Thank you. Total expenditures is $12,797,000. Agreed?

Agreed.

Thank you. Do we agree then, this Legislative Assembly is concluded? I would like to thank the Speaker and Mr. Hamilton for appearing before the committee. A job well done. Thank you.

--Applause

Initially, we have agreed to do a review of the Department of Finance. Do we agree that we will proceed in that order?

Agreed.

Mr. Todd, do you have opening remarks for the committee?

Thank you, Mr. Chairman. I am pleased to introduce the main estimates of the Department of Finance for 1998-99.

For 1998-99, the Department of Finance is requesting a total expenditure budget of $8,898,400 or 6.2 percent less than in 1997-98. This expenditure budget is accompanied by a revenue budget of $1,015,942,000.

The Department of Finance provides advice to Cabinet and the Financial Management Board and otherwise serves the government in five principal areas.

A second departmental responsibility is the preservation of the government's financial and other assets by managing the government's cash, borrowing and banking arrangements and by managing a Comprehensive Insurance Program.

Third, the department develops, interprets and disseminates statistical data about the Northwest Territories.

continues to focus on the strategies to ensure that the necessary funding is in place for Nunavut and the Western Territory by April 1, 1999. Negotiations have begun and are continuing with the federal government, the Interim Commissioner, NTI and yes, the Western Coalition on appropriate funding levels and mechanisms for the two new territories. We hope to conclude these discussions by early March so that a federal decision can be made by April.

In addition, the department will work toward the creation of separate statistical and taxation data bases by April 1, 1999. More specifically targeted to the government's priorities of improving social and economic conditions are the two tax initiatives which I announced last week. The Department of Finance is working to develop the necessary legislation for the implementation of the NWT Child Benefit and the NWT Equity Investment Tax Credit Programs. Thank you, Mr. Chairman.

Thank you, Mr. Todd. I believe on behalf of the committee that reviews this particular area, Mr. Henry, has a report to make. Mr. Henry.

Thank you, Mr. Chairman. The Report of the Standing Committee on Infrastructure on the Department of Finance.

The committee reviewed the options available to the Department of Finance to increase revenues to help pay for existing and proposed programs and services. In the Minister's opinion, increasing corporate income tax at this time would deter any new businesses from coming to the north and would be a hardship on existing businesses. The Minister also noted that most of the corporate income tax is paid by a small number of corporations and any increase would be borne largely by these few businesses.

The proposed Public/Private Partnerships (P3) initiative was discussed as one of the financing tools available to address capital infrastructure deficiencies. The committee is of the opinion that if the proposed P3 program is implemented efficiently, effectively and reasonably, it may address some of the infrastructure problems the government is confronting.

Committee Members discussed the current resource royalty tax regime, which is projected to provide little direct benefit by way of additional revenues from the pending diamond industry. The Minister indicated that the department is attempting to renegotiate the existing tax regime to develop a more appropriate royalty structure, particularly for the diamond industry.

Other creative options must also be considered. Committee Members are of the opinion, that since the diamond sector makes extensive use of the Northwest Territories infrastructure, the industry could contribute to its maintenance and development.

The committee recommended that the government examine additional revenue options such as a highway toll tax for commercial trucks involved in the mining industry, specifically, the diamond sector.

Mr. Chairman, on the Northwest Territories Child Benefit, the committee examined the proposed Northwest Territories Child Benefit, which would provide a tax credit to families based on the number of children, in proportion to their annual income.

The program would be administered by the federal government in conjunction with its National Child Benefit Program. The benefits would be mailed out to families in monthly payments. The committee recommends the adoption of the proposed Northwest Territories Child Benefit for low-income families.

On the formula financing, incremental and transitional costs for division, committee Members were concerned about the negotiations relating to the incremental and transitional costs for division. Issues such as severance pay and office leases, which are, in part, responsibilities of the Government of the Northwest Territories are of particular concern. These figures will be more clearly identified in the division transition document being prepared by the Nunavut Interim Commissioner.

The committee looks forward to receiving the Interim Commissioner's analysis of incremental and transitional costs of division.

Mr. Chairman, on the question of training positions for Nunavut, the committee noted that no Nunavut training positions are identified in the Department of Finance main estimates. Committee Members are aware of the Interim Commissioner's role in relation to staffing the new Nunavut government. However, there needs to be adequately trained staff in advance of division to fill positions in the new territory.

Therefore, the committee recommended that the Department of Finance consider taking steps to access the training funds available through the Nunavut Unified Human Resource Development Strategy, which provides funding for Nunavut training positions. That concludes the report, Mr. Chairman.

Thank you, Mr. Henry. Before I allow for the general comments, I would like to ask the honourable Minister if he wishes to bring in witnesses. Mr. Todd.

Yes, I do actually, Mr. Chairman. I hope they are here, but if not, we will proceed to the witness table anyway.

Thank you. Do we agree? The honourable Minister shall bring in the witness? Proceed. Mr. Minister will you please introduce the witnesses to the committee.

Thank you, Mr. Chairman. On my immediate right is Ms. Margaret Melhorn who is the deputy minister of Finance and on my immediate left is Mr. Bill Setchell, who is the director of finance and administration.

Thank you. Welcome to the committee. We have heard the statement from the Minister and Mr. Henry on behalf of the committee that reviewed this matter. We are now open for the general comments from the floor. Any general comments or shall we go through line by line at this time? Line by line. Mr. Krutko.

Thank you. Mr. Krutko. I guess increasing any form of revenue may have very omni-formula financing agreement. Mr. Todd, do you want to respond?

Mr. Chairman. I will wait until everybody concludes their general comments, if they would like. Then when we can get into detail, I would be only too happy to answer questions, at that time. Thank you.

Thank you. General questions from the floor. We are dealing with the finance detail. Do you agree? I will allow the Minister to respond and then go into detail, line by line. Do you want to respond to Mr. Krutko? No. Operations and maintenance, total operations and maintenance. Mr. Krutko.

Thank you. I have asked the honourable Minister to respond if he wished to and he declined at this time. Mr. Minister.

Yes. My apologies, Mr. Chairman. Maybe I misunderstood because the rules change daily here. What used to be rules yesterday are not rules today. Let me first of all respond to my colleague with respect to taxation particularly, what commonly are known as the sin taxes which are on cigarettes and alcohol.

We have, I am told by my very competent staff, the highest tobacco taxes in the country. We generate somewhere in the region of about $17 million on an annual basis on tobacco taxes. The danger of increasing the tobacco tax any higher than what they currently are, would be a real tendency, we believe and other jurisdictions have found out, for smuggling. It would be highly lucrative. In fact there was, if you recall, some charges laid, I believe in the Iqaluit area, where there was some smuggling which took place. I would be reticent on the sin tax to add any additional dollars.

Just for clarity purposes, if we increased the tobacco taxes five percent, it would bring us about $750,000. There is a serious concern out there with respect to smuggling. As I said and Mr. Setchell points out, our taxation is the highest, repeat the highest, in the country. In some cases it is six times what some other provincial jurisdictions are. The temptation for smuggling would be immense. I would not want to put this government and the territories in that position.

On liquor revenues, again, I am advised our net profit is about $16 million. All liquor net revenues go into general revenues and, of course, they are reallocated through the envelopes and we have debated this before. We do not designate the liquor revenues for this. We designate some into general revenues. Based on the overall general revenues, we allocate to envelopes like the social envelope, who looks after alcohol related issues my colleague, Mr. Krutko, spoke to. I think we all recognize the impact that has both on the criminal judicial side and on the wear and pain it inflicts upon the people we represent and the families across the territories.

On the other taxation, with respect to corporate taxes, I am fundamentally of the belief that at this time it would not be appropriate. We are trying to find creative ways to provide incentives for corporations to reinvest their money. It would be fair to say with the current climate of downsizing the government and of the price of gold and some of the impacts that has had, not only in this town, but in other parts of the territories, I am a fundamental believer in incentive approach to development, not punitive. I would have some reticence at this time to even suggest we even be taxing the corporations. There may be a case for diamonds. I think I have said that publicly because of the degree of profitability and the wealth it is going to bring to its stakeholders, its investors and hopefully this country. We are investigating that. We are looking at the options there. It would be important that I say that out loud today. Overall, I think we would like to keep the corporate tax where it is. It is relatively competitive, I believe, sitting around second or third in the country, I am not sure. Third lowest in the country. I am sort of reasonably comfortable with that.

I am well aware of the dilemma of development like what took place in the Beaufort area and some of the havoc it created when it collapsed. I have seen it myself in the 70s when I was up in that area. We have to guard against that. There is no question about it and the huge expectation that both the business and local community had. We need to find the ways and means to guard against that and the current multi-million dollar ventures that are currently underway in the country whether it is in diamonds or whether it is in a fair amount of oil and gas exploration in the Sahtu Fort Liard area. I am encouraged by that. It is a good sign and I think the community seemed to be very active in that area with industry. I do not know if I answered all the questions, the important ones anyway that relate to the revenue side, at this time. Mr. Chairman. An increase in taxes is not the practical and the philosophical way to go, whether it is in the sin taxes which would encourage smuggling or whether it is in the corporate taxes which would be a disincentive for additional equity investment in the country. It is kind of contrary to some of the things we have put forward in the budget, particularly in the tax credit investment initiative. I hope I have answered the questions my colleague asked.

What else did he ask? The P3. I have talked extensively about that issue. I am glad to see my colleague is supportive of it. I do appreciate that support. It is a new venture for this government even though it has been done in other parts of the country. I have said consistently we have to make sure it is transparent. We have to make sure the communities and aboriginal organizations get active in this initiative. It has to be affordable.

This sort of gives me an opportunity to express a personal concern I have with respect to the public perception on P3. There is a growing feeling out there it is going to solve all of our problems. I want to caution everybody. I see the P3 as just one small part of trying to bring some of the infrastructure needs of the Arctic communities back to where it originally was two years ago. It is not a be-all, end-all. It is not some big panacea where we are going to go out and spend hundreds and hundreds of millions of dollars. There is an affordability issue. There is going to be a fairly stringent criteria for selection, let me repeat that, of projects. There has to be payback somewhere, whether it is in the savings to the government, whether it is in the creation of new job and economic opportunities. I would like to caution as it gives me an opportunity to caution everybody that when we look at the Public/Private Partnerships, you have to look at them with a certain conservative approach to it. I guess, that is the best way to put it. I think that is it. I am not sure. Okay. Thank you.

Mr. Todd, you stated a rule change here daily. Rules do not change. Processes may vary from day-to-day. There are times at the beginning of the general comments and questions we ask, sometimes Members request at the end of the questions from several Members, then the Minister will respond or immediately after a Member has asked. Implying a rule change daily, adds insult to the committee. Mr. Todd.

I did not mean to insult the committee, but I am telling you the procedure changes daily. With all due respect, Mr. Chairman, sometimes it is a little difficult to understand, that is all I was saying. Nothing else. The procedure, nothing else. That is all the comment I was making.

But you have stated the rules change, but the written rules will not change here. For the record, Mr. Krutko, you made a good point, but you do not have a point of order. You made a good point though. Okay. Thank you.

Operations and maintenance, total operations and maintenance is $1.007 million. Agreed?