Is it safe to say that the grants and contribution transfers – we heard the number $15 million – is just a book entry until such time as the money starts flowing in a year from now or two years from now? Is this is a book entry? Thank you, Mr. Chair.
Thank you, Mr. Dolynny. Deputy Minister Aumond.
Thank you, Mr. Chairman. The question is correct in many respects, is that under accrual accounting we have a liability since we signed the Devolution Agreement and we’ve agreed to share 25 percent of our net fiscal benefit with Aboriginal governments. We have to book that and since we are estimating $120 million, their 25 percent share works out to $15 million. We have to account for that in the year that’s earned, which will be ’14-15. We won’t actually have the cash until the ’15-16 fiscal year when we will be able to finalize and determine what the net fiscal benefit is. Then that’s when, as the Minister said, payments would be made to both the Aboriginal governments and the NWT Heritage Fund. Thank you.
So just to be clear, is it a 25 percent model or is it a $15 million dollar model that is being accrued? I ask this with a caveat. Let’s say we have $130 million of resource revenues, what is the deciding factor? Is it the percentage or is it actually a fixed dollar that is being accrued?
Thank you, Mr. Dolynny. Mr. Miltenberger.
Thank you, Mr. Chairman. It’s the percentage.
No further questions.
Thank you, Mr. Dolynny. Next on my list, Mr. Bromley.
Thanks, Mr. Chair. I’m just wondering: with respect to the cost of living tax credit, is that related to the payroll tax and, if so, how and do they work together? Thank you.
Thank you, Mr. Bromley. Deputy Minister Aumond.
Thank you, Mr. Chair. The Member is correct; it is related to the NWT payroll tax, but I didn’t quite hear the end of his question.
Thank you, deputy minister. Mr. Bromley, could you finish the question? Thank you.
Yes, thanks. Sorry. The question was: How are they related and how do they work together? Thank you.
As the Member may know, on his own paycheque he pays payroll tax of 2 percent, then when you do your taxes at the end of the year you apply the cost of living tax credit against that up to a certain threshold level, then you receive that money as a credit. You get it back on your taxes in the year that you file it. Thank you.
How would that vary? Just on that, has the department… We obviously need revenue. This government needs revenue; I don’t think anybody questions that. Payroll tax, based on information provided by the Minister, is providing significant funds, some of which we lose through this cost of living tax credit, but it still leaves significant dollars. I believe it was increased from 1 percent originally to 2 percent. Given our situation where we have so many migrant workers who live somewhere else and work here and take their dollars away so that there are very few benefits, this is the only opportunity we have that I know of. What’s the consideration for raising this from 2 percent to 4 percent or 5 percent?
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Mr. Chairman. For the purpose of this budget, we have come forward with a budget that it stays at the 2 percent. Is there a debate that could be had next budget go around to talk about the efficacy of raising it, how does that work, what kind of additional revenue would it generate? That’s a discussion that we could have, but for this budget we’ve left it at 2 percent. Thank you.
Many Members have recommended that this be raised. Why was it not raised in this budget?
Mr. Chairman, upon review and reflection, the decision was to not raise taxes except for the modest increase we put on to loose tobacco at this point. Looking after our expenditures, managing to live within our revenues and budget for the additional revenue that we look to get through the Resource Revenue Sharing Agreement. Thank you.
I hope I would have your support to get an answer here. I know what the decision was, obviously. It’s represented in the budget here. I’m asking why. What was the thinking? What was the assessment of increases in the payroll tax? What were the barriers? Why didn’t we go there?
This is not the first year that this has been raised. This has been raised repeatedly during my short career as a politician, so I’m looking to find out why we are not taking advantage of this apparent real opportunity to increase our revenue when we so very clearly need revenue, as the Minister has said. Thank you.
Thank you, Mr. Bromley. We’ll go to Deputy Minister Aumond.
Thank you, Mr. Chair. The NWT payroll tax applies to everybody who works in the Northwest Territories where you are a resident or not. While we may get some more revenue from the fly-in-/fly-out workforce, we would also be taxing the people who work in the NWT. To that effect, we would be increasing our own cost of living and it would also cost the government more because our cost of living tax credit would have to go up commensurate with that. But after you reach a certain threshold, you would just be taxing more people who are resident than who are working here.
We can’t just tax those fly-in/fly-out workers because there’s a Charter challenge associated with that mobility right. I guess the intent of the payroll tax originally was to try to dissuade people from flying in/flying out. That hasn’t necessarily worked to the way that we thought it would, so the thinking now is to try to find other ways and means to get people to work and live in the NWT. Thank you.
Thank you. I think that’s the reason why we went to a payroll tax is because we can’t just tax people that live somewhere else and fly in and out. That’s why we went to the payroll tax and that’s why we have this cost of living tax credit as you’ve just explained.
Why couldn’t we simply increase the tax and increase the cost of living tax credit to protect residents?
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Mr. Chairman. The way this payroll tax is structured, from my understanding, once you make a certain amount of money you don’t get any of that back. So we’re, in fact, going to be raising the taxes on intended consequence, the way our tax structure is. It may hit some of the fly-in/fly-out folks, but it will hit even to a greater degree a percentage of our own population, not to mention the fact, of course, that the amount of money we have to pay back will go up, as well, as we collect those taxes. Thank you.
I hope the Minister isn’t trying to be obtuse here. Obviously, the net gain would be significant and that’s what we’re aiming for is increased revenues. So what would be the actual total or what would be the income you would have to have before you would lose access to the cost of living tax credit?
Thank you, Mr. Bromley. Mr. Kalgutkar.
Thank you, Mr. Chair. The cost of living tax credit is a refundable credit based on annual net income and it maxes out at $942 a year. Thank you.
What would be the income before you would reach the maximum there?
I believe this maxes out at $942 a year. I don’t recall what that income level is, so I would have to get that for the Member. Thank you.
What I’m hearing is once you get up into the very high income bracket, you get a protection of about $1,000 and you may be paying several thousand dollars. For the rest, everybody can be protected under that very high income bracket and there would be no effect assuming we adjusted the cost of living tax credit, which would also likely benefit those people again in the high income bracket. Again, I don’t see this holding much water except to protect those in the very high income brackets that obviously don’t need the same degree of protection that we could and very obviously are serving, as we know, in other ways with our government policies. I would urge the Minister to get down to brass tacks and put together a coherent and comprehensive discussion paper on raising our payroll tax in a way that minimizes the impact on our residents, but does maximize our opportunity for revenue. Thank you.
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Mr. Chairman. We will update and refresh the information we have on taxation, including the payroll tax, and have that ready as we start the next budget cycle next month. Thank you.
Thank you. Next on my list I have Ms. Bisaro.
Thank you, Mr. Chair. Thanks to the Minister for reminding us that the budget cycle is never ending. That’s not for Members; that’s for staff, and I appreciate what they do.
When I asked questions yesterday of ITI, I was asking about the recorded $120 million in resource royalty revenues and the revenue is recorded in ITI. I asked where the corresponding expense was recorded because we don’t keep that $120 million; we get $60 million, give or take. So of the $60 million, I see a line item here for $15 million, which is the net fiscal benefit going to Aboriginal parties, but the other $45 million, I have no idea where that’s recorded. I would like the Minister to tell me, apart from the Heritage Fund money, which I understand is going to come later and be recorded in the next budget, but of the money that’s left, where is that recorded in our budget? Thank you.
Thank you, Ms. Bisaro. Mr. Kalgutkar.
Thank you, Mr. Chair. The remaining $45 million is part of our general revenues and it’s being used to finance our 2014-15 Capital Plan. Thank you.
So it’s going to show up in the infrastructure budget? Mr. Kalgutkar said the 2014-15 Capital Plan, if I heard him correctly. My understanding was that it wasn’t going to show until 2015-16. So I’m getting confused here. We have $45 million to expend. In 2015-16, I understand the Heritage Fund money will show up but the other money being used for infrastructure, where can I find that? Thank you.
Thank you, Ms. Bisaro. Deputy Minister Aumond.
Thank you, Mr. Chair. The Member is correct; we won’t actually have the cash in hand until 2015-16, as we discussed earlier, but we have to accrue the revenue in the year that we earn it, as I discussed earlier. So Mr. Kalgutkar is correct; some of that $45 million will show up probably in the 2016-17 Capital Plan, but it will just go into our Consolidated Revenue Fund. If Members will recall the discussion we had last night, our tax revenues are also going down by $30 million. So they kind of offset one another to a certain degree. Given the reduction in revenues, we are also reducing our proposed capital plan by $25 million starting in 2016-17. The funding will find its way into general revenues and will be used to fund programs and services, but primarily that incremental resource revenue will be used to fund our capital plan starting likely in 2015-16, 2016-17. Thank you.
Thanks to the deputy minister. Just to confirm, Mr. Kalgutkar said the infrastructure in 2014-15, but it’s infrastructure in 2015-16. Is that right? Thank you.
That’s correct, Mr. Chair.
Thank you. Committee, we’re on page 5-17, activity summary, fiscal policy, operations expenditure summary, $40.129 million.
Agreed.
Page 5-18, activity summary, fiscal policy, grants and contributions, and transfers, $38.6 million.
Agreed.
Page 5-19, information item, fiscal policy, active positions.
Agreed.
Page 5-21, activity summary, budget, treasury and debt management, operations expenditure summary, $27.8 million.
Agreed.
