Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 20 - Evidence - March 3 meeting
SAINT JOHN (New Brunswick), Monday, March 3, 1997
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-70, to amend the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the Income Tax Act, the Debt Servicing and Reduction Account Act and related Acts, met this day at 1:05 p.m. to give consideration to the bill.
Senator Michael Kirby (Chairman) in the Chair.
[English]
The Chairman: Welcome to the start of our public hearings on Bill C-70, the bill to implement the HST tax. Before turning to our first witness, let me just summarize our procedure, as much for the media as anybody else. Each witness has been allocated a fixed amount of time. Once the witness has completed his or her opening comments, the remainder of the allocated time will be divided equally between the Conservative senators and the Liberal senators, for purposes of asking questions.
Senator Angus, as the committee deputy chairman, will decide which Conservative senator or senators will ask questions of a particular witness, and Senator Rompkey will perform the same function for the Liberal side.
We are pleased to begin this morning with Mr. Bernard Valcourt, Leader of the Opposition and Leader of the Progressive Conservative Party in New Brunswick. Mr. Valcourt, we are genuinely delighted and pleased that you took the time to be with us this morning. I know that you have an opening statement to make, because you have been kind enough to distribute your brief to all members of the committee. I would like to turn the floor over to you now and, as you heard what I said a minute ago, when you are finished we will turn to questions from the senators.
The Honourable Bernard Valcourt, Leader of the Opposition, New Brunswick: Since I am your first witness, let me welcome you all to New Brunswick. We were indeed very glad to hear of this committee's decision to come to Atlantic Canada, the provinces affected by Bill C-70, and listen to the residents and the citizens of this part of Canada. I want to thank the Senate on this decision to hold hearings in the regions directly affected by this national tax scheme, which, I risk adding, has been concocted only for partisan political reasons.
Indeed, it is the constitutional role of the Senate to protect, in the regions of Canada, the imbalance or the inequities that can flow from the exercise of the direct proportional representation vote of the House of Commons. In all of Canada, it is sometimes popular to bash at the Senate, but I have always reminded Canadians, and New Brunswickers in particular, that the Senate in our confederation has a very important role.
[Translation]
Right now you are exercising this role by coming here to New Brunswick for the next two days and listening to these local people tell you what they think of the famous Bill C-70. You know, it is somewhat ironic, on the one hand, that this Bill is the result of an agreement that was reached between the three provincial governments and the federal government.
[English]
The irony of all of this is that you will remember that when this tax reform was started in the previous government, we did that, and I was then a member of the cabinet that introduced those changes and the government that passed them. We had done that because there were economic reasons for eliminating the manufacturers' sales tax. It was of course meant to protect and promote our manufacturing sector, who were being penalized under the old system. Following the Free Trade Agreement this was a measure that was, we felt, necessary, but you will all remember that the GST does contain provisions to protect the consumers that are affected by the shift from taxing the business sector to the consumers. That safety valve was built into the GST and it is there. Our people, senior citizens, people on fixed income, low income families in New Brunswick, for that matter in all of Canada, have that reprieve from the impact of the GST.
In the presentation that I have prepared -- a copy of which we have distributed -- I talk about the Senate's role to protect the region and I argue that the Senate should promote a united Canada and not foster its balkanization and respect the provincial exclusive jurisdiction over direct taxation to raise revenue for provincial purposes. I do not want to sound too partisan here, but have you looked at the impact of this HST bill in terms of the level of competitiveness in Canada in the open market? Our premier in New Brunswick has coined this "The Atlantic Advantage." What is The Atlantic Advantage? Well, The Atlantic Advantage, according to them, is that now the business sector in New Brunswick, when they do business elsewhere in Canada, do not need to collect the provincial tax of Quebec or Ontario or B.C. or Alberta, yet every other province in Canada will have the obligation to collect the provincial sales tax of New Brunswick, which is a component of the HST.
My argument is this: Section 92 of the Constitution Act gives the exclusive power to the provinces over direct taxation to raise revenue for local purposes, for provincial purposes. By creating this imbalance in the national economy, what the federal government is really saying to those provinces who do not want to sign on is: "You will have no choice but to, for economic reasons, because now we have an unlevel playing field; New Brunswick, Nova Scotia and Newfoundland now have an advantage over you economically, and if you want in you must join in and sign on." In this regard, the federal government is going in by the back door instead of the front door because direct taxation for provincial purposes is an exclusive provincial power.
I say that never in the history of Canada has there been such a "veiled constitutional coup," as I refer to it in my brief, and I cannot understand why those --
[Translation]
Our friends in Quebec, who are so jealous of their authority have not spoken yet, neither have we heard from British Columbia. We know that, in the west, a number of provinces are also extremely jealous of their authority. But here, by creating an imbalance in the national market, their exclusive authority in the matter of direct taxation is benefited, and virtually abandoned. Do you know that the Bill you are being asked to adopt in the Senate enables the province of Nova Scotia and the province of Newfoundland to join together and increase the taxation rate in New Brunswick without our consent?
[English]
Two provincial governments, Newfoundland and Nova Scotia, can actually pull together and, with the federal government, decide that the rate in New Brunswick will increase, and there is nothing that we, the elected representatives of New Brunswick in the Legislative Assembly, can do. We can do nothing. The deal is that two provinces can impose a higher rate on New Brunswick. I say that this is an abandonment by our province of our exclusive power over taxation.
For those who would like to argue that the principle of an harmonized tax -- and you will all remember that when the concept was first introduced we favoured an integrated federal-provincial consumption tax, there is no question about that, we did it in Quebec. There was an agreement in principle signed in Quebec but Quebec never gave away a sovereign right over direct taxation to raise revenue for local purposes, and yet this is what this bill does. It balkanizes Canada and it will create a Canada with two different systems. The Senate, which is entrusted by Canadians in our constitution with protecting the regions, cannot let this go; you must put a stop to it.
I have talked a bit in my presentation about the principle of tax harmonization and I say that you must divorce the principle of this bill from its actual provisions. I am not here to tell you that the principle is bad. I am consistent. I once argued that consumers and the business sector in Canada could all benefit from an integrated federal-provincial tax, a sales tax, and I have not changed my position. What I say, however, is that when we -- and we all agree with the principle -- look at the actual provisions of this bill, we see a completely different story. Everyone I know is still at a loss as to why a particular provision of this bill is there -- that is, tax-inclusive pricing, which has nothing to do with the principle of an integrated federal-provincial sales tax.
I have asked our Minister of Finance, who I understand will appear before you at the end of your session in New Brunswick, whether there had been any economic analysis or studies made in New Brunswick, a cost-benefit analysis of tax-inclusive pricing.It does not exist because there are none. It is the business sector throughout Canada, throughout New Brunswick, that tells you, honourable senators, not to pass this bill. It is a killer of jobs and it creates a situation where the consumers in New Brunswick will be penalized.
We already know that a certain national firm will drop our citizens in New Brunswick as clients instead of conforming to this tax-inclusive pricing provision. The three provinces that are participating in this represent 7.6 per cent of the population. We do not carry that much weight on the national scale, and yet they persist in wanting to get this tax-inclusive pricing included there. That alone is reason enough to refuse to pass this bill.
Now, the issue of fairness, because you all know that taxes are levied to finance government services, to redistribute income and influence the behaviour of consumers and investors. Another truism of tax policy is that when taxes are imposed on individuals, business firms or property, private spending is reduced by an equivalent amount. There are criteria by which a tax system is judged, and they are equity, efficiency, economic growth, stabilization, ease of administration, and compliance. These are the general criteria by which we can judge a tax system.
On the issue of equity and fairness, I argue that this harmonized sales tax, the way it has been proposed by the provisions of the bill, is a tax on the poor. In New Brunswick it taxes electricity. Do you know that in 1998, once this is passed, the electricity rates for resident consumers in New Brunswick will have gone up, from 1991 to 1998, by 43.4 per cent, and that is not the fault of the federal government, nor the Parliament of Canada, but because of the local administration of N.B. Power. During the same time period, inflation, or the cost of living, will go up by about 10 per cent, yet our residential electricity rates will go up by 43.4 per cent; increases will also occur in home heating fuel, clothing, items for children and adults of less than $100, which are currently exempt in New Brunswick.
I understand that APEC will come before you. I suggest that a good question to ask them is what they meant when they said -- and I quote a report in the Telegraph Journal on November 8:
Breaking down the HST's impact clearly shows the new tax's `gouging effect' on low income consumers.
My concern before you here today is those low-income consumers -- seniors, and people on fixed income. If you care to look at the statistics, you will realize that in New Brunswick we have many more families in the low-income bracket than in the high-income bracket. I have said to my colleagues in the House that what we are doing is imposing a tax on the poor people of New Brunswick and giving ourselves a tax break, because people with higher income, like me, will be better off. I do not think that that is fair to the other, much larger segment of our population, who will be penalized by this.
The other problem we have with this, in terms of the analysis of its impact, is that when Premier Savage and his finance minister announced the deal, you will remember that they had a sound fiscal and economic analysis outlining what the impact would be in Nova Scotia. We know that the consumers in Nova Scotia are going to be hit by $84 million by this tax. In New Brunswick, the minister says he cannot tell us -- there is no analysis to determine the impact on the consumers at varying income levels.
We did our own analysis, and as I was telling the chairman, Senator Kirby, at the start, we do not have many resources in New Brunswick, as an opposition, to do the job. So we used the FAMEX figures, the StatsCan family expenditure for Atlantic Canada, and concluded that everyone who will earn less than $30,000 in New Brunswick will be negatively affected. Hence, on the first day that this was announced, I asked the finance minister if there would be within the HST a rebate such as the one we have under the Excise Act for under the GST. The answer was no.
You all know that throughout Canada, whether it is Western, Central or Eastern Canada, the poverty concern is real. We have kids who go to school without breakfast; we have the working poor, who have a hard time making both ends meet. I remember a discussion that took place in my other life in Ottawa when we introduced the work income supplement; we abolished the family allowance and introduced the child tax credit initiative, the aim of which was to help poor people. I know that this these initiatives were endorsed by the current government. They improved on it in the last budget, but they were aimed at helping poor people.
The travesty here in New Brunswick is that they have used the child tax credit and work income supplement to allegedly neutralize the gouging impact of the HST on low-income and fixed-income people, and it does nothing for this other large sector who have no kids at home. I am talking about seniors, people who have retired, or even those who have no children, who still must fuel their car, heat their home, and pay the electricity bill at the end of each month. On the issue of fairness, it fails, and for that reason also you should not recommend to your colleagues in the Senate to pass this bill.
Economic impact: There are several reasons why from an economic standpoint we are losing. Why, if this is good public policy, does it take $960 million from the Canadian taxpayers to buy three provinces in? If it is good public policy and good economics, why must we get the taxpayers of Canada to throw money at the scheme? To me, that in itself answers the question.
I am really worried -- and I know that around the table we have a lot of Atlantic Canadians <#0107> about what happens in four years time after the money has run out? We will be saddled with the loss of income of $170 million in New Brunswick. Will that mean that we must then increase the tax to 20 per cent? I guess it will be easy if we hide it in the price. Is that the plan? I do not know, but there are serious questions about the economic impact of this.
Before going to your questions, I have included a chart on the issue of visibility and I talk about the useless and pernicious feature of the HST and tax-inclusive pricing. You have heard the cost to large retail chains, to national advertising, catalogue sales, the ticketing cost, and what could otherwise have been maybe a benefit to consumers is taken away by the tax-inclusive pricing provision.
[Translation]
The other point is this. If we have governments that are really concerned by the impact of this new tax on New Brunswick consumers, why has no mechanism been established to ensure that the supposed benefits to business will be passed on to consumers? You will remember that, when the GST was introduced, a mechanism was established in the Department of Consumer and Corporate Affairs for the specific purpose of exercising control and seeing whether Canadians would benefit from lower prices. And, according to the literature I have seen on the topic, some 80 per cent of the benefit was passed on to consumers. However, here, with the provincial portion of the sales tax that now becomes the harmonized sales tax, there is no mechanism to ensure that the benefit, if any, will be passed on to consumers. One may well ask if there is any benefit, because, with the selling price including the tax, virtually any chance of companies or businesspersons being able to pass any benefit on to consumers is effectively eliminated. On the last page, I told you that I am asking you what the options are. Of course, you may adopt, refuse, modify or amend the bill.
[English]
My plea to you, in the best interests of Canada, in the best interests of Atlantic Canada, is that you reject this bill. It balkanizes the country; it subjugates the exclusive powers of provinces to use direct taxes for provincial purposes; it fails to extend the federal GST rebates to the provincial components of HST; and it includes this offensive tax-inclusive provision which will increase the cost of doing business in these three small provinces, thus removing any benefit harmonization could have brought them. Indeed, it will actually kill jobs, not create them, and we already have examples in the private sector.
Our position is that if business and the consumer want the price included -- either we believe in the private sector and in the free market or we do not -- tax included, then why do retailers not do that, if it is what the consumer really wants? Let them decide. I know of jewellers who include the tax because that is what they want and their customers love it. Let them do it. But do not impose that at a cost to consumers and to business.
[Translation]
You have the benefit of my comments, I have not read the text, I have attempted to present an overview of it. At this point, Mr. Chairman, if you have any questions, or if a member of the Committee has any questions, I will try to respond to the best of my knowledge.
[English]
Senator Angus: The Senate is down here in response to the obvious dismay of the citizens of New Brunswick, and their fellow citizens in Nova Scotia and Newfoundland at this outrageous, according to your people down here, piece of legislation. I was intrigued by your opening remark, Mr. Valcourt, when you said that you yourself were dismayed and you could not understand any logic behind this law other than purely partisan political reasons. I just wonder if you could suggest perhaps for us what you believe these partisan reasons to be?
Mr. Valcourt: As a politician, I have always tried to look at initiatives from a public policy perspective -- the underlying reasons, the public policy objective -- and it is the issue of the principle of an integrated federal-provincial sales tax, and I have no problem with that. However, why this deal? I am not saying that the concept is bad; I say this is a bad deal and it is a bad deal for all the reasons that you hear.
We all know, and it is unfortunate, that the current federal government was elected over a promise to eliminate the GST. The finance committee of the House of Commons -- and I am sure honourable senators have followed their deliberations -- have toyed with this for months and could not come up with anything better than the GST. So they went back to Michael Wilson's statement, who had argued then that it should be an integrated federal-provincial consumption tax, and they said, "Wilson is right, the Tories were right, except that we promised to abolish this and now to take the cash hog away will do it for us politically."
I hate to sound so partisan and political, but that is the only reason. I have tried in the House to get from our premier and our finance minister a good sound public policy reason why tax-inclusive pricing should be imposed, and they could not give me one.
Senator Angus: I am showing you here a document, which I am sure you have seen before, the so-called Red Book. Is this the sort of political reason that you are referring to?
Mr. Valcourt: Indeed.
Senator Angus: In other words, a disguised sort of cover-up for abolishing the GST all together?
Mr. Valcourt: Yes, but you see, senator, I would love the Senate to move beyond that; let us set all of this political stuff aside and just look at the deal. The motivation behind it blurs the debate. When I go home and say that this is partisan political stuff, they would rather know why it is wrong. If we want all of the senators in the house to exercise their mandate of sober second thought, then we cannot blur the debate in a political issue. We all know that is the reason. When you send the bill back to the House of Commons, I think you want to have good reasons for it, and they have given you plenty in this bill.
Senator Angus: Mr. Valcourt, I will not ask you another question, other than to ask you if you could, at some stage during the course of this week, give us some specific, suggested amendments to take back with us, because as you said at this end of your brief, we have various choices -- we could approve the bill as it is; we could reject it; or perhaps we could bring some positive improvements to the bill through amendments.
I know that you particularly target the tax-inclusive pricing, but if you have some other specific ideas, we would welcome those.
Mr. Valcourt: It is tough, and that is the tough position this committee has. There is another player in this -- it is not imposed by the federal government alone; there are accomplices in three provincial capitals.
Senator Angus: Three Liberal governments.
Mr. Valcourt: That happens to be. But then, the rebate that I call for, you cannot amend the federal act to provide that New Brunswick must give a rebate. That is our problem and that is why I am asking you to consider simply killing it, because the negative impact on low- and fixed-income consumers is such that, as senators entrusted with protecting the regions, you cannot endorse this proposal for the harm it will cause these people in those three provinces.
Senator Rompkey: Mr. Valcourt, your articulation certainly has not changed since you were in Ottawa; you are as articulate as you were when you were in the House of Commons.
What has changed of course is his position. The position he takes now is diametrically opposed to the one that he took when he was Federal Minister of Fisheries in the government that brought in the GST. At that time, he gave his unqualified support of the GST. There is nothing in what he said at that time, as far as I can tell, to qualify that support, saying that New Brunswick or Quebec should not harmonize unless all provinces harmonize. I want to read back to him some excerpts from his speeches at that time. And I quote:
Tell your provincial government that this tax, the GST, must be harmonized with New Brunswick. The advantages would be a seven per cent benefit in favour of economic and regional development.
And again, quote:
The New Brunswick government should harmonize its taxation system with the federal government's. The precious dollars that would be saved would make New Brunswick companies more competitive and better prepared to face competition.
And again -- this is not a quote but it is a report -- Mr. Valcourt suggested that the Province of New Brunswick, just like Quebec, establish its own tax on goods and services; that that is the best way to protect oneself and to make the system uniform; that with harmonization, there will be more effectiveness, vis-à-vis the GST.
My first question, Mr. Chairman, is the explanation of the difference between what he said when he was a minister of the government that brought in the GST and the position that he takes now as leader of the Conservative Party of New Brunswick.
Mr. Valcourt: Senator Rompkey, if you read carefully my presentation to you here today you will find that there is no such inconsistency as the one you claim. I am ready to do one thing, senator: take your Liberal mantel away; I will take my Conservative mantel away. Let us look at this in crude terms, in terms of the benefit to our people in Atlantic Canada and the impact of this on the whole of Canada. I am saying to you, sir, that this bill is bad because, quite opposite to the GST, there are no built-in rebates for low-income consumers, in any of the three provinces. If that were there, you would hear me sing a different song.
I have said -- and there is nothing wrong with the principle of this bill; what is dead wrong with it are its provisions. This tax-inclusive pricing is having an impact on the national market such that right now we have national firms saying that they will drop the consumers in New Brunswick as clients because they will not want to comply. How can that be good for Canada? How can that be good for New Brunswick or Newfoundland?
Senator Rompkey: As far as the rebate, Mr. Chairman, is concerned, of course there is a rebate to low-income people. In fact, as was pointed by Mr. Valcourt, the child tax credit has been enhanced in the last budget. All of these are measures to offset the impact on low-income people.
However, let us take the partisan facade away for a moment and deal with APEC. APEC has been around for a long while. I was in the House of Commons for 23 years. They were there through many Conservative and Liberal governments and they still exist. So they still must be doing something right and be reasonably sound. I want to quote from the APEC report with regard to competitiveness.
The feature of the news sales tax will provide a significant cost savings to businesses located or choosing to locate in the three harmonizing provinces and should lower the cost of doing business in many sectors.
They point out that it is in the retail sector that the Atlantic will have to seek its advantage in the future rather than resource industries or perhaps manufacturing. So I wonder why is there this difference between what Mr. Valcourt is saying and what APEC is pointing out?
Mr. Valcourt: In regard to APEC, APEC has also talked about the gouging effect of this tax on low-income consumers. No one will deny that there is an advantage to the business sector; they will have an advantage. However, we all know, sir, that a tax system is measured and judged by different criteria; efficiency is one, of course, but the other is fairness. And here, and not to make hay of that claim by APEC, but the outcome before you, ask him about the Dominion Bond Rating Service report of August 1996. When you look at that report, sir, you find that no province in Canada is giving as much exemption to the business sector as New Brunswick.
In New Brunswick, electricity is exempted, as is firewood, water, farming equipment, fishing equipment, production machinery, R&D equipment, clay, sand and gravel, telephone equipment, 1-800 service. All of these are already exempted. According to our business community, they will not receive a benefit out of the HST because of this. They are already exempted, so where is the benefit coming from? Unfortunately our Minister of Finance is incapable of telling us where from.
The government claims that we will lose $170 million in revenue in New Brunswick. Who from? Well, not from those who were buying farming equipment or fishing equipment or production machinery, or R&D equipment. These items are the movers and shakers of your economy. This is what makes your economy grow. They were already not taxed. Yes, you will save on other items but this will not. According to APEC, New Brunswick is one of the provinces that has benefited more from the free trade agreement. The impact on our export sector has been positive; 65 per cent of our GDP in New Brunswick is exports. Will this go to 80 per cent because of this? I do not think so.
What we are witnessing here is a shifting of the tax burden. Unfortunately, people must buy gasoline every day, they must heat their home every day, they must feed and clothe the kids, and these are the items over which they will be penalized.
Now, if a rebate like the GST had been provided to those low-income consumers, I would feel good and I would probably have been the first one to congratulate our provincial government. However, these security valves are not there to protect those consumers in New Brunswick, and when you add the impact of the tax-inclusive pricing provision, you take all benefits that the consumers could possibly get. That is why I say, without even any inkling of partisanship, that this is bad public policy.
Senator Robertson: Mr. Valcourt, your interpretation of this very bad legislation I believe is very accurate.
In my questions this afternoon, I will concentrate on the consumer, and I will concentrate on those who live in poverty or near the poverty line, because we all know, those of us in this room and those of us sitting around this table, that we in New Brunswick have a large number of our citizens living below the poverty line or just at or just above the poverty line.
I agree with you when you say that the Senate must take action. When I was called to the Senate, my greatest concern and appreciation of that call was my interpretation of the Constitution in the formation of the Senate that we had to protect our people from unfair legislation. That was one of the mandates given to the Senate and is one of the reasons that I am here this afternoon. I feel very strongly about the unfairness of this particular legislation to those of our citizens living in poverty or near the poverty line.
Some of our colleagues will talk about the increase in the child tax credit, and that is good, but what good is the increased child tax credit to New Brunswick if it is all eaten up by the increase in prices? After this proposed legislation comes into effect, if you buy a fur coat you will pay 3 per cent less; if you buy a child's playsuit, you will pay 8 per cent more. To me, that does not make sense. There is no fairness in that comparison. I could give you a list of similar comparisons which show the unfairness.
We are a poor province. We know that our food banks are stretched to their limit. We have the lowest rates for those people living on social assistance of any in the Dominion of Canada. Any. We have the lowest rates. The child tax credit increase does not go to those children living on social assistance; the province just reduces its amount of social assistance so that there is no increase for those children living on social assistance. That is bad. That is very bad and very unfair.
We have very high unemployment. It is fine for some people to say "Go and get a job," but where are the people of New Brunswick going to get a job so that they can pay this increase in taxation? They will not find a job. We cannot find jobs for our university graduates for heaven's sakes, so how will we find jobs for these people who have been living on social assistance and living at the bottom of the income scale for so long? It is terribly unfair.
In any event, I do not want to waste time by emphasizing the unfairness of this legislation. Mr. Valcourt, having heard all of the comments from our provincial government and from the federal government -- I see no relief for the average consumer or the consumer living at the poverty line or below the poverty line -- tell me, when you drive to the gas tank and fill your car with gas, what will happen there? In your debate in the provincial legislature, were you able to unearth that little magical puzzle?
Mr. Valcourt: Yes. Just for gasoline, for example, I think the Minister of Finance will confirm to you that he intends to raise about $30, $35 million more from the consuming public in New Brunswick who purchase gasoline and fuel. What is happening here -- and I am sure he will talk to you about the child tax credits and the work income supplement -- as I point out in my presentation, the child tax credit and the work income supplement were never intended to be neutralized by a further tax grab on people in need. It only goes to show, as far as I am concerned, how uncaring they are about the fact that we have more children than ever before living in poverty in New Brunswick, and the problem is not improving, it is getting worse all the time.
The average weekly earning in New Brunswick has gone up by $2.58 in the last three years compared to the Canadian average of about $30, according to last Thursday's Statistics Canada figures. Also, Nova Scotia's average weekly earnings are about 600 per cent that of New Brunswick, in terms of the increase in 1996; Newfoundland, 950 per cent that of New Brunswick.
In New Brunswick, we have a low wage policy that the premier is pursuing, as well as part-time jobs. We lost 8,000 jobs in 1996, with no end in sight. However, 8,000 part-time jobs have been created because that is the policy; part-time work at minimum wage. That is killing our economy and now we will superimpose another tax grab on those poor people.
Senator Robertson: Mr. Valcourt, it hits our children of the working poor. They will not feel any benefit because of the increase in the necessities of life, whereas the children of the working poor outside of these three provinces will feel the benefit. That is vastly unfair.
What about our seniors living on fixed incomes? Has the government in Fredericton given you any assurance that they will help the seniors, or anyone living on fixed income, the handicapped?
Mr. Valcourt: No, none whatsoever; quite the contrary. They have confirmed that they are ready to take a senior's home away from him or her them through some kind of a reverse mortgage if that senior needs nursing home care. That is where the Senate comes in. We have no one here who is listening to those people.
The Chairman: Our next witness is Ms Elizabeth Weir, who is the MLA from Saint John Harbour as well as the leader of the New Democratic Party in New Brunswick.
Ms Elizabeth Weir, Member, New Brunswick Legislative Assembly: Welcome to New Brunswick; of course, I need not welcome senators from New Brunswick. Also, I want to thank you for the opportunity to appear this afternoon. I am going to try to help you get back on schedule, because I have had the opportunity over the last couple of weeks of dealing with this legislation on the floor of the Legislative Assembly. It seems to me that what is more critically important is that you hear from groups like the Seniors Federation, and you hear from ordinary citizens, because quite frankly they have never been given that opportunity here in the province by our government.
Citizens in Nova Scotia had, although it was a short period, a few days to make their views known about this tax. I have insisted, from the time this legislation was announced, that our citizens equally have that opportunity, and it has been denied them. If it takes the Senate to provide that opportunity to them, congratulations for doing that.
Just to put it in perspective, during the debate, the Minister of Finance tabled a survey -- you may not have a copy of it, however I am sure the Minister of Finance can provide it; I thought I had it with me today -- that was done recently by the federal government with respect to the three Atlantic provinces that are involved in this tax deal, and, of course, both our finance minister and the federal minister used it because of their view that it strongly supported the notion of tax-inclusive pricing.
When the minister tabled it in the legislature -- it is a survey by the Ekos Corporation. As I said, they tabled it in our legislature, so if Edmond Blanchard will not give it to you, we will.
In any event, what was startling about the survey was how little people actually know about this deal. It was a fairly substantial sample -- about 600 residents in the three provinces. Only 10 per cent said that they knew something about the deal. I am assuming that that is more than the name of the tax scheme.
The citizens of New Brunswick, of all of the provinces, knew the least. It seems to me that having an opportunity to better inform citizens, whether it is through debate on the floor of the legislature or here, is very important.
The citizens of our province are now only understanding that the April 1st deadline is approaching, and then the guillotine is going to fall. To give you an example, as an MLA, we get calls from constituents, and we have been struck over the last two weeks because we did not get a lot of phone calls to our office, initially, although there were groups obviously affected -- the housing sector, areas in the retail sector, the catalogues sector -- because we have in Saint John a firm that does a lot of direct mail marketing. They knew that this was going to hit them hard, but for ordinary citizens, we did not get a lot of calls.
The phone calls are now coming in. For example, a Saint John resident might say, "I just opened my Civic Hydro," or a resident from elsewhere in the province might say, "I just opened my N.B. power bill. Are you telling me on April 1st this is what I am going to have to pay?" And those are the calls we are getting now, because people who have been conned by N.B. Power to switch over to electric heating or people who have high heating costs -- and a lot of low income people are in that category -- realize that this is going to hit them.
If you ask me who I think this is going to have the worst effect on, there is no question that it will be seniors. When Edmond Blanchard appears here tomorrow, because he will show you, no doubt, tables showing across income groups that -- and you have to listen to the words carefully -- on average people in all income groups will be better. Well, the inverse argument is, of course, that there are going to be some people that are going to be worse off.
But we have never seen any distribution across age, and I think that is one thing that I would urge you to focus on. You are going to hear or you may have heard from the seniors already, but when you are looking at people on limited incomes -- and again we can damn them with their own figures. You look at where the provincial government says people are going to save. They are all discretionary items, like refrigerators, like new cars -- items that seniors do not buy every year. Where are the increases going to be? They will be in the necessities of life: gas, home heating fuel, electricity. I say to you that I think seniors are going to be most severely affected.
When the tax deal was announced and we were given briefings, we asked, because obviously low-income people live in more inadequate housing and they pay more to heat and light their homes, "What are your projections in terms of how many people will be worse off as a global number under this deal than before?" and the finance officials, the Deputy Minister of Finance, told us that 100,000 New Brunswickers will be worse off.
My question to the Finance Minister -- and again I have to say, I do not think there has been a satisfactory answer <#0107> is: Will the low-income supplement and the child benefit offset those 100,000 New Brunswickers that they anticipate will be worse off under this deal, and I will bet the answer is no, because seniors will not be caught there. That is one thing I wanted to just flag for you.
In terms of the promises of job creation, the estimate is that in this province we will get 6,000 jobs as a result of this. Again when the officials were questioned very closely, those are not new jobs they are talking about. That 6,000 net figure includes "protecting existing jobs".
Now, you tell me what it takes to protect an existing job. So just be leery about that figure if it gets tossed out to you as a benefit in the province.
In the legislature, one of the areas I focused on -- because a number of groups, performing arts groups, approached me. In this province, we have a terrific performing arts organization called Theatre New Brunswick. It tours the province from Saint John to Fredericton to Moncton to Campbellton. It brings theatre into our communities and has done so for the last 20 years or so.
As part of the HST, we are repealing the Amusement and Admission Tax Act. I will be frank with you. I did not have a clue what this was until the groups approached me.
What it does, in essence, is makes sure that when you are dealing with amateur and resident performing arts groups in the province there is not a level playing field, that they in essence had the admission tax exempted -- they had an exemption -- which is kind of a subsidy of a 10-per-cent subsidy for their operations.
You may have had the opportunity to visit our beautiful Imperial Theatre here in Saint John. They actually made money from that old tax, because when we got touring groups from outside the province, they levied a commission. They made $5,000 last year, because what they did was pass it on to the provincial government. They are being hit in two ways.
I know that people will be making this presentation to you, but to me it is very distressing in a province such as ours where cultural groups are so important, whether it is the francophone community or the anglophone community. We have to understand that part of this new tax deal is going to hit those groups because there is now a level playing field, and when people go to those performances they are going to have to pay 15 per cent on the price of the ticket. If that is not bad enough, a kid who wants to go to the Cherry Brooke Zoo will have to reach into his or her piggy bank -- thanks to both the provincial finance minister and federal finance minister -- and take out an additional 15 per cent to go to a zoo. I just wanted to flag that.
I know it has probably been raised for you, but time and again we were told there could be no exemptions, no special deals, and, of course, we learned on Friday that Assomption Vie has received some sort of rebate agreement. I do not know what it is, on the segregated funds, which is the area that they were being impacted in terms of selling these funds in the region.
That is a very quick review, but I just thought perhaps those were things I could highlight for you that might not have been raised by other presenters. My sense is that people just do not know what is going to hit them on April 1st. After April 1st, they are going to know. For seniors, in particular, and low-income people, I do not think we have done all we can to ensure that they are not going to be hurt by this, and I think that is an obligation that has to be addressed.
Senator Buchanan: First of all, I want to welcome Ms Weir to our committee. I find myself in a rather strange position. I do not really disagree with anything you say. In fact, I agree with just about everything you did say.
I just want to mention that this is the first time in my 30-some years in politics -- 24 of which were in the legislature of Nova Scotia, and 13 as the premier of that province -- that I have ever seen a provincial government give away its sovereign jurisdiction over a tax matter. Have you heard that in your research? Has it ever happened before?
Ms Weir: Certainly not to my knowledge, and again during the course of debate on the floor of the legislature, issues were raised and it became apparent that the provincial government could not act unilaterally on these. It would have to do it with the assistance or the agreement of the federal government and the other Atlantic provinces.
One other quick point which you pointed out, part of the "savings" -- and you heard my colleague raise the issue that we had already broad-based exemptions for business in this province from our PST. Part of the argument is that consumers are going to save because, of course, businesses are going to voluntarily pass along the savings. I would commend to your attention the report of the legislative committee in Prince Edward Island that held hearings before that province. That committee recommended to its legislature that the government should not proceed with the harmonization of the taxes.
I have always been convinced that one of the reasons that we did not have public hearings is that Edmond Blanchard's secret nightmare was that business people in New Brunswick -- and I know they are just as honest as P.E.I. business people -- would come forward and say the same things that they said in P.E.I., that are reflected in that committee report. They told the committee in P.E.I that it was crazy if it thought they were going to pass that money along to consumers, absolutely crazy.
We are also sitting in a province where the provincial finance minister, four years ago, gave a 2-cent-a-litre tax break to the oil and gas industry, told them to pass the benefit along to consumers. I have been part of a legislative committee for the past six months that has concluded that they sucked that money onto the profit columns; that they did not put it in the pockets of consumers.
We have a lot of very specious arguments at work here. The sovereignty issue is a compelling one.
Senator Hervieux-Payette: Since this is an exchange of views, maybe I would just like to read for the benefit of people attending this meeting that there is in the agreement a special paragraph, paragraph 21 -- and coming from Quebec you understand that the sovereign question is very important -- and we were the first ones to go to a partially harmonized sales tax. We are completing the task that was done by our predecessor in the Conservative government.
In the agreement that is being signed by the provinces it says -- I will read it in French because I have a French version.
[Translation]
that this binds the province. ... because of the fact that the conclusion of this agreement; effectively abandoning none of their powers, rights or privileges under the terms of the 1867 and 1982 Constitution Acts and amendments thereto, nor having renounced or infringed its powers. And, administratively...
[English]
We have to be reminded that, with a notice of six months, any province that feels that they are great losers can withdraw from the agreement. So, I guess it is important that we share that factor because in Quebec it has worked well. In fact, we are making $700 million a year more. Of courses, that is why we have no compensation. I find it difficult to understand how you can say -- and your predecessor was saying the same thing -- that it is going to cost more since we have to compensate for the lack of revenue. If there is to be compensation, it is because there will be less paid, and the federal government, with the 5-per-cent rule, will pay the difference over a period of four years.
Ms Weir: Just on the issue of the agreement with the Province of Quebec -- that is a bilateral agreement -- it seems to me that it is far less objectionable than a situation where you tie your hands and you have to get the consent of other provinces in order to make changes.
The six-month withdrawal rule is fine, but there are political consequences. You are telling business to change over all the costs that are occurring, and then at some point you are going to withdraw. Sure, it is a safety valve; I am not sure how much comfort it gives. I think the point that my colleague was really trying to make is that if you look across the country, the basis on which the taxes are levied are very different, and that our base -- for the most part, industry was broadly exempt anyway. It is not any kind of great revenue measure that we have given up, but there has to be compensation. What happens if we get into a position of difference of political views and different parties elected in governments? The sovereignty issue raises itself again. I suppose it is an issue that a lot of people feel quite strongly about.
Senator Angus: This issue came up about the rebate or something to do with the segregated funds. Was there some new thing that happened yesterday or a deal made?
Ms Weir: I think it happened Friday, and I am sure the finance minister will be more than forthright.
The Chairman: None of us on either side heard about it.
Ms Weir: I just heard about it on the radio. I cannot be a real source for you. Maritime Life and Assomption Vie had raised concerns about segregated funds, and Friday there was an announcement that a rebate deal had been worked out between our government and Assomption Vie. There was nothing said about Maritime Life.
The Chairman: We have the Minister of Finance here tomorrow.
Ms Weir: Yes, they will provide all the details.
Senator Rompkey: This is one of the amendments that was passed in the house.
The Chairman: No, I do not believe so.
Ms Weir: I think they can do it by way of regulation. Of my reading of the Act, it would be a regulation passed.
The Chairman: I believe you are correct.
Our next pair of witnesses are from Mark's Work Wearhouse, Dusty Carroll, who is a franchise owner, and from the Canadian Direct Marketing Association, Mr. John Gustavson, president and CEO.
It is my understanding from the clerk a moment ago that -- and this is unfortunate since this issue just came up -- that the witnesses from Assomption Vie and Wendy's Restaurant have cancelled. We will have to deal with the Assomption Vie question tomorrow.
Mr. John Gustavson, Canadian Direct Marketing Association: I appear representing national, regional and local businesses engaged in direct response marketing, often through the use of catalogues. I appear in support of the concept of a single national harmonized tax, but also to ask for one small but extremely important technical amendment to the legislation.
CDMA is on record as supporting the blending of the Goods and Services Tax and provincial sales tax into a single, federally administered harmonized sales tax on a national basis. It makes good business sense. It streamlines the taxation process, it reduces the costs of administration for both business and government, and it provides tax relief to business through the tax credits. The wisdom of implementing this harmonized sales tax on a regional rather than a national basis I will leave to debate in other forums. I appear here today for very narrow purposes.
As you know, the legislation provides an exemption from the tax-in pricing provisions for national catalogues. The public policy reasons for this exemption are clear -- not to deprive consumers in Atlantic Canada of catalogue offers available to other Canadians. In most cases, it would simply be prohibitively expensive to produce a separate catalogue for the Atlantic Canada region showing tax-in pricing. What we are asking for, however, is one amendment to the legislation, without which it will be practically impossible for most cataloguers to use this exemption.
Clause 366(3)(b) of the legislation states that a catalogue must:
...indicate in prescribed manner and form and in compliance with prescribed standards, on the cover or cover page of the catalogue and on every second page of the catalogue thereafter, that the prices indicated in the catalogue do not include the tax.
The words "on the cover or cover page of the catalogue and on every second page of the catalogue thereafter" are so detailed and restrictive that it renders the exemption almost meaningless for many direct marketers.
I would also suggest that such detail is properly and normally left to regulations on how the legislation will be implemented. We would ask, therefore, that those few words be removed from clause 366(3)(b) and the nature and form of the disclaimer be left to our ongoing discussions with the Department of Finance officials.
We have no objection to a disclaimer which reads that "prices shown do not include tax" being prominently displayed for customers in Atlantic Canada. Over the past few months, we have been working with finance department officials to try to develop regulations that ensure that consumers in Atlantic Canada are properly informed but that are not so prohibitively difficult or expensive to implement. However, to have that kind of detail contained in this subclause and enshrined in legislation makes this extremely difficult.
For many national marketers, a requirement to place disclaimers on the front cover and on every second page of the catalogue is tantamount to showing dual pricing or producing two versions, both of which are prohibitively expensive and, in some cases, simply impractical. Requirements such as this, which unnecessarily elevate the cost of doing business, may give national marketers no other option than to withdraw from providing products and services to Atlantic Canada. Similarly, such requirements will hamper local Atlantic Canada businesses as they try to expand into other markets.
Each year, there are $3 billion in sales of catalogue and consumers goods in Canada through direct response methods. Atlantic Canada represents some 12 per cent, or $360 million, of these sales. The harmonized sales tax, therefore, should generate more than $28 million in new tax revenue to the governments of New Brunswick, Newfoundland and Nova Scotia through collection of the harmonized sales tax -- predominantly by non-resident, direct-response marketers. As I am sure you know, up to now non-residents have not been required to collect and remit taxes to the provincial government.
Provisions for marketing into Atlantic Canada that prove to be prohibitively expensive for business will, of course, result in significant withdrawal from the marketplace by direct response marketers. This will result in a reduction in potential government revenue as much of the HST that would have been collected by non-resident direct marketers will be lost. There will also be a loss to the federal government of their portion of the tax that otherwise would have been collected.
We operate in a national marketplace -- and often in an international marketplace. It is important, therefore, that this legislation not inadvertently impede the growth of Canadian businesses nationally or in Atlantic Canada.
I understand that the Minister of National Revenue has said in her appearance before you that where a valid point is raised the government is still willing to agree to amendments to the legislation, providing the change does not alter the fundamental principles of the legislation. I would respectfully suggest that the removal of these few words in the subclause clearly falls within that scope, and, I might also suggest that such a specific detailed provision is usually left to the regulations. I would, therefore, ask that you agree to our request to delete these 18 words from clause 366(3)(b).
Mr. Dusty Carroll, Mark's Work Wearhouse: I come to you from Mark's Work Wearhouse in Moncton, New Brunswick. I am speaking to you on behalf of Mark's Work Wearhouse franchises in New Brunswick. Mark's Work Wearhouse is a company of 150 stores across Canada, 14 of which are in Atlantic Canada. Today, I want to raises three points in respect of Bill C-70: First, it is a regressive tax; second, the costs involved; and third, that for myself locally in Moncton it depicts a non-level playing field against competition in P.E.I.
Costs for tax-in pricing: corporately Mark's Work Wearhouse estimate $400,000 to $500,000 to implement the HST and tax-in pricing. For 14 Atlantic stores, this equals $25,000 to $30,000 in additional cost to each store, which comes directly out of the bottom line. Currently, our suppliers are pre-ticketing and pricing our merchandise before it arrives in our stores. After much investigation, it is cheaper for us to re-ticket at store level.
The four options put forth in a bill are not practical or appealing to our customers. We are not a food store or a pharmacy that we can shelf price or bin price our goods; nor can we show separate price cards displaying the HST-inclusive price without greatly reducing the number of items we can put on display.
The advertising costs will increase due to printing changes required to change the price in our flyers to include the HST price. It will be far too costly for us to participate in television advertising due to the additional 15 per cent nationally in costs to regionalize the ad for the tax-in pricing.
I feel it is a regressive tax. Currently, no clothing or footwear is provincially taxed under $93.40 at the retail level; only the 7 per cent GST. With Bill C-70, all clothing and footwear is taxed at 15 per cent effective April 1st. This means that customers will not only be faced to pay an additional 8 per cent in clothing purchases, compounded with the fact that the customers will be paying an additional 8 per cent on other services not previously taxed, but also the customer will have less disposable income to spend on clothing purchases.
Given the fact that consumers are not yet realizing what this tax means to them, I anticipate an increase in costs and lower sales over the next six months. In Moncton, New Brunswick, with the fixed link to P.E.I., my store, opening up this summer, and many retailers in Moncton anticipating a flood of shoppers from P.E.I., currently estimates five per cent of my business from P.E.I. Since P.E.I. has opted out of the HST, there is currently no provincial sales tax on clothing under $100. So a pair of jeans in Charlottetown with a shelf price of $40 in my store will have a shelf price of $46, with the appearance of 6 per cent more in Moncton.
In conclusion, Bill C-70 will have a devastating effect on my profitability, through loss of sales and additional costs in the reduction of advertising that drives footsteps to my door. I ask the committee to review and make the necessary amendments to the bill so that I as a business person can continue to run a profitable business.
[Translation]
Senator Losier-Cool: Thank you, Mr. Chairman. First of all, in the matter of catalogues, exactly what is a national catalogue? Is a 100 page Christmas catalogue a national catalogue? Or, is a catalogue like the Avon monthly catalogue a national catalogue?
[English]
Mr. Gustavson: I will try to be precise, so I will answer in English, if I may, senator. We are currently in discussions with the Department of Finance about what is a national catalogue. There were some proposed rules, but those rules proved to be somewhat impractical to define a national catalogue.
Our argument would be that what you are trying to prevent here is unfair competition with the local retail sector. In other words, you do not want a national marketer coming in saying, "Please come down to our store and buy something," and advertising prices appear to be 15 per cent lower than what would otherwise have to be advertised with the local marketer.
What we are suggesting, however, is where there is a process of distance selling -- this is the way the Europeans have defined it -- where you can buy something not at the vendor's usual place of business, that that actually constitutes a national transaction. As long as the offer is across the country in perhaps the majority of the provinces or something like that, there is some reasonable requirements that can be imposed. However, we think that where the process is not a competition between retailers you can provide an exemption.
That is what we are suggesting for the definition of a national catalogue. There have been no conclusions so far.
Senator Losier-Cool: This may be a question for the customers or retailers of Mark's Work Wearhouse. Madame Weir mentioned the research that was done with Finance Canada and by Ekos Research, and in that document, the majority of your customers -- I believe it was close to 65 per cent -- agreed with the HST. Would you not do what your customers want?
Mr. Carroll: I am not sure how the question was asked -- I think customers agreed to have it in the price -- but I think they were talking about a national tax. This is not a national tax. For retailers, it causes a great problem. For example, a jean manufacturer in Montreal who puts a price on the jeans and sends it to their distribution centre to wait for a person like myself, a retailer, to order it: if the person who places an order for those jean is from Moncton, New Brunswick, the jean manufacturer will say, "Oh, this is Moncton; we have to reprice those goods." At that point, we are looking at a delay in goods and an additional cost to doing it.
I agree that customers do want to know, when they go to the cash register, that the price they are paying at the cash is what is on the goods. However, it is pretty much impossible to do it unless it is focused nationally.
Senator Losier-Cool: I would like to come back to your question about the competition with P.E.I. How we could bring in an amendment or what we could do with this, so that it could solve that problem of New Brunswick for the competition with P.E.I., or Nova Scotia with P.E.I. also?
Mr. Carroll: I would like to see that what is good for one is good for all: either it is implemented for all provinces or for none, until all provinces are on the same system.
Senator Simard: You made a statement to the effect that you might close some stores and the effect of that, costing jobs, in New Brunswick. If you were to pick two or three amendments that you would like to see made to this bill, what would those three be? Would you like to have the choice of price-included?
Mr. Gustavson: Senator, this afternoon you have someone from the retail sector and someone from the direct response marketing sector. From our point of view, we believe that the legislation is flexible enough to accommodate what needs to be done. We want to achieve the one amendment I suggested in my submission to clause 366, without which we think some cataloguers will withdraw from the marketplace in Atlantic Canada because it would be prohibitively expensive. It is a fairly small amendment that we are requesting. I think the retail sector has a different set of problems.
Mr. Carroll: As far as stores closing, I run my own store as a franchisee of Mark's Work Wearhouse. I know corporately that Mark's Work Wearhouse has said -- and you will hear this tomorrow in Halifax from our regional person Jim Killen -- that for a marginal store, if the additional cost for this tax-in pricing turns that store into a profit-losing store, then definitely, they would have to make a business decision on that, and being business people, if a store is not making money, then I could see them closing a store because of it.
Senator Simard: Would you prefer a further delay, of three to four months, so that the government and the Senate could go back and do its homework? Would you prefer it to come into force on April 1, or would you prefer a delay?
Mr. Carroll: Again, I think the problem is that you are trying to take a national tax and blend it with the provincial tax. You people talking about the fact that it is done in Australia. In Australia, it is a national tax. If it were a national tax, as far as delaying it and doing the homework, definitely let us get it right before we do it.
I know customers are talking day to day in the store about it. They are wondering what its effect will be on them and on us. Even today, there is nothing in the mail to find out really how it all works. It is really innuendo. It is going to affect business in Atlantic Canada. It should be done right and we should step back and take a look at it before it is done.
The Chairman: So, I am clear, Mr. Carroll, from your point of view as a franchisee in a large retail chain, small- to medium-sized retail chain, if the tax-included pricing issue were solved, that would be the one objection you would have to this bill?
Mr. Carroll: Yes.
The Chairman: I understand critically it is from the other witness' point of view, but from your point. Mr. Gustavson is clear. I want to be absolutely sure. I sort of hear you saying that is the one critical issue; is that correct?
Mr. Carroll: I do not think we are real happy about the extra tax. As I said, we would like to see a fair playing field with other retailers in the market, P.E.I. for example. At the very least, I would like to see that.
Senator Buchanan: Just to follow up on that. This is not a hypothetical situation, but a real situation. If someone is buying approximately ten items from one of your stores and all of the items are under $100, total $600, Christmas 1996, they would pay $642.
Mr. Carroll: Right.
Senator Buchanan: That is including GST. If this bill were to become law, to buy the same goods at the store in P.E.I. would cost you $642, whereas here you would be charging $690, which includes the additional 8 per cent. The advertised price in P.E.I. would be $600; your advertised price would be $690. That puts you behind the eight ball competitively.
Mr. Carroll: Exactly. Thank you.
Senator Robertson: One supplementary to that. Those of us who are from the Moncton area know that Champlain Place has been developed as a shopping centre really for Atlantic Canada, and people come there from all over the Atlantic. The growth of Champlain has been significant because of this. Have the merchants in Champlain met to figure out how they are going to stop the drain to the Island, because I can see a total reversal, at certain times of the year, and that will result in a lot of vacant store spaces, because even with the migration in, some of them are marginal. Once we start losing the shoppers across the link, the Champlain Mall will be in real difficulty, in my opinion. Have you had meetings with your general merchants?
Mr. Carroll: There has been nothing yet. The Chamber of Commerce have had discussions and phone surveys have been done, and I am sure they are going to come out with something on it. However, you bring up an interesting point. Mark's Work Wearhouse franchise store in Charlottetown -- not that we compete against each other -- but the retail committee for the Chamber of Commerce in Charlottetown is getting ready April 1st to come on board with an advertising campaign in Moncton, and as Senator Buchanan just stated, if I am advertising a pair of jeans at $46, then you can be sure that my counterpart will be advertising the same jeans at $40 in the same paper.
Senator Robertson: I would submit that it is not only going to be the chains; that if people can save money like that, they are not going to shop in Champlain, but go to the Island.
Mr. Carroll: Exactly.
Senator Angus: Just a point of clarification. Mr. Gustavson, as you will recall, the Minister of Finance issued these guidelines on tax-in pricing originally, and from your evidence earlier this afternoon, it appeared that perhaps these national catalogue guidelines are no longer on the table. Had you been negotiating special deals behind the scenes?
Mr. Gustavson: The definition of national catalogue was left to the regulations. In the first proposal, unfortunately when the definition came out, it was designed so that the national Sears catalogue distributed in ten provinces and two territories, around 50 million copies a year, would not qualify as a national catalogue. It was just a lack of understanding between the industry and the officials on how they should be designed.
Since these regulations are currently being written, we are in some discussions with them, or will be shortly, I should say, to get a practical definition of a national catalogue.
Our current problem is not with the legislation, with the one exception; it is basically with this one small clause. Three quick examples: there are some 650 catalogues in Canada listed in the last edition of the catalogues for 1996. Many of them are very small. They would find it extremely expensive, if they were thinking of expanding it to the Atlantic Canada marketplace, to print a whole separate catalogue to incorporate this disclaimer. At the other extreme, a large North American catalogue would probably not want to reformat and redesign the entire catalogue for 1 per cent of its marketplace, which is what Atlantic Canada represents.
In between, you have Sears which, quite frankly, probably could comply with the legislation as it is now written, if it got the exemption through the definition. So our problem is not generally with the legislation; it is with this one specific clause.
The Chairman: Final question, Mr. Gustavson. Given the fact that a number of these issues are being left to regulations, is it possible -- I understand exactly the objective you are trying to achieve -- to achieve that objective with only a regulatory change, a change in regulations, rather than a change in the legislation?
Mr. Gustavson: No, sir. Once the legislation is passed, if that clause remains as it is written, that one subclause, it would be impossible for 366(3)(b), and just those words about the disclaimer must be on the cover and on every second page. The regulations could not get around that. Of course, you cannot defeat the specific terms of the legislation.
The Chairman: I thought that is what you would say, but I thought it was important to have that on the record. That was certainly my understanding of your brief, and I wanted to be sure I understood it.
Mr. Gustavson and Mr. Carroll, thank you very much for taking the time to make a presentation. As Mr. Carroll pointed out, we will be hearing from other members of his organization when we are in Halifax.
Senators, our next witness is Mr. Jacques Leblanc, the President of New Brunswick Home Builders' Association, and Mr. Bob McLaughlin, the President of the Canadian Home Builders' Association. We also have Mr. Gerald Disher, the President of the New Brunswick Manufactured Homes and Parks Association and Mr. Don Jenkins from the New Brunswick Real Estate Association.
Mr. Gerald Disher, New Brunswick Manufactured Homes and Parks Association: Thank you for the opportunity to speak. Our association represents 29.9 per cent of the new housing starts in New Brunswick in 1996. We are concerned about the price increase in the cost of housing. In 1991, a pulse survey indicated that the GST increased the price of housing by 3 per cent, and this resulted in a 25.2-per-cent reduction in new housing starts in 1991.
Now, in 1997, we are looking at a 3.5-per-cent increase in the cost of housing, which is half a per cent above that which costs us a 25.2-per-cent reduction. Because of that, we are very concerned. It could have more of a negative affect on that.
The Royal Bank study shows that there is a large pent-up demand for housing and that if this pent-up demand could be unleashed, there is a great potential for a very good increase in our housing starts, and this we feel could happen if there were some stability and some certainty as to what direction we head in as to the cost of housing.
On top of this -- and I know this is not related to this situation -- we just received some information from CMHC in which we were informed that the TDS, total debt service, and the GDS, gross debt service, will be lowered, which means that people can borrow less money as a percentage of their income. This is a percentage of your wages that you can apply towards a loan, which determines the amount of your loan. That percentage has been decreased only by 3 per cent on first-time home buyers, and on 2 per cent of the total, but in conjunction with an increase in the cost of housing, this also has a significant impact on our first-time home buyers and on the affordability of housing in the lower-income group, which is probably the most vulnerable group because of the tax increase.
Housing is often referred to as the engine which drives the economy. We believe as an industry that it is very important to the economy; but more important than that, when we look beyond the numbers, we see a need for people to own their own homes, and because of that, we must look beyond the numbers and say, "What can we do to make it a better environment for people to own their own homes?" A tax increase definitely goes the wrong way towards people being able to attain that.
For that reason, among others, we are very concerned about the increase in the price of housing. Also, we have been told that there is a possibility of a new housing rebate -- a possibility. If we were to get one, we have not been told of what that rebate possibly could be, which also creates an uncertainty because we are in the process now of negotiating terms of sale of houses that will happen in April, May, June, July, that type of thing, and we are doing this, in large part, in the dark, as to the price of taxes.
Because of the size of our commodity, I think the total price has a great effect on the financing, which is a long term type of thing. It just does not happen overnight. So because we cannot look beyond April 1st, it makes it harder for us to do business after April 1. At the present time, we are trying to do business in June, and we are definitely facing a lot of uncertainties.
Mr. Jacques Leblanc, New Brunswick Home Builders' Association: Good afternoon. Thank you for allowing our association the opportunity to present this brief on behalf of our 295 member companies province-wide.
The New Brunswick Home Builders' Association represents the residential construction and renovation industry in New Brunswick, working to promote the professional commitments of the builder/renovator members, with the support of the broader membership.
Harmonization of New Brunswick's provincial sales tax with the federal GST will result in very severe problems for homeowners, homebuyers, renters and the province's housing and renovation industry. Unless the proposed HST is altered, the new harmonized tax will result in three aspects: First, significantly higher housing prices that will affect the affordability of many New Brunswick families to purchase a new home or renovate an exiting home; second, increased unemployment in the residential construction sector; and third, and not of any lesser value, continued growth in the underground construction activity with substantial negative consequences for housing consumers, government and society in general.
Homebuilders and renovators do not oppose harmonization. The industry is quite prepared to pay its fair share of taxes. However, the proposal to harmonize federal and provincial sales taxes and apply a uniform 15-per-cent tax to all goods and services will have a very detrimental effect on the new housing and renovation industry, and its customers.
The goal of the association is to achieve tax neutrality. In essence, the problem is that the new tax will apply to large parts of housing costs -- mainly construction labour, overhead, profit and land -- that were not taxed provincially before. This broadening of the tax base will raise housing costs significantly.
The federal government recognized the particular problems faced by the housing industry in 1991 when the federal sales tax was replaced by the GST. The result was the New Home Buyer Rebate, which sought to mitigate the effects of the GST on affordability by reducing the effective tax rate on most housing to only 4.5 per cent rather than the general 7-per-cent GST rate. The measure was insufficient and was not made available for new rental housing renovations. The proposed HST will only add to the unfair tax treatment of housing resulting from the federal GST.
The New Brunswick Home Builders' Association commissioned an independent study of the potential effects of the proposed HST on housing. They found that the cost of new home construction will increase by 4.5 per cent and the cost of residential renovation projects will also increase by 4.5 per cent.
In short, the cost of new homes and renovations will go up substantially. The provincial government has admitted this. They hope for a mitigating effect from three areas and we challenge the assumptions of their analysis on all three.
Number one, the government assumes an industry-wide pass-through of business input tax credits of 90 to 100 per cent. Based on past experience with the GST, a more realistic figure is between 60 and 70 per cent.
It is assumed that the change of rate of combined tax from 18.77 per cent to 15 per cent will produce offsetting savings for contractors. The small savings may offset some day-to-day operating expenses; however, they will not offset the increased costs which result from the broadening of the tax base.
It is assumed that the new tax system will produce stronger economic activity. However, as the federal support paid to the HST provinces declines over four years, the tax burden will fall increasingly and more heavily upon New Brunswick taxpayers.
To ensure affordability in housing for all New Brunswickers, the HST legislation in New Brunswick must, first, ensure a meaningful provincial new home and renovation tax rebate of 4.3 percentage points off the 8-per-cent provincial value-added tax portion to achieve tax neutrality; and second, work to eliminate the threshold for companies with revenues of less than $30,000 to opt out of collecting the HST. This provides a loophole for unscrupulous companies and encourages tax evasion and underground economy.
HST will promote the underground economy. With the increase in underground activity, the government will lose income and sales tax revenue, and honest businesses will be put at a great disadvantage.
All levels of government must recognize the enormous job creation capacity of the residential construction sector.
For every new housing start, roughly 2.8 person-years of employment are generated. Nationally, the expenditures on new housing and renovations exceed $35 billion annually, representing over 5 per cent of Canada's gross domestic product. Provincially, the construction industry in 1997 is expected to generate over $630 million in construction spending.
The New Brunswick Home Builders' Association urges all committee members to realize the negative impact of the proposed HST on the housing sector and its consumers. Tax-paying jobs are also at stake.
The provincial Minister of Finance has promised a rebate for new home construction and renovations but to date has not revealed details. Our industry hopes that the minister has heard our concerns and will strive to implement a rebate that is significant enough to mitigate the negative impact of the implementation of the HST.
The new tax can work, but only if the changes outlined are implemented, with industry input.
Mr. Don Jenkins, President, New Brunswick Real Estate Association: I represent the New Brunswick Real Estate Association and its 700 members. I have submitted a brief on behalf of the Canadian Real Estate Association, and it is their position and represents their 70,000 members across Canada. The same brief was presented to a parliamentary committee last summer. It is essentially unchanged; our situation is pretty much the same.
I would like to zero in on just two or three things. I do not intend to go through the brief. If by chance you do not have enough copies, let me know and we will have them delivered to your office in Ottawa.
We have a few concerns as realtors; they do not affect us directly because in the run of a year, whether new homes are built or used homes are resold, the same number of units roughly will be transacted. That is a given. It is no different than the same number of cars will be sold roughly over a five-year period or you will buy the same amount of groceries. It does not directly affect realtors, per se; it is more of an industry problem. In that respect we are supporting the Home Builders' Association.
We found, as did the Home Builders' Association, that when GST came on line, a shock went through the industry and it took a long time to recover from it; and then along came a recession and in fact the industry never has recovered from it. We quite agree that homebuilding in this country is one of the largest engines of the economy.
We are disappointed about several things in particular. One is that it is a late stage in the game, and I understand the provincial government has passed legislation as late as Friday. We still have no idea if there will be a rebate and if so how much it may be. While the figures that the Home Builders' Association and our association have are slightly different, to our embarrassment, we did the Canadian thing, we hired an accounting firm in Toronto to conduct a study in New Brunswick, our figures come up with about 3.5 per cent.
It is our position that if there were a rebate of 3.5 per cent, it would make the whole situation on new construction revenue-neutral. Whether those figures are exactly true, or not, there are many experts who will try to figure that out. Our position is that we are looking for a revenue-neutral situation where a new home simply will not cost any more.
The industry has not recovered from the time when the GST was first brought in, and I can tell you as a realtor that new construction simply is not competitive in the marketplace. The only people looking at that option are those who cannot possibly find what they want on the resale market. Therefore, there are always a few. Basically they are not competitive at this time and we are crippling an important industry.
We also are worried that this is a regional package. We in the real estate industry in general took a position some time ago that we favoured GST; the Canadian Real Estate Association had that position. About three years ago, we lobbied in Ottawa -- and some of you folks may even remember it because we do that every year. We took the position that we favoured a national harmonized sales tax. I stress the word "national." We did not envision this regional method that we will have now. I know that it will cause a lot of problems in other industries and it simply is not very fair. The ultimate or ideal situation would be to have a national sales tax across Canada where we are all on the same footing, and perhaps some day we will actually see that.
The main thrust of the presentation today is that we are asking for leadership at the federal level because if you end up with rebates -- and I presume we will end up with some kind of a provincial rebate, but if we end up with a different one in Nova Scotia, Newfoundland and New Brunswick, this is not exactly the answer either. We are asking the federal government to take a leadership role and try to come up with the same figure.
I understand that the Province of Nova Scotia had announced an interim rebate some time ago of 1.5 per cent, which is nowhere near far enough. I do not believe that that has been changed up to this point. I do not believe that Newfoundland has announced anything and New Brunswick simply is not informing us of their plans at this point.
The Chairman: Mr. Jenkins, one technical question of clarification. Your 3.5 per cent, is that 3.5 per cent out of the full 15, or is that 3.5 per cent out of the provincial 8, given the fact that you now get 2.5 per cent on the federal 7? Do you understand the question I am asking?
Mr. Jenkins: It would be 3.5 per cent on the total cost of the project; assuming it was a $100,000 home, you are talking 3.5 per cent on top of the federal 2.5. Because do not forget, we are talking 15 per cent going on here.
The Chairman: So it is 3.5 per cent on top of the federal 2.5? It is essentially 3.5 per cent out of the provincial portion is what you are saying. Okay, fine. I wanted to be clear, because when you used the 3.5 I was not clear whether it was added to the 2.5 or included 2.5.
Senator Comeau: I was listening to the CBC on the way up to Halifax this morning and the person being interviewed was saying that this will cause quite a bit of chaos in the Nova Scotia retail and home builders' market; as a matter of fact, it is causing quite a bit of chaos right now, insofar as the builders have to scramble to do as much as they possibly can prior to the April Fool's implementation date. Is the same thing happening in New Brunswick, such that there is a big push on and contractors are working day and night?
Mr. Leblanc: There is a portion, it is not that big. Some builders have really made a final push to complete projects or substantially complete them before April 1, but as far as having a large influx of new construction it has not materialized.
Senator Comeau: My understanding was that those people who are able to move into their homes prior to April 1 -- contractors would be at the tail end of the decisions having been made some time ago -- knew this was coming into place and made the decision to build their new home quite some time ago, so that as of April 1 there will probably be quite a bit of a slack in people signing contracts for new houses.
Mr. Leblanc: We expect that. I think there is a lack of information on the part of the consumers as to what effect the HST will have on housing. I, for one, in December, and even late December, got more calls than I have ever had, and I have been in the industry for some ten years. Traditionally, we do not build much in Atlantic Canada in the winter months, but I have had numerous calls from people wanting to build in the winter months just for that reason. We do expect some slowdown in activity when the HST takes effect.
Senator Comeau: If I understand you correctly then, building a house in Atlantic Canada, or in the three blended provinces for lack of a better word, and putting aside the value of the land would be actually more expensive than elsewhere in Canada.
Mr. Leblanc: Yes, proportionately. There are markets that are more expensive for reasons other than the HST naturally, land costs and so forth. However, putting that aside, we will see an increase and it ranges depending on whose study you look at. We are saying 4.3 and other associations are quoting different figures, but there definitely will be an increase, no question.
Senator Comeau: This may fit quite well with any kind of an incentive for people to move outside Atlantic Canada anyway.
Senator Rompkey: I wanted to ask you first of all, whoever would like to reply, with respect to the $5 million that was announced in the New Brunswick budget, how will that apply and what will it do as far as the construction industry is concerned? Do you know?
Mr. Disher: It is not near enough to cover what we need. It is a portion of what we need but we have been told that that will be divided between renovations and new housing. It is not enough for new housing alone without adding renovations. We need that to extend to renovations, but not enough money is allotted.
Mr. Leblanc: I think to add to that, that that is only a commitment for one year and, as my colleague has mentioned, it is certainly not enough to offset anybody from avoiding the underground economy. We have figures right now that are saying that as much as 50 per cent of all renovations are done underground.People do not want to pay 7 per cent. What do you think will happen when that is raised to 15.
Senator Rompkey: Mr. Chairman, I was interested in what APEC had to say about the construction industry. They seemed to indicate that it was one sector that would benefit from the harmonized sales tax, and they point out that regionally that sector paid $273 million in provincial sales tax in 1992. They say that construction more than any other sector is expected to see significant declines in its operating costs, likely to reduce the cost of building in Atlantic Canada, particularly non-residential building. They go on to say that this will improve the competitiveness of investments in property, plant and equipment in the three harmonizing provinces, particularly vis-à-vis other provinces. For example, Ontario construction sectors will still be paying approximately 1.2 billion in sales tax whereas firms in this region fully flow through on these taxes.
I wondered if you want to comment on the APEC study and how it compares with your own?
Mr. Disher: Does that include commercial and industrial as well as residential? That would make a tremendous difference. Because on your commercial and industrial you have 7 per cent, or a 15 per cent input tax credit on your final price, whereas with residential we do not. We have a 36-per-cent rebate on the federal and a question on the provincial portion. It would make a substantial difference.
Mr. Bob McLaughlin, President, Canadian Home Builders Association: That was somewhere that we heard when GST came into place, we heard those same comments, that it would be cheaper for new homes and it did not work out that way. We lost. We are still missing two points off of the GST. The consumer of the day makes the final decision.
Senator Simard: I want you to tell the citizens of this province and Atlantic Canada, on residential construction, what will the effect an increase on the percentage wise comes after April 1?
Mr. Disher: From the manufactured housing industry we figured on a hundred per cent flow through of ITCs and our price will increase 3.5 per cent. That is with a 100-per-cent flow through of ITCs. We tried to take a best case scenario; this is the best that we can hope for.
Senator Simard: On residential construction you are predicting that -- you have supported that. That is why you are asking for provincial rebate or a rebate for 3.5 per cent so that the neutrality would continue?
Mr. Leblanc: Our figures show an increase of 4.3 per cent and that is based, one thing that we feel is that the pass-throughs of 90 to 100 per cent that are assumed, that did not happen when the GST was introduced and we do not feel it will happen with the HST. It is one thing to say that our operating costs are going to be reduced. Most of the residential industry in New Brunswick are small contractors, there are probably no more than half a dozen contractors that would build 30 homes and up in the whole province, so how often do you buy equipment, how often do you buy computers and how often will you buy trucks where you will have a saving, but how big are these savings, they are minimal at best.
Senator Simard: Obviously you have not bought and you are not prepared to buy in the government propaganda. I know that Senator Rompkey quoted, you were there, quoted twice the APEC so obviously you are not believing the optimism that this report said; it would be a boom for everybody in New Brunswick including construction.
Mr. Disher: The report could be right but we are a part of a different --
Senator Simard: And we know governments and business leader and chairman of commerce, and even Minister of Finance on the various government have been wrong at times with their predictions, so we heard you and I will ask the same question I asked the other group previously. Would you either see the government going back to the blackboard and get it right while continuing to live in the uncertainty if it takes five or six months or a year, would you prefer that we delay the bill or have a bad bill coming into force April 1?
Mr. Disher: Speaking from my association's point of view, we are not against HST but the part that we have a problem with is the increased price of housing. If it meant delaying it to make it right, we would like to see it done once and done right.
Senator Simard: Preferably a national tax too.
Mr. Disher: We are more localized in that respect, but our main concern is to do it once and do it right and try and keep housing affordable.
Senator Simard: Mr. Jenkins said in their brief, the retail association brief was tabled in Ottawa before the House of Commons committee. Would you say that because the present Liberal government is saying in their defence of this bill that there have been much consultations over the last three or four years, so have they accepted suggestions resulting in one or two amendments from your bill?
Mr. Jenkins: There was very limited consultation. We have appeared in Ottawa twice; once it was for a matter of two minutes and the other time, before a parliamentary committee, was somewhat longer, but no, there have been no two-way conversations and there certainly has been no input accepted on behalf of the government. As I say, our position has always been favouring GST and it is still our position that we would like to see a national sales tax coast to coast, but this is not.
Senator Simard: Obviously you have not changed your mind? I, and obviously your organization and yourself, Mr. Jenkins, have not changed your mind, you are in favour of GST on the Canadian harmonization scheme throughout Canada?
Mr. Jenkins: We are.
Senator Simard: It is only the Liberal government that has changed its mind; they were going to scrap the GST and they are trying to fix the election promises by penalizing again the people of Canada. Do you share that agreement?
Mr. Jenkins: I am trying to be politically neutral here.
Senator Hervieux-Payette: When we started to govern after the Conservative government with their GST, do you remember what was the mortgage rate in this province?
May I have the answer?
Mr. McLaughlin: Fourteen per cent, 13.
Senator Hervieux-Payette: And today?
Mr. McLaughlin: Today it is 7 per cent for five years.
Senator Hervieux-Payette: You understand a bit why I am asking that question is that I would understand if we were still at 14 per cent that you would have some concerns because of course everybody renewing a mortgage or taking a new mortgage would have to pay the 14 per cent, which is 7 per cent more than today. But today every home owner in this province when they renew their mortgage on the balance, if I compare those who renew and those who buy, what is the percentage of new housing per year? Is it about five per cent of new houses, two per cent new houses per year?
Mr. McLaughlin: There are 3,000 new homes predicted for next year and last year we built 2,740 in the province of New Brunswick. I do not know what that percentage is compared to existing houses, I could not tell you that.
Senator Hervieux-Payette: What is the trend? I want to know how it will affect. I looked at your text and you talk about the impact of the new tax but where we were four years ago and where we are now?
Mr. Disher: I think the interest rates definitely affect numbers, there is no question about that, but interest rates more so in our business affect the size of the house because people borrow -- I am speaking for New Brunswick -- we find that most of the people who buy homes, have homes built, mortgage for the maximum amount of their income, their total debt service, they go to the maximum, so the interest rate has an effect on the size of their house probably more so than the number of homes built, although it does affect the number, there is no question about that, but it affects the size of the house more so than the number.
Senator Hervieux-Payette: Did you conduct any survey? Because you tell us that after April 1 you have some concern but did you make any scientific poll, did you conduct any specific study about the three per cent, which I consider would be about three per cent increase over the existing situation?
Mr. Disher: The 3.5 per cent will affect the size of our homes down to when you get to the bottom, to the affordable housing, which are the people at the bottom end of the scale who can absorb this the least that will go for a minimal house at best, they will now no longer be able to get into the new housing market. It will be the people at the lower end of the scale who suffer the most. The people at the upper end of the scale can knock off a few options, maybe downsize, knock a couple of feet off their house, they can still do their house if they want to.
There is the psychological end of it which is probably quite important also; I will pay more taxes, I will wait. That is important. However, it is the people on the bottom end who simply say I cannot do it now, and that has a great impact on our business.
Senator Hervieux-Payette: And your feeling is not that by maintaining a low interest rate we would rather serve better your industry than by not questioning the question of the deficit and the debt and of course paying debt?
Mr. Disher: No, there is a big picture for sure. What we look at is, sure, the interest rate is in our favour, there is no question about that, it is in our favour for carrying other own company debt load within our industry, but still when we look at an increase in taxes it does have a negative effect on consumer spending.
Senator Angus: Mr. Jenkins, I was impressed by your comments on the effects vis-à-vis an underground economy in the house building and renovation business and, Mr. Leblanc, you mentioned it as well. We asked the Minister of Revenue a couple of questions about this the other day in Ottawa and she answered by saying that Canadians are honest people and they pay their taxes. My eyebrows raised when she said this and of course you have confirmed my thoughts. Could you just comment on that? What do you think?
Mr. Leblanc: There is no question. There are a lot of legitimate businesses out there but there are also a lot that are not legitimate. As I mentioned a while ago, if 50 per cent of all renovations are done so-called under the table today --
Senator Angus: Fifty per cent I think you said.
Mr. Leblanc: Fifty per cent is a large figure. If we are looking at bringing down the federal debt, we could collect that 50 per cent of taxes; we have an industry that generates some $20 billion a year. Could you imagine, if you could collect the other 50 per cent, what it would do in terms of generating revenue? It is tremendous.
Senator Angus: Have you made these arguments not only to the Department of Finance in Ottawa but here in New Brunswick?
Mr. Leblanc: We definitely have in New Brunswick to both the Minister of Finance and the Premier.
Senator Angus: What is their comment?
Mr. Leblanc: I think we talked a while ago about the rebate, the $5 billion that was announced; we do not know how that will be distributed and how much will respond. We feel it is definitely not enough to have any impact. The basic point of this rebate is to do exactly that, fight the underground economy, and we feel it will have absolutely no effect on the underground economy because it is too minimal of an amount.
Senator Angus: On rebates generally, I understand it in its simplest form, when you convince them to give a rebate on one or other of these sectors, the effect is to neutralize or we might just as well not have the tax; is that not right?
Mr. Leblanc: If the rebate were substantial, as in the case of the GST -- it is not enough but it is still substantial -- it would have encouraged people to use legitimate builders, because if you are paying somebody under the table obviously you cannot claim a rebate because you have no receipt to show the taxes that were paid because they were not paid.
Senator Angus: On Senator Hervieux-Payette's point on the mortgage interest, I think you would agree these mortgage rates are not particular to New Brunswick, that if they change up or down they are the same all across Canada, right?
Mr. Leblanc: Yes. I do not want to take the floor here, however, although it is true that the interest rates are favourable to our industry right now, this province is roughly 1,000 housing starts shorter than in 1993. CMHC tracks what they call the DEFAM affordability index; they feel that a 4.5-per-cent increase in housing costs will prevent roughly 2,000 families in New Brunswick from being able to afford the price of an average starter home.
Mr. McLaughlin: We used to build 4,200 houses in the Province of New Brunswick. Interest rates alone is not the only thing that will help; consumer confidence, among other things, is also a factor. We predicted nationally that CMHC studies have said that we should really be building 160,000 homes a year. Right now the industry predicts 138,000 to 140,000. CMHC has predicted 141,400, which is a long way from the 160,000 starts, and that is not including a major pent-up demand that has been lying out there from the banks that have stated that there is a major pent-up demand. The Royal Bank in particular says we should be building in the vicinity of 200,000 new homes a year. So there is quite a difference. Interest rates alone do not really help it; consumer confidence and job security are also factors. There is a whole umbrella that we need to look at.
With respect to taxes, the CHBA has just completed a study which indicates that the accumulation of taxes, fees and levies, and transition costs on new houses alone have really increased the cost of new houses, which has also kept individuals from buying, and this does not help.
Mr. Jenkins: Just a quick word about interest rates. I am sure you are aware that interest rates come about not just by governments but by the economy. One of the reasons we have low interest rates right now is that our economy is not very strong. Here in New Brunswick, I believe the unemployment rate is around 12 per cent or so; in the city of Saint John, it is 15 per cent. If we did not have low interest rates today our economy would be totally devastated. I have been around long enough, unfortunately, that I can remember selling houses at 22 per cent. I was able to sell more houses at 22-per-cent mortgage rates than I can today, because the economy was booming, people were making money, and we had more disposable income. Today, people do not have that disposable income. They are not buying cars, they are not making major purchases, they are not buying new houses, and they are not buying old houses for that matter in the same volume. If we did not have the low interest rates we see today, this country would be totally devastated.
Senator Angus: We heard the expression "the Atlantic Advantage" in these three provinces.
Mr. Jenkins: We cannot find it.
Senator Angus: Would you say it is more like an "Atlantic disadvantage"?
Mr. Jenkins: It is, unless we hear about some rebates soon.
Senator Angus: Which, if you start getting into the business of rebates, why have the thing at all, right?
The Chairman: Our next group of witnesses includes Mr. Stephen Boyce, the executive director of the New Brunswick Senior Citizens Federation, and Ms Edna Dorion, a member of One Voice For All. She is accompanied by Pamela Coates of the National Anti-Poverty Organization and Ms Carolyn McNulty, who is the executive director of Romero House.
Mr. Stephen Boyce, Executive Director, New Brunswick Senior Citizens Federation: I will read this statement and then I have a few notes that we can hopefully have a chance to relay to you afterwards.
On behalf of the New Brunswick Senior Citizens Federation and our 27,000 members in this province, I would like to first express a great disappointment with our federal government, who promised to abolish the GST and failed to live up to that 1992 election campaign promise. It is becoming more apparent that our federal politicians believe that memory capacity will not exceed a four-year term of office in the people's minds. This belief also seems to be transferred over to our provincial government here in New Brunswick.
In New Brunswick, our own provincial government, during their last election campaign, promised to consult New Brunswickers prior to implementing new major policies. This is a quote, promise number 77, from the Liberal platform book entitled "Moving Ahead Together." This promise was made in 1995. Since our government returned to power there has not been any consultation with our organization or with the recently renamed News Brunswick Common Front For Social Justice, which represents several dozen organizations in New Brunswick, totalling, between our memberships, about 200,000 citizens. They also have not had any consultations with their government since their re-election. We know that seniors are not the only segment of our population not being consulted then. The negative impact of the HST will be felt immediately by most seniors, especially since this tax will cause another dramatic increase in the cost of heating their homes. Several years ago, our province encouraged people to convert their heating systems to inexpensive clean electric heat. Now that many seniors have converted to electric heat and can ill-afford to switch back to other forms of heating, the government is basically holding these seniors hostage to continued electrical user fee increases.
Those who live in seniors' apartments or residences that do not qualify for the current GST rebate, and where heat is provided by their landlords, will soon be expecting to pay higher rental payments to cover the added cost of heating. So on the one hand we are told that the HST will not cover rents, however, it will indirectly cause rents to increase in some cases.
One need only read the mounting evidence as accounted in various media and speak to New Brunswick seniors, whose incomes remained fixed or have decreased due to smaller returns on their investment because of low interest rates. Keep that in mind that low interest rates are great in some circumstances, but in others low interest rates can have a negative impact, especially on those seniors who rely upon interest income. So the HST will have a negative effect, when it further reduces the basic and disposable incomes of many seniors and other New Brunswickers alike.
The credits being offered to low-income workers and single parents is but a Band-Aid solution, which avoids in fact addressing the real problem and cause of child poverty and poverty, and that is greed. Many unjust laws exist in our country that encourage profiteering corporations and individuals to take advantage of our human and natural resources.
Bill C-91, for example, the drug patent bill, needlessly puts countless billions of taxpayers' dollars into the hands of multi-national pharmaceutical companies. There still exist many tax loopholes. Thousands of corporations and high-income earners, hundreds of high-income earners -- and those are people earning $150,000, $200,000 or more a year -- pay little or no taxes. One needs only to look at Paul Martin's description of the budget recently in the little booklet in which he makes that claim.
The HST is another vehicle which will ultimately ensure that in New Brunswick, and like the rest of the country eventually and maybe we are trying to copy other countries where this is the case, the poor will become poorer and the rich will become richer. The Honourable Edmond Blanched, our provincial Minister of Finance, tells us of goods and services that will be taxed at a lower rate on April 1, but many of these items generally carry much larger price tags and are items which most seniors will likely not be required to purchase in the rest of their lifetimes. I do not need to go over what some of those products are; you probably know what they are.
Telephone service rates we are told will be taxed 3.7 per cent less come April 1. However, on the other hand, we have already heard in this province that NBTel, the local telephone provider, is looking at increasing its basic phone rates. I doubt that the outcome will be beneficial once everything is said and done. Any savings consumers might have had on telephone bills because of the HST will likely be short-lived.
We can understand that the HST may enable New Brunswick manufacturers and importers to have a competitive edge in a global marketplace, but we do not like the fact that this is being done on the backs of many seniors who have worked, scrimped and saved all of their lives in hopes that they may lead not a life of luxury but one of quality in their retirement. Increased property tax assessments, increased cost of living, increased fees for services have all been adding up gradually. We have noticed also that all of these policies and implementations of policies, such as the HST, which have basically been done without proper information and consultation being shared with New Brunswick seniors and the community in general, is leading to stress, is leading to uncertainty in people's lives, and is actually causing depression and maybe even ill health in these people. That is not a fabrication, that is a fact.
While on the one hand the government tries to blame the necessity of health reforms on lack of money and skyrocketing health-care costs, its own failure to openly consult with New Brunswick's aging population is leading to more seniors becoming ill from stress and uncertainty in their lives. More and more seniors in New Brunswick are seeing everything they have worked for gradually disappear. We are told that competition in the marketplace will probably cause prices to fall on many items but there is no guarantee of this.
I will remind you that this was once promised to you when the manufacturers' sales tax was eliminated and the infamous GST was first implemented. Subsequently, there might have been a short-term effect on some prices of goods but after that nobody has noticed a major difference and in fact prices continue to rise and not fall, with the exception of some products.
I understand that cleaning supplies will cost 3.7 per cent less on April 1. When this news was given to our executive committee recently, in a meeting with Edmond Blanched, I did not see anyone jumping for joy. These are not items that will make a big difference in their budgets over time.
The HST will add 8 per cent to public transportation, haircuts, gasoline, clothing under $100. These are practically basic requirements for all New Brunswickers. After April 1, we will all pay more. Our government tells us that everyone will enjoy a reduction in income tax to alleviate the effects of the HST. Even if these tax breaks materialize, from the calculations we have seen, they will not be that great, and, if so, they will not really appear until 1997 returns are filed and that will not be until the spring or early 1998. Until then all New Brunswickers are being asked to invest more of our own resources by paying more taxes immediately on a number of goods and services, and cross our fingers and hope that prices will come down on enough products and services that overall our budgets will be better.
Calculation of the eventual tax breaks show that higher-income earners will obviously get a greater reduction in taxes than lower-income earners. The tax breaks will certainly not compensate for the added cost attributable to the HST. The NBSCF has estimated, and estimates based on average purchases, that seniors in New Brunswick can expect to shell out an additional $300 to $400 a year because of the HST. This is contrary to some of the figures we are being given by our provincial government. This assumes that prices of goods and services will not drop as government hopes. I will point out to you that seniors generally buy more services than goods and since the HST will negatively affect services and will add costs to services obviously they cannot win from this scenario.
Businesses who now pay provincial sales tax and who are able to claim a rebate on GST will now be able to claim the entire HST as a credit. Obviously it will save millions of dollars to businesses who will be able to claim their payment of PST as an expense, or however that is accounted for. As a result, these businesses will likely pay less corporate tax.
Our Minister of Finance now tells us that these businesses will likely reinvest their extra profits by creating more jobs, but, again, there is no guarantee of this. Our provincial Minister of Finance, with whom I had a brief conversation just this last Friday, has not yet read this book, The End of Work by Jeremy Rifkin -- you may have heard of it.
The New Brunswick Senior Citizens Federation speculates, as does Jeremy Rifkin, that businesses are currently involved and will be more likely to invest their greater profits in modernization, computerization and technology. The current business trend, which is happening around us now, and you know better than I do, is one where businesses are continuing to downsize, or, as many corporations are now calling the process of laying off human labour and replacing them with machines, "rightsizing." In other words, they have always been too big. Now what they are doing is the right thing.
There are still too many areas left where governments could save tax dollars without resorting to further financial burdens on our seniors, and lower- and mid-income learners -- for example, limits on salary expenditures claimed by large corporations; higher taxation on incomes over $100,000; greater taxation on corporate profits or greater demand on corporate reinvestment into Canadian communities; elimination of unfair trade practices, such as Bill C-91; the closing of international tax-free loopholes; taxing all profits made in this country equally and proportionally to what we are now taxing individuals.
We could argue the pros and cons of the HST until we are all, pardon me, blue or red in the face. However, what we ask you to do today is to stop the HST from going through and obligate our elected officials to live up to their own promise. They made the promise, make them live up to it, to consult and inform New Brunswickers better they have so far; they have not done it.
Our Minister of Finance has said that their government has consulted with New Brunswickers, but we want open and public consultation such as what you are doing here today. This should have happened in New Brunswick prior to your arrival here; then, maybe all of this would not have been necessary. We do not want private consultations, which is what our government claims to have been doing; we want open and public consultations, because there are injustices in this bill.
Basic necessities such as food, shelter, clothing, heating, should not be affected by this tax and should not be exposed to this tax. The Canadian Senate has an opportunity to correct a great wrong which has been committed in New Brunswick. The failure and collapse of true democratic process and consultation with all segments of our population here in New Brunswick proved to us that the Senate of our country understands and respects this argument. Reject the HST, protect the integrity of democracy in New Brunswick and in this nation.
Ms Carolyn McNulty, Executive Director and Foundries, Romero House Soup Kitchen: The Romero House Soup Kitchen has been in operation for 15 years and has provided in excess of 800,000 meals to the needy and low-income members of our community. Over our years of service, we have developed eight phases of service and are known throughout the care service network as a full mission house. We are a non-profit organization and we have no source of income. We operate solely on free will donations and are not a tax burden to our community or government.
Under the present GST tax system, we pay all the GST and are reimbursed 50 per cent of that amount, but only on select items. A typical month when our taxable expenses were $3,701.25, Romero House paid $304.34. Of that $304.34, $203.11 was the GST, of which $101.56 is rebated; $202.78 is paid out in taxes. Under the new system of HST, the same kind of month, expenses of $3,701.25, we will be paying $555.19 for HST, $277.60 of which will be rebated to us, and we will have paid $277.60 out on taxes. This results in a difference of $74.81 per month, or $897.72 for the year. We are mindful that under the HST, we will be charged on a wider range of items and services on which we will be taxed.
The HST will definitely affect our expenses and cost us more money, but this is not the only impact it will have on us. Our holistic approach to those in need covers more than the basic needs of food and clothing. It also affects their self-worth. We have already been affected by the UIC changes. Our clients who we have been able to help and who are deemed unemployable by income assistance are hired nine hours per week at $5.55 an hour to supplement their income assistance and are part of a self-esteem program. This allows our clients to be part of a combination volunteer work program that encourages giving back and becoming part of the community effort to help the needy. They work hard and long and are proud to be able to do so.
In an effort that is, in my opinion, just short of picking our pockets, the government is now taking $1.45 per week from these clients for unemployment insurance; Romero House must multiply this by $1.4, equalling $203, or $6.09 per week, and we have three such clients like this. This is an additional $18.27 a month, or $316 a year. Three of our clients were let go because of this. I wonder, if the unemployment insurance program wanted a donation why did they not just ask for it and save us the paperwork. It would be more honest.
We provide beds for the homeless. Some of them work a few hours a day to help, but for those who are unable we pay $6 a night. This too will be affected by HST. We pay on an average for 30 beds per month to enable us to keep people from sleeping on the streets of Saint John, for a total $180 plus $27 HST; of this $27, we will get $13.50 rebate, but $13.50 is still paid out.
We provide clothing to our recipients. We have a membership of approximately 2,063 in our clothing room, and in 1996 they made 7,839 visits. Each one of these memberships could have one person in the family or eight. With the new tax on clothing, these numbers will increase. Household items are very much in demand as well. We have a long waiting list of families needing furniture and appliances. Their meagre allowances do not allow for purchases of brand-new items, and even secondhand furniture is out of their league.
There is a new idea that some charities have adopted in contracting their donated household items to secondhand dealers for repair and eventual sale with the HST being added by the purchaser. An agreed percentage of this is then donated back to the charity. This in my opinion totally disregards the intention of the donor to donate to the needy. It sounds like the people involved are plain greedy but, as always, it is the needy who become even more victimized.
I am totally amazed at what lengths are taken to extort $35 here, $13 there, and cutbacks that leave families with no buying power. Low-income families are in desperate shape; welfare families can barely exist. The rate of poverty is staggering in New Brunswick; we have the highest poverty rate of any other province in Canada.
In 1997, Romero House will pay more under the new HST plan. More items will be taxed by HST: 90 cents for each bed at $6; more demands on our clothing room, up from the 7,839 visits in 1996; more demand for used household items; more HST on secondhand items that are not donated any more, like mattresses and fridges and stoves, et cetera. When we have families that are in desperate need for these things, who cannot get them themselves, we must put the cash money out under what we call "Family Projects," and we hardly ever get the money back.
We will be paying more HST on these family projects for help with hydro and heating bills, prescriptions that are not covered, and user fees will rise, to name a few. All of the above, along with the increases to the EI deductions and the CPP deductions that are also going up, place extra financial burdens on a non-profit, non-governmental funded, privately run community charity that addresses the grassroots problems in a practical, caring way without cost to the taxpayers.
In closing I would like to say that I believe this whole hearing is redundant, that so many presentations, meetings, et cetera, are falling on deaf ears, but people like me and others keep trying to get someone to listen. I guess we are as desperate as our low-income families and only exist by the skin of our teeth from month to month like our welfare families. The response we get from the grassroots people gives us hope because it tells us that it is the will of the people that every Canadian receive their basic rights to food, clothing and shelter in a style befitting a Canadian life. Those who have different agendas are on a path to social suicide. Canadians have known something else and they will not remain docile. No one will be able to live in affluence while others go without basic needs.
I am against the HST. My whole organization is and I hope you people can stop it.
Ms Pamela Coates, National Anti-Poverty Organization: The National Anti-Poverty Organization, NAPO, is three-quarters made up of low-income people, people who either have lived in poverty or now living in poverty. I myself am a single parent living in poverty, and have for a number of years. NAPO's concern is that the HST is going to put more people on the street in the Atlantic region. More people will not meet their basic needs and more children will be hungry.
This is the decade for the eradication of poverty, and so far we have not seen anything to take care of that. It is the same thing with child poverty, which is supposed to be ended in the year 2000 and something. Again, we do not see any positive steps. What we see is this harmonized sales tax and cuts in reforms on the welfare system -- it is all about dollars and cents and not about people.
NAPO is here to say that we do not support the harmonized sales tax. We would like to see the Senate stand with us in this.
The Chairman: Lynn Toupin, who has appeared before us on a number of occasions, is the executive director and your are the president, correct?
Ms Coates: She is the executive director and I am the president.
The Chairman: The president changes from year to year or every couple of years?
Ms Coates: Yes.
The Chairman: I just wanted to be sure my understanding was correct.
Ms Edna Dorion, Member, One Voice For All: I am here to speak to you on behalf of One Voice For All, Saint John's welfare activists who have endeavoured over the past five years to keep the general public informed about the inadequate provisions made in this province for people on income assistance and low-income earners.
Too many of the citizens of the province of New Brunswick are not adequately informed about the real affects of a harmonized taxing system on their day-to-day expenditures.
Businesses have been saying consistently that they are not sure just what is going to happen and how it is going to impact them, their business, and their clientele. In Prince Edward Island, where the harmonized tax is not being instituted, businesses have clearly indicated that they see no saving for the consumer of a general nature since savings, they believe, will more often than not be reinvested in business.
Here are some of the details we have gleaned from a variety of sources over recent weeks:
Did you know that following April 1st, 1997, a postage stamp will cost a person on income assistance 52 cents -- after taxes -- while the same postage stamp will cost 45 cents for Canada's big corporations because taxes in this regard for corporations are fully and automatically rebated?
Did you know the average car under HST will cost approximately $900 less after April 1st? Regrettably, for most persons on income assistance, this will have no affect.
We are told that people purchasing large appliances and new homes will save money on taxes after April 1st. Though we do not want to take away the gain that may be made for some, we are very mindful that poor people will not likely be buying new appliances or new homes.
However, people on limited incomes will still be paying fuel and electricity bills. The HST will make these bills go up. Therefore, even small operation landlords will have to raise their rents to cover the increased costs.
People on low incomes will still be buying clothes and footwear. The HST will increase this bill, even for purchases under $100, even when purchases are made through second-hand outlets.
New Brunswick's poor people will still need haircuts, purchased transportation like buses and taxis, home appliance repairs for appliances and other basic services. The HST is a tax on many basic items which all of the citizens have come to expect as a matter of course.
All of these actions will serve to drastically widen the gap between Canada's wealthy citizens and her poor.
We are aware of the need for changes to Canada's taxing system. We appeal to the Senate Standing Committee on Banking Trade and Commerce to do its part to see that the necessary changes take place equitably across the country, that all Canadians, including the wealthy and large corporations, pay their fair share.
To make this more personal, let me tell you my story. My monthly income after deductions from HRD-NB is $613 for myself and my son. My monthly rent is $300 for a two-bedroom apartment. I pay a monthly electric bill of $100. My telephone costs $25 per month and I buy cable TV access for $43 each month. I am currently, with the assistance of the YMCA, providing my teenage son with a "Y" membership, at a cost of $10 per month. That presently leaves me $135 a month to buy groceries, clothing, and all other incidentals for my son and myself.
After April 1st, the HST will take at least an additional $20 from my monthly cheque. As you can see from this budget, that additional loss will cut into my food budget, which is already insignificant for the two of us. Twenty dollars may not seem like a lot to someone like Mr. Arthur Irving or Finance Minister Paul Martin, who both own at least one home, but to me it is like a million dollars.
For these reasons, One Voice For All appears before you today to speak in opposition to the imposition of a harmonized sales tax in the province of New Brunswick.
The Chairman: May I thank all four of you for some very moving and excellent testimony.
Senator Robertson: I certainly have no quarrel with any of your testimony. And where to start. This tax as some of us have been saying consistently just heaps injustice on those who can afford it the least, and some days you wonder what is happening, and why.
It is interesting in this province, what I see is going on. This HST, from no matter where you look at it, is bad social policy, and most people tend to look at this legislation not as social policy, but economic policy.
Now, in our province I do not have to remind you that our premier takes great delight in the rapid changes in technology, and is always waving around progress reports on what is going on with the Internet interventions, and the newest technology that he wants everyone to have. However, I think what our premier misunderstands, does not see, and which you people see very clearly -- and I commend you for it because you live with it everyday. You can see the changes in technology, you can see them all around you, to the point where you become frustrated sometimes, and the Premier can see those changes in technology. However, most people cannot see the changes in social policy, which happen just as fast as the changes in technology, but nobody sees them until we mop up. I think that is going on in spades right now to the detriment, to the hurt of those who cannot fend for themselves.
I knew your predecessor, sir. I have not sat down with you to talk, but we must do this some time soon. I used to sit down and fight with the previous director.
What I should like to know from you is: How many senior citizens have we in our province?
Mr. Boyce: Not many New Brunswickers nowadays apparently like to be called seniors, no matter how old they are. However, if you look at the -- and I am going to round these figures off -- group over 65, you are looking at close to 90,000 in that range, and those over 50, which by the way our federation membership is open to -- if you are interested in getting a card I have some extra ones there <#0107> number 180,000, roughly, at this time. If you do the math, in 15 years roughly 20 or 25 per cent of our population in New Brunswick will be over 65.
Senator Robertson: Roughly, what is the average income of our senior citizens?
Mr. Boyce: I do not have any specific stats on that. A figure was given to me by one of our members in the Saint John area -- this comes from Statistics Canada -- and I understand, based on these figures that I have been given, that there could be 23,000 seniors over 65 earning less than $15,000 a year in the Saint John area.
If these figures are correct, you could extrapolate that throughout New Brunswick, and the figures would be very high. There is a myth out there that seniors are making a lot of money, that they have got a lot of wealth. We do not disregard the fact that that may be the case in some cases, but the majority certainly are not in that picture.
Senator Robertson: The percentage is very small, unless figures have changed, and I have not seen any dramatic effects to that. Unless the figures have dramatically changed since I was involved in a very intimate way with the programs, it seems to me that here in Atlantic Canada, a very small percentage of our senior citizens who have private incomes, other than the old age pension systems and the guaranteed income supplement.
Mr. Boyce: We are, needless to say, concerned with the level of poverty and we know stats are showing that there are more and more poor people coming into the Canadian marketplace and community and so on. What really bothers us is this situation where both federal and provincial governments seemed to be embarked on this hype and fear strategy that there is not enough money.
However, to give you an example to the contrary here in New Brunswick, a recent policy was passed and will come into effect on April 1st, as well, respecting long-term care strategies, and so on, whereby the government is implementing for the first time a rule whereby if a person no longer has any cash or liquid assets to pay for their nursing home costs but has a home, they are now going to dip into the assets of that. We are told that that is going to generate $300,000 this year to the coffers.
On the other hand, the government is also basically letting some tax breaks go by to the enjoyment of some corporations. So at the same time as they said they are going to have to take $300,000 out of the seniors' assets in New Brunswick, affecting 250 or so people, they have passed legislation that will remove tax assessment on railway beds.
Now recently, as we know, CN sold off some railway beds to one of the largest corporations in this province. So what is that costing taxpayers, that little incentive that has been given there?
There was mention a moment ago of Assomption Vie, Assumption Mutual Life Company. It would be nice if the senior's federation and other groups, anti-poverty groups who represent a lot more people than that company does, could stand up and object to the HST, and that the Minister of Finance would personally go to their annual meeting which I was at last Friday, and behind closed doors settle a deal with Assumption Life in which they will be the recipient of some type of HST rebate in order to please them.
How many dollars worth are they throwing back to that company with regards to the HST? What about the rest of the people? What about the ordinary persons, the seniors, the poor, what about them? Sooner or later you are all going to have to face the facts that there has to be a better balancing between social, business, corporate, and government dollars, in the way they are distributing. There is going to have to be a better sharing system because the situation you saw and heard recently in Sydney, Nova Scotia, where there was a practical riot, where there is 20-some per cent unemployment -- if you have not read this book, I recommend it to you.
Senator Robertson: I understand completely what you are saying. I have not had time to delve into the social assistance recipients or those of the working poor who are just on the edge, but the numbers are so significant. I believe every senator from Atlantic Canada has a responsibility to stand up and stop this legislation from going through. It is hurting people.
[Translation]
Senator Losier-Cool: Now it is my turn to congratulate you. I would like to thank you for being here. Also, I believe I may thank you on behalf of everyone you represent. Because you are always there for the organizations. Whether we are talking about senior citizens, the "Maison Tamara", anti-poverty groups. And I think that you are doing wonderful, wonderful work. And one of you said earlier that your motivation is the power of those you represent, who encourage you to continue. And without being perhaps a little negative, and perhaps because of the work you do, because of the pressure you exert, that you have been exerting for many years, do you not agree that we are taking a small, slightly positive step forward? Mr. Martin's budget of last week is perhaps not sufficient, I agree, but there is already talk of an anti-poverty supplement. I was very touched, Mrs. Doran, by your comment. You do a great deal with what you have. But you know, because of tax harmonization, you are going to be getting $200 to $250 more. To my mind, these are positive measures. They are positive steps. I am not saying that this is the solution. And this is why you must continue to come here, to talk to us, to come and keep us up-to-date and aware of what is going on. I would like to ask Mr. Boyce, in your brief, when you talk about raising rents, is there no commission in New Brunswick that regulates the percent by which rents can be raised?
Mr. Boyce: Not to my knowledge.
Senator Losier-Cool: I must have the wrong province. What I mean is, if you are told that next month your rent would go up 20 per cent, you can appeal. Is there a commission of appeal?
Mr. Boyce: No, no, maybe there are regulations that govern increasing the rent on houses that receive grants under a government program, but not for a private industry or the private sector, not to my knowledge.
Senator Losier-Cool: To my knowledge, and when I was paying rent, it seems to me that there was something. And another thing, with regards to the telephone, they are not allowed to introduce increases; NBTEL cannot introduce increases that quickly, can they?
Mr. Boyce: No, but there have been increases in the past few years. Some have already been approved. And there is more talk of the need for further increases to defray the effects of the deregulation of long distance charges. I assume that the company is losing a great deal of income in this area.
Senator Losier-Cool: And for the benefit of the committee here, could you tell us something about Minister King's most recent reform concerning the elderly?
Mr. Boyce: Well, it is considered a drastic measure and, if we allow this measure to go ahead, it is the beginning of the end. Until now, the principal residence was not considered when one sat down with the client, the person who was to enter a nursing home. And, when it was determined whether or not the person had enough liquid funds or pension or whatever to pay for or defray the cost of a nursing home which, according to the government can be as much as $3,200 per month, at that time, no other property was touched, the house for example. As of April 1, a percentage system, an option system if you wish, was introduced. There are three options. The client today, if he has a house assessed at over $40,000... by the way, most houses in New Brunswick fall into this category, some may be assessed at less than $40,000, but not many--will pay a percentage of the value of that house in order to determine what his contribution should be.
Now, when that point in the calculation is reached, the point where the person has no more money, the house is considered. If the house is assessed at $50,000 or $100,000, let's say $100,000 for calculation purposes, we are told that a percentage, a charge, an invoice will be allocated. An invoice will be sent to the owner of the house or his heirs. And when the person dies, the invoice must be paid.
Senator Losier-Cool: Was the measure adopted at the last session of the government?
Mr. Boyce: Yes, to my knowledge, it is supposed to come into force on April 1.
Senator Losier-Cool: Does this also affect the law of succession?
Mr. Boyce: It contains some provisions that I do not yet fully understand in detail. For example, at one time it was said that they could go back two years, now it is five. So, if the property was transferred within the past five years and the person goes to a nursing home, the government could go back in time if the house was sold to a family member.
Senator Losier-Cool: Is it possible to have more precise information, because a number of times you have said "to my knowledge". Is it possible for us to find out exactly what will be in this act?
A. Boyce: If this year they say that they will take 5 per cent of the value, what will it be next year? What will it be the year after that? We must put ourselves in the position of the elderly person. For example, when the veterans came back from the war, the government told them to go and have children, contribute to the economic development of our country, build a house. It is this aspect, not only a sentimental one, it is also the work that has to be done throughout one's life to get a house. And, when we talk about the house, it is a very, very sensitive subject with the elderly. In my case, with the situation of my grandfather, when he was dying, he knew he was dying, he did everything -- and he came to see me to see if I could do something -- to protect his house when he was dead. Because, although it was an old house, that house meant everything to him. It represented everything he had left in this world.
So, it is not a question of money and, if it is true that there is not enough money in New Brunswick or not enough money in the public coffers, it is true that we must work together to find solutions in order to regulate our expenditures. When we are told, on the one hand, that there is no money and that, on the other hand, a credit is given to Assumption Life for the harmonized tax or an interest-free loan is given to Irving, we ask "How can this be allowed?" We are hostages, we are all hostages of the giant corporations and that's the opinion we seem to have here, in New Brunswick, especially the elderly who have lived a long time.
Senator Losier-Cool: With everything you have told us, what is the morale of the elderly? We have heard about the morale of those who are in health care, in education, what about the elderly?
Mr. Boyce: Unfortunately, I cannot tell you that morale is very good. Basically, in the past two and a half years that I have worked with the Federation, I have travelled an average of 60,000 kilometres per year in New Brunswick. Every week, almost every day, we have meetings. And so I have met with a great many of our elderly residents of New Brunswick, face to face. And in most of the places I have been, there is really a feeling of solitude or, not exactly giving up, but in the sense that people are depressed and think that they are governed by all the decisions the government takes. These are attitudes that obviously exist, the people believe there is nothing to be done.
I can assure you that our Federation is about to begin to tour the province and that we have the intention of meeting approximately 7,000 individuals in five weeks at public information sessions. They will be packed everywhere we go. And one of the objectives that we have at this time is to make people realize the political power the elderly have. We are trying to encourage them to unite within the Federation. We now have 27,000 members and believe we have the potential to reach 50,000 in a fairly short time. This is one of the roles we intend to play. We will ensure that our elderly are more self-confident.
Senator Losier-Cool: Grey power?
Mr. Boyce: Absolutely.
Senator Simard: I would like to congratulate our four witnesses. In my opinion, you have prepared a very good brief. You are in contact with reality, with your members. And, because this is not the only result of your brief, the operation has been successful. We know that large companies, manufacturers and all the associations were invited to Ottawa, and came to Ottawa. I have enjoyed hearing you today. And you have certainly been heard by my colleagues on this side. And I would like to take this opportunity to repeat the commitment I made last week and the week before that. With my colleagues on this side, I will fight this odious, pernicious, unfair, poorly thought-out bill. And I invite the Liberal and independent senators to do the same.
[English]
Mr. Boyce: My colleagues here -- and I would have liked to have heard them more as well -- we are all behind you as well here. I understand that Assumption Life's presentation has been cancelled today, and I wonder why.
The Chairman: So we are clear for the record, it was not cancelled by us.
Mr. Boyce: I know that it was cancelled by them. Obviously they made a deal Friday and now they do not have to be here. Tomorrow you are meeting with representatives of the business community, the Chamber of Commerce and so on and so forth. I have no idea whether these people -- I presume that they are pleased because of the fact that they are going to basically pay less. They will be able to credit the HST, which is what they were not able to do before -- they were not able to credit the provincial sales tax. So, obviously they are going to speak to you on their behalf.
We have nothing against the business community. We are all for profit, we are all for making the economy work. There has to be a greater balance in this country with regards to social programs. Whether these corporations like it or not, they have got to start re-investing more of their profits in the communities where jobs and being depleted and eliminated. If you do not want a situation similar to what has happened in Sydney -- I can tell you there are other communities in New Brunswick where the morale is such as that -- you are going to have to address this in a very serious manner, and these little rebates, these little Band-Aid solutions, are not going to cut it. We need to show some fair treatment of all individuals, including corporations. You have got to start showing that you are going to treat them as equally as individual taxpayers in this country.
The Chairman: May I say on behalf of the committee, to all four of you, to pick up on a point of Senator Simard, we not only very much appreciate you attendance here, but also your presentation proves the value of a committee travelling. In Ottawa, the reality is that we can always hear national business organizations; frankly, if it is a big issue we can even hear individual provincial business organizations. However, we can only hear from people who run grass-roots organizations like yours by coming here. Hence, you are really the reason we are here and we appreciate you taking the time to be with us today.
Ms Coates: You have a very unique opportunity, this Senate committee, on the understanding of these things, to speak for low-income people, for the common person, who is trying to get bread on the table and shoes on the kids' feet. I really am pleased to hear that you are considering seriously not recommending this for the Atlantic provinces.
The Chairman: Senators, our next witnesses are Sharon O'Brien, President of the New Brunswick Home Support Association, and Shirley Clayton, the local administrator of Comcare.
Ms Shirley Clayton, Administrator, Comcare (Canada) Ltd.: I am here as a local administrator for Comcare (Canada) Ltd. I am also speaking as an advocate for senior citizens, who are being affected by this HST.
We are a wholly Canadian-owned company, and we have offices all across Canada. We are in home nursing and home support service. We provide care for individuals at home.
Ms Sharon O'Brien, President, New Brunswick Home Support Association: My name is Sharon O'Brien. I am president of the New Brunswick Home Support Association. The association represents 28 different agencies, more than 500 employees and over 500,000 hours of in-home service to New Brunswick families in 1996. We represent both for-profit and not-for-profit agencies, and on their behalf I am presenting today to the senators.
Ms Clayton: I am here today to speak on behalf of Comcare (Canada) Ltd. with regard to its role in the community and the economy and how the implementation of the HST will impact on our business. As I said before, Comcare is a Canadian company with a history of providing quality in-home nursing and home support services. We have nearly 27 years of caring and we are a for-profit company providing jobs for health care workers across the country. We are proud to serve all levels of government, both provincial and federal.
In addition, we provide home care services and support to individuals who are not assisted financially by any government department. We have long worked to help our clients to remain in their own homes and to be as independent as possible for as long as possible. We respect the individual's right to choose to stay at home and it is through the provision of home support and home care that this is possible. The financial benefit to health departments and assistance programs has been very substantial.
These homemaker and home support services, when funded by a government or municipality, whether wholly or partly, or when supplied by a charitable organization, are currently exempt by GST, while private-sector homemaker services are taxable.
This represents a basic unfairness for the private purchaser of these services in that these private-pay individuals must pay GST. This creates inequities as well for the private-sector suppliers of these services since there is no level playing field. This distortion, or inequity, will only increase with the implementation of the harmonized sales tax.
An example of what this new increase of 8 per cent will mean to the private-pay client may be demonstrated with the following examples. In New Brunswick, Mrs. Jones purchases ten hour's worth of home support service to assist her with caring for her elderly husband in their own home on a weekly basis. As with many seniors, she and her husband live on a fixed income. She is very happy and comfortable with her Comcare service and has grown accustomed to paying the 7 per cent GST, because she values the quality of the work and appreciates being able to have herself and her husband remaining at home.
While Comcare has always maintained the lowest possible cost to the consumer, the addition of the 7 per cent has meant a hardship for Mrs. Jones. However, now faced with an additional 8 per cent under the HST, Mrs. Jones will have to consider managing with fewer hours of service and giving up a little more of her independence.
Another alternative would be for her to purchase service from a not-for-profit organization. This would remove Mrs. Jones's right to choose her service provider. This is a good example of the distortion in fairness to business that I mentioned earlier. Mrs. Jones's only other choice may be that she consider moving her husband into a nursing home and giving up her own home. This will certainly impact on Mr. and Mrs. Jones, but as well it will affect the public purse because of the increase in cost of caring for Mr. Jones in such a setting. This cannot be considered a good alternative.
A recent position statement by the Canadian Homecare Association entitled "Homemaker Services: a Vital Part of the Health System" calls for homemaker services, when a part of the care treatment plan, to be GST-exempt. Further, the Canadian Homecare Association states that clients should be able to access homemaking services from their choice of provider without additional financial burden. Agreeing with that statement that homemaker services are a necessary part of our community healthcare system, we believe that these services must be universally accessible and should be publicly funded. Removing accessibility of services or of choice of services may indeed lead to deterioration of health status and may increase the long-term cost to the government of caring for individuals no longer able to manage with support in their own home.
Speaking as a business operator, we at Comcare do not presume to dictate to government regarding the need for a harmonized sales tax. We do, however, strongly oppose the implementation of the HST as it is now planned.
It is our feeling that introducing HST on a formula other than a national formula presents costly administrative difficulties. In New Brunswick, we have reviewed pricing and have no choice but to pass along the additional 8 per cent to our clients. These clients must be advised that the increase will take place unless the request for tax exemption, universally, is approved by government at both federal and provincial levels.
I thank you for the opportunity to speak on behalf of my company, but more importantly on behalf of the clients that we serve every day. I hope that this committee will give serious regard and consideration to the impact, both long and short term, that the proposed implementation of the HST will have on their lives.
Ms O'Brien: On behalf of the New Brunswick Home Support Association, which promotes the interest of agencies providing in-home care, including Comcare -- for the most part we supply the non-health components of care, components recognized by your own National Advisory Council on Aging in 1995 as often the most important in maintaining independent living, personal care, meal preparation, and light housekeeping.
Interestingly, we are a part of a team providing also palliative care for those who choose to live out their lives at home. We also provide services for those discharged early from hospital following a hip replacement, open-heart surgery, fractures, back surgery, et cetera.
I, too, represent our clients, those requiring our services. Our New Brunswick Health Minister, Dr. Russell King, tells us that approximately 12,000 people presently receive in-home care.
Under the new assessment program to be introduced April 1, family income and assets will determine financial contribution. Everyone will be expected to contribute something to their care. Some clients choose to bypass the government program and pay privately. Only those paying privately will be taxed.
Often, services are requested by families when faced with an elderly relative being discharged from hospital for recuperation at home. The Single Entry Program assessment is too slow to meet their need and was not really intended for this use. They pay privately. Again, they are taxed.
How will the HST affect the home care industry? Some citizens will be taxed and some not; in effect, a two-tier system of care. Hours of service could be decreased, forcing companies to downsize staff. There will be an increase of stress, already experienced by employees, as clients demand more care in less time; increased employee burnout. Some employees are already expected to serve six to eight clients a day in separate residences. This is not caring.
There will be increased turnover of staff, as they experience less and less satisfaction in their work, and again a decreased quality of care for the clients. There will be a weakening of an essential link in care provided to our citizens in a time when our province is continually increasing its expectations of the suppliers.
Senators, the HST on home care services is an unfair tax. If in-home care is truly to be a strong link in the continuum of care in the community, then it is imperative that the application of HST to home care be stopped.
In-home care allows people to remain at home and out of long-term care facilities and acute hospitals. At the hospital level, and in facilities, no GST is applied. Why then is it applied to home care? Why are families and individuals who are assuming responsibility for the care of family members being penalized by 15 per cent?
What are the negative outcomes for clients and families? First, clients may refuse or discontinue service, putting themselves at risk. More clients may be hospitalized for conditions resulting from poor nutrition, poor management of medications, and poor balance.
There will be a greater increase of the present large black-market home care industry. Families hire untrained caregivers often at minimum wage or less to maximize hours of care. These workers often do not report this income and may refuse to give receipts. HST will only increase this problem. There will be increased family caregiver stress and burnout, because families will try to provide the care needed at the same time as they fulfil requirements for their careers and their family responsibilities.
I will also say here that we are seeing more and more 89 and 90-year-olds caring for 94-year-olds in their homes, and it is the 89 and 90-year-old who is dropping dead, because the other person has no stress.
For the above reasons, there will be an increase in elder abuse. This is a problem all agencies are facing far too often. A conservative estimate of the number of New Brunswick seniors experiencing abuse is 3,000 a year. Senators, one is one too many. The other end of the percentage is as high as 15 per cent of our seniors living at home.
The New Brunswick Home Support Association asks that application of HST to home services be carefully reviewed and stopped.
What will be the bottom line in dollars for our clients? The Province of New Brunswick will pay agencies $9.50 per hour for in-home care. When a client qualifies under the provinces' Single Entry System, no tax is applied. However, if the client does not qualify for financial or other reasons, but still requires supervision and/or assistance, agencies must charge tax.
In plain dollars and cents, an hour costing one person $9.50 could cost a neighbour $10.93 from the same agency. Three hours will cost the government $28.50, while a private client will pay $32.79 for the same three hours.
A government client receiving ten hours of care a week would cost $408.50 a month, while a private client would pay $470 for the same care.
A government client receiving 35 hours of care a week would cost $1,429.75 cents a month, while a private paying client would be billed $1,644.97 a month.
The application of HST will truly support the two-tier system.
In conclusion, our member agencies are desperately trying to provide appropriate and effective care that is responsive to the changing needs of our citizens in a rapidly changing health care system. We serve the frail and the vulnerable of our communities.
Senators, you must stop the application of HST to home care services.
The Chairman: I just want to ask one question of factual clarification. I think there are two distinct issues we are dealing with. First of all, currently the GST applies to private home care services but not home care services funded by a government, whether it is provincial or a municipality; is that correct?
Ms O'Brien: That is correct.
The Chairman: The second problem is that the provincial sales tax is not now applied to such services?
Ms Clayton: That is right.
The Chairman: Also, you have the inequity, as you perceive it, from the current application of the GST, and then in addition, there will now be a provincial sales tax on services that are not now provincially tagged; is that right?
Ms O'Brien: That is right. It is only the people who are paying privately, people who are taking the responsibility as our government pounds into us so clearly that we must assume responsibility, and these are the people that are being penalized.
The Chairman: There are, in effect, two related but nevertheless distinct issues.
Senator Hervieux-Payette: I will ask a few clarifications, because it is a little bit puzzling for me. The system in Quebec is a bit different. Yes, the CLSC is providing free home care. Could you define what home care is compared to health care?
Ms O'Brien: Home care is provided by home support workers and usually consists of personal care, which is bathing, meal preparation, and light housekeeping. However, on top of that, as I say, we are increasingly being asked to care for palliative care patients. Again the same services, but much heavier care.
Also, people now are being sent home after open heart surgery in four or five days. Sometimes they live alone. A lot of our clients are rural clients. They need support, or they will land back in hospital. Again we are providing the same type of services.
Senator Hervieux-Payette: Who is making the choice to provide either the government services versus your services? Does the patient decide or does the government decide whether or not people are eligible?
Ms O'Brien: The government has criteria that is applied to everyone who applies for financial assistance. That is our Single Entry Program. It is a 47-page assessment.
Senator Hervieux-Payette: You are saying personnel, staff. Do they provide the same care to both?
Ms O'Brien: It is the same people providing the same services.
Senator Hervieux-Payette: How many people do you have with nursing qualifications in your group?
Ms O'Brien: These are not nurses. We do have nurses as well. They are home support workers, formally known as homemakers, personal care workers, something like 28 different names for them, but they all do the same thing. It is non-medical care that is provided, but it keeps people out of the medical system.
Senator Hervieux-Payette: Do you supply personnel because there is a lack in the public system, or because there is not enough people to do that, or is it because these people do not qualify with their income? Why is the government not providing this home care free to the patient released from the hospital after four days for heart operation?
Ms O'Brien: No, they have to provide their own care.
Senator Hervieux-Payette: Everybody?
Ms O'Brien: That is right. We have extra-mural hospitals. They have nurses who will go in, and they are in and out. They will change the dressing; they will do anything medical. A 90-year old with a hip replacement cannot go home 20 miles from the city and care for themselves. It is impossible.
Senator Hervieux-Payette: And from what I understand, this free service is not available to those who have low income?
Ms O'Brien: The free service is available if they meet the criteria of the government assessment.
Senator Hervieux-Payette: What are the criteria?
Ms O'Brien: The criteria is one, financial; and two, their deficits. What can they not do for themselves? Can they not bathe themselves? Can they not toilet themselves? Can they not transport themselves? Can they not do their own banking? Can they not prepare meals? We have many clients for whom the last thing we do when we leave is take the fuses out of the stove so they do not get themselves in trouble before we get back in the morning.
Senator Hervieux-Payette: And is it tax deductible from these patients, providing these people have some income? Do you provide them with a receipt?
Ms Clayton: If it is privately paid, yes, we do provide them with receipts. I would like to make a couple of things clear, if I could. One is that the not-for-profit segment of the service providers are not required to charge the tax. The private companies like ours -- mine and Sharon's -- are required to charge the tax. That is an inequity in itself right there.
I would also like to clarify that registered staff, which means registered nursing assistants or nurses, that calibre of worker, are not taxable anyway, but the lower paid, the unregulated worker, if you will, the home support service is taxable. Another inequity.
You mentioned that the government should be supplying the service free. We wholeheartedly agree with that. However, do not be under the misconception that the services are provided free in any instance, really. The only time the service is free is if the financial situation is so great and the physical deficits are so great that the combination puts them at what is considered to be the maximum, and in this province it is currently $1,470 at the maximum a month to provide service for an individual. That has just been announced as being increased.
However, there is no real free service for anybody. They may be partly subsidized, and that subsidization has happened for very many people depending on their particular situation, but it is only if they apply, and many of our seniors do not want to ask for what they perceive to be welfare. They would rather struggle and sometimes suffer for that struggle than ask for what as I said they perceive to be welfare.
Senator Hervieux-Payette: If tomorrow you abandon the notion of a private company and become a non-profit corporation, there would be no tax applied to your client?
Ms O'Brien: That is right.
Senator Hervieux-Payette: That is clarifying for me. The difference in Quebec for people who need that kind of care that is provided free by CLSC, and if they stay in the hospital because there is no available services, is a long-term patient in hospital pay for their meals and pay for some of the services they receive in hospitals. There is a charge. You do not have a free ride if you are in the hospital. You just have a decent amount left for your own personal expenses, but it is not meant to encourage you to stay in the hospital.
Senator Comeau: As I understand it, there is some form of a means test whereby one applies to government if one knows about this program -- the person's means are evaluated so they may fall under a not-for-profit or a for-profit, correct?
Ms O'Brien: It does not go that way. The means test does not determine who their service provider is. The means test simply identifies the person who is eligible for a subsidy from the government.
Senator Comeau: And the government is prepared to not charge the BST not-for-profit, but will charge the BST on profit.
Ms O'Brien: The government does not charge GST. It is the private service provider who must charge that GST.
Senator Comeau: Now, based on your experience, what will happen now that many of your people to whom you provide services are going to be facing increased costs of municipal taxes? I do not know how much it will be; it works out to quite a bit of money, that people will need to pay on their homes, increased cost of electricity, heat, light, and so on and so forth. All the necessities of life are going to be all that much higher, and people to whom you provide services are generally on a fixed income.
Ms O'Brien: That is right.
Senator Comeau: What is going to happen? Would these people be more or less resorting to black-market services?
Ms O'Brien: That is what I presented as one of the outcomes, that the black market will just mushroom.
Senator Comeau: It will go to non-professional people who do not have the knowledge or experience?
Ms O'Brien: That is right. They will be non-bonded, non-supported, non-supervised, non-trained. I think I am using all the "non" word, but untrained. These are the people that are employed and they are employed at minimum wage or less than minimum wage, and they put absolutely nothing back into the economy as far as tax money goes, because they do not claim it.
Senator Comeau: At the end of the day, we may be in fact driving those people who we do want to support into high-cost nursing homes much quicker than they ordinarily might have gone?
Ms O'Brien: That is right, or back into the acute hospital system, because they have fallen and broken a hip or because they have not taken their medications for three days or they have not eaten properly for a week.
Senator Comeau: Did the government of New Brunswick during its look at the GST, talk to your group, or at least discuss this?
Ms Clayton: No.
Senator Comeau: I find it absolutely incredible here.
Ms Clayton: So do we.
Senator Comeau: Here we are, unelected so and we are the first ones actually coming in and talking to you.
Ms Clayton: And we are very grateful for that.
Senator Comeau: This is absolutely amazing. I could understand the members of Parliament in Ottawa not wanting to come to Atlantic Canada, but for your own provincial people not to talk to you, I am amazed.
Ms Clayton: I have placed three calls to our finance department office myself in the last two weeks and I have yet to have a return call.
Senator Comeau: However, they did talk to Assumption Mutual Life apparently.
Ms Clayton: Apparently I am not large enough.
Senator Comeau: I guess they carry a bit more weight.
Ms Clayton: That is correct.
Senator Comeau: We think in terms of nursing, of home care, as being only those people who are senior or aged and so on. Does it include people who are not seniors?
Ms Clayton: Absolutely. Recently, the process in New Brunswick was changed to include anybody from the 19 to 64 year age group as well. That covers people who suffer mental challenges, people with physical disabilities, the whole range. Additionally, I know that Sharon's company serves, as I do, the full range, everybody, all age groups. We seem to be seeing more deterioration in health status amongst seniors perhaps right now. We know that their fixed incomes are not going to make this HST possible for them to live with, and quite frankly I have concerns that we are going to see seniors who are, in order to pay these increased costs, going to take away from the very meagre budgets for food and things of that sort.
Senator Comeau: Many of them do not have vehicles with which they can pick up their food, and this type of thing. What can you say to that?
Ms Clayton: They are charged at every turn. There are services around that will bring the groceries to them, but they have to pay for that. They do not have the money.
Senator Comeau: These services are going to probably pay increased costs, gas and so on?
Ms Clayton: Everything. That is right.
Senator Robertson: How many groups like your own in the province are privately operated?
Ms O'Brien: The New Brunswick Home Support Association, we represent 28 agencies, but those agencies have multiple offices, and that is only the tip of the iceberg.
Senator Robertson: If there is no change in the tax policy, what will be the fate of organizations such as yours? Do you see the demise of your organizations, or how are you going to function?
Ms O'Brien: I do not see the demise of the organization so much as the demise of some of the member agencies who will not have the work because people will not ask for the services.
The Chairman: Thank you for your presentation and for outlining in fact the two related but nevertheless distinct issues that face your industries.
Our next witness is Mr. John Slipp, who is the President of the Tourism Industry Association of New Brunswick. Just as a matter of curiosity, are you a full-time employee of the association, or do you in fact have a tourist business of your own?
Mr. John Slipp, President, Tourism Industry Association of New Brunswick: I have a tourism business of my own, and I am elected president of the association.
The Chairman: What is your business?
Mr. Slipp: I manage the Woodstock Duty Free Shop, which is the visitor rebate centre for Atlantic Canada.
First of all, just to enlighten you about the Tourism Industry Association of New Brunswick, ours is a 300-member organization. The Tourism Industry Association of New Brunswick appreciates the invitation to comment on the implementation of Bill C-70.
The Retail Council of Canada has referred publicly to the negative impact that inclusive pricing policies will have on their members, specifically as it relates to tax-inclusive pricing, direct mail marketing and catalogue shopping. The tourism industry may realize the same impact through similar marketing initiatives. An additional cost is created as a result of a necessity to print regionally specific materials.
Restaurant operators may see increased operating costs and we may also see increased costs as consumers. Restaurants have a significant impact on our economy. Negative results in food and beverage sales will also have an overall negative effect on the tourism industry in Atlantic Canada.
Service providers such as tour operators may also see a negative impact as a result of the increased advertising costs. There are, however, several factors featured in the proposed legislation.
The Visitor Rebate Program has played a key role in promoting the Canadian tourism product for the past ten years. Many residents, visitors, operators and communities do not have an awareness of the program or of its benefits. The tourism growth potential offered through the new 15-per-cent tax-back program is very significant.
Tax rebates offered on business supplies also offer a significant benefit for most small businesses. Whereas, there is currently only a 7-per-cent rebate on these goods, the small business operator should see an immediate decrease in operating costs respective of the provincial sales taxes previously paid in each province.
While limited provincial participation may create differences in the payment price between goods purchased in the participating provinces and abroad, the participating provinces may also benefit from the competitive advantage of being in a more favourable position to promote the purchase of goods at home.
The 368-page Bill C-70 limits the opportunity for a more in-depth discussion on the issue. While I am certain that given the opportunity an individual could speak at great length on the bill, I have chosen to remain within the time guidelines provided by your staff. It is with this in mind that I offer the following recommendations for your consideration at this time.
The role of government must be appropriately considered when adjusting taxation policies. Like any policy shift, clear and effective communications are required. Unlike most government policies, sales taxation involves the business operator, the supplier, and the consumer, and changes should therefore be implemented with respect to the broad of the policies. When we involve several organizations or levels of government in implementing new regulations, there are usually significant communication challenges that need to be addressed. The implementation process for the HST has already demonstrated the need for more effective communications.
We have attempted to implement a more effective private-sector communications strategy in Atlantic Canada. While inter-provincial cooperation was not achieved, the New Brunswick Chamber of Commerce, the Tourism Industry Association of New Brunswick, and the New Brunswick Departments of Economic Development and Tourism and Finance, together with Revenue Canada, have recently agreed to work together to achieve more effective communications with the implementation of the HST in New Brunswick. Our goal is to assist with the transition from the current sales tax programs to the new harmonized sales tax.
I commend the Province of New Brunswick for recognizing the need to work together to accomplish this goal. We recognize that timing has been a significant factor for the implementation of this proposal.
A large number of small business operators are not knowledgeable on the subject and negative reactions to the changes can be expected when considering that the information has not been properly provided. That which is learned is often learned through the media and by word of mouth -- the expression "a little knowledge can be dangerous" applies here.
Following the Province of New Brunswick's lead, I would like to encourage the committee to include recommendations in their report that address the communications requirements as well as promote the concept of being open for change. The Province of New Brunswick made it very clear from the very beginning, on this issue, that they would be open to suggestions and comments regarding the implementation of the proposed legislation.
In addition, the committee's report should also address the benefits of tax-inclusive pricing policies and the regulations, respectively. While there has and continues to be lengthy debate on this issue, I do have to ask one very important question. What are the true benefits to our governments and to our business and to our consumers of regulating tax-inclusive pricing?
Survey information suggests that the majority of consumers in Canada prefer tax-inclusive pricing. The reaction of Canadians to the implementation of the GST program was very negative. The public message was very clear at the time. We were happier not knowing what we were paying in taxes. Many have suggested that those reactions were a direct result of the changes.
Some of the negative reactions today can probably be attributed to the same. Perhaps the question of effective communications would also address these negative reactions. Whatever the basis for these results, it is important that we weigh the costs verses the benefits of any program or action prior to implementation.
After all of this, we can probably agree that Canadians have delivered a message to their elected representatives. As consumers, we prefer taxes to be hidden. Now we can examine the role of government on this issue.
I propose that the committee include in its report recommendations that will permit the business operator to decide whether he or she should include the tax in the price. The consumer dictates business policy as voters dictate government policy. I do not recognize any immediate benefits for governments on forcing the issue of tax-inclusive pricing. We will, however, require appropriate guidelines for the issuing of sales receipts and for the posting of taxation policies in our businesses.
Our governments can be very helpful both to our small business operators as well as to our consumers. Our government's responsibilities should be more clearly defined in a way that will benefit all concerned. Government is equipped to help address policy compliance issues where necessary. In addition, government can be very helpful to small businesses through the effective delivery of information.
I propose that the committee include recommendations in their report that encourage our governments to assume a more supportive role for small business. We can all benefit from a process that will see our governments work to provide small businesses the tools required to succeed in today's global economy.
The harmonized sales tax program has the potential to help our economy. The Atlantic Provinces Economic Council suggests that this potential exists to the tune of more than $35 million.
There may be more economic advantages hidden within the legislative documents. We sometimes fail to recognize our own advantages. Whose responsibility is this anyway? Are we going to permit our governments to continue to be responsible or are we going to assume this role ourselves? Business does have a role to play here and we need to be reminded of that.
Allow the operator to decide what is best for his or her own operation. The consumer will quickly determine the success of the operator's decisions. Governments can help our businesses find the advantages available in the new program and help us learn to promote these advantages, for example, the Visitor Rebate Program, and therefore benefit from the economic growth as a direct result of having successfully addressed the basic requirements of a knowledge-based economy; information and communications.
Senator Buchanan: There is no question that there is the advantage of the 15-per-cent rebate. I want to address a few other things though.
I am told, for instance, that travel agencies in Nova Scotia or New Brunswick, if I purchase a ticket here in New Brunswick, or in Nova Scotia or in Newfoundland, basically the province I know, Nova Scotia, I will pay more to buy that ticket at the travel agency than if the same ticket were purchased in Toronto, say for a ticket from Halifax, Toronto return, or vice versa, I pay 8 per cent more if I do it in Halifax.
Mr. Slipp: When you look at the cost to the consumer domestically this is certainly a concern and a lot of organizations have already represented their concerns regarding the increased cost to the consumer. What I have tried to do here, as opposed to taking a negative or positive position on the issue, is to identify what we believe to be the disadvantages and advantages so the committee can report back appropriately, and my approach here is to certainly recognize some of the benefits as well as the disadvantages.
Senator Buchanan: I would just like to ask you though, in your brief you did not mention this?
Mr. Slipp: No, I did not.
Senator Buchanan: Why?
Mr. Slipp: When we think about tourism we are thinking about visitors coming to Atlantic Canada, and travel agents are dealing with people going away.
Senator Buchanan: You do agree that all travel agencies in Nova Scotia will now be required to charge their clientele 8 per cent more versus if I were to buy my ticket in P.E.I. and have them mail it to me; it will be 8 per cent cheaper?
Mr. Slipp: That is my understanding.
Senator Buchanan: As I understand it, national carriers, Air Canada, Canadian and the rest of them, are governed by federal law, therefore, after April 1 if this bill goes through the carriers must advertise nationally the tax-inclusive price of a ticket from wherever to wherever in the country. However, travel agencies and tour operators are not required to do the same. They are not under federal law, they are under provincial, so that those agencies can advertise in Toronto or Western Canada or P.E.I. without tax-inclusive prices. The advertising you will see with the national carrier will be, say, $550, whereas the operator will be less than that as far as the add is concerned. Does that not add to a lot of confusion in your business?
Mr. Slipp: It adds to a lot of confusion if that is the way it is implemented, and my understanding would be different from that. My understanding was that the government does not have a role in restricting advertising, it only has a role in how businesses indicate to the consumer how the tax is included in the price. The carriers must examine very carefully their advertising plans and they have a very complicated issue to deal with. I am sure a lot of organizations have already referred to catalogue marketing or that type of thing, print material, and how they will approach this when they are designing national programs. I do not have the answers for those national carriers, but I did not recognize that there was a national advertising standard attached to this.
Senator Buchanan: If it is federally regulated, the carriers are. In my understanding, Mr. Chairman, they are.
Mr. Slipp: I did not understand that that would mean that they would be, that the restrictions on advertising would be put forth according --
Senator Buchanan: They must have a tax-inclusive price, that is my understanding.
Secondly, why, in your opinion, P.E.I. being the tourist-oriented province it is, did they opt to stay out of the HST in your opinion?
Mr. Slipp: I am only assuming here, from the little knowledge I have, that it is more from a consumer-based concern than it is from the business operators end of things. The tourism industry would certainly have an advantage with a 15-per-cent tax-back, but the concerns of the consumer or the people making their purchases were the more significant concerns I assume for P.E.I.
Senator Buchanan: What do you think will happen when, as I understand, many businesses in P.E.I. will start national advertising, maybe advertising in the New England States, that their goods are 8 per cent cheaper in P.E.I. than in Nova Scotia and New Brunswick?
Mr. Slipp: Well, they can advertise that if they like.
Senator Buchanan: Goods that are under $100 and goods that are now not taxed with PST?
Mr. Slipp: They may very well do that, but I am certain that New Brunswick businesses, and Nova Scotia and Newfoundland, will be groaning that they get the taxes back from visiting their provinces at 15 per cent so it is tax-free visiting.
Senator Buchanan: Do you understand though that there is a move, they will start advertising that goods in P.E.I. are cheaper than the other provinces?
Mr. Slipp: I understood that was part of their plans, yes.
Senator Rompkey: If you come to New Brunswick as a visitor, you get your taxes back, right?
Mr. Slipp: Currently with the GST there is a national rebate program, visitors to Canada get the 7 per cent back, and some provinces have a provincial rebate as well. With the implementation of the HST, the 15-per-cent tax-back will apply to the participating provinces.
Senator Rompkey: However, not to P.E.I. A visitor to New Brunswick will get a rebate, but a visitor to P.E.I. will not get a rebate; is that right?
Mr. Slipp: A visitor to P.E.I. will get 7 per cent.
Senator Rompkey: Is that not an advantage to New Brunswick?
Mr. Slipp: Again, in terms of the rebate process and promoting the program and the advantages of the program, the visiting consumer comes to get their taxes back or makes the application.
Senator Rompkey: Is it not like that all over the world? If I go to Germany and I leave, I get the VAT, and the same thing is true of Britain, that is a worldwide practice?
Mr. Slipp: Europe does have a program, yes, they do.
Senator Rompkey: Are we not just slipping into a practice that is available in many parts of the world?
Mr. Slipp: It is available in many parts of the world but the question is how we promote it and there is an opportunity here. The provinces did consider whether or not they would participate in offering the 15-per-cent tax-back and, as I understood it, some of them considered it very seriously and if they chose not to then we would be in a very tough situation.
Senator Rompkey: That is why you emphasize communication, and I want to compliment you on that. You have said that it is important that these things be communicated and you started to work with the government to communicate this point.
Mr. Slipp: Two things I might just feature here. First of all, in the ten years the rebate program has been in existence in Canada, today the majority of the tourism industry and Canadian residents in general are not familiar with the program. Number two, because of all the other political discussions happening with the HST, again, such an advantage is being buried and it is difficult to get the message across. With the provincial governments rushing to get the information out and doing their very best, like anything in this type of strategy change, it is difficult to get the message across and to help the business operator.
My message to you is if there is to be a policy shift like the HST it is so significant, it affects the operator, the supplier, consumer. The government can help these businesses if they take a communications role.
Senator Rompkey: You say that the operator should decide whether to include the tax in the price and you agree that the consumer wants to see the tax included in the price but that is possible now, is it not; under the present law, it is possible to have a tax receipt included and to show the tax separately?
Mr. Slipp: Correct.
Senator Rompkey: Does that not solve the problem?
Mr. Slipp: I think it does.
Senator Rompkey: You would agree then, it seems to me, with the comment of Debra Ward, who is the president of the Tourism Industry Association of Canada, when she says that the harmonized region will have a huge advantage over the non-harmonized regions in this particular area, where they will be able to give a 15-per-cent rebate to travellers who visit Nova Scotia and New Brunswick and Newfoundland? We have already covered that point, but I wanted to indicate that there has been other testimony to that effect as well.
Mr. Slipp: Back to the P.E.I. question just briefly: We all must consider that the businesses may adjust their prices accordingly with their increased costs, and so if an operator in P.E.I. is adjusting their prices because of their own increased cost, and competition per se, doing business on a regional or a national scale, perhaps the consumer is not really getting all of the money back, whereas in the provinces that are participating the visitor is actually getting a full rebate.
Senator Rompkey: Can you tell us the future of tourism in Atlantic Canada; is it a growth industry or a sunset industry?
Mr. Slipp: Tourism is a growth industry in Atlantic Canada. As the last three successive years have indicated, the numbers each year have gone over the top. The question now is the Canadian dollar; if the Canadian dollar does grow, as some economists suggest, there could be some challenges in the tourism industry. Atlantic Canada has grown as a new product. There is an Atlantic Canada tourism partnership which has promoted that as a product and the benefits that exist within a program like the HST, if they are communicated properly, could assist those businesses in tougher times when the Canadian dollar rises and Canadians start to go south and fewer Americans are coming here.
You also talked about the value-added tax. Communications again. In Europe, it is a common thing. We are now, as Atlantic Canada, promoting ourselves more to the German and the European market. This value-added tax back is very attractive to European visitors. The question is what do we do with it.
Senator Rompkey: The dollar is a concern for a lot of industries, whether it is iron ore or fish or whatever, but would you agree that the dollar has remained relatively stable and relatively advantageous up to this point?
Mr. Slipp: Yes, it has. However, economists continue to suggest that there is a brighter future for the dollar, and what concerns me about that particularly is that more rural communities and border communities are not prepared to deal with a change in the dollar and, as Canadians again exit south and as Americans find it less attractive to come to Canada because the dollar value is not there, we will have some future challenges ahead and that is where the operator needs more tools.
Senator Buchanan: My understanding is that the GST Visitors' Rebate Program has not been as well communicated as it should, particularly in the U.S. I know of many people who come up here from U.S. who do not know anything about it. One of the reasons that it may not have been so successful is the complications of doing it. As I understand, you must get the application, you must keep your receipts, you must make out the application, attach your receipts when you get home, and then you mail it back into Ottawa, then you wait for your refund. You may as well have a bookkeeper doing it all for you. Is that the kind of thing we will have? It is my understanding it will be the same kind of application process for tourists.
Mr. Slipp: Two things: First of all, you probably are all aware of this, the federal government has decided to review the entire visitor rebate program; it is currently under a significant policy review. In terms of getting the rebate, we have a program in Canada where visitors get the money back at licensed duty free shops; instant cash back, no filling out applications, and you should see the happy looks on their faces when they arrive at our door and they take the cash with them.
Senator Buchanan: Could you give me the percentage of visitors who come to Canada from the United States who have actually applied for and do get the rebate program?
Mr. Slipp: Approximately 20 per cent.
Senator Buchanan: Approximately 20 per cent; 80 per cent either do not know about it or it is too complicated to get it. What I am saying is that if I were a retailer in Halifax looking for people coming by at my store, goods under $100, and I saw an advertisement that said that it costs 8 per cent less in P.E.I -- I would go to P.E.I if I were a consumer. Communications. They have been working on the GST communications now for six years.
Mr. Slipp: Let us go back to the communications. I am addressing this as an issue today. It is an opportunity, it is potential; the business operators need the tools. The role of government must be reviewed. What can a government do for small business? I am suggesting that the government can provide the tools through communication to help them compete.
Senator Oliver: I just want to make sure that I understand the two points that you are making in your brief. Senator Rompkey asked you questions about communication and I now understand that. The second relates to this price-included; on page 5 you ask the question and then on page 6 you try to answer it. I do not know what the answer is that you are asking this committee to implement. The question you ask is:
What are the true benefits to our governments and/or to our businesses, and/or to the consumer, of regulating tax-inclusive pricing?
That is the question that you asked.
Mr. Slipp: Yes.
Senator Oliver: Then on the next page you say that the thing you would like this committee to do is to recommend, not to amend but to recommend, which will permit the business operator to decide whether he or she should include the tax in the price. First of all, a recommendation in a report from the Senate means nothing. Are you asking for some kind of an amendment and if so what would you like to see amended?
Mr. Slipp: Yes, I am asking for an amendment.
Senator Oliver: To do what?
Mr. Slipp: To allow, in this program, the operators to make their own decision and not to make it law that tax be included in the price.
Senator Oliver: Therefore you are against tax-included pricing; is that correct?
Mr. Slipp: I am saying that the benefit to government, to the consumer, and to the business person must be reviewed. I do not see the benefits, first to government, by regulating that you must have the tax included in the price. What is the benefit to government?
Senator Oliver: You are not in favour of it?
Mr. Slipp: I do not see the benefits.
The Chairman: Senators, our next witness is a family physician, Dr. Evan Pugh.
Dr. Evan Pugh, Family Physician, Saint John, New Brunswick: I brought a written brief with me; it is just a short submission, with a few points to it. I will read it for the record.
I appear before you as a family physician who has practised in Saint John for 28 years. As a physician, I have watched the cost of running my practice rise over the years, like everybody else. My office expenses include electricity, heat, rent and supplies. I also employ two office workers. With the introduction of the GST, my costs have increased; however, unlike other small businesses, and my practice is a small business, I am unable to claim a tax rebate for the GST from the federal government.
The GST costs each physician in this country approximately $1,500 a year, without any ability to get rebates. With the introduction of the HST in New Brunswick, I will see the cost of my practice rise again. It has been estimated the HST will add an additional $1,480 per year per practice. This is approximately $3,000 a year for physicians in New Brunswick and in the Atlantic provinces.
As a GST- and HST-exempt medical practice, I am unable to recover these taxes by rebate from either government. All other small businesses in New Brunswick are able to recover these costs. Physicians also have no other way to recover the costs from fee changes. Under the Medical Act of Canada, we are not able to charge extra for anything like this. We are unlike other businesses that are exempt -- they can increase their fees.
Fifty-five thousand physicians in Canada employ approximately 10,000, about two per practice. As a small business operator, I only ask for fairness in this tax, if we are to get this new tax, and it appears we are.
Senator Angus: I think you are probably a member of the Canadian Medical Association.
Dr. Pugh: I am.
Senator Angus: You should be happy to know that they came to our committee last Wednesday in Ottawa, the president and two colleagues, and they pointed this out to us. We were all struck by the very anomalous situation you find yourselves in because you are a very key part of the continuum of care that we hear about, especially with health care reform and the role of the family physician in this.
The Chairman: Also for the record, in case some of our colleagues do not know and the audience does not know, on the issue of health care, Senator Angus is actually one of the most knowledgeable people in the Senate. He chairs the board of directors of the Montreal General Hospital as part of his contribution to the voluntary sector. If you see what is happening to hospitals these days, you understand the depth of knowledge he has had to accumulate about the medical profession and medical services in general in that capacity.
Senator Angus: That was not a solicited ad, however, in any event, I think we are all interested in health care; it affects everybody's lives very intimately. One of the very difficult things that is happening in our health care system today is the shrinking money that is available for all aspects of the care. Therefore, your problem is highlighted in this document and in your remarks are all that more impressive. I am just wondering if you have any particular ideas as to how we might address it. What kind of reaction did the New Brunswick government give to you on this issue?
Dr. Pugh: I wrote to the premier and to the finance minister and they said that they would not exempt us, period, that is it, and I do not know why; exempt us or at least give us a rebate like every other small business. I also wrote to the federal Minister of Finance and the finance committee of the House of Commons. They referred me to Paul Martin's office and he wrote me a three-page letter saying that it is too bad, but that is it. I posted it up in the common room at the hospital so that people could read this letter. It was a two- or three-page letter which said nothing, except that they did not want to do this.
I guess they do not consider a physician's office as a small business. It is a small business. We do employ people and we do have costs. I know that the government has cost difficulties in the health care dollar, and I do not mind paying my fair share of taxes, as long as I am treated fairly, like any other small business. That is all I ask for here. I do not like the tax.
Senator Angus: Other people get it back and in your case it is because the government, I gather, pays you out of medicare.
Dr. Pugh: Health care is supposed to be GST-exempt. People do not pay us 7-per-cent GST for coming into the office. However, the other side of the coin is that when I have a bill with GST on it, I have no way to recover it, so it is an anomalous situation, as you mentioned.
Senator Angus: Somebody had the idea that if the governments were a little kinder and gentler they might negotiate with you an increase in the fee, for example, that is paid.
Dr. Pugh: That is a provincial thing. There are many governments; if there were just a rebate like every other business. I am not asking for anything special. If they wanted to exempt all the other businesses, I am sure you would hear howls from the rest of the world; but the other businesses can always apply and get a rebate of their taxes.
Senator Angus: Does it happen with dentists as well?
Dr. Pugh: Dentists can raise their fees. They are not limited; they are not subject to the health legislation.
Senator Angus: Is there a difference if you have your office in a hospital, say in a teaching hospital?
Dr. Pugh: No.
Senator Angus: Because you get the supplies or the equipment, the items on which the tax would be paid are bought by a hospital or something. We heard a story on that too.
Dr. Pugh: We do not know what the hospital situation will be. I think they would be exempt. If you are in a hospital situation, have an office there, I am sure the hospital would negotiate a rate for your rent without the GST, or something to that effect. I am talking about a private practice outside the hospital.
Senator Angus: I understand that, and it makes it even all the more unfair, it seems to me, that there you are, outside the hospital in a private office, and you have this inequitable tax.
Dr. Pugh: It is, in effect, a small business, but people do not think of it that way but it is.
Senator Angus: These numbers that you have here in your document are very conservative I imagine, are they, and that would just be like a one-person office?
Dr. Pugh: I am just talking per person.
Senator Angus: If you had four doctors with different specialties practising together, that would be even more, would it not?
Dr. Pugh: This is the average for the physicians in New Brunswick. I do not know if you saw the brief presented by the CMA, who suggested that the GST has cost about $360 million to physicians since it is been introduced, and there is no way to rebate it. That is a lot of money if you want to look at it. I am just talking just as an individual, as a small business owner.
Senator Angus: We are certainly pleased that you came here and highlighted that.
Senator Rompkey: Is it not true that this is really not so much a problem of harmonization, it may exacerbate the problem, but really this is a GST problem, is it not?
You can read the Red Book -- Senator Angus has it there; he showed it this morning. You should go and read it because I do not think you have read it properly. Anyway, I think I have the floor, Mr. Chairman, and I want to compliment Senator Angus on being chairman of the board of an important hospital. I know he does a good job there but I do not so much compliment him as being a supporter of the Conservative government that brought in the GST, because I think that is what created the problem in the first place. This was a decision that was made and we believe that is the case, health care services are not taxable.
Now, if you were to exempt that, you would lose perhaps $350 million a year. The question then becomes: Where do you get that $350 million, because if you exempt a number of people you are back into a ballooning deficit again in very short order?
Dr. Pugh: You are only exempting a few select people; the rest of them all have rebates. The rest of the country gets rebates. The rest of the small businesses get rebates. We were excluded then and we will be excluded again. It is like two cups of poison or one cup of poison.
Senator Rompkey: I was just simply making the point that this problem is inherent from the beginning as part of the GST, the decision that was made initially to bring in the GST.
Dr. Pugh: It could be changed.
Senator Rompkey: That was the only point I wanted to make.
It could be changed, but if you start changing one, and then five and then ten, as I said before, you are back into a ballooning deficit in very short order, which is what the government has tried to solve, and polls show that people support it.
Dr. Pugh: The problem is that you are trying to solve it on the backs of physicians; but the rest of the small businesses in this country are exempt, they can all get their rebates. Why pick on us? I mean why not pick on the rest of the businesses also? You would get rid of your deficit very quickly but you would not be very popular.
Senator Buchanan: Are you saying that the reason for the HST is to bring down the ballooning federal deficit, is it?
Senator Rompkey: No, I am saying --
Senator Buchanan: That is what you said.
Senator Rompkey: I am saying that if you lose tax revenue, you must start borrowing.
Senator Buchanan: But the HST is revenue-neutral. The medical doctors that he is talking about in Nova Scotia and New Brunswick did not get a GST; now they are going to pay another tax and they will not get a rebate. But you said you could not give them a rebate because the deficit would balloon. That is the first time I heard it said --
Senator Rompkey: If you start getting rebates and subsidies --
Senator Buchanan: That is the first time I have heard it said that the HST was put into effect to help bring down the ballooning deficit.
Senator Rompkey: No, I did not say that. I said if you started to give rebates and subsidies, as we were doing before, we will be back into a ballooning deficit again; you will be borrowing and Canada will be back where it was when your party left office.
The Chairman: Senators, we are here to ask questions to the witnesses, not to have a discussion among ourselves.
Senators, we have four witnesses who have asked to come forward: Hazel Alexander, Stanley Devine, Jerry Hudson and Theresa Louis.
Mr. Jerry Hudson: Honourable senators, I am a senior living on a fixed income. According to Statistics Canada, there are 12,000-plus seniors living in the Greater Saint John area age 65 and over whose income, like mine, is well under $15,000. They tell us that the HST will be good for us. I can tell you that for seniors living on a fixed income this new tax will have the opposite effect.
Mrs. Hudson and I live in an apartment. When the owners must pay more to heat the building, repair it, et cetera, they will certainly pass those additional costs on to their tenants. I have already heard of one landlord tell me she must increase the rents for four seniors who live on a fixed income who are tenants in her building.
My everyday cost of living will increase. Thank God I have a wide part in my hair; I will not need a haircut so often. Every time my wife and I buy an article of clothing under $100, it will cost more; it will cost more for a pair of shoes, gas for a car, taxi fare. They have already announced the increase in bus fares. Unless we prepay our funerals, they will cost more. Newspapers, books will increase in price. Governments say most health and dental care; what is meant by "most" health and dental care? They do not explain. How many seniors are buying a new car, television sets, other large ticket items?
Mrs. Hudson and I, like most seniors, have worked all our lives; we have paid taxes and put six children through university. Now we must pay more. I ask myself, if it was not for us seniors, many of whom fought for Canada, and a lot who fought for Canada and died so we would have a Canada, why are we still paying? Honourable senators, you have an opportunity to change the tax. I urge you, no, I beg you, to do so.
Ms Hazel Alexander: I basically represent myself, so if I mention any other organizations I am not representing these organizations.
When I arrived today I was not prepared to make a presentation, however, I would like to mention a few things with respect to the HST, how it affects me personally and perhaps a lot of other people in the same situation. Premier McKenna suggested that the GST, or maybe I do prefer the BST, would be good for the province. This may be the case, however, it may not be particularly good for citizens. In New Brunswick, the government seems to be of the impression that they can give out anything they want and all they need to do is put up a shield of armour and hold out until all of the opposition has died down, that eventually the people will take what has been given. In our province, we are paying the provincial taxes on top of the GST; other provinces are not in that situation. It is, in a sense, a double taxation.
Some things that have been happening in New Brunswick already are causing us problems, and this will just be another nail in the coffin if you like, the coffin which again, as has been mentioned, will cost more after April 1. I get the impression that both Dr. King and Mr. McKenna are telling us "My mind is made up; do not confuse me with the facts."
Our health care in New Brunswick has changed drastically over this last short period. They seem to be saying on one hand in newspaper reports that they are saving all of this money by bringing in food to the hospitals already precooked and what have you, frozen food, and all the money they have saved has been by laying a lot of people off. In so doing, they are not getting the taxes from this. The people themselves are emotionally becoming upset, they have no income; it will cost the province more, and yet they are patting themselves on the back for saving a little bit and it is costing them more.
Another thing in which I am involved is Saint John Ambulance -- in the Province of New Brunswick it has just celebrated its one hundredth year. Unfortunately, the way we celebrated that was to give up our ambulance service. We were the only remaining province in Canada that had Saint John Ambulance as an ambulance. What this actually meant in the Saint John area is that we did transports; for example, if you were in the hospital and then required an ambulance to take you home, if you called Saint John Ambulance we could do it. We would take you wherever, Nova Scotia, New Brunswick, wherever; and if you paid, you paid what you would like to pay, or you made a donation, you were not sent a bill.
In the recent past, the provincial government made the statement that all ambulances must have at least one EMT qualified person on each ambulance. We were working towards that goal. They then upped it to two EMTs. What this meant was that the time frame to train these people, who are volunteers, was such that Saint John Ambulance could not do it within the time frame and the province refused to give them an extension.
Unfortunately the result was that Saint John Ambulance had to pull out of the province and out of the ambulance service, which meant that other services, paid services, would take over the business. What this meant was that while Saint John Ambulance and other volunteer services were covering this, it cost the government something like $800,000 a year. Once Saint John Ambulance got out of the business, the other people taking over took a loss the first year and it cost the government $4 million. Now what this means -- somebody said about having to go to the hospital. A few months ago, to go to the hospital from here would have cost you $125; now everywhere in the province it is $275.
These are just things that people from Saint John and from New Brunswick must pay that have changed. If we have this harmonized sales tax, everybody is saying "Oh well, now you only pay 15 per cent instead of 1.187, whatever." What is happening is that people are saying that that sounds good, until they stop to realize what they will be paying this tax on. It is nice to say you will be paying less on this, but, as we have been talking about our aging population, that will be an increase of 8 per cent on funerals, we are talking about gas, we are talking a lot of the basic needs that people must have in their homes, that you and I will must have regardless of our salary. The government sometimes responds by saying "We will give you a tax credit," but a tax credit is no good if you do not owe any taxes anyway, if you do not make enough money.
There are a lot of people who require the government to sit down and think about these things. Someone told me that the premier had told him that his son told him, "Dad, you better get out before somebody takes a machete to you." I think the son was wise. I am not suggesting that anybody take a machete to him, but I think that the premier is making a lot of changes that might be good for the government, whatever that means, but it is certainly not good for the people.
We have been beaten down, we have had all of our expenses increased. I worked for 20 years. I am not old enough to retire, I resigned because of health. I am a Christian and I believe that the Lord is looking after me. Right now I live with my 84-year-old mother who is on pensions and who is legally blind. I do not have an income. We have a car, yes. If I had wanted to go for social assistance -- our house is in both our names -- they would probably have wanted to put a lien on my house. That would mean that I would probably then need to rent and therefore it would cost more again.
Sometimes, when people enter politics, it seems they forget about the individual; it seems to be numbers they care about, instead of people. When a person loses his or her job, whether you call it downsizing, or whatever you happen to call it, this person is an individual. Think what would happen to you if all of a sudden you had nothing; your family, your sons, your daughters, your brothers, your sister, whoever, your mother, what happens to them? What happens to you if you cannot get a job, if you do not want to take social assistance? It is a psychological thing, then you become sicker. You can look at the statistics on this. People who become more depressed start using the health system more and, instead of saving money, you are increasing the deficit.
I would ask you, senators, to please make the provincial government aware that this is not a good thing and that they should be listening to the people before they start doing this kind of thing. Maybe if they took the time to listen instead of trying to just implement it, we would be much better off.
Mr. Stanley Devine: I am just an ordinary retired citizen, married with five children and seven grandchildren. I belong to three veteran's agencies, organizations. I am representing no agency here. I am a citizen.
At the offset, before going into my presentation, I would like to say how strange I feel coming before a Senate committee to oppose a tax system that is going to affect only three provinces in Canada, and I wonder where this is going to lead. Are we going to be the second-class citizens? Is it going to lead to separation? In this age, where we are trying to keep Canada together, it seems that politicians are fighting like hell to separate us, to make us different. I find it very strange, really, to live in a wonderful country like Canada and to be the envy of a lot of the world, and see us doing this to ourselves.
The HST is the most ill-conceived tax imposed on the people of New Brunswick for the following reasons: The tax is good for the rich and very bad for the rest of the population, particularly since the premier continues to dole out forgivable loans to wealthy corporations and industrialists.
The 15 per cent tax on heating fuel and power is most deplorable with the extreme cold winter weather we have here. There should be no tax of any kind on heating fuel in cold climates.
Under the HST, the bulk of sales taxes will be transferred from high-priced luxury items to the basic essential living requirements and has removed the choice of doing without if you cannot afford to pay the tax.
It is common knowledge that a referendum on the HST would fail in New Brunswick, which is a strong indication that the elected government officials are not representing the majority of the people in this issue. This is very demoralizing for citizens of New Brunswick, particularly for those of us who fought in the Second World War to defeat dictatorship and preserve democracy.
In closing, I wish to thank the Senate committee for conducting these hearings in Saint John.
The Chairman: Before going to Ms Louis, which part of the Canadian services were you in?
Mr. Devine: I was in the Canadian Merchant Navy, senator. We were not recognized for a long time. We are still fighting. I was also a prisoner of war.
The Chairman: In Europe?
Mr. Devine: In North Africa. I am thankful to be alive and to be living in Canada, but to witness the money that is being handed out, without question, to wealthy industrialists and corporations, when we have such a deficit and when the people are having a hard time subsisting in this climate, to raise the cost of fuel by 15 per cent, which is something they cannot do without -- there should be a federal law against taxing fuel in Canada; it would be different if you were in a warm climate, but where the heat is such a necessity. Maybe after a few people are found frozen to death in their beds, there might be something done.
I hope in the meantime that the Senate committee will deliver the messages we are presenting, and hopefully something can be started. As I have said, I do not believe a referendum in New Brunswick on the HST would pass. It will fail.
Ms Theresa Louis: My name is Theresa Louis. I am a mother of four. I work full time at minimum wage, and I am presently finishing my third year university. I am one of the poor people that this HST is going to affect. I have no notes. I did not come prepared, but at the last minute I decided that I was going to speak.
I agree with the three other witnesses here that have appeared before you. It is a tax that is going to hurt only certain people. It is going to hurt the poor; it is going to hurt the elderly. Another group that have not mentioned that I think it will hurt is the native people. I want to know -- you can tell me now or later -- what the implications will be on the native peoples with these harmonized sales tax.
I know that for individuals living on reserves it may not make a difference; however, it might. There are so many different rules in the taxes that we have here that it is hard to distinguish what falls where.
I just want to know what the implications would be and I urge you to listen to the people who have spoken before you. I have heard Elizabeth Weir speak; I also heard the witness before her speak -- I cannot remember his name. I urge you to listen to what the people are saying because this HST is not a good tax. The people do not want it and it is going to hurt only a certain few.
I do not believe all of you were born with a silver spoon in your mouth, so maybe you can go back in time and remember what it is like to be poor. If you can think back to that time, maybe you can understand what the people here are trying to say. I would appreciate that and urge you not to pass this HST.
The Chairman: On behalf of the committee, may I thank all four of you for taking the time. I know it is not easy to come up and make comments. It is precisely because we have the opportunity of hearing from people like you -- not just this Senate committee, but other Senate committees have taken the time to travel across the country on issues that we think people really care about. It gives us an opportunity -- as some of us are fond of saying -- it gives us an opportunity to hear real people as opposed to necessarily only the people we hear in Ottawa. We are really delighted that you took the time and trouble to come and be with us today.
The committee adjourned.