“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

· Sales tax harmonization is particularly beneficial for Newfoundland and Labrador.

· Newfoundland and Labrador has an export-oriented economy that depends substantially on the ability of its resource sector to compete in world markets. A harmonized value-added tax will reduce business costs and make Newfoundland and Labrador products more competitive. This will help keep and create much-needed new jobs in the province.

· 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

· Business, particularly small business, is being driven to distraction by the need to deal with two different sales tax systems -- two calculations, two sets of tax forms, two different remittances, two sets of auditors. It's extremely costly, and we all pay for it.

· The Canadian Institute of Chartered Accountants has estimated that a national harmonized sales tax could save Canadian businesses between $400 million and $700 million. Businesses in Newfoundland - especially small businesses - would share in those savings.

· Equally importantly, a harmonized value-added tax would reduce the cost of Newfoundland products, helping our businesses to compete better both in the home market and abroad. Our exports would leave the country free of tax buried in the price.

· That means more exports -- and more jobs in Newfoundland.

Some say that business benefits from harmonization at the expense of consumers. In fact, when you don’t tax services, you distort the economy. You’re imposing a burden on some businesses, but not on others. But a broader tax spreads the burden fairly to all sectors and to all consumers. That creates a level playing field at a time when services are one of the fastest growing parts of our economy. Moreover, both the Consumer Association of Canada and business associations like the Canadian Chamber of Commerce have expressed support for harmonization.