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The leaders of the five registered parties participated in the first debate of the campaign. (CBC)

Sales taxes are becoming a major issue in the P.E.I. election campaign after the first leaders' debate on tourism Thursday in Hunter River.

The five leaders of the registered political parties took turns debating how to expand tourism to become a $500-million industry by 2015 in front of an audience of about 60 people at Harmony House Theatre.

While Progressive Conservative Leader Olive Crane proposed one way to do this is to introduce a two per cent cut in the provincial sales tax, Liberal Leader Robert Ghiz said the province can't afford it.

"It would be a $42-million commitment and right now, I guess, that would be the entire size of our deficit in the province of P.E.I.," said Ghiz.

"From my perspective, it's not something we can afford right now. We're going to make modest announcements over this election campaign because our goal is still to have a balanced budget by 2014."

NDP Leader James Rodd tried to corner Ghiz on whether his government would bring in the harmonized sales tax, something the NDP and the Island Party oppose.

Crane accused Ghiz of negotiating in secret with the federal government to bring in the harmonized sales tax to P.E.I.

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A crowd of about 60 were on hand in Hunter River to watch the leaders' debate. (CBC)

Ghiz denied there were any such negotiations, but then said Ottawa's offer of compensation to P.E.I. to bring in the HST was unacceptable.

Crane maintained the province can make the provincial sales tax cut, saying it's a matter of priorities.

"That money will circulate two and three times in the economy and stimulate at a time that we really need it," Crane said.

She also said she would let all Islanders have a say in whether the HST should be introduced.

Ghiz said he'd consider the HST if he gets an acceptable offer of compensation from Ottawa.