Thank you, Minister Miltenberger. Mr. Koe, Mr. Kalgutkar, Mr. Aumond, welcome to the Chamber again. Committee, we would like to do general comments.
Detail.
I’m getting detail. Seeing no general comments, we’ll go into detail. Is that right, committee?
Agreed.
Thank you, committee. Committee, we’ll defer 5-7. We’ll come back to it after we’re finished the activity summaries. Committee, I have 5-8, information item, infrastructure investment summary. Any questions?
Agreed.
Thank you, committee.
Thank you, committee. Page 5-9, information item, revenue summary. Any questions? Mr. Bromley and then Ms. Bisaro.
Thank you, Mr. Chair. I’d just like to start off here with the first line, the grant from Canada, $1.28 billion. What is the agreement going forward? I keep hearing how we’re sweating and the Minister says our population is declining; we’re losing our federal grant. It’s up considerably, I think about $90 million this year, despite our declining population.
So what’s the situation and how long is the agreement in place for and what trends can we expect to the extent that we know what’s happened? Thank you.
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Mr. Chairman. The biggest increase, of course, is the $67 million that we are getting added to our A base from devolution negotiations. I’ll ask the deputy if he wants to add more detail about the further particulars. Thank you.
Thank you, Minister Miltenberger. Deputy Minister.
Thank you, Mr. Chair. The Territorial Formula Financing Grant increased by approximately $88 million in ’14-15, and of that, $67 million was due to the adjustment to our base with devolution and $39 million was due to the escalation of the grant of about 2.9 percent.
The issue, really, is the population growth. Our growth, relative to the growth in Canada, is a big factor in escalating our grant and right now our population is stagnant and we’re not growing at a rate equal to the rate of the rest of the country. As a result, it has an adverse impact on our rate of growth. So, we are predicting, based upon what’s happening with our population and some other factors, including provincial local spending, is that our grant, our base will grow roughly between 2 and 2.5 percent a year. Thank you.
Thank you, Ms. Bisaro. Oh, sorry, Mr. Bromley, it’s been a long day. Sorry.
Thank you, Mr. Chair. So we’re going to grow 2 to 3 percent in our base and our population is stable to declining. That seems like not too shabby a deal. In fact, it seems more positive to me and everybody should be sitting in such a pretty situation.
I just noticed the Canada Health Transfer, again a huge increase here, something like $10 million from the main estimates last year. What’s going on with that one? Thank you.
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Mr. Chairman. The estimates are higher. There was a formula change from an equal per capita, total allocation cash and tax transfer to an equal per capita cash allocation, and to put that into simple English, I’ll turn to the deputy. Thank you.
Thank you. Deputy Minister Aumond.
Thank you, Mr. Chair. So, as Minister Miltenberger has stated, they recalculated how they are going to calculate the CHT transfers for provinces and territories and it went per capita transfer, tax transfer, which for ourselves and Alberta was beneficial. So we have what appears to be a one-time escalation of about $10 million on the CHT and we don’t expect that that’s going to continue, starting next year. We know that CHT will grow after this year by roughly about 6 percent a year until, I believe, about ’16-17 or ’17-18. I can’t remember which year that is, and then it will increase. As per the announcement last year by the federal government, it will increase by a nominal GDP, or a floor of 3 percent.
Thank you, Mr. Aumond. Mr. Bromley.
That’s obviously positive in the short term and negative in the long term since we know that our health costs are growing at, well, this year 8 percent, and that’s not atypical, but it certainly does serve to cushion the increase we see in our health budget this year.
Just looking at personal income tax, again I see a very significant increase there, and again, the Minister has been on about some serious differences there. Perhaps he’s projecting that for the next fiscal year.
Again, can I get an explanation there? I see we’ve dropped in our corporate income tax here a bit as that is what we do from time to time, and especially given our policies where these mines, for example, can write off all of their costs right away so they never make a profit that we see, but maybe I can get a bit of an explanation there too.
If we look at for the year ’13-14, which, really, the taxation revenue that we’re receiving this year is based on the 2012 tax year, we’re looking at a personal income tax drop of about $18 million over what we originally estimated last year, and in ’14-15, based upon that, we’re looking at a personal income tax drop of about a further $38 million. Then it should start to level off after that and we will start to see some stabilization, hopefully, but that is what we’re looking at this year, remainder of this year and for going into ’14-15.
I wasn’t jumping back and forth between rows enough to completely follow that, but I guess I did understand that the estimate for this year of $105 million, roughly, was about $38 million lower than expected, and I’m wondering how we could possibly make such a high projection there. Is that us who do that? Is that the GNWT that makes that projection?
For PIT, personal income tax, we get an estimate from the federal government that’s based on what they’ve seen in previous years based upon what they see happening with personal taxation across the country. Before that we were looking at an estimate much higher and then in December we got some federal estimates back that national taxable incomes were lowered in December based on the 2012 actual returns that were received to date. In addition to that – and we went back to 2005 to check on this, because it was the first time since we’ve been keeping detailed records that consistent – with that is the number of tax filers in the Northwest Territories has declined from 2011, causing the NWT share of total estimate to decrease, so our 2012 actual returns lower the 2012 estimate. That’s the reason for the decline in the estimate, but the federal government collects personal and corporate income taxes on our behalf, much like they do for almost every other jurisdiction, with the exception of Quebec, and for corporate income tax for Alberta they collect the tax and they provide the estimates on that taxation revenue back to the jurisdictions
Thanks for that additional information. I recall in the 16th Assembly we had a similar sort of thing. Now, we may not have had the number of taxpayers go down, and it sounds like that’s part of what’s happening here. But we certainly did have that same sort of proportionate decrease. I believe it was in, actually, corporate income tax if I remember rightly. Are there further adjustments that will be made to these numbers? Is this just the update and we can expect more updates?
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Mr. Chairman. As we have indicated previously, the intent is to move away from relying on the federal projections and we’re going to start using our own five-year rolling average which we think will give us a more consistent and realistic number, but I’ll ask the deputy if he wants to add anything further.
Thank you, Minister. Deputy Minister Aumond.
Thank you. As the Minister said, for corporate income tax we’re going to use a five-year rolling average. That’s probably a little bit more realistic and a little bit more conservative and gives us some downside mitigation. For personal income tax, because there has been such a big adjustment, we’re going to wait another year and see what happens with the number of filers, and we’ll get a better understanding in May, when we actually get the more detailed data from Canada on what happened with the 2012 tax year, to try and figure out what’s actually happening.
Certainly on the corporate side, we’ve always been subject to a lot of volatility from year to year. We’re going to take a more, I think, prudent, conservative approach.
On the personal income taxes, this is the first time we’ve seen this and it could just as easily come back. We don’t know, so we want to take a little bit more wait and see, and see if we can dig into the data and see if we can see what’s happening there. But on the corporate side, we’re changing the approach where we’re just going to go with the five-year average, as the Minister said, instead of relying completely on the federal estimate.
Thank you, deputy minister. Next on my list I have Ms. Bisaro, followed by Mr. Dolynny.
Thank you, Mr. Chair. I need to ask some questions about the revenues and taxation. I’m still struggling to understand these numbers. The Minister, in his budget address, indicated that we were down about $30 million in terms of taxation, and I think he referenced both personal and corporate income tax when he said that. I just heard the deputy minister say that our personal income tax has gone down, and yet I look at these numbers in the book and I’ve got almost $105 million in ’14-15 for personal income tax and $87 million in ’13-14 for personal income tax, so I don’t get where it has gone down. I’m really struggling to understand the explanations that we are being given.
I guess I would like to ask initially, I know that we received numbers from the federal government in December or January, whenever that was, and it was an indication of what our personal income tax was likely to be in terms of revenues for ’14-15, so I guess I need to ask the Minister what that number was. What did the federal government tell us in December or January, whenever we got that number from them, what did they tell us we would expect in revenues for personal income tax in ’14-15?
Thank you, Ms. Bisaro. Deputy Minister Aumond.
Thank you, Mr. Chair. Prior to getting the new estimates in late December on personal tax, so in ’13-14 we would have been estimating to get about $107 million in personal income tax, and in ’13-14 we are now looking at $87 million in personal income tax. If the Member looks at the main estimates revenue page back last year, we would have been estimating $98 million at this time last year, and then as the year went on the federal government would have provided additional estimates throughout the year, and as late as the end of November we were looking at $107 million in personal income tax, according to the information provided by the federal government. Then in January, when we got revised numbers based on actual returns to date, the federal government revised its estimate to $87 million, which is what you see here. But we were looking, originally, in ’13-14, at $107 million. At the same time, we were looking at $110 million in ’14-15, based on those previous estimates and that is now down to $105 million for ’14-15. Thank you.
I’m trying to do some quick math in my head and I’m struggling again, I guess. So, if we are…and my quick math tells me that we’re losing about $20 million in personal income tax that we expect to get for ’13-14. If that’s the case, I don’t understand why Finance is estimating $104 million or $105 million for ’14-15. If we are so far down in ’13-14 and we’ve got these numbers from the federal government on, basically, kind of actuals, why are we not estimating revenues that are closer to this year’s actuals? Why are we going up some $15 million? Thank you.
The Member asks a good question. As I stated earlier when Member Bromley had asked the question what method are we relying on for personal income tax, again, this is information that we are provided by the federal government, discounted by the actual terms we received in 2012. Again, we won’t know until we see the datapacs in May about what kind of trends we’re seeing here. But based on the information by the tax collector, which is Canada Revenue Agency, their estimates that are in ’14-15, based on the 2013 tax year, our estimate should be $105 million, which would be an increase over what we are projecting for ’13-14, this year, at $87 million.
Based on what they’re telling us and what we’re seeing, we’ll take that as it is and then we will always look at revising as we get more information and we understand the data. But as I said, until May when we actually get those datapacs from the 2012 year, we won’t have a good understanding about what’s actually happening with the returns. Thank you.
I think it’s getting slightly less murky. So, we’re still working with an estimate of revenues for ’14-15, so it could go down at any time, I guess, or in May we’ll get a better idea and it could go down. If I understand rightly, the $30 million that the Minister has referenced that we’ve lost is basically revenue in this current budget year. It sounds to me like the revenue we expected in the ’13-14 year didn’t come through. Am I right on that? Thank you.
There’s a large PIT in estimate revenue in ’13-14, but I would just like to restate again that we are looking at a drop of about $38 million in CIT revenue in ’14-15 in addition to the $5 million in less revenue than we were projecting prior to January in personal income tax. Thank you.
Yes, I got that, so thank you for that information.
The next question that I have with this loss of revenue, I have yet to understand, in all the discussions that we’ve had so far, what we’re going to do to our budget, how we’re going to mitigate this loss of revenue. We’ve got a budget before us but we are expecting less revenue, so we’re already in the hole. What are we doing in this budget to mitigate for that loss of revenue? Thank you.
Thank you, Ms. Bisaro. Mr. Miltenberger.
Thank you, Mr. Chairman. In this budget before us, we have about $6.8 million in passive restraint. We capped our forced growth at I think it is 2 percent and we are trying to limit the growth of government. Going into ‘15-16 we are going to be looking for a total of $30 million in re-profiling to pay for the budget that is currently before us, with the addition of the Heritage Fund bump-up from 5 to 25 percent. Thank you.
Thanks to the Minister for the info. I understand the $6.8 million in passive restraint. That is a number that I can deal with. Capping our forced growth at 2 percent, how much money does that net us? I’m trying to get us up to the $30 million or whatever that we need to find to balance the budget. Thank you.
Thank you, Ms. Bisaro. Mr. Aumond.
Thank you, Mr. Chairman. For ‘14-15, the Minister is correct; we have the passive restraint target. Really the efforts going towards trying to mitigate the impact of this revenue on an ongoing basis will be through the ‘15-16 budget planning cycle. As the Minister said, we will be looking to identify $30 million in savings through a combination of limiting forced growth where we reasonably can and trying to re-profile some dollars within the existing budgets of the government.
In terms of trying to mitigate that revenue for ‘14-15, as far as we have gotten to date is the passive restraint. Thank you.
Thanks to the deputy minister. So, we are looking to save about $7 million in passive restraint and we are going to “go in the hole” for the other, say, $25 million, is that right? Thank you.
Thank you, Ms. Bisaro. Minister Miltenberger.
Thank you, Mr. Chairman. The passive restraint is the main reduction exercise, cost controlling exercise with the ‘15-16 looking to re-profile and save $30 million, which is an election year budget, I might add. Thank you.
Thank you, Mr. Miltenberger. Next on my list I have Mr. Dolynny.
Thank you, Mr. Chairman. My questions will be around the same theme as my colleagues, around the personal income tax and the corporate income tax.
I guess to set the stage here is to look at what the past has shown us, and if you look at the past tabled documents when it looks at the main estimates, the curiosity I have here is I find that there has been some revised-revised estimates, that I am looking at here with respect to the ‘13-14 revised estimates. But that’s fine. We kind of got the explanation here from the deputy minister.
I just wanted to be clear; we have heard from the Minister here that we have had a shortfall of calculations or miscalculation of about $30 million. What we heard today was more like $38 million in terms of a shortfall in both personal and corporate income tax. So let’s set the stage here so we can get at least that number accurate. Can I get that number accurate, please?
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Mr. Chairman. First, just to point out that if it is not already clear, these are very fluid numbers, the projections that are changing with CIT. Corporations can reach back years to file, decide when they are going to file, where they are going to file. Personal income tax, people file at different times and it takes months. So these numbers are fluid but, yes, $38 million is the number.
