News Release Archive
FINANCE--COMMENTS BY FINANCE MINISTER BILL GILLIS ON TAX CHANGE ----------------------------------------------------------------- NOTE TO EDITORS: BACKGROUNDER ON THE HARMONIZED SALES TAX. "Despite efforts to offer modifications, exceptions and exemptions, the current Provincial Sales Tax (PST) system is a roadblock in the effort to create jobs. It taxes both businesses and their customers. It means businesses here in Nova Scotia have higher costs than their competitors in Ontario, Alberta, Ireland or France. It means lost sales by our seaweed producers, our environmental engineers and our tourist operators. Eliminating the PST offers Nova Scotia a chance to lower business costs, improve our competitive position with the rest of Canada and the world. It offers our businesses a chance to gain more customers and create more jobs. Canada's other sales tax system, the Goods and Services Tax (GST), only taxes the final customer. Most businesses are able to get the tax they pay back through refundable input tax credits. But, eliminating the PST also means the government loses $750 million dollars in revenue. That's about one-sixth of the revenue needed for health care, education, social assistance and other government programs. The solution has been to harmonize the sales tax systems. To use just one system that lowers business costs and makes our businesses more competitive; one that still raises money for needed government programs. In theory the Harmonized Sales Tax (HST) will do all of that, but in practice the amount of revenue raised falls short. Estimates show the HST will raise about $120 million less than the existing PST system. That will be good for the economy because that money will be spent on new investment or passed on to customers in the form of lower prices. Eventually, new economic growth will replace the lost revenue. But, the government was left with a dilemma. How could it manage to pay for services while it waited for the economy to grow? The Government of Canada has come up with the answer. It will cover the losses in the early years so Nova Scotia can afford this huge annual tax reduction. The payment is for $249 million dollars. The money was received last fall, and is being used over the next few years to keep the budget in balance. The result is a sales tax system that is significantly simpler. Including income tax cuts on July 1, 1997, the Low Income Tax Reduction Program and the Direct Assistance Program, it will also be better for consumers and the economy." -30- Contact: Bruce Cameron 902-424-8787 trp Mar. 26, 1997 - 8:55 a.m.