This is page numbers 853 - 869 of the Hansard for the 12th Assembly, 5th Session. The original version can be accessed on the Legislative Assembly's website or by contacting the Legislative Assembly Library. The word of the day was chairman.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 862

The Chair Brian Lewis

Mr. Pollard.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 862

John Pollard Hay River

Mr. Chairman, I don't see any disadvantages other than the fact that people don't like to pay taxes. But the fact of the matter is, last year we instituted a payroll tax which was placed upon employees and we didn't touch corporate income taxes. This year, we're looking to the corporations to donate a little more into our budget. I don't have to tell everybody in this room that there are constant suggestions in this House and outside this House for new ways to spend money. If we're going to have to spend those dollars, then we're going to have to get them from somewhere. This year it looked to me like it was a fair deal to put two per cent on the corporate income tax of these large corporations, simply because we were the lowest in Canada, except for Quebec. So I don't think there's going to be any disincentive to large corporations in the Northwest Territories. Thank you, Mr. Chairman.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 862

The Chair Brian Lewis

Thank you very much. Before I recognize you again, Mr. Zoe, in the gallery today we have a large delegation of Rotary Northern Experience students from

Alberta, British Columbia, Saskatchewan, Denmark, New Zealand and Columbia. I would like to welcome you.

---Applause

Mr. Zoe.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

Henry Zoe

Henry Zoe North Slave

Thank you. Mr. Chairman, given that the federal government is pressuring the Northwest Territories to increase taxation revenue, what will the effect of this increase on our fiscal relationship with the federal government be?

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

The Chair Brian Lewis

Mr. Pollard.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

John Pollard Hay River

Mr. Chairman, we get all of the funds raised by this tax. It's a tax increase, it's not a volume increase. So all of the money flows to us and there won't be any perversity at this time on this particular $5 million.

I guess you might say that it will raise our average against the Canadian average. With the lowering of tobacco taxes by the federal government and provincial governments, that kind of lowers their average so we're closing the gap on the perversity factor by a small amount, Mr. Chairman.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

The Chair Brian Lewis

Thank you, Mr. Pollard. General comments. Mr. Arvaluk.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

James Arvaluk Aivilik

Thank you, Mr. Chairman. How can you be assured that the companies will not pass on the extra expense to the consumer, for example, government public tenders for schools and public housing? The better question would be, will you still be able to recover substantial amount, for example, $5 million, when the companies start adding on more to avoid the two per cent extra expense that they would have to look out for?

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

The Chair Brian Lewis

Thank you, Mr. Arvaluk. Mr. Pollard.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

John Pollard Hay River

Mr. Chairman, the number of companies that pay this tax are fairly small compared to the number of companies that there are in the Northwest Territories. So I don't anticipate any large, trickle-down affect that will effect government expenditures. I still come back to the point that it is a reasonable tax when you look at the average corporate tax rates across Canada, in my opinion. Thank you.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

The Chair Brian Lewis

Thank you, Mr. Pollard. Anybody else? General comments. Mr. Ballantyne.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

Michael Ballantyne Yellowknife North

Thank you, Mr. Chairman. I just have a couple of questions. We all understand the pressures that the Finance Minister and our government are under by the federal government to increase our taxes, and corporate income tax is probably politically one of the more easily attainable taxes that you can increase. I understand that and I sympathize with the Minister. I have a sense of deja vu when we actually have this discussion.

My question to the Minister is and the Minister did what the he felt he had to do, but what companies are looking at right now, it's not just a snapshot of one tax, it's trends. They're looking for some sense of security that this is not going to be an ongoing trend. It's two points this year; next year, two points; the year after, two points. Same with the payroll tax. I know the Minister can't give a definitive response to the question I'm going to ask right now, but I would like to get some indication if the Minister can provide some comfort to companies who right now are looking with a lot of interest at moving to the Northwest Territories, specifically in the mining area, that there won't be increases next year and during the remainder of the life of this government.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

The Chair Brian Lewis

Thank you, Mr. Ballantyne. Mr. Pollard.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

John Pollard Hay River

Mr. Chairman, to be frank, fiscally, in Canada today, there is no comfort. I understand what Mr. Ballantyne is saying, but I can't say at this table in this room right now, that there won't be some adjustments next year.

Mr. Chairman, I want Members to understand that it's not just the fact that we want to balance our budget and we want to raise more revenues so that we can pay for more housing, or social programs or whatever. There are people in the Northwest Territories who have lobbied me and said those large companies that we see with the 727 plane flies in and out of Yellowknife, directly over our heads, don't seem to do as much business in the Northwest Territories as they should do. Those large companies that extract gold from the ground that's going to be there in some 20, 30, 40, 50 or 100 years time, when we could probably mine it ourselves, should be paying something. If they're not prepared to do business with northern companies, if they're not prepared to reside in Yellowknife or other communities, then they should be paying something.

Now this diamond issue has come upon us and people are saying, are we going to see the same thing where large multi-national companies come into the Northwest Territories and extract the goodies, and leave after 20 or 30 years, and maybe they've employed a few people but they really haven't put as much into this country as they've taken out. So that drives me as well. There's been a suggestion that we really look at this issue, simply because you only get the gold, oil or the gas out of the ground once. It doesn't regenerate down there. Diamonds won't reappear after another 100 years. Once they're gone, they're gone. I think that argument has been made many times before.

I have been under some pressure by people who say, at least get some tax dollars out of them while they're here, because we may not get very much else. Thank you, Mr. Chairman.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

The Chair Brian Lewis

Thank you, Mr. Pollard. Mr. Ballantyne.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 863

Michael Ballantyne Yellowknife North

No one will argue with those views. I see probably some other aspects of that. The Minister is correct to say that there is no fiscal comfort, but if you look across the country, every jurisdiction is recognizing that there is a certain limit to taxation, after which it becomes counter-productive. In fact, poorer jurisdictions -- and I'll use Newfoundland as an example -- are trying very hard to put together an economic package to attract people to their jurisdictions.

The comments that the Minister makes are correct, that it has to be balanced with other realities. I've been told by accountants, because I don't pretend to be an expert in this, that there are creative ways that companies can do their accounting to minimize the impact of these taxes also. There has to be a threshold, where you maximize the gains from taxation. When you pass a certain point, you start to have a lot of negative factors coming into it. Has the Minister had the department look at this in a strategic way?

It may be worthwhile if you raise it another two points because you raise $5 million, but two companies that were going to come in might not come in. There are other factors too. People may use more creative accounting and you don't actually get the benefits of the revenue. Is the Minister looking at this in a broader context, rather than just the context of the necessity to raise revenue?

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

The Chair Brian Lewis

Thank you, Mr. Ballantyne. Mr. Pollard.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

John Pollard Hay River

Mr. Chairman, I look at it in the context of what effect it will have, what revenues we will gain, how difficult it is to gain those revenues, how it will affect our formula financing arrangement with the federal government, if it will drive business away, or whether it will dampen enthusiasm for large corporations to be here. All those things are taken into consideration.

One of the aspects that surprised me is the flexibility of corporations to declare tax in this jurisdiction. I believe it was in 1991 that we saw a tremendous amount of corporate income tax declared in the Northwest Territories. Mr. Chairman, without taking up too much time, the work-force in the Northwest Territories doesn't fluctuate back and forth by 50 per cent or 100 per cent. The fact is, this corporate tax can move around so very quickly, that you start to look at the forecasting. Can you forecast that you're going to be able to capture X amount of dollars from corporations in a fiscal year?

When you examine that, you find out there is flexibility amongst Canadian corporations to declare or not declare in this jurisdiction. And you determine that what would make it attractive for them to declare is low tax rates. What does that do for the Northwest Territories? To be honest with you, Mr. Chairman, when we get a volume increase in the amount of corporate taxes paid in the Northwest Territories -- as we did in either 1991 or 1992 -- by some $20 to $30 million, that hits us hard in the area of perversity in the formula funding agreement.

In 1991, we paid a premium on taxes that were declared in the Northwest Territories of some $21 or $22 million, of $220,000 out of our formula funding agreement. Even though it looked good, we had greater revenues of some $20 million or so, we paid for it out of the formula funding. I have to look at that aspect, as well. Do we want corporations to declare income in the NWT so that they can get a tax break when it ultimately costs us at the federal table?

I'm very cognizant of all the issues, the effects, political and business ramifications. Then, of course, you have to look across Canada to find out the average across Canada. In this case, we fell way below the average and that is why the

decision was made, Mr. Chairman, amongst others. Thank you, Mr. Chairman.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

The Chair Brian Lewis

General comments. Mr. Gargan.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

Samuel Gargan Deh Cho

Mr. Chairman, I have a question about clause four which says "By dividing the taxation year into two notional taxation years." I looked the word up and all it says is that it is something that is not real. What exactly is the purpose of having the word "notional?"

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

The Chair Brian Lewis

Mr. Pollard.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

John Pollard Hay River

Mr. Chairman, it is a technical term that deals with the comparison of a company's year end that a company decides upon. There is flexibility for companies to decide which is their fiscal or financial year. It's the term attached to their year, as opposed to the calendar year, as we would normally talk about. It is determined as a notional year. It is just a technical term.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

The Chair Brian Lewis

Mr. Gargan.

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

Samuel Gargan Deh Cho

In clause five, it says that the act is deemed to have come into force on January 1, of this year. Are we also talking about the last fiscal year for this tax? Including December 31, 1993?

Bill 15: An Act To Amend The Income Tax Act
Item 18: Consideration In Committee Of The Whole Of Bills And Other Matters

Page 864

The Chair Brian Lewis

Mr. Pollard.