November 6, 1997 (36th Parliament, 1st Session)


Hélène Alarie

Bloc Québécois

Ms. Hélène Alarie (Louis-Hébert, BQ)

Madam Speaker, it is with pleasure that I take part in this debate on the opposition motion by the Bloc Quebecois, which asks:
That this House condemn the government for blatant unfairness to Quebec in the matter of the GST, the government having denied it compensation without letting it submit its arguments to an independent arbitration panel made up of three experts, the first to be appointed by the federal government, the second by the government of Quebec, and the third jointly by the first two.
Let me outline the background for the motion moved today in the House of Commons. In 1990, Quebec and the federal government signed a memorandum of agreement on harmonization of the provincial sales tax and the goods and services tax at 7%. Compensation was calculated for the calendar year during which the federal government and the province signed the memorandum of understanding.
Quebec did what it had to and harmonized its sales tax. It did so without any financial assistance. There were of course considerable financial costs involved. These costs were absorbed by increasing the tax burden for corporations and by applying restrictions to input tax refunds.
Under the Quebec sales tax system, large corporations can apply for an input tax refund only on certain goods and services acquired to conduct their business. For these corporations, this represents additional costs totalling $500 million annually.
So those who are in fact being penalized by the federal government, which refuses any financial compensation for the Government of Quebec, are Quebec businesses. These still cannot benefit from the tax breaks that harmonization gave to competing firms in the three Atlantic provinces. This situation is especially unfair when you consider that the tax benefits given to corporations in the Atlantic provinces were in part financed by the taxes paid by individuals and businesses in Quebec.
With this compensation, the Atlantic provinces were able to harmonize their sales tax in one single operation. In Quebec, harmonization is not yet completed; it is being phased in over several years due to the fact that it is impossible to remit the input tax refund to businesses because this would entail, according to conservative estimates, a loss of around 10% in provincial sales tax revenues.
On April 23, 1996, the federal government announced the signature of memorandums of understanding with the three Atlantic provinces, whereby their respective sales taxes would be harmonized beginning April 1, 1997, at a combined rate of 15%. To compensate financial losses in these three provinces, the federal government will grant them, under a readjustment program, compensation totalling almost $1 billion, the equivalent of $423 per capita. The federal government also announced that Quebec, the only jurisdiction to have harmonized its tax, could not benefit from this new readjustment program.
Questions are being raised concerning this financial compensation program. Was it designed so that only certain groups could receive this funding? The financial assistance program that is benefiting the Atlantic provinces does so at the expense of Quebec. It only considers sales tax revenues instead of the whole tax base representing the provinces' global tax policy.
It should be noted that the share of provincial sales tax revenues compared to total tax revenues for 1994 was 8.6% for Quebec compared to 12.9% for the Atlantic provinces. These figures are real and can be verified, since they come from statistics on government revenue published by the OECD and Statistics Canada.
The federal government established that the compensation is equal to 100% of the cost of harmonisation exceeding 5% of the provincial sales tax returns before harmonisation for the first two years, 50% for the third year and 25% for the fourth year.
Quebec believes it is entitled to compensation and the Bloc Quebecois supports that claim. On Friday, December 13, 1996, Bernard Landry and Jacques Brassard held a press conference to demand that Quebec receive compensation of $2 billion for having harmonized its PST to the GST. Quebec acted alone and without any financial support. This compensation would represent an amount of $273 per person, which is clearly less than the amount of $423 paid to the Atlantic provinces.
Yet, the federal government still refuses to pay compensation to Quebec on the ground that harmonization of the PST and GST has cost it nothing. Now, one only has to look at the public accounts and budget documents to see the magnitude of the costs involved.
The annual conference of premiers of August 1996, which was held in Jasper, supported the position of the Quebec finance minister by saying that all provinces should benefit equally from the agreements on harmonization, including compensation. We have had support from various sources. Participants to the 1996 socio-economic summit, even the Leader of the Opposition in Quebec, whose political leanings are well known, supported Quebec's position. Last but not least, premiers meeting in St. Andrews in 1997 renewed their support for Quebec's position.
On the strength of such overwhelming support, the Bloc Quebecois would like the federal finance minister to admit his calculations are flawed. This is the reason why, during the last federal election campaign, the Bloc Quebecois leader asked the Liberal government to create an independent arbitration panel to put an end to the deadlock.
To this day, the minister has turned a deaf ear to this request. He insists his numbers are accurate and says that he has taken the right decision. Why then is he so afraid to face independent experts and show he is right when Quebec's deputy premier and finance minister are willing to compare their numbers with Paul Martin's so that justice may be done?
The Bloc Quebecois believes that voting against this motion means that the arguments used so far by the federal finance minister would not stand the comparison with Quebec's. We want to settle this dispute once and for all so that independent experts may come to a clear and fair decision.
I would even go so far as to amend the motion. Therefore I move:
That the motion be amended by deleting the word “blatant” and substituting the following therefor: “flagrant”.

Topic:   Government Orders
Subtopic:   Supply
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