The Canadian Press

The goods-and-service tax was a classic case of the poor getting poorer, says a report by the Atlantic Provinces Economic Council.

Atlantic Canadians have sent $3 billion more in sales tax to Ottawa since the GST was introduced in 1991, while the tax's effect on Ontario and Quebec has been almost neutral, says the report.

Ontario and Quebec were the big winners because the removal of the manufacturers sales tax, a hidden tax which the GST replaced affected them the most, says the report.

"Eighty to 90 per cent of the benefit of the removed manufacturers sales tax went to Quebec and Ontario" because of their large manufactering bases, council economist David Amirault said in an interview.

"There has been a massive transfer of tax burden from the two richest provinces to the other eight, poorer provinces. It's an amazing impact."

In Nova Scotia's case, the federal government has taken in a total of $800 million more in taxes since the GST took effect, while Ontario and Quebec have sent Ottawa a total of $165 million less over the same period, the study said.

The GST's negative impact left most of the Atlantic region's provincial governments with little choice but to agree to a blended sales tax, he said.

"The reality is that, if they didn't do this, their tax base would be constantly eroding," Amirault said.

The 15 per cent blended rate, replacing the GST and provincial sales taxes in Nova Scotia, Newfoundland and New Brunswick, takes effect April 1.

The new tax will be good for the economy because it will reduce taxes on items such as restaurant and hotel bills, sectors that were the most hurt when the GST was brought in, said.

"Without getting those sectors moving, in terms of increasing the spending ability, this economy isn't going to go anywhere," Amirault said.

However, Amirault said he doubts the money the tax will save business will be passed on to consumers to the extent government says.

"The provincial government is hoping businesses will pass on the savings to the consumers but I don't think the savings are as great as they think they are"' he said.

Amirault also doubts the blended tax will provide as big an economic boost as government predicts, but he says overall it will have a positive impact on the economy.