Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 23 - Evidence - March 11 meeting
OTTAWA, Wednesday, March 11, 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 11:10 a.m. to give consideration to the bill.
Senator Michael Kirby (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we are here, as I think all of you know, to deal with potential amendments to Bill C-70 which were discussed in committee yesterday and left in abeyance.
Senator Angus: Mr. Chairman, there are so many new people on the committee that I thought we should introduce each other.
The Chairman: As a democrat, Senator Angus, I am sure you understand it is numbers that count.
We had five items left from yesterday. Senator Angus and I have discussed an order for dealing with them, and I should like to proceed to that order.
The first item is the question of whether the committee is able to deal with the comments we heard during the public hearings in relation to the impact which expanding the provincial tax base will have on low-income people living in the three provinces, specifically including seniors and students.
In the discussion yesterday, the point was made quite forcefully that, in many respects, this issue is really the responsibility of the provincial governments because the problem has been caused by the expansion of the provincial tax base. Nevertheless, senators were asked to go away and think about whether there was an amendment which would deal with the problem.
Senator Cochrane has developed a resolution which I would like to have circulated to everyone now. It is in both official languages. It is not an amendment to the bill but a resolution of the committee which urges provincial governments to take their responsibilities and, in fact, deal with the impact which the expansion of the provincial tax base will have on low-income people living in their provinces.
I would to ask Senator Cochrane to read it into the record, along with any other comments she would like to make. I then would ask any other senator who wants to comment to do so briefly. We can then proceed to vote on it. I say that because I for one find the resolution well-drafted, and I am quite prepared personally to support it.
Senator Cochrane: Thank you, Mr. Chairman. I have drafted as well, with the help of the legal staff, a good amendment. If I could put my amendment forth first, Mr. Chairman, I would appreciate that.
The Chairman: I did not realize you had an amendment. I am happy to have you do that.
Senator Cochrane: My amendment is as follows --
Senator Stewart: Could we have a copy of the amendment?
The Chairman: We should ensure that everyone has two documents in front of them. One is an amendment which has, in the upper right-hand corner, clause 242, pages 334 and 335.
Senator Cochrane: It is 269.1, Mr. Chairman.
The Chairman: Thank you. The second document you should have in front of you, in the event that the amendment fails, is a resolution. Do we all have a copy of that resolution?
Senator Cochrane: If you do not, I have it here.
I move:
THAT Bill C-70 be amended, on page 365, by adding after line 40 the following:
"269.1(1) The portion of subsection 122.5(3) of the Act before paragraph (a) is replaced by the following:
(3) Where a return of income (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)) is filed under this Part for a taxation year in respect of an eligible individual resident in a non-participating province as defined in subsection 123(1) of the Excise Tax Act and the individual applies therefor in writing, 1/4 of the amount, in any, by which the total of
(2) The Act is amended by adding the following after subsection 122.5(3):
(3.1) Where a return of income (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)) is filed under this Part for a taxation year in respect of an eligible individual resident in a participating province as defined in subsection 123(1) of the Excise Tax Act and the individual applies therefor in writing, 1/4 of the amount, in any, by which the total of
(a) $407,
(b) $407 for a person who is the qualified relation of the individual for the year,
(c) $407, where the individual has no qualified relation for the year and is entitled to deduct an amount for the year under subsection 118(1) by reason of paragraph (b) thereof in respect of a qualified dependant of the individual for the year,
(d) the product obtained when $214 is multiplied by the number of qualified dependants of the individual for the year, other than a qualified dependant in respect of whom an amount is included by reason of paragraph (c) in computing an amount deemed to be paid under this subsection for the year, and
(e) where the individual has no qualified relation for the year, the lesser of
(i) $214, and
(ii) 4.3 per cent of the amount, if any, by which
(A) the individual's income for the year
exceeds
(B) the amount determined for the year for the purposes ofparagraph 118(1)(c),
exceeds
(f) 5 per cent of the amount, if any, by which
(i) the individual's adjusted income for the year
exceeds
(ii) $25,921,
shall be deemed to be an amount paid by the individual on account of the individual's tax payable under this Part for the year during each of the months specified for that year under subsection (4)."
Senator Angus: I will second that. I am not sure if Senator Cochrane wanted to give an explanatory statement about the resolution, what it means and why she is presenting it.
Senator Cochrane: We have heard during our travels about people on low income, making less than $30,000 or in that range, who will definitely be hurt in a manner which will affect their children and these people as seniors and so on. This will help these people in that range who will not be able to survive if they do not get a rebate.
The Chairman: Does anyone wish to comment on the issues?
Senator Angus: Yes. As seconder of Senator Cochrane's motion to amend the bill, I should like to say a few words. We heard during the last three or four weeks from people in the maritime provinces, particularly the working poor and the elderly, indicating that that this legislation does not include, as the GST did, a mechanism that will permit a rebate to those unfortunate persons who are particularly disadvantaged by the GST and who are unable in other ways to take advantage of the various compensatory provisions which would otherwise be there. Given the fact that Bill C-70, and particularly the HST, does not seem to have recognized that, it is the strongly held view of the Conservative members of the committee, and other members of our caucus who are privy to the overwhelming evidence, that the bill is flawed in this way. Therefore, we would like this amendment to go through.
We do recognize, I think it is fair to say, that this would require moneys that emanate from, or are the product of, the provinces' share of the taxes to be rebated to the citizens of Atlantic Canada and that there may be constitutional difficulties with that. However, we have taken advice, and we understand that this amendment is technically sound.
For these reasons, we very much would like to pass it through this committee.
Senator Stewart: What Senator Angus has said is very helpful. As I understand it, the purpose of the amendment would be to authorize the Government of Canada, which collects income tax on behalf of, let us say, the government of the province of Nova Scotia, to deduct from the yield of the personal income tax in the province of Nova Scotia an amount sufficient to pay to eligible persons a rebate for the amount to which they are eligible on that portion of the harmonized tax which is attributable to the inclusion of the provincial sales tax. Am I correct?
Senator Oliver: Up to 15 per cent, but not to exceed it.
Senator Stewart: That portion. Really, it will be up to 8 per cent. The 7-per-cent federal tax is taken care of.
Senator Oliver: It is not to exceed 15 per cent.
Senator Stewart: This is a deduction from provincial income tax revenues. Is that what you intend?
Senator Cochrane: Yes.
Senator Stewart: I guess the question for Senator Angus is the following: Under the tax arrangement agreement, can the Government of Canada do this legally?
Senator Angus: Senator Stewart, I think your question is a good one. I anticipated it, in a sense, when we sought advice from the various law clerks that abound on these premises. The advice we received was that it is constitutionally valid.
As you know, I submit that this is not one tax but two taxes. It is all disguised. My argument is about the Red Book, but we are not here to talk about that today. It appears there has been a delegation to the federal government of complete administration of these moneys, the fruits of the 15-per-cent tax. To that extent, if they decided that they could rebate the provinces' shares, they would be able to do so.
Quite frankly, I recognize that there are many problems with that. It is for those reasons that Senator Cochrane has also prepared this motion, which I am sure she will talk about afterwards.
Senator De Bané: Mr. Chairman, following what Senator Stewart said, the harmonization agreements provide no mechanism for the federal government to recover the cost of the program from participating provinces.
Second, some provinces have already introduced measures to offset any potential regressive impacts of the provincial portion affecting low-income Canadians within their borders. New Brunswick, for instance, has decided to introduce a refundable child tax benefit instead of a low-income sales tax, and Newfoundland is studying the introduction of a provincial low-income sales tax for implementation in 1997.
In summary, I wish to remind my colleagues that the federal government already provides a refundable credit to low-income Canadians in respect of the sales tax. Harmonization, per se, does not increase the federal sales tax. Therefore, from a pure, rational position, it does not justify an increase in the low-income credit because we are not talking here of an increase in the federal sales tax. Why would you have an increase here?
I remind you that harmonizing provinces have already indicated that they would introduce changes to their own legislation to assist specific groups of individuals who may not benefit from the harmonization of the sales tax.
In conclusion, consumers in the harmonizing provinces would be better off with the harmonized sales tax, and the provinces have already announced that they will initiate programs to alleviate the problem legitimately identified by Senator Cochrane.
The Chairman: Does any other senator wish to comment, or can we proceed to a vote on the amendment?
Senator Hervieux-Payette: I have a question for you, Mr. Chairman, or the Deputy Chairman.
A memorandum of understanding led, of course, to the preparation of legislation both at the federal and provincial levels. I do not see anything in the memorandum of understanding providing a delegation to us of utilizing the proceeds of their tax. I think we are there as a collection agency. We take all the costs. I think we are doing a good job for them, but to say that we can redistribute the money we receive to offset some of the extra costs for low-income people would be going far beyond the scope of the memorandum of understanding. I do not see how a party that has been in office could bypass the three provinces that have signed that document.
I recognize the merit of providing extra money to low-income families. There are other ways of doing it rather than intervening in a process which has been put in place by official governments. I submit that it might be a good idea, but in introducing an amendment of that sort, I feel we are going far beyond the power of this committee.
The Chairman: In addition, there is obviously the possibility that the federal government could operate a rebate program or credit program at the request of the provinces, because it is a single collection agency.
The point I hear being made from the Liberal side is that this is provincial money. In some sense, while legal, there would be an element of the federal government not living up to the nature of the commitment, and a feeling that the federal government should not be unilaterally trying to take money away collected under a federal-provincial agreement, however legal that might be.
I wonder, senators, if we could proceed to a vote on that question. Could I ask honourable senators who are in favour of this motion to signify by saying "yea"?
Some Hon. Senators: Yea.
The Chairman: Could I ask honourable senators who are opposed to this motion to signify by saying "nay"?
Some Hon. Senators: Nay.
The Chairman: I declare the motion defeated by a vote of six to five.
I will now ask Senator Cochrane to proceed to her resolution, which is not an amendment; it is a resolution of the committee.
Senator Cochrane: I do apologize to honourable senators for not having a French copy.
Mr. Chairman, I recognize the position you have taken in voting against this amendment concerning rebates on the harmonized sales tax, that this would be an unwarranted intrusion on provincial jurisdiction in administration of their own taxes and that, properly speaking, any such action should be taken by the provinces themselves. I also recall, Mr. Chairman, that you and some of the members on the other side expressed sympathy -- and even Senator Hervieux-Payette expressed sympathy this morning -- for the genuine concerns and fears that the committee heard from so many of the less-well-off taxpayers in Atlantic Canada. As you know, this tax will be a significant hardship on that segment of society. People honestly do not know how they will now be able to meet their daily, weekly or monthly expenses. These are concerns I believe we all share.
In that spirit, Mr. Chairman, I wish to move a resolution which I hope the committee will adopt and recommend to the Senate as part of its report on the bill.
The resolution is this:
The committee notes that, since the inception of the GST, the federal government has made GST rebate payments to compensate the working poor, people on social assistance, senior citizens, students, and other low-income taxpayers for the added tax burden imposed on them by the GST.
In the case of the harmonized sales tax to take affect in Newfoundland and Labrador, Nova Scotia and New Brunswick, no such mechanism exists in either the federal or provincial legislation to relieve the burden on lower-income taxpayers.
Be it therefore resolved that the committee recommends that the Senate urge the provincial governments in provinces where the harmonized sales tax will take effect to provide relief to low-income taxpayers through rebates, tax credits or deductions to offset the provincial portion of the harmonized sales tax.
The Chairman: I am happy to second that resolution, if that is all right. I am not sure it is appropriate for the chairman to do so. I am asking to do so in any event.
Senator Stewart: It is out of order, Mr. Chairman.
I have a question for the honourable senator.
The Chairman: I assume you are seconding the motion.
Senator Stewart: No.
Senator Angus: I will second the motion.
Senator Stewart: You do not need a seconder in committee.
I wanted to ask the senator a point of clarification. You say in paragraph 1, "and other low-income taxpayers". Does this include all the people who are eligible for GST rebates? Do only low-income taxpayers get GST rebate payments? Do you have to be a taxpayer and what does that term mean?
Suppose a person is not reporting any income. Is that person classed as a low-income taxpayer for the purpose that you are describing?
Senator Cochrane: He has to be maintaining a certain earning, that is my understanding.
Senator Stewart: But what happens if a person is not earning a living?
Senator Cochrane: Let me refer to some of my colleagues.
Senator Kolber: Are you saying if he is poor, that is one thing, but if he is extremely poor, that is another?
Senator Cochrane: No. Students, for example, already receive the GST rebate. At the same time, they can also be helped because they will have to pay this extra 8 per cent.
Senator Stewart: It is just the description of who is now receiving the GST rebate payments that I am querying, because you say "others", which implies the working poor. Many senior citizens, for example, are low-income taxpayers.
The Chairman: Senator Stewart's point is that you can, without changing the intent of the resolution in any way, shape or form, delete the word "other", which clearly does not change your intent.
Senator Cochrane: Would the wording "low-income taxpayers" be acceptable?
Senator Hervieux-Payette: No. What we want to remove is the word "taxpayer" because some people may not pay taxes.
The Chairman: How about "low-income Canadians"?
Senator Cochrane: Okay.
Senator Stewart: Thank you very much, senator. That is good.
The Chairman: Can I then call for a vote on the resolution?
Senator Stewart: Just a minute. We have the same problem in the third paragraph where it says "to provide relief to low-income taxpayers". What about people who do not pay income tax?
The Chairman: Wherever "taxpayers" appears, we will change it to "Canadians". I take it that motion is passed unanimously.
Hon. Senators: Agreed.
Senator Cochrane: I thank the honourable senators.
The Chairman: Senators, the third item that was raised yesterday dealt with what has been referred to as the insurance company issue which specifically affects Assumption Vie in New Brunswick and Maritime Life in Nova Scotia, and deals with the way the tax is applied to management of administrative services supplied to segregated funds.
In the discussion yesterday, it was left to Senator Angus and me to determine whether or not there is a problem and, if so, whether the problem warrants being dealt with by way of amendment.
There are two facts you need to know. First, both the Provinces of New Brunswick and Nova Scotia, which are the two provinces that have the head offices of the two life insurance companies I mentioned, have already made arrangements with those companies to ensure that they are rebated any impact which the HST would have on segregated funds. For the next two years, there is an agreement between each of the companies and their respective provincial governments to deal with the problem. At worst, the issue does not need to concern us for at least two years.
Second, the federal government and the three provincial governments have reached an agreement to examine this issue in some detail six months down the road, when one gets a better sense of whether it is a problem. The governments will then have 18 months to deal with it before the current two-year agreement expires. In light of that, it was the view of both Senator Angus and myself that we need not consider an amendment at this time, that we have plenty of time to come back to the issue, if it is still an issue two years from now.
Do I have the sense of the committee that that is an acceptable resolution of that issue?
Hon. Senators: Agreed.
The Chairman: The next item that arose was the question of whether or not the GST would be removed from books. Some of you will recall that in evidence given in committee yesterday, it was pointed out that under the current bill there is already a refund to be given on the GST applied to books purchased by universities, libraries and so on.
The three provinces involved have already agreed and enacted in their legislation a refund on the provincial sales tax portion of the HST. The issue that was before the committee, therefore, was whether or not the refund of the GST should be extended beyond simply a refund on books sold to universities, schools and libraries, to include all books.
It was pointed out to us yesterday by the assistant deputy minister in the Department of Finance that such an amendment would cost the federal government $115 million. That summarizes where we were yesterday.
I would ask Senator Angus whether or not his side intends to move an amendment specifically related to the books question or not.
Senator Angus: Yes, Mr. Chairman. Senator Oliver will speak to that point.
The Chairman: I understand that, for the ease of all senators, we have a draft amendment.
Senator Oliver: Two motions.
The Chairman: Would you proceed with the first?
Senator Oliver: The first is that Bill C-70 be amended on pages 95 to 98 by deleting clause 69(1).
Senator Angus: Just for clarification, Senator Stewart, it is the matter that relates to pages 95 to 98 and then to pages 164 to 165 in the bill.
Senator Oliver: The next page, which is called Motion 2, states that clause 149(1) of Bill C-70 be amended, on page 164, by replacing line 8 with the following.
The Chairman: Would you explain to the committee members what is the difference between the two? I would be happy to receive a motion that your three-page version, which you called Motion 2, be taken as having been read into the record. However, could you explain to us what is the difference between the two?
Senator Oliver: Basically, we are trying to zero-rate books. We are taking out the provision that did not give the credit to the people who buy books. We are reinstating it by zero-rating them with Motion 2. That is the essence of the amendment.
The amendment, by the way, follows Senator Di Nino's Bill S-11 which is in the Senate. You will recall, when we had our first meeting, I asked one of the witnesses who appeared before the committee whether he was familiar with Bill S-11 and whether he was happy with the language in the Di Nino bill in terms of the desired zero-rating of books and reading materials. The answer was yes, and this motion reflects that evidence.
The Chairman: The long version zero-rates books?
Senator Oliver: It applies to all reading materials.
The Chairman: It refers to the same set which is in Bill S-11, essentially all reading materials.
Senator Oliver: That is correct. My first version takes out the present clause and replaces it with the second.
The Chairman: I see. The motion has been moved. There are actually two separate motions. I presume someone on the Conservative side has seconded those motions.
Senator Angus: I so second.
The Chairman: Any discussion?
Senator Stewart: I want to ask Senator Oliver about his exclusions. The clause refers to not including anything that is or the main component of which is, and then lists various items. Can you tell us what is to be taxed?
Senator Oliver: That was the question raised by the department yesterday. They said you have to draw a very fine line.
Senator Stewart: I gather that if I buy a magazine by subscription, I will not have to pay tax on it. On the other hand, if I buy it off the shelf, I will. Is that right?
Senator Oliver: The definition we are using is a book, periodical literature or other reading material but not including anything that is or the main component of which is a magazine or periodical acquired otherwise than by way of subscription.
Senator Stewart: But in my specific question, if I get a magazine by subscription, do I pay the tax? What happens if, on the other hand, I buy it off a shelf? Are you making that distinction? It would appear that you are. It states, "otherwise than by way of subscription."
Senator De Bané: If the publisher is from the United States, I do not pay him GST. If he is in Canada, I do.
Senator Stewart: You are confusing Senator Oliver.
Senator Oliver: You have to read the section further and go into clauses (b) and (c) and read all of the next page as well. Each of them is a qualifying paragraph. For instance, it depends upon the printed space devoted to advertising and so on.
Senator Stewart: Senator, I asked you a very simple question. Let us refer to Saturday Night which I now buy by subscription.
Senator Oliver: There is no tax.
Senator Stewart: If I forget to renew my subscription and I go to a local shop to buy the missed issue, do I pay a tax?
Senator Oliver: You should not, no.
Senator Stewart: Is that the effect of your proposed amendment?
Senator Oliver: That is what we are trying to do, yes. We are trying to zero-rate books, periodicals and magazines.
Senator Stewart: You do not intend a distinction?
Senator Oliver: We are trying make it easier and less costly for Canadians to have reading materials, books, periodicals and so on, without tax, in pursuit of literacy.
Senator Stewart: My problem is your expression "by way of subscription". You seem to be making a distinction as to how I acquire Saturday Night. Do you intend to make that distinction or not? If not, why is the language there?
Senator Oliver: We are not trying to deny the people who were to purchase your hypothetical Saturday Night. We are not saying that anyone who does not have the subscription should not also have the same benefit of no tax.
Senator Stewart: Why is this language in here then?
Senator De Bané: If the publisher is in a foreign country, there is no GST.
Senator Oliver: Yes.
Senator De Bané: Your answer to Senator Stewart now is that, whether we buy a magazine in a store or through subscription, you cover everything, both books and periodicals?
Senator Oliver: Yes.
Senator De Bané: Do you have an idea of how much revenue the government will forgo?
Senator Oliver: We were told yesterday by the government people sitting here that it would be around $115 million.
Senator De Bané: That figure was for books. If you add periodicals, I think you add another $200 million to $300 million.
The Chairman: So we are clear, the $115-million figure quoted yesterday referred to books only. It absolutely did not include the wide range of reading material that is covered in Bill S-11. I do not know whether Senator De Bané's number is correct, but, clearly, if books are worth $115 million, the number including magazines and periodicals would be substantially higher.
Senator De Bané: Mr. Chairman, I have phoned the Department of Finance. They tell me that, if you put both of them together, the government will forgo $350 million of revenues per year. That, I submit, is very difficult to entertain with the present fiscal situation.
Senator Oliver: What about the government's policy of literacy?
Senator De Bané: I think what is being suggested here really pursues the objective that you have been emphasizing, and rightfully so. By offering a 100-per-cent GST rebate on books for public libraries, educational institutions, municipalities, qualifying charities and non-profit organizations, we are being more effective because those institutions play an instrumental role in fostering literacy by providing individuals, regardless of income, with access to reading materials.
As you know, most of the reading materials in Canada are produced in foreign countries. Because of NAFTA regulations, your amendment would be subsidizing publishers from outside of Canada as well as skewing or disrupting consumer patterns of spending, et cetera. If you reduce the tax base and if you want to keep the same revenue for the government, you must increase the rate on other goods for other consumers.
For this reason, I think the 100-per-cent rebate for institutions which make their libraries available to the general public is less costly and will still obtain the objective that you are pursuing.
Senator Oliver: Thank you.
Senator Hervieux-Payette: The introduction by the government of the rebate for municipalities and public libraries is a new measure. Until the bill is in force, even the libraries are paying the GST and, from now on, they will not pay the GST. That is the way I understand it. This is a measure to help people who really cannot afford costly books. They can go to the public library or the school board library or whatever. The library will be provided with an incentive now that they do not have to pay GST.
This is a good step. When public finances are in order, it will be one place to contemplate making some reductions. I do support the government because they are adding another measure to help students. Their computer software and hardware will now be taxed, instead of at 18 or 19 per cent, at the level of 15 per cent.
For higher education students, this is the way to go. It will help them get access to textbooks and to such things as the Internet. I do not see how moving gradually on this subject would put our education system at a disadvantage.
We have to draw a line in terms of making exceptions. As far as I am concerned, I will go along with the Minister of Finance's proposal that we support the rebate on books in libraries and other public institutions but I am not prepared to contemplate a full rebate to everyone buying books. First, this is going in the direction of a broad base, and I think the broad base is being established through the harmonized sales tax. I will come to that later. This has been working well in Quebec and I am sure it will work well in the Maritimes.
Senator Oliver: Mr. Chairman, I wish to ask Senator De Bané and Senator Stewart one question. Would your arguments be the same if the proposed amendment before you now were for books only and not for periodicals? We are talking about $115 million if they were zero-rated.
Senator De Bané: To be clear about the numbers that I received from the Department of Finance, if we are talking about books only, the figure is $140 million. If you add magazines, it will be $350 million.
Senator Angus: On a point of clarification, my understanding is that the $140 million includes books to libraries, schools, and so on. They are already included. The question is: What is the incremental cost if Senator Oliver were to change his amendment so that it did not embrace all printed material, such as periodicals and magazines, but only books, and had the exemption apply to everyone who purchased them, not just public libraries and universities. You are setting up a double standard which will lead to an underground economy in books. I think the number is quite small, Senator De Bané.
Senator De Bané: To make it clear, we have two options here: The one that we are proposing, which will represent a shortfall of $25 million to the treasury; and the one put forward now by Senator Oliver, which would cost $140 million.
I submit that if a particular category such as books is excluded from the base, revenue shortfalls must be recovered either by including other items in the tax base or by increasing the overall rate. It is one or the other. At the moment, we exclude groceries and prescription drugs. If you add another category, you will have to compensate by increasing the rate.
Senator Oliver: Senator Stewart, are you of the same mind if it were restricted to books only?
Senator Stewart: I have two problems, Senator Oliver. First, I assume that by "books" you mean fiction and that you intend to include paperback fiction. I do not see the distinction between paperback fiction on the one hand and a magazine on the other hand.
Since some books, and certainly a lot of magazines, are bought largely for purposes of entertainment, I do not see why entertainment in the form of a book should not be taxed and entertainment in the form of a new television set should be taxed.
Senator Oliver: Under your proposal, if you go to a library you can get a book for entertainment and not be taxed. You can get paperback books in public libraries as well.
Senator Stewart: Yes, I concede that point. However, I think it is more likely that people who go to libraries are not going there simply for entertainment.
Senator Angus: In the future, they will go there to buy books. There will be a little cottage industry there.
I did not get the full answer, Senator De Bané, on the numbers. Is it $140 million?
The Chairman: I will read the numbers that representatives from the Department of Finance passed to me.
The cost to the federal treasury for the exclusion of libraries, schools and universities, which is already contained in Bill C-70, will be $25 million. There would be a $115 million additional expense if all books -- using the definition of "books" that is now in the act -- were to be excluded. If all reading material were to be excluded, which is essentially Senator Oliver's amendment -- and that is also equivalent to Bill S-11 -- the total cost would be $350 million. That is the number Senator De Bané used.
I wanted to have the numbers before you so that we do not argue about them.
Senator Angus: You have now clarified my question, Mr. Chairman. There are three levels here. The bill as drafted, which only goes part way, costs $25 million.
The Chairman: That money is in the bill.
Senator Angus: If we were to add printed books for the general public, what would the figure be?
The Chairman: It would be another $115 million.
Senator Angus: Are we sure of that?
The Chairman: That number was given by the Department of Finance yesterday and it is the number that an official of the same department gave to me now.
Senator Angus: When the government was considering how far to go to keep a promise it made -- and they have gone the $25 million route which, in my parlance, is not the extra mile -- why did they stop at universities and not go the whole way as was suggested in the Red Book? This is a serious question.
The Chairman: I do not know the answer because I was not part of the negotiations. Fiscal restraint being what it is, the view was probably that by focusing on reading materials directed either at education, as in the case of schools and universities, or at libraries, you would clearly cover books that had an educational and, in many ways, a low-income element because of the people who use libraries. The expansion to all books not only had a significant fiscal impact but also would grant a tax break to many publications or books to which one would not necessarily want to grant an exemption. That is simply a guess. I do not honestly know the answer.
Do we have any other comments on this issue?
Senator Oliver: I understand that you and Senator Angus drafted a proposed amendment that deals only with books. Do all senators have a copy of that? This is the change that would cost $115 million.
The Chairman: As a result of the discussion yesterday, it was the understanding of Senator Angus and myself that we were not dealing with all periodicals but with books. As your steering committee, we agreed to get lawyers from the government to draft an amendment that appeared to reflect the subject under discussion yesterday. In having that amendment drafted, there was no intent that either of us was bound to support it; we were simply doing the service for the committee. That amendment, which deals with books only, is available to all members because all the amendments that we had drafted in both official languages were distributed to members when you arrived this morning.
Senator Oliver: Everyone has it, then. You have the one that addresses books only, which is only an extra $115 million.
Senator Comeau: That does not even come close to the Red Book promise.
The Chairman: Can we deal with the proposed amendment that Senator Oliver has already put forward? That amendment deals with all reading materials as defined in his motion and in Bill S-11 which is before the Senate.
Will all those in favour of that amendment to the bill please say "yea"?
Some Hon. Senators: Yea.
The Chairman: Will all those opposed please say "nay"?
Some Hon. Senators: Nay.
The Chairman: I declare the motion lost on a vote of six to five.
Senator Oliver: I therefore move the "books only" version.
The Chairman: The "books only" version is that which Senator Angus and I had drafted for the purposes of the committee.
Will all those in favour of the motion please say "yea"?
Some Hon. Senators: Yea.
The Chairman: Will all those opposed to the motion please say "nay"?
Some Hon. Senators: Nay.
The Chairman: I declare the motion defeated on a vote of six to five.
The next item and second-to-last item on our agenda deals with the issue of medical services. The issue, as you will recall, was presented to us by the Canadian Medical Association here in Ottawa and by the three provincial medical associations in the three respective provinces. It is an issue not related to the HST but to the GST. It relates to the fact that when the GST was first introduced, medical services were exempted. Therefore there is a tax question relating to the inability of doctors to recover the GST they pay on business inputs to their private practices. That issue was discussed in some detail in the committee yesterday. I am open to amendments on this issue.
Senator Buchanan: As you said, Chairman, we heard from the CMA and the medical associations of the three provinces involved, as well as from many individual doctors. I think there is no question in the minds of all members of the committee that doctors have not been treated fairly here. You said this was not an HST problem. It is an HST problem but part of that problem is provincial and we cannot deal with it. The problem has become much bigger for doctors because of the HST, but let us deal with the GST part of it. That also relates to HST. Neither tax component is fair to doctors who, unlike all other small businesses in this country, are not allowed to claim tax input credits for GST. There are other health providers who also cannot claim those inputs, but most of them can claim them back from their patients, while doctors cannot. Under the Canada Health Act, they are prohibited from doing that. Therefore, doctors pay all the costs of running their businesses but cannot claim the tax input credits.
They claim, and I agree, that that is not fair. They are not on a level playing field. We have heard some people say that they can use those on their income tax returns. That is true, but all businesses can do that. Doctors are the only group unable to claim tax input credits on office expenses.
As fair-minded people, we should all agree that doctors, a very important segment of our society, should be treated as fairly as any other persons running businesses. They currently are not. They are not zero rated and they should be.
Therefore, Mr. Chairman, I will propose some amendments which will allow physicians to claim tax input credits for the supplies and equipment they need for their offices, just as all other businesses in this country are presently permitted to do. Other business people pass these expenses on to their clients. Doctors cannot because the Government of Canada, through the Canada Health Act, has prohibited that. They do not get the tax input credit and they cannot pass the cost on to their patients. Therefore, they are left in an even worse situation than they were in before. We can help them by at least allowing them the tax input credits from the GST.
My amendments are to clauses 93.1, 93.2, 95.1 and 136. They will allow doctors to claim their tax input credits.
I move:
THAT clause 93.1 of Bill C-70 be amended, on page 131, by replacing line 29 with the following:
"93.1 Section 5 of Part II of Schedule V to the Act is replaced by the following:
5. A supply (other than a zero-rated supply) made by a medical practitioner of a consultative, diagnostic, treatment or health care service rendered to an individual (other than a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes).
93.2 (1) The portion of section 6 of Part II".
I move :
THAT Bill C-70 be amended, on page 132, by adding the following after line 24:
"95.1 Section 9 of Part II of Schedule V to the Act is repealed.".
I move:
THAT clause 136 of Bill C-70 be amended, on page 156, by replacing lines 30 and 31 with the following:
"provision of Part II of Schedule V and a service related to".
The Chairman: The cost of this to the federal treasury is somewhat over $100 million. We know that from data given to us yesterday by the Department of Finance.
Senator Hervieux-Payette: When the GST was drafted, there was no provision for any tax credit, although small businesses were running their offices in the same way. I would say we are now maintaining the original provisions of the GST bill.
As we are talking about millions of dollars here, can anyone on the other side tell me why they did not originally take that into account, since they were a party considered friendly to private business?
Senator Buchanan: It was probably wrong then. We indicated at that time that it would be looked after later, but we were defeated.
Senator Comeau: We are looking at the future now. That was the past. You are the government now. It is up to you.
Senator Hervieux-Payette: I was not here then. The doctors must have told you at that time that it would cost them something.
Senator Comeau: That is the past. Let us look at the future.
Senator Hervieux-Payette: The federal government is contributing money to the provinces for medicare. We are paying our share and the provinces are negotiating with the doctors. The provinces can tomorrow agree to give the extra money needed to cover the harmonized sales tax. It could be done overnight by the three provinces because the doctors get most of their revenue from the government. We would pay our share, because it is a cost-sharing arrangement.
There must have been a technical reason for doing that in this way. It is not a matter of depriving the doctors of some income because there would be control over the expenditures in the medicare program. I do not know. That is why I am asking.
Senator Angus: Senator Hervieux-Payette, you were present here in Ottawa and subsequently in Newfoundland when we heard from the doctors there that this is the straw that breaks the camel's back for these physicians. I do not think you were present in Halifax when one physician expressed the hope that no Liberal senator would get sick while there for our hearings.
We have been very responsive to the evidence of the doctors because it is happening in a context of health care reform. There is a movement to get health care services out of the hospitals as part of the continuum of care and into the community. It has become much more prevalent that doctors have their offices in the community. This was explained to us articulately and repeatedly, not only by the CMA but by the provincial associations and by a number of individual physicians. First, the circumstances are very different in 1997 from what they were in 1990. Second, what was done in 1990, for whatever reason, is clearly not right now. We should not be encouraging doctors to leave Canada, the Atlantic provinces in particular, at a time when their support is needed more than ever.
We on the Conservative side were most impressed with the compelling evidence they brought to us. There is a huge number of physicians out there to whom a real injustice is being done.
I plead with you -- I urge you -- to vote in favour of this amendment.
Senator Stewart: I should like to ask Senator Buchanan a question because he is in a unique position to be helpful.
Let us take examples regarding his argument. A dentist in private practice can pass on the cost of her or his equipment to her or his patients. However, in the case of a physician in private practice, those costs cannot be passed on. Presumably, the logic of the parallel suggests that compensation ought to be provided in the provincial fee schedule.
Therefore, I am asking you, Senator Buchanan, as a very experienced person in provincial government, is it your experience that, let us say in the case of the government of the province of Nova Scotia, that this matter was taken into consideration when the provincial government negotiated the fee schedule with doctors?
Senator Buchanan: I wish I could answer that question, but I cannot. Those negotiations were carried on with the medical society of Nova Scotia and with the medical services insurance of Nova Scotia. I was not there when those negotiations took place. I have no doubt that, over the years, the discussion did include the fact that doctors cannot claim the tax input credits; but I do not know.
I can tell you that in the last four years Nova Scotia has lost 90 to 100 doctors. They have left our province and gone either to the United States or overseas.
Recently, the East Hants Hospital has indicated that it is in a very serious position. They have lost three doctors over the last number of months, one to Australia and two to the United States. We have lost doctors in Cape Breton. We have lost doctors in your part of the province, Senator Stewart, who have gone to the United States.
Senator Stewart: They are good doctors who can make a lot more money.
Senator Buchanan: That may be, but they are stating, and I believe them, that they are not being treated fairly under our tax system in this country. In the case of East Hants, if any more doctors leave -- and they are saying they will go -- then we will have a very serious situation in some of those hospitals. When Dr. Cynthia Forbes spoke to us in Halifax, she said the medical society is concerned that the HST could be the straw that breaks the back of many doctors who have been considering leaving and who now may just take the gamble and leave our province. I am not speaking just for Nova Scotia, but for New Brunswick and Newfoundland as well. We do not want that to happen.
Senator Stewart: I am not disputing that there may be a problem here. My question is whether it is one to be dealt with by the provincial governments when they negotiate their fee schedules rather than having Ottawa reaching in to do it.
Senator Buchanan: I agree with that. However, I think the three premiers of the Atlantic provinces affected here will have to take a look at this situation as far as their part of the HST is concerned. The GST is a federal tax. As such, we should deal with it here.
Senator De Bané: What the former premier of Nova Scotia has said in response to Senator Stewart is really the heart of the issue. Essentially, it is a negotiation between the association of doctors in each province with the department which pays their professional fees, which is the provincial health department. It must take into consideration all those factors. Let us not forget that doctors in every province have always paid sales tax. Of course, every tax that they pay is a legitimate business expense which is part of the expenses that they can deduct.
According to the Department of Finance, if we adopt what you are suggesting, senator, it would represent forgone revenues for the federal treasury of over $100 million.
Second, it would then be difficult not to extend this same exemption to other categories of health providers, which would mean forgone revenues of over $250 million, without taking into account the income tax effects.
Senator Buchanan: Senator De Bané, you and I have been friends for a long time. As a result, I know one thing about you. It is that you are a very fair individual. You were always very fair to Nova Scotia during your years as a minister and my years as premier. I just pass this on to you. All small businesses in Canada -- and doctors are small businesses -- are also permitted under the Income Tax Act to claim deductions for their office expenses, equipment, et cetera. Doctors are not the only group in this country who can do that. However, they are not permitted a tax input credit on their GST, nor will they be allowed one on their HST.
You mentioned other care providers. They can pass on that additional GST cost to their patients or to their clients. Doctors cannot. They are boxed in, in two ways: First, they cannot claim the GST as a tax input credit; second, the Canada Health Act prohibits them from charging their patients. Therefore, they have to absorb that additional cost which, in our three provinces, amounts to about $4.7 million, which the doctors must pay out of their own pockets. They cannot claim any of these credits and they cannot pass the costs on to their patients.
Senator Stewart: You are assuming that the provincial fee schedule does not take this into account. I would have thought that it is so obvious that it would have been taken into account.
Senator Oliver: When we were in Halifax, the president of the Nova Scotia Medical Association, Dr. Forbes, was asked that question by me. I asked: Would it be a solution to your problem if you could negotiate with the province to have the fee schedule changed to accommodate this? She said, "We have tried and it will not work." Therefore, they are looking for the federal solution as set forth by Senator Buchanan. A provincial solution is not an option for them. That is the evidence we received in committee.
Senator Stewart: You say it is not an option, but you do not explain.
Senator De Bané: Senator Buchanan, I would like to remind you that all sales tax paid by doctors is income tax deductible.
With regard to the point you have so eloquently emphasized, any inequity suffered by doctors is not the function of federal tax policy but, rather, the result of the way in which physicians are remunerated. As Senator Stewart said, physician costs are taken into account by provincial fee schedules.
Senator Stewart: We hope.
Senator Buchanan: I do not think they are. Dr. Forbes said they were not.
Senator De Bané: When Senator Stewart asked you the question, you said, "I do not know."
Senator Buchanan: I said that I do not know about the negotiations that took place between MSI and the medical society. I do not know that. Dr. Forbes said that they have attempted to have the GST included in the medical fee structure, and, as Senator Oliver just mentioned, she said the provincial government has not agreed to do that.
I agree that the medical fee structures is one way to do this. I also say the GST is not a provincial tax but a federal tax. The doctors must pay the GST. It is a federal tax imposed on them, as on everyone, in 1990, and they must pay that tax. Every other business in Canada is permitted to get a tax input credit for the GST in running their offices.
Senator De Bané: We are suggesting that that issue can be dealt with in their negotiations with the provincial government.
The other point, which you seem to be ignoring, is that it would be difficult to justify zero-rating physicians' services without extending equivalent treatment to all other health care services which are currently exempt.
Senator Buchanan: Other than in the Canada Health Act.
Senator De Bané: First, there would be pressure to zero-rate other price-regulated health care services such as for-profit ambulance services. Second, there would be pressure to zero-rate health services which are only partially insured by the provinces, such as physiotherapy and homemaking services. Third, this would trigger pressure from private, non-price-regulated health professionals, such as dentists, who would demand treatment equivalent to physiotherapists and other professionals who privately bill patients for their services. Finally, health care institutions such as long-term facilities and hospitals would contend that their partial GST rebates should be replaced with a zero rating since, like doctors, their funding is also set by the provinces. You would trigger all these different institutions and professionals to ask for the same exemption. This is why, Mr. Chairman, we should not entertain this generous inspiration.
Senator Buchanan: Senator De Bané, I am being repetitive here: In the whole group you mentioned, doctors are the only ones who cannot recover any of the taxes they are spending. The others can all recover it, but doctors are covered by the Canada Health Act and cannot recover. Doctors are simply asking for a level playing field and fairness. As far as the institutions you mentioned, it is my understanding that, at the present time, they have 80- or 90-per-cent tax input credits on GST.
Senator Hervieux-Payette: Cosmetic surgery is not covered. They fall into this category. They have private clinics, and people pay $2,000 to have a new nose or ear.
We must go back to the substance of this issue. The federal government and the provincial governments are now administering medicare. We put money in the envelope, and it is administered by the province. Since the provinces are administering the envelope, the provinces should take that into account.
We agree with you that their operating costs should be part of their remuneration. However, it is not up to the federal government. It is a purely provincial matter. In my province, we have the CLSC where all these costs are taken by the province, and the system has been working quite well.
We cannot have different standards. When the doctors are practising in private practice and are remunerated by the public, they are treated as such, and when they are working on a fee schedule and are negotiating with the government, the provincial government should be handling that.
Senator Milne: I recognize your expertise, Senator Buchanan, with Nova Scotia. However, it seems to me that, in other provinces in this country, the doctors as a group swing an awful lot of weight with provincial governments. They just had fee increases in Alberta and in Ontario. I have quite severe qualms about drawing up federal legislation which will eventually, I hope, apply to all of Canada which treats one particular province or, in this case, the doctors in one particular province, differently from the way they are treated across the board. Perhaps the doctors in Nova Scotia need more clout with the government.
Senator Buchanan: The amendments I am proposing, quite frankly, are not just for Nova Scotia, New Brunswick, and Newfoundland. They are Canada-wide, for all provinces. We can only amend the act to apply to Canada.
It is unfortunate you had not thought about this situation when you segregated the three provinces away from the rest of the country. That is what has happened here. There has been a separation of three of our provinces in the Atlantic region from the rest of Canada -- a Balkanization -- because of this bill. You are saying that these are just three provinces. That is true. This bill applies to three provinces. It should not. True harmonization should be Canada-wide.
I move this amendment.
The Chairman: All those in favour, please say "yea".
Some Hon. Senators: Yea.
The Chairman: All those opposed?
Some Hon. Senators: Nay.
The Chairman: I declare the motion lost.
Senators, I have saved the least-contentious item until the last, that being tax-included pricing. You will recall that that is the one other issue with which we agreed we would deal today. It is my understanding that Senator Angus has an amendment -- which should not surprise anyone -- he wishes to make with respect to tax-included pricing. I ask him to introduce that amendment now and then proceed to speak to it. We will then have a discussion on it.
Senator Angus: Thank you, Mr. Chairman. If you have no objection, I would rather say a few words first and then conclude by moving that the provisions on tax-included pricing be removed entirely from Bill C-70. The issue of tax-included pricing is, as you know, easily severable from the bill itself. Those provisions are tacked on towards the end of the bill for reasons which no one who came before this committee, other than the legislators or the draftpersons from the department, could explain to us.
Quite frankly, I showed the Minister of Finance yesterday morning a list of 47 individual witnesses who came before the committee and said that the provisions relating to tax-inclusive pricing would do a minimum of five deleterious, negative things and would turn what has been called "Advantage Atlantic" into "Disadvantage Atlantic".
We Conservatives wholeheartedly support harmonization in concept. We did in 1990 and continue to do so. We believe that the best way to go ultimately is to have a national sales tax which is harmonized amongst the various provinces of this nation. What we have here instead is a Balkanization and a breaking down into a fragmented marketplace.
The witnesses who came to us said that if they are forced, for an area of Canada that comprises roughly 7 per cent of the Canadian population, to re-label and re-jig their distribution setups, especially reprogram their computers -- I am talking about distribution centres in provinces outside this zone -- it will be so costly that it will completely nullify any benefits which would have been derived from harmonization.
In Alberta there is no sales tax at all. In Quebec they have a form of harmonization which they introduced shortly after the GST was passed. We now have a new situation in these three provinces, Nova Scotia, New Brunswick, Newfoundland and Labrador. We have Prince Edward Island, which is being set up as kind of after mini tax haven. Then we have Ontario, British Columbia, Manitoba and Saskatchewan. We have a completely confused picture with a different regime in almost every region and area in Canada. It is unbelievable how confusing it becomes and how costly it is.
On this side of the chamber, we believe that Bill C-70 simply cannot go forward as it is. We are determined to fight tooth and nail to block this bill if we cannot persuade senators on the Liberal side to agree to an amendment to the bill that will effectively remove the provisions relating to tax-inclusive pricing for only these three provinces. This bill will never see the light of day by April 1. You can take my word for it. We are determined. We have our forces marshalled, and this bill will never, ever get out of the Senate in time. The evidence is that that will create even more confusion.
This committee travelled. I salute the chairman and the members on this side and my colleagues in the Conservative caucus who suggested that this committee travel, and the committee did travel. As we felt would happen, there was an outpouring of evidence. The emphasis was on the tax-inclusive pricing.
We have heard from Senator Buchanan about the doctors. A number of special groups had a particular axe to grind with the legislation. They were very vociferous and their arguments were legitimate, but the tax-inclusive pricing had much greater implications. As the numbers we were shown graphically illustrated, it will effectively remove benefits which would otherwise be gained by the bill and by harmonization. We do not understand why it has been tucked in there.
Wearing a political hat and putting a political spin to this, I suggest that this is a cynical, crass and arrogant attempt to bury the fact that the GST was not abolished. However, quite apart from that strictly political rhetoric, this provision makes absolutely no sense. This bill will fragment the Canadian marketplace and do damage to retailers and others.
We had evidence, senators, for those of you who were not in the Maritimes, that many national businesses operating in the Maritimes will have to close. Even as things are today, their businesses are marginal. We were told that new stores on the drawing board will not go forward. We were told that, as in Quebec and Ontario, there will be an element of cross-border shopping in Prince Edward Island. We had the illustration of a new shopping mall in Moncton, which is counting on a level playing field. However, now that the Fixed Link is scheduled to have a big gala opening on June 1, New Brunswickers will be able to drive over on Saturday and shop in Prince Edward Island.
Senator Buchanan made the argument, I thought very eloquently, that in these three Atlantic provinces it will cost more money to send a letter than it will anywhere else in Canada. Someone in Quebec, Ontario and the rest of Canada can send a letter to the Maritimes paying the usual 45 cents. To answer that letter in this new zone will cost at least 8 per cent more. There are anomalous situations, and I could go on ad nauseam.
Honourable senators, we will go to the wall on this bill because this provision is absolutely unacceptable. It is totally unrelated to the benefits that could be gained by harmonization, which we support. I cannot tell you how strongly we feel about this. However, I can suggest to senators that we are prepared to stop any further debate in the Senate on this issue if we can have the tax-inclusive pricing removed from the bill this morning. The provinces have legislated. In many cases, closure has been invoked. Everyone is geared up and set up. The provincial regimes are ready, and the feds are geared up to run this new 15-per-cent tax. If it is not ready to go by April 1, there will be chaos and confusion. We would like to have the bill passed by April 1, but not if it includes tax-inclusive pricing.
Senator Cochrane: We heard representatives from Mark's Work Wearhouse. They are all geared up to expand their business; but if this TIP goes through, they will not expand.
The Chairman: Senator Angus, are you moving an amendment?
Senator Angus: If you will allow me to.
The Chairman: I trust your preamble is over.
Senator Angus: Well, it is not over.
Senators, I wanted to put those remarks on the record so our position would be absolutely clear.
The Chairman: Perhaps you could explain the intent of the amendment.
Senator Angus: The amendment states that the provisions contained in clause 242 of the bill starting at page 327 under the heading "Division XI," "Tax Inclusive Pricing" be deleted in their entirety right down to the end of clause 242.
The Chairman: Just so we are clear, senators, the amendment being put forward by Senator Angus amounts to a complete deletion of all of the tax-inclusive pricing provisions of the bill. Is that correct? I want to be clear.
Senator Angus: That is absolutely right, Mr. Chairman. It asks that clause 242 be deleted.
The Chairman: On the basis of the discussion we had in this committee yesterday when I said no one disagreed with me, effectively, all of the business witnesses had no objection to the principle of tax-included pricing. What they had an objection to was the application of tax-included pricing to a small portion of the population. Witness after witness, who, as Senator Angus described a few minutes ago, were adamantly opposed to tax-included pricing on a small province or small population base, nevertheless argued that they had no objections whatsoever to the principle of tax-included pricing. I ought to make that point.
As well, I should note for senators around the table that in his comments -- and I wrote his exact words down to make sure I did not misquote him -- Senator Angus said two things.
He said that he was opposed to the tax-included pricing provisions in the bill and he said at one point that he would insist on provisions which would effectively remove the implementation of the tax-in pricing provisions from the bill. I note that in my mind there is at a small difference between eliminating the sections entirely and action which would effectively remove their implementation until presumably some future test was met. I wanted to make that point.
Senator Stewart: Mr. Chairman, what we have here is a legitimate clash of interests. On the one hand, it is simpler for consumers to be confronted with one price which covers all they will pay. I know there has been controversy in the committee as to the validity of the survey that was adduced on behalf of the government concerning the consumers' view point. However, it is pretty obvious that any of us who is a consumer will find it easier and simpler to be told what she or he will pay.
On the other hand, it seems to me that at least some of the advertisers and the retailers do have a point. It was not a unanimous position when the retailers were here. Some of them said they could handle a situation where each individual item did not have to be ticketed specially. Others, such as the woman who sold dresses, made the point that she could not put a bin price or a shelf price up; there had to be a ticket on each garment. We do have a legitimate and understandable conflict of interests.
Senator Angus, on behalf of the Progressive Conservative Party, has taken a stand that those retailers and advertisers who do not want the tax included in the price must prevail, and he has told the committee that unless those retailers and advertisers prevail, this bill will not pass before the end of March. In other words, insofar as the present agreement with the provincial governments is concerned, the bill becomes a nullity.
Senator Angus: On a point of order, Senator Stewart, that is not what I said at all. It is a total misrepresentation. This goes way beyond retailers and advertisers. I listed 47 individuals across the whole spectrum who are against this provision because they will be negatively affected.
Senator Stewart: I thank you for that. It is probably a legitimate amendment to what I said.
I have a question for Senator Angus on behalf of his party. When he spoke, he said the reason he took the testimony of the retailers and advertisers so seriously, as I understood it -- and he will correct me if I misunderstood it -- is that what we have here is a fragmentation of the market and that creates difficulties for advertisers and retailers.
The question I want to ask Senator Angus is this: If this harmonization applied throughout Canada so that there was not this problem of fragmentation, would he be prepared to have tax-included pricing in the legislation?
Senator Angus: Any good professor knows one never asks a question to which one does not know the answer. Therefore, I am quite happy to tell you that if this were true harmonization, the principle that you have asked for would not be a problem for me or my party.
Senator Oliver: For all of us.
Senator Buchanan: Yes.
Senator Stewart: So the problem is having only three provinces.
Senator Angus: The problem is the passing on the new costs.
Senator Buchanan: We have been singled to have higher prices for just about everything because of this foolishness.
Senator Stewart: I must protest. We have had a fair amount of legislation passed through the Parliament of Canada which has been specifically aimed at particular parts of the country, for example, ACOA. I am sure that if Senator Buchanan had been here, he would not have argued this was fragmentation.
Senator Buchanan: That is a different thing.
Senator De Bané: Sometimes we are asked what is the difference between Conservatives and Liberals, the two mainstream parties at the centre with some emphasis to the right or left. When I listened to the explanation by Senator Angus when he was presenting his amendment, that to me was a defining moment of difference between the two parties. Senator Angus gave us a background explanation of the rationale behind his motion and not once in his statement did he utter the word "consumer" -- not once.
Senator Angus: I was cut off by the chairman.
Senator De Bané: No, sir. You made a statement saying, "Look, if we do not get what we want, that bill will never go through because we had so many business groups who have opposed it." Not once was the word "consumer" uttered.
Of course, Senator Angus, like Senator Oliver and the others, when they wear the hat of consumers, would like to know how much they must pay when they go to the cash register. Today, when they wear their other hats, speaking on behalf of business, not once did they try to balance legitimate interests.
Senator Oliver: Everyone on this side has not spoken on the matter.
Senator De Bané: When he spoke to his motion today, Senator Angus said he wanted to give a background. First he said businesses are opposed to it. Second, he made a threat that this bill will never pass and there will be a filibuster.
Senator Angus: You are misquoting me, Senator De Bané, and that is not your style. I mentioned the 47 people who covered the whole spectrum of the population. We are getting the Liberal shaft.
Senator De Bané: Not once did he say we have to offset that with the interests of consumers. What he said, essentially, is that, at the end of the day, consumers should know that business interests come first.
Senator Oliver: That is not an accurate representation at all.
Senator Angus: Where were you when the witnesses were saying that?
Senator Oliver: It is a misrepresentation.
Senator Angus: It is a Liberal cover-up; it is a disgrace.
Senator De Bané: He made a statement in which he never even implicitly talked about consumer interests. He talked about the business groups opposed to it. I challenge Senator Oliver to find one sentence in the statement by Senator Angus prior to his motion in amendment where he talked about consumer interests.
Senator Oliver: The reason he is adamantly against tax-included pricing is because of the impact on the consumer.
Senator De Bané: I repeat, it was a defining moment.
Senator Buchanan: I should like to inject some stability into this debate in a non-political way. We are here to look after the interests of the people, not the politicians.
I would support tax-included pricing if it was from B.C. to Newfoundland and included the territories.
I think it is great that people walk into a store and can see what they are going to pay for goods. That is a good idea. However, it is not a good idea when you segregate three of the smallest provinces in Canada and say, "You will do it."
Senator Stewart: They are progressive provinces.
Senator Buchanan: No. The most progressive province was PEI. The Liberal government of Catherine Callbeck said no, as did Pat Binns. They will be the beneficiaries of it all.
I will not go into the issue of the stamps. It is true, though. People understand little items.
There has not been anyone who has disputed this. The Finance Minister said yesterday that he doubted the figures were as high as the Retail Council of Canada were saying. Let us say that they are a bit high. I have a breakdown here for some of the individual stores that show that it is a true figure.
Let us say the figure for the transitional costs for this year alone for tax-included pricing is $100 million, plus $80 to $90 million a year for the three provinces annually. Let us cut that back even further to, say, $90 million for transitional costs and $80 or $70 million annually. That is still a lot of money. As Senator Angus has said, we have a lot of stores in our provinces that are, unfortunately, marginal. One fellow in Newfoundland said that he is just on the margin. The $30,000 that he will have to spend transitionally, not counting the amount each year, will be the straw that breaks his business's back. We have a lot of stores in that situation: Winners, Mark's Work Wearhouse, the Gap, and many other ladies' and the men's clothing stores. These stores are not the big stores in Toronto or Ottawa or Montreal making good profits; they are marginal. This will break their backs.
Here is what happens to the consumer, Senator De Bané. These stores will have to do one of two things. They can absorb this $80 to $100 million cost, but if they do so, they must pass that additional cost on to the consumers. Even if consumers will be helped by a decrease in tax on big items like refrigerators and so on, they will be hurt because of all these other items which will have to go up in price to look after the $80 to $100 million. If these stores do not pass that additional cost on, then they must look at the bottom line and many will say, "That is it. We have to close."
As the retail council said, in Nova Scotia alone that could result in 6,000 lost jobs. That is a lot of jobs for our province. That does not even include the jobs lost in Newfoundland and New Brunswick because of tax-included pricing. That should not be taking place in our three provinces. Should it be Canada-wide? Absolutely. It would even work if it applied to a massive majority of the country. I would have no problem with that, but the problem arises because it is to be applied to only three provinces.
I agree with Senator Angus that consumers and retailers will be hurt. Therefore, our people will be hurt. I certainly support his motion.
The Chairman: Does anyone else wish to comment on Senator Angus's motion?
Senator Oliver: In relation to what Senator De Bané called the defining moment, there is only one reason we on this side are so concerned about having TIP excluded. Having heard 200 witnesses appear before this committee, the overwhelming evidence is that if TIP applies to only three provinces, consumers will be damaged and hurt and will have a lot of extra costs imposed upon them. That is why we are concerned. It was not the defining moment that Senator De Bané said it was.
The Chairman: Are there any other senators who wish to speak on this amendment?
Since there are none, I will call for a vote on the amendment put forward by Senator Angus. So that we are absolutely clear, we are voting on the issue of the complete deletion of all the tax-in pricing provisions from the bill.
Will all those in favour of the motion please say "yea"?
Some Hon. Senators: Yea.
The Chairman: All those opposed?
Some Hon. Senators: Nay.
The Chairman: I declare the motion defeated, six to five.
In light of the comment that Senator Angus made at the beginning, in which he suggested that his intent was to ensure that the tax-in pricing provisions do not go into effect in what he called a fragmented market -- and since he indicated in response to Senator Stewart that he was in favour of the principle of tax-included pricing -- I will ask him whether or not he has an alternative amendment that he wishes to pursue.
Senator Angus: First, I must say how disappointed my colleagues and I are that the Red Book philosophy continues to prevail. You are trying to bury this thing and not take it out. This is a terrible thing.
Having said that, we would like to see this bill get through by April 1 without tax-included pricing. I believe that the consumers of Atlantic Canada would be disappointed if I did not put forward a motion.
There have been many circumstances in Canadian political history where the provinces and the federal government have been in negotiations. Over the years, various formulae have been discussed by very learned scholars. A practical formula evolved in connection with constitutional matters, namely the 7/50 formula, where seven provinces having at least 50 per cent of the population of Canadians could carry the day. That formula might be appropriate here.
Trying to draw from that, I move:
That Bill C-70, in Clause 242, be amended by replacing lines 40 to 45 on page 334 and lines 1 to 4 on page 335 with the following:
(2) Subsection (1) comes into force on a day fixed by order of the Governor in Council, which day shall not be before the first day on which provinces together having at least 51 per cent of the total population of all provinces that are participating provinces (within the meaning of subsection 123(1) of the Act) or that impose a general retail sales tax at a percentage rate on all goods (other than those specifically enumerated in the legislation that imposes the tax) or a general value added tax at a percentage rate on all goods and services (other than those specifically enumerated in the legislation that imposes the tax), have enacted laws requiring that suppliers include the tax under Part IX of the Act in indications of the prices of property or services supplied.
That document is before you in English and French, senators. The only change that I made is in the third line of the bold copy. I have deleted the words "one- third" and replaced them with" 51 per cent".
That would be my motion, Mr. Chairman.
The Chairman: I presume that you have a seconder? I think I saw Senator Buchanan second it.
Senator Buchanan: No. I wanted an explanation on a point of information.
I have no difficulty with Senator Angus just said. As I have always said, the kind of formula that we put together back in the 1980s on constitutional matters worked. However, this is a different situation. We have heard from just about all of the retail people that this kind of thing would be satisfactory to them. In their opinion -- and I agree with this -- it must include Ontario. Approximately 80 per cent of sticker pricing and other pricing that comes into our provinces is done in Ontario.
The Chairman: Senator Buchanan, I understand the intent of your statement. So that all senators are clear, I will try to explain the amendment in non-legal terms.
The amendment put forward by Senator Angus suspends from proclamation all clauses of the bill dealing with tax-included pricing at least until provinces representing 51 per cent of the population are included in the harmonized sales tax.
Since that will never include Alberta, you cannot get to 51 per cent without including Ontario. To put it another way, Alberta minus Ontario does not get your 51 per cent.
Senator Buchanan: Will you repeat that?
The Chairman: I said you will never have Alberta because Alberta does not have a sales tax. Therefore, you cannot get to 51 per cent without having Ontario, because if you do not have both Alberta and Ontario, do you not have half the population of the country.
Senator Buchanan: You are the mathematician. Fifty-one per cent is 15 million people, in round figures.
The Chairman: Because I thought we might get into an argument about percentages, I got the numbers for every province. Believe me, you cannot get 51 per cent without Ontario.
Senator Oliver: Listen to the Buchanan figures.
The Chairman: I am using the exact census figures.
Senator Buchanan: I understand where you are coming from, Mr. Chairman. I had not thought of Alberta. They will not have a sales tax.
The Chairman: Right, and therefore you cannot get there.
Senator Buchanan: How many people are in Alberta?
The Chairman: Senator Buchanan, I checked the numbers. Your objective is met by Senator Angus's amendment.
Senator Oliver: We would like, if possible, to have the word "Ontario" in the motion, but we cannot because Ontario is the cause of the pain.
Senator Angus: The Red Book is the cause of the pain.
The Chairman: As Senator Buchanan and I understand, having gone through the agony of the negotiation of the constitutional amending formula, you create a host of other problems if you explicitly name provinces.
Therefore, Senator Buchanan, your objective is met by this amendment.
Senator Buchanan: Are you satisfied with the numbers, Senator Angus?
Senator Angus: I am satisfied, Senator Buchanan.
Senator Buchanan: I second the motion.
Senator Stewart: This language is quite involved. Of course, Senator Buchanan, unlike Dr. Gillis, is very quick at understanding these clauses.
Just as a point of pedantry, Mr. Chairman, why do we put a comma after the word "provinces" in the third line? The words "together having at least 51 per cent of the total population of all provinces that are participating provinces" are definitional and therefore ought not be set aside. I am sorry to be pedantic.
Senator Angus: I do not quite understand your point, Senator Stewart.
Senator Stewart: We are defining the provinces which would have to participate before TIP would come into effect. We have this language, "which day shall not be before the first day on which provinces..."
Senator Angus: "...together having at least 51 per cent of the total population of Canada."
Senator Stewart: What is the point of the comma?
Senator Angus: Out with the comma. That crept in on a Liberal typewriter.
Senator Stewart: Lawyers love to put these things in because that is how they ultimately get their appeals to the Supreme Court of Canada.
Senator Angus: Fair enough. I agree with that.
The Chairman: In order to ensure that there is no confusion, the proposed amendment says that the tax-included pricing provisions will not be proclaimed until such time as provinces representing 51 per cent of the population are included in the harmonized sales tax.
The other point that Senator Angus made in his comments, as I understood him -- and I want to be sure that I am not confused on this -- was that, on the assumption that the tax-in pricing provisions do not go into effect in the three affected provinces, debate on this issue will be concluded in the Senate by the end of this week.
Am I correct on that?
Senator Angus: That is what I said, Mr. Chairman.
The Chairman: In that case, I am happy to call the vote.
Senator Buchanan: However, we certainly have the right to debate on the floor of the Senate.
The Chairman: Absolutely.
Senator Angus: Until Friday.
The Chairman: If there is leave from both sides, I would hope that Senator Angus and I could start the debate this afternoon in the chamber.
Senator Simard: In debating, we are not abdicating a duty of the Senate. There will be debate until Friday of this week, with the possibility of Tory senators presenting amendments on the floor of the Senate.
The Chairman: To be clear, to my knowledge it is not possible to prevent individual senators from doing whatever they want in the chamber. The understanding was, however, that, regardless of what prevails, debate on this issue will be concluded by the end of the week.
Will all those in favour of the motion so indicate?
Hon. Senators: Yea.
The Chairman: I believe that the vote was unanimous.
Shall we then dispense with clause-by-clause study?
Senator Stewart: Mr. Chairman, I move that all clauses of the bill, 1 through 273, including the amendment to clause 242 carried this date in the committee, stand part of the bill, that the schedule stand part of the bill, that the title stand part of the bill, and that the bill be reported as amended.
The Chairman: Will all those in favour of the motion so indicate?
Hon. Senators: Agreed.
The Chairman: The motion is carried.
Senator Angus: To be absolutely clear, Senator Cochrane proposed a resolution which we unanimously passed as part of the report.
The Chairman: To be clear, when the bill is reported this afternoon, it will be a unanimous report because the two items in the report were unanimously passed by the committee. One is Senator Cochrane's resolution and the second is the amendment that we have dealt with.
The committee adjourned.