The Canadian government and Quebec formally signed a C$2.2 billion ($2.1 billion) tax deal on Friday, ending two decades of squabbling which had helped fan separatist sentiment in the largely French-speaking province. Quebec had pressed Ottawa for almost 20 years to compensate it for harmonising its sales tax with its federal equivalent. Successive federal governments refused, arguing Quebec had not fully harmonised the tax.
The governing Conservatives in Ottawa committed during the May 2 election campaign to strike a deal, and they set aside the money in their June 6 budget. "Quebec wanted a harmonisation agreement, we worked together to make it happen, and it is now in place," Prime Minister Stephen Harper said after signing a memorandum of understanding with Quebec Premier Jean Charest in Quebec City.
Under the terms of the deal, Canada will pay C$733 million to Quebec on January 1, 2013, and C$1.467 billion on January 1, 2014. The deal commits Quebec to making a number of changes to the Quebec sales tax in order to harmonise with the federal goods and services tax. "Once fully implemented, this agreement will fully remove QST on key business inputs such as telecommunications and energy, and ensure that the sales tax treatment of financial services is consistent for QST and GST purposes," the federal government said in a statement.
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