VANCOUVER - Finance Minister Jim Flaherty offered a firm endorsement Sunday of a harmonized sales tax while at the same time distancing his government from a policy that has sparked criticism of provincial governments considering it, particularly in British Columbia.
Flaherty, speaking with reporters in Vancouver, said "there's no question" that combining provincial sales tax with the GST is good fiscal policy -- but he stressed it's not up to Ottawa.
"First of all, the decision to harmonize the GST and PST has to be that of the provincial government," he said.
"I realize that this is challenging for provincial leaders, but I have no doubt in my mind that it's good long-term economic policy for our country."
Flaherty has long said he would prefer the provinces make the switch, and Ottawa is offering some encouragement in the form of billions of dollars in transition funding for governments that sign on.
While supporters argue switching to the HST will save businesses money, critics complain that it would apply to numerous items currently exempt from provincial sales tax, costing consumers more.
British Columbia and Ontario recently announced they would be switching to the HST system, and other provinces are considering doing the same.
The issue has become a headache for B.C. Premier Gordon Campbell, who is facing persistent calls to reconsider the plan, set to take effect next year, and accusations that he hid his intentions during the spring election campaign.
Campbell's government tables a new budget on Tuesday, and he's expected to use the occasion to argue his case for the HST.
The political opposition in Ontario has also seized on the issue, although it hasn't gained the same traction as in B.C.
Saskatchewan, Prince Edward Island and Manitoba are considering adopting the HST, but they have expressed concern about its impact on consumers.
Several Conservative MPs and the Prime Minister's Office have said the federal government had nothing to do with the province's decisions.
Flaherty quickly brushed aside the suggestion that federal Conservatives are trying to avoid political fallout.
"It's not up to us," he said.
But New Democrat MP Libby Davies said the federal Conservatives are trying to hide from public anger.
"I don't think he has any idea that it is now the biggest issue here in B.C. -- people are hopping mad," said Davies, who showed up to Flaherty's media availability to speak with reporters.
"The Conservatives campaigned on this, I find it very curious that the Conservative members of Parliament in B.C. are now running for cover."
Meanwhile, Flaherty used a speech Sunday evening to offer a glowing assessment of his government's handling of the global economic crisis.
Flaherty acknowledged there is still work to be done to ensure Canada recovers from the recession and avoids slipping back into trouble, but he said Canada's response has been a model to the rest of the world.
"We put forward our system as an example for others to follow, while not ignoring the need to make certain improvements here at home," Flaherty told a conference on fiscal policy.
"All countries must take a critical look at their own systems and do what it takes to prevent another financial meltdown. The Canadian system clearly works, and works well."
In a familiar refrain, Flaherty boasted that Canada's banks have avoided the collapses and massive financial bailouts seen elsewhere, and he lauded the Conservative government's stimulus program, including infrastructure spending and tax cuts.
He promised his government isn't finished yet, listing off several changes still to come that he suggested will strengthen Canada's financial footing.
He said the Bank of Canada will be asked to look for ways to implement monetary policy to ensure financial stability, and he said his government continues to work towards a national securities regulator.
"This might be the part of the speech where I say, 'If it ain't broke, don't fix it,"' he said in his speech.
"While we have led the way internationally, our system is not perfect."
Earlier this month, Flaherty said the deficit for the current fiscal year will total $50.2 billion. The federal government plans on running deficits for at least the next four years.
