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Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

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 bill.

Senator Michael Kirby (Chairman) in the Chair.

[English]

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 otherwise needed.

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 priced differently.

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 oral form.

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 sales tax.

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 nature.

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 areas.

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 forward.

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 weeks.

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, though?

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 finance department.

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 implication.

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.

[Translation]

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 underground economy.

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.

[English]

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 too much?

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 consumers.

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 them.

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 pre-pricing policy.

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 store.

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 correct?

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 beginning.

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 throughout Canada.

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 that correct?

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 unintended consequence.

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 problem?

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 solution.

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 Canadians.

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 qualify.

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 our economy.

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 business activities.

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 thing will.

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 create jobs.

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 constituents.

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 that opportunity.

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 future.

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 budgets.

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 on.

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 deliberations.

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 to you?

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 tax?

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 altogether.

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 pay them.

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 create jobs.

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 Council.

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 businesses.

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 participate.

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 tax-included pricing.

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 15?

Mr. Boyd: Exactly.

The Chairman: Therefore it is the broadening of the tax base that has caused the problem?

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 provincial tax?

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 the case?

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 goes through.

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 underground economy?

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 particular issue.

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 live with?

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, please?

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 this country.

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 place.

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 investigated.

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 people out.

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 you.

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 clothing.

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 care services.

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 today.

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 to Montreal.

Ms Slater: Yes, but that is no good to the rest of us here, who want to move around here.

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 Island.

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 that reason.

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 biggest problem.

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 individual have?

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 saying?

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 affect veterans.

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 harmonized tax.

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 training?

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 witness.

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 people increases.

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 received.

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 situation.

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 assistance.

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 Mainland Mi'kmaq.

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 the exemption.

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 us.

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 into being?

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 non-signatory provinces.

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 provinces.

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 advantage?

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 of 1995.

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 signatory provinces.

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 Nova Scotia?

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 issue.

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 very difficult.

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 Municipality.

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 mess.

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 clearly.

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 pay.

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 Scotians.

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 individuals.

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 not know.

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 the tax.

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 government.

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 country.

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 competition.

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 taxation.

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 thing.

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 it belongs.

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 to you.

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 thing?

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 whole.

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 cetera.

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 provision.

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 possible.

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.

The committee adjourned.