motion carries, Mr. Speaker, there is a matter which I wish to bring to the attention of the house. It concerns the proposal which has been made by the federal government to the various provincial governments to amend the British North America Act so as to enable the provinces to impose an indirect sales tax or turnover tax of 3 per cent. This proposal has been the subject of a great deal of criticism by private individuals, by the press and by some of the provincial governments across this country. It is to be hoped that the proposal is dead and that the government will not proceed with it. But because we have not had that assurance and because the time when these amendments to the British North America Act must be passed, if they are to be passed, is coming closer and closer, we in the official opposition think that it is timely to ask the house to express its opinion in opposition to any change in the constitution
whereby the provinces will be given the power to levy an indirect 3 per cent sales tax.
It may be helpful, Mr. Speaker, to review briefly the history of the proposed amendment to which I have referred. It was discussed at the recent dominion-provincial conference and it was at first suggested-and it certainly became generally accepted in the mind of the public-that the proposal for the 3 per cent sales tax was in part at any rate to enable the provinces to bear their share of the increased cost of the revised old age pension scheme. So for a time, as I will show, certainly in the minds of many of the provincial premiers and in the mind of the public, it was assumed that the two proposals-the revised old age pension scheme and the constitutional amendment on the 3 per cent sales tax-went hand in hand and that one was dependent on the other. In the course of a recent discussion in the house the Minister of National Health and Welfare (Mr. Martin) to some extent confirmed that that had been the impression, when he said that it was suggested that the two might conveniently be considered together.
Topic: PROPOSED AMENDMENT TO BRITISH NORTH
Subtopic: AMERICA ACT
Sub-subtopic: TURNOVER TAX OF THREE PER CENT
The minister has said that one never depended on the other. I have said, and as the correspondence with the provinces shows-I will refer to that correspondence in some detail-certainly the provincial premiers were under the impression that one was dependent upon the other, and it was suggested by the provincial premiers that they be separated, and they stand now on an entirely separate and independent basis.
The proposal to amend the constitution to allow the provinces to levy an indirect sales tax was first put forward in the following form, and I am reading the correspondence which has appeared at various times as appendices to Hansard. In the appendix to Hansard for February 1, 1951, at page 43, the following proposed amendment is set forth:
2. Re-enact head 2 of section 92 to read as follows:
"2. The raising of revenue for provincial purposes by
(a) direct taxation within the province, and
(b) indirect taxation within the province in respect of the sale of goods (except goods sold for shipment outside the province) to a buyer for purposes of consumption or use and not for resale, at a rate not exceeding three per centum of the sale price, but not so as to discriminate between sales of goods grown, produced or manufactured within the province and sales of goods grown, produced or manufactured outside the province."
It became obvious to the government that the proposed sales tax would be attacked, as it has in fact been attacked, and therefore efforts were made to offer the proposed amendments in various particulars so as to make it more palatable. We find, for instance, the following letter from the Minister of Justice to the premiers of the provinces, as reproduced at page 45 of Hansard of February 1. I am reading in part. There was a growing feeling across the country that this tax was unpopular and undesirable and the Minister of Justice went on to say:
Apparently the attack will be made partly on the plausible ground-
These are rather odd words, I think, Mr. Speaker, to come from the Minister of Justice in discussing the proposal which the federal government had put forward, seriously and honestly it is presumed, to the provinces. These are his words:
Apparently the attack will be made partly on the plausible ground that if provincial governments are allowed the right to levy indirect sales taxation, they may discriminate between different classes or types of retailers based on their residence-
Then he went on to say:
You will recall that it was on this general ground that a somewhat similar proposal was defeated in the Senate in 1936.
And so the Minister of Justice submitted to the provincial premiers on January 20, 1951, the following words to be added to the proposed amendment:
And not so as to discriminate between sellers or classes of sellers of the same class of goods.
Well, Mr. Speaker, the fact is that this proposal to allow the provinces to levy an indirect sales tax may be attacked on a number of grounds. Whether the minister may classify some of them as plausible or not, the fact is that it is a bad tax, and every ground of attack which I have seen mentioned in any of this correspondence, or in the newspaper articles dealing with the subject, is a valid one because the tax is a bad tax, and when it is examined and analysed it does not stand up. It is clearly shown to be contrary to the best interests of the Canadian people to transfer to the provinces this power to impose this type of taxation. And indeed the arguments which are used by the provinces and by those people in newspapers and elsewhere against this tax in the hands of the provinces apply with equal force to the use of this type of taxation by the federal government. The whole subject, Mr. Speaker, is closely related to the discussion which recently took place in connection with the budget, and the proposals to increase the general sales tax. The same arguments against this form of indirect taxation apply in both cases.
Well, then, another objection to the proposed tax became evident when it was seen that some of the provinces, at any rate if these amendments were passed, would use the authority contained in the amendment to apply the indirect sales tax to more than the retail sales of goods; that is, on other things besides goods, on services, and so on. This becomes clear when one reads the letter from Premier Campbell to the Minister of Justice, reproduced at page 991 of Hansard for March 6, where he said:
This proposed amendment deals only with the sale of goods. It would therefore presumably not apply to such things as electrical power, or services provided by laundries, theatres, hotels, restaurants, barber shops and the like. It was our understanding that this amendment should enable the province to impose this type of tax wherever it is a more convenient method of raising revenue from the people in the province who get the benefit of goods and services available in the province. It therefore seems to us that the proposed amendment should make it clear that it covers these other types cf industries, which provide services directly to the consuming public.
In that approach to this problem the objectionable feature of this tax becomes most obvious when it is to apply not only to the retail sale of goods but also to services provided by laundries, theatres, hotels, restaurants, barber shops and the like, wherever it is a more convenient method of raising revenue, wherever it may be conveniently hidden so that the people will not know in fact the extent to which they are being taxed. There was another letter from a premier showing that the tax would be enlarged from the original proposal, as found in the letter from the premier of New Brunswick to the Minister of Justice, dated February 2, in which he says:
As to the second proposed amendment involving constitutional changes which would permit the provinces to impose indirect taxation by way of a sales tax, we feel that the proposal advanced will not meet the situation of the provinces, fixing as it does the maximum tax that could be levied thereunder at three per cent.
In our view the main and overriding purpose of such an amendment is to be found in the advantage which would accrue to the provinces through being able to impose such indirect taxation in lieu of a purchasers' or consumers' tax such as is now found in five of the provinces.
He went on to say:
We would strongly urge that the federal government amend its proposals to permit the imposition of a tax at a higher level; to meet our situation it should be at least four per cent.
Then a letter from the premier of Nova Scotia contains a somewhat similar suggestion. This is the letter of March 12, and is found at page 2729 of Hansard. The quotation is as follows:
I should like, however, to repeat what I have already said in my memorandum which accompanied
my letter of January 19. That was that the amendment constitutes the sole source of the provinces' power to impose an indirect tax. It ought, therefore, to be sufficiently wide in its terms to authorize any tax which it is contemplated the provinces should have a right to impose.
Therefore it becomes clear from this correspondence, Mr. Speaker, that some of the provinces at any rate intended and feel that they should be allowed to use this constitutional amendment, if it passes, not merely to impose a limited three per cent tax on retail sales, or retail turnovers on sales of goods, but to impose indirect taxes on all forms of commercial transactions, on the rendering of services, on amusements, on theatres, hotels, and on anything else, as Premier Macdonald says, on which it is contemplated the province should have a right to impose such a tax. As we have seen, some provinces felt it should be a higher rate even than the three per cent rate at first suggested.
Then, coming back to the question as to whether or not the two constitutional amendments were at first considered together, I should like to read a few letters to make it clear that they were at first considered together. But the point I wish to establish by these references is that it is not necessary that the old age pension amendment must be accompanied by the sales tax amendment.
That being so, and that being clearly agreed and established-and it must be said that it was a pity that the confusion was ever allowed to develop; and the purpose of the amendment I intend to move is to enable the house to express its opinion-I hope nothing further will be heard of the proposal that this undesirable, discriminatory and vicious form of taxation should be imposed, thereby increasing the already heavy burden of inflation and high taxation being borne by the Canadian people.
I am convinced that, when the people of Canada realize they do not need this proposed sales tax amendment in order to have the amended old age pension scheme, they will speak even more clearly and unequivocally against the sales tax amendment than they have up to the present time. But it was necessary for provincial premiers to make the first suggestion that the two constitutional amendments should be considered separately. This will be seen from consideration of one or two letters. For instance, there is the letter from the premier of New Brunswick to the Minister of Justice, as set out at page 2734 of Hansard. Reading from that letter, as it is continued on page 2735, the premier said:
The government of this province would welcome an assurance from you that so far as the federal
government is concerned the two amendments are not inseparable; and in particular that the old age pension amendment will not stand or fall with the other.
And in another passage:
On the assumption that general agreement is arrived at with the provinces on both proposed amendments we have another suggestion to offer. It is that the matters should be dissociated when laid before parliament. In other words they should, in our view, be made the subject of the two separate joint addresses.
And then at page 2736, in a letter of April 16, addressed to the premier of New Brunswick, and copies sent to all the other provincial premiers, the Minister of Justice makes it clear for the first time in this correspondence that the two proposals will be considered separately, when he says as reported at page 2736:
In line with the thought that these two constitutional amendments are separate and distinct, we are quite agreeable, if the provinces wish it that way, that these two constitutional amendments should be made the subject of two separate joint addresses to be presented to the parliament of Canada requesting respectively that these two constitutional amendments should be passed by the parliament of the United Kingdom.
There are other extracts from letters of provincial premiers I could read, to the same effect. But the extracts I have read make it clear that it was at the suggestion of the provincial premiers, first, that the two constitutional amendments were separated. So that we are now in a position clearly where the one is not dependent upon the other.
That being so, it seems to me that this house should and must approach the question of the proposed sales tax amendment on its merits, and not be moved in any sense or influenced, or be placed under any pressure to approve of that proposal because we are told, or because we may be told, or because it may be suggested or has been suggested, that without it we cannot have the old age pension plan.
Turning, then, to the merits of the sales tax amendment proposed to the provinces by the federal government, this can and should be said, that the proposal is one which envisages the imposition of a tax by the provinces of Canada which is undesirable, vicious and unnecessary. I have said, and I repeat, that the arguments used against the sales tax at the provincial level apply, in my view, with equal force to any proposals to increase or to apply the sales tax at the federal level.
But I said that the tax in the hands of the provinces is unnecessary. The provinces can now levy a direct retail purchase tax. That is done by several of the provinces, the one with which I am most familiar being the one in British Columbia where there is a 3 per
cent retail purchase tax, which is perfectly constitutional because it is completed on the purchase and collected at the retail level. It is not an indirect tax. That tax yields in one year, in round1 figures, at the rate of 3 per cent the sum of $28 million to the provincial treasury-and that is from a population of approximately 1,200,000 people. So that it is not essential to have a constitutional amendment in order to enable the provinces to levy a retail tax, even if it is desired to do so.
Then, other objections to the tax, on its merits, are that these forms of indirect tax, such as contemplated in the proposed amendment, are multiplied from the time they are imposed at the source, all the way down the line, through the hands of the distributor and the retailer to the consumer. So that the tax itself is multiplied many times over in the ultimate purchase price of the commodity. To that extent they are directly inflationary, which is of course the main objection to this type of taxation.
On motion of Mr. Fulton the debate was adjourned.
Topic: PROPOSED AMENDMENT TO BRITISH NORTH
Subtopic: AMERICA ACT
Sub-subtopic: TURNOVER TAX OF THREE PER CENT
And we will listen to the amendment-and see if it is in order, Mr. Speaker.
Following that we will take up Bill No. 198, to amend the Customs Act; Bill No. 293, respecting Units of Length and Mass; Bill No. 191, to amend the Prisons and Reformatories Act; Bill No. 192, to amend the Petition of Right Act, and, last, Bill No. 322, respecting the Canada Post Office.