Proceedings of the Standing Senate Committee on Banking, Trade and
Issue 22 - Evidence - March 7 meeting
HALIFAX (Nova Scotia), Friday, March 7, 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 9:00 a.m. to give consideration to the
Senator Michael Kirby (Chairman) in the Chair.
The Chairman: Honourable senators, our first witnesses this morning are Mr.
Peter O'Brien, Vice-President of the Canadian Federation of Independent
Business, CFIB, Mr. Mike Henderson, who is the Director of Apparel
Manufacturing for Stanfields and a former student of mine, so please be kind to
him. The third member of the panel is Mr. Ed Macdonald, President and General
Manager of Nova Scotia Textile.
Mr. Mike Henderson, Director of Apparel Manufacturing, Stanfields: While tax
harmonization may be a good concept, the attempt to introduce it in only one
region of the country is bound to cause problems. However, the insistence by
the federal and provincial governments involved that tax-inclusive, or tax-in
pricing at retail be part of the package could have disastrous results.
In our business, most products are required to be pre-priced when shipped by the
manufacturer. Like most others, we follow a national retail pre-pricing
methodology. This is essential to keep costs at a minimum, and for the quickest
possible turn-around time on orders. Tax-in pricing for three provinces
destroys these advantages. If we are to correctly retail price for stores in
these areas, the inventoried goods must all be unpacked and have a new price
tag applied. Not only is this very costly but it will add up to 40 per cent to
the warehousing time for orders in the affected area.
This is, of course, exactly the type of service that accounts cannot withstand
in this day and age. The costs of the extra handling at our plant cannot be
absorbed by us and must be passed on to the retailer, the net result being to
make us less competitive, and/or to provide inflationary fuel when it is not
We will become less competitive versus imported products, the manufacturers of
which will naturally refuse to provide this service to a small region of a
country. Furthermore, we will need to expand our warehouse space to allow for
the re-pricing and/or separate pick-up areas for similar items that must be
Many retailers have instituted a non-compliance program, by which manufacturers
are charged exorbitant penalties for ticketing errors. Thus, if one item priced
for the three eastern provinces mistakenly winds up in a non-BST store, or vice
versa, we run the risk of being fined up to ten per cent of the value of the
purchase order, which routinely run into five figures. To ensure that we are
compliant, we will need to increase our packing audit staff to prevent errors of
this nature. That would not occur in a non-taxing environment. If nothing else,
tax-in pricing will be a boon for employment, albeit the new employment will
quickly make local businesses unable to compete.
Other issues to be considered include the unlikely retail prices that could be
created by tax-in pricing, and the likelihood that this would further
complicate the pre-pricing situation. For example, an item currently retailing
for $12 would now require a tax-in price of $13.80. Most retailers will balk at
this, and sell for the more conventional 13.50 or $14 price point. How are we
to know what price to apply? Do we now have further divisions within the
region? While consumers may want to see the total price, tax in, on an item,
how many others will be discouraged from purchasing by sticker shock. For
example, a golf shirt selling for 39.95 may be considered an attractive
purchase, even with tax to follow, whereas the same shirt, ticketed at 45.95,
may not even get a second look by many consumers. How can one estimate the
business loss through this factor?
You have heard retailers bitterly complain about their conversion costs,
re-ticketing merchandise in stores, reprogramming cash registers, advertising,
et cetera. Do not think for a moment that they will be the only group facing
additional and unnecessary costs. We will spend large amounts of money in data
processing and accounting, making our invoices to national accounts comply with
the new legislation. Most of the orders for these national customers are sent
from Truro to Montreal to a distribution centre, and then routed back to
Atlantic Canada. We must take steps to ensure the properly ticketed merchandise
returns, and that the roll-up invoicing can be broken down for the different
tax jurisdictions. Again, a lot of expense; is it really necessary?
Stanfield's Limited is not requesting any favours, but we do not wish to see our
business damaged on the altar of political expediency. I will summarize by
saying that tax-in pricing under these regional circumstances is one of the
most ill-advised policies ever to come down the pike. Regardless of loss of
face and other political promises, those responsible should immediately
recognize the error of their ways, and recant this legislation immediately.
Mr. Edward MacDonald, President and General Manager, Nova Scotia Textiles: I am
appearing today in support of our customers who appeared before you yesterday:
Mark's Work Warehouse and Saan's Stores presentations, because their concerns
are representative of the difficulties that manufacturers and retailers face in
implementing the pricing requirements of the HST.
I should say that I am very pleased to be appearing today with our friends in
Truro, Stanfield's. I absolutely, unconditionally support everything that Mike
has said. He describes the problem perfectly from the manufacturers' and the
retailers' point of view, I believe. We are not opposing the integration of the
GST and PST, but rather we are attempting to address concerns with the effective
implementation of the new HST.
Our company, Nova Scotia Textiles, is a vertically integrated knitting mill
located in Windsor, Nova Scotia, in a lower profile location, you might say,
than Stanfield's, but in a very similar industry. We produce a specialty line
of high quality winter weight underwear, sweatwear, T-shirts and
flame-resistant safety knit products. Our company has been continuously owned
and operated in Nova Scotia since its incorporation in 1893 as a family
enterprise. We currently ship products throughout Canada and the Northern
United States, and we have developed export markets in Britain and Japan. We
employ up to 200 people in our plant in Windsor.
Currently, we have about 1,600 active accounts right across Canada. Some of
these are single-store locations, while many others, such as Mark's, Saan's,
Root's, Sears, Work Wear World, have many retail outlets. To comply with the
current implementation of the pricing regulations, we will be shipping to two
commercial countries, in effect: the HST provinces and the rest of Canada. This
duplication increases costs, as Mr. Henderson has described, while decreasing
the efficiency of both our shipping departments and our customers' distribution
centres. Our product must be pre-packed for each individual store. They must be
priced and bar coded to conform to each retailer's specific requirements.
You have had the charge-back situation described to you. Our tasks and our
shipping, and our retailer's tasks in their distribution centres, will be
further complicated by the HST retail price-included requirements. Basically,
from our point of view, that is to absolutely no avail. If you present a
tax-included price on a store shelf and break out the taxes on the receipt which
the customer receives, it is a very poor political attempt to hide the tax, and
serves no other useful purpose whatsoever.
The proposed methods for in-store pricing will be confusing to the shopper
because they vary from location to location. This will make effective price
comparison frustrating for the consumer. We believe that the successful
implementation of the harmonized sales tax requires a clear, workable
store-shelf pricing system, and that can be efficiently accomplished by simply
continuing to show all retail prices without the applicable taxes. That,
gentlemen, would solve the problem.
Mr. Peter O'Brien, Vice-President, Canadian Federation of Independent Business:
The history of the CFIB's involvement with the various iterations of
value-added, tax-added tax goes back a long way; more than ten years. In the
mid-1980s, we researched VATs internationally, because it was obvious that some
form of value-added tax was coming to Canada. In the late 1980s, CFIB made
numerous representations to appropriate House of Commons and Senate committees,
to ministers, to bureaucrats and to others, to express and articulate the views
of Canada's independent business community.
What we found -- and I think what we still find -- is that the essential common
theme of all the feedback we have had from our members for more than a decade
is that a national harmonized sales tax is in the best interests of Canada. I
do not think we can walk away from that for a moment. However, what we have
done because of the latest proposals is what normally do: we have gone out and
surveyed our members, and we have surveyed them extensively. In the
presentation, some of the results are in more detail than I will give to you in
There were almost 1,300 responses to our survey, a little lower than normal, but
we had it out for only two weeks because we wanted to have the results to put
before the House of Commons Banking Committee. Those results showed, I think, a
very dramatic and serious interest by our members. I felt that if we had had it
out longer, we probably would have doubled that number very easily.
Forty-six point eight per cent of respondents anticipate somewhat or very
negative impacts from the harmonized sales tax. Forty-four point two per cent
expect positive or neutral impacts, and 9.1 per cent were unsure of the impact.
The major positive results expected from the new tax was that it would be
simpler to understand, it would improve the firm's bottom line, and the combined
tax would be at a lower rate for those who are currently charging provincial
The major negatives identified were the higher tax rate on services not now
subject to provincial sales tax. The cost of converting cash registers does not
appear to have been nearly as difficult a problem as had been anticipated.
Costs resulting from the need to re-price items that are pre-priced, and the
growth of the underground economy, which I do not think has been addressed very
often before you, but it is of major concern in the construction industry, and
in some aspects of the service industry, in hairdressing and things of that
On tax-in pricing, 46.4 per cent were opposed to including the tax in the price;
47.8 per cent were positive or neutral; 5.8 per cent were uncertain.
Incidentally, I should tell you that those most strongly opposed were found in
the retail, construction, transportation and service sectors, in that order.
Those least opposed were in the hospitality, restaurant, and food and beverage
Since receiving the results of the survey, we did what we have always done when
there are tax changes in this country: We communicated on a consistent and
ongoing basis with all four governments. I must be frank and say that the doors
of all four governments have been opened, and have remained open. We were able
to effect some minor changes which I think do help some people when it comes to
tax-in pricing, but not all people, and we must be very frank about that.
We believe that that dialogue is something we have a responsibility to continue
as this matter goes forward. That is one of reasons we are here today, and that
is one of the reasons we will continue to communicate with government, because
we see this as a work in progress, just as the GST has been a work in progress
ever since it came in, and changes were made in that tax as recently as last
year. We think that this will be an ongoing thing.
The rationale behind tax-in pricing, which I think is the most significant issue
before you, might be understandable if we were dealing with a nation-wide
harmonization effort. However, since we are only dealing with three provinces,
and in the absence of real evidence from consumers that tax-in pricing is
highly desirable for them, we believe that the cost of compliance is not
justified at this time.
To date, CFIB has worked extensively with governments to find ways to reduce
problems associated with tax-in pricing. We will continue that. However,
eliminating the requirement would be the most effective way to remove many
business concerns about labour costs associated with re-pricing, as well as
other concerns involving competitiveness.
Regarding the issue of unfair competition from outside the region, businesses in
the clothing and footwear sectors, as well as many in the service sectors, are
especially concerned about that aspect. Quite frankly, they are concerned about
how that will be policed, and they need to hear that issue addressed, and
addressed articulately and well. We have seen the opposite of that, where we
were to go in and self-regulate. When we purchased goods from outside the
region, we were to pay the provincial sales tax. That has never happened. One
benefit from this tax is that retailers in this region will play on a level
playing field with people who were shipping in from outside. There are benefits
as well as negatives in that aspect of it.
The only other thing I would like to say in closing is that we believe that you
are in a very awkward position at the present time. As recently as yesterday, I
received from one of our large members, who has 19 locations now in Atlantic
Canada, a copy of his new price tag, which is there, and which really meets the
requirements as laid out in the paper. They have gone to extensive expenditure,
I think, and change. To move to that, they have changed their whole pricing
policy, and they have radically changed the way in which they will do pricing.
That has happened already with a lot of firms, so many of them have moved
We have also seen some slowdown in retail sales waiting for the change, because
for many there will be a drop in price. Quite frankly, our members get very
angry when people suggest that the drop in price will not be passed on. Where
it can be, it will be passed on. We are still coming out of a recession in this
region of the country, and business people will do everything and anything that
they can to encourage economic growth and consumer spending. We are concerned
that we not get into the kind of debate that will stifle what growth we have
seen, and we have seen growth in the last four months, up until the last few
The final thing I would like to say is that there is an incredible amount of
confusion in the business community, and on the street, because government has
not communicated well. We have spent a great deal of time on our own, working
with the people inside the bureaucracy, federally and provincially, to develop
a very significant question and answer document which will go to our members,
and to anyone else who wants it, as soon as your deliberations are made public,
so that we will know that we are presenting them with the most factual and
up-to-date information possible. That is crucial. April 1 and April 7 are just
around the corner, and that information must be got out quickly, so I would
urge you to finalize your deliberations quickly.
Senator Oliver: Mr. O'Brien's statistics were very helpful. We have had other
statistics, but at least yours are quite bona fide because the supporting
information comes from your membership.
Several people have raised -- and you raised it again -- this whole business
about the underground economy and how it will affect us. However, no one has
suggested what, if anything, this committee should do about it. When you raised
it again this morning, I remembered that that had been referred to in the
Atlantic Provinces Economic Council, or APEC, report. Perhaps I could just read
you two lines and ask you to comment and say what recommendations, if any, you
might have for this committee about this problem. APEC says:
Under the HST, the labour component of many installed products will now be taxed
at 15% rather than 7%. The material or product being installed is however
likely to fall in price. There may be an increased incentive to drive the
labour component of these installed goods underground. Consumers may choose to
buy the materials/product themselves under the pretext of a `do-it-yourself' job
and then covertly hire the services of a craftsperson to install the product
thereby avoiding the HST on the labour component of the work.
What should we be doing about that?
Mr. O'Brien: That is a very serious and very significant issue, and its
ramifications go far beyond this tax. For example, consumers do not realize,
when they hire someone to repair their house or do something like that, that
they are liable for Workers' Compensation, for example, if the person that they
hire is not already covered. Consumers must become more knowledgeable. I think
there is an educational thing that must happen for them. There is not always
the benefits that they perceive at first sight.
There is also the 15-per-cent input tax credit, which I think does some
balancing but not total balancing. I think better compliance is needed, and
better effort by the people in the tax division of government. I have members,
for example, I had one who phoned me last summer who took his GST auditor to
lunch deliberately to show him 12 people working in the underground. The comment
from the auditor was that "It is interesting, but I can make more money
working on your books than by chasing them for two years." That
circumstance must change.
We have met with the Minister of National Revenue, the Honourable Jane Stewart,
on that issue, and she has indicated a willingness to really become aggressive
in chasing people who are the legitimate underground; not small businesses that
are registered and paying taxes, but people who are not. I think that that must
happen, and that it must be a concerted effort, and the penalties must be
significant enough to offset any potential benefit to any business that does it.
Senator Oliver: Do you have any specific recommendation for the Kirby Committee,
Mr. O'Brien: You must look at the penalties. The other thing that you might want
to ensure is that the $30,000 limit does not go higher. I think that is very
dangerous, because the minute it does, more and more people can fall into that
area where they do not report. My understanding is that the provinces are
considering registering all businesses, not just those earning above $30,000.
That is not a bad thing to do. In fact, that might be an appropriate thing to
do. You may not need to collect from them, but at least we should have them
registered, so that we know where they are, and so that, in fact, they can be
sought out and examined from time to time by audit. That would be one of the
recommendations I certainly would make.
The Chairman: That is a very good idea. We had an interesting anecdote told to
us by the Minister of Finance in Newfoundland, where he said that within the
shadow of the finance building in Newfoundland, they had walked along the
street and checked out a series of companies to see if they were registered,
and three-quarters of them were not, even though they should have been. This
was, as he described it, in the shadow of the office building housing the
Senator Oliver: I just wanted to ask the two retailers on this end if I could
have your view on whether or not these April dates that we now have are
appropriate in the circumstances. The Banking Committee will be going back to
Ottawa today and reporting on this bill early next week, and there should be
some kind of finality there. However, will that give everyone time to do all the
work, and should we be looking at another date? Should we be looking at
September 1, and then advertise it, promote it and let everyone know what will
happen when. My question is about timing. What should the timing be?
Mr. Henderson: First of all, we are not retailers; we are manufacturers who are
involved in a lot of the pre-pricing, as I said, but I think any deferral would
be helpful. Due to the uncertainty of what is happening here in our factory, we
have not begun to price anything at this point. Everything is priced as it has
been, and no provision has as yet been made for tax-in pricing.
If April 1 is indeed the date when this change comes into play, we will have a
mad scurry, and tons of overtime and everything else in order to get our
merchandise ready to go to retailers. April 1 would come upon us very quickly.
We have not been, I do not think, necessarily delinquent. You might say "Why
have you not prepared more?" The answer is just because of the nature of
this hearing and others, and rumour that there may be some deferral. We cannot
have it both ways: it is either tax in, or it is not.
Mr. MacDonald: We are in a very similar position. You must remember that the
manufacturers, when it comes to the distribution system, are really working to
specific requirements of every individual retail chain in the country. There is
an indication in some of the presentations we have attended of a phase-in time
frame where immediate, absolute compliance will not be required, and I do not
think you will be able to see that, even if the legislation goes ahead.
However, I believe you are dealing with a more fundamental issue here, and that
is simply whether it is fair and appropriate to the consumer, to industry, to
the region and to the country at large to have tax-in pricing. That, to me, is
the nub of the problem. Mr. O'Brien has outlined a number of concerns that also
affect this whole equation, but I believe you could make a very clear
recommendation on the pricing issue itself, because essentially the tax-in
pricing structure does not provide any real advantage to the consumer. We have
lived with varying rates of provincial tax in this country for many years, for
many reasons, and I think that it is rather demeaning of the government, in its
view of the consumer, to assume that the consumer can only figure out what a
price is with tax in it on a sign. We are not as dumb as dirt, but that is the
You have the opportunity to make a really significant statement here, and affect
the course of economics to our benefit in Atlantic Canada and in the rest of
the country because, as Mr. O'Brien says, sooner or later more cohesion must
come to our taxing system, but we must do it in an organized, planned,
thought-out way; not one dictated by absolute sheer political expediency.
Senator Losier-Cool: Good morning, Stéphane, happy to see you. I would
like to get back to this matter of underground economy that Senator Oliver
mentioned before. That question has been subject to a lot of discussion in
Quebec. Has Quebec taken any steps to eliminate that problem? Do you know
anything about it?
Mr. Robichaud: There are no steps as such that we know about in Quebec. But as
far as the question goes here in the Atlantic region, we have already met the
Minister of Revenue who has really shown an interest in wanting to attack this
problem at its source. Just as the tax itself, I think this question is also
work in progress. There must be some linkage. Because the underground economy is
certainly something we are going to have to look at. It is already a serious
problem. I think there are going to be opportunities to work on that. This
underground economy is due, first and foremost, to a high level of taxation.
When your tax level is high, that is when people see an advantage to working in
the underground economy so as not to pay any tax. We think there is an
opportunity with employment insurance where the rates could perhaps be
decreased to give some leeway in order to start doing something about the
Senator Losier-Cool: With harmonization, is the higher tax level going to be
favourable to the underground economy?
Mr. Robichaud: At this point, GST is going to be applied to labour and will go
from 7 per cent to 15 per cent.
Senator Losier-Cool: As you know, the tax-inclusive pricing is a concern to this
committee. Yesterday we heard from the grocers association, and they were
recommending more time to implement, and I think also that Revenue Canada will
be ready to give more time to implement that tax-in pricing. I think I will ask
Mr. Henderson: Are you against tax-in pricing because the consumers do not want
it, or because retailers will feel that it is too much problem and it will cost
Mr. Henderson: The answer is yes for both parties, both consumers and retailers,
and selfishly, if I may say, I will add ourselves as well.
Senator Losier-Cool: Are you aware of the last survey made by a researcher in
Canada where they say that 52 per cent want the tax in? Those are the
Mr. Henderson: Yes, I am aware of that, and I agree with Mr. MacDonald's
comments, that especially with the 15-per-cent levy that we are looking at
here, it is not a major calculation for most people if the tax were not
included. I think people have become used to it, even with funny numbers like
18.8 per cent or whatever, that we have had to deal with since the advent of
the GST in addition to the PST. Fifteen per cent will be a walk in the park for
I agree with him, I do not think Maritimers especially are unable to handle
that. I do not know who did the survey, but I think it could be one of those
situations where you can get whatever answer you want from that survey. I
really believe that, so I think it will be detrimental to consumers, retailers
and certainly manufacturers in our situation, who must follow a national
I fear for us potentially losing business to some national accounts, who will
decide the costs of administration and changeover make it not worthwhile, and
may decide to lessen their business here, or not expand. I do not think many
people will leave here, but I know some of our accounts have said it will make
them less likely to look at the maritimes as an area in which to expand.
Senator Losier-Cool: You would not agree with a recommendation that would ask
for more time? You simply say no to tax-inclusive pricing, that is your
position. Is that yours also, Mr. MacDonald, because I just caught the last
line of your comments.
Mr. MacDonald: Yes, that is. In response to your question, I would like to also
point out that my understanding of the survey that you are referring to is that
people would prefer tax-in pricing if everything was equal, assuming that the
calculation was made for them. The one thing that is not considered in that
equation, and I think is key to it, is that the tax-in pricing will end up being
a cost-plus factor for manufacturers and retailers.
What Mr. Henderson has described is identical in our shipping departments in
Windsor and in Truro, although we are two slightly different companies in our
market emphasis. Our customers require the same type of thing: orders
transmitted by EDA, electronic data interchange, quick response times,
pre-pricing, pre-packaging. They want the product going through their
distribution centre. This is no longer an economy that has warehouses; it has
very small distribution centres so that everything is pre-prepared for the
Tax-in pricing will cost more because of the duplication you have heard about,
which will need to be passed on to the retailer to some degree, and they will
increase the price point to compensate for that. You will not have a good that
will retail at $19.95; this will push it to the next available retail price
point, and I think that is the information that was missing in that survey.
Therefore I would caution you that, in my opinion, there is a reality there
that has not been fully described.
However, to answer your question directly, we feel that "no" is the
appropriate answer. We do not need tax-in pricing.
Senator Losier-Cool: But right now, the pricing of different retailers is not
the same, and the consumers are not that confused. If I go to your store, your
pricing, some have shelves and some have racks, and some --
Mr. MacDonald: But everybody prices on clothing as goods without taxes in.
Therefore the customer knows what the goods cost; they know what the tax is.
That seems to me to be a fair approach. I would suggest to the committee that
we do not see a persuasive reason for tax-in pricing.
Senator Losier-Cool: The consumer does not want surprises at the cash register.
The price issue arises at the cash register.
Mr. MacDonald: They do not get surprises, they know exactly what the product is
when they buy it in that retail store that is fair and equitable. There is
nobody around here who believes that taxes are lower in Nova Scotia than they
are in Alberta to the consumer, for example. They know we have different
structures in different parts of the country. That is why I come back to the
idea of the fairness and the rationality of having a price in a store. They
know they can go from store to store and get a better price on the same
brand-name product in some stores at some times because of sales and
promotions. But when you put the tax on to that equation, and some stores have
tax in, and some stores have it displayed differently, and some stores are
having sales and some stores are not, it does not make the job of the consumer
to get good value any easier.
I would point out to you that other than the administrative cost that Mike has
described, the direct benefits tax-wise to our companies is a wash. What we are
doing is trying to respond to our customers' and retailers' requirements. That
is why we are here.
Senator Rompkey: I just wish to say, first of all, Mr. Chairman that I am
wearing Stanfield's underwear this morning, although I am not prepared to go
further than the verbal acknowledgement of that, although I will admit it was
purchased outside the harmonized zone.
I wish to ask Mr. O'Brien to comment on the figures in the survey, because they
show that 46.4 per cent were opposed to including tax, 47.8 per cent were
positive or neutral, and 5.8 per cent were uncertain. If you factor in that
percentage of the uncertain who were positive, it means slightly more were
positive or neutral than were negative.
You also told us that the retail, construction, transportation and services were
those most opposed, and that hospitality, which is a growth industry in the
area, was positive. Your association, as such, recommends against tax-in
pricing and you say you believe the cost of compliance is not justified. I want
you to elaborate. The figures are roughly 50-50, or a little better than 50-50.
Mr. O'Brien: We recognize that, in the end, a national harmonized sales tax, one
tax rather than two, is exactly what we need. We see what is happening in these
three provinces as an appropriate move in that direction. We wish the other
seven were as astute as the maritimes, but that normally does not happen, and I
can say that as a Newfoundlander.
We are very concerned, however, that there are complexities, particularly for
larger firms, and we must acknowledge that. We have some large members in our
federation -- not all of our members are small -- with tax-in pricing. We think
that it has become, to some extent, the major stumbling block, the thing that
will create resistance, both from consumers and from business. We have heard
people say that they will no longer ship goods to the Atlantic provinces. I
have had a little battle in the press with one major retailer in Ottawa who
says "I will write off six per cent of my sales." I do not think he
will do that, but he is saying that because of real or perceived complexity.
I want to suggest that we have not even thought of some of the complexities yet,
while some of the things that we think are complex will not be. Because that is
always the history when taxes change. We are seeing the normal reaction to any
change by government. Business does not trust government, and that is a built
in part of this as well.
The underlying concern that I have this morning in appearing before you is to
tell you that a delay for three months or six months, or two days at this
stage, would effectively turn down consumer spending, and that scares the heck
out of me. We are not as far out of the recession as the rest of the country.
We still have areas of this region that have more than 25-per-cent unemployment.
That has not changed, and we are just beginning to see daylight as far as
consumer spending is concerned.
I would suggest that you may want to look at some other aspects of this issue.
Already, the technical papers suggest that the real compliance date is August
1, as long as people are attempting to comply. You may want to look at that a
little bit, but I do not think you should look at the April 1 date as being
something that should change. I say that with some reluctance, because there
will be real problems for some of our members on that date, and real problems
for the two gentlemen sitting here with me. However, there will be just as real
problems for those who have already made the change, and many have, and are
prepared to go forward on April 1. We are on the horns of a dilemma.
Senator Rompkey: Just to conclude, then, all four of you are against tax-in
pricing but all four of you are in support of the harmonized sales tax, am I
Mr. O'Brien: I think we certainly are.
Senator Buchanan: I want to clear up one thing about the poll that you
mentioned. Are you aware that in that poll -- and I have it right here -- 90
per cent of the people who were polled either did not know anything about the
HST, knew very little about the HST, or maybe knew a little bit about the HST?
In addition to that, on the question: "Would you prefer tax-inclusive
pricing?" very few of the people polled really understood what that meant,
but in any event 73 per cent said yes. However, they were totally unaware of
the fact that this could cause an increase in the cost of the products that they
purchased. Nor were they aware of the fact that this tax-inclusive pricing was
just for three little provinces, representing 8 per cent of the whole country.
That is the poll on which they are basing their whole tax-included pricing
strategy. Were you aware of that?
Mr. O'Brien: I was aware of that, senator, and I would remind you of a great
statesman from Western Canada in the 1950s and 1960s who talked about little
dogs and polls.
Senator Buchanan: Yes, I knew him well.
Mr. O'Brien: The reality is that we did not do a poll. What you have from us is
a survey of people who have some knowledge, and who are affected. The
difficulty is that, because of the rhetoric that has gone on around this
particular debate from day one, nobody really understands the reality of what is
happening. Very few of us who have not been deeply involved in the issue fully
understand the significance of the change. Some of the so-called complexities,
some of the so-called negatives, and some of the so-called positives have not
been very accurately portrayed at this stage, and that is a major problem.
Senator Buchanan: One other comment I wish to make is that if the drafters of
the HST bill were aware then of what they know now, in my opinion, they never
would have put the tax-included pricing on this bill. It is not a good move
either political or otherwise. However, it is severable. That part can be
severed off and not even affect the HST bill.
Mr. O'Brien: Senator, we started knocking on the doors of the people who put
this bill together last July, and you know me: we knocked on doors, and we
knocked on doors. I have a motto, which is that I never give up, and I never go
away. There are people in Ottawa who know that, and now some who know that now
in the three provinces.
I think there was a commitment to that philosophy from the very beginning, and
we saw that, and we argued against it, and although we won some of the
arguments, that is certainly not one of our winners. I think that element was
inherent in the philosophy behind the evolution of the tax from the very
Mr. MacDonald: May I make a comment on that, very briefly, Mr. Chairman?
The Chairman: Yes, Mr. MacDonald. Go ahead.
Mr. MacDonald: I would like to point out that we will comply with the law,
whatever that law is. There is no question about that.
The Chairman: We all assumed that, I think.
Mr. MacDonald: Absolutely. The other thing that I would like to point out to you
is twofold: in doing that, we may anger and aggravate a number of our customers
because their requirements could be different than the law allows. I do not
think you should put anyone in that position. I also think that this committee,
and the Senate in general, has an opportunity to rise above the politics of this
situation by making a sound economic recommendation. That recommendation does
not need to be based on polls taken some time ago; it needs to be based on
sound economic thought for the future of the taxation system in this area and
The Chairman: Honourable senators, our next witness is Mr. Bill Black from
Maritime Life Insurance Company.
Mr. Bill Black, President and CEO, Maritime Life: Good morning, senators. With
me today is Tracey Jennings, who is our tax expert, and as soon and we get
beyond generalities and into questions, I will immediately look weak and turn
to Tracey, and she will explain exactly how it all works.
I should start by making a general statement that we are supportive of the
harmonized sales tax. As an issue, we think it is good government policy. That
is even though we will ultimately end up paying about 70 per cent more tax with
it than we did under the prior regime. I will tell you that, in the near term,
we do not; we pay actually a little less than we do right now, but that is only
until you have recruited some more provinces and, as more provinces come in,
that tax situation will change to the point where we are actually paying about
70 per cent more than we do right now. However, we do think that it is the
right kind of policy direction.
I should say next that when the measure was first proposed, a severe problem was
envisaged with respect to the life insurance part of our business, and steps
were taken fairly quickly to solve that problem. We are appreciative of the
steps that were taken in that regard. However, we still have quite a
substantial problem vis-à-vis the segregated fund part of our business. I
should just take a minute and say that if you are a life insurance company, a
segregated fund is identical to a mutual fund in everything but name. From the
point view of the customer, it looks exactly the same. From the point of view
of us as the supplier, it is same. The legal structure under which we operate is
called the segregated fund.
The Chairman: Just by way of clarification, it is essentially a trust fund, is
Mr. Black: Yes.
The Chairman: That is why it is segregated?
Mr. Black: Yes, that is right; they are segregated from the rest of the assets
of the company, and it operates exactly like a mutual fund.
The Chairman: I was trying to understand where the word "segregated"
comes from, and it comes from being segregated from the rest of the assets
precisely because of its trust-like nature?
Mr. Black: That is right. The way the law is written is that the trust must be a
resident somewhere. For us, because we are headquartered here, our fund is
viewed as being resident here. In the initial version of the legislation, the
way in which it was proposed, the consequence of that would have been that our
trust would pay the harmonized sales tax to us and to Assumption Mutual up in
New Brunswick, but that we would be the only companies in Canada which paid
that tax, and would therefore leave us at a severe competitive disadvantage
versus other companies.
I must say that in both the written communications from the Finance Department,
in the form of technical papers and so on, and also in our discussions verbally
with Paul Martin and others, everybody has stressed that there was no intention
to create a competitive disadvantage for companies inside the harmonized zone.
Therefore I do not believe that it was anybody's will to cause this problem. My
own view of the situation, and having watched the dialogue that Tracey has been
trying to manage, is that we are dealing with a little bit of bureaucratic
intransigence, which is the kindest characterization I could make of it.
The proposed solution that was presented to us was helpful, interesting and
mildly bizarre. Essentially, the consequence of it was to solve our problem in
respect of customers outside the harmonized zone, but to continue the problem
in respect of those customers inside the harmonized zone. That is to say that
we would pay the tax and nobody else would.
Let me stress that we do not mind paying the tax; we just mind being the only
ones who pay the tax. I am pretty sure that this was not the intention of any
of the political forces involved. Nevertheless that is a consequence that is
there. Certainly, we have been making representations, both provincially and
federally. We were in Ottawa for the parliamentary commons committee. Diane
Brushett was there, and other people were there, and we got to explain our
point of view. Everybody smiled warmly and nodded and wrung their hands and
knitted their brows, but at the end of it all, nothing changed. We are feeling
a bit discouraged about that.
From our point of view, you must appreciate that our business is all over
Canada. Eighty-five per cent of our business is in Western New Brunswick, but
of our 900 employees, 600 of them are here in Halifax and, as a native here,
that is the way I like it. We would rather have the jobs here than elsewhere.
We can solve this problem by exporting jobs to Calgary or Montreal, but that is
really not what we would rather do. We would rather have a solution that is
legislative, and that really fulfils the original intent of all the political
people who were involved in this move. That is what we represented to the
commons committee, and that is what we are representing here this morning.
I am able to say -- and I am very pleased to be able to say it -- that the
Province of Nova Scotia as of late yesterday, and in a release that they will
be making this morning, has offered to solve our problem for a couple of years
on a temporary basis. That is very helpful, because April 1 is coming fast and
we have been a little bit under the gun. I suppose, too, that in a way they may
have been as perplexed by the absence of any activity on the federal level as
we are, so we are very appreciative of the efforts of the Province of Nova
Scotia to provide an interim solution.
I would also say to you that I do not think that that is the right long-term
home for the solution. The right long-term home for the solution is at the
federal level. In the brief that we have presented to you this morning, we have
outlined two different ways -- and there are probably ten ways, but we have
outlined two different ways in which the issue can be solved. From our point of
view, I stress again, we do not mind paying the tax. We only mind paying the
tax if we are paying it in respect of a group of customers, and others are not.
That is essentially the issue.
The Chairman: Before turning to Senator Angus to begin the questioning, may I
ask you a technical question? Can your problem be solved through regulation, or
does it require a change in the bill? The reason I ask that question is that it
was our understanding that Assumption Life out of New Brunswick had solved
their problem through a regulatory change and, indeed, your indication that you
can get a two-year delay by some kind of an agreement with the Nova Scotia
government would suggest to me that it is not a legislative problem; it is a
regulatory problems. Ms Jennings, can you help us with that?
Ms Tracey Jennings, Corporate Tax Analyst, Maritime Life: First of all, perhaps
I will give you a little bit more background in terms of the federal
legislation and what is in there, and what the province has offered. On a
federal basis, the way we sit right now, we would be required to charge a
resident of Nova Scotia the 15 per cent tax on our segregated fund fee. However,
that resident of Nova Scotia could buy the segregated fund from a London Life
representative, or a representative of any other company situated elsewhere and
only pay 7-per-cent tax. We got there by the federal government providing a
relieving section that says "People in Ontario are not required to pay the
tax; essentially, we will rebate you, the segregated fund, the tax to the
extent that you have a resident in Ontario buying a fund."
The Chairman: It is in the bill?
Ms Jennings: That is a rebate provision that they implemented after the House of
Commons committee met. That rebate basically says that if you are a segregated
fund, we will provide you with a rebate based on the number of unit holders or
the unit holders outside of the harmonized zone. To the extent that we have
charged tax to those unit holders situated outside the zone, we will rebate the
tax, but that does not provide relief to the extent that we have unit holders
inside the zone.
There is our problem, we are left with the situation where we must charge the
tax to a Nova Scotia resident, but companies situated outside of Nova Scotia,
New Brunswick and Newfoundland will not be required to charge the tax. The
provision is in the federal legislation to solve our problem, and I think that
is really where the solution should come from because if you are trying to
implement a harmonization, the federal government and provincial governments
both realize -- and so stated in their technical paper -- that they did not
want to disadvantage suppliers based on their location.
The Chairman: Do you have with you the legal amendment that would be required to
solve the problem?
Mr. Black: It is in the brief.
Ms Jennings: In the back of the presentation. What I did is I took the provision
that provided the rebate based on unit holders, and I provided you with the
wording that would be needed to change that provision to provide us with that,
and leave us at the same level.
The Chairman: As far as you know, the four governments which signed the
agreement did not intend such a consequence to result. In other words, it is an
Ms Jennings: It is clearly stated, as provided in our presentation, that in the
technical paper that was introduced on harmonization, in the agreement it said
that a supplier will not be disadvantaged based on location. If you are selling
inside and outside the zone, you will be the same before and after
harmonization, and that is where we really have the problem.
Mr. Black: I might go on to add, senator, that the provincial Deputy Minister of
Finance wrote to his federal counterpart in November, as soon as he became
aware of the problem, asking that it be solved along the lines that we are
describing to you today. Clearly, at the provincial level, it was not intended.
Senator Angus: It is a single issue presentation, and I think your brief is
excellent. I just wondered if I could put it into greater perspective by asking
you: Would the problem go away if you moved your head office to Ontario?
Ms Jennings: Yes.
Mr. Black: Yes.
Senator Angus: No further questions.
Mr. Black: Actually, just for what it is worth, Montreal and Calgary would both
be better choices, from a purely tax point of view.
The Chairman: For reasons that go beyond the HST?
Mr. Black: No, purely HST. For reasons other than HST, Halifax is absolutely the
best place in Canada for our head office.
Senator Angus: You know of no reason, or nobody suggested that they would want
you, as a consequence of this legislation, to move to another part of Canada,
so therefore it is truly an anomaly. The proof of the pudding is that if a
company with segregated funds like your own -- London Life being an example --
had unit holders here in Nova Scotia, they would still not have the problem.
Mr. Black: That is right.
The Chairman: Given the fact that the problem lies in the federal legislation,
what has the province been able to do to solve your problem? You said that Nova
Scotia has solved your problem for two years?
Ms Jennings: Let me take a couple of minutes just to explain what they can do.
There is federal legislation provided on the harmonization. There is also
provincial legislation, which says that we will charge the harmonized tax. In
the legislation that was introduced in Nova Scotia, a provision was introduced
in the legislation which allows the province to implement, by regulation, a
rebate, a point-of-sale rebate, in certain circumstances. That is the way in
which, for example, books have been dealt with. Each province has implemented a
rebate in their regulations that says books will be zero-rated.
Therefore, because we do not have relief on the federal level, and since it is
just not equitable because we will not be able to compete in Nova Scotia, what
has been proposed in the interim is that the provincial government has said "Because
we cannot get the federal government to fix the problem that needs fixing
before April 1, we will offer you a rebate." In other words, we will not be
required to charge Nova Scotia residents the tax.
The Chairman: Has the federal government indicated that if, at some point in
time down the road, this bill were to be amended, they would solve your
Mr. Black: No.
Ms Jennings: What the federal government representative said is that if a
province such as Ontario came on side, they would look at the deal again, -- in
other words, look at the provisions of the harmonized legislation. The
indication I got from that was that we were not big enough to worry about at
this point in time.
Mr. Black: Just to stress, if it is part of one's assumptions about the future
that Ontario will join this scheme at some point in time, the whole bill sort
of self-destructs at that point in time on this issue. They must draft it again
anyway, because at that point in time the legislation will affect not just one
or two companies, but most of the providers that there are in the country. The
whole thing basically just does not work. Whether you follow the format that we
are suggesting or another one, they must redo it anyway, at the point in time
when other provinces become plugged in.
Ms Jennings: The two solutions that we recommended is either to make everybody
charge the tax, or make no one charge the tax. We are accepting either
The Chairman: Honourable senators, our next witness is Diane Brushett, the
federal member of Parliament for Cumberland-Colchester.
Ms Diane Brushett, Member of Parliament, Cumberland-Colchester: My name is Diane
Brushett, elected member of Parliament for Cumberland-Colchester, that great
riding in the northern peninsula of Nova Scotia. My home town is Truro. I am a
sitting member on the Standing Committee on Finance for the House of Commons.
I would like to begin this morning by addressing some of the concerns that
constituents have called or written to my office regarding this sales tax. Let
me say that the first question that is coming through is: Why dump on us here
in the Atlantic region, the poorest region in this country? My answer to that
is that we are not dumping on the Atlantic region; we are bringing our tax rate
down to a competitive rate across those three province, currently ranging from
19 and 20 per cent, depending on the province here in the Atlantic, down to a
harmonized rate of 15 per cent. That is a reduction of at least four per cent.
This is good news for the Atlantic region and, so I am told, for grocery stores.
According to the National Council of Grocery Distributors, every Canadian
visits a grocery store approximately twice a week, and 30 to 40 per cent of the
goods that they buy there are taxable. Approximately in that range, 30 to 40
per cent of everything that Canadians buy twice a week, will be reduced by
nearly four per cent in tax. That is why this tax is good for Atlantic
The second point, Mr. Chairman, that I would like to address is that we are not
a target. We will be competitive. That is because of the reduction of tax, and
the incentive that that gives to business and the creation of jobs. This tax is
not a quick fix to anything. It is about long-term vision; it is about having a
sustainable economy in Atlantic Canada.
Many of the myths that are out there on this tax are totally that: myths.
Therefore I would like to put some facts before this committee today. First,
with harmonization, provinces will no longer be issuing tax exempt numbers.
Many people have not understood that. They think they will still go in and get
a farm tax exempt number. This is not so; no longer will there be any such
thing. Everyone will be paying the harmonized tax.
The rebate of seven per cent currently will become 15 per cent, and the federal
government will get seven per cent of that, and here in Nova Scotia the
provincial government will get 8 per cent. The federal government has given a
one-time transfer to the Atlantic region of $961 million to be divided among
the three provinces. The reason for that transfer is that we are losing
provincial sales tax beyond the threshold of 5 per cent, and we therefore
If Prince Edward Island were to join in the harmonization, they have been
offered $60 million, and that is because of lost revenue to the province
through provincial sales tax reduction. This is the reason for the transfer of
money. It is not a quick grab by the Atlantic provinces; it is a reasonable
adjustment through a transition period.
The question has come up repeatedly: Why did we not give Quebec something? Why
did we not offer them money in the transfer to harmonization? The reason Quebec
was not given compensation is that they did not suffer any loss in provincial
sales tax beyond the five per cent threshold. Those are key, significant facts,
and Ontario would come on tomorrow if we could afford to give them some money
and transfer the reduction of their sales tax. However, we are not in a position
to do that at this time.
In 1992, Statistics Canada indicated that $196 million was paid in provincial
sales tax by businesses to the Nova Scotia government. This is money that,
under harmonization, will remain in the hands of small business, because that
is basically what we have here in Nova Scotia creating our jobs and keeping the
economy going. This is money that stays in the hands of what I refer to as the
little people, because they are the ones who are creating the jobs.
The figure of $700 million is estimated to be the provincial sales tax that will
be saved in the combined Atlantic provinces, in 1996 dollars, through
harmonization. This is the 11 per cent that gets reduced to eight per cent, and
the money that stays back in the hands of that business owner so that he can
employ more people, create more jobs and stimulate the Atlantic economy.
I want to raise a point here that is significant. Everyone is saying "Why
the Atlantic? Why these three little provinces?" I just heard the senator
here a few minutes ago, "Us, little provinces; so small; Why us?" To
illustrate my answer to that, I would point to the time when Medicare came in,
in the 1960s -- and this is very important -- two provinces joined on; two
provinces joined Medicare in the beginning, and it took an entire period of six
years to harmonize the rest of the Canadian provinces into the Medicare system
that we love and respect and would die for today. Something that is very
significant here is that such schemes must begin somewhere, and I say let it
begin with us.
Recently, I have had many people sending me letters regarding Lee Valley Tools
of Ottawa, and also warehousing in New York. As many of you know, sitting on
the Finance Committee, we hear witnesses from across this country in every
sector of the economy, and so often I find myself asking myself: Do I defend
these people who simply have a warehouse, and bring in goods from Taiwan? They
ship them through a warehouse, or through a customs office, and then they sell
them to our people. Money goes out; nothing stays here to generate anything in
This is what Lee Valley Tools is about. At present they are lobbying down here
in the Atlantic region; 25,000 letters: Buy through catalogue sales from
Ottawa, or New York, or wherever. I say to those people who want to support Lee
Valley Tools: "Sure, that is good, but what happens to our economy? The
money goes out, they invest nothing in jobs in this region, in regenerating our
economy for sustainability." I will not sit here and cry or bleed for Lee
Valley Tools, or anybody like that from other parts of the country, who are not
supporting the Atlantic economy.
A long list of people have indicated support for harmonization and for
tax-inclusive pricing. It is not a straight question of yes and no, but among
those who have continued to support the harmonized goods and service tax are:
Certified General Accountants of Canada, Alliance Manufacturers and Exporters
of Canada, Canadian Council of Grocery Distributors, the Atlantic Building
Supply Association, Canadian Automobile Association, Canadian Federation of
Independent Business, Co-op stores -- they are advertising in their magazines
now, "What you see is what you pay," and so on. Elizabeth Weir from
APEC, the Atlantic Provinces Economic Council. The advantages of this tax for
the Atlantic region far outweigh any disadvantages. It is merely a
simplification of taxation. It breaks down interprovincial trade barriers, and
the tax is not inflationary.
I want to come back for a moment here just to report on the letter that I
received yesterday in Ottawa, addressed to the Honourable Colin Kenny, and it
is from the Retail Council of Canada who presented before you in Ottawa just a
few days ago. In that letter, because I think they feel that they have been
misrepresented, I would like to reiterate what was said before your committee.
It is headed:
Retail Council of Canada strongly supports the move to harmonized sales tax.
This is a three-page letter, I have taken the liberty of providing a copy of it
to your colleagues on the Banking Committee, and to Atlantic Canada MPs and
MLAs so that they, too, can be reassured that the Retail Council and government
representatives will continue to work on the transition to the new tax system.
That is from the Retail Council of Canada, ladies and gentlemen.
I would comment upon the fact that we have had some adverse comments reported in
the press here, such as those from our Senator John Buchanan -- and this is The
Chronicle-Herald of Thursday, February 27. He is reported to have said:
The BST will hurt low and middle-income Canadians, as well as tenants who will
have to pay additional rent under harmonization.
I would like to challenge the senator here and now, and reiterate that rent will
not be taxed in residential areas, and commercial rents will be as they have
been before. They will be taxed, and you will get your rebate under commercial
As well, I would like to say that it is all quite interesting to me, the facts
of how this tax began originally in 1990. We go back to that point, and we
leave the Senate open for criticism at most times. In 1990, a group of eight
senators was appointed on September 27, and I would like to name them. Before
doing so, however, let me tell you that there were actually 24 senators
appointed by Brian Mulroney: 24 Conservative senators, in a period of less than
30 days in 1990. The twenty-four were: Michael Forrestall, James Ross, Normand
Grimard, Thérèse Lavoie-Roux, Janis Johnson, Eric Berntson, Pat
Carney, Mario Belliveau, Nancy Teed, Gérald Comeau, Consiglio Di Nino,
Richard Hatfield, Donald Oliver, John Sylvain, John Buchanan, Noël
Kinsella, Claude Castonguay, John Lynch-Staunton, Trevor Eyton, Mabel DeWare,
James Kelleher and Walter Twinn. Twenty-four Progressive Conservative senators
appointed between August 30, 1990 and September 27, 1990, to bring in the GST.
Here we are today, before that same appointed body, with some of them attempting
to discredit a harmonized tax that will serve the Atlantic region like no other
Honourable senators, let me give you a bit of my background: I come from a
lumbering family, a family that spent many generations in sustainable lumbering
in rural New Brunswick, a business that is still going on today. Therefore, as
a child, I grew up in a business family. As an adult person, my former husband
and I began a company from practically nothing called Dominion Biologicals
Limited that became very successful. That company created jobs for young
scientists here in Atlantic Canada. We were naive, but we were idealists as
well, enough that we would put our money where our mouths were in order to
That is why I am here today; because I believe in the Atlantic region. I have a
long history in the Atlantic region, and it is all about having a sustainable
economy. We have not had that in this region for a long time, and I am told
that people will generate jobs here from this tax. People will relocate here,
and we must work on our assets and on our strengths. I have a sister in this
city here who has nine businesses, she and her husband and family. Each and
every one of those businesses, from manufacturing to retailing, will benefit
from the harmonized sales tax. When I asked them, "How does it help you?"
"How does it hurt you?" the reply was "It is good for us."
I would like to talk again about the tax-inclusive pricing. When a business gets
a rebate of 15 per cent, they have this money in their hands to generate more
manufacturing, to generate more jobs, and they also have the opportunity to
pass some of those savings on to the consumer. I not only represent business,
but consumers. There are close to 85,000 constituents in Cumberland-Colchester,
and they have said to me that they want tax-in pricing. We have the survey of
February 13th, 1997, and 79 per cent under the Ekos survey want tax-inclusive
pricing. This is because the price they see is the price they will get. This is
the concept that has operated under the value added tax. It is one system. You
do not break it down and give business the benefit of the 15 per cent rebate,
and say, "Fine, we will just harmonize." Instead, you pass on some of
the savings through tax-inclusive pricing, so that the consumer has some of the
benefit, because this is about a total, complex society.
Honourable senators, I will finish with that, and be pleased to answer any
questions that you might direct.
Senator Comeau: Mrs. Brushett, elected member of the House of Commons Committee,
you spent only three days of hearings in Ottawa on a bill that impacts on Nova
Scotia, Newfoundland and New Brunswick. Parliament was not sitting, so most of
the press gallery was away. The committee did not hear from ministers, neither
federal nor provincial. Witnesses were given three minutes only. Now that the
unelected members of Parliament are here in Atlantic Canada to listen to the
concerns of constituents, you decide to appear before us. In fact, as elected
members of the Parliament of Canada, what you have done is denied your own
You come here telling us that you have conducted polls, and that because of
these polls, you want to implement such things as tax-in pricing. Why did you
deny your own constituents here in Atlantic Canada the opportunity to come and
say those things to your committee that they have been saying to us for the
past week? Second, with respect to tax-in pricing, do you think it is proper for
elected members of Parliament to base public policy on public opinion polls?
Are public opinion polls to be the way of public policy of the future?
Ms Brushett: I will first address the point about the hearings in Ottawa. These
were held over three days. I sat there, day and night. There were plenty of
press there because some of them today are here in this room. We did have John
Hamm, Conservative party leader in the province of Nova Scotia. We had Alan
Billiard, a Tory-nominated candidate for the riding of Dartmouth. We had Robert
Chisholm, the NDP candidate. There was no one, no single person who was denied
the opportunity to have their way paid to Ottawa to present before the Standing
Committee on Finance, and we would have sat day and night. No one was denied
This is the second point: We had been in the Atlantic region in November of
1996, and the public again could have spoken on any issue, pre-budget, GST --
anything during that period in November. Less than two months previous to the
time you are talking about, we had been here in this very city. Therefore the
public did have the opportunity to have its say.
As far as I, myself, am concerned, I made that opportunity. I put notices in the
paper; advertisements. Anyone at all can come to Ottawa; no one was denied the
opportunity. I want that very clear for the record. Absolutely no one was
denied a paid trip to Ottawa to present their views.
Second, in terms of the public, I consider myself an experienced businesswoman.
I am not sure how many around this table here today have been in business,
having to meet the banker, face the payroll, generate jobs and manufacture for
the Canadian public, so that they can know the value of what it will mean to
stimulate an economy that will be more sustainable, with a vision for the
We do not base anything on public opinion polls. Mr. Chairman, on dealing with
this tax, the answer has been in the works since 1989 and 1990, and from the
very beginning harmonization was what the public discussed. I presented a
thesis which was an entirely alternative view back in 1993, early 1994, but it
was not accepted because the provinces want eventual harmonization. It is a
matter of arriving at a tax rate that is acceptable, where there is some
advantage to them, because it does simplify taxation.
Senator Losier-Cool: It is nice to see you here, and thank you for coming to the
committee. I must say that I see you work on the hill up in Ottawa at the
Atlantic caucus, at the national caucus, at the women's caucus, and I see you
express so often the concerns of your constituents, and very often I think to
myself "Those people do not know to what extent they are lucky, that they
have a person who works so hard and who tries so much." Sometimes I meet
you and you tell me "I was up at 6 o'clock in the morning," and you
try so much to allay the concerns of your constituents. I think they are lucky.
Because you are in business, and we have heard in Newfoundland from large and
small craft shops, and they say that there would be the $30,000 tax rebate. Did
you hear about any concerns from your people, and you mentioned some businesses
that you have about that?
Ms Brushett: Indeed, there are many concerns on this tax because it is a very
complex tax. It is not simple. However, there will still be the same threshold
of $30,000; that anyone who is not grossing more than $30,000 will be exempt.
As well, the benefit of being in Ottawa for the hearings was that we had the
finance experts from the department sitting behind us, and we could make
amendments in response to many of the concerns on the spot. That was a
tremendous advantage of having your department available to go and sit with
your witness as soon as they presented their case. We dealt with a lot of issues
in that area, such as in relation to catalogue sales, and the need to put
disclaimers in catalogues as opposed to including the price for one region of
the country only, so that it could be simplified as much as possible and not
make their life difficult. This tax is intended to benefit our economy, and not
to make things more difficult for those people who are in business.
In terms of the smaller businesses, yes, there is a benefit to them as well.
Crafters have expressed some concerns, but I believe that most of those
concerns were already addressed, just as the insurance sector before us were
addressed regarding their segregated trust funds. Those were being addressed
and the final outcome, obviously has not been settled completely, but there are
means of addressing these things.
I believe people have a confidence in the tax because already Lawton's Drug
Store, for example, has listed the two prices. I went in there to buy a pen the
other day, and they had the tax-out pricing of the pen plus GST. Then they have
the total tax-inclusive pricing. However, they are not charging the reduced
rate at this time until April 1, but they already have it in the works. Ordinary
people are more capable consumers than sometimes we give them credit for, and
consumers are knowledgeable about this tax.
The Chairman: Our next witnesses are Mr. Larry Wark, First Vice-President of the
Nova Scotia Federation of Labour, and David Peters, President of the Nova
Scotia Government Employees Union.
Mr. Larry Wark, First Vice-President, Nova Scotia Federation of Labour: We
welcome the opportunity to appear before the committee here this morning. I say
it must be a little difficult for some of the committee members, considering
the mess we find ourselves in today as a direct result of the implementation of
the GST to begin with.
However, I think it is fair to say that this new tax, the blended sales tax,
though in some people's eyes it may be a boom -- for instance, to those who are
buying big-ticket items such as automobiles, furniture and other high-cost
commodities of life, if you take a look at it from the ordinary consumers'
point of view, I think you will find that on the regular staples, the things
that we use week in and week out, this new blended sales tax will cause a great
deal of difficulty for the average Nova Scotian. Obviously, I do not think it
is any great surprise that I, one more time -- and in this instance even much
of the business community -- find that this tax will not bring the promise of
jobs and a more fair system to the public at large, because obviously those who
can afford to pay the least will be hit the hardest, as a number of consumer
products which previously did not have this tax on them are about to do so.
Therefore we would just want to make it clear that, in the beginning, it is our
opinion that the key thing to this government strategy is that we are really
taxing those who can least afford to pay this tax. We consider the tax
basically to be an unfair tax, and there would have been a much better way to
carry out this plan than what the federal and provincial government have decided
is a better way of taxation.
Mr. David Peters, President, Nova Scotia Government Employees Union: I also
appreciate the opportunity to be here this morning along with the Nova Scotia
Federation of Labour. This is the third time I have appeared before a
legislative committee about the BST/HST, and I hope that your presence here in
this region finally means that our concerns are being taken seriously. In my
opening remarks, I want to briefly discuss our concerns with the process being
used for this legislation, the content of the bill itself, its likely impact on
Nova Scotians in general, and its likely impact on provincial finances and
The Chairman: I wonder if you might sort of hit the highlights of your brief,
because we will read your brief, you can be absolutely sure of that; but we
find that the dialogue is very helpful.
Mr. Peters: Thank you, Mr. Chairman. Regarding the process, we are very
frustrated with the process followed with respect to this bill and the whole
tax merger. There has been virtually no opportunity for the public to
participate in a meaningful way at any stage of the development of this tax. The
real insult or injury for us was the unwillingness of the House of Commons
Standing Committee on Finance to hold hearings in the provinces affected by the
new tax, and not just in Ottawa.
Regarding the content of the legislation itself, while we criticized the Nova
Scotia government for producing a skimpy, seven-page bill that was devoid of
any meaningful content, we are troubled on the other hand by the massive 355
pages of this very technical federal bill. The legislation is clearly designed
to confuse the public about what this new tax will mean, and to undermine
legislative authority and public accountability.
The complexity of this bill presents a serious problem for its implementation,
especially considering that most other provinces are not in agreement with it.
Regarding the impact on Nova Scotians, probably what is most disturbing to us
is how regressive this tax will be for most Nova Scotians, and how much it will
further impoverish many of our people. The new tax will add still more financial
burdens for the members of my union, both at home and at work, because in order
for the provincial government to recover the HST, now they will not allow any
third party billings for travel and accommodations, and so our members are
forced to pay those out of pocket, and wait to recover those costs.
There is no evidence at all; no concrete evidence that thousands of new jobs
will be created, as claimed at least here in this province. In fact, the exact
opposite is true. The provincial homebuilders have said that the new tax will
take away more than 2,000 jobs in the housing sector alone. In this province,
our government was so desperate for some good news about the HST that it asked
our staff in the Department of Finance for names of businesses which would
benefit from this new legislation, and did not ask them for the names of
businesses which would not benefit by it. We asked for an apology to our
members for that, and we have received such an apology.
With respect to the impact of this tax on provincial finances, we are equally
troubled that the new tax will accelerate what the Canada Health and Social
Transfer has started, namely a massive reduction in government funding for
essential social programs such as health, social services and post-secondary
education. In our view, this effect will accelerate and cause huge service
terminations, because the net effect to the provincial revenues in this province
is a net loss in revenues, and the burden is all being placed on the backs of
ordinary Nova Scotians by the increased tax on the new services and goods to
which it will apply -- and it will apply to some of the very basic things, such
as electricity costs, heating fuels, clothing under $93, children's shoes and so
In conclusion, we see the tax as simply a tax grab that will decrease the
standard of living for most people in our region, while at the same time
enhancing and extending the power and influence of the corporate sector.
We therefore recommend that this committee, and all members of the Senate, do
everything in their power to prevent the passage of Bill C-70 until:
D Bill C-70 and the federal-provincial agreements have been taken out for
extensive public consultation, at least in the Atlantic region;
D this legislation has been revised to include written guarantees of more
meaningful moneys for individuals, less burdens to small businesses and stable,
sufficient funding for the programs of the government, especially for health,
education and community services.
D it includes the federal-provincial agreement and no overrides or restrictions
of other existing federal and provincial legislation.
D a comprehensive review of taxes is done with a view to establishing a truly
progressive tax system with much fewer tax burdens on low and middle-income
Canadians and small businesses.
Failure to stop this tax will do irreparable harm to the ties that bind our
region to this country, especially considering the way in which it is being
rammed down our throats, and the fact that it is only being implemented in this
region at this time. We thank the Senate committee for coming to our region and
allowing us to express our views.
Senator Oliver: These are excellent briefs, and very helpful in our
There are two areas that I would like to discuss with you, and the first is the
tax-included price. Second, I would like to ask you something about tax evasion
and the underground economy that may come into being as one of the results of
this new tax.
The first is tax-included pricing. When we were in New Brunswick, in
Newfoundland and now in Nova Scotia, ordinary Canadians -- the elderly on fixed
incomes, the poor, retailers, and ordinary customers and consumers have said to
us, "This tax-included pricing is wrong, because when we look at it and
analyze it, we realize that the whole concept of tax-included pricing will add
more cost to the goods we will buy."
We have also been told by experts, such as ministers of finance, that the
tax-included pricing component of this harmonization is severable, and is
separate and distinct from the harmonization; that is, the blending of the GST
and the provincial tax.
My question is, have you had representations from your members with respect to
doing something about this tax-included pricing, and if so, what have they said
Mr. Peters: The tax-included pricing makes it a hidden tax. As many of you
certainly will recall at the time when we got rid of the manufacturers sales
tax, that was because it was a hidden tax, and taxes should be visible to
people right up front. We believe that that should still be the case so that
people can identify what the cost of the product is, and what the taxes on it
are. We should not be deceitful or deceptive to the general public.
Some of the ways of dealing with that, such as putting up signs in these large
stores, and so on, you are absolutely correct, that will only further confuse
and confound consumers who are not used to dealing with figures as a normal
part of their daily life.
Mr. Wark: Obviously you would not have had the opportunity, senators, to view a
lot of the local media down in the Atlantic provinces, but if you take a look
at any of these surveys that have been done, and any of the reporting that has
gone on local television down here, every member of the public interviewed says
that to hide the tax makes it seem like there is something even more fraudulent
than what they believe has already occurred here.
Obviously, I do not know what the problem is with saying "The price is $2,
and here is the tax on your two bucks," because most people, I think, are
concerned with the fact that if there was a sale, they would not know what was
on sale, the taxes or the product. I mean, how can you tell? I do not know any
more, because all I can see is this one big boom. The whole idea that you would
have to hide the tax, I think, casts a shadow that something else is wrong,
even if there is not. The perception is, why do you have to do that?
Obviously, if we take gas taxes as an example, every now and then when the gas
companies and all these others come out and say, "Here are the taxes and
here is the real price of a gallon of gas," everybody flips. I think This
is the impression that has been left in a lot of minds in the Atlantic
provinces: "Here we go again." If they change anything, we will never
really know what it is because you cannot see it.
Senator Oliver: Can I get your view on the second question I asked?
Mr. Peters: There is another, very important point to be made here. As you know,
this tax will cost consumers, but there are some savings to business involved
in that. However, while it was suggested that those savings would be passed on
to consumers, the cost of repricing to include the tax will be paid by the
businesses, and therefore there will be no flow-through savings to the consumer.
There is, indeed, an added cost to businesses in respect of repricing. National
brands will not have a taxed-in price, but local businesses must include that
tax when they are pricing the stuff for their own shelves.
Senator Oliver: Could you comment on the second point about driving some stuff
underground, and the new underground economy as a result of this new harmonized
Mr. Peters: Yes. I am not too sure how aware members of the Senate are about the
black market in this area of the country. I will use tobacco as one example.
The legitimate taxes being lost on the underground sale of tobacco in this
province is significant; astronomical, really. This is exactly what will happen
in relation to some of the goods and services that were not taxed in the past,
but will now carry the new. Obviously, people whose budgets are stretched to
the limit will be looking for ways around this tax, and there are individuals
out there who will provide those goods and services and bypass the tax
Mr. Wark: I think the other thing about the underground economy and what that
does to taxes in general is that what happens in Toronto does not relate to
what happens here. This is a very rural part of our country, and in the smaller
communities there is a great deal of opportunity to avoid the tax man by doing
things in a significantly different way that is not visible; that is not even
detectable, in most instances. However, it does go on, because people talk
about it. They say to themselves, "I am not paying that. We will do it
some other way," and they get around it.
You would think that provincial governments in rural provinces such as Nova
Scotia and New Brunswick, Newfoundland and whatnot would understand that if you
want to create a viable and really vibrant underground market, do it in rural
communities where nobody gets to see very much. What is more, the people who
operate in that way are not about to come to Halifax and make a big
pronouncement about it to anybody in government, either way. What this does is
provide another reason for people who normally would pay their taxes, not to
Senator Rompkey: On the other hand, we have heard that with the flowthrough of
imbedded taxes, there might be some incentive for people to register that that
was not there before, so that they can take advantage of those flowthroughs.
However, Senator Oliver made the distinction between the tax-in price and the
HST itself. While it is true, I think, that most of the business groups which
have come before us have been against tax-in pricing -- clearly, that has been
the position of most of them -- it is also fair to say that the position of
most of them has been that they are for the harmonized sales tax, and think that
it will have a beneficial effect on the Nova Scotia economy, and thereby will
On the issue of the harmonized sales tax itself, have you had a dialogue with
small business? This morning we heard from Mr. O'Brien of the Canadian
Federation of Independent Business, an association that represents quite a few
small businesses in the Atlantic area, and indeed all over the country. Mr.
O'Brien said that while marginally his people were for the tax-in pricing, his
organization was against it. However, they were certainly very favourably
disposed towards the harmonized sales tax. Have you had a dialogue with small
business at all about the impact of the taxes and the job creation that might
flow from it?
Mr. Wark: Not on a direct basis, but as the Federation of Labour, of course, we
talked to Mr. O'Brien and other people like him. However, the part that we find
confusing is that the Automobile Dealers Association here in Nova Scotia are
raving because they will hold the 17 per cent, and keep that on until 1999, so
if anybody thought they might get a deal here on a blended tax which will be 15
per cent come April 1 -- and this is what makes it very confusing -- but not
for autos. In other words, where there might have been a saving, there will not
be because we are not doing it that way. Let me tell you that that is different
from what Newfoundland did. This is becoming very confusing with respect to
what business really view as a good or bad advantage.
I would think that small business may see some degree of savings in here. We
were told the same thing when we got rid of the manufacturers sales tax and
replaced it with the GST: that consumers would see not only job creation but
also a reduction in prices. I can tell you that there is not one person in
Canada who could point and show me where the price of an automobile went down
because they saved 6 per cent.
I do not believe that there is a flow of jobs or savings to the public at large
when these kind of taxes and this kind of revamping of taxation takes place,
but there is some confusion in the business community in that respect. Maybe
Mr. O'Brien's group might view this as a boon. However, if you listen to other
people who represent other interests in the business community, they do not see
this as quite such a boon. I think a lot of that is because we were not even
consistent in what we told the public we were doing. We are now changing the
rules, even in the Atlantic provinces, from province to province. It will
certainly not going to equate with the predictions that everybody wants to make
to this committee.
Mr. Peters: Perhaps I could just add to those comments, senator. In fact, I
would challenge anybody to produce evidence that this change in taxing methods
will create jobs. We have the statement from the home builders here in this
province that 2,000 jobs will be lost. That is not my statement; it is theirs.
The way I see it, the extra estimated at $84 million that will come out of
consumers' pockets will have the opposite effect, in fact, because it is
consumer spending that creates jobs.
With respect to the advantage to business, businesses are already saying that
there is very little, if any, advantage to them, so there will be no job
creation there. The loss of the $84 million that consumers will now be paying
in taxes will not be recirculated in the economy, and therefore will not create
any jobs; in fact, it will create a net job loss. That is the way we see it,
after discussion with small businesses within our own membership.
The Chairman: Thank you very much for appearing here today, gentlemen. We
appreciate your taking the time to attend. Thank you also for taking the time
to give us written briefs, because that will be really helpful to us.
Honourable senators, our next witnesses are Daryl Lingley from the Halifax
County Business Association, Terry Norman, Co-Chair of the Metropolitan Halifax
Chamber of Commerce Task Force on HST; Valerie Payn, General Manager of the
Metropolitan Halifax Chamber of Commerce, and Dan Boyd from the Windsor Town
Mr. Daryl Lingley, President, Halifax County Business Association: Mr. Chairman,
honourable senators, good morning. My name is Daryl Lingley, and I am President
of the Halifax County Business Association. We are a relatively small group of
business people, engaging in various business activities, whose major
objectives include less bureaucracy within government, certainly a more
equitable tax structure, and sincerity from government regarding the small
business sector as one of the major engines driving the Canadian economy. I
guess I will add that obviously those are bread and butter issues to most small
The debate, confusion and frustration regarding the GST from its inception, and
now the same circumstances surrounding the HST, represents a prime example of
how business loses valuable, productive time, thereby reducing our efforts in
operating our businesses when those efforts are most needed. As individual
consumers, we continue to see our take-home pay eroding -- that is, when we can
afford to take home some pay. Our standard of living is going in a reverse
direction. When we see our basic cost of living being dramatically increased
due to the HST additional charges on electricity, heating fuels, gasoline, et
cetera, and any other key items, what are we to really think and do?
What about that new home that some of us were about to buy, let us say in the
price range of $125,000? It will now cost us between $5,000 and $10,000 more in
additional tax dollars. There goes a good portion of the downpayment that would
have been proferred by many consumers in this part of the country. The result
is that we do not buy the house.
Who also loses? The small businessman loses, of course. The real estate agent,
contractors, developers and so on. I might also add that charging the HST on my
second-hand car which I wish to sell to my brother, or an aunt, or somebody
else, how can it be justified? I cannot justify it. However, referring now to
our own businesses, and the effects that the HST will have on those businesses,
it is obvious that the less consumers have to spend, the less products or
services we will be providing. We feel it is counterproductive to where the
economy is really supposed to be going.
When our group recently met to discuss the merits of making this presentation,
it was with much scepticism on the part of many of our members. The time factor
involved in properly preparing, the lack of HST details available on specific
business activities, and the general confusion over the HST, instigated many
negative feelings and responses. One or two of our more radical members -- and I
use the term `radical' with some trepidation -- suggested a dog and pony show
to get your attention. They insisted that you hear the real facts about the
hardships of small business in Nova Scotia in a really graphic, memorable way.
Since I was expected to be the dog and pony show, I exercised my authority as
president, and as you can see, decorum has prevailed. However, I had to make one
concession, and you will note several business cartoons enclosed with our
copies of this presentation; the cartoons really get to the heart of our
concerns and matters.
Over and above all of our frustrations, two issues stand out clearly, and
indicate why we mistrust the government in particular on this matter.
Partisanship is one of those issues, and as a business group, and therefore
apolitical, we feel that if there was less partisanship, perhaps our elected
officials would use more common sense in these governmental processes.
The second issue really gets under our skin. During the provincial and federal
legislative process, each level of government held public hearings. We, the
people, spent a tremendous amount of time, expense, and anguish on these
hearings. We, the people, were completely ignored on the recommendations that
were made. The feds did not even have the common courtesy to come to Atlantic
Canada to hold their hearings. In addition, each level of government invoked, or
threatened to invoke, closure or other means to stifle the HST debate in the
respective houses. Is it any wonder that we are truly frustrated over the HST
issue? I think not, and I trust we have made our point.
I sincerely thank you, senators, for the interest and concern you have shown in
convening this committee, and for the opportunity to present out views. I thank
you on behalf of the members of the Halifax County Business Association.
The Deputy Chairman: Honourable senators, just for your information if you have
not seen it, the cartoons the gentleman referred to are attached as an appendix
to the brief of the Halifax County Business Association.
Mr. Lingley, I commend you. It was not a bad dog and pony show, either.
Ms Valerie Payn, General Manager, Metropolitan Halifax Chamber of Commerce: Mr.
Chairman, senators, we appreciate the opportunity this morning to present to
the Standing Senate Committee on Banking, Trade and Commerce the views of the
Metropolitan Halifax Chamber of Commerce on the proposed harmonized sales tax.
In April of 1996, the chamber established a task force to research and develop
sound, thoughtful and informed policy recommendations for the chamber's board
of directors. The task force's approach has been an unprecedented commitment of
time and effort by both our staff and the volunteer resources of the chamber.
We conducted extensive consultation process, which included meeting with
several hundred member businesses and organizations, six different chamber
committees and more than a dozen local and national industry associations. In
addition, we had three meetings in Ottawa with the federal government.
Representatives of the federal government also met with us three times here in
Halifax. We have had at least a dozen meetings with our provincial government
over the past months.
The chamber has long supported the principle of converting existing provincial
sales taxes to a value added structure, and we have recognized the inherent
advantages of integrating the federal and provincial sales tax systems. The
chamber strongly supports the harmonized sales tax, but we cannot support the
implementation of mandatory tax-included pricing until a majority of the
provinces have agreed to adopt it.
The primary reasons why we support the harmonized sales tax are that there will
be significant economic benefits and efficiencies for businesses. As a value
added tax, the HST will remove the impairment of the economy's productive
capacity currently imposed by the provincial sales tax. Removing this
impairment will improve the return on investment for business, thereby
facilitating economic growth in Nova Scotia. It will reduce the cost of doing
business and make our exports more competitive, thereby stimulating economic
growth in Nova Scotia. By combining the existing two tax regimes into one, we
will achieve efficiencies by reducing government red tape, thereby freeing up
both government and private sector resources for more productive activities.
We believe that mandatory tax-included pricing is not a taxation issue; rather,
it is a consumer and corporate affairs issue. The harmonized sales tax can
still be implemented without affecting the integrity of the taxation or
economic principles that underlie it, and we can defer mandatory tax-included
pricing until a later time when this can be done on a national basis.
In principle, the chamber does not object to tax-included pricing on a national
scale, provided that the amount of tax paid is clearly disclosed to the
consumer. However, we have major concerns about implementing mandatory
tax-included pricing in just three out of our ten provinces: Nova Scotia, New
Brunswick, and Newfoundland and Labrador. Tax-included pricing should only be
implemented when a majority of the provinces, including Ontario, have agreed to
We believe that regional implementation of tax-included pricing will have
adverse implications for business and consumers within the Atlantic harmonized
zone because businesses within the harmonized zone may not be able to fully
participate in the national distribution and merchandising systems, which
operate on a tax-excluded pricing basis. There will be additional costs
associated with merchandising, such as re-tagging and advertising products for
tax-included pricing. These costs will fall upon businesses and consumers
within these three small provinces. In addition, tax-included pricing would
make it more difficult for our regional retailers to expand outside our region
because merchandising will be in a different zone than the rest of the country.
We believe that tax-included pricing in just three provinces could lead
consumers to perceive that local prices are higher than in the rest of the
country when in fact they are the same, or even lower. This would adversely
impact not only the retail sector but also other sectors such as tourism, which
is a very important part of our regional economy.
We also believe that the benefits to the consumer that will result from the
flow-through of input tax credits under the harmonized sales tax could be
masked as a result of implementing tax-included pricing at the same time. This
may create the impression that taxes overall have increased, even though they
have been reduced from 18.8 per cent to 15 per cent in many cases.
In 25 days, businesses in Canada must start collecting the harmonized sales tax,
and within 31 days they must start to implement tax-included pricing. As our
presence here today indicates, the harmonized sales tax is not yet law. We
strongly believe that harmonized sales tax should be implemented on schedule on
April 1st, 1997, because it will provide substantial economic benefits for Nova
Scotia. However, we strongly urge the government to delay the implementation of
The government has indicated that it will not enforce tax-included pricing until
August 1st of 1997, provided that businesses are making an effort to implement
it. This is ambiguous and is open to arbitrary application. We believe that
tax-included pricing should not be implemented at this time, and a clear
statement should be made to that effect.
To summarize our recommendations, the Metropolitan Halifax Chamber of Commerce
fully supports the harmonized sales tax, and we strongly urge the Government of
Canada to implement it on schedule on April 1st, 1997. However, we recommend
that tax-included pricing should be deferred until a majority of the provinces,
including Ontario, have agreed to participate.
The Chairman: I assume, Mr. Norman, that you do not intend to add anything. You
are waiting for questions?
Ms Payn: Mr. Norman will help me answer the questions that you might have.
Mr. Dan Boyd, Councillor, Town of Windsor, Nova Scotia: Thank you very much for
allowing me this opportunity to appear before you today. My remarks this
morning are on the negative effect that the new blended sales tax will have on
municipal governments in Nova Scotia, but more in particular the Town of
Windsor where I serve as an elected member of the Town Council.
Our provincial government has refused to take the case to the federal government
to continue exemption for municipal units for the provincial portion of the
tax. The result of this is that all municipalities will be paying millions of
dollars in additional taxes to the province. This can only result in increases
in property taxes just to maintain the same level of service as last year.
The proposed legislation, in its present form, must be scrapped so that
discriminatory costs to Nova Scotia municipalities -- and I add exorbitant tax
increases to the ratepayers -- will not be the end result. In the case of
Windsor where I serve, we have calculated the additional tax that we will have
to pay this coming year on operations alone, and I want to stress this figure:
It will be $80,000.
On top of the additional tax on operations, we will be faced with a huge
increase in tax on capital projects undertaken under the federal-provincial
infrastructure program. If we were to continue to provide sewer, water and
street works at the same level as in the past two years, we would be faced with
borrowing an additional $472,000 to cover the additional tax just to accomplish
the same amount of work. These are added costs that a small town of 3,800
residents simply cannot afford.
On behalf of the citizens of Windsor, I urge this committee to ensure that the
legislation is not passed in its present form, and to ensure that municipal
governments in this province are not hit with a totally unnecessary tax grab by
the provincial government through the blending of the provincial sales tax with
the GST, because we simply cannot afford it.
The Chairman: Thank you, Mr. Boyd. I want to make sure I understand the problem.
The problem arises because, at the present moment, you pay the GST on municipal
purchases, am I correct on that?
Mr. Boyd: Yes, you are.
The Chairman: Essentially, the problem is caused by the fact that the blending
of the tax -- or another way to describe it would be the broadening of the tax
base -- means that now, on provincial purchases, you will pay an 8-per-cent
provincial sales tax, in effect, that being the 8 per cent that is part of the
Mr. Boyd: Exactly.
The Chairman: Therefore it is the broadening of the tax base that has caused the
Mr. Boyd: That is right. We have always paid the GST, but hitherto, we have been
rebated a portion, 57 per cent.
The Chairman: Is there any plan that you know of to rebate any portion of the
Mr. Boyd: There have been negotiations, and we understand this through
newsletters from the president of the Union of Nova Scotia Municipalities, but
in any of the newsletters I have read, the negotiations are not going anywhere.
The Chairman: Your problem is the broadening of the provincial tax?
Mr. Boyd: Exactly.
Senator Rompkey: I just wanted to be clear on the position of business, because
I see some differences between what the Halifax County Business Association is
saying and what Valerie Payn is saying on behalf of the Metropolitan Halifax
Chamber of Commerce. Indeed, I seem to have been clear on the position of the
business groups that have come before us. I understand that they are against
tax-in pricing, but it is also very clear that they are strongly supportive of
the harmonized sales tax. The Metropolitan Halifax Chamber of Commerce has
indicated the reasons why that is so again this morning.
However, the cartoons that we have seen says "Vote for the HST and destroy
our customers;" "Help drive business deeper underground. Vote for the
HST;" and "It's just another tax grab."
I am confused. I want to be clear on what the position is of business in Nova
Scotia, and perhaps you two have had some conversations, and I am wondering
whether there is, in fact, a difference between you or not.
Ms Payn: Perhaps the best way to answer that would be for both of us to tell you
a little bit about the organization, and I will be brief. The Metropolitan
Halifax Chamber of Commerce is the only chamber of commerce for the
Metropolitan Halifax area, which is composed of the former communities of
Halifax, Dartmouth, Bedford and Sackville. We have a population base of
approximately 330,000 people. Our membership is a broad sector of all types of
businesses representing 2,300 members in this community.
Mr. Lingley: There certainly is a difference. The Halifax County Business
Association originated in the former county of Halifax, although we have
members throughout the whole of the metropolitan area. It was organized mostly
through a group of land developers, small construction companies, trucking
associations and a number of groups like that; individual businesses that were
having a lot of problems: environmental problems, taxation problems, planning
and development problems. We have very few retailers in our group, but
certainly several that we do have have expressed limited concern over the GST
situation, with the exception of what Ms Payn mentions.
With respect to our concerns, as I say, I guess we are more of a watchdog group
on those broader issues, and particularly in the area of added costs to the
consumer, we just see those added taxes stifling our businesses, or much of the
small business community that we represent. We do not disagree 100 per cent,
but there are some areas there that were going in a little different direction,
I believe. Have I confused you more?
Mr. Terry Norman, Member, Board of Directors, Co-Chair of HST Task Force,
Metropolitan Halifax Chamber of Commerce: Perhaps I might also respond to that.
Our task force was formed in April of 1996, and it was formed by a broad
cross-section of our membership in Halifax, including experts on taxation and
members from the retail sector. What we did, first of all, was talk to all of
the businesses which are members of our chamber, and try to determine where
there appeared to be problems with the proposed HST.
We then presented a report on that survey to both the federal and provincial
governments. We had very good, ongoing discussions, dialogue back and forth. As
a result, back in August we presented a position on five points that we felt
should be changed. Four of those five points were adjusted, and we were very
pleased to see that. The fifth one, being tax-included pricing, has not been
changed at this point.
However, we have also had a lot of discussion with other chambers of commerce in
Atlantic Canada, as well as the Canadian chamber. We participated through the
Canadian chamber's tax committee as well. Therefore, this is a task force that
has done a lot of homework. We are probably the most experienced in the country
on this issue at this point in time, and have provided information to other
chambers to assist them in their efforts. I might add that this has been an
ongoing effort over the past year, with a very large number of hours of time
committed by volunteers from the chamber.
Senator Rompkey: Ted Williams, of course, would have thought that four hits in
five times at bat was a pretty good average. In addition, there has been a
great deal of discussion about your fifth point. Let me just ask you in
conclusion: Is it your position that the majority of business in Nova Scotia,
both small and large, while they may have serious concerns about the tax-in
pricing, are fully committed to the harmonized sales tax as a measure? Is that
Mr. Norman: That is very clearly the case, that the majority of businesses see
that the harmonized sales tax will be very beneficial to them, and it will be a
real boost to the economy in Nova Scotia. It will create jobs in Nova Scotia,
contrary to what you may have heard otherwise. We have looked at this whole
area in detail. We have done detailed economic analysis of it, and it is very
clear that this is a positive move for Nova Scotia businesses and consumers.
Senator Rompkey: Just on the underground economy, we heard both sides of that
argument; that it will drive more people underground, or it will bring them up
out of the underground because they can now register for tax flow-throughs.
What do you have to say about that?
Mr. Norman: There certainly is a potential for an increase in the underground
economy as a result of this initiative, because in certain sectors --
construction of housing, for instance -- the small construction firm or
individual could easily do that through the underground economy rather than
registering. However, there is a strong incentive for them to register and get
the tax flow-through themselves.
I think it is something that will need to be monitored closely. However, I think
it is a separate issue that really needs to be addressed separately from the
harmonized sales tax.
Senator Cochrane: Prior to your appearing before us, we heard from some people
representing home builders, and so on, and they were telling us that they are
anticipating 2,000 jobs lost within the region if this harmonized sales tax
With the businesses that you people represent, if this harmonized sales tax goes
through, do you have an estimate as to how many jobs will be lost, or will
there be any lost?
Mr. Norman: I would like to address that issue. Based upon our analysis of the
housing industry, there will be rebates in Nova Scotia to the home builders,
but it appears that there will still be a difference in cost. We are not sure
exactly how much that will be. It appears that it would be in the one to two per
cent range net of the rebates.
There has been a lot of discussion that house pricing will go up significantly
after April 1 and, as a result, there has been quite a boom in house building
during the first three months of this year. We might see a drop off after April
1, just because of that pent-up demand which is flowing through right now. The
net result to housing I do not think will be significant in the long term, and
it will be a matter of working it through the economy. Generally, the
construction sector is very competitive, and if it is a competitive situation
then you will see the flow-through of the input tax credits in the pricing as a
result of that.
We do not expect that there will be a substantial job loss as a result of
harmonized sales tax. There will be some impact, but looking at the situation
over the next year or two, I do not really see a significant impact on the
industry one way or the other.
Senator Cochrane: In the building sector itself, do you see a growth in the
Mr. Norman: We have noticed that there appears to be more in that area. It is
something that we are concerned about, and I think special attention should be
paid to it from both government and industry.
Senator Cochrane: I might ask a question to Ms Payn. You specifically mentioned
tourism, and how tourism will be affected. Could you elaborate on that?
Ms Payn: Actually, if I may, Terry Norman is the gentleman who has been leading
the task force which has been studying all aspects of the impact, so if I might
defer to Terry?
Mr. Norman: There is an impact on the tourism industry because of the broadening
of the tax base. For example, a small bed-and-breakfast guest house would not
be required to charge the harmonized sales tax, whereas a motel with income of
more than $30,000 a year would. There are some particular parts of the tourism
industry that will be affected by this change. We think there could be some
attention paid to that as well, in order to make sure that it is applied evenly
right across the industry.
The concern from the tourism industry, particularly on tax-included pricing, is
that our prices will appear to be higher here than they are in other parts of
the country. If tourists are enquiring by telephone, or over the Internet or
whatever, they must be advised that the price includes taxes. Thus a hotel room
in Halifax, for instance, at $100 a night at the Sheraton, for instance, where
we are right now, must be advertised at $115, whereas that same hotel room in
Toronto at a hundred dollars would be advertised at a hundred dollars, even
though when you check out, you still pay $115.
The concern is that the public will have a perception that would induce them to
therefore travel to somewhere else, rather than to this part of the country,
because they think the prices are higher here when, in fact, they are not.
Senator Cochrane: It is a deterrent to the tourist industry, then; an industry
that is really growing, especially in Atlantic Canada.
Mr. Norman: That is correct; it is one of our major industries, and we want to
do everything that we can to support it, and not have something happen that
would change the perception of tourists and make them go somewhere else. We
think we should be encouraging more people to come here.
Senator Angus: I should like to address one general question to the panel. I
think you have all made excellent presentations. As I said yesterday at the
outset of our morning, we, the Conservative senators, intend to insist upon the
delay of the institution of tax-in pricing. We intend to move on this when we
get back to Ottawa on Monday morning. I just want to be sure that that is what
you want. We have been, as you know, to Saint John, New Brunswick, and to St.
John's, Newfoundland, and we have heard from some 73 witnesses, who have all
said, both from businesses and from consumers, that the HST part is fine but
the TIP just makes no sense, and they would like to have it out. I would not
want to go ahead and do that if it is not what you want. Could I perhaps have
your confirmation that that is what you would like us to do?
Ms Payn: As I stated in our presentation, the chamber does not oppose tax-in
pricing; rather, it is a "not now" situation. We do not want tax-in
pricing with three provinces as it is currently proposed. On a national scale,
if you were to come and listen to us at a later date when such a move was being
proposed nationally, I think you would hear this chamber of commerce supporting
that move, but not now for the three provinces. Definitely not.
Mr. Lingley: I must agree with Ms Payn. The few members that we have who are in
the retail sector have not expressed any great concern, other than with that
Senator Angus: Right, and I take it, Mr. Boyd, you agree?
Mr. Boyd: That is not my issue; that is not why I am here this morning, in
relation to tax-included pricing.
Senator Angus: I appreciate that that is not something on which you are focused,
but do you have any problem with our opposing it?
Mr. Boyd: Absolutely none.
Senator Angus: Just on that subject, Ms Payn mentioned that they would not be in
agreement with such a move until a number of other Canadian provinces come on
side, including Ontario. For example, if we were to say something like "The
implementation of Bill C-70 should be deferred insofar as it relates to
tax-including pricing. That section will not come into force until such time as,
say, five other Canadian provinces, having at least 50 per cent of the
population of Canada, were to agree..." Would that be something you could
Mr. Norman: That would certainly be an improvement. We believe it is important
to have Ontario on side, though, because many of the retailers are based in
Ontario, and much of the pricing originates from Ontario. It just happens that
if they were to do tax-included pricing right now, it would come out to 15 per
cent, which just happens to be the same as we have here. The retailers in
Ontario tell us that they would be in favour of moving in this direction if it
were done on a national basis, and we think it is important to have Ontario in
on it. If we had five other provinces, but without Ontario, realistically, I
think, it would not work.
The Chairman: I have one last question for Mr. Boyd, although you raised the
issue obviously with respect to the municipality of which you are councillor.
Am I right that the issue you raised is, in fact, an issue -- and presumably
the identical issue -- for all of the municipalities in Nova Scotia?
Mr. Boyd: Very much so.
The Chairman: In other words, it is a group problem; there is nothing unique
about the Windsor situation that affects this issue?
Mr. Boyd: No, it is not unique to the Windsor situation, but I just felt
strongly about it, knowing what it will be like with our budgeting process this
year; it will literally kill us.
The Chairman: I really appreciate you doing that. I just wanted to make sure I
had not missed something in the sense of uniqueness.
Honourable senators, our next group of witnesses are from the Canadian
Pensioners Concerned, from the Federal Superannuates National Association, and
from the Nova Scotia Federation of Seniors. Would those witnesses come forward,
Dr. Myrna E. Slater, Past President, Canadian Pensioners Concerned: On behalf of
Canadian Pensioners Concerned, a non-profit organization, we thank you for the
opportunity to make a presentation on behalf of our members regarding the HST.
We are concerned, indeed insulted, about the process used to develop and to
pass this legislation in this province; in particular, with the lack of
opportunity for residents of this province to have any meaningful input. It
seems to us that this opportunity should have been provided before the
legislation reached this stage.
Statistics Canada reports that there are in excess of 120,000 Nova Scotians aged
65 or older. This accounts for approximately 15 per cent of our total
population. Our research tells us that around 50 per cent of the seniors
population have gross incomes of less than $24,000 per year per household.
While this large sector of the population is our prime concern, we are also
concerned about the effect the HST will have on all Nova Scotians, particularly
the low income earners and families.
I would like to begin -- in case Mr. Chairman cuts me off before I finish --
with the recommendations that we have decided upon which are in the
presentations that you have been given, and they are four in number. Number
one, that the list of products and services to which the HST is to be added
should be reviewed. Every effort must be made to eliminate fuel oil, power,
gasoline and clothing under $94 from this list. Perhaps the adjustment in the
tax rate for other products or a rebate system could be put in place. I think
from the temperature that has prevailed on the two days that you have been
here, you realize how vitally important fuel oil, power and gasoline are to
Number two, as recommended by the Retail Council of Canada, tax-in pricing
should not be implemented until all provinces participate in the tax
harmonization process. Number three, that no changes in the HST rate be
permitted without the agreement of all participating provinces. The
constitutionality of two participating provinces forcing a third province to
accept changes should be investigated.
Number four, with just four weeks left before the implementation of this
regressive tax in Nova Scotia, regulations to the enabling regulation have not
been completed. This has the potential to make it very difficult for businesses
to comply, and further potential to cause confusion for consumers. As you know,
regulations can do strange things to legislation.
I would like to speak to these recommendations, given time. The residents of
this province, including those engaged in the retail businesses sector, express
anxiety about this tax. Among the major concerns voiced by seniors has been the
effect this tax will have on essentials such as fuel, power and transportation.
We have recently experienced a 16-per-cent increase in the price of heating oil,
an increase in the cost of power and one on gasoline. The addition of another
tax makes the burden of these increases even more difficult.
Seniors have also expressed concern regarding the effects that HST may have on
their cost of accommodation. They fear the additional cost to landlords for the
services they must purchase will result in higher rents or fewer services being
provided. They are concerned about increased postal rates, the cost of clothing
and footwear under $94, funeral expenses, which we all must face, and for the
provision of home care workers when supplied by private agencies and not
involving the use of registered nurses or licenced practical nurses. Even
services such as tax preparation and the preparation of wills will cost more
with the addition of the HST.
It has been estimated that, to offset the increases caused by the HST, one would
need to purchase more than $5,000 worth of products which will have lower
costs. Further compounding the issue for seniors is the fact that there have
been other pressures on seniors' incomes resulting in increased costs for their
Pharmacare program, recycling changes and charges, and increased local telephone
rates. In addition, there are seniors who live with unemployment and fixed
incomes constantly who are experiencing lower incomes because of lower than
expected earnings on investments. There are also indications that changes in
federal programs over the next few years may also adversely affect many
seniors. You know what those are.
Media releases indicate that the business community does not favour a tax-in
pricing. They expect no savings from such a system, and in fact believe it will
result in additional costs to them, thereby reducing the chances of any savings
to consumers. We are aware that when the GST was introduced we were told that
the elimination of the FST would see lower prices. This did not happen.
One of the most aggravating aspects of this process has been the lack of
consultation between the government and the taxpayers of this province. Many of
our members have taken the position that those they elected to represent them
have failed to do so. Instead, they supported their party as opposed to their
constituents. It appears to many of us that our provincial government was
anxious to obtain federal funds to help them balance their budget, and eager to
get the federal government off the hook respecting their commitment to the GST.
This can be described as short-term thinking. Here we are, only four weeks
before the HST is to become effective, and the regulations are not yet in
Just before the bill was passed in the Nova Scotia Legislature, we learned that
after the four-year period during which no changes would be made in the tax
rates, any two of the three participating provinces could change the rates
without the consent of the third, and the third province would be forced to
agree. It seems that the constitutionality of this arrangement should be
Mr. Rex Guy, Regional Director, Nova Scotia Region, Federal Superannuates
National Association: While the introduction of the HST, combining the
7-per-cent GST and 11-per-cent provincial tax in one 15-per-cent tax, appears
to be an improvement over the present tax-on-tax situation, the application of
the HST to a broader base of goods and services than that of the provincial
sales tax actually increases the consumer tax burden, and will have a
disproportionately adverse effect on seniors, who tend to be heavier users of
goods and services than other groups.
HST also will, in effect, set New Brunswick, Nova Scotia and Newfoundland apart
from the rest of Canada. I saw a press report the other day that one major
catalogue order establishment in Ontario has announced that their services to
this province will be discontinued. They will not even send their catalogues
out or receive telephone orders from this province, or accept them.
There are indications, too, that the harmonized sales tax is forcing some
businesses to close. In my local newspaper just two days ago there was an
indication that within the Annapolis Valley there were three businesses closing
down, long term businesses, and HST appears to be the straw that forced those
During the last ten years or so, successive government initiatives have slowly
but surely dismantled the retirement benefits, causing a steady erosion of
retirement income; income which will be further reduced by the additional tax
burden coming with HST. The more significant changes were that, in 1986, the
65-year-old income tax credit became reduced from full indexing to inflation
minus three per cent, and that started a whole train of events, such as that
the $1,000 investment income tax deduction was eliminated. That was brought in
to encourage people to have private savings and investments, and the
elimination of that measure affected retired persons harder because of their
reliance on investment income from savings.
Income tax exemptions were converted to tax credits, and that increased the tax
for retired persons with income above the lowest tax bracket, and it goes on.
Old Age Security clawback destroyed the universality of Old Age Security, as
the clawback is based on income. Because its threshold is indexed to the
inflation rate minus three per cent, the clawback affects more and more seniors
each year. There is a detailed list in the printed submission that I have given
It came to fruition in 1995 with two events: the Nova Scotia government changed
its Pharmacare program, which imposed an additional $215 on each person over 65
in this province as a premium for belonging to the Pharmacare program. The fact
that they reduced the co-pay is neither here nor there in that regard. At the
same time, the federal government announced that in 2001, the $1,000 pension
income deduction and the over-65 age deduction will be eliminated for everyone
over the age of 65 in Canada, regardless of whether they elect to remain under
the Old Age Security System and the GIS system, as some of us have the option
of doing. Those two benefits are eliminated, which in fact will increase the
tax burden by between $1,200 and $2,000 a year on those people who are affected
by it: all the people over age 65, that is.
All these retirement benefits were paid for either directly or indirectly during
our working lives, and they were to be there for everyone. People were
encouraged to build on them for financial security in retirement, and now,
having reached retirement, these same people find these benefits being whittled
away, and retirement income shrinking at an alarming rate. This will be
exacerbated by the additional taxes stemming from the harmonized sales tax.
An example of this is my own case. We made preparation for retirement, and I
retired from the Navy in 1983. At that time, we had provided ourselves with a
residence without a mortgage, and done all the good things. At this point now,
just a few years later, we are finding that every month we have to dip into our
savings to make ends meet because the retirement income has diminished at that
rate. Pretty soon, I suppose, it will get even worse, and I will need to find
another place to live, but that is downstream.
Replacing the GST and its piggybacked 11-per-cent PST with a simple harmonized
sales tax of 15 per cent in many cases does reduce the cost to the consumer.
However, it is applied over a greater range of goods and services not
previously subject to the provincial sales tax, many of which are heavily used
by older persons. Taxes on such things as home heating fuel, gasoline, propane,
firewood -- and you have probably heard them listed over and over again --
clothing and footwear, professional and personal services, will increase from 7
per cent to 15 per cent. Electric power, already heavily taxed, increases from
10.21 to 15 per cent.
Another example is my own case. I got my power bill on Monday and I was working
on my visit with you today, so I ran my own power bill through the HST. It goes
up by $30 a month on that one bill. I get six bills a year, so that is 180
bucks a year more on my power bill because of HST.
Because of advancing age or deteriorating health, seniors are not able to carry
out work such as property maintenance and many other, personal services which
in earlier years they were able to accomplish on their own. As they grow older,
they are obliged to purchase these services. Resistance to cold diminishes with
advancing age, and so heating costs go up and more must be spent on warmer
Transportation costs increase in direct proportion to the number of medical
appointments which must be kept, and in this day of diminishing health care
services, considerable distances may be involved. Again, as an example, my
nearest health care service, which until recently was quite conveniently
located four miles from where I live, is now 20 miles away, which is a round
trip of 40 miles every time I go. The additional expense of that is something
that was not allowed for in the beginning.
For all of these reasons, the broader tax base of the harmonized sales tax will
impact heavily on the older population. It has been calculated and well
advertised that the HST, with its broader tax base, will impose an extra tax on
each person in the province of Nova Scotia of $170 to $250 per year. That is an
average. The impact on retired people will be more.
As a partial compensation for the extra tax which will be paid through HST,
provincial income tax is to be reduced starting on July 1 of this year. This
small reduction is said to give the average single senior a $120 tax reduction,
which does not pay for the increase in my power bills. In most cases, it is
insufficient to offset the effect of HST, and will be more than overtaken when
the over-65 tax credit and the $1,000 pension income deduction are abolished in
2001. Provincial income tax may well be a smaller percentage, but it will be a
smaller percentage of a much larger amount.
In summary, HST, with its larger tax base, will seriously diminish discretionary
income within the senior population of Nova Scotia. The reduction in income tax
is not adequate compensation for the added cost of the harmonized sales tax.
Any positive benefit will be lost when the age tax credit and pension income
are abolished. We actually live in the only area of this nation where a 45-cent
postage stamp will cost 52 cents.
I have three recommendations I would like to place before you. The first one is
that the harmonized sales tax be delayed until it can be implemented on an
equitable basis throughout Canada. Failing this, if HST must be enacted on
April 1, 1997, that it be applied to exactly the same tax base as the PST; that
is, without adding tax to goods and services which are not now subject to the
provincial sales tax.
Finally, tax in or tax out seems to give everybody a lot of problems with
product marking and stickers and things. Our recommendation is that that be
left to the discretion of the dealer and the people who send out the
catalogues, provided that the customer is not left in any doubt.
Ms Vivian Macmillan, Representative, Hants County Seniors, Nova Scotia
Federation of Seniors: It seems to me that it has all been said, and my brief
is simple because I am writing it on behalf of grassroots seniors. As you have
heard, we were not consulted; we did not have the chance to make our opinions
known. This why we are thanking the senators for coming to listen.
I am sort of trying to wear two hats, because I have been on the phone for three
days with our president who is storm-stayed. I am really here looking for
answers. We received brochures a week ago, which I am passing around to people,
but that is late, and it does not cover everything.
You have heard all about the concerns, such as heating our own homes, whether it
be with oil, propane or by other means, the tax on clothing and footwear.
Living in one's own home, which is dear to seniors, is a right. As in most
cases, Nova Scotians have worked and saved so that at retirement they have
earned this privilege. If one is in a position where one must rent, the landlord
will surely raise your rent. How else will he cover all of his expenses?
Public transportation is really the focus of why I got involved in coming here.
That is an almost non-existent commodity in most parts of Nova Scotia, and if
one does not have a car, with this tax the cost of a taxi will be higher, as
will the cost also of a bus ticket. The price of gasoline will be higher. Then
what about our licences, insurances? We do not know yet, and we must pay $3 on
that tire we are buying.
The volunteers are what I am really concerned about, because what would we do
without them? They plan programs for shut-ins and in almost all cases provide
transportation for them. That will be an extra expense, since the alternative
transportation is provided by another senior, usually. What about
transportation to medical care for those who need hospitals, clinics, dental or
other health centres, which are getting scarcer, too? It is often necessary to
travel for tests, if seniors are to be kept healthy and in their own home, and
hospital care is becoming difficult to receive.
If one is forced to sell their home, will there be an extra cost in real estate
fees, lawyers' fees and other services? As the cost of requirements for one's
home goes up, there is always the possibility of the need to sell, as one can
no longer afford to live where one wishes.
To the politicians, I wonder if they ever reflect on the time when they will be
sitting at home and a simple thing like the arrival of the morning paper is the
highlight in their day. I have watched it in my own home with a 98-year-old
mother. Also, that small weekly, where one finds out what is going on in their
area, will that cost more? These are only nickels and dimes, but they add up.
What about the person who lives alone, and is given to depression when they do
not see people. Another lack of contact, because we cannot bring them out. What
about writing a letter or a postcard: the stamp, the paper, the envelope, the
pen. Also, transportation costs to look hopefully for a message from a family
member or a friend. Will these all cost more then? When government tells you
that one should stay in one's own home, we all agree, but not to the extent of
being lonely and getting depressed.
As a senior talking and working with other seniors, we know there are many
seniors in our area, and many of them are living at or near the poverty line.
These increases will not be large and, in themselves, will not add a financial
burden, but it is the total of all these little additions that make many
seniors fear that they will not be able to continue an independent lifestyle,
and we feel we deserve that. If one cannot pay their own way, they might need
to seek social assistance. It will cost the government more, and that would be
due, in part, to the addition of this new tax, by whatever name it is called.
I work closely with more than 30,000 seniors as part of the Nova Scotia
Federation. It is the effect of the HST on essential items which are consumed
on a daily basis that is their concern. Members of the Banking, Trade and
Commerce Committee, on Bill C-70, we respectfully request that you listen to
the voice of the people in the maritimes and, as other provinces have already
done, reject the proposal to create a tax which is a great cause of worry to
Nova Scotia's seniors population.
Ms Lucy Riley, Halifax Representative, Nova Scotia Federation of Seniors: Our
federation of senior citizens and pensioners represents a large number of
seniors, about 30,000. Although we did not get a chance to check with all of
them, in the meetings we have had we certainly got the feeling that the seniors
feel very much as if they cannot really take any more tax, and feel that it will
really make their life quite difficult. We definitely go along with pretty much
everything that has been said about the seniors in general.
Senator Cochrane: I am really pleased to see you all here, taking the time this
Friday morning, after the big storm we have had in Nova Scotia, to come here.
We do appreciate what seniors have to say, and we will certainly look at your
views in a light that I think probably people of your age do not think we do,
but we really look at seniors as a respectable group, and we are certainly
concerned with all of your views.
Dr. Slater, you do represent a national organization, do you not?
Ms Slater: Yes.
Senator Cochrane: Just this morning, we heard from a member of Parliament, and
her name was Ms Brushett, the sitting member of Parliament from Truro. She said
that people from Nova Scotia had all of the opportunity in the world to appear
before their committee, to express your views and to tell the MPs about your
concerns, but you tell me that you are upset with the process. Well, there are
conflicting views here, madam. Maybe you would like to tell us about that?
Ms Slater: The MP of which you are speaking must have had a different source of
information than I have, and I do not know that she is a senior. That makes a
difference, too. I think the point is that on most other issues where we have
had the opportunity to present our views, we have had lots of notice, lots of
letters from the government. On this issue, and we had none of these things, and
I know whereof I speak.
Senator Cochrane, we are not just insulted, as you say; we are 15 per cent of
the population of this province. That is a large number of votes. I think that
should be kept in mind, because we do like to have our opportunity to express
our opinion on what these changes do to us. We are not against change; we have
been putting up with it for longer than anybody else. We do know what change
means, but we also know that the opportunity to have input with respect to this
legislation in Nova Scotia was, well, I would like to say nil; I do not know
what my partner would say.
Mr. Guy: I did not want to butt in. I wanted to address the same point that
Myrna has addressed and point out to you that, here in Nova Scotia, we have a
unique organization of the leaders of seniors groups who now number nine, and
who are part of an advisory committee to the Senior Citizens' Secretariat. We
do meet with the ministers of the province twice a year, on average, and all
these points are presented in a formal way to those ministers. In fact, we did
that just a month or so ago. These very points that you are hearing today have
been presented. We do take advantage of whatever platform is offered to us.
Senator Cochrane: Did you express those same concerns, like the concern about
postage rates, clothing, footwear under $94, funeral expenses, home care
services, private agencies, home heating, transportation -- you expressed your
concerns on all of those items?
Mr. Guy: In various ways and at various times, they have been expressed, yes.
Senator Cochrane: And what has been the reaction?
Mr. Guy: Their reaction is to take it under consideration.
Ms Slater: I would like my friend Joan Lay, the Vice-President of our Nova
Scotia Division, to speak in relation to our concerns in terms of home care
services, because that is a very big concern for seniors. Joan knows more about
that subject than I do.
Ms Joan F. Lay, Member, Canadian Pensioners Concerned: Our concern is basically
with the fact that the HST will be charged on home care services when they are
supplied by private agencies, and many seniors are now having to use private
agencies because of the lack of provision of home care services in the
government's program. So many services and other items have been cut out, and
these have had to be supplemented somehow by private agencies. If the cost of
these services goes up, then that will be a very real hardship on seniors and
on their relatives, many of whom are paying the costs of these private health
Senator Cochrane: You were saying -- and rightfully so, because I think that is
the way seniors are really thinking today -- that you have the right to live in
your own home, and your major concern was with transportation. You realize that
it was your Premier who got together with the other two Premiers of
Newfoundland and New Brunswick, and they went to Ottawa and came to an agreement
there with the government for the harmonization of this sales tax. Before they
went to Ottawa, or even in the process, did you seniors have some input?
Ms Macmillan: This is the fear, and what we are hearing is that there has been
no input. I hate to tell you that we had a Health Council in Nova Scotia, and
that council went to the province to have some input, but then it was
disbanded. I think people are feeling that today is the first time they have
ever been heard on any of these topics.
To tell you a personal story, a senior luncheon is being held today in Windsor,
which I promoted. When we have such events, we call the people up and offer to
give them a ride, so I had to work on that before I came here. The other day, a
lady gave me $5 for picking her up. I said "What is this for?" since
I had to pass her house anyway, and she said "That is to pay for your
dinner and my ride there." She lived just down the road from me. I told
her I was going to the dinner anyway, and that our project is to take her out,
with 90 other seniors, to have a good, home-cooked meal for a very small amount.
She said that to her it was worth the $10, because she was throwing $5 in the
pot to get a ride to the dinner.
Ms Slater: Mr. Chairman, and senators, we are very aware in Nova Scotia about
the lack of transportation for anyone, but especially seniors, who have
limitations on their ability to drive, and there are limitations as to the
availability of bus services, which is practically nil. That is something that
has continued, and this tax will just continue that limitation of service.
Senator Losier-Cool: I want to welcome you here also. I am always impressed by
the seniors, pensioners, and all of the other groups and people that you
represent, and by the amount of work that you do whenever your time comes to
make a presentation. I also want to thank you for the wonderful contribution
that you are making to Canadian society. Keep it up; you are our role models.
There has been general concern about which taxes are to be increased, and the
need to make available to every Canadian the services that we have. By that I
mean the universality of the health care system and the need to keep it up or
to make it better, even. Would you have any suggestions or alternative where we
could make a change to taxes, because we must tax somewhere. I understand that
the heating bill is not a good place; nobody wants that. Do you have any
alternatives to suggest, or have you ever discussed that with your groups? I
know it is your recommendation number one, that we scratch that tax.
Ms Macmillan: We have been told over and over, for the last few years, that for
a senior, staying in your own home is the way to go, and we certainly agree
with that. However, we feel that something must be done to help us stay in our
own homes; something more than is being done now. I do not have a suggestion,
but we are hoping that there will be some ideas arising from our interviews here
Ms Riley: I feel seniors are helping each other a great deal, and this
provincial government is are expecting more and more now that volunteers will
take over, because they are closing hospitals, they are cutting staff, and in
order to make it possible for volunteers and seniors to help each other, it is
important that they are not further taxed. Already I think it is hard to get a
volunteer who feels they can afford to drive someone here, there and
everywhere. In the effort to get volunteers to work at our seniors centre, for
instance, we must find a place for them to park, and pay for their parking, and
that really is something that makes me wonder whether they can help. Using
volunteers is good for us because it keeps us alert, and so on, but on the
other hand it can be hard for us.
Ms Lay: If we perhaps had some input into the regulations that will be attached
to the bill, then at that time we could possibly come up with some ideas that
yes, there must be a tax, but just what should be taxed? In regard to the
volunteers, there could be a possibility of some type of refund or whatever, if
they wish the volunteers to continue, after having to pay more money for
gasoline, more money for this and for that. Perhaps that is one solution.
Senator Losier-Cool: Just more question that I want to ask to satisfy my
curiosity. In New Brunswick, the federation for senior citizens told us about
the big reforms that have been made there for senior citizens concerning their
homes, the owning of their own homes. They told us that if they must leave
their home because they are not well enough to take care of it, and go to a
nursing home, now they must either put their house up for sale and give part of
that money to the government, and they have two years to do that. Is it about
the same thing in Nova Scotia?
Ms Lay: No, that was changed by provincial law, and if it is your primary
residence then you do not give that to the government. It belongs to you.
Senator Losier-Cool: You can still keep it?
Ms Lay: For your dependant, yes.
Senator Bonnell: I just wanted to congratulate our seniors for their excellent
presentation, but I am feeling rather depressed because I am getting close to
the age of being a senior; in fact I passed that age some time ago. I had been
thinking "This is great, I will sit back and enjoy my life now, and enjoy
all the savings that my great Navy friend had."I also put away a few
dollars when I was young. The trouble is that the interest rates on that are
now so low that I am going backwards.
I come from a little place called Prince Edward Island, just across the strait
there, where the country was born, and most of our senior citizens will come
across now on that Confederation Bridge to New Brunswick and do their shopping
because it will be a lot cheaper. They will also come across on that new ferry
they are putting down at Wood Island to come across to Pictou and New Glasgow to
do more of their shopping because it will be cheaper.
There is something wrong here with the stories, one way or the other, and I do
not know to which one I should listen. I thought it would be great when I got
old, but apparently it will not be as good as I thought it would be. I would
have my own home, I would not need to pay any taxes to buy a new house; I would
use the same old house. I do not need any new furniture; I would have the same
old furniture. There would be no sales tax to pay on that, or GST or HST.
However, should I be counting on living on Prince Edward Island, where we have
no communications or trains -- they even took away the tracks.
Ms Slater: We do not have any trains, either.
Senator Bonnell: I thought there was a train that came from Halifax and went up
Ms Slater: Yes, but that is no good to the rest of us here, who want to move
Senator Bonnell: The only thing I suggest to do, come over to Prince Edward
island where we just have that one tax, we do not have that harmonized tax, and
it is a beautiful place to come to, and retire to when you get older.
Ms Slater: Senator, you do not need to do a tourist sell on us for Prince Edward
Island. We love it. But I want you to know that we are very anxious and afraid
that something like this kind of tax can be implemented in only three provinces
in our nation. It sounds as though we have been conned, and we cannot think of
it any other way.
Ms Macmillan: Actually, what she is saying is, congratulations to Prince Edward
Mr. Guy: I heard a report on the radio this morning that we will all be rushing
over to P.E.I., across the new Confederation Bridge, to Mark's Work Warehouse
where there will be no tax. I think you will have heavy traffic over there for
On the question of seniors themselves, we are getting a bit tired of being
classified as seniors. We would rather be called chronologically advantaged, or
tribal elders. We do not lose all we ever had on our sixty-fifth birthday.
In the matter of suggestions to change the tax system, I would like to say that
having the privilege of living in this country, and enjoying the privileges and
benefits as we do is worth every penny of the taxes we pay. I speak for most
seniors when I say that seniors do not object to paying their taxes; they just
object to paying more than anybody else, because there are taxes that are
targeted exclusively at the seniors population, that do not affect others.
On the matter of the taxation system, there are far too many taxing authorities,
and every mail brings something that says "Send money." You must send
money to either the federal government, which I had to do last week, or to the
provincial government, which tells me that they have just raised my property
assessment, which increases my property taxes by 40 per cent for this year.
What we must do is to get all of the taxing authorities under control, and
coordinate them with each other, because one tax leads to another. A change in
federal income tax automatically changes provincial income tax, because one is
a percentage of the other. There are all sorts of insidious things happening in
the taxing system that really need to be taken control of, and it is probably
impossible because it is such a complex system that every agency around you has
the authority to tax, one way or another, from the federal government down to
the local school board, or even the fire brigade in my case. It is getting to
be far too much, and pretty soon there will be nothing left for the individual
to send to all these authorities who keep asking for this money.
Senator Oliver: When the minister was here from the Province of Nova Scotia, he
said that they are trying to educate seniors and others and they have prepared
a whole series of pamphlets trying to describe this new harmonized tax and I
was wondering whether you had read the seniors' pamphlet, and if so, whether
you believe some of the things they tell you there, such as that the rents will
not go up, and so on?
Ms Macmillan: I received lots of pamphlets, and I am kept busy passing them
around and telling other people to read them, but people are asking me "What
about these other things?" In other words, it does not cover the things
that we do not know about, that we are not hearing about, and that is our
Senator Oliver: Some people from the real estate board were here, and they told
us that if you own an apartment building, there will be tax on repairs and
renovations, tax on advertising, professional services, snow removal, garbage
collection, and they must pass that on to the seniors by way of rental
increases, you see, so that that pamphlet is not very accurate.
Ms Macmillan: I mentioned that in my brief, so when I got the pamphlet, I read
it carefully, and there was nothing in there about rent, which I had heard
seniors were already worrying about because you cannot expect the landlord to
absorb all of that extra cost.
Ms Slater: Senator Oliver, you should realize that Canadian Pensioners Concerned
is an intergenerational organization. We care about our grandchildren and they
are a part of our membership. When we hear what will happen to the cost of
clothing for those children, that is scary. Below $94 is what they usually must
keep to because children's clothing is costly, and they do grow out of them. I
do not think that has been considered.
We are not here just for seniors, but for our society. The seniors feel affected
just as much by their grandchildren and their concerns.
Senator Oliver: We hear you and we agree with you.
The Deputy Chairman: Our next witness is Ms Sandra Pelley, from Comcare Limited.
Ms Sandra Pelley, Administrator of Comcare Canada Limited, Nova Scotia: First of
all, I would like to thank you for the opportunity to address this committee. I
am speaking on behalf of Comcare.
Comcare is a nursing and home health care company. We have been providing care
to clients in their homes across Canada for more than 26 years. We employ
hundreds of Canadians in the Atlantic Provinces, and we provide thousands of
hours of home care every week. Our clients are from all walks of life, all
ages, and all have different health care problems.
Under the current tax system, when an individual receives home care services
purchased by a charity, the service is exempt from GST. If that care is
provided by Comcare or any other company and the service is funded in whole or
in part by a government program, again the service is exempt from GST. On the
other hand, if Comcare provides the identical service to an individual on a
private basis, that recipient of homecare must pay 7-per-cent GST, and will now
pay an additional 8 per cent. This is fundamentally unfair for a number of
reasons: First, it forces one resident of Nova Scotia to pay a 15-per-cent tax
for a service that his neighbour, obtaining the same service through a
government program or from a charity, is not paying; second, it may create an
economic hardship that forces an individual to give up his right to have his
service from the agency of his choice; third, it creates an unlevel playing
field and an unequal competitive marketplace for providers of care.
Permit me to give you an example of this unfair tax system: Mr. Macdonald cares
for his wife at home. She has Alzheimer's disease, and requires assistance with
her personal care. She gets this care from her charity home support worker, and
that is GST exempt. Mr. Macdonald's neighbour, Mrs. McGillvery, also cares for
a loved one at home. Her husband of 40 years-plus also has Alzheimer's. Mrs.
McGillvery needs someone to help her with her husband's bathing and personal
care. That care is provided by Comcare. Mrs. McGillvery currently pays
7-per-cent GST, and as of April 1 will pay 15-per-cent tax on that service.
Where is the fairness to this Nova Scotia consumer? What choice does this
The answer is a very difficult one. She can either give up her preferred worker
or she can pay the tax. This service is not a luxury. This service is a
necessity for both the recipient of care and for the caregiver at home.
Individuals who are not eligible for government programs, for whatever the
reason, do not need the added burden and worry of whether their service is
taxable or exempt. Quite frankly, they have enough to worry about.
Comcare has carefully reviewed its prices in light of this increase in the tax
rate. We are worried. We are worried that we may lose our clients to charity
organizations. This will result in stress for our clients who will lose their
Comcare home support worker, and we are concerned that our workers may join the
list of those in Nova Scotia already unemployed. Comcare is not against the
combined sales tax, but we are against its unfair application. We believe that
all home care should be exempt.
Senator Cochrane: I certainly can sympathize with your concern, and I do know
that home care is really important for seniors. It really is. It gives them a
sense of satisfaction that they know the person who is coming into their home,
and that they have continuous access to that same individual. It also gives
them a sense of security.
In light of the concerns that you have expressed, you feel that there is an
unfair advantage here. Have you met with any representative from government and
expressed this concern to them?
Ms Pelley: We have not met with the government to express our concerns, but if I
may say, I do not really think that that is the issue. We have all sat here and
listened to a number of people who have met with government and expressed their
concerns, and yet we are all still in the same boat.
Senator Cochrane: Do you think, then, that there is any hope for you in the end?
Ms Pelley: I am hoping that this committee may bring us hope.
Senator Cochrane: Thank you. I am hoping the same thing, madam. You are saying
that you are worried that you may lose your clients -- in other words, you may
just close down -- to a charity organization, and therefore your employees
would be laid off and you may just go out of business. Is that what you are
Ms Pelley: With the tax system that is currently in place, and with the new
combined sales tax, as I stated in my brief, charity organizations do not need
to charge this tax to recipients of care, whereas we, as a private company,
must charge that tax. In light of reviewing our prices and having to pass on
this increase, many of our clients who are seniors are also handicapped
individuals, many of whom are on fixed income, and they cannot afford that
increase. If they have to make the choice, then their choice may be that they
will have to give up their regular Comcare home support worker because of this
additional financial burden, and go with a charity organization. If that is the
case, if there is no work for Comcare, why would we exist?
Senator Oliver: When we were in the provinces of New Brunswick and Newfoundland,
we had representatives from medical doctors and the medical association
appeared before us, and yesterday the president of the Nova Scotia Medical
Association appeared before us. The problem is that doctors have the same
problem as you do. This new harmonized tax will cost them around $2,400 a year
that they cannot pass on. I asked them whether there was any other group or
class within the medical services community that would also have the same
problem, and they told us that companies such as Comcare who provide home
services, would have the same problem. Therefore the sort of recommendation
that they want, to be exempt, is the same thing that you want, so you are in
good company. They made very strenuous representations to this committee and to
the government about that, and we will just have to hope and pray that you can
be included with any exemption that they get. The main thing to remember is
that you are not alone.
Senator Rompkey: I just wanted to get an idea of the marketplace for home care.
What has been the growth or otherwise of Comcare over the last five years, for
example? Could you describe for me the share of the market that you have
compared with what, say, government services have, or charitable organizations
have? What percentage of the marketplace do you occupy, and how has that changed
over the last, say, five years?
Ms Pelley: What I can say is that currently in Nova Scotia about half of the
work that Comcare provides is for clients that are under some type of
government funded program, but the other half that we provide is to clients who
pay for our services on a private basis.
Comcare across Canada provides service to government programs. I cannot speak on
a national basis as to what our percentage is, but certainly a large percentage
of our clients purchase their service privately from our company.
Senator Rompkey: I understand what you are saying, but my question was really
with regard to the total number of people who are availing themselves of home
care. Would most of them be getting that care through government agencies,
charitable organizations or through your company?
Ms Pelley: I would have to say -- and this is a guess on my part -- that the
majority of them -- I do not know. I can say that there are a number of people,
certainly, who are getting their service through the Home Care Nova Scotia
program. I also know that there are large numbers of private agencies like
Comcare out there in the marketplace providing care on a private basis, but who
do not provide care under government programs.
Senator Rompkey: I just wondered what the percentages were: 50:50, 75:25?
Ms Pelley: I have no way of knowing those statistics. I am sorry.
The Chairman: Senator Bonnell, did you want to highlight the virtues of this
wonderful legislation? Tell us why P.E.I. did not join.
Senator Bonnell: I will tell you why they did not join. They had a Liberal
government there at the time, and they decided no, and this government decided
yes. That is the basic reason. The new government of Prince Edward Island, the
Conservative government now, disagreed. But when they decided no, the taxpayers
all voted against them, and put them out. Perhaps they should have said yes.
Anyway, let us get back to basics.
Under the veterans legislation there is what is known as the Veterans
Independence Program. Are many of your clients veterans?
Ms Pelley: A lot of our clients are veterans.
Senator Bonnell: Will this tax be a hindrance at all as far as the veterans are
concerned? The Government of Canada pays all the tax, PST, GST and everything
else for those veterans, so the fact you put 10 more taxes on will not make a
bit of difference to your clients?
Ms Pelley: Clients who receive care under any type of government funded program
are exempt from GST, and my assumption is that they will be exempt from this
harmonized tax also. Therefore, to my knowledge, the answer is no, it will not
Senator Bonnell: Are veterans the majority of your clients?
Ms Pelley: No, veterans are not the majority of our clients. We do have some
veterans, but no, they are not the majority of our clients. Our clients are
approximately 50:50. Fifty per cent are under some type of government funded
program, be it veterans, the Department of Community Services or Home Care Nova
Scotia. The other 50 per cent of our clients are clients who receive their care
and pay for it privately. Those are the clients who will be affected by this
Senator Bonnell: What sort of registration process do your personnel need to
pass in order to do this job in the home, looking after these elderly people,
sick people and disabled people? Must they be registered nurses? Do they need
to take a course, or courses? Do they need to have any training? Or do they
just walk in there, get themselves hired and get paid for doing the job?
Ms Pelley: There are three classifications of people who provide care in the
home. There are registered nurses, there are LPNs. This brief does not address
either of those because they are classified as professional nursing services,
and those services are already exempt. It is the classification of home support
worker that would be affected by this tax change, and Comcare's home support
workers are all trained in-house. They all have training in First Aid and CPR,
and they have a training course provided by our company.
Senator Bonnell: Your company might give them a certificate, but who in your
company has the qualifications to train them? I mean, where do you get this
Ms Pelley: The people who train our home support workers are registered nurses.
Senator Bonnell: So registered nurses train these other people?
Ms Pelley: That is correct.
Senator Bonnell: You are telling us that these people, these home care workers,
can go into the home and look after these elderly, sick people without any
government licence or anything else?
Ms Pelley: There is no licensing in this province for that type of work.
Senator Bonnell: Do these people -- we will say your people who are trained and
looking after the elderly and sick in their homes -- have any protection or
bonding, that things will not be missed in the home, that they will not be
talking outside in the neighbourhood about what is going on in the home. Do
they have no protection, no licensing or anything else?
The Deputy Chair: Senator Bonnell, I do not want to interfere with your
questioning, but as Chair, I am just having a little difficulty in
understanding what this has to do with Bill C-70 or the presentation of this
Ms Pelley: Just to assure the senator, I can tell him that all Comcare staff
sign an oath of confidentiality, and they are all bonded and all covered by
malpractice and liability insurance by our company, although I agree it has
nothing to do with this presentation.
Senator Bonnell: It has a lot to do with the presentation, because if the people
you serve know what your qualifications are, then they know whether they should
stay with you, because you have a nice personality and do a good job, or
whether they should go with the other person.
Ms Pelley: Fair enough. I stand corrected.
The Chairman: Senators, the next witnesses are from the Halifax Presbytery of
the United Church. We have with us the Reverend Ivan Gregan, Chairperson,
accompanied by the Reverend Gordon K. Stewart, who is a member of the Church
and Society Committee.
Rev. Ivan Gregan, Chairperson, Halifax Presbytery United Church of Canada: The
annual deficits and accumulated debt, both federal and provincial, must be
taken seriously. Canadians cannot go on living beyond their means as we have
been doing. It is not the poor, however, who are guilty of extravagant living.
Nevertheless, the disadvantaged are being made to pay a disproportionate share
of the cost of deficit reduction.
The HST will apply to the necessities such as electricity, children's clothing
and school supplies, heating fuel and gasoline, and is thus a regressive tax.
The poorest of the poor will be driven further into poverty as this additional
burden is laid upon them.
The federal government downloads on provincial governments; provincial
governments download on municipalities and on the voluntary organizations; and
this generation downloads on the next.
Some 20 years ago, it was reported by the Canadian Council on Social Development
that the 20 per cent of the population with the highest personal income were
receiving more than 40 per cent of the total personal income in the country,
while the 20 per cent with the lowest income had less than 4 per cent of the
total. That was bad enough, but since that time the poverty gap has grown. Many
more people are undernourished, deprived of essentials, and dependent on food
banks, while some bank presidents, CEOs and sports entertainers have annual
incomes in the millions.
Some 2,700 years ago, the prophet Isaiah spoke of those "who add house to
house and join field to field, until not an acre remains, and you are left to
dwell alone in the land," all others being crowded out. That is what is
happening in Canada today. The burden of taxation must be distributed, we
believe, more fairly.
A Scandinavian patriotic song, written some 150 years ago, envisions a society
in which few will have too much and fewer still, too little. Canada has
traditionally prided itself in providing justice for all, but we are moving
further and further away from that ideal.
The results are increasing dependence on food banks -- which we know first-hand
-- decline in health, increased expenses for our children and grandchildren,
growing social problems and predictable social unrest. The harmonized sales tax
will produce growing disharmony in our society as the stress on low income
We would suggest that, at least, children's clothing and school supplies be
exempted from taxation, and that the basic income tax exemption be raised. We
welcome the opportunity to express our views to you this day.
Senator Oliver: As you know, we have been to New Brunswick and to Newfoundland
as well, and we have heard from almost 80 witnesses so far. One of the very
first presenters who came before us in Halifax was Mr. Gillis, the Minister of
Finance in Nova Scotia, and when he appeared before us, he said, "I am
aware that some people will call this a regressive tax, and I am aware that
there has to be something done for the poor because of the increased cost of
clothing and gasoline," and so on. He said to us that two years ago they
had a $12 million grant to help the poor and the low income people, and they
increased that again in the 1996 budget. Therefore there is a $24 million
program for low income earners available here in Nova Scotia. Were you aware of
that? If so, what do you say about that program?
Mr. Gregan: We are aware of all the grants that are given, and they are well
received, but they are not reaching the people who are most in need. It is hard
to give a grant to somebody on the street who has no address. It is hard to
give a tax rebate to somebody on the street who has no address. It is hard to
clothe those people who live behind one of our churches in the city in cardboard
boxes. It is hard to reach out to those people who are shunted from apartment
to apartment because they cannot pay the rent. It is hard to gave any kind of
help to those people who are constantly changing their address because they
have no money. The church meets these people face to face, daily, and to add
more tax to anything that affects these people is driving them deeper and
deeper into poverty.
Senator Oliver: Someone suggested that this new money will mean a difference of
about $100 a year for some individuals, which will not really help very much
with clothing and with the expected increased cost of power and electricity,
and so on. To me, part of the concern is provincial and part is federal. What
would you have this federal committee take back to Ottawa? What changes would
you like to see?
Rev. Gregan: The exemption that is being added to those things that have been
provincial, such as used cars, I would ask you to deal with that. Put pressure
on the provincial governments to see that children's clothing is exempt from
this new harmonized sales tax, that all food is exempt, and that basic heating
fuel is exempt. These are things that perhaps the average person who has
electricity to heat their home, or the average person who has enough money to
pay for such things, are not deeply incensed about. But to the poor, those who
have nothing, to add even further to their tax burden is a crime. Therefore, if
the federal government can, in some way, ease that burden and put any kind of
pressure on provincial governments to ease that burden, it will be greatly
However, for the federal government to add to the burden of the poorest of the
poor is a crime, in our minds.
The Chairman: Our next witness is Eric Zscheile, legal advisor to the
Confederation of Mainland Mi'kmaq, who is actually here on behalf also of the
Assembly of the Nova Scotia Chiefs.
Mr. Eric Zscheile, Legal Advisor, Confederacy of Mainland Mi'kmaq: I would like
to thank the committee very much for listening to what the 13 Mi'kmaq Chiefs of
Nova Scotia have to say regarding the new harmonized sales tax. I would begin
by apologizing. The chiefs had wanted to make it here themselves to make their
presentation to the senators. However, right now they have a meeting regarding
the newly-signed Mi'kmaq education authority, and are working out some of the
wrinkles of that new agreement and were not able to make it.
The Chairman: Chief Marshall was here yesterday, am I correct? I thought I
recognized him at the back of the room.
Mr. Zscheile: Yes. Chief Lawrence Paul had also made it down, and in fact one
the comments they had wanted me to make was tantamount to some of the comments
I will make later. It seems unfortunate that sometimes communications between
governments and the Mi'kmaq people are not as good as they could be. I think
the chiefs feel that they had not been aware that these hearings were taking
place until they had come down yesterday, and after seeing them reported in the
news last night, and of course having seen the topic, most assuredly they
wanted to get some sort of comment in. We hope that after some of the comments
and some of the things we can discuss, it will highlight this need for
communication between the First Nations of Canada and the federal government.
A brief outline about myself. As stated, I am the legal advisor for the
Confederacy of Mainland Mi'kmaq. We are one of two tribal councils in Nova
Scotia. The Union of Nova Scotia Indians and ourselves represent all the 13
First Nations of Nova Scotia. On issues such as this, the 13 chiefs of Nova
Scotia get together and form the Assembly of Nova Scotia Chiefs, and the brief
before you is on behalf of all the chiefs in that assembly.
The tax relationship of the past, as seen by the Mi'kmaq people of Nova Scotia,
has been a most unproductive situation. I think it is clear to say that
taxation in the First Nations community is seen as a topic of dispute and
confrontation and, unfortunately, court appearances and non-compliance. The
list goes on, and I do not think that is necessarily specific to Nova Scotia. I
think that is specific to most First Nation situations across the country.
In fact, currently there are numerous litigations taking place in Nova Scotia
over the application of the Section 87 Indian Act Tax Exemption to the GST and
how it applies. As we are told by the federal government, it is the GST rules
for the application of this tax exemption that will apply to the harmonized
sales tax. Therefore there has been no changes or no alterations to that sales
delivery requirement under the GST, and so that will remain in place with the
harmonized sales tax.
It is unfortunate, in the opinion of the Mi'kmaq people, that our
nation-to-nation relationship, as evidenced by the treaties that the Mi'kmaq
have with the federal crown, must be replaced by courts making these
determinations. It is the view of the Mi'kmaq people that, in the future,
negotiation on a nation-to-nation basis would be a much more productive way of
handling issues of taxation rather than the courts. The courts are,
unfortunately, limited; the courts are adversarial, and the court system does
not allow for a full, productive way of looking at the fiduciary relationship
that the Mi'kmaq feel they have with the federal government.
It is equally unfortunate because, right before the announcement of the
harmonized sales tax, 13 Mi'kmaq chiefs were in negotiation with the province
of Nova Scotia regarding tax exemptions to the provincial sales tax that at
that time existed within the province, and it is the opinion of the Mi'kmaq
that we were at the point of agreement with the provincial government, and in
fact were told by the provincial government that but for the new harmonized
sales tax, there would have been a tax agreement within this province.
What this tax agreement amounted to was a full tax exemption to Mi'kmaq
purchases, be they made on or off the reserve, the set up of a system of tax
cards to prevent abuse or non-compliance by Mi'kmaq purchasers. A second
element, for purchases made on reserve by non-status Indians, a system would be
in place whereby taxes would be collected by the Mi'kmaq entrepreneurs, and the
province and the particular band involved would enter into an agreement as to
how some of those funds could be used by the band for its own purposes; in
other words, the band having its own sales tax regime to finance the needs of
the band through purchases made on the reserve.
The third element was a Mi'kmaq auditing office to take away some of the
mistrust and the misapprehensions that both sides had of either one controlling
compliance in the new taxation scheme. Therefore, there would be an office,
made up both of the province and of Mi'kmaq individuals, to look after the
Unfortunately, as I said, when those negotiations fell apart, the Mi'kmaq chiefs
were told that the HST and the provisions for Section 87 of the Indians Act and
delivery requirements were now a federal problem, and the province had no say
in it, and therefore further discussion would have to take place with the
federal government over what would happen.
We were assured that the province would support us and support the nature of the
agreement that we had been working toward. Yet, in the end, they said that it
was up to the federal government to finally give either approval or disapproval
to the new scheme.
Upon consultation, or so-called consultation with the federal government, what
the Mi'kmaq people were told was that the GST rules would apply -- there was
really no discussion -- and there would certainly be no deviation from that on
the national scope. That has been the sum total of the communications that we
have had with the federal government, to this point.
To briefly outline some of the concerns that we have with the HST as proposed --
and these are also contained in the brief, so I refer you to that -- first of
all it is the problem of no consultation. The Mi'kmaq people feel, on a
nation-to-nation basis, and based on the fiduciary obligation, that surely some
sort of consultation would be advisable in respect of any changes that are
taking place to the taxation field, especially since that is a situation of
such controversy between the First Nations and the federal government.
In fact, not only do we feel that there was no consultation in this process, we
feel that we were absolutely ignored in this process, and again that has led us
back into the brick wall mentality of our position vi-à-vis the federal
government position, and no room for manoeuvring in between.
Second, the concern that the Mi'kmaq chiefs have is the age-old problem or
question of provincial jurisdictions on reserve and around First Nations
issues. Many of the chiefs are concerned that, because this is a blended tax,
because it involves two jurisdictions together, this might be a back-door
attempt, or back-door method by which provincial jurisdictions can begin to
apply on reserve where they could not have applied in the past.
Third, in last recent weeks the Government of Canada, the Government of Nova
Scotia and the 13 Mi'kmaq chiefs have agreed to enter into what is called a
tripartite forum. Essentially, that is the setting up of a forum made up of all
jurisdictions to discuss matters of concern which involve all three parties. We
clearly saw taxation as a classic example of something that needs to be referred
to this tripartite process so that all three parties can discuss it together
and in the open.
We especially believe this, given the fact that taxation to the Mi'kmaq people
is seen as much more than just rules and regulations; it is seen as a matter of
self-government and a matter of self-sufficiency. The Mi'kmaq people have begun
looking at taxation not as a simple exemption for people off reserve or on
reserve, but as an economic tool to begin to explore some of the needs
expressed in the report of the Royal Commission on Aboriginal Peoples.
Somehow, First Nations people must begin entering into the economic mainstream
in this country. Entrepreneurship must be encouraged and nourished. Bands must
somehow get out of the spiral of welfare and dependency. Unfortunately we look
at the tax exemption rules and the way in which they are being applied -- for
example the necessity of having things delivered on reserve -- as simply
looking at a way of circulating reserve money throughout the reserve but in no
way bringing off-reserve money on to the reserve. Without off-reserve money
coming on to the reserve, there will be no economic growth in the community,
because 95 per cent of the money on the reserve is from welfare or social
Therefore, the reason we would like to see this discussed within the tripartite
forum, and the reason we would like to take a much more intricate look at the
way tax exemptions are viewed is that we must find some economic method of
using taxation to bring First Nations in line so that eventually
self-sufficiency for First Nations becomes a goal that is realistic, and not
simply something that is a dream in the sky. Those are my comments, and I
invite any questions.
Senator Angus: I just have a couple of questions, sir. Your name is Eric
Zscheile. I gather you are a lawyer, sir?
Mr. Zscheile: That is correct.
Senator Angus: Are you with a firm here in Halifax?
Mr. Zscheile: No. I work directly out of the Tribal Council Confederacy of
Senator Angus: And that is based where, sir?
Mr. Zscheile: On the Millbrook reserve, which is just outside of Truro.
Senator Angus: You realize the focus of our hearings is specifically Bill C-70,
and not the larger issues that you have brought to our attention. Your concern,
I take it, about this particular piece of legislation is the lack of
consultation and the inability of your clients, the people you work with and
represent, to have their points made. Is that a fair summary of your position?
Mr. Zscheile: That is fair. I would also add to that, what sort of direct action
do we see as being possible at this stage, and at this point? It is
unfortunate, but we heard from the chiefs of New Brunswick that they did not
have the chance to make any presentation to you.
Within New Brunswick itself, an interesting decision on a case on this very
subject was handed down just last year. That case looked at the New Brunswick
application of the tax exemption rule, which is currently part of the GST
legislation, and which will be embodied in the HST, but at the time of this
hearing was in the New Brunswick provincial tax. In that case, the judges found
the delivery requirement to be contrary to the rights guaranteed in section 87
of the Indian Act. Therefore what we have tried to get through to the federal
government, and what we are still trying to get through to them, is to follow
the law as stated in that case, and to follow a liberal application of section
87 of the Indian Act. The GST rules are far too narrow for the application of
Senator Angus: I appreciate that, sir, and I think my colleagues from the
Liberal Party have taken note of that, and they will report back to their
political masters in Ottawa. For our part, I just want you to know that we
share your concerns about this legislation specifically, and the speed with
which it is being visited upon us, in many cases for reasons which neither we,
on this side, nor the many witnesses who have come before us understand.
Therefore, if, as you indicate in your brief, you have a need to give more
detailed submissions, we would be glad to receive them at your convenience and
give them a full hearing.
The Chairman: Mr. Zscheile, just for the record I want to be clear on one thing:
On sales on the reserve, you pay federal tax, but historically you have not
paid any provincial tax for sales on the reserve, even though there has been a
PST for a long time?
Mr. Zscheile: The confusing issue is that when it becomes sales on reserve to a
status Indian, no tax is collected.
The Chairman: I understand that.
Mr. Zscheile: That is right. In the past, GST has been collected but no PST.
The Chairman: Correct, and that has been true for -- well, since the GST was
instituted. However, the rule on not collecting the PST -- I am trying to
remember my days in the Nova Scotia government -- we did not collect PST on
reserve sales 25 years ago.
Mr. Zscheile: That is right, and that highlights the issue of whether this is a
way for the province, who we now understand will be collecting a percentage out
of the harmonized sales tax, will now be collecting an actual sales tax from
The Chairman: Very well. I just wanted to make sure that I understood the issue.
Thank you very much for coming, and thank the chiefs. I am sorry I did not have
a chance to say hello to them yesterday.
Honourable senators, our next witnesses are Stephen O'Regan, President of the
Canadian Automobile Dealers Association, and Mr. John Sutherland, Executive
Vice-President, Nova Scotia Automobile Dealers Association; and from the Young
Drivers of Canada, Mr. George Green, who is the Director.
Mr. George Green, Director, Young Drivers of Canada: Thank you for holding this
hearing today, first of all, and for allowing us to make our point. I will
hazard a guess to start off with: I will assume that you have probably heard
more complaints about this harmonized sales tax than votes in favour of it.
Like many Canadians, I actually do understand why the taxes are levied in our
country by the government in order to help us enjoy the standard of living that
we have. I am therefore not against taxation per se, but I am against excessive
or ill-conceived and discriminatory taxation. Since the proposed harmonized
sales tax falls into the latter category, I am compelled to add my voice to
those people who are saying that it is not a good thing.
I disagree with the lack of consistency in application throughout Canada, and I
am personally disgusted that our Prime Minister has the gall to claim that by
getting three of the ten provinces to agree on a blending of provincial and
federal sales taxes, he has fulfilled the promise he made to kill the GST. That
is a promise that we all know he did make, in fact, and which I feel in no
uncertain part lead to the election of the Liberal Party of Canada to power.
The small business I own has four employees full time, plus myself as
owner-manager. My business is a Young Drivers of Canada franchise, as I
indicated. It offers defensive driver training to Nova Scotians, and to my mind
is small business in its true form. It is also unique in that the service we
provide has been proven to save lives. That means that it also saves this
government considerable money in health care and rehabilitation costs for those
who, because of the training they have received from us, do not get involved in
car crashes. I can also make names available from people who will tell you that
our training has kept them out of hospitals.
Government at both the levels concerned are telling us that the proposed HST
will actually help both consumers and business owners because it will result in
a lower overall tax. Businesses can pass on their savings to their customers by
way of lower prices. In the case of my business, and in any other Young Drivers
of Canada franchise in Nova Scotia, New Brunswick or Newfoundland, the tax on
our service will actually increase by 8 per cent.
The discriminatory aspect is that the GST will continue to be charged on Young
Drivers of Canada elsewhere in the country, but it will only be GST; it will
not be the added 8 per cent. This means that, unlike my colleagues outside of
the HST provinces, to stay competitive here in Nova Scotia I have actually had
to consider lowering my course fee to subsidize a new tax on behalf of my
customers. Profit margins in many businesses, mine included, are quite thin
enough as it is. Yet this government keeps telling us that it recognizes how
important small business is to the economy. In the same breath, it takes action
that will harm or outright destroy it.
Absorbing a portion of the new tax along with the progressive increases in
payroll taxes, such as CPP contribution limit increases, will put at great risk
four years of very hard work that I have put on the line as I get squeezed to
meet my overhead and wage commitments. If I were to lose just 15 per cent of my
client base, I would be looking at laying off an employee, who depends on my
franchise for his livelihood. You would probably be amazed -- I think everybody
would probably be amazed -- at the resistance and complaints I still get when I
tell people that we have to charge GST on top of our course fees. This is a tax
that has been in place for years.
I can tell you what that tax did to the business of Young Drivers of Canada in
1991, the year in which it was implemented. The Halifax franchise of Young
Drivers of Canada saw a drop in business of 21 per cent over 1990 figures;
Young Drivers of Canada across the country saw a drop in business of 15.2 per
cent in 1991. Those percentages translated into lay-offs and a lack of access to
what we view as an essential service. Therefore, based on the previous taxation
experience, my contemplation of a potential 15-per-cent drop in my customer
base is not at all unrealistic.
Canadians do not want to pay what they see as excessive taxes on goods and
services. The service that we provide is a discretionary one from the point of
view of the consumer, which means that if they are not willing to pay a higher
tax hike price for it, they either settle for lower quality service at a better
price, purchase it under the table, or do not bother at all. In my business, it
is not just money we are talking about; we are talking potential lives.
Therefore, should the numbers prove out again, I have a question for the Senate
Banking Committee, to Mr. Paul Martin and to Mr. John Chrétien. Which of
you should I call to deliver the pink slip if those figures prove out? Who
would like to pick the one who goes and tells one of my employees why business
has dropped so much, when it all seemed to be going so well before this tax came
The governments involved in the harmonized sales tax are not doing small
business people like me any favours. They are not helping my business, or any
others, grow. Rather, they are taxing it to death by inches, and destroying
employment at the same time. You must know that, like many other business
people, I will do whatever is necessary to overcome the difficulties I
anticipate. Of course I will do that; any business person would.
If the Senate passes this legislation, I can tell you right now that, despite
the HST directives to the contrary, I am prepared to tell my customers clearly
and explicitly how much is course fee and how much is tax. To my mind the
consumer has the right to know where the money is going before they make a
purchase, and I have the right to determine why a potential customer does not
purchase my service. I think it is very sad that I should be forced into
looking for ways just to help my business survive that could include fines and
negative legal ramifications. Rather than being able to continue to grow my
business with confidence, I should be able to see it succeed without having to
worry about it being hindered by the poorly considered action of my government.
This may not sound like it right now, but I need you all to know that I am
actually an optimist by nature, and it took a lot for me to come in here and do
this. That is how much this tax change has incensed me. You ask any business
person and they will tell you that to take the risks that they do, you must be
an optimist. The two go hand in hand. However, I do not think it can be taken
lightly that the same optimism, and the pleasure and satisfaction I get in
being able to offer gainful, meaningful employment to my fellow Canadians and a
chance for them to build a future is not being encouraged by a government that
keeps finding ways to knock me down. I will never ever give up. You need to
know that, too.
I have come to the conclusion that my country, under this government, is no
longer a friend of small business. It would appear, if I could close now, that
certain politicians in Ottawa and three of the Atlantic provinces seem to think
there is nothing wrong with passing legislation that is contrary to the will of
the majority of the governed population who elected them. I recall another
politician who, not so many years ago, added seats to the Senate to pass
another bill. I have not seen him on the Hill lately. Therefore I strongly and
respectfully urge you to either amend this bill to include the entire country,
or kill it. Thank you for your time.
Mr. Stephen O'Regan, President, Canadian Automobile Dealers Association: By way
of introduction, I just point out that the Canadian Automobile Dealers
Association is a national trade association representing the franchised New
Automobile and Truck Dealers of Canada. There are 3,700 dealers selling and
servicing new automobiles and trucks, both domestic and import, in Canada. They
employ over 100,000 persons, have annual sales in the order of $30 billion and a
total investment in Canada of an estimated $6.5 billion in land, buildings and
equipment. In Nova Scotia, our 117 members employ 3,300 Nova Scotians.
The Canadian Automobile Dealers Association supports the federal government's
sales tax harmonization agreement with Nova Scotia, New Brunswick, Newfoundland
and Labrador. We believe that the HST will simplify the existing sales tax
system. CADA is pleased to note that the new HST in Atlantic Canada achieves
harmonization while reducing overlap and duplication. However, we continue to
urge both the federal government and the provincial governments in those
provinces that have not yet signed the harmonized sales tax agreement to do so.
Harmonization has the effect of broadening the tax base, and we feel that
broadening the tax base for the replacement tax to include more goods and
services would allow the government to make three positive changes to the tax
system. First of all, the tax rate can be reduced without decreasing revenue;
second, the tax system will become simpler to comprehend and administer; third,
the government can address any regressive aspects of such a broadly based tax
through the use of increased income tax credits to lower income Canadians.
After a thorough examination of all the alternatives to the GST, CADA
recommended to the parliamentary Finance Committee that the GST be replaced by
a multi-stage value added tax. CADA believes that a multi-stage value added tax
is inherently preferable to a retail sales tax. The most significant weakness
in a retail tax system is the tax cascading effect.
For most retail businesses, and certainly in the retail automotive industry, the
advertised sales price is the overriding criteria used by retail customers in
deciding where to shop. Sales taxes on high ticket items, such as automobiles,
are significant and have a definite impact on sales. A retailer who must
advertise tax-inclusive pricing will be at a competitive disadvantage over a
retailer who does not.
In the proposed harmonized sales tax, this competitive disadvantage will be
eliminated within the signatory provinces. However, border communities with
non-signatory provinces will face a competitive disadvantage as the goods and
services in the non-signatory provinces will appear to be cheaper. Once again,
CADA urges all provincial governments to adopt the HST, eliminating
cross-border competitive disadvantages between signatory provinces and
The GST, as presently legislated, does not require tax to be levied on the
private sale of used goods, including automobiles. This has resulted in a
serious market imbalance between legitimate auto dealers who must apply the GST
to the sale of used automobiles and those individuals who sell used vehicles
privately, or in the underground economy, and do not apply the GST. As a result
of this unbalanced approach to taxing used vehicles, there is widespread
consumer bias against buying used automobiles from legitimate registered
dealers. Our members are at a significant competitive disadvantage because of
this. To exacerbate matters, the federal government last year repealed the
national input tax credit, which had acted as a counterbalance by allowing
dealers to better compete with private sellers of automobiles.
In signatory provinces, the harmonized sales tax eliminates this competitive
disadvantage. The single combined HST is applied to the private sale of used
vehicles and collected when the new owner registers the vehicle with provincial
governments during the normal course of a title transfer. Therefore CADA
supports the HST because it eliminates this competitive disadvantage in
signatory provinces. However, once again CADA urges all provincial governments
to adopt the HST, eliminating the competitive disadvantage in the non-signatory
In conclusion, the Canadian Auto Dealers Association supports the federal
government sales tax harmonization agreement with Nova Scotia, New Brunswick
and Newfoundland and Labrador. Our dealers, our dealer association and its
members will continue to work with governments at all levels to ensure the
fairest possible tax system for all Canadians.
Senator Angus: When we were up in Saint John, New Brunswick, earlier this week,
the Minister of Finance, Mr. Blanchard, came and told us that this is terrific
legislation, that it gives a great advantage to Atlantic Canada. He called it
Advantage Atlantic. I am hearing the word "disadvantage" here from
all three of you, or certainly from the two presenters.
Yesterday the local Minister of Finance, Mr. Bill Gillis, came before us here,
and he said the following. He said, "Harmonization is good for Nova
Scotia. We will make this economy work, and we have the strengths and the
traditions to do that. Harmonization is just one more weapon in our arsenal,
one more tool in our tool kit. Our future is in exports. We have always been a
trading region, selling goods to the world. Now, we are reclaiming that part of
our history and making it work again. Over the past four years, our foreign
exports have increased by 35 per cent. HST will increase that number. We
believe that this is just the beginning."
He went on to say, "Harmonization will boost our strategic sector such as
high tech and information technology. The HST makes it more profitable to set
up a computer or software-based company here in Nova Scotia. The HST makes it
more profitable for businesses to expand or for new businesses to locate in
Nova Scotia. We are becoming the place in which to do business. HST is not the
only reason to invest in Nova Scotia, but it tips the scales in our favour."
Do I derive from your comments, Mr. Green, that you would not agree with that
minister one bit?
Mr. Green: If I could address that, I think before the advent of the HST, this
was the place to do business, frankly.
Senator Angus: Before this law?
Mr. Green: Yes. I am a transplanted Ontarian, and when I moved here, people told
me I was crazy to move here because there is perennial unemployment, et cetera.
I came here and I started a business, and I have managed to employ four Nova
Scotians, two of whom were collecting UI before I hired them.
If I drop 15 per cent in business, and that is not unreasonable to expect when
you tack 8 per cent more on to a course fee, I will not be able to employ as
many Nova Scotians. There is a great deal of price resistance from the
consumer. I find it kind of an advantageous coincidence that these gentlemen are
sitting beside me. If I lay someone off, or I cannot hire somebody, they do not
sell one more car. I purchase an automobile, or the instructor purchases it,
rather, based on the employment I give him. If I cannot hire someone, no car is
bought. If I must lay someone off, they might need to sell their car.
The costs of operating that vehicle get passed through the economy as well. On
average, an instructor will spend $3,000 in gasoline to run that car to
instruct students during the year, so somewhere in this area there is a
gasoline retailer who will not receive sales of that nature. There is the
insurance industry that will not benefit. There is a domino effect. It will
hurt, and I disagree with it.
I feel that if this tax could be spread around to all Canadians -- getting back
to the point that one of these gentlemen made -- the disparity and the
competitive disadvantages that are created, it is not right, and I do not think
the $960 million in transfer payments being awarded to the three provinces
which agreed to this scheme will prove to be a long-term benefit. I think they
are a short-term fix the money will be spent quickly, and then we will be back
at square one.
We need a tax framework, not just here but across this country, that will
encourage businesses, and encourage consumers to spend at those businesses, and
then the government will get the tax revenues that they need. That is how I
would address that situation. I do disagree with that minister.
Senator Angus: In your view, it is the Atlantic disadvantage, not the Atlantic
Mr. Green: That is correct.
Senator Rompkey: Mr. Green, are you a member of the Canadian Federation of
Independent Business, and are you associated with the Halifax Board of Trade?
Mr. Green: The Better Business Bureau is the body with which I am associated at
this point. In terms of the Federation of Independent Business, no, I have not
approached them for membership. I am aware of the organization but I am not a
member of it.
Senator Rompkey: I think it is fair to say that although the business
organizations from Nova Scotia which came before us were against tax-in
pricing, they were overwhelmingly in favour of the HST, and testified before us
today and yesterday -- almost all of them, I think, without exception -- that it
would be a good thing for Nova Scotia.
I understand your position; I understand what you are saying, but I just
wondered if within those organizations there is some give and take among
businesses, and if businesses like yours have a chance to make their point,
make their feelings known, because what I am hearing is different testimony
from the organizations that represent both large and small business.
Mr. Green: I guess I can see their point of view as well, because you have
likely been hearing from business owners who already charge PST and GST, in
which case a lowering of the overall tax may benefit them somewhat. However, I
currently do not have PST on my service, so I am looking at a price increase,
because of taxes, of 8 per cent. I would not have a problem with that were the
tax spread evenly to all Canadians and all people in the service sector who
will be subjected to the new tax. What I disagree with is that while I am
charging 15-per-cent tax on a service, someone over in Quebec or Ontario or
elsewhere can get the identical service to mine for 7-per-cent tax. What it
means is an inflation of my prices that will make it more difficult for the
consumer to purchase my service. That is the main argument I have with this tax
change. I am not against taxation per se. I understand the necessity for it, or
else we would not have the standard of living that we do.
Senator Rompkey: With regard to the impact on Nova Scotia, I gather the
automobile dealers would say -- and have said in their brief -- that although,
again, tax-in pricing will cause you some disadvantage, basically you believe
that the harmonized sales tax will be a good thing for the participating
provinces, and maybe you could elaborate on how you see those benefits flowing.
Mr. John K. Sutherland, Executive Vice President, Nova Scotia Automobile Dealers
Association: Mr. Chairman, senators, I think it would be interesting to take a
look at a case which recently took place in Newfoundland. Although in advance
of a harmonized environment, on December 13th, 1996, in that province, the
provincial government effectively reduced its provincial sales tax to an amount
which, when coupled with the GST, was equivalent to the 15-per-cent harmonized
sales tax. It was interesting to note that in less than two weeks in December
1996, vehicle sales increased by 52 per cent when compared to sales in December
January is normally not a very good month in the vehicle business in
Newfoundland. However, again in the environment of sales tax having been
reduced to the 15-per-cent level, sales in January of 1997 increased by about
32 per cent over the prior year, being January of 1996. For our industry,
taxation policy has an incredible effect. It is a big ticket item. The positive
news is that this is a lowered tax rate on a large ticket item. That means, we
assume, that consumers find it more palatable to buy that item and indeed save
money on the tax. Therefore we feel that this tax change will be beneficial, but
we note that in our submission we do support a national tax and a harmonized
tax because, indeed, there are problems created in border situations between
signatory and non-signatory provinces.
Senator Rompkey: I will not ask Mr. O'Regan whether any of his relatives in
Newfoundland and Labrador were among those who made new car purchases. I think
one of them was, actually.
Mr. O'Regan: It could be.
Senator Rompkey: I just wanted to clarify as to how you would see the benefits
flowing. If people are spending more, does that mean an increase in job
creation and a general, overall benefit to the economy?
Mr. O'Regan: Very definitely, yes.
Senator Oliver: I have a question for Mr. O'Regan. When I heard his
presentation, I heard him say and stress on many occasions that what he and his
organization would like to see is for all provinces of Canada to adopt this
HST. The bill on which we are here today is Bill C-70, and there are only three
provinces in Canada that are adopting this change. We do not know, or we have no
information whatsoever that before the sunset date, April 1, Ontario and the
western provinces are coming in. Therefore I am just wondering if the evidence
that you have given us is not somewhat coloured by your hope that one day this
will be a national tax, when, in fact, it is only covering three of the
provinces in Atlantic Canada?
Mr. O'Regan: There is no question that that is our hope, and our association
really will work as much as we can towards seeing harmonization. Medicare
started in two provinces of Canada and then eventually made its way across the
country. We hope that the HST will follow a similar course.
Senator Oliver: What negative effects will there be to Nova Scotia in
particular, by virtue of the fact that 90 per cent of the population of Canada
is not involved in this harmonization scheme?
Mr. O'Regan: The problems really occur in the bordering provinces that are not
Senator Oliver: Like what?
Mr. O'Regan: Is that what you mean? Because of the perception, particularly in
advertised prices, that the prices in our jurisdiction will be higher.
Senator Oliver: Is that not a problem?
Mr. O'Regan: That is a problem, yes, there is no question.
Senator Oliver: Is that perception likely to affect sales for the 117 dealers in
Mr. O'Regan: Yes, it will, particularly in the bordering areas; areas that are
bordering on the non-signatory provinces. Perception is always the important
Senator Oliver: Then it is not all honey and roses?
Mr. O'Regan: No, it is not.
Senator Buchanan: We, as politicians, know what perception is, and it becomes
reality. I know what you are talking about, Steve.
We heard an automobile dealer, I believe in Newfoundland and Labrador, who
agreed with the HST, but he did say that his concern was the tax-inclusive
pricing and the sticker price that is normally on a car. That will now change
and include the full tax, which will increase the cost of the vehicle as far as
the consumer is concerned. The traditional way of negotiating with consumers to
get to the bottom line will now be changed in your business. As you start off
now, you start off with your sticker price, negotiate it down, and then add the
tax. He said that will change, and it will be a problem.
Too, using tax-inclusive pricing will be a cost to his dealership. His bottom
line, therefore, was the benefits -- and there is a benefit, no question about
that. There is a reduction of 3.7 per cent here in the cost of purchasing an
automobile, but that reduction will be watered down because of these additional
costs and the other problems and the confusion, of course, will be watered down.
The saving for the consumer will be less than 3.7 per cent, or more than that
in Newfoundland. This dealer told us that what he would like to see is the
tax-inclusive pricing deleted from the bill, which can be done, or deferred
until all the provinces had opted in. Would you agree with that?
Mr. O'Regan: We certainly would not be disappointed to see that happen until the
other provinces become harmonized. It does create a definite problem with
tax-inclusive pricing when everybody is not on the same base. That would make a
lot of sense if the tax-in pricing were to be put aside. Overall, it is a very
good thing, and ultimately that is the way we should be trying to go, but when
we have some provinces included and some not, it makes tax-included pricing
The Chairman: Honourable senators, our first walk-on witness is Mayor Walter
Fitzgerald, the Mayor of the Halifax Regional Municipality.
Mr. Walter Fitzgerald, Mayor, Halifax Regional Municipality: With me here today
is Mr. Corrigan, our Director of Finance, and Diane Eisenhauer, who is in
charge of planning for this particular tax.
We have some strong points we would like to make against this tax change. We are
not in favour of it whatsoever, and the Halifax Regional Municipality strongly
recommends that the proposed legislation on the harmonized sales tax be amended
to neutralize the impact of the tax on the municipality and its taxpayers.
The implementation of the HST, and the application of it to all goods and
services, means that the 15-per-cent rate will apply to all goods and services
currently taxed under the GST system at the existing rate of 7 per cent. That
will have a negative financial impact on the Halifax Regional Municipality. The
key factor underpinning the negative impact of the HST is the fact that the
municipality does not currently pay provincial sales tax on any goods or
services. Therefore we will be stuck with paying this extra 8 per cent.
We have been fighting with our provincial government about this situation. I
have met with them on numerous occasions, and I might as well talk to that wall
as deal with them. They are charging us what will cost us an extra $6 million.
In other words, our taxes will go up by 2 per cent, and they will get their
money back. I have lived here in Canada all my life, as most of you have as
well, and I say that this is an unfair tax on the municipality.
With the implementation of the HST, the municipality will not only pay the
additional 8 per cent provincial component of the HST on all goods and
services, but will be limited in its ability to recover the tax paid.
Municipalities are limited, for the most part, to recovering a rebate of 57.14
per cent. We agreed to that some time ago. However, that was done at a time
when the implementation of the tax was down the road. The rebate
notwithstanding, the annual cost increase is in excess of $5 million to the
residential and commercial property taxpayers in the Halifax Regional
When that much extra tax is imposed on a government or on the people, it is
discouraging, especially when we are trying to recover from the last recession.
Looking out of the windows here, you see lots of harbour. However, there are
not many ships going by here, and not much activity at all. There is not even
enough to be made on fish out here to go fishing.
We think that this tax downloading affects our overall budget, and will result
in a net municipal tax increase of roughly 2 per cent, on average, or else
reductions in municipal services to absorb the amount. Since the Province of
Nova Scotia did not previously tax its municipalities, this, in effect,
represents a new tax to the municipality and to all the taxpayers therein.
As a result, the Halifax Regional Municipality, on behalf of its property
taxpayers, formally requests that the municipality rebate on the 15-per-cent
HST be increased from 57.14 per cent to 80 per cent. This would effectively
restore the neutral position of the Halifax Regional Municipality with respect
to the province's conversion to the HST.
This request carries the unanimous approval of the Halifax Regional
Municipality, which stretches as far as you can see, from Hubbards right
through to Ecum Secum. Our municipality contains a little more than a third of
the population of the province. We have taxability, and the ability to make
things happen. If you wish to make things happen in Nova Scotia, you must make
them happen in the Halifax Regional Municipality.
Senator Buchanan is from all over, and he would probably agree with me that if
Halifax Regional Municipality goes ahead, so does everybody else. This is where
it takes place. There are lots of strength throughout the region, and lots of
pockets, some of them deep, but the only place where the population is
concentrated is Halifax. We have a strong feeling with respect to this HST, that
unless it is cut down, unless the province does something about it, then we are
in deep trouble.
You gentleman, you are the ones who can help us, and I really feel strongly
about this. The provincial government has not been listening at this point in
time, and we feel that if they do not act, the tax increase will do more harm
than good, and you will be down here again, facing further problems. We will be
facing problems together as Canadians.
As far as I know, P.E.I. are not participating in this HST, and they are smart.
We are prepared to pay 20 per cent, not 80 per cent. We think that that is fair
and that is equitable, and I cannot make the case stronger. Larry Corrigan, our
Director of Finance, would agree with me on this, even though we do not always
agree, that 20 per cent would be the maximum that we should pay, and that is
what I put forward. We ask you, as members of the Senate, to listen to our
case, and if there are any questions you would like to ask of me or Mr.
Corrigan, or even of Ms Eisenhauer, who is one of the people who work on the
numbers and figures and works it all out.
In cooperation with the Greater Halifax Partnership, the municipality recently
undertook a survey of the business community of this region. The results are
just now being tabulated but it is clear that taxes are a major concern of
business. You know that right across the country. In the survey and in our
conversation with business, the BST has been specifically raised as a deterrent
to economic growth. I have not been to all of the meetings, but I would say
that if the meetings are anything like the conversations I have with the people
who talk to me on the street, then I might say that the people, in general, are
very upset about this tax change. The BST has been specifically raised as a
deterrent to economic growth.
On their behalf, we would ask that the impact of the tax be reconsidered, in
order to ensure that the negative impact on our business community could be
minimized and that they are not to be disadvantaged in competing with companies
elsewhere in Canada that are not affected by the BST. In other words, you have
companies here paying the BST, while somewhere else they are not, and it is a
I am here this afternoon, gentleman, to implore you to show some reason and to
give us the benefit of the doubt. We are prepared to pay 20 per cent, and that
is what it is: 20 per cent overall. I am not prepared to pay anything, and I am
prepared to go to gaol. I am Vice-President of the Nova Scotia Union of
Municipalities. I am not speaking on their behalf at all today, but the past
president, myself and a few others are prepared not to pay this tax, and to go
to gaol. I am not quite sure I want to do that, but I will say it, anyway. We
are sort of hesitating on that, but we felt so strongly about this issue, that
this tax is really a deterrent and will hurt us rather than help us.
We are only short about $90 or $95 million. They will soon collect that up with
the changes, and if the municipalities paid 20 per cent without paying anything
else, I am sure you will very quickly arrive at the total. With the economy
improving as it is, there will even be more money coming in, there will be more
taxes paid, and they will get it. Why kill our economic growth down here? We do
not have enough growth, and we are fighting about the harbour, we are fighting
about the airport, we are fighting about everything. This is supposed to be a
Liberal government. They say that if it was anything else, it would probably be
worse. I think it could not be any worse. However, senators, that is what I
have to say, and I am saying it very strongly. I hope I have made my point
The Chairman: Our next witness is Mr. Terry Donahoe, a member of the legislative
assembly. Mr. Donahoe was a long time member of Senator Buchanan's cabinet, and
also at one point an interim leader of the opposition in Nova Scotia.
Mr. Terry Donahoe, Member of the Legislative Assembly of Nova Scotia: As Senator
Kirby has indicated, my name is Terry Donahoe and I am the MLA in the Nova
Scotia Legislature for the constituency of Halifax-Citadel. In that capacity, I
had an opportunity to speak at great length, and very frequently, in an effort
to convince the provincial Liberal government to see the folly of this
particular harmonization. That government did not listen, and I am here today in
the hope that you will listen but, more to the point, not only that you will
listen but that you will hear, and do the right thing.
Liberal senators -- and indeed all senators -- have the numbers in the Senate
and in the House of Commons to do the right thing, and you can do the right
thing if you have the will to do so. The scheme to harmonize the GST and the
PST, set out in Bill C-70, fails on three counts: It fails the consumers and
taxpayers of the province of Nova Scotia, it fails our business community, and
it fails the Atlantic region by isolating us from key markets.
First, I would like to discuss the effect of this tax on consumers and
taxpayers. The provincial government's own figures tell us that the BST will
cost consumers in Nova Scotia an additional $84 million in consumer taxes.
Depending on whose numbers you want to accept, that equates to something in the
order of $172 in new taxes, on average, for each and every family in the
province of Nova Scotia. I ask you to consider the impact of that kind of a tax
bite on those whom all of us in the political world purport to represent, and
certainly speak about greatly, and that is, of course, the middle and lower
middle income families in the areas that we represent.
Mr. Chairman and senators, Canadians are being pummelled by a far too onerous
tax regime. It is becoming more and more difficult to make ends meet. Over the
last several years, Canadians have seen their disposable incomes fall and fall
again, dramatically. Those who are fortunate enough to have a job have spent
their cushions of money, and are living now from paycheque to paycheque.
Indeed, personal savings have dropped to their lowest levels in a quarter
century and, at the same time, people are declaring bankruptcy in this province
and across this country in record numbers. Now we are facing a tax that will
take money out of the pockets of every lower and middle income family in Nova
Scotia, and it is simply a wrong-headed move; it does not make sense.
If Bill C-70 is passed, senators, consumers will pay double the tax for the
basic necessities of life. It will cost more to buy clothes for our children
and to buy them school supplies. It will cost more to put gas in our cars and
to pay our heating bills. It will cost more to buy a new home or to rent an
apartment. These new costs will be added to an already punishing tax burden.
I think it is important to put the BST in some context. Working Canadians,
senators, have seen their tax bills creep up for the last several years. For
instance, payroll taxes are artificially high. Employment Insurance premiums
are a direct tax on jobs; they kill jobs and employment. The federal government
has refused to reduce EI premiums despite a huge surplus in the EI fund.
Just very recently, we learned that CPP premiums will be increased. Working
Canadians again will pay almost twice as much in CPP over the next six years
without a corresponding rollback in personal income taxes. It is again a public
policy initiative which is guaranteed and designed to kill employment and jobs.
In the coming weeks, as those same people fill out their income tax returns,
many will discover that inflation has pushed them into a higher tax bracket.
They will be paying more tax despite see no real increase in their take-home
Senators, it has been death by a thousand cuts for the Canadian taxpayers over
the last three or four years. We are hurting, the Canadian taxpayers are
hurting; particularly, may I say, the people of this region. We simply cannot
afford another tax grab. I say to you without hesitation that this BST cannot
be characterized in any other way than as a tax grab.
The federal and provincial governments continue to deny that the BST is a tax
hike. They claim that industry rebates will produce savings for business;
savings that will be passed on to consumers. However, business owners have told
us, and I know they have told this committee, that this is not likely to be the
case. It will be the case that those who support this ill-conceived BST suggest
that the savings to business will be passed on to the consumers. The truth of
the matter is, as I know you know, senators, that those same businesses, who in
many cases will realize some relief as a result of those pass-throughs, simply
have been pounded themselves corporately over the last number of years to the
point where, when they look at their bottom line, they simply do not have the
capacity or the flexibility to pass on that saving to the consumer. They have
said that to me; they have said it to our provincial caucus; they have said it
to the provincial government, and I suggest that they have said it to you
effectively and forcefully in the context of these hearings.
In fact, I suggest that this tax will dramatically increase the cost of doing
business. The Retail Council of Canada tells us -- and it has told you -- that
it will cost their members a minimum of $100 million a year to set up a
separate tax-in price regime for Atlantic Canada. Quite simply, business cannot
pass on savings where there are no savings to be had. We will see the red tape
burden of this new tax resulting in higher prices. Nova Scotians are
intelligent consumers, and you know that. They do not want to pay more out of
their strained household budgets for the so-called privilege of tax-in pricing.
The presentations over the past few days have also made it crystal clear,
senators, that this legislation will harm business. Consumers will opt out. We
have been warned that the new tax will drive them to the underground economy,
and I will tell you, I have personal experience of that in recent weeks. At the
same time, businesses will need to scramble for cash while they wait for their
rebate cheques, and these issues are just as serious as tax-in pricing.
Senators, these problems, as I am sure you know, are not imaginary or
hypothetical. A whole raft of retailers: K-mart, Woolworth Stores, Carlton
Cards, Mark's Work Warehouse -- have said that they will either axe workers or
move stores out of Atlantic Canada. Yet Mr. Gillis, the Minister of Finance
from Nova Scotia, comes in and attempts to suggest to you, and to all of those
who will hear of him through media sources here, that this will be a great job
creator. Why is it that K-mart, Woolworth's and all these other organizations
are saying that they may well be axing workers or moving stores out of Atlantic
Canada? The impact of this tax, senators, will be real; it will be personal and,
in the case of employees and small business owners who lose their livelihoods,
it will be tragic.
The words "global economy" and "competitiveness" used to be
buzz words that only politicians would use. The circumstances of the past
several years have changed this, and changed it dramatically. Canadians have
seen the first jobless recovery in their history. They are aware that their
future and their security lies in entrepreneurship, innovation and the ability
to adapt. Bill C-70, senators, I suggest to you, imposes a red tape burden on
business that contradicts those values and those priorities.
In addition, Bill C-70 creates the first tax regime in the world to set
different rates on a geographical basis within the confines of the same
country. Hooray for us for making history. Well, it is the poorest imaginable
piece of history that we are making that I can conceive. The Atlantic region of
Canada represents only eight per cent of Canada's retail market. We already
must work harder and do better in order to compete. Now we are facing
legislation which will isolate Atlantic Canada, cut off retailers from their
key markets and discourage investment in the region. All this means stunted
economic growth and fewer jobs for Atlantic Canada, and fewer jobs for Nova
The federal government, senators, has failed to bring all the provinces on board
with a single national tax. However, this is no excuse to experiment; indeed,
it is no time to experiment with the most fragile economy in all of Canada. It
is time to forget partisan politics and return to the basics. The best social
policy program able to be initiated is the development and the creation of new
wealth and new jobs. The best foundation for jobs is not an increased but
rather, may I say, senators, a reduced level of taxation. Less red tape for
business and the free flow of goods and services across provincial borders.
How long have we heard the debate in this country that one of the elements that
stifles economic growth, the creation of new wealth and the establishment of
new jobs in Canada is that we have so many interprovincial barriers, province
to province, across the country. What have we done here, again, with this BST
but set up a whole new range of difficult and complex interprovincial borders.
This particular harmonization scheme fails, senators; it fails miserably on all
of these fronts. If it is the intention of the incumbent government to
harmonize PST and GST, I ask that you attempt to do it right. Let us go back to
the drawing board and plan a national tax with a single rate and a single
administration. Implementing this tax, as you are doing, in a piecemeal manner,
I suggest to you flies in the face of common sense, and is reason enough for
all of you and all of your colleagues -- and all of your colleagues in the
other place, to vote against Bill C-70.
I will close, senators, by calling upon you to kill Bill C-70. How can it make
sense to establish a tax regime in three Atlantic provinces, three fragile
provincial economies, which cuts them off from the mainstream of the Canadian
economy? I say to you it makes no such sense, and it should be scrapped.
The Chairman: Our next witness is Mr. Bill Casey who, as many of you will
recall, is a former member of Parliament from Cumberland-Colchester.
Mr. Bill Casey: I wish to make a brief presentation because something bothers me
about this whole tax, and it seems to me that one of the main, fundamental
principles is being lost in the details, and in the confusion, of exactly how
to administer it. It is a fact that this is the biggest transfer of taxation,
probably, in the history of the province.
The provincial governments would not change the income tax system to allow
businesses to stop paying income tax completely. They could not do it; they
would not be allowed to do it; but that is exactly what they are doing with the
BST. Under the BST, business absolutely stops paying their fair share of
provincial sales taxes. The PST is not only being blended with the GST through
the action of BST, but it is being changed dramatically.
At this point in time, and under the current system, we have a goods and
services tax which is a value added tax. We also have a provincial sales tax,
which is a sales tax. The sales tax is paid by businesses and individuals.After
the BST, the GST stays exactly the same. It has not changed; but the PST
portion of the blended sales tax is now converted to a value added tax, the same
as the GST, and it is not paid by individuals or by businesses, it is only paid
by individuals. It is a total transfer of taxation from businesses to
No longer in Nova Scotia will the sales tax burden be shared by businesses and
individuals; it will be totally carried by individuals. Compare that to the
Province of Ontario, for instance, where the sales tax burden is shared between
businesses and individuals. Here it will be carried totally by individuals and
municipalities, I should add. I believe it is unfair to individuals in Nova
Scotia to be required to carry that burden.
If you turn to page 3 of my little blue paper here, in box 1, for instance, if
IBM, a national company, pays $30,000 for a car for their local manager, they
will pay no sales tax, no BST, GST or PST; none. If any regular Nova Scotian
buys exactly the same car on April 2, they will pay $5,100 in sales tax. How
that can benefit Nova Scotians, I cannot imagine.
If Wal-mart buys a $3,500 computer to count their money, they will pay no BST.
If a Nova Scotian student buys the same computer, he or she will pay $525. How
that will benefit Nova Scotians, I cannot imagine. DuPont Chemicals, or any
company, pays $300 for work boots and coveralls, but they pay no taxes. If a
Nova Scotian worker buys those clothes for himself or herself, they pay $45.
These savings by these companies will not be passed on to consumers in Nova
Scotia. These companies cannot -- and will not -- establish unique pricing for
Nova Scotia but will maintain their national prices. There is no benefit to
Nova Scotia, and there will be a major increase in their share of taxation. In
a time when many people think the business community does not pay their fair
share of taxes, it is strange that the governments would invoke the ultimate
tax loophole: a complete end to cooperate sales tax.
That is my point. My bottom line is the same as that of everybody else whom I
have heard here, and that is: if there is to be a harmonized tax, it must be a
national program, so that individuals in Ontario pay their fair share of sales
tax, the same as they do in Nova Scotia. Also, it must have a single
administration, and it must focus on all Canadians, not just a small group of
Canadians who will benefit from the BST.
On page 4 of my brief, I have asked some questions and I would really like to
know the answer to the first one, if anybody knows it. The others I would like
to have later on if the committee can send the information to me.
The provincial government has already increased the BST to 17 per cent on one
specific item: automobiles. Can the provincial governments unilaterally
increase the BST on April 2 if they choose to on a specific item? Can they?
Does anybody know the answer to that?
The Chairman: What I think they have done is put a surcharge on certain items,
in the same way that periodically income tax has surcharges on it. I must
presume it is legal, but one of my blessings is that I am not a lawyer, and so
I am not sure.
Mr. Casey: The answer is yes, they can; any provincial government within the BST
group can increase the BST at any time they want to, or add a surcharge.
The Chairman: You are drawing that conclusion. I tried to give you the piece of
information that I had. I cannot give you a correct, legal answer because I do
Mr. Casey: They have done it in this case, though, so indications are that they
could, six months from now, add an additional percentage or two on to some
other commodity, or something like that. That means, too, that they can
probably increase the BST at their discretion. To me, that is extremely
dangerous, and wrong, and unfair.
On that transition tax, does business pay the transition tax?
The Chairman: The purpose of these sessions is to allow someone to make a
statement, and not to get into a dialogue with witnesses or participants. You
are asking technical questions which we would need to get experts to try to
answer. I would be happy to do that, off-line, once these public hearings are
over. We would be happy to have some of the experts talk to you about that.
Mr. Casey: Let us put that down as a question on which we would like to have an
answer: Does business pay the transition tax, or do they get a rebate on that
as well, in addition to the total BST? I think the fact that nobody at this
table knows the answer to that question is an indication of the confusion on
That ends my presentation, but I would like to have answers for the questions I
have listed here, because I could not get the answers from the provincial
The Chairman: We will get you those.
Our next witness is Mr. Jim Gourlay.
Mr. Jim Gourlay, Publisher, Eastern Woods and Waters Magazine: Mr. Chairman,
members of the committee, my name is Jim Gourmet. I publish the largest and
longest-running, unsubsidized, paid-for circulation, coloured periodical in
Atlantic Canada. I am here as an unofficial representative of 12 other regional
publishers in this part of the country, and somewhat ex officio for the Canadian
Magazine Publishers Association.
I am here today, I suppose, somewhat in desperation because my industry has been
quite frustrated in its attempts to talk to government about the very negative
ramifications of the a harmonized sales tax upon periodical publishing, first
here in the participating provinces, and then the fear goes right across the
As an Atlantic Canadian periodical publisher, it is my opinion that the manner
in which this harmonized tax is being very hastily imposed threatens the very
existence of periodical publishing, first in this region and, as I say, across
country. It promises to open the door wide to a further exacerbation of
American domination of cultural industries in Canada. The tax will further
weaken an already beleaguered industry, to the competitive advantage of foreign
The Canadian Magazine Publishers Association, with more than 300 member
publications, including Maclean's, Saturday Night, Canadian Living, and so on
and so forth, of which 13 exist in Atlantic Canada, in concert with the Don't
Tax Reading Coalition, is alarmed at the implications of this tax for a
Canadian cultural industry that is already under assault by massive American
competition. In constitutional terms, it is a widely held view that free access
to information is an integral element of any working democracy, and that the
state should be in no way permitted to impede, control, manipulate or restrict
information. Taxation on reading, therefore, is construed in some democracies
as being an offence to that principle. For this reason the United States, Japan,
Britain, Australia, Ireland and others do not tax reading, and see the
constitution value of tax-free reading. In many other countries which have
national consumption taxes, the tax rate for reading is significantly less than
the generate rate.
In Canada, what is worse and what is scary is that this tax is only tacitly
applied to foreign competition. Six years after the fact, and despite promises
to the contrary, the Canadian government still has not figured out how to
impose GST on subscriptions to American magazines. That puts us at a 7-per-cent
disadvantage. After April 1, I will be at a 15-per-cent disadvantage to my
foreign competition. Only in Canada, we might argue, would the government
punish our local industry for the benefit of foreign competition.
The practical implications of this tax are much more dire, especially while it
is only applied piecemeal in the country. My publication is distributed in
every province and territory in this country, in the United States and in
Europe, and so it is a dog's breakfast for me to try to administer this thing,
but I can perhaps explain to you best, in order to have you understand well the
implications of this whole situation, if I tell you of my own experience.
I am in my fourteenth year of publication, and the dramatic impact of
ill-considered tax changes are as follows: In 1991, immediately following the
imposition of the goods and services tax upon reading, my magazine's price was
arbitrarily increased by 7 per cent, because we were tax free previously, and
we were impacted at the consumer level by a 55-per-cent decrease in subscription
renewals. In addition to the 55 per cent in the first two quarters of 1991, in
addition to the 55-per-cent subscription revenue deficiency, our advertising
rates had to decline in accordance with a drop in subscriptions by more than
half, and the result was immediate and catastrophic. Within 21 months after the
first of January 1991, the company was rendered insolvent and the business was
unsustainable. We avoided bankruptcy by a hair's breath.
It is my opinion at this time that because we have not fully recovered from the
imposition of the GST, the harmonized sales tax, as I understand its provisions
at this time, would be a repeat performance that would put me and everybody I
know who does what I do in this region out of business if we try to charge that
tax on top of the price of our product. To arbitrarily hike my price to the
consumers by a further eight per cent would be suicidal and, in very simple
terms, I must eat it.
I will explain the implications to you. In this part of the country, the margins
on publishing are about 3.5 per cent. To eat the harmonized tax represents
about 3.5 per cent of my gross revenues. In other words, I would need to give
100 per cent of my profit to the government. I ask you, how many people would
want to stay in business under those circumstances?
I have concluded that, post-harmonized sales tax, periodical publishing in
Atlantic Canada will move from marginal to non-viable, and that the region will
henceforth revert to being serviced from outside, with a corresponding revenue
drain and cultural deprivation.
I ask you to prevail upon the governments of the day to delay the implementation
of this ill-considered tax in order that all of its manifestations may be
properly and fully considered. I also ask you prevail upon the governments of
the day to level the publishing playing field by exempting from this tax
subscriptions to Canadian newspapers and periodicals, in the same way that these
governments, by default, exempt many American newspapers and periodicals from
I would point out to you in closing, Mr. Chairman, that if you ask me about
books, we have exempted books. Unfortunately -- and ironically -- the vast
majority of books are now published in the United States, so that if I want to
inform myself on the latest on the O.J. Simpson trial, I can do that in a
tax-exempt way, and if, as an informed citizen, I wish to inform myself on what
is happening in my own community, I must pay tax for the privilege.
Dr. Thomas Hutchinson, Nova Scotia Veterinary Association: Thank you, honourable
senators, ladies and gentlemen. We are speaking on behalf of the Nova Scotia
Veterinary Medical Association which represents veterinarians in this province.
We oppose the harmonized sales tax. Some of the reasons are as follows: It has
been well documented that seniors with pets are better able to stay in their
homes longer, and remain healthier, if a pet is in the home. These seniors
require less public assistance for health and other care.
It has also been documented that post-surgical survival rates in human medicine
are extended if there is a pet in the home. Increased costs for spaying and
neutering animals would increase the number of unwanted pets, hence increasing
the cost to municipalities for animal control. Fixed income families would find
it a lot more difficult to own a pet and to expose their children to the
responsibilities of pet ownership, and the possibility of reduced health care
to animals could increase the incidence of zoonotic diseases. These are
diseases that are transferred from animals to humans, rabies being the most
important zoonotic disease.
Dr. Ernie Prowse, Nova Scotia Veterinary Association: The human-animal bond is
certainly a very strong one, and the added taxation will be outweighed by the
cost factors already identified. It would also have a negative influence on the
employment of veterinarians, animal health technicians, veterinary assistants,
receptionists, pet food and other pet-related retail industries, grooming and
boarding facilities, and other ancillary pet industries.
We would like to take this opportunity to thank the Senate committee for hearing
our concerns, and look forward to a favourable decision.
Ms Bev Sweetman, Retail Manager, The Dorchester Corporation: I am here actually
representing two groups of people: First, the company that I work for, which is
Dorchester Oaks Property Management Inc. We are a large property management
company with branches across the country, and locally in Nova Scotia we have
many, many properties on our books. We have a large retail component to our
properties, and it is on that note that I am primarily here. With my retailers,
I speak to you against tax-in pricing.
I have a number of national retailers in my properties, and the cost to them, as
you know, and I am sure you have been told over the last several days, is
phenomenal. I am in the process of trying to work with several other national
retailers to renew in my centres, and as well to attract new retailers to my
centres, and I must say I am meeting with incredible opposition to the climate
that they will be coming to, or looking at, by staying here in Nova Scotia,
with the cost of converting to tax-in pricing and the cost of maintaining a
tax-in pricing system when they run several other stores across the country.
Also, with my retailers and my other tenants in mind, the blended sales tax in
itself is, from a cash flow point of view, a very difficult prospect. As we all
know, it is a flow-through, but from a cash flow point of view, the waiting
until the refund cheques come in will be a burden on a lot of them, and in our
retail climate and our general business climate, it could be just the burden
that would make the difference to them.
Those, really, are my main two points. I guess there is not much point in my
wasting any more of your time. However, I would ask you to please give these
points consideration. It is difficult for us enough here in Nova Scotia, and we
really just do not need this added burden.
Mrs. Louise Moores: Mr. Chairman, ladies and gentlemen of the Senate, thank you
very much for taking the initiative in touring the Maritimes to listen to what
we have to say about our soon-to-come blended sales tax. I sincerely hope, on
behalf of all the small people, ordinary citizens like myself, that your
studied and strong recommendations regarding this blended tax to our federal
government in Ottawa will be considered to the point of scrapping the whole
I consider myself and my family as being middle-class citizens, Mr. Chairman,
and when you take into account all of the taxes that are paid by one family
member -- in this instance my husband, since he is the only one in the family
who is working -- and even though he earns a very good salary, what he brings
home after taxes, it hurts, and it is very discouraging. In Canada, we pay taxes
at a speed faster than we can make the money.
The Employment Insurance payments and the Canada Pension Plan payments just went
up. Well, guess what: My husband got a small increase, and his paycheque was
less than I usually get, because of those two previously mentioned increases. I
have two children at university, and I have no choice. When I shop, Mr.
Chairman, I have to budget, and I always try to purchase clothing on sale, but
nice clothing. There is no tax to pay right now, except for the GST, which is 7
per cent. Now it will be 15 per cent for the same things. Shoes, the same.
What will happen to the poor people? They need clothing. They need shoes. They
will have to dish out 8 per cent more. Where will they make the money? Rich or
poor, you must heat your house or your apartment. Oil to heat your property
will cost you 8 per cent more. For instance, my last delivery was close to
$300. My next delivery will probably be $324. Fuel is delivered every three
weeks in the winter months, so you figure, for somebody who does not have much
money and is on a very tight budget, what will happen?
The Tory Leader of the Opposition in the Senate, Mr. John Lynch-Staunton -- I do
not know if he is here right now.
The Chairman: No, he is not.
Ms Moores: I read in the paper that his party will try to amend or kill the bill
at third reading in the Senate next week. I will just add in a small comment of
my own that is not written here.
Senators, you know that your situation was raised recently in the media; that we
do not need senators because they are only there for a nice, big pension and
they are there as a thank you for being in politics, and it looks good.
However, senators, I want to thank you for the initiative you took at this
time. It will prove that our senators in Ottawa are doing something. That
comment is from me, anyway, and I am very glad you did.
I want to talk about buying a second hand car. When you do not have too much
money, you must consider that. Before the advent of this tax, on such a car you
were paying 11 per cent in provincial tax. With this new HST, now we will be
paying 15 per cent -- and we are only talking second hand cars here. As I just
told you, heating oil will cost me $24 more next time. Clothing and shoes --
there will be another 8-per-cent tax on everything.
I want to quote a few things that Mr. Gillis said yesterday at his presentation.
I would have come if the weather had been nicer. He said that the harmonization
of the tax represented a drop in the tax burden for Nova Scotia. He said "It
is not a tax grab, it is a tax break. We will take in approximately $100
million less each year." The fact is that we are already poor. I do not
know why they want to give us that much money and put on more tax. It does not
make sense. There are a lot of things that sometimes do not make sense, and we
must swallow them, and say nothing.
At what price for the poor and the middle class will all this come to? Nova
Scotia is known to be one of the poorest provinces in Canada. Especially after
what they have done to all of the fisheries. What is the point? What are we
trying to do here? The rich will be better off and the poor people will lose a
lot more. Rich, better off; poor, worse off.
With respect to buying, I will give you another example that I have been
thinking about. I know some people who have money. They have good jobs, and
they do not mind spending a few bucks on nice things. For instance, the men go
to the boutiques on Spring Garden Road or in Barrington Place here -- you may
have had a chance to see those, some of you who come here once in a while -- and
if they need a tie, they will pay as much as $100 for a tie. Those sort of
people will save 3.8 per cent in their pocket every time they do that sort of
thing, because right now they are paying 18.8 per cent.
Another example of that sort of thing is if a lady goes and says to the boutique
people, "I want a silk blouse," and it costs $125, she will also put
3.8 per cent into her pocket every time she has such a transaction. Therefore,
the rich people who can afford to do so will be shopping, and putting 3.8 per
cent in their pocket every time. In turn, that will give them more money to
spend on other things.
I know there are rich people in Nova Scotia, but they are not the majority.
Also, with respect to the other provinces, as some of the presenters before me
have suggested, I think we should try to work out a more stable plan that will
make this tax the same tax all across the country. If we do not, it will be
such a mess for the visitors, and vice versa.
I urge you, members of the Senate, to seriously revisit this Bill C-70 before it
is too late, and make taxes more affordable for the poor, the ordinary or the
middle class people all across Canada. The maritimes are not a rich area. Why
should we allow something so foolish to be imposed on us, and for the first
time? We are the first ones. We are the poorest, but we are to lead the way?
What does our provincial government want to prove or achieve by doing that?
I thank you very much for listening to me. I am just a little lady walking in
from the street.
Ms Debbie Kelly: One thing I want to say to the senators on the panel is that I
really want to thank you for coming down to give the citizens of Nova Scotia
the opportunity to say what we have to say about the HST, which is unlike Bill
91, the provincial bill that we were not given an opportunity to speak on.
I am here representing myself, my family, and other citizens like me who know
that this HST will hurt us. You have heard it all before, but heating fuel will
soon become unaffordable. I am already figuring out now: What can I cut back on
so I can pay the oil, the lights, and just basic necessities? I have a letter
at home from my oil company that I received just this month, announcing that the
price of oil has jumped by 39 per cent. Last year, we had a 6-per-cent raise in
our power bill.
My salary has not gone up, but everything else has. Now they want to tax food --
essential food -- and fuel, of all things. What I mean is that we are no longer
given any dignity to live and die here. Nova Scotia has been hard hit enough.
If I could afford a $100 pair of shoes, I would not have to be sitting here
talking to you, I would be home laughing. Everything will be affected by this
tax: heating, food, electric power, essential clothing. You must understand,
that regular people -- and I am talking middle class; I consider myself middle
to low class -- can barely make it now -- I can barely make it. I have
struggled for 15 years to keep my home, and I am still struggling. It is
essential that politicians understand that.
We are really looking forward to the fact that the Senate can help make a
decision and help make a difference to Nova Scotians like myself, that we do
not have to put up with this; that this tax can go into the horse field where
As far as home care goes, I was a victim of the health care cuts. My father was
affected by those cuts. We had to beg for every speck of home care that he
received. That home care was not from the province; it was provided by private
companies. They gave dad his care, and we had to beg for it every step of the
way, and he had to pay half of his pension for everything. This new tax would
have increased the amount of money that he would have had to pay towards his
home care, from renting his wheelchair to paying for his 24-hour oxygen that we
had to have, and the VON -- the entire thing.
Senators, I am begging you, basically, on bended knee here to get rid of this
tax; eliminate it, put it back where it belongs, because we do not want it.
When we want harmonization, we did not want the tax increased on essentials. I
do not know where anybody's mind possibly could have been to include these
things. It baffles me to understand why somebody would add tax to something that
is so essential. I mean, has any one of you ever tried to eat Kraft Dinner as a
steady diet over a period of years? Or make a package of wieners last a month,
just so they would have some meat?
That is basically all I have to say, and I know everybody else sort of said it
before me. Thank you for listening to me, and I really hope that we get through
The Chairman: I notice, Mr. White, that you have given us about an eight- or
nine-page brief, so can you hit the highlights rather than read the whole
Mr. Wade White: I did condense the longer version. Basically, I am here
representing the poor and the people who will be affected the most by the
implementation of the BST, or what we refer to as Bill C-70.
First of all, I point out that we are familiar with the national referendum we
all had to deal with in the past. Mr. Chrétien has provided Mr. Bouchard
with fuel to necessitate another referendum with the blended sales tax
legislation. I looked up the word "distinct" and it means different,
dissimilar, separate, diverse, various, definite, explicit. Among other similar
adjectives, these adjectives can be used to define the approach that the
federal government has taken to administer and to introduce the blended sales
tax legislation into the Atlantic region.
The blended sales tax legislation describes and endorses a distinct society. I
believe Mr. Chrétien's government is not aware of the problems that
might arise from the blended sales tax legislation once the legislation is set
in motion. Our Canadian Constitution is based on provincial association
agreements. Once you begin to tinker with any part of our provincial agreements,
you have qualified the need to amend our Constitution.
Taxes are a principal part of our provincial association. I will argue that if
the blended sales tax legislation redefines this fundamental principle, our
association within our Constitution has changed. In turn, the blended sales tax
legislation will approve Premier Bouchard's platform for separation. When the
Senate reviews the blended sales tax legislation, please ensure that the
legislation does not alter nor obstruct the provincial association agreements
that define our Canadian Constitution.
To continue further, Mr. Chairman, I will describe the poor; I will describe the
people whom this tax will affect the most. Those are the seniors, the working
poor, students, and social recipients. Given the base that the blended sales
tax is to cover, it will affect every person, every business and every
association within the Atlantic region.
Mr. Chairman, I do not intend just to sit here and throw nails at you, and not
offer you a way out. In order to alleviate the added cost of the blended sales
tax to the poor and to the consumer, the proposed amount of savings, the amount
that Mr. Gillis talks about it generating, once it is implemented -- can be
distributed to the poor and to the consumer via the federal GST rebate program.
Increasing the payment amount as well as time intervals of the GST rebate will
not only help the poor but will help business and the Atlantic economy as a
I realize that Bill C-70 is not the GST legislation. I realize that this a
separate tax form. However, what I am saying is that, instead of isolating
Atlantic Canada and defining it as a poor community, and going counter to the
tax policies that are established right across the nation, they should have
used the GST program that is already institutionalized instead of creating
something that nobody understands and that hurts everybody. Through the
already-established GST-rebate program, everybody could be accommodated. You
can help those who need help the most. When you go and buy a child a pair of
needed boots, or even just a slice of bologna -- just to get that slice of
bologna, Mr. Chairman, you might take it for granted but the majority of
Atlantic Canadians do not.
The GST-rebate system is based on consumption, as is the BST. Allocating the
savings to the GST will be an acceptable method of delivering needed assistance
to those who will be most affected by the implementation of the blended sales
tax legislation. The GST program is already established and implemented across
the country. Including the rebate in the GST rebate will be consistent with the
way things are done in the rest of Canada, not to mention our association
agreements and our Constitution of Canada.
The GST rebate will be easy to employ on an individual basis without interfering
with any other source of income, whether it be from a government social program
or from a private sector business. The GST-rebate system is unbiased, and will
assist non-custodial parents as well as custodial parents and seniors, et
The blended sales tax will be a great cost to business to implement. I suggest
to the Senate committee that you amend the bill as it is to exclude tax-in
pricing. That will help businesses. I mean, basically they are on welfare, too.
It is hard for everybody.
The cost to the businesses of Atlantic Canada to adjust prices can be processed
through the business GST rebate program, if you adopt the GST rebate system for
later on. The revenues can be provided from the savings that the governments
have set aside for the implementation of the blended sales tax program in
Atlantic Canada. Utilizing the business GST rebate system to implement the
blended sales tax legislation saves money for Atlantic Canada's businesses. The
GST program is already employed at Revenue Canada. In other words, you are not
about to create another tax agency to deal with just Atlantic Canada and the
rest of the country.
The legislation of the blended sales tax does not harmonize federal or
provincial taxes. Let us take the milk shake scenario, Mr. Chairman. You have a
scoop of ice cream, you have a jug of milk, and you have the vanilla. Very
well. Let us say that the ice cream as the federal government tax; the milk is
the provincial tax, and the vanilla, the cream of the crop, the municipal tax.
Mr. Chairman, when I make a milk shake, I throw the ice cream, the milk and the
vanilla into the blender, and when I turn that blender on, I end up with one
thing: it is called a milk shake. The word "blended" tax is a
misconception. "Blended" to me, means one. When you speak about the
tax, you still speak about 7-per-cent federal tax and 8-per-cent provincial
tax. To me, that is not blended. I will now summarize my remarks.
Mr. Chairman, the bottom line is that the blended sales tax, or Bill C-70, is a
farce. If you cannot get to the point where you can discard it, please take the
businesses of Atlantic Canada into consideration and disallow the tax-included
Mr. Leo Greenwood: I represent the working poor. I am a taxi driver, from the
City of Dartmouth. There are many reasons why all of us in Nova Scotia feel we
should be exempt from paying, or charging, the BST. I will comment on just two
reasons. Based on fair business practices, we in the taxi industry are
providing transportation to the public, meeting needs not satisfied by the Metro
Transit System. We in the taxi industry should be afforded the same BST
exemption as any and all other public transportation systems. The only
transportation system that operates 24 hours a day within the Halifax Regional
Municipality is the taxi industry. The buses stop around midnight, and they do
not start again till six o'clock in the morning, and they are exempt from the
BST. There is no reason why taxi drivers should not be exempt from the BST, the
same as the buses are.
The second reason is that nobody today in the Atlantic provinces in the taxi
industry, to my knowledge at any rate, is making over $30,000 a year. That is
one of the reasons that any other business is exempt from collecting and paying
the GST: they do not make $30,000. Unfortunately, we are one industry that was
exempted from that provision, and we must pay it. Not making that type of money
is putting a big hardship on the taxi industry in the HRM.
In the past nine years, taxis in the Dartmouth zone have not had an increase in
fares, other than the seven per cent GST which was added on, and which resulted
in a decrease of 25 per cent in our business. Now if we add another eight per
cent on top of our present fares, we are looking at probably another 20 to 25
per cent decrease in business. There will be no business left.
We do not know what we will do. We do not know what the poor people will do who
are trying to get to work at four or five o'clock in the morning and have no
way of doing so, and they are paying the extra fares. We in the taxi industry
wonder why you would exempt one part of the transportation system from the GST
and not the other part. We cannot understand it, and we would ask that senators
will take that into consideration. Since we are a strong part of the
transportation system here, we would like to be exempt from the BST if at
possible, and we would like the senators to put an amendment forward if
The Chairman: Senators, our last witness is Mr. John Gardiner.
Mr. John Gardiner: I am a former daycare owner in the City of Halifax who is
being hit with about a $7,000 bill on the GST, and when the HST comes in,
someone in my position would be getting a $15,000 bill, approximately, for
trying to open and run a business, which I think is totally unfair. The bill
comes from Revenue Canada, deeming that I built a building I did not build.
Other businesses are not treated in this way. Other businesses are not exempt
from GST, and receive input tax credits if they do convert to residential use.
In the case of daycare establishments, there is no actual conversion because
the houses in most cases are already houses. You are not taking a gas station
and turning it into the condo; you are just reselling what you have. Zoning
precludes me from doing anything else with the property. I cannot, like a
commercial operator, become a paint store or an auto parts store. I feel I am
being treated unfairly.
The Chairman: Honourable senators, this concludes our hearings. I might just say
two things for the record: First of all -- and I asked the clerk to do the
calculations -- we have heard from nearly 200 witnesses this week. In some
cases there were two and three representing the same association, but we had in
the order of 200 witnesses. We have had almost 40 hours of hearings since
Monday, which has been a long stretch, but on behalf of all of us, I would say
that it has been a very useful and educational experience.
On behalf of the committee, I would like to thank both the translators who
worked with us very hard on this tour, and the reporters, who have had
extraordinary difficulty with a very short staff of reporters; nevertheless
they took the full Hansard record.
Honourable senators, this committee will adjourn until 9 a.m. on Monday morning.
At that time, Mr. Martin will be our final witness from 9:00 to 10:30 a.m.