Thank you, Mr. Speaker. What I would like to suggest to the honourable Member is that I organize a meeting and ensure that both Mr. Arvaluk and Mr. Arngna'naaq attend so they can state first-hand, to both operators of the airlines in the region, what the concerns of the constituents are.

Oral question period has elapsed. Item 6, written questions. We will take a short break.

---SHORT RECESS

I would like to call the Assembly back to order. Item 7, returns to written questions, Mr. Clerk.

Return to Written Question 16-12(3) asked by Mrs. Marie-Jewell to the Government Leader concerning business travel done by the previous Minister of Culture and Communications.

The following is a list of the duty travel of the previous Minister of Culture and Communications, Minister of Education and the current Minister of Renewable Resources and Municipal and Community Affairs from December 1991 to December 1992: December 2, 3, 4, Iqaluit, NT, Baffin Regional Council; January 20 and 21, Iqaluit, NWT, visiting schools and TVNC opening; February, no travel; March 14 and 15, Whitehorse, Yukon, meet with Minister of Education; April 16 to 17, Edmonton, Alberta, meet with Minister of Education; May 8 to 15, Japan, representative of the GNWT; May 20 to 24, Whitehorse, Yukon, circumpolar language conference; May 25 to 30, Iqaluit, NWT, Baffin board of education; June, no travel; July 6 and 7, Edmonton, Alberta, meet with Minister of Education; July 9 to 12, Edmonton, Alberta, meet with Minister of Transportation; July 13, Trout Lake, NWT, meeting regarding community Assembly building; July 20 to 27, Inuvik, NWT, Inuit circumpolar conference; August 10, Winnipeg, Manitoba, Ministers meeting for Municipal and Community Affairs and Renewable Resources; August 17, Pangnirtung, NWT, Atlantic fisheries Ministers meeting; August 23, Fort Rae, NWT, opening of friendship centre; September, no travel; October 19 and 20, Toronto, Ontario, Renewable Resources; October 21, Iqaluit, NWT, meet with regional superintendent of Renewable Resources; October 29, Iqaluit, NWT, signing of Nunavut Accord; November 11 to 13, Iqaluit and Rankin, NWT, announcement of land claim vote and meet with Keewatin regional council; November 21, Norman Wells, NWT, meet with mayor; November 25 to 28, Ottawa, Ontario and Fredericton, NB, Canadian Council of Ministers of Environment; December, no travel.

Item 8, replies to opening address. Item 9, petitions. Mr. Pudluk.

(Translation) Thank you, Mr. Speaker. I would like to table Petition 8-12(3), a document from Resolute Bay with regard to the housing rental increase for the government employees in Grise Fiord and Resolute Bay. The other document I would like to table is Petition 9-12(3), from Arctic Bay signed by 15 people with regard to rental increases for housing. Thank you.

Item 10, reports of standing and special committees. Mr. Antoine.

Thank you, Mr. Speaker. The Standing Committee on Finance is pleased to submit its report on the review of Tabled Document 21-12(3), Payroll Tax Act. Mr. Speaker, the Standing Committee on Finance has completed this critical review of Tabled Document 21-12(3), Payroll Tax Act. The committee cannot support this draft bill in its present form. The Standing Committee on Finance met in Yellowknife

on five occasions to consider the proposed payroll tax. The committee consulted with the Minister of Finance and reviewed written submissions from the public, who were invited to provide input. The committee also employed the services of a taxation specialist, Mr. William P. Daye, C.A., to undertake a detailed review of the draft legislation with the Department of Finance. Mr. Daye's report, which we generally endorse, is attached as appendix one.

The purpose of reviewing the proposed payroll tax was to determine and assess the policy objective of the department, to ascertain whether the proposed tax would meet policy objectives and to determine whether in the context of the total revenue and expenditures the proposal presented was realistic and allowed the government to fulfil their mandate. The objective of the payroll tax was to have two interrelated objectives. One is to raise revenues to help reduce the deficit and provide funding for government programs. The second one is to obtain tax revenues from individuals who work in the Northwest Territories and who do not pay income tax in the territories, taxing temporary and non-resident workers. The Minister indicated that after years of study the payroll tax system was determined to be the only feasible method to meet objectives of taxing temporary and non-resident workers. All other approaches, which the department investigated, would run a foul of the mobility provisions in the Canadian Charter of Rights and Freedoms, in that we would be deemed to discriminate among persons primarily on the basis of place of residence. The committee and the majority of the public submissions received support the underlying principle. However, the committee has a number of concerns regarding the means of implementing this tax. These concerns have been conveyed to the Minister.

The tax would impact more than just the targeted population. For example, many northerners would be required to pay the tax and would not be eligible to receive the tax credit. Taxpayers in similar situations would have dissimilar tax positions. For example, a bank inspector travelling to Yellowknife would have a tax imposed upon him/her that his/her colleague travelling to Whitehorse would not. Certain individual residents in the Northwest Territories are not subject to income tax but will be subject to the payroll tax. An example would be priests and nuns who have taken a vow of perpetual poverty. A tax credit would provide some relief but this relief would not be as visible as an initial tax levy. There are many technical issues that may prove to be problematic for the employer, employee and government, such as the mismatching of the payroll tax and the cost of living tax credit. For example, a self-employed individual would be entitled to the tax credit even though he would not have paid the payroll tax. The calculation of employee remuneration subject to the payroll tax may be difficult, particularly in the case of fly-in fly-out employees.

There has been, and will continue to be, a very negative reaction amongst northerners because the method proposed for implementing this tax is flawed.

Another major source of revenue, by the time the proposed tax changes are fully implemented in 1995-96, it is projected that annual net revenues of approximately $1.6 million will be generated. Approximately 14 per cent of the net revenue will be absorbed by the administration costs. These administration costs do not include the costs which will be borne by employers to collect, remit and, comply with the proposed Payroll Tax Act. The employers' costs are hidden costs but it has the potential to be quite significant.

The taxing statute with a very narrow focus such as the payroll tax must be relatively simple and straightforward to administer. This is particularly true for one which is expected to generate such a small amount of revenue. The administrative complexity will likely result in an erosion of taxpayer' respect and compliance. It is anticipated that the administration, enforcement and collection difficulties will increase at a rate disproportionate to the revenues being generated. As a means of raising revenue the payroll tax is too complex in relation to its revenue potential.

The Minister of Finance warned the committee that withdrawal of the proposal currently before the committee would necessitate compensating increases in other taxes such as corporate or personal income tax. However, it is this committee's view that there are alternatives. For example, the loss of projected revenue resulting from withdrawal of this proposal could be offset by expenditure reductions of $1.6 million, an amount which represents a small fraction of the total territorial budget.

The committee wishes to point out that the Minister of Finance is relying on the projected revenue of $8 million from the payroll tax to balance the 1993-94 budget. It is misleading to use this projected revenue to balance the 1993-94 budget without showing the off-setting tax credit expenditures which would occur in the following fiscal year. While the introduction of the payroll tax will have a significant impact on the cash flow in the first fiscal year, the real net effects are far less significant. If the government is unable to introduce the payroll tax on July 1, 1993, as originally intended, the budget may suffer an apparent $8 million reduction in revenue. However, the real net effect will be a reduction of only approximately $1.2 million.

Alternative methods identified, while the committee has the duty to critically review money bills we also have a duty to offer constructive suggestions and recommendations. In this regard, the committee provided the Minister of Finance with the many

concerns raised and some suggestions of resolution. Specifically, it was suggested that the Minister consider replacing the employee based payroll tax with an employer based tax which could be levied in respect to all permanent establishments located in the Northwest Territories. All remuneration paid from or to a permanent establishment, including construction sites, of the employer in the Northwest Territories could be taxed.

In addition, we suggest a notched provision which would eliminate many small employers from tax-based and thus minimize some of the complexities involved in the administration of the tax. We also suggested financial incentives be offered to those companies who hire locally. However, the Minister does not appear to see the merit in our suggestions nor seems as concerned as the committee about the potential difficulties identified by our research.

In conclusion, the Standing Committee on Finance has conducted a critical review of the proposed Payroll Tax Act. The committee supports the principle and objective of this policy initiative, however, our review has raised a number of concerns many of which are related to the means of implementing this tax. We have developed a number of suggestions for resolving our concerns, however, the Minister of Finance does not appear to see the merit in our suggestions nor be too concerned about the potential difficulties we have identified in our review.

As a result, the Standing Committee on Finance cannot recommend passage of this Payroll Tax Act in its present form. We would like to take this opportunity to thank the individuals and organizations who took the time to submit their comments to us. The committee heard what you had to say and felt that, under the circumstances, a public hearing was not necessary at this time. We feel that public consultation on such an important issue as this is critical and recommend it to the government in the future.

Mr. Speaker, this concludes the Standing Committee on Finance report on Tabled Document 21-12(3), Payroll Tax Act.

Motion To Move Committee Report 10-12(3) Into Committee Of The Whole

I move, seconded by the honourable Member for Yellowknife Frame Lake, that Committee Report 10-12(3) be received and moved to committee of the whole for consideration. Mahsi Cho.

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

Committee Report 10-12(3) is moved into committee of the whole for tomorrow. Item 10, reports of standing and special committees. Item 11, reports of committees on the review of bills. Mr. Arngna'naaq.

Report On Bill 12

Thank you, Mr. Speaker. I wish to report to the Legislative Assembly that the Standing Committee on Legislation has reviewed Bill 12, an Act to Amend the Mental Health Act and wishes to report that Bill 12 is now ready for committee of the whole. Thank you.

Thank you, Mr. Arngna'naaq. Pursuant to rule 66(5) Bill 12 is ordered into committee of the whole two days from now. Item 11, reports of committees on the review of bills. Item 12, tabling of documents. Mr. Ningark.

Thank you, Mr. Speaker. Mr. Speaker, I wish to table Tabled Document 41-12(3), 30 letters from Gjoa Haven concerning and opposing the GNWT housing strategy. Thank you.

Item 12, tabling of documents. Mr. Kakfwi.

Item 12, tabling of documents. Mr. Pudluk.

Thank you, Mr. Speaker. Mr. Speaker, I wish to table Tabled Document 44-12(3), five letters from the government staff at the Allurut School in Nanisivik concerning the new government housing policy, Tabled Document 45-12(3), a letter from an Arctic Bay adult educator concerning the new government housing policy, and Tabled Document 46-12(3), a letter sent to the superintendent of MACA in Iqaluit from Resolute Bay regarding the operations and maintenance of the pipeline system. Thank you.

Item 12, tabling of documents. Mr. Antoine.

Thank you, Mr. Speaker. I wish to table Tabled Document 47-12(3), correspondence addressed to myself and dated February 4, 1993, from Chief Steve Kotchea of the Fort Liard Dene band regarding the importance of ensuring appropriate referrals for families struggling with alcohol and drug abuse. Mahsi.

Item 12, tabling of documents. Mr. Clerk, replies to petitions.

Mr. Speaker, pursuant to rule 57(10) I wish to table Tabled Document 48-12(3), Response to Petition 1-12(3) presented by Mr. Ningark and responded to by the Minister of Education, Culture and Employment Programs.