Paul Szabo

[Provincial Choice Tax Framework Act, December 8th, 2009]

Madam Speaker, I have spent a fair bit of time on aboriginal and first nations issues, particularly matrimonial and property rights, which are still with us.

There is nothing in Bill C-62 that affects aboriginal legislation. However, it is kind of interesting to note that if we were to have consultations today with aboriginals with regard to Bill C-62, the only choice would be to defeat it or not, because there is no clause in here that we can even talk about concerning aboriginals.

The consultation for aboriginal persons is with the Province of Ontario, in the legislature of Ontario, with regard to Ontario legislation. That is where the hearings and the representations have to be made. The only representations that would be made here would be if there were amendments proposed to the rules related to the taxation of first nations people.

It is easy to say, but quite frankly, what the member is suggesting is that we should make the decision here as to whether or not we want to allow a province to harmonize its tax. That is not in the best interests of Canadians.

[Provincial Choice Tax Framework Act, December 8th, 2009]

Madam Speaker, the price of gas is affected not just by the level of taxes. The taxes have not been changing up and down. The commodity prices certainly have. Therefore, I do not accept the member's argument.

However, I can say that we have examples. For instance, when the GST was cut, the savings that should have been passed on to people were not. Therefore we know the Conservatives have not followed through on the GST. An example would be, and most Canadians would understand, the price of a theatre ticket to go to a show, to watch a movie. That price did not go down. They still charge the same price arguing that they had additional costs so that despite whatever reduction there was in the GST, they increased their own costs and therefore the price is the same.

It does take some discipline, but in a competitive economy where the costs cascading at least from the provincial sales tax level are not passed on, if they are not invested in investments in that business or passed on that means the bottom line of the business has gone up. It means that it has decided to pocket those.

That is why we need a competitive economy. That is what the issue is. It is all about competition. Businesses that are not going to be competitively priced will lose business and will no longer be able to participate. Everyone does it at their own peril.

However, the member raises an interesting point about the need for consumers to be vigilant and governments to be vigilant when there are changes and businesses are not treating the consumer in a fair fashion.

[Provincial Choice Tax Framework Act, December 8th, 2009]

Madam Speaker, we have a situation now where the governments of two provinces have committed to harmonizing their taxes effective July 1, 2010.

The Province of Ontario, in conjunction with the legislation it is bringing in to harmonize the sales tax, is also concurrently going to bring in income tax cuts and other credits for residents of Ontario. These cuts are going to be effective on January 1, 2010, six months before the HST in that province would take effect.

For the Ontario government to be able to make that effective January 1, its plans are to pass its legislation on the HST with the other permanent income tax cuts before Christmas. It cannot do that unless Bill C-62 makes the necessary changes to the Excise Tax Act so that Ontario's bill conforms with the laws of Canada.

I wish the finance minister would simply get up in the House and announce to everybody that the government made a deal with the Province of Ontario, which faces a great deal of difficulty in terms of its economy and wants to move forward with these tax cuts and the harmonization. On a projected basis, these tax cuts and the harmonization would create over 500,000 new jobs, create $47 billion in increased capital investment and increase annual incomes by up to 8.8% or some $29.4 billion.

The consequences of this legislation to Ontario are enormous. We have to ask whether the Parliament of Canada feels that it should not pass Bill C-62, thus effectively stopping the Province of Ontario from carrying out its decisions to address its economic crisis and therefore being able to make a contribution towards remedying the economic crisis facing our country as a whole. That is really the big question.

The provinces have a choice about whether or not to do this. I could make a case, as others have, by indicating that a haircut would cost 8% more, but that is not exactly true because the hair salon or the barber shop also incurs provincial sales tax on all the other supplies and services related to its business and they all cascade down. Once we convert, their costs of doing business will go down in a perfect flow-through fashion in a competitive economy. In fact, their prices will go down. Even though the 8% tax will be added for the additional provincial tax component, the overall price really should not change. In fact, it theoretically should go down because of the built-in taxes in the underlying costs of doing business.

Canadians are going to hear a lot of stories, but the best thing they can do is to ask for all of the information on what a harmonized sales tax is and visit the provincial websites to see what the plans are. They will also see a copy of the agreement that outlines all of the details.

In Ontario, for instance, notwithstanding that the harmonization of the tax would affect only about 17% of the goods and services that we purchase, there is going to be a very substantial reduction in personal income taxes for all Ontarians. In the first year, families are going to get a $1,000 transitional credit. There will also be a sales tax credit increase to reflect the fact that the harmonized sales tax has both levels of government tax included in it.

These are offsets. Canadians should know that to the extent that some exemptions will no longer be there, that is pursuant to the agreement. The agreement limited the exemptions to 5% of all of the goods and services that are being offered. Therefore there had to be some streamlining of the benefits. However, to take that into account, some things may be taxed now that were not previously taxed, but there is going to be a permanent offset through income taxes as well as through tax credits and the one-time transitional credit of $1,000 for a family.

There is more for people to know about. In Ontario, for instance, I know some of the members are saying this is a tax grab and asking how we feel about it. In fact, after implementation the provincial sales tax revenues to the Province of Ontario will actually decline. It is not a tax grab. In fact the revenues are decreasing.

If we look at the implications for Ontario, there is the possibility of getting the job creation activity that it drastically needs, as well as business investment. Businesses should be able to pass on the savings to them by investing further through creating jobs. We cannot ignore the job creation issue. It is critical in the economy of Ontario.

The Government of Ontario has made this decision. I am hopeful that Canadians will take the opportunity to inform themselves instead of listening to linear arguments.

[Provincial Choice Tax Framework Act, December 8th, 2009]

Madam Speaker, if someone were to tell someone else on the street that there would be an 8% increase in the cost of a number of services not currently charged any tax, and then took a survey of all of those people, asking them if that were a good idea or how they felt about it, I can only assume that most of the people would say that they really did not want to pay any more tax on something, if it is not taxed already. That, indeed, has been the basis of the argument a number of people have made.

Interestingly enough, the conversations that members have had and the discussions and debate have been about income tax issues in the provinces of Ontario and British Columbia at this time. The conversations are not with regard to Bill C-62 specifically, the bill we are presently debating. It is the nature of this place that if a person can make a link to an issue, they can talk about pretty well whatever they want, because politically it may be more advantageous for them to say some things, but not everything.

That is unfortunate, because the constituents I have heard are not exactly sure what is happening and who is in charge of what. So I thought I would try to explain this to them, because most of us have received a lot of emails from people about a harmonized sales tax, and they are not exactly sure what all of the details are, because the bills that will lay out all of the details have not even been presented yet in the Province of Ontario or the Province of B.C. There are some preliminary pieces of information on the websites of those provinces, which their residents can look at.

The Conservative Government of Canada has entered into agreements with the provinces of Ontario and British Columbia to harmonize the federal and provincial taxes into one tax called an HST. Three other provinces have already done it. The fourth province, Quebec, has done a sort of harmonization; it is not complete and, indeed, there are still discussions going on about whether or not Quebec may be entitled to further compensation for having entered into a quasi-harmonization agreement. Now two provinces want to enter into such an agreement as well.

We have to ask ourselves, why would provinces want to do that? Why would they want to harmonize their taxes, knowing that the issue of taxation is not politically popular? They do not do it because they want to somehow agitate people. There must be a reason. Having done enough research and having looked at the economic analyses and to some of the people who have been involved historically in dealing with consumer taxes like GST or PST, the consensus among the analysts I have looked to, the people who appear regularly before the finance committee and, indeed, some other committees, has been that the provincial sales tax system is a very inefficient system.

It is inefficient because provincial sales tax is charged at each stage of the life of producing a product. That means when someone gets the raw materials, for instance, cutting down a tree, that business of cutting down trees and sending trees to the lumber mill is charged provincial sales tax. The lumber mill will have some other expenses and it will process and produce the trees into two by fours and other building materials.

Those are sold to wholesalers and there is a provincial tax added to them, the same provincial tax. Now the product has been hit three times along the way. Ultimately, it goes from there to where the individual consumer can purchase the wood needed for the project, which is again charged. The provincial sales tax has been charged more than once. It is charged all the way along the line. It is tax on tax on tax.

In fact, if we were to look at the analysis of the final selling price of a product that people purchase in the province of Ontario, we would find, notwithstanding that the provincial sales tax rate is currently 8% in Ontario, that the amount of provincial sales tax in the ultimate price we pay is far greater than that, because it has been applied several times and compounds. There is an enormous amount of tax.

Could anyone imagine if that provincial sales tax were treated the same way the GST is treated? The GST is only paid by the end consumer. It is charged at the first point of production, for instance, in the example that I used, but when the product is sold to the next person down the line, maybe the lumber mill, the seller gets back the taxes paid. The seller has just passed on the 7% and it keeps building up.

However, at the end of the day, the total amount of GST charged on the same product is currently 5%. That is the total amount that people would see in the final purchase price of that product compared with something now that is far in excess of the current provincial rate, simply because there are no input tax credits.

Most of the members here are very familiar with that, particularly the member for Hamilton Mountain. She is on the finance committee and we talk about a lot of these things. She and I know the mechanics of the system and know very well that if efficiencies in the tax system save businesses money, these are is not going to help the consumer very much if the businesses decide to hoard the money and keep it themselves rather than passing it on to consumers.

The only way to address that is to have a competitive economy. There has to be enough competition within the system so that if a competitor is going to pass on more or all of the savings from changes in tax policy, another competing business has no choice but to match those or else lose business to the competitor simply because of the economies of lower pricing.

Therefore, it does make some sense to make the provincial system more efficient and fairer, in fact. We are overtaxed at the provincial level.

However, why now? Many of the members have raised the issue of it being good policy but bad timing.

I do not think anybody is going to dispute the fact that the Province of Ontario is in some very serious difficulty in terms of its economic fundamentals. Its projected deficit is some $24 billion. The unemployment rate in most regions is much higher than the national rate.

The Conservative government has boasted about a stimulus plan that it has committed to but has not actually issued cheques for. It is a matter of, “Here is what we have promised to do and we have promised to do it so many times over and over again”. Eventually projects might get the money. However, before we know it, things are going to lapse and the government is going to say that the project did not get done or that it did not manage to get the money out, and it is just going to lapse.

I am sure this is going to happen. Much of the money that should have been spent and the cheques that should have gone out to approved projects are going to lapse. It will never happen and we will never get the benefit of the job creation that was supposed to happen.

Members will know that, because it also happened in the last fiscal year with the infrastructure funding. I think it was somewhere around $3 billion of approved infrastructure funding that lapsed and never got out. It was approved and ready to go and the government just did not issue the cheques. This is one of the reasons that members have to hold the government accountable on things.

It is easy to use this place and to say that the Province of Ontario has decided that it wants to enter into an agreement with the Government of Canada, which they did. There is a copy of it. It is about four pages long and includes a number of details. This was an initiative by the Province of Ontario directly related to what it can do to create jobs and investments in Ontario to deal with the economic crisis in the province.

We have a system of taxation under our Excise Tax Act that permits the harmonization of taxes. As I indicated, we do have three provinces that have formally harmonized their sales taxes, including all of the maritime provinces. Now two other provinces have decided they want to make their system more efficient and do some other things in conjunction with that, as part of their program for economic recovery in their provinces.

As members would know if they looked at Bill C-62, it does not talk about the tax rate we are going to charge on haircuts, etc. That would be in a bill that would appear in the legislatures of Ontario and B.C. Our bill actually has amendments to the Excise Tax Act, and we would have to have the Excise Tax Act sitting beside us to know what some of these clauses mean.

I went through the clauses that were of interest to me last night, and I think I understand the bill a little bit better. However, I am pretty sure that most members have no idea what is in this bill and what it means, what it means for direct sellers for instance, or what it means in terms of non-taxable items and how the system will deal with those to make sure that things do not slip through the cracks.

The bottom line is that this bill is an enabling piece of legislation. What it does is that it makes the necessary amendments to the Excise Tax Act, so that the agreements the Government of Canada has entered into with Ontario and B.C. can be formalized and those provinces will be able to pass the necessary legislation to conform to the agreed framework in the memorandum of agreement and the Excise Tax Act, as amended by this.

I thought it was interesting that most members wanted to debate closure on Motion No. 8, another instrument that prescribed how we are going to deal with Bill C-62. It basically said that we were not going to allow the normal process to take place; in fact we were going to deal with this whole bill in a day. Is that not outrageous?

We have a situation here where the HST memorandum of agreement—

[Provincial Choice Tax Framework Act, December 8th, 2009]

Mr. Speaker, the member has covered a lot of ground. It is always interesting to hear what constituents have to say about things when they are only told part of the story.

At the end of her speech the member mentioned the fact that there will be tax credits or input tax credits to businesses because there will not be the cascading of the provincial tax that currently exists, which means that the cost of business expenses will go down, but they will not be passed on unless there is a competitive environment. That is probably true. That is a very important point.

She quoted from an email saying, “Is anyone honest anymore?” I kind of hearken back to the very first thing she said which was that the price of a haircut was going up 8%. Period. Full Stop. However, throughout her speech she did not mention that as part of the agreement between the Conservative government and the province of Ontario, there are permanent income tax cuts of 16.5%, there is a one-time $1,000 credit, and there will also be a new sales tax credit, just as Canadians receive now with the GST sales tax credit.

So there are offsets. It is pretty easy to list the number of goods and services, particularly the services, that will in fact attract a new tax to make the whole system simpler, but the offset to that is to give real, permanent income tax decreases to the residents of Ontario at the same time, and those tax cuts are proposed to be effective January 1, 2010 whereas the HST is not intended to be implemented until July 1, 2010.

My question for the member is, has she been honest with her constituents?

[Provincial Choice Tax Framework Act, December 8th, 2009]

Mr. Speaker, another colleague of the member from the Bloc spoke yesterday about the compensation situation with Quebec, and she laid out a couple of aspects.

The first was that the harmonization taxation was not fully implemented, or that there were still other areas in which harmonization could take place. The other was that Government of Quebec, unlike other provinces, collected all the taxes and remitted to the Government of Canada its share as opposed to the reverse, which is the arrangement with the other provinces.

I do not know what impact those differences may have on the overall bill, but it would appear that the memorandum of understanding with the province of Ontario is unique, as is the understanding and the arranged agreement with B.C. Both of those are even different from the agreements that were reached with the three maritime provinces that harmonized some time ago.

Could the member clarify what changes Quebec would have to make to the harmonization regime and framework that it implemented and how that might impact any requests for a renegotiation of the settlement, or the inducement to have a harmonized tax?

[Provincial Choice Tax Framework Act, December 8th, 2009]

Mr. Speaker, I have two questions for the parliamentary secretary.

The first has to do with the memorandum of agreement with the Province of Ontario. Near the end of the agreement there is reference to the appointment of a panel that would be put together to deal with potential changes. One of those is a potential change to the revenue allocation framework, such as replacement by a system that would provide distribution of revenue based on actual sales of goods and services.

I wonder if the member could explain to the House why that has not been included in the enabling legislation.

The second question has to do with the question of the haste with which this bill has been dealt with. The parliamentary secretary will know that the Province of Ontario has announced that, as part of its implementation of a harmonized tax, it wants to pass its legislation by Christmas so it can implement a personal income tax cut by January 1. None of that can happen unless this legislation is passed, as I understand it.

Is it part of the deal with the Province of Ontario that the Government of Canada pass Bill C-62 before it rises for Christmas break?

[Petitions, December 8th, 2009]

Mr. Speaker, the second petition is also from constituents in my riding of Mississauga South and has to do with the issue of child pornography and victimization.

The petitioners would like to draw to the attention of the House that the creation, use and circulation of child pornography is condemned by a clear majority of Canadians. They state that the CRTC and Internet service providers have the responsibility for the content that is being transmitted to Canadians and that anyone who uses the Internet to facilitate any sex offences involving children is committing an offence.

The petitioners therefore call upon the Parliament of Canada to protect our children by taking all necessary steps to stop the Internet as a medium for distribution of child victimization and pornography.

[Petitions, December 8th, 2009]

Mr. Speaker, pursuant to Standing Order 36 and as certified by the clerk of petitions, I have two petitions to present today.

The first one is on the universal declaration of animal welfare. These petitioners from my riding of Mississauga South would like to point out that there is scientific consensus and public acknowledgement that animals can feel pain and can suffer and that all efforts should be made to prevent animal cruelty and to reduce animal suffering.

They also point out that over a billion people in the world rely on animals for their livelihood and many others rely on animals for companionship. They also point out that animals are often significantly affected by natural disasters and yet are seldom considered during relief efforts and emergency planning despite their recognized importance to humans.

The petitioners therefore call upon the Government of Canada to support a universal declaration on animal welfare.

[Disposition of an act to amend the Excise Tax Act, December 7th, 2009]

Madam Speaker, the member has certainly laid out some examples of some new items that will be taxed and that are presently not taxed, but as the member knows, when we eliminate the cascading of the provincial sales tax, we all of a sudden have a lower cost base to pass on to the ultimate consumer. Theoretically, in a competitive environment it may not be a perfect translation to an 8% increase, but if it translates perfectly, in fact there should be no increase in the actual cost.

The other thing that the member may want to comment on is whether or not he believes that the 16.5% cut to the personal income taxes effective January 1 should also be taken into account, since it is a permanent income tax decrease for Ontarians.