup the HST paid on business purchases, and as a result, these costs will no longer be hidden in retail prices.

The price of certain goods and services that were not taxed before might go up, but this increase will generally represent an amount lower than the provincial portion of the HST. Again, this will have been made possible by eliminating hidden taxes.

The HST will also ensure greater tax fairness for individual consumers and families buying various combinations of goods and services.

Evidence indicates that businesses will pass on tax savings in the form of lower prices. Past studies done in Canada and other countries show that when sales taxes are replaced with value added taxes, savings are passed on to consumers.

After the introduction of the GST in 1991, prices were monitored by the GST consumer information office. Its analysis of changes in the consumer price index showed that after adjustments, the increase in the CPI attributable to the GST was around 1.1 per cent.

The results also showed that overall the old federal sales tax was removed from prices and savings for the removal of that tax were passed on to consumers. The 1.1 per cent increase attributable to the GST was below the estimates the office had made prior to its introduction when the estimate was 1.4 per cent increase in overall prices, assuming that the savings resulting from the removal of the FST were fully passed on to consumers. The increase attributable to the GST was 1.5 per cent over the first three-quarters of 1991.

These figures included adjustments for inflation and other tax changes. After adjustments, prices in 20 out of 46 categories of goods and services surveyed had actually gone down when these prices were compared with pre-GST prices.

Business pass through of tax savings is a direct function of competitive markets. Any business that fails to take advantage of harmonization to improve its price competitiveness will soon find itself priced out of the marketplace. Competition among businesses is intense in today's marketplace. If one business can attract more customers by reducing prices, other businesses will be forced to follow suit in order to stay in business.

Studies of the Canadian experience under the GST and those of other countries that have adopted a value added tax model indicate that market forces ensure that business savings are fully reflected in consumer prices within a very short period of time.

Members should know that 18 other countries have value added taxes so Canada is not venturing into new territory. The longest running value added tax can be found in Australia where it was introduced in 1930. Denmark has had a value added tax since 1967, France and Germany since 1968 and the U.K. since 1973. One might ask: "Then what is wrong with the GST?" The answer is very simple. Not one of those countries has two contradictory co-existing levels of retail sales tax.

In introducing the GST, the previous government gave Canada one unique characteristic among countries of the world: two retail level sales taxes applied on different bases to different goods and services, all paid by the consumer on the basis that they have to go to the cash register to figure out whether the good is taxable under the GST and under the PST, under the GST but not the PST, or perhaps not the GST and the PST. Then they must calculate the appropriate rate doing the two different calculations to see whether it is 7 per cent GST and 8 per cent PST, or perhaps it is 9 per cent depending on the province, or if you are fortunate enough to live in Alberta, zero per cent PST.

You can see that this is slightly different from a totally harmonized sales tax where the consumer picks up the good at the counter, goes to the desk and pays the price marked on the good. That is progress.

With businesses now having to apply, collect and remit HST when they sell into a participating province, these goods will not be free of provincial sales tax. This means that consumers buying locally will not pay any more tax than consumers ordering goods from out of province firms.

As I say, a key benefit of the HST to consumers will be tax inclusive pricing. Consumers across the country have clearly indicated their preference to know the full price of an item before they actually make a purchase.

The days of consumers in Nova Scotia, New Brunswick, Newfoundland and Labrador calculating taxes mentally, on the back of an envelope or having to carry a calculator with them before they go to the cash register, will soon be over because the sales tax will be included in the price which is what consumers across Canada want to have. At the same time, the amount or rate of sales tax payable will be visible on receipts and invoices so that consumers will still know how much and what tax they are paying.

The flexibility incorporated in the tax inclusive pricing rules will reduce unfair competition, since businesses will be able to continue posting the before tax price next to the tax inclusive price.

Similarly, participating businesses will not be at a disadvantage vis-à-vis the competition from everywhere else.

In addition, the federal and provincial governments will work together to ensure that consumers are informed of how the tax will be included in prices. Participating governments want this process to be transparent. Under the tax inclusive pricing scheme, the amount paid in tax will be clearly visible on receipts. Consumers will know right off how much the goods and services they buy will cost because the tax will be visible.

Next April consumers in Nova Scotia, New Brunswick and Newfoundland and Labrador will have substantially lower sales tax rates, a simpler sales tax system and lower prices on most goods. Would that it be true as well in Ontario. They will also know the full price of an item before they get to the cash register. They will pay only one tax and they will know how much tax they are paying. They will know that their federal and provincial governments are working more efficiently by eliminating needless and costly duplication.

Bill C-70 represents a significant step toward the goal of a fully harmonized sales tax system in Canada. I would like to add that the federal government and the governments of the three participating provinces will not generate any more revenue under the HST than they do now under the existing taxes.

Harmonization has many supporters. When the announcement was first made last April, Nova Scotia's finance minister explained this by saying: "On balance we believe consumers will come out ahead. It may cost you $1 more to fill up your tank, but on a $500 car repair bill you will save more than $20 in tax. You may pay $1 more for a haircut but you will save a buck when you buy shampoo, soap and toothpaste".

An excerpt last April from a press release issued by the Certified General Accountants Association said: "There is no question that today's announcement with Newfoundland, Nova Scotia and New Brunswick will be a tremendous shot in the arm for consumers in those provinces".

Rosalie Daly Todd, Consumers Association executive director had this to say: "Consumers will no longer have to guess at the total cost of their purchase, a situation which has been the source of frustration for many people. At the same time, listing the amount of tax on the bill or receipt keeps the tax visible and the tax makers accountable to consumers".

Newfoundland's finance minister is quoted as saying last April: "Taxpayers would have $105 million more to spend, save or invest and there would be significantly lower after tax prices on a wide range of goods and services, and significantly less tax paid by the people of the province".

In October, Elizabeth Beale, Atlantic Provinces Economic Council president, was quoted as saying: "The HST will be an improvement on a number of fronts. Consumers should see relief in the total level of taxation dropping on a whole range of products".

APEC recently issued a report that was highly supportive of sales tax harmonization. It identified significant economic and administrative efficiency benefits to the harmonizing provinces. That is the reason the premiers of the three Atlantic provinces have bought advertising space in newspapers displaying the Atlantic advantage: no sales tax in Nova Scotia, New Brunswick and Newfoundland and Labrador.

It is time that the other provinces also got on board with the harmonized sales tax. This is the tax of the future. This is a fairer tax. This is an easier tax for business to administer. It is a more understandable tax for consumers. I do not understand why a government of a province in Canada would be unwilling to move forward with a measure that is so much in the interests of its taxpayers.

[Propane Prices, December 3rd, 1996]

Mr. Speaker, I want to share the hon. member's concern for the effect of these high prices of propane on many consumers.

He will know that the provisions of the Competition Act give the director power to investigate situations of alleged price fixing. I remind him that citizens themselves can request that the director investigate a situation by simply providing the director with the information required by the statute.