Quebec, Ottawa close to HST deal

The federal government and Quebec are close to making a deal to compensate the province for harmonizing its sales tax a decade ago, The Canadian Press has learned.

Such an agreement, whichwould potentially send billions of dollars to Quebec, could help keep Prime Minister Stephen Harper's minority government afloat longer.

That's because the Bloc Qubcois would be hard pressed to vote down the next federal budget if it included HST funding for Quebec something Quebec politicians have spent years lobbying for.

Sources say talks have been picking up steam. Finance Minister Jim Flaherty had dinner with his Quebec counterpart, Raymond Bachand, this week, and the issue was discussed.

"I had a further discussion with Minister Bachand this week, and I think we made some progress," Flaherty said Thursday. "We're not near completion, but we've made some more progress, which is good."

Catherine Poulin, a spokeswoman for Bachand, said she couldn't go into detail about the talks.

"Discussions continue," she said. "The ministers are talking, but it's not over ... We're not ready to make an announcement yet."

The deal could also help take the pressure off Harper to hand over money for a new Quebec City hockey arena an issue the city's Bonhomme Carnaval jokingly raised with Harper during a photo-op Thursday on Parliament Hill.

The federal government gave Ontario $4.3 billion and British Columbia $1.6 billion to help their transitions to a harmonized sales tax this year.

Quebec has demanded up to $2.6 billion in compensation for harmonizing its sales taxes in the 1990s. But Ottawa has argued that the taxes were never fully harmonized, with Quebec operating an independent tax system.

A deal would see Ottawa collect the taxes and send Quebec back its share, instead of the other way around.