Debates of March 30, 2004 (day 11)

Minister of Health and Social Services, Mr. Miltenberger.

Further Return To Question 119-15(3): Status Of Turning Point Facilities In Inuvik

Thank you, Mr. Speaker. Mr. Speaker, I believe I saw the same letter that the Member did just before I came into the House this afternoon, and I’ve indicated to the staff that I want to talk to the deputy minister about the situation there and get briefed so that we can ensure that there is no diminishment of services in the community, and that we’re flexible enough to accommodate the program deliveries that are in that particular situation. Thank you.

Thank you, Mr. Speaker. My written question is for the Minister of Aboriginal Affairs.

Can the Minister of Aboriginal Affairs provide the following information on the progress and tracking of the implementation process of the Sahtu Dene and Metis comprehensive land claim (1993), specifically the chapter on economic measures?

Has the Ministry of Aboriginal Affairs conducted any reviews of the economic measures chapters of other settled land claims in the Northwest Territories?

What, if any, report did the ministry have that provided a "report card" for the GNWT’s role in implementing their part of the agreement under the land claim document?

How much of the economic measures items have been implemented in the settled land claims area?

Thank you.

Thank you, Mr. Speaker. I have a written question for the Minister of Municipal and Community Affairs.

Will the Minister recommend other than "industrial standards" for land that may be used for residential areas?

Will the Minister consult with the City of Yellowknife in the determination of reclamation standards?

Thank you, Mr. Speaker.

Mr. Speaker, I have a return to written question asked by Mr. Braden on March 24, 2004, regarding reclamation of Miramar Con Mine. Mr. Braden asked if there is a specified reclamation standard in the Con Mine leases that the leaseholder must achieve. The leases require Miramar Con Mine to prepare a restoration plan dealing with, among other things, the removal of buildings and structures on the property, roads, and the land in general. The plan is to be prepared with the objective of restoring the land to an environmentally-safe and reusable condition, to the satisfaction of the deputy minister of Municipal and Community Affairs. In determining what constitutes an environmentally-safe and reusable condition, the department refers to existing standards and guidelines under territorial and federal legislation.

Miramar Con Mine has five leases with varying termination dates. The lease on the Rat Lake parcel expires in 2006. The leases on Tin Can Hill and Armstrong Island expire in 2011. The leases on the mine site and the town site both expire in 2021. The leases require that a restoration plan for the parcels be submitted to the deputy minister of Municipal and Community Affairs approximately two years prior to the expiration date of each of the leases. Municipal and Community Affairs is working through the process established by the Mackenzie Valley Land and Water Board to arrive at one abandonment and restoration plan satisfactory to all regulatory bodies.

The department has deemed that the draft abandonment and restoration plan, submitted by Miramar Con Mine as required under their federal water licence to the Mackenzie Valley Land and Water Board in March 2003, is an acceptable format for the restoration plan that is required to be submitted under the leases. Municipal and Community Affairs participates on the technical working group that is currently reviewing the draft Miramar Con Mine abandonment and restoration plan and intends to adopt the draft abandonment and restoration plan once it has been finalized and approved by the Mackenzie Valley Land and Water Board, provided it meets the test of environmentally safe and reusable as required under the leases.

Mr. Braden further asked if the leases permit the Minister to set or alter the standards of reclamation that Miramar Con Mine must meet. The answer is yes. The deputy minister has the authority to direct Miramar Con Mine to revise the restoration plan. This process is ongoing and being monitored through Municipal and Community Affairs’ participation on the technical working group, chaired by the Mackenzie Valley Land and Water Board, and which is currently reviewing Miramar Con Mine's draft abandonment and restoration plan.

Finally, Mr. Braden asked if the reclamation standards are not achieved by Miramar Con Mine what remedies are available to the Minister to have the necessary work carried out. The deputy minister can order the restoration of all or any part of the property and any expenses incurred by the deputy minister in doing so would be recovered from Miramar Con Mine as a debt due to the Commissioner of the Northwest Territories. The deputy minister's authority to order the restoration of all or any part of the property, should Miramar Con Mine fail to do so, is contained in the Commissioner's Land Act and regulations. Thank you, Mr. Speaker.

Thank you, Mr. Speaker. I move, seconded by the honourable Member for Thebacha, that Bill 6, an Act to Amend the Payroll Tax Act, 1993 and the Income Tax Act, be read for the first time. Thank you, Mr. Speaker.

The motion is in order. To the motion.

Question.

Question has been called. All those in favour? All those opposed? The motion is carried.

---Carried

Thank you, Mr. Speaker. I move seconded by the honourable Member for Thebacha, that Bill 5, Tlicho Community Government Act, be read for the second time.

Mr. Speaker, this bill gives effect to chapter 8 of the Tlicho agreement relating to Tlicho community governments. It establishes the community governments of Behchoko, Wha Ti, Gameti and Wekweti and describes their boundaries. The provisions for community governance are modeled upon those set out in the proposed statutes included as schedules to Bill 25, the Municipal Statutes Replacement Act, through variances due to results from the Tlicho agreement.

This bill provides for transitional matters, including the initial composition of the council of each community government, the first election of council members, the establishment of initial land administration by-laws which will govern upon establishment of a community government and the statutes of by-laws, contracts, rights and obligations of the Hamlet of Rae-Edzo and the Charter Community of Wha Ti. Consequential amendments are provided for and a sequential coming into force regime is established with specified provisions coming into force on assent and the remainder coming into force on the effective date of the Tlicho agreement. Thank you, Mr. Speaker.

The motion is in order. To the principle of the bill.

Question.

Question has been called. All those in favour? All those opposed? The motion is carried.

---Carried

Bill 5 has received second reading and accordingly the bill is referred to committee.

We are dealing with Bill 2. I want to ask Mr. Roland if you would like to introduce the bill.

Thank you for the opportunity to present Bill 2, An Act to Amend the Income Tax Act.

Two weeks ago, in my budget address, I announced increases to personal income tax rates for higher income individuals, an increase to the corporate income tax rate for large corporations, and an increase to the payroll tax. The bill before you is necessary to implement the first these measures. Bill 2 would increase our corporate income tax rate for large corporations from 12 to 14 percent effective January 1, 2004.

This measure will be effective in 2004. Because of this, we need to advise the federal Minister of National Revenue of our new rates before April 15th of this year so that they can be administered by the Canada Revenue Agency. In order for this changed to be implemented, this bill needs to be passed in this sitting of the Assembly.

As I stated in the budget speech on March 17th, this measure is part of a package of revenue and spending measures necessary to meet our target of a balanced budget in 2006-07. As I announced in the Assembly last week, the federal Minister of Finance has agreed to postpone rebasing the formula financing tax effort factor for the grant by one year. This change, along with the other spending and revenue measures announced last week, will allow us to achieve a balanced budget in 2004-05.

However, this federal measure, while welcome, only postpones our deficit for one year. We still need to make the spending and revenue changes outlined in the budget in order to balance our budget by 2006-07. We still face the debt wall in two years. The tax changes I announced are still necessary.

The change in our corporate income tax rate from 12 percent to 14 percent is expected to raise $8 million in 2004-05, and similar amounts in future years. As I stated last week, when the formula financing tax effort factor is rebased, we will actually lose revenue on a net basis. An extra $12 million in revenue at the 12 percent rate would lose $12.8 million on the grant. Rebasing has only been postponed one year, until 2005-06. Unless we can develop alternatives to the current approach to tax, we must work on the assumption that rebasing will go ahead.

Some Members raised concerns about the loss of our competitive position on corporate income tax rates, and have asked what this might mean for corporate tax filings in the NWT.

However, even at a rate of 12 percent, we would be unlikely to receive any tax windfalls similar to those received in the past, since Alberta is scheduled to reduce its corporate tax rate to 11.5 percent on April 1st. We could not afford to compete with Alberta and lower our rate to 11 percent. At that tax rate, increases in our tax base would cost us even more in net revenue losses.

This measure is necessary for our long-term fiscal stability, and I strongly believe that our government’s balanced approach to tackling our fiscal challenges, that is spending reallocations and revenue initiatives was well received by the federal government, who saw we were not relying only on increased federal support, but were prepared to take measures to deal with these challenges ourselves.

Mr. Chairman, I would be pleased to answer any questions the committee has on this measure. Thank you.

Thank you, Mr. Roland. At this time, I would like to ask Mr. Hawkins if he would like to read the report of the review done by the Standing Committee and Oversight Committee on Bill 2. Mr. Hawkins.

Thank you, Madam Chair. The Standing Committee on Accountability and Oversight conducted public reviews of Bill 2, An Act to Amend the Income Tax Act, on March 25 and 26, 2004. The committee would like to thank all the witnesses for their submissions which were made on very short notice. The committee would also like to thank the Minister and his staff for presenting the bill.

The committee was very concerned about the short amount of time allowed for the public to review and respond to this bill. Members appreciate that there were special circumstances in this case due to the recent territorial election which did not allow time for the usual opportunity to review and discuss draft business plans in advance for considering the budget. Further, the government is required to notify the federal Minister of National Revenue of changes to tax rates before April 15, 2004.

The committee wishes to put the government on notice that it will now allow short timeframes for public review to become the ordinary course of business for the 15th Assembly. The Minister acknowledged the concern and advised that he will endeavour to bring initiatives before the committee in a more timely manner in the future. Members expect the rest of Cabinet to adhere to the same standard.

Bill 2 proposes to raise the large corporate tax rate from 12 percent to 15 percent beginning with the 2004 tax year. Committee heard opposition to Bill 2 from Mr. David Connelly of the Yellowknife Chamber of Commerce, Mr. Mike Vaydik of the NWT and Nunavut Chamber of Mines, and Mr. Dave Tucker of the NWT Construction Association. All three presenters voiced concerns about the increase to the already high cost of doing business in the North and the impact it may have on the northern economy and businesses. The witnesses rightly pointed out that the business contributes a great deal to the North through jobs, training and spending. They also warn that the increase to the tax rate may encourage some businesses to rearrange their affairs in order to file some of the in income in other jurisdictions with lower tax rates.

In contrast, the committee heard support for Bill 2 from a representative of Alternatives North from Ms. Suzette Montrieul. Alternatives North does not believe the proposed tax increase is unreasonable and considers maintaining the GNWT’s social programs to be more important than maintaining low tax rates. Ms. Montrieul pointed to a recent survey by the Centre for Research and Information on Canada that suggested most Canadians, including northerners, consider money for social programs like education and health care a higher priority than cutting taxes or reducing debt. Ms. Montrieul also pointed out that even with the increase to 14 percent, the NWT will still have the fifth-lowest large corporate tax rate in Canada. Further, unlike most other Canadian jurisdictions, the NWT does not have a tax on capital. As Ms. Montrieul stated, the NWT cannot hope to compete with its neighbour, Alberta, which is able to maintain lower tax rates as a result of the substantial oil and gas royalties it enjoys.

The committee finds it regrettable that the current fiscal situation has resulted in the government bringing this tax increase forward, however Members agree with Ms. Montrieul that maintaining social programs is the priority. The reality is that if corporate taxes remain at 12 percent, the GNWT will suffer a net loss as a result of the formula Canada uses to calculate its grant to the GNWT if the federal government does not change its approach in the next year. Members, therefore, believe that an increase is unavoidable.

Members wholeheartedly agree with Mr. Connelly, Mr. Vaydik and Mr. Tucker that the underlying issue is our formula financing agreement with Ottawa which is, as Mr. Vaydik stated, “ridiculous.” All three witnesses offered their assistance in working with the GNWT to lobby Ottawa for a reasonable formula. The committee strongly encourages the government to take them up on this generous offer.

This concludes the committee’s opening comments on Bill 2. Individual Members may have additional questions or comments as we proceed. Following the committee’s review, a motion was carried to report Bill 2, An Act to Amend the Income Tax Act, to the Assembly as ready for Committee of the Whole. Thank you, Madam Chair.

Thank you, Mr. Hawkins. I would like to ask the Minister if he would like to bring in witnesses for consideration of this bill.

Thank you, Madam Chair. Yes, I would.

Thank you, Mr. Roland. Does the committee agree?

Agreed.

Thank you. I will ask the Sergeant-at-Arms to escort the witnesses to the witness table.

Mr. Minister, could you introduce your witnesses for the record?

Thank you, Madam Chair. To my immediate left is justice representative Rebecca Veinott; to my immediate right is Deputy Minister Margaret Melhorn; and further to my right is Mr. Gerry Gagnon, director of tax policy.

Are there any general comments on Bill 2? Mr. Allen.

Thank you, Madam Chair. I want to exercise my right to speak to the bill. I think it’s not only important for the Minister to be concerned, but myself as well that there are potential negative impacts that may occur in our idea of industrialization in the Mackenzie Delta/Beaufort. I am not going to speak against the bill, but highlight some of the important points I have been making the last few weeks in trying to look at different tax initiatives that would help facilitate the investment we need in the Northwest Territories.

Again if I could bundle it all up together, I'm still concerned that with the way the federal government is treating us, that it still becomes one of several sovereignty issues that should be raised by this Assembly throughout the course of our tenure.

Madam Chair, also I want to make reference to the open letter that was submitted to the Honourable Joe Handley and the Honourable Floyd Roland, Minister of Finance, by the Canadian Federation of Independent Business which really establishes some of my rationale in supporting and trying to see if can attract great investment to the North through a number of different mechanisms. One of the things that interested me is they suggest perhaps eliminating the whole issue of the corporate tax or lowering it even further would go a long way in attracting greater investment to the North who, in turn, would pay more territorial income and property taxes. I ask the basic question: Has the Government of the Northwest Territories considered eliminating corporate tax as an alternative to the perverse calculation of the tax factor?

Another analysis that was provided says here, "Lowering corporate income tax is one of the best ways to allow firms to retain more of their earnings, that they can feed back into the NWT coming through new investment, jobs, lower prices, creating a more sustainable and diversified economy." That's the point I'm trying to make, Madam Chair, in asking the Minister and his Cabinet colleagues if they would take a look at some of these different tax initiatives and use some imagination to that effect and see if we could use that process to encourage economic and business investment in the Northwest Territories, rather than having to always look at tax initiatives to raise revenue.

It concerns me simply because at some point we're going to hit a threshold where you won't be able to afford to sustain social program costs, unless you continue to increase taxes. That's my concern in the long term, is if you don't address and readdress our expenditure problems, then I don't think we have the ability if I was to follow your chronology of events and your many different statements to that effect, Madam Chair. Not that I'm opposing your tax initiative, but I'm always trying to encourage looking at other ways to try to raise new levels of investment in the North and the way we do it. I think that's the key here. How do we continue to ask industry to come north if we continue to go against what we call the economic freedom and prosperity and allowing different industries to come north and invest in exploration and a number of other things?

Another thing that rightly concerns myself and the people who advise me accordingly is the fact that we should try to work on skill development, and I raise this in the context of an article that was in the Edmonton Journal. I think we need to combine some kind of a corporate tax culture with education and trying to produce our own skilled labour force. I think if we don't do that, then somewhere along the line, it will impact upon your ability to increase the payroll tax, and that's certainly one of the things we can somehow at this moment or in the very near future give further thought to.

One other thing I would like to do is speak briefly to having this mandate built into the joint parkland committees so we have some idea of what we're going to do in the long term. Certainly my idea is to work with yourselves in trying to develop a system where rewarding spending money in the territory should be afforded to all levels of industry, whether it be diamonds, oil and gas, or the…(inaudible)…sector.

One last comment I would like to make, Madam Chair, in the context of this bill, I still think we need to look at a tax credit versus one where we offer grants and other tax incentives to try to promote our northern economy. With that, Madam Chair, I want to thank you for allowing me to speak to the bill. Thank you.

Thank you, Mr. Allen. Those were general comments. I didn't hear any questions there, so I will proceed to Mr. Braden, then after Mr. Braden I have Mr. Ramsay next on the list. Mr. Braden.

Thank you, Madam Chair. I have a couple of comments and a question. I would start by saying that I'm speaking in favour of the bill. I think it's predictable, Madam Chair, that in the context of a tax bill I can't say that I'm speaking with enthusiasm, but as the Minister and his officials have explained to committee and in public forums in the last while, the circumstances around increasing the corporate tax rate is fairly straightforward. At least in part due to some of the factors outside of our control; what happens in other parts of Canada and as a consequence of the rather weird and convoluted formula financing deal with have with Ottawa, we are essentially compelled to do something in order to stem what really amounts to a net loss because of the 12 percent rate.

It has been brought to our attention that it was a couple or three years ago that we actually did the reverse here in this Assembly. I think we had a tax rate that was at 14 percent and we dropped it to 12, because circumstances at the time indicated that it was a good thing to do.

Could I ask the Members of Cabinet to take their visiting and revelry outside of the Chamber so that we can hear Mr. Braden's comments.

---Applause

Thank you. Mr. Braden, sorry to interrupt you, please continue.

Thank you, Madam Chair. So now we have other information, other circumstances, and even though it's only the space of a couple of years we are, I feel, compelled to reverse that situation and go with the 14 percent rate.

I've said it several times before and it's a message, I think, that's worth repeating. Anything that our government does to increase the cost of living or the cost of doing business in the NWT has to be considered very, very carefully. There are so many other cost drivers here that we have no control over that put the crimp on people, on their families and on their businesses, that anything like this has to be looked at with extreme care. I think again in this case we have done so. I know in the case of a business that's going to be charged more, that may not look like a very good reason. But as one of the MLAs sitting here looking at how we are managing our overall situation, this seems a realistic thing to do.

I would like to see if I could, for the public record, bring out a bit more information that may help me comprehend this a bit better and perhaps some people in the public too. The rate that we're setting here affects the large corporate taxpayer. Could the Minister or his officials define that, especially in the context of what then is a small taxpayer or the other tax levels here? What I want to do is try to bring a little bit of light to the situation where if people are running a small business out there, what is small, are they going to be captured in this. Just where is the cut-off for enterprises in the NWT who will be affected by this? Thank you, Madam Chair.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Madam Chair. The Member is right; this increase is for the large corporate taxpayer. The small corporate tax rate is unchanged, at four percent. That includes companies that have a taxable income of $250,000 for the year 2004-05. That rate is actually moving up to $300,000 in 2005-06. Thank you.

Thank you, Mr. Roland. Mr. Braden.

Thank you. So at four percent, and this is taxable income, this is not sales, this is after everything else if you have a so-called profit, and will be moving up to $300,000 at a four percent rate. How competitive is that four percent rate? I know this isn't to the bill, Madam Chair, but I would just like a bit of information. How does the NWT rack up at four percent for a small business tax rate? Thank you.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Madam Chair. We are a little bit better than middle of the pack, when you take a comparison to other jurisdictions. There is one at 4.5, one at three percent, and we're at four. I think there are only actually three lower than us in the small corporate tax area. I'm corrected: two. So we're third lowest in the small corporate tax area. Thank you.

Thank you, Mr. Roland. Mr. Braden.

How many corporations do we anticipate will be captured in this as large corporate taxpayers? Thank you, Madam Chair.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Madam Chair. I'll have Ms. Melhorn give you that detail.