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No sign yet Flaherty can bridge ‘significant’ Quebec HST gap

Finance Minister Jim Flaherty is pushing up against a Thursday deadline for honouring a key campaign pledge: striking a $2.2-billion deal with Quebec on a harmonized sales tax.

During the federal campaign, the Conservatives promised to strike a deal with Quebec "as soon as practical after the election and in no event later than Sept. 15, 2011."

Both Quebec and Ottawa insist that talks are ongoing, but Mr. Flaherty added a twist last week when he suggested to reporters in Ottawa that the deadline might not be met.

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"Our officials have been working hard. We have exchanged draft memoranda. There's still a significant gap," Mr. Flaherty said Thursday. "It's very important that Quebec be prepared to harmonize the base of the Quebec tax and the federal tax. I'm not saying it won't happen, I'm not saying it will happen. I'm saying that we've been working hard on it."

Now with just a few days left, there are no signs an announcement is imminent. Catherine Poulin, a spokesperson for Quebec Finance Minister Raymond Bachand, said the minister is of the view that even if Thursday's deadline is missed, a deal could still be reached shortly after.

Ottawa has already agreed to let Quebec manage the federal and provincial portions of the sales tax. Mr. Flaherty's comments suggest the issue is the "base," meaning agreeing on a common list of items on which the tax will apply.

Quebec aims to follow the example of Ontario and British Columbia, which were allowed to have differences in terms of federal and provincial sales taxes, provided that the items did not add up to more than five per cent of total revenue.

Mr. Flaherty pushed hard for non-harmonized provinces to get on the HST train, arguing it will make the private sector more competitive. In 2009, he offered Ontario $4.3-billion and B.C. $1.6-billion in federal cash as incentive to make the switch. It was only after those deals surfaced that Quebec became increasingly vocal, arguing that it harmonized its sales tax in 1992 and never received a penny.

The file blew up into a major headache for Mr. Flaherty this year when British Columbians voted in a referendum to pull out of the HST deal. The B.C. government has said it will return the $1.6-billion to Ottawa, but has yet to say when.

Still, the promise to Quebec remains.

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"Both sides have been working on a harmonization agreement with a goal of achieving it by Sept. 15. The work continues," Flaherty spokesman Chisholm Pothier told The Globe on Monday.

Separately, the Finance Minister delivered a speech to the Whitby Chamber of Commerce. Mr. Flaherty repeated the government's main message that, for now, there's no reason for Ottawa to change its financial course in spite of slow growth in the economy.

Liberal Treasury Board critic John McCallum held a news conference in Ottawa later on Monday urging the Conservatives to scale back their deficit fight in light of cooling job numbers.

Others are pressing the Finance Minister to act quickly with a new jobs plan – on the heels of U.S. President Barack Obama's latest stimulus proposal. But Mr. Flaherty appeared to reject the idea of turning his annual fall update of the government's numbers into a mini-budget with new policy measures.

"We will do the fall economic update in the fall, of course. We haven't decided on a date yet," he told reporters. "In terms of content, it would be way too early to talk about content. But the plan — so that you're not misled – the plan is not to do a second budget. The plan is to do an economic update as I did last fall."

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About the Author
Parliamentary reporter

A member of the Parliamentary Press Gallery since 1999, Bill Curry worked for The Hill Times and the National Post prior to joining The Globe in Feb. 2005. Originally from North Bay, Ont., Bill reports on a wide range of topics on Parliament Hill, with a focus on finance. More

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