HST deal with Quebec expected Friday

The Conservative government is planning to cut Quebec a long-awaited cheque for merging the GST with its provincial sales tax.
Earlier this fall Federal Finance Minister Jim Flaherty said an HST deal with Quebec was imminent. (Canadian Press)

Prime Minister Stephen Harper will be in Quebec City on Friday to announce a long-awaited harmonized sales tax compensation deal.

Quebec harmonized the GST and provincial sales tax in 1992, and sought compensation from Ottawa after the federal government refunded Ontario and British Columbia for similar measures.

Quebec is asking for $2.2 billion, but negotiations dragged on over technical issues including tax collection and taxable items.

It wasn't clear whether Quebec could be compensated for harmonizing the taxes, and still collect the tax itself.

The list of items eligible for taxing was also a contentious point — some products, such as baby cribs and books are subject to the GST, but aren't taxed provincially.

During the 2011 spring election campaign, Harper pledged to resolve the harmonization compensation issue with Quebec by mid-September.

The deadline was extended, with Federal Finance Minister Jim Flaherty saying a deal was imminent.

Ottawa struck harmonization deals with Ontario ($4.3 billion) and British Columbia ($1.6 billion).

B.C. has since backtracked on the harmonized tax.

A majority of B.C. residents voted to scrap the tax in a binding, province-wide referendum held in August.

B.C. now has to eliminate the HST and reinstate the PST at an estimated cost of $3 billion.

It also has to repay Ottawa for its compensation.