Tax deal could help Canada government avoid defeat

* Canada, Quebec working on tax deal, no agreement yet

* Opposition Bloc Quebecois says could back government

* Quebec seeks C$2.6 billion in compensation for tax move

By David Ljunggren

OTTAWA, Nov 26 (BestGrowthStock) – Canada’s minority Conservative
government is working on a possible tax deal with the
influential province of Quebec that could help Prime Minister
Stephen Harper stay in power longer than expected.

Finance Minister Jim Flaherty confirmed on Friday he was in
talks with Quebec over federal compensation for tax changes the
province introduced almost 20 years ago, something the
separatist Bloc Quebecois has long demanded.

The Bloc indicated that if the tax measure were in the
minority Conservative government’s next budget in early 2011,
it might vote in favor and thereby head off an early election.

“If the (budget) is generally bad for Quebec, we’ll vote
‘No’. If it’s generally good for Quebec, we’ll vote ‘Yes’,”
senior Bloc legislator Pierre Paquette told reporters, saying
it was “a bit early” to predict what the party would do.

The Conservatives need the support of at least one
opposition party to stay in power. Many political observers had
predicted that all three opposition parties would unite early
next year to reject the budget and force a new election.

A “yes” vote from the Bloc would prevent that and keep the
government in power.

The Bloc, which seeks independence for the French-speaking
province of Quebec, has voted for budgets presented by the
Conservatives on two occasions, arguing that the spending plans
were in Quebec’s best interests.

Paquette urged Ottawa to launch a “blitz of negotiations so
we can reach agreement before Christmas” on a tax deal.

Polls show the Conservatives would lose seats if a federal
election took place now and could have trouble creating a
stable minority government. But no other party has a realistic
chance of winning power.

Quebec wants around C$2.6 billion ($2.5 billion) from
Ottawa to compensate it for harmonizing its sales tax with
federal taxes. Federal governments have refused that in the
past, arguing that Quebec had not fully harmonized the tax.

Flaherty told the House of Commons that he had made
progress in his talks with Quebec’s provincial government, but
some challenges remained.

Ottawa has already compensated other provinces for
harmonizing their taxes.
($1=$1.02 Canadian)
(Reporting by David Ljunggren; editing by Janet Guttsman)

Tax deal could help Canada government avoid defeat