Four-part harmony

As reported in La Presse today, and elsewhere in the national media, Quebec's Finance Minister is steaming mad over Ontario's sales tax harmonization agreement with the federal government.

To wit:

"Pour Mme Jérôme-Forget, il serait injuste que l'Ontario soit compensée, tout comme les provinces atlantiques, alors que le Québec n'a pas reçu un sous pour avoir harmonisé la TVQ et la TPS il y a plusieurs années."

Andrew Steele has a couple of posts on the subject at his Globe and Mail blog that are insightful and well worth reading. (ed. I disagree entirely with the premise of the first one, but that's for another day)

First, some hairsplitting - Quebec's sales tax isn't fully harmonized. Unlike the other HST provinces, Quebec's sales taxes are not collected by the Canada Revenue Agency, rather, as distinct societies are wont to choose, they prefer duplication of administrative services by making sure they preserve their own bureaucracy. Nationalism, even of the civic variety, isn't always compatible with the concept of "economies of scale". Tant pis.

What is interesting, however, is not so much the vocal and immediate response from Quebec, but rather the absence of any riposte as yet from any of the governments of Nova Scotia, New Brunswick, or Newfoundland & Labrador.

Unlike Quebec, those three provinces have a true harmonization agreement with the federal government, similar to the one Ontario announced this week. More importantly, they were given a specific incentive to to be early-adopters in the face of opposition from the less co-operative provincial governments (Mike Harris, Jacques Parizeau, Ralph Klein, etc.) of the day.

For example, section 75 of Newfoundland's Tax Agreement Act, 1997 reads:

75. If Canada should enter into a sales tax harmonization agreement with a non-participating province on terms that differ from those of the Agreement then in effect between Canada and the Province, the parties shall, at the option of the Province acting jointly with the other participating provinces, enter into a succeeding agreement regarding harmonization on the same terms as that agreement with the other province.

In other words, if Premier McGuinty's boosters have been correct this week in awarding high praise to the Ontario government for striking such a comparatively wonderful deal, then it's only a matter of time before Premiers Graham, MacDonald and (especially) Williams show up on Jim Flaherty's doorstep demanding same. And unlike previous questionable qualms that any of these Premiers may have had with Ottawa, this one will carry with it the force of statute.

The days ahead will see many pundits, consumer groups, business leaders and accountants subjecting McGuinty's harmonization agreement to intense scrutiny, but perhaps the greatest scrutiny of all will come from certain bureaucratic corridors on the East Coast.

Stay tuned.