Debates of March 19, 2004 (day 4)

Agreed.

Agreed. Thank you. Liquor Commission revolving fund, active positions.

Agreed.

Agreed. Thank you. Revenues, recoveries and transfer payments. Mr. Braden.

Thank you, Madam Chair. On the revenue side of taxation, I would just like some clarification. Do the numbers posted here reflect the increases that would come, pending approval of the taxation measures that the Minister has proposed? Are those numbers reflected in the projection here? Thank you, Madam Chair.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Madam Chair. Yes, they are reflected in these numbers.

Thank you. Mr. Braden. Ms. Lee.

Thank you, Madam Chair. I have a question on a couple of items. On the first one under transfer payments, Canada health and social transfer, I noticed that the breakdown is different this year, and I'm interested in some explanation as to why that may be. Is it just a simple breakdown? In previous years, the transfer payments for health and social services were all combined. It appears to me, on this line here, for the upcoming year it has been broken down.

The second question I have on that item is could I get an explanation of the increase under this transfer from 2002-2003? Where it was in the amount of $31 million, now we are seeing a combined transfer of $23 million plus. So may I just get an explanation on that, please? Thank you.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Madam Chair. The change is a result of how the federal government treats that. Initially, it was combined under the Canada health and social transfer. They have now broken it down into the two pots there: the Canada social transfer and the reform fund. The actual breakdown and the lesser amount equates to the treatment that it receives under the formula and the taxation situation. For more detail, I will have Ms. Melhorn give that.

Thank you. Ms. Melhorn.

Thank you, Madam Chair. Just to explain the way Canada health and social transfer works, there are two components to the transfer. A cash transfer, which is recorded here, and what's known as the tax point transfer, which is related to the value of a portion of personal income tax and corporate income tax that each province and territory receives. So the federal government has determined a total of CHST entitlement. It then subtracts the value of the tax point transfer and determines the cash transfer. So CHST changes as our personal and corporate income tax estimates change. It also depends on prior year adjustments to corporate income tax which is then reflected in a current year's CHST. It's a very complicated determination of the cash transfer amount. I guess that's the short answer to the question.

Thank you, Ms. Melhorn. Ms. Lee.

Thank you. I think you managed here. In that case then, the announcements for additional funding that we're getting from the federal government -- there have been a couple of them in the last while -- where would that appear? Would that appear under the Department of Health, or would it appear on this page somewhere? Thank you.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Madam Chair. That would appear in the reform fund portion, and it would be a portion of the Canada social transfer. So it's accounted for in this section of revenues.

Thank you, Mr. Roland. Ms. Lee.

Thank you, Madam Chair. Does that mean that on net we are getting less in this fiscal year than we did two years ago? Is that a correct interpretation? Thank you.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Madam Chair. It would be more a reflection of prior year adjustments that would show up in your 2002-2003 actuals. Our concern is that we continue to be affected negatively. As stated, the estimates of this year coming from Canada are reflected on previous year's corporate tax numbers and personal income tax numbers. So that accounts for some of the changes in the numbers you see here.

Thank you, Mr. Roland. Ms. Lee.

Thank you, Madam Chair. I have a question on the personal income tax item there. We are seeing an increase of $7 million from the 2002-2003 fiscal year to the fiscal year of 2003-2004, prior to any increase in personal income tax that is being proposed in this year's budget. So I am interested in knowing what explains that $7 million increase, considering that it was my understanding that we had in fact increased the personal tax exemption, which I understood would decrease the income from personal income tax. Or is that exemption taken out somewhere else and is this gross personal income tax revenue? Thank you, Madam Chair.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Madam Chair. Using the comparison between the 2003-04 main estimates to the 2004-05 proposed main estimates, we have included the income of $700,000 from the two highest tax brackets in additional revenue, but also a $1.3 million reduction in the two lowest tax brackets that comes into effect January 1, 2005. So by adjusting the two lowest brackets and incorporating the two highest bracket increases, that nets out and it's slightly less than what we would have gotten if we did not make the adjustment for the low-income side. Thank you.

Thank you, Mr. Roland. Ms. Lee.

Thank you, Madam Chair. I don't believe that explains what I'm trying to find out here. I guess there are two things happening here. One is that even with our proposed income tax increase for this upcoming fiscal year, we are projecting less income from personal income tax this upcoming year, according to this page. In the previous year, comparing the main estimates for 2003-2004 and the actuals, we are seeing an increase where a more logical answer to me would have been that you would have seen a decrease because of the introduction of an increase in exemption, which I understood would bring us less money. I'm trying to be rational and clear in my questioning, because I understand that whenever tax is involved it's pretty complicated. I wonder if the Minister understands my conundrum here. The numbers don't seem to jibe there. Thank you.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Madam Chair. One of the difficulties of this is that the estimates -- for example 2003-04 main estimates that were provided during the previous year of $51 million and again if you look at 2004-05 proposed main estimates of $57 million -- that is our department working with the federal department to come up with an estimate as to what we will be receiving. They collect our taxes for us and remit them back to us. So that's how we work with them.

What you find in the 2003-04 revised estimates of $57 million, are prior year adjustments. The possibility is there with the 2004-05 numbers -- although we're proposing $57 million because that's the numbers we are working with with the federal government -- that there will be some adjustments again coming forward and that will be reflected in the next cycle. It makes it complicated in that way. Normally the comparison should be from mains to mains, to reflect adjustments that are made throughout the year as there are either more earnings or fewer earnings. In fact, this shows a prior year's adjustments being incorporated in the revised estimates; that shows a $57 million figure. Thank you.

Thank you, Mr. Roland. Ms. Lee, your 10-minute time limit has expired. I'll put you back on the list. Next I have Mr. Menicoche.

Thank you, Madam Chair. I was just looking at the budget address. Our projected revenue was stated at $917 million. On page 3-22, it says total revenue is $820 million. I wonder if you could give me an explanation of the difference.

Thank you, Mr. Menicoche. Mr. Roland.

Thank you, Madam Chair. The $820 million shown here in total revenues is the total amount this department receives. There are a number of other smaller funding amounts that go directly to other departments. I should say it comes into consolidated revenue, but other departments account for it in their budgets. So this is what we account for. All the total money goes into a consolidated revenue fund, but other departments account for some of the pockets of funding they have where they have specific agreements with federal departments. Thank you.

Thank you, Mr. Roland. Mr. Menicoche.

Thank you very much for that explanation. I take it it’s other transfers or other grants that other departments receive that don’t actually show up in the Department of Finance.

Thank you, Mr. Menicoche. Mr. Roland.

Thank you, Madam Chair. The Member is correct. Every department, as we go through this exercise, will have a similar page of revenues, recoveries and transfer payments. For example, Transportation charges fees for licences and so on. They account for it in their section of the budget and if there are any specific agreements that are dealt with by department by department, that’s where it would be accounted for. That’s why we don’t have the total amount here. At the end of it, it’s all in the consolidated revenue fund and that’s where we come up with the $917 million of revenue. Thank you.

Thank you, Mr. Roland. Mr. Menicoche, please go ahead.

I just have one more question with regard to taxation revenue and property taxes. It looks like a $3 million increase. I am just wondering what to base that on. In fact, it looks more like a $6 million increase if you go from mains to mains.

Thank you, Mr. Menicoche. Mr. Roland.

Thank you, Madam Chair. The reason that jumps up is assessments are done and incorporated, so there will be some increases just due to the normal assessments that are done. The reason there is such a large jump in this one is we have also done assessments on property taxes or properties to do with the large industry out there right now. That’s why it’s such a large jump. The vast majority of that is the exercise of now doing assessments for mines and other large developments and that’s the income on the property tax side.

Thank you, Mr. Roland. Mr. Menicoche.

Thank you, Madam Chair. Will this figure be used for the next four years annually, $14 million taxation revenues and school revenues? I am just wondering if we will be using that figure for the next four years.

Thank you, Mr. Menicoche. Mr. Roland.

Thank you, Madam Chair. The number we are establishing right now is for current year and there could be slight changes as the taxation assessment role changes. So if there are new properties put on, for example, if more lot development takes place and houses are built in tax-based communities, that would show the growth in that area as well as any small changes in how the assessments are done in the value of properties, but it is forecast to go up by a small amount going forward. Thank you.

Thank you, Mr. Roland. Mr. Menicoche.

Thank you, Madam Chair. I am just trying to establish if that will be our revenue base in that line item in the next few years. It seems like that is how it’s going to be. Thank you very much.

Thank you, Mr. Menicoche. Are there any other questions on revenues, recoveries or transfer payments? Ms. Lee.

Thank you, Madam Chair. I have a short question, which has been introduced by Mr. Menicoche on the property taxes and school levies. May I get the information as to what portion of the increase between 2003-04 mains to 2004-05 mains, which amounts to almost $7 million, is coming from the diamond mines? Thank you.

Thank you, Ms. Lee. Mr. Roland.