Barry Campbell

[Excise Tax Act, December 10th, 1996]

Mr. Speaker, I rise on a point of order. With all due respect, we would assert that it is not a reasoned amendment opposing the principle of the bill, but rather that it raises extraneous issues that go to the motive behind the bill and that it is not a properly receivable amendment.

[Excise Tax Act, December 5th, 1996]

Mr. Speaker, I rise on a point of order. I apologize to my hon. colleague. I understood that on resuming debate we were into normal debate followed by questions and comments. Is that what we are doing?

[Excise Tax Act, December 3rd, 1996]

Mr. Speaker, I was pleased to hear the hon. member say that in the minority report they did endorse harmonization, although not without some qualifications. At least we have that much on the record because he neglected to say that they support the principle of harmonization. I thank him for that clarification.

[Excise Tax Act, December 3rd, 1996]

Mr. Speaker, I will use the same themes that the hon. member opposite used: misleading, hypocritical and self-serving but I will throw them back at him.

The hon. member is misleading the Canadian people. The auditor general did not qualify the financial statements of the Government of Canada. He made an observation. We disagree about that observation. That is entirely permissible and within what is appropriate under generally accepted accounting standards. The hon. member knows that.

The hon. member also said the tax is not revenue neutral. I ask him to prove that. That is untrue, it is revenue neutral.

It is interesting under hypocritical. I had the privilege to work with the hon. member. He worked diligently with other members of his party on the committee that went across the country looking into replacements for the GST. I will tell who is hypocritical. The hon. member supports harmonization. He neglected to tell us that.

Under self-serving, it is interesting. The hon. member attacks the transitional assistance but I have never heard him attack the $1.6 billion paid to western grain farmers when the Crow rate subsidy was removed. Not a word. Here we have a member from one region of the country criticizing transitional assistance going to another area of the country and telling them what is good for them but never rising to criticize similar transitional assistance in his own backyard.

This is a quiz show if you will, Mr. Speaker. I ask the hon. member one further question. Who said the following? "I want something that works. If we had one value added tax, one base, one bureaucracy to collect it, the manufacturers and businesses in Ontario would save over $1 billion by being able to deduct those costs that cannot be deducted today on the sales tax. It has been one of the areas of a major competitive disadvantage that Ontario manufacturers have had and Ontario businesses have had. I say stop the rhetoric, stop the politics, stop the finger pointing. Get on with harmonization and simplification of the GST or whatever the new initials are, along with the PST". Who said that? I will give the

hon. member a hint. He is now the premier of the province of Ontario.

[Excise Tax Act, December 3rd, 1996]

Mr. Speaker, on a point of order. The hon. member purports to be quoting from the auditor general's report and he made reference to the word bribe. I would like to know if that is part of what he is quoting from the auditor general. If not, would he excise that and read the quote again without that word in it.

[Excise Tax Act, December 3rd, 1996]

Madam Speaker, I thank the hon. member for his responses. He did not comment on the second part of the question and I want to give him an opportunity to do so. I asked him about the credits on inputs and how that will work in a harmonized system. Does it make good economic sense and what will happen to those savings?

[Excise Tax Act, December 3rd, 1996]

Madam Speaker, I would like to thank the hon. member opposite for his comments. Unfortunately, one gets used to a lot of the rhetoric coming from the other side, so the hon. member's candour and honesty is very refreshing.

He endorses harmonization. I would not expect otherwise, in the light of the Reform Party's position after the GST review. He endorses tax included pricing. He is widely recognized as a prominent economist. I would be surprised if he said otherwise. He accepts, in all fairness, that there will be one time costs, but in the light of ongoing savings they may well be offset in the long run. All of that is refreshing and welcome. I would be surprised if the hon. member had said otherwise. He also has some doubts and some concerns. That is also fair.

I want to make one observation and ask him one quick question. The observation is on tax included pricing. Is he aware of the accommodations that the government has made in consultation with businesses in responding to the very concerns he raised about implementing a harmonized system in one region and not others? For instance, accommodations are being made which will allow catalogue publishers and retailers that produce catalogues to overcome the concerns they have. They need not print the prices in the harmonized provinces, as long as they indicate in the catalogue that their prices do not include taxes.

Is he aware that discussions are ongoing and regulations will reflect that the government and retailers have agreed to allow bin pricing for those items that are labelled, which would otherwise have to be relabelled individually? That would be a tremendous imposition on business so the government has accepted the principle of allowing small items that are prelabelled to be placed in bins, with the prices indicated on the bin. In modern retailing that is often the way things are done. We only have to think of our neighbourhood stores.

Is he also aware that the opportunity still exists for retailers to indicate sale prices that are exclusive of taxes as long as the tax included price is also indicated?

Is he aware that there are ongoing discussions toward improving the system more as regulations are drafted? He may not have been aware of those things. I am sure he will welcome all of those comments.

The question is to him as an economist, because he stood and spoke as an economist and less so as a politician. We welcome that in debates on critical issues such as this.

He did not speak, at least not at length, about the inefficiencies in provincial sales taxes, particularly where hidden taxes are concerned, which is a cascading of taxes, tax on tax. The ultimate consumer pays for all those hidden taxes.

I wonder if he would comment on whether a harmonized system where input credits are available now, not just for those taxes paid under the GST system, but for the component of provincial taxes would also be available, is a much more efficient system. I ask him what a rational retailer business person would do in light of those savings.

[Excise Tax Act, December 3rd, 1996]

Madam Speaker, Quebec did not receive compensation at the time that it harmonized. It would not qualify for compensation under the formula that was announced, debated and passed by this House several months ago.

That formula requires a province to incur a net loss of tax revenues of over 5 per cent in order to qualify for assistance on any measure. Quebec would not be in a position to benefit from that formula, nor might I add would Ontario were it to harmonize now or British Columbia. Other provinces would qualify. The maritimes do quality and that is the simple answer.

Not only did the province of Quebec not lose revenue on harmonizing in the manner in which it did several years ago, but in fact gained revenue by operating two systems simultaneously for a period of time. I wonder if the hon. member is aware of that.

[Excise Tax Act, December 3rd, 1996]

Madam Speaker, I listened with interest to the comments of the hon. member opposite and, as usual, there was the litany of complaints. But he did allude to the fact that of course Quebec has a harmonized tax. I would like him to tell this House whether that is an improvement over the situation which prevailed previously when there was a separate Quebec sales tax and a federal GST.

Is the hon. member supportive of harmonization as it has been working in Quebec and, if so, why would he deny the same opportunity to other regions of the country?

[Excise Tax Act, December 3rd, 1996]

Mr. Speaker, I am pleased to lead off second reading of important and historic legislation, the introduction of a new harmonized sales tax, or HST, throughout most of Atlantic Canada. With the inauguration of the HST we have begun a process for replacing the GST and providing all Canadians with a better sales tax system.

Today's legislation will enable the federal government and the provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador to introduce a new harmonized tax effective April 1, 1997. But as the benefits of the HST become clear and concrete, benefits for consumers, for businesses and for the economy as a whole, I am confident that other provinces will put the interests of consumers first and sign on to the HST.

This is extensive legislation covering as it must changes to the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act and the Income Tax Act and related acts. In my remarks today I want to highlight the key elements of the HST and to remind this House why these are important and positive steps forward.

When the current government came to power we said: "A Liberal government will replace the GST with a system that generates equivalent revenues, is fairer to consumers and to small business, minimizes disruption to small business, and promotes federal-provincial co-operation and harmonization". These then were the principles that guided us as we examined all the options for replacing the GST: fairness; equivalent revenues; federal-provincial co-operation and harmonization; and simplification.

The new government followed through with its election promise. As members might recall, the process to replace the GST was initiated immediately following the election.

In fact, it is at that time that we asked the House Standing Committee on Finance to look into every possible alternative to replace the GST and to consult Canadians on the various options.

The committee heard close to 500 witnesses, namely tax experts, business people and consumers from across Canada, and received over 700 briefs.

After reviewing 20 different options, committee members came to the conclusion that a large majority favoured harmonization, that is replacing the current mosaic of federal and provincial sales taxes with a single value added tax.

The Standing Committee on Finance made four key recommendations. First, it came down in favour of a value added tax. Second, it recommended harmonizing the federal GST and provincial retail sales taxes without delay. Third, it recommended streamlining the tax. And last, it recognized the importance of including the tax in the price, so that the price consumers see on the shelf is what they pay at the cash.

The Standing Committee on Finance looked closely into the economic impact of the proposals it received as well as their acceptability to businesses and consumers across Canada. What is more, the committee's recommendations were entirely in keeping with the government's red book commitments.

That is why we are actively promoting the implementation of a new tax based on harmonization with the provinces as the best alternative to the GST.

To help smooth the way for harmonization and make the harmonized tax as simple and fair as possible, we put together a major package of streamlining initiatives. These initiatives will help to fulfil the recommendation of the finance committee and the commitment of the red book to a simpler sales tax system.

The streamlining package includes over 100 measures. Many of them are technical and sector specific. Quite a few have been recognized as major positive changes for the many sectors they will affect. The proposed changes include new and simpler rules for many areas of the GST, for example for charities and non-profit organizations, for employee benefits, health care and used goods.

Since the streamlining package was announced last April, the federal government also announced on October 23 a 100 per cent rebate for the GST or the federal portion of the HST on books purchased by a broad range of educational institutions and public sector bodies across Canada. This reflects this government's firm commitment to supporting literacy in as cost effective and fiscally responsible manner as possible.

In short the streamlining changes will help to make the harmonized tax a better tax and improve the operation of the GST in the non-participating provinces.

At the same time that we announced this package, we also announced that a memorandum of understanding on a harmonized sales tax had been reached with the three participating provinces. Taken together this signalled the inauguration of a process for harmonization, one under which provinces can come on board with the HST as they are ready. Subsequently on October 23, the governments of Canada, Nova Scotia, New Brunswick and Newfoundland and Labrador announced detailed agreements to replace the GST and the provincial retail sales taxes in the three Atlantic provinces with a harmonized sales tax.

The new HST will apply at a single rate of 15 per cent on the same base of goods and services as the current GST. The rules governing the operation of the HST will be set out in the Excise Tax Act and will generally be those rules on which the GST currently operates subject to the streamlining changes I have already mentioned.

Under the terms of the agreements which are before us now in legislative form, the HST will be administered initially by Revenue Canada and eventually by the proposed border and revenue agency. Businesses that are registered for the GST will automatically be registered for the HST and will continue to use the current GST return. There are no changes there.

The HST base will be the same as the GST base. Vendors will be required to price on a tax included basis to ensure that consumers are aware of the final price before they reach the cash register.

At the same time, because the HST is in large measure about federal-provincial co-operation, the specific situations and the specific priorities of participating provinces are fully reflected in the agreements. The participating provinces will for example provide point of sale rebates for book sales in those provinces. The rules governing rebates for housing and public sector bodies will reflect the particular circumstances of each province.

A further important reflection of the spirit of federal-provincial co-operation that gave rise to these agreements is the transitional assistance that the federal government will provide to help offset revenue shortfalls in participating provinces. Hon. members know that this government has never shied away from important structural change. It has always recognized the importance of providing transitional assistance to make such changes possible, be it with regard to removing subsidies from the agricultural sector or promoting important sales tax harmonization.

In adopting the HST, the Atlantic provinces have replaced a system that is cumbersome, costly and complicated with one that is simpler, cheaper and a lot more efficient. For consumers, businesses and taxpayers in the participating provinces, the result will be one sales tax not two, one tax base not two, one tax rate not two, one sales tax administration not two, and one price not two. These changes will add up to a simpler, fairer system and a stronger economy.

Consumers in participating provinces will benefit in a number of important ways. First among those will be the lower rate of tax. For Nova Scotia and New Brunswick the combined rate of 15 per cent will represent a decrease of nearly four percentage points in the effective sales tax rate. In Newfoundland and Labrador the rate decrease will be close to 5 per cent. Consumers will also benefit from the removal of provincial retail sales tax from business inputs and from lower compliance costs for businesses.

The overall impact of the tax from the perspective of consumers is that prices on most goods will be lower as will the overall sales tax burden.

Including the HST in the prices displayed gives consumers another important advantage. It puts an end to the surprise they get at the cash register, which is one of the most annoying features of the current system. However, the consumers will still know the amount of tax they are paying since the exact amount, or the tax rate, will be printed on receipts and bills.

This approach will reduce unfair competition between businesses that are located in participating provinces and those that are not. Furthermore, businesses will be able to continue using the cash

registers they have now and still comply with the requirement that the tax be included in the price.

Businesses, like consumers, will benefit from the lower combined tax rate. In addition they will now have to deal with only one set of tax forms, one set of operating rules and one tax administration. By thus reducing the paper burden and administrative hassle associated with a two tier system, the HST will reduce compliance costs for businesses.

The Canadian Institute of Chartered Accountants has estimated that if all non-harmonized provinces were to join in a national sales tax system, Canadian businesses would save between $400 million and $700 million in administrative costs alone. The benefits of lower compliance costs will be particularly advantageous for small businesses which bear disproportionately the costs of dealing with the current two systems.

A further benefit to businesses in the participating provinces will be the recovery of HST payable on their inputs. In fact, harmonization will eliminate over $700 million in hidden sales taxes on business inputs, taxes which have been passed on in the past to consumers. Harmonization will eliminate $280 million in hidden sales taxes in Nova Scotia, $265 million in New Brunswick and $180 million in Newfoundland and Labrador. The elimination of this hidden tax drag will promote the competitiveness of businesses in Atlantic Canada. It will also promote fairness between different kinds of businesses since the tax will not impact differently on businesses just because they are structured differently. The broadening of the tax base will also help ensure a level playing field between businesses that sell different kinds of products.

The proposed legislation also includes rules to ensure a level playing field for all businesses selling in participating provinces. Under the proposed approach, businesses across Canada that are registered for the GST will be required to collect and remit the HST on goods and services sold into a participating province or shipped to a consumer in that province.

I want to stress the fact that this is not a new tax on goods and services sold in the participating provinces. Interprovincial sales have always been subject to the sales tax. The new approach simply makes collecting and paying the tax easier.

Not only will the HST benefit consumers and be simpler and more equitable for businesses, it will also generate some overall economic advantages, especially because the provincial retail sales taxes will be abolished on all the business inputs I have just mentioned.

The elimination of provincial retail sales taxes on those business inputs is a benefit not only for the businesses directly affected. It is important to realize that this measure will reduce the overall cost of exports from participating provinces and eliminate the competitive advantage that is now unintentionally extended to imports.

Furthermore, because it will ensure fair competition among various types of products and business structures, the elimination of the tax on inputs will simplify the context for investment decision making.

All of this translates into more economic activity for Atlantic Canada and more jobs. Government administrative costs will also be reduced through the elimination of overlap and duplication in the administration of federal and provincial sales taxes.

As I said earlier, these changes will add up to a simpler, fairer system and a stronger economy. They clearly meet the criteria set out in the red book and in the recommendations of the finance committee for replacing the GST. Equally important, they represent the significant first stage in a process by which I am confident other provinces will come on board. They will do that sooner or later because harmonization offers significant benefits. The more provinces that join in, the greater those benefits because most existing provincial sales tax systems are inefficient and distorting and the provinces know that.

In provinces across Canada, existing retail sales taxes are killing businesses and jobs. Personally I believe the provincial governments recognize this just as they recognize that taxes on business inputs are taxes that are hidden and are currently being passed on to consumers.

The legislation before us improves the operation of the GST across Canada. For the participating Atlantic provinces it provides an even better system, a system that will benefit consumers with lower tax rates and on many goods, lower prices. They will also know the full price of goods before they get to the cash register.

It is a system that will benefit businesses because they will deal with only one tax, one rate, one base, one set of forms, one administration. That system will benefit the economy of Atlantic Canada by making its exports more competitive. It is a system and a bill that deserves the unqualified support of every member of the House.