EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, January 22, 1997

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[English]

The Chairman: The finance committee of the House of Commons is pleased to be continuing its hearings on Bill C-70. We have with us tonight our last round of witnesses. We're grateful to them for taking this last slot today.

From Shoppers Drug Mart we have Peter Effer, manager of corporate taxation; from the Nova Scotia Employees' Union we have David Peters; from the National Union of Public and General Employees we have James Clancy; from the Canadian Manufactured Housing Association we have Margaret Webb and Aaron Robichaud; and from the Canadian Association of Broadcasters we have Mike McCabe and Peter Miller.

We welcome you all before us. I suggest that we limit opening remarks to three minutes.

Would you like to start, Mr. Miller and Mr. McCabe?

Mr. Michael McCabe (President and Chief Executive Officer, Canadian Association of Broadcasters): Thank you very much for inviting us.

The Canadian Association of Broadcasters, as you probably know, represents the vast majority of private broadcasters in Canada, including radio, television, and specialty services. We're not here really to argue about the philosophical basis of harmonization, but to talk about some specific negative consequences for our industry with tax-in pricing and to suggest some solutions.

It goes without saying that national advertisements in national broadcast media are identical across the country and that it's simply impossible for such ads to have tax-in pricing in Atlantic Canada and tax-exclusive pricing in the rest of Canada. It's vital that exceptions already agreed to, we believe, for national catalogues apply to national broadcast advertising in national and Atlantic media. This would mean they would be advertising tax-exclusive pricing with a disclaimer, ``not including taxes''.

National advertisers will simply not pay the additional production costs required to produce separate price advertising for the three harmonized sales tax provinces. Atlantic Canada is not a sufficiently important advertising region; it represents only 4.3% of television advertising and 8.3% of radio advertising. The cost for a whole new radio ad could be an additional 100%. For television, 10% to 50% could be added to a $100,000 to $200,000 ad. Wendy's Restaurants, for instance, estimates an additional cost annually of $200,000 to do this.

In order not to have a devastating impact on Atlantic Canada, this exception must apply to regional broadcast advertising as well. In television, the four Atlantic provinces are served by MITV, which is CanWest Global, and ATV, which is CTV, both out of Halifax. Both cover the region, including P.E.I., from this single source. Newfoundland TV broadcasts in Newfoundland only.

Regional advertising represents 25% of television ad dollars in Atlantic Canada, and price advertising is fully half of this. A loss of one-eighth of our regional ad revenue would be devastating for local programming. Local news programming in particular would be affected.

Atlantic broadcasters are the least profitable in Canada. The combined radio and TV regional advertising losses under a proposal like this could reach $2.5 million annually in provinces that have already lost $11 million in broadcasting revenue over the past five years.

Regional advertisers are not prepared to confuse Atlantic residents with combined tax-in and P.E.I. price ads. The CRFA talked to you about the importance of price-point advertising and I think they talked to you about their coffee and muffin deal.

Theoretical answers won't work either in the real world, such as advertising $1.14 or $1.17 in P.E.I. Advertisers just won't do this when the price is the key in the advertising.

Complicated disclaimers won't work either. Take automotive advertising, for example. National advertising for automobiles is generally image advertising; regional advertising is usually focused on price. Auto advertising represents roughly 5% of television advertising in Atlantic Canada. Auto dealers' associations have put broadcasters on notice that they will have to reconsider their campaigns if tax-in advertising is adopted.

To conclude, the purpose of tax-in pricing is to respond to consumer preference. There are real problems with it, and I'm not sure they're going to get better. Even if other Canadian provinces with different provincial sales tax regimes come onside, we will never have genuine common tax-in pricing across Canada. Consumers will get more confused, not less, with tax-in advertising.

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In sum, without an exception for broadcast advertising, tax-in pricing will make national and regional price-based campaigns virtually impossible and will cause significant losses in revenue for Atlantic broadcasters, which for TV will have a direct and immediate impact on local news and information programming. We urge the committee to recommend an exception that would permit tax-exclusive advertising in national and regional broadcast advertising or that the requirement for tax-inclusive advertising be omitted altogether.

Thank you.

The Chairman: You're prepared to accept tax-excluded pricing plus a disclaimer?

Mr. McCabe: Yes.

The Chairman: I would have thought this was a done deal.

Mr. McCabe: We have been talking with officials, and there seems to be an openness to it, but I think it's in your hands.

The Chairman: Okay. We will recommend that.

Mr. McCabe: Thank you.

The Chairman: That will be done in the guidelines that have to come out and are not actually part of this bill tonight.

Mr. McCabe: We understand that.

The Chairman: Okay. If you'd gone on one more minute, you might have talked us out of it, but I thought your first three minutes were very compelling.

Some hon. members: Oh, oh!

Mr. McCabe: Thank you, sir.

The Chairman: Thank you very much.

From the Canadian Manufactured Housing Association we have Margaret Webb.

Ms Margaret Webb (Director, Canadian Manufactured Housing Association):Mr. Chairman, we would like to thank you and the committee members for allowing us to appear before the committee during your review of this bill. Unfortunately Mr. Robichaud got stuck in Moncton and couldn't make his flights, so he is unable to attend this evening. Mr. Youdale has agreed to accompany me.

The Canadian Manufactured Housing Association has been in existence for over 40 years. We represent 80% of all mobile and modular housing manufacturers and their associate suppliers, builders, and retailers across Canada.

As an association, we support the concept of one harmonized, value-added sales tax. However, we do have some concerns over the implications for our industry. Manufactured housing is a specific sector of the housing industry, and as such we do not necessarily face the same issues as the site building industry.

The provincial associations of Nova Scotia and New Brunswick retained the services of Price Waterhouse to conduct an analysis of the possible impacts of HST on our industry. Price Waterhouse has determined that the manufactured housing industry is facing housing price increases of 3.5%.

Our industry is the most prominent supplier of affordable housing in Canada, specifically through the supply of mini-mobile homes and manufactured home communities. The removal of the land component requirement of housing significantly reduces the cost of owning your own home and permits many Canadians the opportunity to enter the housing market, from which they would otherwise be excluded.

We have determined that the cost of developing a manufactured home community will increase by over 5%. Over 50% of all mini-mobile homes sold in Canada are placed on leased land. Many of the occupants of these communities are seniors and young families - consumers who have the lowest tolerance for any increase in prices.

The underlying assumption that the new HST will be revenue neutral may very well be true when applied over the entire business sector. However, the housing industry is expected to see price increases in the range of 3% to 4%, as echoed by the Nova Scotia Home Builders Association. Housing is a basic necessity, and as such, consideration must be given to reduce any negative impacts that will occur.

Specific to manufactured housing is the concept of trading up your home. Purchasers of a manufactured home can trade in their existing home in order to buy a newer home or move up in size. We would like to see the HST calculated on the net sale: the difference between the assessed value of the existing home and the purchase price of the new home. This is currently practised in the province of Nova Scotia. This will protect the homeowner's existing equity and will reflect the embedded taxes that have been paid on the older home under the previous system.

The manufactured housing industry differs from the site building industry in one major area: our product is transportable until it is delivered to the customer's site and affixed to the land. We do not pay provincial sales tax on our material but remit sales tax at the time of sale. This means we are excluded from the provision for homes partially completed.

We strongly urge the committee to consider the following: a housing rebate of 36% of the full 15% of the harmonized sales tax; housing rebates that can be assigned to the manufacturer, lender, purchaser, solicitor, or retailer; and housing rebates that can be applied towards the required down payment. This last proposal is based on the success of a similar program offered by the Province of Nova Scotia. We also recommend a one-time rebate equal to the 8% provincial component of the HST at the time of self-assessment on manufactured home communities.

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The issue of land has not been addressed. We propose a special rebate provision be entered for existing residential land lots that have water and sewer services, and therefore PST embedded in their cost. The rebate would be equivalent to 8% of the sales price, which is the extra tax the HST would impose on residential lots.

We propose that all units produced that have a genuine sales contract for delivery prior to the implementation date of August 1, 1997, but cannot be delivered due to conditions beyond the control of the manufacturer, retailer, or customer, such as bad weather, be taxed under the current PST and GST regulations, even though delivery will occur after April 1, 1997.

Mr. Chairman, we wish to thank you and the committee for taking the time to consider our recommendations. We are available to answer any of your questions, either today or in the future. Thank you.

The Chairman: Thanks.

I think the parliamentary secretary will have some comments on this issue. Do you want to wait for a while, Mr. Campbell? Okay.

Mr. Clancy is next. We look forward to hearing from you.

Mr. James Clancy (President, National Union of Public and General Employees): Thank you. I'm the president of the National Union of Public and General Employees. Mr. Peters, who is the president of our Nova Scotia component, the Nova Scotia Government Employees Union, will begin our presentation.

The Chairman: Thank you.

Mr. Dave Peters (President, Nova Scotia Government Employees Union): Thank you,Mr. Chairman. I appreciate the opportunity to be here along with brother James Clancy.

First, concerning the process, we're very frustrated with the process followed with 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 in the development of this tax. The real insult to injury for us was this committee's apparent unwillingness to hold hearings in the provinces affected by the new tax, and not just hold hearings in Ottawa. We know that the committee has travelled regularly to regions across the country, so we find it inexcusable. I can assure you that you have given us one further reason why this tax will long be known as the hated sales tax.

Regarding the content, while we criticized the Nova Scotia government for producing a skimpy seven-page bill that is devoid of meaningful content, we are very troubled on the other hand by the massive 355 pages of this very technical federal bill. It is clearly designed to confuse, and not inform the public about what the new tax will mean. Moreover, the agreement with our province and Bill C-70 together represent in our view a significant diminution of public control and accountability of legislative bodies by not requiring these bodies to approve any changes to the rate or the tax base of the new tax before they actually take place.

Regarding the impact on Nova Scotians, and I represent 17,000 working men and women in the province of Nova Scotia, 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 people. This will happen because many of the items where Nova Scotians will face increased costs are very basic items, such as children's shoes, home heating fuel, school supplies, and clothing under $93, to mention some of them.

Moreover, there will be no price reductions due to a 50% pass-through. A growing chorus of businesses have made it very clear that this is out of the question, because they will face increased costs with this new tax, so the consumer will also face the increases.

Similarly, there is no evidence for thousands of new jobs, as has been claimed in our province, to be created, because this tax, as one noted local economist said, will boost only a small sector of our economy, and that's the export sector, while burdening the larger service sector. In one example, provincial home builders have said the new tax will take away more than 2,000 jobs in the housing sector alone.

Regarding the impact on provincial finances, we're equally troubled that this 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.

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In our view, there is no way a one-time federal compensation program of $239 million to our province can ever compensate in the longer run for the loss of what our provincial government has admitted to be approximately $100 million a year in provincial sales tax revenue and another$53 million in income tax breaks each year.

In our view, we will be facing HST - huge service terminations - especially in light of the balanced budget legislation passed last spring in our legislature, which limits the extent to which expenditures can surpass revenues. We think this in many ways is the real sleeper in the bill.

All in all, the HST is quite simply a tax grab and 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 have four recommendations:

1. That Bill C-70 be taken out for extensive public consultation by this committee, at least to the Atlantic region, where it will have the most impact in a very few months.

2. That this legislation be revised to include written guarantees of more meaningful moneys for individuals, fewer burdens to small businesses, and stable and sufficient funding for programs of the government, especially for health, education, and community services.

3. That it at least include the federal-provincial agreement, and no overrides or restrictions of other existing federal and provincial legislation.

4. That if these conditions cannot be met, the legislation be scrapped in favour of a comprehensive review of taxes and establishing a truly progressive tax system with much less of a tax burden on low-income and middle-income Canadians and small businesses.

All in all, we urge the Chrétien Liberal government to honour its 1993 election commitment by scrapping the GST and this latest version of it. Failure to do so will do irreparable harm to the ties that bind our region to this country.

Thank you.

The Chairman: Thank you very much, Mr. Peters. Mr. Clancy.

Mr. Clancy: This is a fairly large change in public policy the committee is seized with deliberating on. As the committee can well see, it affects business, consumers, and countless others in the three provinces in question. But I want to talk very briefly and very specifically about a group that is affected by this change, and those are the public employees, both at the provincial level and the federal level, who have worked in many cases for 20, 25, 30 years, and now we've got this dramatic change before them.

We're working and seeing this government and a host of provinces look at the ``rationalization'' of public services, not only in this area but in agriculture, fisheries, and so on.Mr. Chairman and committee members, I think this committee could do a great service to those employees in question by ensuring that there's proper consultation with the members affected and the unions that represent them.

Let me talk about three specific areas that are proving problematic. One is in the area of pensions for a provincial employee who may end up transferring and doing some of the work that would result if this bill is passed at the federal level. We are also talking about the question of the qualifications, the pensions, and the job security of those members.

This may be a small point, I suppose, because you're dealing with what in effect is a major policy change involving billions of dollars. But I'm asking that this committee speak to the issue and encourage not only the provincial governments in question but the federal government and the appropriate officials in the federal government to ensure that those negotiations and consultations over the employees' futures take place properly.

I leave that one small request, given the fact that you're listening to business and the huge amounts of money that are in play. But I'm talking about hundreds of employees. As we sit here tonight deliberating tax-in and tax-out, price-in and price-out, those employees are sitting at home wondering what the future holds for them. So let me end by just requesting that in your report you make some comments to the appropriate officials to ensure that takes place.

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The Chairman: Thank you, Mr. Clancy.

I'll turn now to Mr. Effer from Shoppers Drug Mart. Did I mispronounce your name?

Mr. Peter Effer (Manager of Corporate Taxation, Shoppers Drug Mart): No, ``Effer'' is correct. Actually, sir, you are one of the few people who did get it correct.

Mr. Chairman, I represent the central office, and Mr. Gary Smith is a franchisee from Saint John, New Brunswick. We do request permission for both of us to speak tonight.

The Chairman: Sure.

Mr. Effer: Good evening, ladies and gentlemen. Thank you for the opportunity to speak to you tonight.

My name is Peter Effer and I'm manager of corporate taxation at Shoppers Drug Mart-Pharmaprix, with our central office situated in Willowdale, Ontario, which I believe is your home riding, Mr. Chairman.

Shoppers Drug Mart-Pharmaprix is Canada's largest organization of retail pharmacies, with approximately 850 franchised and company stores, employing more than 30,000 people nationwide and generating over $4 billion in annual retail sales.

I'm here to present the grave concerns that Shoppers-Pharmaprix has with the tax-inclusive pricing requirement of a harmonized sales tax. In general, Shoppers supports tax harmonization if the intent of tax harmonization is to reduce cost to business, thereby opening the way to lower prices for consumers. However, tax harmonization with TIP takes a good idea and negates all of its benefits by adding extra costs throughout the system, which ultimately harms both retailers and the consumer.

I'd like to talk to you about two specific issues of a corporate nature that affect us. One is the re-pricing at stores for tax-included pricing, TIP.

All store signage currently reflecting the tax-out price will need to be changed under your proposals. This will be a very onerous task, because it will include a one-time changeover of all shelf labels, re-ticketing of certain pre-priced goods, and the replacement of every single sign that denotes price. The estimated cost of this changeover is approximately $4,000 per store, or $424,000 for the 106 stores in the harmonizing region. The conversion cost incurred in each store, if harmonization and TIP rolls out across Canada, would be enormous for Shoppers, at approximately $3.4 million, assuming 850 stores at $4,000 per store. Furthermore, this process would need to be repeated, at a cost of $3.4 million, each time there is a federal tax change. Different but substantial costs result for each provincial tax change.

With regard to labels, to avoid additional cost associated with operational personnel and computer systems dealing with two pricing regimes, tax-in and tax-out, dual pricing is the only feasible option for SDM to accommodate your proposals. Shelf labels used in our stores are approximately one inch by two inches. I have an example of our general shelf label. On this label we show a product description, a UPC code for scanning purposes, and price. Adding more information, that is to say another price, especially in the same font size, which is a challenge in itself, will lead to customer confusion, as the price the customer should be focusing on would be uncertain.

As to the flyers, Shoppers creates an eight-page national advertising flyer each week for English Canada and a French flyer in Quebec for our Pharmaprix stores. On average, in the national flyer at least six of those pages are similar, with regional changes purposely placed on certain pages to avoid additional printing costs. Although the exact guidelines for flyers have yet to be released, any change from the national advertising flyer will result in an additional split-run flyer. This is clearly adding a prohibitively expensive and onerous responsibility, which will affect all retailers who use flyer ads.

The additional split-run flyer would add approximately $500,000 per year of cost. Furthermore, if HST rolls out across Canada, a separate split-run flyer would need to be created each week for each jurisdiction that introduces tax-included pricing with a rate other than 15%.

In your previous guideline, one option for flyers was a dual-priced flyer. The clutter that is created by two prices on a flyer, using the same font - should this also be a requirement for flyers - results in a flyer with little room for advertising the product. This is especially true for SDM's bilingual flyer, which is used in parts of New Brunswick.

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The Chairman: I don't mean to interrupt you, Mr. Effer, but we've had the same problem with national catalogues, and we've undertaken to solve that problem for you in terms of your national flyers. I assume it's the same problem the issuers of national catalogues have. We've undertaken to work that problem through, and our committee is strongly behind your efforts to make sure it doesn't increase your costs or hassles. We're looking at tax-excluded pricing plus a disclaimer.

Mr. Effer: On flyers as well?

The Chairman: Yes. Is that okay?

Mr. Effer: That's certainly an improvement on the Friday proposals.

The Chairman: Good.

Mr. Effer: But there are other concerns.

The Chairman: Okay.

Mr. Effer: I'm on my conclusion, in any event.

Shoppers believes all the benefits of tax harmonization can be achieved without tax-included pricing. There is no evidence whatsoever that with tax-included pricing, consumer purchasing behaviour at the retail level will be any different from if tax-included pricing were dropped.

Furthermore, to implement this type of system would result in significant costs as HST crosses Canada, costs that are permanent and disastrous for the retail industry if more than one tax rate for HST results. The only time tax-included pricing could possibly warrant review would be when there is one base, one stationary rate, and one central administration for the HST in Canada. Until that day -

The Chairman: Which will be never.

Suppose Alberta came on at 7% and everybody else was at 15%. You still wouldn't go for tax-included pricing?

Mr. Effer: I would certainly say that would be a better result than the potential -

The Chairman: No, but you just said you would never support tax-included pricing unless we had the same rate and the same base right across the country.

Mr. Effer: That's correct. That is what I said. I won't dispute what I said.

The Chairman: Okay, but is that reasonable?

Mr. Fewchuk (Selkirk - Red River): His heart is telling him something different.

The Chairman: Is it reasonable that tax-included pricing could be prevented by one province that wouldn't go to the common rate, if that's what you're telling us?

Mr. Effer: Right now we have stores in the territories as well.

The Chairman: Okay, so you would not support it if it didn't include all the territories and all 10 provinces in the same way.

Mr. Effer: At this point in time Shoppers recommends that tax-included pricing be abandoned until the point in time when there is one rate, one administration, and one base.

The Chairman: Which means never, because the territories do not necessarily have their own provincial taxes and Alberta will never have one, unless...

So we can give up the idea of tax-included pricing in Canada as far as you're concerned.

Mr. Effer: I think what you're saying to me is you think we will never support tax-included pricing because there will never be 15% in the other jurisdictions. I can't really say there will never be 15% in those other jurisdictions.

The Chairman: I can. I understand your position, and it means consumers in Canada can never have the benefit of tax-included pricing as far as Shoppers Drug Mart is concerned.

I can understand your concern in doing it for three provinces; I really can.

Mr. Effer: If the situation were presented to us of two types of jurisdictions in Canada - 15% and I guess what we're saying is 7% - at that point in time Shoppers would review the situation and come up with a new recommendation. However, being a citizen of Ontario, I've heard our premier indicate that 15% is not an option for Ontario.

The Chairman: I just heard your recommendation tonight. You're a man of very carefully chosen words, and I just wanted to make sure I understood you clearly. If you didn't mean exactly what you said -

Mr. Effer: Shoppers Drug Mart's position is that until the day it's one rate, one base, and one administration, similar to the other retailers -

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The Chairman: I understand that. It's just some other retailers are a lot more flexible than you are.

I don't say I'm arguing with you. It's your duty to come here and present your opinion and it's our duty to think of what's in the best interest of all Canadians.

Mr. Effer: Shoppers is certainly very interested in the consumer, and if you're reading that that is not Shoppers' position, that's not a correct analogy.

The Chairman: No, I didn't want to put words into your mouth. I'll let you put them in yourself.

Thank you.

Mr. Smith, you want to add something else that hasn't been said?

Mr. Gary Smith (Associate Owner, Shoppers Drug Mart): Thank you, Mr. Chairman.

My name is Gary Smith. I'm a pharmacist and the owner of a Shoppers Drug Mart franchise in Saint John, New Brunswick. I'd like to thank you for allowing me to speak.

I work six to seven days in my store, on the front line, dealing with customers every day, so I can give you a perspective on the HST from the trenches and from a business owner-operator's point of view.

I'm here to express my concerns on the TIP guidelines related to harmonized tax, released last Friday. Before I state my detailed concerns about TIP, let me first of all say I commend the government for its negotiations of the HST deal, in general. Harmonized federal and provincial sales taxes offer an administrative simplicity to independent business owners such as me.

Unfortunately, though, the Government of Canada has consistently insisted that TIP be part of the HST deal with New Brunswick - my home province - Nova Scotia, and Newfoundland. The government has done so on the basis that consumers want to be informed as to the final price before purchasing a particular product.

As an active member of the Saint John Board of Trade, I can state with confidence that the original TIP proposals that required retailers to implement full TIP would have resulted in substantial costs. For smaller retailers those costs related primarily to reprogramming or replacing cash registers and re-ticketing of pre-priced merchandise.

With the recently released guidelines, while they offer some savings to the cash register and re-ticketing process, costs will still be incurred. More importantly, however, the guidelines will cause chaos for consumers trying to interpret the many different pricing applications outlined in the guidelines, which have to be implemented in retail stores.

As an independent owner-pharmacist of a Shoppers Drug Mart with 24 years of direct, front-line retail experience, I'd like to present my concerns on the consumer confusion that TIP will cause in the day-to-day operation of my store. To save on costly system conversions and to remain competitive in the retail environment, dual pricing is the only option available to me to satisfy TIP requirements - a costly conversion.

As to conversion charts, in my store, to avoid re-ticketing of greeting cards and magazines, conversion charts will need to be positioned on or near the product racks. Available space is my initial concern, as retail space is a rare commodity in my store, since most of it is used to run my business of selling products to customers. My greater concern, however, is that customers may perceive that since we live in a tax-inclusive world, the price on the card or magazine is the final price, with HST included.

Based on my retail experience, I'm not sure who will bother to look at the conversion chart. Will my neighbour's 80-year-old mother understand the principle of the conversion chart when all she is hearing from the government lately is that the price you see is the price you pay? To make matters worse, it is not you who will have to explain the HST or TIP to my customer. It will be the cashier working in my store who will have to explain it to the customer while other customers are forced to wait in the line-up. I can tell you this is going to create bedlam at my store.

My success as a retailer is determined by my ability to provide the best level of customer service. My customers expect nothing less and I want to give nothing less. These proposals will make it very difficult if not impossible for me to achieve that goal, and I must protest any regulatory requirement that will hinder my ability to provide the best customer service.

Shelf labels and font size, as Mr. Effer explained to you, are an issue. If I am to put another price on a shelf label with a smaller font size in order for us to get the right information on that label, consumers will have a difficult time reading that label, and in fact the inscription that describes the product on the shelf will be almost impossible to read. Price comparisons will be difficult for consumers with all the various prices available to them. Once again, all the questions related to this confusion lead to questions for my cashiers.

As for conversion costs, it's going to cost me $4,000 to convert my store to this confusing pricing system. Every label, shelf talker, and sign denoting price will have to be changed. Although I appreciate that this is a one-time cost, it is far from inexpensive for me.

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Can I be promised that the rate will be stationary for the next 30 years, or 10 for that matter, or will I be incurring costs many times as either the provincial or the federal rate fluctuates? I know there is an agreement on rate stability in the short term, but our history shows that different governments result in different tax structures.

For those products that cannot satisfy TIP requirements with signs and shelf labels, I will need to incur re-ticketing costs, which is regressing to a 1970s retailing style. Although much lesser, I admit, with the new guidelines, any administrative costs introduced into my store, or any business for that matter, result in inefficiencies and higher costs to consumers.

In conclusion, I have grave concerns regarding TIP, as an experienced retailer. Canadian and foreign visitors to the province of New Brunswick, the gateway to the Atlantic, will not understand TIP in its various forms. The price confusion for both provincial residents and visitors that will be caused by the TIP will lead to buying resistance and a decline in impulse purchases, a major component of retail business.

Further, price confusion will lead to cross-border shopping as suspicious shoppers look to more traditional and understandable retail pricing for purchasing comfort. Three provinces, with two million people, are the only jurisdiction in all of North America that will have tax-inclusive pricing.

In summary, the government should not be involved in regulating retail pricing practices and marketing decisions. That relationship should continue to exist between the consumer and me, the retailer.

Thank you very much.

The Chairman: Thank you very much, Mr. Effer and Mr. Smith.

Mr. Bélisle has kindly waived his right to question for now.

Mr. Solberg, please.

Mr. Solberg (Medicine Hat): Thank you very much, Mr. Chairman.

I want to start by moving, seconded by Mr. Bélisle, that these hearings be extended and that the finance committee be allowed to travel to Newfoundland, Nova Scotia, and New Brunswick to gather further testimony on Bill C-70.

Mr. Campbell: Mr. Chairman, does the clerk have a copy of that motion in both official languages? Is it in order?

The Chairman: I'm sure it is. If it's not, it will be.

Mr. Campbell: Okay.

Are we having discussion now?

The Chairman: Yes.

Mr. Campbell: Do you want to begin with the presenter of the motion or do you want to hear from me?

Mr. Solberg: If I might, Mr. Chairman -

The Chairman: Do we want to debate it?

Mr. Solberg: Mr. Chairman, I will be very brief.

We have heard all kinds of people come forward and say they have not had a chance. We've had gentlemen from the unions here; earlier we had Mr. Chisholm making statements about this. We've heard other criticism.

People in Atlantic Canada, because they're going to be primarily affected by this, have a fundamental right in a democracy... When we're talking about taxation policy that is going to have a dramatic effect on their lives, they should have the ability, not only to be offered a trip, if they can afford to spend a day, to come to Ottawa, but to come to a meeting like this in their home province, in their home town, to make their point.

The Chairman: Before we get into this - and I can assure you this has no other intent but to assist the witnesses before us, who are not part of this particular debate, although one has suggested it - I would be happy to entertain this motion after we have heard our witnesses.

Mr. Solberg: Absolutely. I don't want to hold them up.

The Chairman: I give you my word we will give you the floor, as soon as we've adjourned with our witnesses, to present that motion. I think that would be fairer to them.

Mr. Solberg: Absolutely.

The Chairman: Thank you.

Mr. Solberg, do you have any questions for our witnesses?

Mr. Solberg: I have a quick statement.

First of all, with respect to Mr. Effer's comments, retailers are more than prepared to be quite flexible on this legislation, and they've indicated that. But they've also indicated very strongly that they would much prefer tax-in pricing to be delayed until well after the time when there is harmonization across the country.

People have said over and over again that they don't have a problem with harmonization per se. There are certain aspects of it that cause them concern, but tax-in pricing does cause grief for a number of retailers. In Atlantic Canada, where they can least afford it, we don't need higher prices passed on to consumers, and that's precisely what this legislation will do.

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We heard today that people are going to be closing down stores. Woolworth is going to be closing 30-some stores. We heard that Carlton Cards will close some stores.

Mr. Chairman, you said Mr. Effer -

Mr. Campbell: Mr. Chairman, no one said they would be doing that. They said -

Mr. Solberg: Marginal stores.

Mr. Campbell: - they'd be looking at that, and that it may have that impact. I don't think anybody has said that unequivocally, as Mr. Solberg continues to repeat. If you ask those people, I think they would say this may happen.

That's as far as they went, Mr. Solberg. It's completely outrageous to come here and repeat three times in a row now that these people have decided to close stores.

Mr. Solberg: Mr. Chairman, I'm certain they weighed their words carefully when they appeared before the finance committee of the House of Commons -

Mr. Campbell: That's why they didn't say what you said they said.

Mr. Solberg: - and made those sorts of remarks.

As well, on the subject of flexibility, it's the government that's being incredibly inflexible on this issue. They are the ones who are insisting on pushing ahead with tax-in pricing when people have said, almost with one voice, that they don't want it right now. It's going to cost $100 million a year and jobs in Atlantic Canada. That point was made very eloquently by the other presenters today when they made their remarks about marginal stores having to be closed down if this legislation proceeds.

Those are just my comments.

The Chairman: Do any witnesses wish to respond?

Mrs. Brushett.

Mrs. Brushett (Cumberland - Colchester): Thank you, Mr. Chairman.

I would like to read into the record some of the benefits to Nova Scotians that this harmonized sales tax would have. All Nova Scotians will receive a 3.4% provincial income tax reduction. There will also be an enhanced low-income tax reduction program. In addition, there are rebates on tax conversion of vehicles for the disabled, and direct assistance for many of those who do not benefit from the income tax cuts.

Mr. Chairman, I would be so bold as to say that the people of Nova Scotia have been given consideration and benefits of the low income.

Mr. Peters, I'm so happy you're here tonight. I'm very pleased. I'm reading right now the headlines from your press release: ``Union praises government's approach on PST employee transfers''. Am I correct?

Mr. Peters: You're absolutely correct. In Nova Scotia they did the right thing.

Mrs. Brushett: Thank you.

That's all, Mr. Chairman.

The Chairman: Mr. Campbell.

Mr. Campbell: Before we move to discussion of the motion as put forward, I want to thank the witnesses. It has been a long day for all of us. You've raised some interesting issues for our consideration.

Mr. Smith, you're familiar with the guidelines, I take it. So the suggestion that you would be re-ticketing or re-pricing leaves out the other option you have, as mentioned by your colleague from ``central'', as he called it, which is shelf and bin pricing. That's also an option for you, is it not, under the guidelines?

Mr. Smith: It is, except there are a number of items we would buy nationally from various suppliers that would be pre-priced and that would not come in sufficient quantity such that bin pricing would apply. As with the Carlton Cards scenario, clearly 40% of their business, over and above their greeting cards, is pre-priced. They will have to re-ticket all of those products.

Mr. Campbell: But the bin and shelf does go part-way toward solving the problem.

Mr. Smith: It does. But I would have a substantial number of those types of products that I would buy from Carlton Cards. So I am not indifferent to the Carlton Cards scenario.

The Chairman: Mr. Campbell, didn't we, for Carlton Cards, say they could put up a conversion chart?

Mr. Smith: For the greeting card portion, yes, but the rest of the business is also pre-priced.

Mr. Campbell: So the guidelines go some way toward addressing some issues, but not everything.

Mr. Smith: What it does, really, is create a new manual process that revisits a 1970s way of doing business. We have to go out and buy a pricing gun again.

Mr. Campbell: You're a franchisee. I'm sure you know your numbers. Have you done any analysis of what you currently pay in PST on your business inputs?

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Mr. Smith: The ITC benefit for my business is approximately $11,000 a year.

Mr. Campbell: It's interesting, because in the Atlantic provinces about 20% of the$700 million in ITCs that will be returned goes to the retail sectors.

Mr. Smith: I would question your numbers on that, Mr. Campbell. Not to challenge you, but I suggest that those ITCs are for all the products that are brought into the store. The real benefit is in the expense ITC. The merchandise that we receive ITCs on is not a benefit. The real benefit is only in the ITC derived from expenses.

Mr. Campbell: Mr. Chairman, I just want to repeat two things that I've said at each panel today. First, with respect to catalogues, I think it is likely that this committee will recommend, and the government will take very seriously a recommendation, that we take another look at, in consultation with the provinces, the issue of catalogues, flyers, and direct sellers because of some of the issues that have been raised with respect to those.

Mr. Peterson has also indicated to you that we've heard much testimony here to the effect that as advertising guidelines are developed, it would seem to make sense and certainly enhance fairness all around if ads were to contain, if not tax-inclusive pricing to be comparable to what you have to do in-store, then a disclaimer so that it is clear and evident to people that the advertised price is plus tax.

The other clarification is with respect to housing - and again I appreciate hearing from people from the housing sector - and it is only to repeat, Mr. Chairman, as I have earlier, that there are ongoing issues with respect to the housing sector, very complicated issues, some of which the HST and the hearings we're having lead us to discuss today others that predate and will continue notwithstanding HST in other provinces.

First of all, in the Atlantic provinces themselves, as I've said numerous times today, we would prefer to see consistency in terms of rebates. It is a decision ultimately, as you will understand, for each provincial government, but we will note from these very extensive hearings here in Ottawa that this continues to be a problem. I wanted to inform you, as I have colleagues of yours from your sector who appeared in other panels today, that the department is in active contact with, for instance, the Canadian Home Builders' Association and their president, talking about some of these very issues, and that those consultations continue. If you are not making your views known directly to the department, I suggest you do. We have a lot of issues still to deal with in your sector.

Those would be my comments, Mr. Chairman.

The Chairman: Thank you very much, Mr. Campbell.

Is there any response from any of our witnesses? Is there anything else you'd like to say before we adjourn? Mr. Clancy.

Mr. Clancy: I haven't had the pleasure of meeting Madame Brushett. It's nice to meet you.

The Chairman: You're in for a real pleasure.

Mr. Clancy: I just want to make one point clear. While it's true we've had success in Nova Scotia on this issue, on the question of the employees affected, we're not meeting with success in Newfoundland and New Brunswick. Those problems that I outlined, as we sit here tonight...as I said, those members and their families are at home wondering what will happen to them.

Again, Mr. Chairman, I encourage the committee to speak to that issue, because we're dealing with the HST here, but there are a number of other areas that are going to come up over the next few years in terms of this rationalization of public services. So as a member of the government, if I could speak specifically to government members of the committee, you would be doing a great service if you could address that issue at this point in your hearings.

My final point is that public hearings in those three provinces, or the committee being in those provinces, would be healthy. People would have an opportunity to come out and talk with you and learn more fully about the implications of this HST. I think that would go a long way towards people understanding more fully what's happening.

The Chairman: Mrs. Brushett.

Mrs. Brushett: Thank you, Mr. Chairman.

I appreciate your comments, Mr. Clancy, because we're all here with the intention to serve the public as efficiently and as effectively in our economies as we can. I think you do make valid points.

I would say this whole process is ongoing. It doesn't end with the passage of a bill. Just a few weeks ago we were doing some legislation regarding the old GST bill. The HST will be a bill in progression probably as long as we're all around here. It's the kind of thing that we will continue to consult.

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We were in the Atlantic in November, and a couple of years ago did cross-country hearings on what to do with the GST. So we've been out there. I personally put ads in the paper inviting the public here. That's why we had several politicians up here. They knew that the hearings were on and that their way was paid. I think we've given it full consideration at this point in time.

I must assure you, it is ongoing. We will do our best to communicate with all those people who would be interested and affected.

I thank you for your comments.

The Chairman: Thank you very much to our witnesses on behalf of all of us around this table.

To me, Mr. McCabe, your problems for national advertisers are so self-evident. We're going to urge the government to work with you in a very cooperative way. The same goes for Shoppers Drug Mart.

Mr. Smith: Mr. Chairman, I'd like a clarification on one of the guidelines with respect to conversion charts. The proposal indicated that conversion charts would be permitted for greeting cards, magazines and seeds. Is it restricted to that list?

The Chairman: That is right now, but we want you to work with us to make this thing acceptable, or more acceptable, to you. That's what I'm saying. The door is open. Our instruction on the committee to our officials, federally and provincially, is to work with you to get something that's the least intrusive to your operations, the least costly to you and the most effective in communicating to your customers what they're going to have to pay. You might not get everything, but I think probably, through working cooperatively, we can work out a lot of solutions. We've already found we've been able to do this over the last couple of days.

Mr. Smith: Can I assume from this, then, that there is flexibility in dealing with the other pre-priced products we spoke about earlier?

The Chairman: Yes. I think we're approaching this with a spirit of total flexibility. If you find there are roadblocks being thrown up to you for non-rational reasons, your politicians will want to know about it.

Mr. Smith: Okay. Thank you.

The Chairman: If the negotiations to make this thing more workable aren't proceeding on the highest level of openness and exchange of information, or if there's a digging in of heels, then we would want to know about it.

Mr. Smith: To the degree that further dialogue is probably necessary, I would have concern about the short timeframe within with we have to work.

The Chairman: You'll have until about next September.

Mr. Smith: Did we just get an extension?

The Chairman: It comes into effect in April, but with probably total leniency and flexibility until September or so. We want it to work.

Mr. Fewchuk: If it's urgent, phone Mr. Peterson at home.

The Chairman: We've heard the same approach from the parliamentary secretary, Ms Webb, in terms of your industry.

Mr. Clancy, let me say to you - and I'm glad you were here to mention this to us - that we went through the same type of thing with our federal public servants, where unfortunately we've had to downsize 14%, which meant 245,000 public sector jobs. We did this with a heavy heart.

It was this committee that told the people responsible to do it not on an across-the-board or departmental or unit basis but on the basis of substitution. Let those of any ilk who want to get out and take the retirement package take it, and let other people who are deserving be substituted in the areas. The government accepted that recommendation.

I'm glad you brought it up to us. The human side of this is really important. Thank you very much.

On behalf of all members, I thank you. Good night.

Oh, excuse me. I forgot something. I notice we have here the leader of the New Democratic Party of Canada, Alexa McDonough.

I'm glad you're with us. It's awfully good of you to come by. Best wishes, and happy new year to you.

Mr. Solberg. Motion.

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Mr. Solberg: Mr. Chairman, I don't think this needs to take very long. I think I've made my point that I do believe it's time for the finance committee to head off to Atlantic Canada to hear from Atlantic Canadians on Bill C-70. I made my point earlier, so I don't think I'll go on any more. I'll leave it at that.

The Chairman: Mrs. Brushett would like to respond to that.

Mrs. Brushett: The Atlantic region has been involved in this process, not only for the past few months but for the past few years, and I can tell you, personally, that I probably get 100 phone calls a day and up to 40 letters. I put ads in the Halifax newspaper and in the provincial newspapers. That's why we have politicians here today, because I put the dates in, gave the clerk's phone number and her fax number. I gave my address, with phone numbers and fax numbers. I invited the public and said if people weren't interested in coming to Ottawa, they had the opportunity to send me their brief or to bring it.

I send letters daily. Yesterday you must have heard me question how to get more items on the list that would be zero-rated, such as scallop dragger nets, for example. Fishermen have written me letters asking if we could please add scallop dragger nets to the list because they are something new being purchased; in the old days they used to make them. I've had letters from farmers who want similar items on the list. And it goes on.

So the consultation has been there. We were in the Atlantic region in November. People talked about the harmonized sales tax then. I believe they've had every opportunity. I go out of my way as a communicator to invite input, and it's been coming, from the medical association, from right across Atlantic Canada. I think we've had a lot of people here from Nova Scotia, from our province, and that's part of the reason...

I feel we've let the public know. I've been receptive. Phone calls and faxes still come into my office, and I invite them to continue. I will take their concerns to the finance committee, to the department, or to Revenue Canada. As was brought forward yesterday, there will be a joint committee in the provinces now, making these decisions. I get a lot of letters from all sectors, and they've clearly expressed their views. We've heard them here as witnesses.

Mr. Solberg: Mr. Chairman, that's admirable. I think you've done as much as you can do in terms of bringing people to Ottawa. However, I truly believe that it should be a fundamental right...when you're going to have a tax imposed by both levels of government on your region, the people should have a say in whether or not, first of all, that tax comes into being and also about the particulars of the tax.

Today we've heard from people from Atlantic Canada who have great concerns about it, but that's only one sector - by and large, it's one sector. We've heard from the business community and we've heard from some politicians, but we've also heard about people who are very vulnerable, such as people on fixed incomes, people who are scraping by from day to day. Frankly, I don't think in many cases they have the means. These people have families. Did we offer to pay for their day care? Did we say we'd pay them for their day off work? These people would be much more comfortable coming to hearings in their own communities to tell this committee how paying more for fuel for their homes and for clothing and those sorts of things would affect their lives.

I truly believe that, despite your best efforts, they are not good enough. I think it's only proper that the finance committee travel to Atlantic Canada to meet with those people who are affected.

Mrs. Brushett: I have a further comment, Mr. Chairman. I held three town hall meetings in my riding in the last week. Virtually no one brought up the harmonized sales tax.

Mr. Solberg: But you just said that you've been getting all this mail.

Mrs. Brushett: That's my mail. That's right. But at town hall meetings -

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Mr. Solberg: Were they specifically -

Mrs. Brushett: They weren't requesting to come to Ottawa.

Mr. Solberg: They weren't specifically on this issue.

Mrs. Brushett: It was wide open for anything. I had beef producers with great concerns. I had the corner store very concerned about an 18-year-old who can no longer sell tobacco. These teenagers have jobs in corner stores, and this was as big an issue as anything in my town hall meetings. Because of the new tobacco act, these kids under 18 are not allowed to handle tobacco, so they're really concerned about young people who won't have their corner store jobs. These are the things...they're variable. They come up in all directions. But people had the opportunity.

Mr. Solberg: You will forgive people for being a little bit cynical about approaching a single MP, a good MP but a backbench MP, about bringing forward their concerns when -

The Chairman: What do you have against backbencher MPs?

Mr. Solberg: - that's a good point - when this is the proper committee to bring those issues to. This is -

Mrs. Brushett: Mr. Solberg, with all due respect, people in my riding have no reluctance whatsoever to bring any issue forward - absolutely none.

Mr. Solberg: That's fine, Mrs. Brushett, but let's face it, people out there know that MPs probably don't have a tremendous amount of influence when it comes to the government. We've had Finance officials here today. We deferred to Finance officials all day today and yesterday and the day before to find out whether or not we were going to be able to change the rules. This is the appropriate place to come to make those sorts of decisions, before the finance committee. I would argue that people have not had the chance to do that. A lot of people would be uncomfortable coming to Ottawa. They would rather do it in their province. I think it's only right. I think it's proper for scrutiny by the media as well. I'm sure the media in Atlantic Canada would love to have the finance committee come so they can present what's going on to the people in their area so that people do understand how the tax is going to affect them.

Mrs. Brushett: Mr. Solberg, we have the media from Atlantic Canada sitting behind you now.

Mr. Solberg: We have excellent media here.

Mrs. Brushett: They've been here for the last three days.

Mr. Solberg: We've had two print journalists here.

The Chairman: Don't turn your back on them.

Mrs. Brushett: The public, and I would beg to differ with the fact, with the department officials here...see how much success we've had in correcting those issues where there were inefficiencies, where we have solved the problems here at the table. This is progress. We couldn't have done that out in the field.

Mr. Solberg: I think we've solved some of them.

Mrs. Brushett: A large number of them.

Mr. Solberg: So let's take the Finance officials with us and go to Atlantic Canada and maybe we can solve a few more.

Mrs. Brushett: Mr. Solberg, I believe Atlantic Canadians have had every opportunity. We turned no one away. There is no one who could say that they chose to come and were turned away - with their expenses paid.

Mr. Solberg: That's sounds like a wonderful argument never to travel again. I hope that's not what this is.

Mr. Fewchuk: Mr. Solberg, with all due respect to the third party, all I have heard in the last three years, every time we wanted to travel, is no, we shouldn't; cut back; no, we can't travel; our party doesn't believe in spending money to see the people. We've heard that over and over -

Mr. Solberg: We've made some very constructive suggestions.

Mr. Fewchuk: For you to change policy and play politics because of some kind of election in the next 10 years...

The Chairman: With all due respect, Mr. Fewchuk, Mr. Solberg is not responsible for his party.

Mr. Solberg: We've made some very constructive suggestions with respect to travel, including video-conferencing, which saved a tremendous amount of money whenever the government did it. It would be a wonderful way to have input from people in Atlantic Canada.

The Chairman: Might I suggest that we bring this debate to an end, unless somebody else wants to add something.

Mrs. Brushett: I have one final comment, Mr. Chairman. I'm not sure if Mr. Solberg was present at our December 13 meeting in this room, I believe, when the honourable Herb Grubel was present from the Reform Party, your colleague and my colleague. At that time he indicated that he probably wouldn't be able to be present at the harmonized sales tax hearings because he had booked some previous and private plans. However, he did indicate that he would give all of his support to the honourable Dianne Brushett, that she would ask for a fair and open hearing on all concerns for Atlantic Canada. That was offered, and anyone around this table was here to hear those words spoken.

Mr. Solberg: I think you've done your best, but I think you do need this body to help you out in Atlantic Canada.

Mrs. Brushett: I think you've done a great job with us, too, and we've had a fair hearing. Thank you.

The Chairman: Because of my age I'll just take the last little word. I know you didn't want to mislead the committee, but you said in light of the call by so many witnesses that we should travel... You asked us to travel from Ottawa, you said because so many witnesses had asked that we do that. I just want to point out that I think the record will show that the people who asked us to go were Mr. Woolford from the Retail Council, who then backed off and apologized for that request, Mr. Chisholm, Mr. Hamm, Mr. Clancy and Mr. Peters.

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Mr. Solberg: It's not a bad number.

The Chairman: That's 5 out of 68.

Mr. Solberg: Okay. I just wanted to set the record straight.

The Chairman: Shall we vote?

Motion negatived

The Chairman: Perhaps we can take a five-minute break.

Will our parliamentary secretary be ready to go?

Mr. Campbell: Colleagues, can I ask for a 15-minute break? I'm waiting for some material to make this a little easier on all of us this evening. Shall we say 7:30 p.m.?

The Chairman: It's a long time, but okay.

Some hon. members: Agreed.

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The Chairman: Order.

We have a matter of procedure. I'm certainly in your hands. We have four pages indicating an amendment could have been brought forward by the government. In addition, there have been amendments brought forward by the Reform Party. So in the interest of expediting things, I was going to ask the parliamentary secretary to take us very quickly through the amendments that are not technical from these four pages. We would deal with every amendment.

I would propose that you talk about your amendments, Mr. Bélisle. Then I would propose that we pass or defeat all of the amendments of the government in a group, and then that we would deal with all of the amendments of the Reform Party in a group or in any way you want to, Mr. Solberg. Then I would propose that we simply propose that the Bill C-70, as amended or not, be adopted. Then I will do the last five clauses.

Mr. Bélisle.

[Translation]

Mr. Bélisle (La Prairie): Mr. Chairman, I would like to make a proposal or table a motion. The clerk only gave me the documents containing the amendments at 5 p.m. today.

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As you inferred, Mr. Chairman, it was a very good thing that we were given this document. I would have liked to be able to examine it between 5 p.m. and 7:40 p.m., but although I took a speed reading course 20 years ago, that time was not sufficient for me to look over this entire document.

We have here a series of motions being proposed. I move, seconded by Mr. Solberg, that we defer the work on the amendments so that we can, among other things, take into account the testimony we heard today. Moreover, I find it late to start clause-by-clause examination of such an important bill for which 113 amendments are being tabled tonight.

You will recall that when that bill was tabled in the House last April, I wondered if we had had sufficient consultation. By October 1996, the government was proposing major amendments to its bill; today, three months later, 113 amendments are being tabled for a bill that contains 273 clauses. Therefore, the government plans to amend over a third of the bill.

Given the testimony we heard here today, I'm very worried. During the last election campaign, the prime minister told us: ``We will scrap the GST''. I get the impression that the government is preparing to abandon the harmonized tax proposal. Even as an opposition MP, I must concede that the bill contains very good elements. That's why I move that the committee defer its work and allow both the opposition and the government members to examine seriously the 113 amendments being tabled today.

The Chairman: Mr. Campbell.

[English]

Mr. Campbell: I might be able to respond to the quite legitimate concerns that have just been raised by my friend at that side of the table.

First of all, I was going to describe how what I was about to do might help. You're quite correct: we have proposed and will be discussing this evening 113 amendments. They were presented and the opportunity for briefing was given to your researchers earlier today. Nonetheless, it's a substantial package of amendments. I was going to explain in my very brief remarks that 100 of the 113 amendments are of a technical nature, correcting errors or omissions in the wording for consistency, for translation. They're the kinds of things we have seen before this committee from time to time that are non-substantive in nature.

There are, however, 13 amendments that are substantive in nature. I am happy to report,Mr. Chairman, that these respond directly to the testimony we have heard these last few days and consultations that have been going on since last April's announcement.

What I had hoped to do was to read these remarks, focusing on the substantive amendments. I have passed to each of you a chart headed ``Motions to Amend Bill C-70''. You will see in bold those that are substantive. If you follow along, you'll see that all the rest are labelled as ``technical''.

I think that would expedite our discussion tremendously, Mr. Chairman. This has been the way we have normally proceeded in focusing just on substantive changes. I understand Mr. Solberg has some amendments of his own that he will propose at the appropriate time as we discuss clauses.

I wondered if that way of proceeding might help expedite things and respond to Mr. Bélisle's quite legitimate and understandable concerns about the volume. One hundred of these are purely technical.

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[Translation]

The Chairman: Following Mr. Campbell's statement, I move that we undertake our discussion of the 13 substantial amendments, after which you may wish to suggest another deferment.

Mr. Bélisle: I would prefer that we defer the work of the committee so that I can really examine the amendments in greater depth with the assistance of the researchers. As the parliamentary secretary pointed out, Finance Department officials have indeed provided more explanations to our researchers this afternoon during a three-hour briefing, from 1 to 4 p.m. We would have liked to have more time to analyze the amendments in greater depth in order to respond in a more pertinent manner this evening.

I therefore move, seconded by Mr. Solberg, that the committee suspend its work this evening so that members can examine the proposed amendments in greater depth.

The Chairman: How much delay are you proposing?

Mr. Bélisle: I would propose a week.

The Chairman: Personally, I would prefer to hear the government describe the amendments it is submitting so that I can have a better idea of the direction that it's taking. I don't want to suspend our hearing because I believe that it would be easier for me to understand the 13 substantial amendments if the parliamentary secretary and the officials accompanying him tonight explained them to us. Shouldn't we at least listen to the party in power? Perhaps they could give us a better idea of what will happen. Afterwards, you could submit your proposal again.

Mr. Bélisle: We will let the parliamentary secretary have the floor. With all due respect and recognizing your objectivity, I find it worrisome that as chairman this evening, you're waiting for explanations from the parliamentary secretary. Since you are a member of the government majority, I had imagined that you were very well informed about the proposed amendments.

In order not to delay unduly the work of the committee, I will concur with you. I think we should listen to the parliamentary secretary and move forward.

The Chairman: Thank you very much, Mr. Bélisle.

[English]

Mr. Campbell: I think this will expedite matters.

We have indeed an extensive list of motions to bring forward seeking amendment to Bill C-70. I'll try to proceed expeditiously. While most of the government's proposed amendments are technical in nature, several have policy implications. I know researchers have had a chance for both opposition parties to look at these amendments and be briefed. So they'll have a chance to let you know where I've spoken fairly of the substantive amendments or amendments with policy implications.

Throughout these hearings, the government has listened carefully to the concerns expressed by witnesses. Where witnesses have raised potential inequities, we have moved immediately to draft amendments that will address these problems.

These proposals have been developed concurrently with these hearings and were therefore not finalized until this afternoon. I understand that a briefing has already been conducted, as I said, for staff and researchers of the Bloc Québécois and the Reform Party.

Now let me outline the key amendments.

An issue I wish to address at the outset was raised by Mr. MacKnight of the Canadian Tax Foundation. That was the suggestion that inadvertent non-compliance with the rules might lead to a criminal record. Let me say first that this was a misunderstanding on Mr. MacKnight's part. Proposed section 368 creates a regulatory offence; it does not create a criminal offence.

The misunderstanding was perhaps based on the term ``summary conviction''. I want to state for the record, Mr. Chairman, that it is only the summary convictions process that is incorporated from the code, which is in fact the standard process for regulatory offences such as parking tickets or speeding tickets. The process employed does not make an offence a criminal offence.

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I should also point out that only in the most serious cases will the summary convictions process be used - for example, for persistent failure to comply.

In general, non-compliance will be dealt with through application of the federal Contraventions Act. Ticketing will be the norm, with fines limited to $100. Per section 33 of that act, contravention does not constitute a criminal offence, nor does a conviction lead to a criminal record. We are proposing an amendment to clause 242 of the bill, which will reinstate the court's ability to suspend sentence and grant a discharge.

Consistent with provincial legislation in this area, the motion sets out factors for the court to consider in determining punishment for an offence. The defence available to an employer, that the employer exercised all due diligence to prevent the commission of an offence that was committed without the employer's consent or knowledge, is being relaxed by deleting the word ``all''.

By that explanation and that amendment, Mr. Chairman, I think members will agree that we have responded to a major item that was highlighted by Mr. MacKnight.

This past Monday, a second concern was raised that, as drafted, Bill C-70 provides special authority to make regulations under proposed section 277.1, retroactive to a date prior to their announcement. This sparked concern over the possible use of non-relieving retroactive amendments. The motion to amend clause 235 removes authority to make the retroactive regulations. This responds directly to the testimony we heard and the concerns raised, and eliminates the problem completely.

Let me now proceed through other substantive proposals in order. Bear with me, colleagues; some of this is substantive, although it may sound quite technical.

The first proposal is at clause 1, page 11. This amendment is being proposed in response to a submission by the Canadian Resort Development Association. The proposed motion grandfathers time-share agreements entered into before April 23, 1996, the date of the announced change, regardless of when the rebate application is received by Revenue Canada.

The next proposal can be found at clause 26, pages 38 and 39. It deals with the problem raised yesterday by the automobile dealers about the auction process. This motion has been developed in the last days in consultation with representatives of the auctioneer industry and the automotive industry. The proposed rules for the sale of goods by auctioneer will have cashflow consequences for certain principals. This motion addresses these issues by allowing certain principals and auctioneers to make an election out of these proposed rules under certain circumstances, again responding directly to testimony heard before this committee.

The next substantive proposal deals with limitation periods found at clauses 28, 29, 44 and 50. The amendment is proposed in response to representations made by the Direct Sellers Association and the Canadian Bankers Association. Bill C-70 reduces the limitation period for financial institutions and large exempt suppliers to claim input tax credits. The motion ensures that these entities have at least two years to claim input tax credits. The limitation period will be changed from two years after the beginning of the reporting period in which the related tax became payable to two years after the end of the fiscal year that includes the reporting period.

The next proposal will amend clause 69.1 at page 97. This will ensure that musical recordings do not qualify for the rebate for audio recordings of printed books.

We are proposing to amend clause 161 to clarify that a vendor who sells several items on a tax-included basis may calculate the applicable tax on the total of the tax-included prices for those items.

The next proposal deals with transactions between related financial institutions. This is at clauses 209 and 241. The amendment is proposed in response to concerns raised yesterday by witnesses.

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Bill C-70 provided that in determining net tax under the special attribution method, financial institutions would effectively pay the 8% tax on the fair market value of services received from a related party. This would have resulted in their effectively being taxed on salaries and wages of a related company. The motion ensures that salary and wage component of the price charged is not subject to an 8% tax.

The next motion proposes to amend clauses 204, 205, 230 and 241 as they relate to property and casualty insurance. The amendment provides flexibility to allow property and casualty insurers to exclude expenses related to these claims from the calculation of net tax under the special attribution method.

We are also proposing to amend clauses 209 and 241, which deal with information requirements for financial institutions. The motion proposes that a selected listed financial institution will be required to meet information requirements to support any amounts that the institution deducts as HST paid in calculating its adjustment to net tax for HST purposes. The information requirements are the same as those that apply for input tax credit claims.

With regard to rebates to investment funds for services at clause 230, investment plans and segregated funds, based on the participating provinces, have argued that their payment of 15% on all purchases will put them at a competitive disadvantage relative to comparable funds based outside the participating provinces. Again, this was testimony heard before this committee in the last few days.

The motion proposes that an investment plan or an insurer's segregated fund will be permitted to claim a rebate of the provincial component of the HST payable on management and administrative services to the extent it holds or invests funds for persons who are resident outside the participating provinces.

We are also proposing several amendments to clause 242 in relation to specific concerns about tax-inclusive pricing, as follows. The definition ``specified supply'' is being changed to specifically include passenger transportation services, telecommunication services and taxable supplies by banks. The motion also amends the definition of ``price tag'' to specifically exclude a postage stamp so these do not have to bear a tax-inclusive price, although we should bear in mind that booklets of stamps will be sold on a tax-inclusive basis.

The motion provides authority to prescribe the manner of indicating within a national catalogue that prices do not include tax. Where suppliers use dual pricing, the proposed amendment provides that the tax-included price must be as large as the tax-excluded price. Previously the bill required that the tax-included price be as prominent as the excluded price.

Finally, Mr. Chairman, we are proposing to amend clause 254, which deals with the place of supply of postal services. The motion refines the place of supply rules for postal services to base the location on, in the case of postage paid by stamps, where the stamps are delivered; in the case of postage paid by meters, where the meter is ordinarily located; and in the case of permit mail, where the mailer is required to deposit the mail. However, where mail is delivered under a bill of lading the tax will apply according to the destination of the mail.

This concludes the substantive amendments being put forward by the government. I want to comment at this point that we have had some intense and very long days here, and some compelling testimony, which we have responded to with these amendments. As well, we have responded to other ongoing issues that have been in consultation for some time.

Ms Whelan is going to speak to another issue we will want to address this evening, but before I close I want to reiterate that you will each have received a chart setting out all 113 motions, or proposed amendments, of which 100, as I said earlier, are purely technical in nature with respect to grammar, consistency, error, omission or translation. Bolded items represent the 13 substantive policy amendments I've just described and reflect the testimony we've heard during these hearings. I urge members to support these amendments.

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Before I turn to Ms Whelan for the last item, I want to thank hon. members for their patience through this presentation this evening, and indeed for their participation these last few days.

I think the testimony we've heard and the response of the government through these amendments shows that the system works. I think the committee in these last few days was working at its absolute best, Mr. Chairman. No process is perfect, but this process, where we have heard as many witnesses as we have heard, dealt at length with as many issues as we have dealt with, and came back with substantive changes to the bill as a result, is a real tribute to this process, your hard work as chairman, and the hard work of all of my colleagues on the committee. I want to thank you, and I just want to ask your indulgence to allow Ms Whelan to speak to one other issue.

Ms Whelan (Essex - Windsor): Thank you, Mr. Chairman.

Mr. Chairman, I would move that clause 151 be deleted, and I'd urge members of the committee to support this. Basically, clause 151 introduced an amendment to subsection 129(6) of the Excise Tax Act. Subsection 129(6) applies when a branch or a division of the public service body that's a registrant becomes a small supplier division and allows a public service body to remain a registrant. It was to amend the formula that calculated the proper tax. There's an error in the amendment. It's not necessary, so we'd ask that clause 151 now be deleted.

The Chairman: It's out of order to delete a clause.

I'm going to suggest that after discussion we vote on it and we vote to defeat it as opposed to deleting it. This makes a substantive difference in law.

Another thing we could do is just take a pair of scissors.

Motion agreed to

[Translation]

The Chairman: Mr. Bélisle, you've listened to the amendments proposed by the government in response to certain suggestions made by witnesses.

Mr. Bélisle: I'd like to come back to my proposal to defer the work of the committee this evening. The main amendments described by Mr. Campbell tonight all result from the consultations held this week and today. These amendments seem so major and so important to me that, in my opinion, they constitute proof that we must suspend the work of the committee this evening in order to examine them in greater depth.

I agree with Mr. Campbell that the technical amendments do not have the same impact, but with regard to the 13 main amendments, amendments concerning policy, substantial amendments, I feel that we must allow the opposition to examine them in greater depth. I would suggest that the work of the committee be suspended for now and that we continue to hold hearings, for example in the Atlantic provinces as Mr. Solberg proposed earlier this evening.

Since the motion to continue hearings in Atlantic Canada and the Maritimes has been defeated, I would come back to my earlier amendment and urge the committee to suspend its work now so that all members, particularly opposition members, can examine in greater depth the 13 amendments proposed by Mr. Campbell and the government.

The Chairman: Yes.

[English]

Mr. Campbell: I would only add, Mr. Chairman, that I do know there are a number of other items that we've heard that members are concerned about that are more complex and require more study and more work, and you may well speak to those later this evening.

It would seem to me, Mr. Bélisle, in response, that these 13 amendments - and you've already acknowledged that the 100 are not a problem - are so straightforward and so immediately responsive, for the most part, to testimony we heard and to the broad consensus around this table that they should not present any difficulty at all. They're fairly straightforward.

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I wanted to say that I have officials with me at the table who would be happy to take any questions, should you have any, about those 13 amendments, some of which are extremely straightforward. I should have made that offer before.

I apologize, Mr. Chairman, for not doing so earlier, but as is normally the case here, officials are available. To the extent I run out of things to say on a particular amendment, I turn to my helpers from the Department of Finance. We're prepared to respond to your questions on those 13 amendments, which your staff and researchers were briefed on this afternoon.

[Translation]

Mr. Bélisle: Allow me to point out that the briefing session that the press attachés of my party attended this afternoon lasted one hour, from 4 to 5 p.m., and not three hours as I stated earlier. I apologize for that mistake. Unfortunately, our press attachés did not have access to any documents at that time. This really came out of the blue tonight, as we say.

Mr. Campbell, you described the 13 major amendments quite forcefully and in detail. But as an opposition member, I would like to have an opportunity to discuss this in greater depth with my researchers in order to see the actual impact of these 13 amendments, to see if each of them may have an impact on other more technical aspects of the bill.

[English]

The Chairman: This bill was tabled in the House and received first reading on December 2, 1996, which is a long time ago. That's almost seven weeks ago.

All of us, recognizing that this is a very complex issue, have had opportunity since it was tabled in the House to read it, study it, and form our own opinions as to what is good in it and what is not. All of us did that over the Christmas holidays. Then we had three days... Yes, they were intensive, long days, but really there were no surprises as to what I would have anticipated, having worked on this area of goods and services tax since the beginning of this Parliament.

From my own point of view as a member of this committee, I have not been shocked by anything the government has brought forward, Mr. Campbell. I don't feel I've been surprised. I have a number of other things that I think we as a committee will want to put on the table in terms of future evolution of this process, but having sat through all of these hearings and listened to all the witnesses, I'm delighted the government responded so quickly.

This is a precedent for excellent work by the department. I would hope other departments could respond with such alacrity. When witnesses bring up a point on the spot and the committee signals to them, my goodness, we have these amendments in place at the end of that period. They're the ones who had to do the work, because we told them to do it. This is what we told them to do over the last three days. I'm delighted.

Having gone through the amendments, I feel they've been very responsive. If they haven't been, I would like to know. If somebody could give me an example of how even one of these amendments is not responsive to what we heard from the witnesses and what we as a committee felt, I thought from all parties, then I could understand the reason for further delay.

.2010

I never like to railroad anything, but I also like to think that we as members of Parliament have had... I know we've all done our homework, and I am quite satisfied, based on my own study of these amendments, that these amendments are responsive.

[Translation]

Mr. Bélisle: Mr. Chairman, you say that the 13 amendments proposed by Mr. Campbell respond to what we already had in the bill. Given the testimony that we heard today, as an opposition member, I would like to have an opportunity in the coming days to examine them in greater depth to see if indeed these 13 amendments respond to the testimony we heard today, yesterday and last Monday.

The Chairman: Mr. Duhamel.

Mr. Duhamel (Saint-Boniface): In the course of this meeting, we will undoubtedly adopt a number of amendments. But what will happen to the bill after the meeting? Where does it go? That might help...

The Chairman: It will go back to the House for third reading. I know nothing about House procedure. It will be sent back to the House for third reading and afterwards to the Senate.

Mr. Duhamel: I'm not very good at procedure myself, but I would like to know if Mr. Bélisle and Mr. Solberg and others will have an opportunity to table amendments if they wish to do so. That's what I want to know.

The Chairman: Certainly, in third reading and

[English]

at report stage. There's a difference between the two. They happen after us; that's all I know.

[Translation]

Mr. Duhamel: Thank you for that clarification, Mr. Chairman.

The Chairman: We'll have several opportunities to table other amendments and criticize the bill in the House.

Mr. Bélisle: Mr. Chairman, it's almost 8:15 p.m. Everyone has worked very hard in the past three days; therefore, I don't want to delay the work of the committee unduly.

I've demonstrated to you and the other members of the committee the need Mr. Solberg and I have, as opposition members, to examine in greater depth the impact of these 13 major amendments, which are substantial amendments that affect policy.

I note that the committee and yourself, Mr. Chairman, are somewhat reluctant to do that. In any event, as opposition members, we will have an opportunity to table amendments at third reading. Therefore, given the hour and the time already devoted to this by everyone around the table, I agree that we should continue.

The Chairman: I would like to check with our experts whether it would be possible for anyone to table amendments at third reading.

The Clerk of the Committee: At report stage, Mr. Chairman.

The Chairman: At report stage, that is, in the House, any member of Parliament will have another opportunity to table amendments, and I can assure you that the government will also table several following discussion with the opposition, the provinces, etc.

Can the clerk assure me that we can introduce amendments at third reading?

The Clerk: At report stage, Mr. Chairman.

The Chairman: At report stage. Thank you.

[English]

Mr. Solberg: I want to make one comment, Mr. Chairman. I'm still holding out hope that the Prime Minister will scrap the GST.

The Chairman: Well, we have just developed a new definition of ``scrap''. We figure 142 amendments to a bill of 260 clauses is scrapping.

Mr. Solberg: That's a lot of scrap.

.2015

The Chairman: Or in the words of the GST, it would be a substantial renovation. We finally now have a definition of that difficult and elusive term.

Mr. Campbell: I just stabbed myself in the back with my parliamentary pin. I don't know if that's an omen of any kind.

[Translation]

The Chairman: Thank you very much for your co-operation.

[English]

Clause 1 as amended agreed to on division [See Minutes of Proceedings]

Clauses 2 to 12 agreed to on division

Clause 13 as amended agreed to on division [See Minutes of Proceedings]

Clauses 14 to 21 agreed to on division

Clause 22 as amended agreed to on division [See Minutes of Proceedings]

Clauses 23 and 24 agreed to on division

On clause 25

Mr. Solberg: Mr. Chairman, I thought the agreement was that we were going to say a word on clause 25.

The Chairman: Okay, sure. I'm happy to do it any way you want.

Mr. Solberg: This is with respect to the notional input tax credit. We have addressed the concerns of RV dealers and people like them in this amendment. It effectively leaves a paper trail so that we won't have to worry about the problem of churning.

Mr. Campbell: I think you may misunderstand the tenor of that amendment. I know Mr. Peterson wants to speak to that issue later, but there are no amendments being proposed in the bill to deal with that specific point.

Mr. Solberg: That's my amendment.

Mr. Campbell: Oh, sorry, your amendment.

The Chairman: Yes.

Mr. Campbell: I'm sorry, I've done all mine. Mr. Solberg has an amendment to address the -

The Chairman: Why don't you talk about it.

Mr. Solberg: Basically, it's a variation on what the RV dealers proposed. It leaves a paper trail, eliminates the problem of churning, and solves their problem for them. That's what we're proposing.

The Chairman: My understanding is that it is probably the course we're going to take, but we do have a problem if you require that all deals be done by way of a cheque so that it can be traced, because cash is a legal tender and all that sort of stuff.

Mr. Solberg: No, I don't think that's the whole... There are several caveats -

Mr. Campbell: Your amendment, which I haven't had a chance to read, is it basically the proposal that the RV dealers who appeared before us have made to the finance department put in legislative form?

Mr. Solberg: I believe that's correct, yes.

Mr. Campbell: The days all blend together. One day this week when the RV dealers were here, they proposed a very serious fix, if you will, in response to our concerns with respect to how the notional input tax credit has been working. We've only had that for a very short time and it is very complex and it may or may not address all of the concerns we have with respect to abuse that arises from inflating invoices, from churning, and some of the problems and concerns we have about whether these credits are going through to the consumer as they were designed to do.

Mr. Solberg, notwithstanding that you're convinced that this is the perfect way to deal with it, what I said to the committee was that the department was going to continue to work on this and look at this and see if it was indeed the solution that would also satisfy the RV dealers association.

I'm afraid you may have jumped the gun, because we on the government side have not had the chance to determine whether that proposal is workable. It's serious; it's one we're taking seriously. I just wanted to make that point.

Mr. Solberg: I should say that with my research team we've looked at it and measured all the implications and consequences and we're quite convinced that this is the answer.

The Chairman: I suspect Mr. Campbell would be suggesting that at this point we defeat the amendment proposed by Mr. Solberg. But might I say that since we don't have the best answer yet, we're not convinced we have the total answer, could we work with you and your research people? We might end up adopting that amendment later on.

Mr. Solberg: Absolutely.

The Chairman: Okay.

Amendment negatived [See Minutes of Proceedings]

Clauses 25 and 26 as amended agreed to

Clause 27 agreed to

Clauses 28 and 29 as amended agreed to on division [See Minutes of Proceedings]

Clauses 30 to 36 agreed to on division

Clauses 37 and 38 as amended agreed to [See Minutes of Proceedings]

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Clauses 39 to 43.1 agreed to on division

Clauses 44 and 45 as amended agreed to [See Minutes of Proceedings]

Clauses 46 to 49 inclusive agreed to on division

Clauses 50 and 51 as amended agreed to [See Minutes of Proceedings]

Clauses 52 to 59 inclusive agreed to

Clause 60 as amended agreed to [See Minutes of Proceedings]

Clauses 61 to 69 inclusive agreed to on division

Clause 69.1 as amended agreed to [See Minutes of Proceedings]

[Translation]

The Chairman: Oh, excuse me.

Mr. Bélisle: No.

The Chairman: As amended.

Mr. Bélisle: The Bloc Québécois is opposed to clause 69.1 as amended.

The Chairman: You are against the two amendments?

All right, let us continue.

[English]

Clauses 70 to 77 inclusive agreed to on division

Clause 78 as amended agreed to [See Minutes of Proceedings]

Clauses 79 to 81 inclusive agreed to

Clause 82 as amended agreed to [See Minutes of Proceedings]

Clauses 83 to 149.1 agreed to on division

Clause 150 as amended agreed to [See Minutes of Proceedings]

Clause 151 negatived

Clauses 152 and 153 as amended agreed to [See Minutes of Proceedings]

Clause 154 agreed to

Clauses 155 and 156 as amended agreed to [See Minutes of Proceedings]

Clause 157 agreed to

Clause 158 as amended agreed to [See Minutes of Proceedings]

Clauses 159 and 160 agreed to

Clauses 161 and 162 as amended agreed to [See Minutes of Proceedings]

Clauses 163 to 167 inclusive agreed to

[Translation]

The Chairman: Excuse me. Stop me if necessary.

Mr. Bélisle: It's going a little too quickly. The Bloc Québécois has expressed its opposition to 69.1.

The Chairman: All right.

Mr. Bélisle: Now I will let you move forward. Up until now, it was on division. To accelerate the procedure, I would like that to be noted. Afterwards, we will let you go ahead.

With your permission, Mr. Chairman, there are three like that. I can list them and afterwards I could let you go ahead on division.

The Bloc Québécois is opposed to the amendments being made to clauses 150 to 255 concerning harmonization of the GST; clauses 261 to 266, regarding fiscal arrangements for harmonization, among other things, compensation; and clause 270, which also deals with tax arrangements for harmonization. We are opposed to these three series of clauses.

The Chairman: Thank you.

[English]

Mr. Duhamel.

Mr. Duhamel: I just wanted to make sure

[Translation]

that our colleague Mr. Bélisle had finished.

Mr. Bélisle: In conclusion, Mr. Chairman, and I will then let you carry the clauses on division, I would simply like to tell you that the Bloc Québécois is against all clauses as amended by the Liberals, because we have not had time to examine them. As for the rest, you can go ahead.

The Chairman: You are against the Liberal amendment to increase the funds from one billion to two billion dollars for the four years?

Mr. Bélisle: For the Atlantic provinces?

The Chairman: Are you against that?

Mr. Bélisle: Yes.

The Chairman: All right.

[English]

Mr. Campbell.

Mr. Campbell: Mr. Chairman, there are two matters. I was disappointed to hear Mr. Bélisle say that, because I thought he said he had no problem with the 100 technical changes, but he hadn't had time to digest the 13 substantive ones.

[Translation]

Are we agreed on the technical amendments, yes or no?

[English]

Mr. Chairman, there's just one other point. I did not hear what you said with respect to clause 157. It should be as amended.

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The Chairman: Well, I certainly hope so. I intended that from the bottom of my heart.

[Translation]

Mr. Bélisle: With regard to procedure, I will let you decide. With regard to the three series of clauses that I mentioned, I would like to have a recorded division. It's up to you to decide if you want to do up to 270 before recording the vote.

The Chairman: What were the numbers again?

Mr. Bélisle: One hundred and fifty to 200...

The Chairman: One moment. From 150 to...

Mr. Bélisle: Yes. First of all, there was clause 69.1. Then,

[English]

from clauses 150 to 255, from clauses 261 to 266, and then clause 270.

The Chairman: Okay. We're going to have a recorded vote on clause 69.1.

Mr. Fewchuk: I suggest we do them all in one block.

The Chairman: We'll apply the vote after, okay?

Clause 69.1 as amended agreed to: yeas 7; nays 2 [See Minutes of Proceedings]

The Chairman: For clauses 150 to 255, I suggest we apply the same vote.

Mr. Solberg: Mr. Chairman, I have an amendment to clause 252.

The Chairman: Okay. Would you like to talk about that before we do it? I guess that would be the procedure. Talk about that amendment and then we'll dispose of it.

Mr. Solberg: I also have another one for clauses 265 and 266.

The Chairman: Talk about them both right now, then.

Mr. Solberg: Also, for clause 277 I want to have a recorded vote.

The Chairman: Sure, no problem.

Mr. Solberg: The amendment to clause 252 is basically a variation on what the medical community was asking for. As Mr. Chairman put it, they're the meat in the sandwich under the current deal, and because they have to pay all these GST costs that they can't pass on, I'm proposing we treat doctors equally with everybody else. Therefore I urge people to vote in favour of this amendment to clause 252.

This is a long-standing grievance. I think everybody recognizes it's unjust. Therefore we would urge the support of the committee.

The Chairman: Mr. Parliamentary Secretary.

Mr. Campbell: I want my honourable colleagues to understand this would entail a major revenue cost to the federal government. This proposal effectively would zero-rate all goods and services and would be a major revenue hit. Therefore we are opposed to it.

As I've said at this committee, as we've discussed in this committee, and as we may well recommend as a committee, the issue of the cost of doing business for the medical profession is one we are concerned about. The solution lies certainly in the fee structure that's negotiated in each province, which recognizes the cost of doing business in each of those provinces. We do not in any way make light of the concerns of the medical profession, but this solution is simply not workable, given its revenue cost.

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Mr. Solberg: Mr. Chairman, we cannot shuffle the responsibilities of the federal government onto the provinces. This is an issue that was created by the federal government, because it explicitly left physicians out of the initial GST agreement. When it was considering how to handle all of the various sectors, it left them out in the cold. They're bearing costs that nobody else has to bear. It's fundamentally unfair.

Yes, it will be a revenue cost, but as we all know, there have been expenditures of revenue by this government that by anyone's standard were not good expenditures. I think the government can find this money if it wants to address this issue, just on the principle of being fair under the law.

The Chairman: Is there further discussion?

Mr. Duhamel followed by Ms Whelan.

Mr. Duhamel: I appreciate the efforts of my colleague, and I understand the spirit with which he puts it forward. I too have serious concerns. In fact, government officials have acknowledged that there is a difficulty here that needs to be addressed.

I will not vote for or against it, but not because I am trying to weasel out of it. I will simply abstain from this vote on the understanding that the government will in fact, as the parliamentary secretary has indicated, look at what might be done in order to see whether or not we can find some solution that's acceptable to both the government and the doctors. But I feel it needs to be looked at, and I will insist that it be looked at.

The Chairman: Ms Whelan.

Ms Whelan: Mr. Chairman, I also want to go on record as saying that I recognize that there are some concerns that need to be addressed with regard to both the doctors and a couple of other industries in the medical profession. However, I do believe that at this time Bill C-70 addresses about 100 concerns there have been with the GST and makes a number of corrections that are long overdue. This is still on the table and is still there for discussion. Hopefully there can be a resolution to this soon.

Thank you.

The Chairman: Shall we vote on Mr. Solberg's amendment?

Amendment negatived [See Minutes of Proceedings]

[Translation]

Mr. Bélisle, I will continue with the amendments and I will come back to you afterwards.

[English]

Clause 161 as amended agreed to on division [See Minutes of Proceedings]

Clause 162 agreed to on division

Clauses 163 to 167 inclusive agreed to

Clause 168 as amended agreed to on division [See Minutes of Proceedings]

Clauses 169 and 170 agreed to

Clauses 171 and 172 as amended agreed to [See Minutes of Proceedings]

Clauses 173 to 177 inclusive agreed to

Clause 178 as amended agreed to [See Minutes of Proceedings]

Clause 179 agreed to

Clause 180 as amended agreed to [See Minutes of Proceedings]

Clauses 181 to 183 inclusive agreed to

Clause 184 as amended agreed to [See Minutes of Proceedings]

Clauses 185 to 189 inclusive agreed to

Clause 190 as amended agreed to [See Minutes of Proceedings]

Clause 191 agreed to

Clauses 192 and 193 as amended agreed to [See Minutes of Proceedings]

Clauses 194 to 203 inclusive agreed to

Clauses 204 to 206 inclusive as amended agreed to [See Minutes of Proceedings]

Clauses 207 and 208 agreed to

Clauses 209 to 211 inclusive as amended agreed to [See Minutes of Proceedings]

Clauses 212 to 214 inclusive agreed to

Clause 215 as amended agreed to [See Minutes of Proceedings]

Clause 216 agreed to

Clause 217 as amended agreed to [See Minutes of Proceedings]

Clauses 218 and 219 agreed to

Clauses 220 and 222 inclusive as amended agreed to [See Minutes of Proceedings]

Clauses 223 to 227 inclusive agreed to

Clause 228 as amended agreed to [See Minutes of Proceedings]

Clause 229 agreed to

Clauses 230 and 231 as amended agreed to [See Minutes of Proceedings]

Clauses 232 to 234 inclusive agreed to

Clauses 235 and 236 as amended agreed to [See Minutes of Proceedings]

Clauses 237 and 238 agreed to

Clause 239 as amended agreed to [See Minutes of Proceedings]

Clauses 239.1 and 240 agreed to

Clauses 241 and 242 as amended agreed to [See Minutes of Proceedings]

Clauses 243 to 252 inclusive agreed to

Clauses 252.1 to 252.3 inclusive as amended [See Minutes of Proceedings]

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Mr. Campbell: Mr. Chairman, I'm not sure that's right.

The Chairman: I have amendment R-2 to clause 252.

Mr. Campbell: No, I don't think that's correct, Mr. Chairman.

The Chairman: Let's allow for retroactive amendment to it.

Mr. Campbell: Can we go back, Mr. Chairman? We could start again at clause 242 as amended, and then beyond that, clauses 243 to 253 should be as is. Does the clerk agree?

The Chairman: I have amendments to clause 252.1, from Reform.

Mr. Campbell: Monte, you had an amendment.

Mr. Solberg: Not to clause 252. We've already done that one.

The Chairman: For clause 252.1?

Mr. Solberg: We already did that. That was the one on the doctors.

The Chairman: Oh, we just did that.

Mr. Solberg: Yes.

The Chairman: Okay, thank you very much.

Clause 253 agreed to

The Chairman: I have 13 government amendments to clause 254. All motions on clause 254 up to page 335 are technical, to correct errors and omissions in the wording of the bill.

Mr. Campbell: Mr. Chairman, can I ask for clarification? How was clause 262 dealt with? It was as amended, I believe.

The Chairman: We haven't come to clause 262 yet.

Mr. Campbell: I'm sorry; clause 162.

The Chairman: We amended clause 162.

Mr. Campbell: Okay, and clause 221 should be as is.

The Chairman: It was amended.

Mr. Campbell: I don't think that's correct, Mr. Chairman. There's no amendment.

The Chairman: I have one: G-57.

Mr. Campbell: It's not a government amendment.

Is that one of yours, Mr. Solberg?

Mr. Solberg: No, that's not one of mine.

The Chairman: I have amendment G-57 on it, a government amendment.

Mr. Campbell: Excuse me. I'm sorry. It is as amended. You're correct once again, Mr. Chairman.

The Chairman: Mr. Campbell, our clerk is never wrong.

We're up to clause 254 as amended, with 13 amendments.

Clause 254 as amended agreed to [See Minutes of Proceedings]

Clauses 255 to 264 inclusive agreed to

On clause 265

Mr. Solberg: I'd like to say something here.

For clause 265, the amendment here deals with tax-in pricing. Basically it asks that tax-in pricing not come into effect until such time as there's harmonization in every province.

What can I say on this that I haven't said already? Obviously there's tremendous opposition to it. Notwithstanding what Mr. Campbell said, there are people who are going to close down their businesses - and they very explicitly said it in this committee - as a result of this.

Given the paucity of evidence from the government that tax-in pricing will be in any way good for Atlantic Canada when only Atlantic Canada is harmonizing, I think it would be good for all members to vote against tax-in pricing and vote for this amendment.

Mr. Campbell: Obviously we are opposed to this amendment, for all the reasons we have been advancing. Hon. members understand from over the last few days that Canadians want tax-inclusive pricing. We heard testimony to that effect - very vivid, direct testimony. We have tabled and made available supporting information we have. It is in the interests of consumers. It is in the interest of full information in the marketplace and a more efficient economy.

There isn't anything else I can say either that I haven't already said on the point, Mr. Chairman, except that I am pleased to hear implicit in Mr. Solberg's remarks that he supports harmonization except for this little problem.

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Mr. Solberg: I don't want to leave anyone with the impression that I support what the government is doing. We support tax simplification, absolutely, and we have proposals of our own that support tax simplification of all kinds, but let it never be said that we support this government on harmonization.

Some hon. members: Oh, oh!

The Chairman: Okay.

Mr. Campbell: I tried.

The Chairman: We'll vote on the amendment to clause 265 proposed by Mr. Solberg.

Amendment negatived [See Minutes of Proceedings]

Clause 265 agreed to [See Minutes of Proceedings]

On clause 266

The Chairman: Mr. Solberg, you have an amendment to clause 266.

Mr. Solberg: Mr. Chairman, it's essentially the same argument as for clause 265. I won't repeat my argument.

The Chairman: Okay.

Amendment negatived [See Minutes of Proceedings]

Clause 266 agreed to [See Minutes of Proceedings]

Clauses 267 to 273 inclusive agreed to

The Chairman: I'd like to go back.

[Translation]

As was suggested by Mr. Bélisle, we will have a recorded division for clauses 150 to 255.

Can we apply the same vote?

Mr. Bélisle: Yes, the vote on 69.1.

The Chairman: The vote held on clause 69.1 will apply to clauses 150 to 255, 261 to 266 and 270. Agreed?

[English]

Clauses 150 to 255 inclusive agreed to as amended: yeas 7; nays 2 [See Minutes of Proceedings]

Clauses 261 to 266 inclusive agreed to as amended: yeas 7; nays 2 [See Minutes of Proceedings]

Clause 270 agreed to as amended: yeas 7; nays 2 [See Minutes of Proceedings]

Mr. Solberg: I have a point of order, Mr. Chairman.

I apologize. I had hoped to protest in some way to proposed section 277.1. I gather it's under clause 235. We've already voted on that.

The Chairman: That's okay. We'll go back.

Mr. Solberg: Maybe the clerk can help me out here. I gather it's clause 235 on page 276.

Mr. Campbell: This is the provision we discussed at great length in committee yesterday, on which we proposed an amendment this evening.

Mr. Solberg: Right. This is the one that grants broad, sweeping powers to the government to do whatever they want. It's clause 235.

Mr. Campbell: Yes, dealing with section 277 of the Excise Tax Act.

Mr. Solberg: Right.

I just wanted to register my protest, and I don't know if we can do that in the form of voting on it again.

The Chairman: I don't mind. I think we should be totally flexible. Would you like to go back to clause 235?

Mr. Campbell: Mr. Chairman, there may be another way for Mr. Solberg to indicate his displeasure. I'm not sure whether his displeasure is about they way it was before amendment or about the way it is presently amended. In any event, it doesn't exist as it was. It was amended earlier this evening.

We're certainly open to letting Mr. Solberg indicate what his problem is.

Mr. Solberg: When my research staff met with federal officials, it was indicated that it did leave the power and quite a bit of latitude to go ahead and make changes without coming back to Parliament.

The Chairman: I would suggest we give unanimous consent to go back, if you want to talk about that or vote against it.

Mr. Solberg: I don't want to talk about it. I'll just say I'm opposed to granting that much power to the government without coming back to Parliament.

The Chairman: No problem. Thank you. We'll let the record show that.

Shall the schedule carry on division?

Some hon. members: Agreed.

The Chairman: Shall the title carry?

Some hon. members: Agreed.

The Chairman: On division.

Shall the bill carry?

Some hon. members: Agreed.

The Chairman: On division.

Shall the committee order a reprint for use at report stage?

Some hon. members: Agreed.

The Chairman: On division.

Do you think anybody wants to read this?

Shall I report the bill as amended to the House?

Some hon. members: Agreed.

The Chairman: On division.

.2045

I hate to keep you here any longer, but Mr. Campbell alluded to the fact that many things that came up are not within the direct scope of the bill, or are within the direct scope of the bill, where we don't feel satisfied. I don't have this in writing, but I would like the record of our committee to show this, because I think we should report this to the House.

I will give opposition members

[Translation]

like you, Mr. Bélisle, Mr. Solberg and the others, the opportunity to add other things before I table this in the House. This will be a report from our committee to the House which will indicate that

[English]

there are at least 10 things that we think are hanging loose and should be dealt with. We were going to suggest that, one, on advertising in all media, while guidelines have not been released, the committee urges that these guidelines include a provision for tax-exclusive pricing with a disclaimer. We have heard a lot about the costs in catalogues and the national media...and from McCabe this afternoon, this evening and everything.

Two, in terms of housing we urge the provinces to consider the impacts on the housing industry in moving to the HST. We know the provincial component of the tax there is adding costs. We think we should work together on that one.

Administrative leniency I'll come back to.

In terms of place of supply, we heard yesterday about how the place of supply rules cause problems for various particular services. We urge the department to work with - insist that it does - the various industries, and maybe even require specific rules for specific industries to take into account their various circumstances.

In terms of the RV dealers, we urge the government to examine the proposals put forward by the witnesses and that suggested by Mr. Solberg in order to come up with a better situation than we find them in now.

On recycling, the committee awaits further information from the witnesses with respect to their particular concerns before we suggest any measures on them. They indicated that they didn't have any information for us but would get back to us.

A number of people mentioned night physicians. The committee urges the participating governments, when setting their annual fee schedule, to consider the impact of the HST on physicians.

In terms of the multi-employer benefit plan, we urge the government to continue its consultation with the representatives in this sector with a view to ensuring that these funds, which are serving the workers of this country, are not unduly prejudiced by tax measures.

We heard evidence on segregated funds in Atlantic Canada. We have put an amendment of substance. We think this amendment will work, but it may not be sufficient if more provinces come on. Therefore, we urge the governments to continue to monitor the issues raised by the witnesses with respect to segregated funds and investment plans, based on the participating provinces. We expect to hear from them if there are difficulties.

Finally, on catalogues, the committee urges the governments to review the guidelines for national catalogues in the context of the more general guidelines in advertising, bearing in mind the testimony we've heard. We believe this will pretty well go all the way toward solving the problems Mr. Solberg has found with it.

The law becomes effective in April. There's going to be a long lead-in time. Governments and the private sector must work together to make sure we understand what the rules are. We're going to work with the private sector and consumers to make sure those rules are as responsive as possible to their needs. After April 1, when this goes into effect, we heard many witnesses ask - and this committee strongly recommends and urges - that Canada employ administrative leniency and flexibility in dealing with taxpayers.

In terms of future amendments, this committee recommends very strongly that Finance officials, of course working with all members of Parliament, be very cognizant of the fact that we have entered into a major tax reform. Never in the history of mankind has major tax reform been accomplished perfectly from conception. It is our responsibility, as the parents of this bill, to ensure that the bill itself grows up to be strong and that we continually make changes to adapt it to ensure that it responds to the needs of Canadians.

.2050

That will be, in essence, part of the report of this committee that goes forward to the House when we come back, but with suggestions from members from all sides to add to those ten or eleven things we've already suggested.

In closing, we owe a tremendous amount of thanks to our clerk, Bev Isles, who is awaiting a child. If it's a woman, she's going to call her ``Harmony''.

Some hon. members: Oh, oh!

The Chairman: We owe incredible thanks to our research staff, to our House of Commons staff. These are the people who have worked over the holidays to put together this mountain of paper and who got together so many witnesses on such short notice.

I want to thank all members: Mr. Solberg, Mr. Bélisle, Mr. Loubier, Mr. Pomerleau,Ms Whelan, Mrs. Brushett, Mr. St. Denis, Mr. Duhamel, Mr. Pillitteri and Mr. Cullen.

Mr. Fewchuk, I want to thank you. I'm sorry you're not coming back. I'm sorry we're going to lose you from this Parliament. You've made a great contribution here. It's been a great thing to work with you. This is not adieu, it's au revoir. We're going to see a lot of you, we hope.

I particularly want to thank our parliamentary secretary, who has been wonderful to work with. I know he has asked me, on behalf of all of us, to thank our officials from Finance, who have not had holidays. This has been a marathon for them.

On this issue, as on everything I've seen them do in the past, their time, 24 hours a day, has been at our disposal to try to make the legislation better and to try to make this a better country. All of us admire their professionalism and appreciate their help.

This has been a lot of work for all of us. Again, to all members from all parties, thank you very much. You're all invited to our caucus in Quebec City, starting tomorrow.

We are adjourned.

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