News Release Archive

More Nova Scotians working, competitive advantages for business,
and generally lower prices for consumers will result from
blending the two existing sales taxes -- the federal Goods and
Services Tax and the provincial Health Services Tax -- into one
lower tax.

Finance Minister Bernie Boudreau announced today that Nova Scotia
and the federal government have signed a memorandum of
understanding, and will now work to reach a detailed agreement to
blend the two sales taxes on April 1, 1997. Nova Scotia joins New
Brunswick and Newfoundland and Labrador in reaching an agreement
in principle with Ottawa, along with Quebec which will have a
blended tax by this November.

"What we are announcing here today is the biggest tax reduction
in Nova Scotian history, reducing total sales tax by $120 million
in 1997-98," Mr. Boudreau said. "That's money that will stay
right here in the Nova Scotia economy."

Growth in the Gross Domestic Product, as estimated by the three
Atlantic provinces, will create thousands of jobs. "We estimate,
cautiously, that 3,000 or more, new lasting jobs will be created
in Nova Scotia alone," the minister said.

When the tax reduction goes into effect, the sales tax on many
items Nova Scotians buy will drop from the combined GST-PST rate
of 18.8 per cent, to 15 per cent. The base will be consistent
with the current GST base, so on some goods and most services,
the tax rate will increase. However, government will eliminate
hidden taxes now paid by business, and in turn paid by consumers,
which will lead to lower prices.

Today, many businesses pay provincial tax on the materials,
supplies and services needed to produce their goods and services
and run their operations. These taxes drive up costs at all
levels -- from the manufacturer, to the distributor, to the
wholesaler, to the retailer -- and are passed on to consumers.
Harmonization removes these taxes from the economy, Mr. Boudreau

On balance, consumers will come out ahead. "You may pay a dollar
more for a haircut, but you will save a buck when you buy
shampoo, soap and toothpaste," Mr. Boudreau said. "You may pay a
little more for your dry-cleaning, but you will pay less for a
burger and fries. A golfer may a pay another couple of bucks for
green fees, but he will save five on a new driver."

The price consumers see on the tag is what they will pay at the
cash register. The tax will appear on the sales receipt, so
consumers will know how much tax they are paying, without having
to calculate it before making their purchase.

The administration of the tax system will be streamlined and
simplified, reducing red tape, paperwork and costs to businesses.
The federal government will take over the cost of collecting the
tax, saving about $6 million for the Nova Scotia taxpayer, he

The province will collect $120 million less in sales tax. The
federal government is providing adjustment assistance to offset
this revenue loss, totalling $249 million over four years.

Mr. Boudreau said the economic activity generated by the tax cut
will make the real difference.

"Our government's plans have always included tax reductions,
because that's what it takes to grow our economy and create
jobs," Mr. Boudreau said. "The bottom line is a stronger economy
-- with lower taxes, more jobs and competitive advantages for our

Before a detailed agreement is worked out, the government will
talk to Nova Scotians on how to maximize benefits and try to
resolve as many concerns as possible. As well, the provincial
budget later this week will include measures to ensure the tax
system is fair to all.

A toll-free line has been established for questions and comments,


Contact: Jim Vibert       902-424-4886

         Donna MacDonald  902-424-8787


                ONE TAX  -  MANY ADVANTAGES
         What A Blended Tax Means for Nova Scotians


Nova Scotia and the federal government have signed a Memorandum
of Understanding (MOU), agreeing in principle to blend the
federal GST and provincial Health Service Tax into a single, 15
per cent sales tax. New Brunswick and Newfoundland have signed
the same MOU. Quebec will have a blended tax by this coming

The MOU outlines the principles on which this progressive tax
reform will be built. In Nova Scotia, it is the biggest tax break
in provincial history. It means a huge economic boost and the
creation of 2,000 to 3,000 new, lasting jobs.


1) One blended tax of 15% will replace the two existing taxes
which, when combined, add up to an effective tax rate of 18.8%.
The blended tax will be applied to a common base that puts
producers of goods and services on an equal footing.

- Because of the lower rate, consumers will pay less tax on many
of the goods they purchase; on some, they may pay more. But on
balance, consumers will come out ahead.

- Groceries, rent, tuition, child care, prescription drugs,
medical devices and some other items will remain tax free for the

- A tax reduction on automobiles will be phased in over three
years, beginning at 17% in 1997; 16% in 1998 and finally to the
blended rate of 15% in 1999.

- The common base for the blended sales tax will be consistent
with the current GST base. The GST base includes all clothing and
footwear, fuel, electricity, new home sales, books, personal,
recreational and professional services. However, because of the
lower blended rate of almost 4%, consumers will save $3.66 on a
$97 monthly long distance phone bill. A $70 dinner out for a
family of four will be $2.64 less in taxes. Or if you're buying a
$35 toaster, you'll save $1.32. These savings are on taxes alone,
before businesses pass any savings on through their lower cost of
doing business (Described in section 2, next page on the Input
Tax Credit.).

- The blended 15% rate is lower than, or consistent with, the
rate in other jurisdictions with a value-added tax, which range
from 15% in Germany and Luxembourg, to 17.5% and 18% respectively
in the United Kingdom and France, to 20% in Australia.

2) Businesses will receive an "Input Tax Credit" of 100%. This
reduction in business costs will spur economic growth and be
passed along as savings to consumers.

- A tax on business is a cost to the consumer. Today, businesses
are taxed at 11% on many of their "inputs" -- that is what they
use to produce their goods or services, from light bulbs to legal
services. These taxes become embedded at all levels of the
economic chain - production, distribution, wholesale and retail.
Consumers don't see these embedded taxes, but they're paying them
just the same. For businesses, costs become inflated, putting
them at a competitive disadvantage.

- With harmonization, government will remove these hidden,
embedded taxes from the economy. Government will refund the taxes
on business inputs and provide Nova Scotia businesses with a
competitive advantage they lack today.

3) The administration of the tax system will be streamlined and
simplified, reducing red tape and paperwork for businesses and
saving tax dollars.

- The federal government, which will initially administer the new
tax, has proposed more than 100 measures to streamline and
simplify tax administration. These changes range from reducing
the number of charities and non-profit organizations that must
register and account for tax, to expanding the range of tax-free
agricultural equipment and supplies, to simplifying the tax on
used goods.

- The MOU commits Ottawa to making every effort to employ Nova
Scotian tax administrators in Nova Scotia.

4) The price people see on the price tag is what they'll pay at
the cash register.

- The taxes will appear on the sales receipt, so consumers will
know how much tax they are paying. They won't have to try to
calculate it before they make their purchase decision.

5) Subject to a detailed agreement, the new tax rate is expected
to be in place on April 1, 1997.


A Win for the Province ...

Job creation, economic boost.

- Harmonization is expected to result in the province's Gross
Domestic Product growing by at least one-half-of-one per cent.
This will mean 2,000 to 3,000 full-time jobs.

- Selling more goods and services abroad means new wealth and
jobs at home. Nova Scotia's exporters are an increasingly vital
part of our economy. Merchandise exports have steadily increased
since 1991, growing by 14.5% in 1995 alone. Now, to build on this
success, exporters have a new competitive advantage. The input
tax credit will make our service sector a more competitive force
in the national and international marketplace.

A Win for Business ...

Single largest tax break in Nova Scotia's history.

- The province will collect less sales tax. In fact, $120 million
less in 1997-98. The government is positioned to offer these tax
reductions as a result of careful fiscal management, its
commitment to support the creation of lasting private sector
jobs, and federal adjustment assistance.

Increased competitiveness.

- Full input tax credits will improve the competitive position of
Nova Scotia business and industry. Goods will be more
competitively priced on the national and international market, so
people will buy more, resulting in increased production and more

- The federal adjustment assistance will ease the province's
transition. Assistance is determined by a formula which,
oversimplified, is intended to cover 100 per cent of the
province's revenue loss in year one and two, 50 per cent in year
three and 25 per cent in year four. Nova Scotia will receive $249
million in adjustment assistance.

A Win for Consumers ...

Lower prices on many items.

- The after-tax cost of many items will be reduced because the
blended 15% rate is lower than the combined rate (18.8%) of the
two existing taxes. In addition, prices will come down as
business costs decline and as hidden, embedded taxes are removed.

- Consumers will pay substantially less on many of the goods they
purchase. For example, on a $1,000 car repair bill, consumers
should save more than $40 ($41.81). On a $500 television, the
saving should be more than $20 ($21.63).

- Assuming businesses pass along just 50% of their savings to
consumers, a family with an income between 30,000 and 50,000
would save $109 annually.

The price consumers see is the price they pay.


A stronger economy -- with lower taxes, competitive advantages
for our businesses, and more Nova Scotians working -- benefits
everyone. As the cost of doing business goes down, prices for
consumers, will also go down. However, some prices (on services,
for example) may rise, at least initially. Before a detailed
agreement is signed, the government will listen to Nova Scotians
to maximize the benefits and solve as many concerns as possible.

For more information, call toll free -- 1-800-731-7707.


trp                   Apr. 23, 1996 - 11:27 a.m.