03/26/2012 07:25 EDT | Updated 05/26/2012 05:12 EDT

HST for P.E.I. being negotiated, says Shea

Ottawa is not pushing the harmonized sales tax on Prince Edward Island, says National Revenue Minister Gail Shea.

P.E.I. is negotiating with Ottawa to bring in the HST, she said Monday, following the Kensington Chamber of Commerce luncheon, where she was guest speaker.

Shea was reacting to comments made by Premier Robert Ghiz a couple of weeks ago, after a meeting with Prime Minister Stephen Harper.

"There was some misleading information that was out in the media, that the federal government was asking P.E.I. to harmonize. That is not the case," she said.

"This is a provincial matter, a provincial decision."

The compensation for the HST is based on an established formula and there's no new offer on the table, said Shea, who is also the MP for Egmont.

"P.E.I. was given a fair offer in relation to all other provinces that have harmonized and it will be their decision whether or not they continue to pursue harmonization."

The current offer for federal compensation is about $45 million.

Sources say P.E.I. wanted $100 million, but has since reduced that amount to $62 million.

Finance Minister Wes Sheridan, who also attended the luncheon, declined to confirm those figures. "We don't have a number nailed down," he said.

"There are no secret negotiations, there are no deals on the table, none of those types of things are taking place."

But Sheridan said he supports the idea. "My position has been clear. It's the best thing we could do for Islanders."

It has been shown in other provinces that the harmonized sales tax helps the economy grow and creates jobs, Sheridan said.

Transitional payments needed

But the island still needs to have transitional payments to ensure the change doesn't hurt low income islanders.

There won't be a deal until that extra money is in place, he said.

“Talks are ongoing. The numbers have to be recalculated from 2008, the last time we ever talked about it. There are differences in the bases now as to the growth patterns in both PST and the GST portions of taxation,” he said.

“So those have to be recalculated and to look at what the impact would be to our economy under that type of differences.”

Meanwhile, Shea and Sheridan said the coming federal and provincial budgets will be tough and have far-reaching effects, which could include widespread government cutbacks and job losses.

"We can't continue to live beyond our means," said Shea.

"We are under a very, very different format of cash and we're going to have to make some tough decisions," agreed Sheridan.