“A Liberal government will replace the GST with a system that generates equivalent revenues, is fairer to consumers and to small business, minimizes disruption to small business, and promotes federal-provincial fiscal cooperation and harmonization.”

Creating Opportunity:
The Liberal Plan for Canada 1993

“Taken together, we believe the components of this package constitute a major advance in responsible sales tax reform. We believe that consumers, taxpayers and business — particularly small business — will benefit....What we have arrived at is not the best alternative conceivable. It is the best alternative possible. And it is in keeping with our Red Book commitment.”

Finance Minister Paul Martin
April 23, 1996

· The signing of Memoranda of Understanding between the federal government and the governments of Nova Scotia, New Brunswick and Newfoundland and Labrador marks a significant first step towards an integrated federal-provincial sales tax.

· With the province of Quebec concluding the harmonization process this year, the government is committed to work with the remaining provinces to make this a fully national system.

· The government is also introducing over 100 measures to streamline and simplify the operation of Canada's sales tax. These measures are an essential part of the new architecture of a much-improved system.

· Taken together, this package constitutes a major advance in responsible sales tax reform. Consumers, taxpayers and business -- particularly small business -- will benefit.

· This is not perfection, but a real world solution and real improvement.

· The single federal-provincial sales tax represents a significant tax reduction for Newfoundland and Labrador. The province will be reducing its total sales tax intake by $105 million annually. This money will stay in Newfoundland, in the hands of businesses and consumers, and be put to work in the local economy.

· To make up for the shortfall in revenues, and to ease the transition to the new tax regime, the federal government will share adjustment costs with the provincial government. Newfoundland and Labrador will receive $348 million in adjustment assistance over four years.

· Harmonizing the GST with the existing retail sales tax will mean a drop in sales taxes from a combined 19.8 per cent rate on most items to 15 per cent, a decrease of almost five per cent. Provincial governments could save as much as $100 million a year in administrative costs, if all provinces were harmonized.

· The province’s Gross Domestic Product (GDP) is expected to grow over the next several years because of Hibernia oil and Voisey’s Bay mineral production. Under the new arrangement, oil and minerals will not be subject to provincial sales taxes; these export commodities will be even more competitive on international markets.

· Consumers will share fully in the benefits. The harmonized sales tax rate of 15 per cent will be four percentage points lower than the current combined rate, but because of tax paid on tax in the current system, the real drop will be almost 5 percentage points

For consumers, businesses and taxpayers in each of the harmonizing provinces, the result will be a different tax:

· one sales tax, not two

· one tax base, not two

· on tax rate, not two

· one sales tax administration, not two

· one price, not two