Mr. Chairman, the business plans being prepared for the next fiscal year will include the hotel tax in it, based on the assumption that it is going to be approved. But the House will have the opportunity to approve or reject the legislation when it comes forward. If that legislation is approved, then we will proceed with the preparations for the tax. If the legislation is rejected, then that is the end of it.

We intend to consult pretty extensively on this over the next few months. Certainly, the consultations have some bearing on what we do following that consultation period. Thank you.

Mr. Dent.

Thank you, Mr. Chairman. Can I assume from the responses so far, that part of the sentence should probably not have been there? If this tax is approved, then, because, in fact, what I hear the Minister saying is that the Department of Finance will be coming forward in the next business plan to implement the tax for inclusion in the 2001-2002 budget.

Mr. Handley.

Mr. Chairman, if you are reading it to mean that I am suggesting I want approval with this budget here right now, then I suppose that part of the sentence should not be there because my intention is to seek approval for the legislation in November. I am not asking for approval in it as part of this budget package here.

The purpose in announcing it now is simply to give everyone a heads up to allow us time for consultation and have the best input possible before we implement something. Thank you.

Maybe we could circulate this information so it will make it easier for the discussion. Mr. Dent.

Mr. Chairman, just carrying on with this specific sales tax, I am just wondering how the Minister decided that a sales tax, specifically on hotel rooms, would be better than a sales tax on, say, fishing licenses or anything else, like groceries or other things that we could charge a sales tax on? How did he happen to choose the hotel tax?

Mr. Handley.

Mr. Chairman, I chose the hotel tax because I wanted to have a tax that is paid largely by tourists, visitors to our territory rather than local residents. I do not want to add another tax onto local northern people, Northwest Territories residents, anymore than we have to.

I realize there is some impact on Northwest Territories residents, but this seemed to be the one that would tax the industry itself. This, I have to emphasize, is not meant as a way of generating revenue to balance our books. It is a tax that is there to be reinvested back into the tourism industry. Thank you.

Mr. Dent.

Thank you, Mr. Chairman. That does not answer the question. Why not a tax on airline seats that would impact the same number of tourists? It would probably have the same sort of impact on northern residents that hotel taxes already have as well.

Mr. Handley.

My information was that a tax on airlines or an airport tax is going to have a bigger impact on all Northerners than does a hotel tax. Many Northerners have to use airlines as the only way of travelling and I think it would have a much bigger impact on our own residents. Thank you.

Mr. Dent.

Thank you, Mr. Chairman. Mr. Chairman, a sales tax does not impact people according to their ability to pay. That is one of the biggest problems of a sales tax. Earlier today the Member for North Slave talked about the impact on people from the smaller communities having to accompany people who are going to larger communities for medical treatment and the cost that they were facing. So we are impacting, with this hotel tax, people from those smaller communities without the ability to pay. I know that the Minister has characterized the typical five dollars increase on hotel rooms as not being of importance to some people.

From what the Member for North Slave was saying earlier today, I am not sure that his constituents who would have to travel to a larger centre with a relative and perhaps stay in a hotel, would consider that extra five dollars a day a reasonable expense. That is really the concern. No matter how you look at this, it is a sales tax. It does not tax people according to their ability to pay. In fact there are a significant number of Northerners who will be impacted.

I think it will also cut down on the amount of travel that municipalities will be able to undertake for training sessions, the number of training and regional capacity building sessions that aboriginal governments will be able to undertake, because of the impact. After all it may only be five dollars a night per person but over the course of a year, for the amount of travel that northern organizations undertake, it can add up to be a significant amount.

I really think that this tax needs an awful lot more thought because I do see the potential here for a significant impact on Northerners. Thank you, Mr. Chairman.

Mr. Handley.

Thank you, Mr. Chairman. Just two comments. One is that the reason why it was introduced early, before it being implemented, was to make sure that we have full consultation and everybody has an opportunity to have input into it.

The second comment is that a representative of the Northwest Territories Tourism Association came to see me and told me that he has a report from a consultant who does work in this area who has concluded across the country that a five percent tax makes no noticeable difference at all in trade or in the amount of use of hotels and so on, across the country and anywhere else. The impact begins to be felt when the tax starts to approach 20 percent, as it is in some countries. But at five percent, the consultant's report says that there is no noticeable difference at all. Mr. Chairman, I might add I do not have the name of that particular consultant at this time, but I could get it if people wanted it. Thank you.

Mr. Dent.

Thank you, Mr. Chairman. Mr. Chairman, one of my colleagues in the House noted that the Canadian Federation of Independent Business people had written to the Premier suggesting that we reconsider this issue of the hotel tax because in every jurisdiction where there is a hotel tax, it is being or the businesses are requesting, that it be removed because it is a sales tax that is targeted at one area of the business community and it is not felt to be fair.

I think that is also something that needs to be considered here. If we are going to embark on a sales tax, we have to be prepared to justify that sales tax. Personally, I do not think we can ever justify a sales tax, but if we are going to institute a sales tax, I am really having a hard time justifying it being on one narrow segment. I do not see how we can do it. If we are not going to tax fishing licenses for tourists or if we are not going to tax or raise monies from taxing the airplanes they come in on, then I do not see how we can pick one small area. It certainly should not say that we would not include tour operators or other people. You cannot just pick on one part of the industry and say they should bear the entire cost of increasing the advertising for the whole industry.

If I can move onto another issue briefly that was covered by the Canadian Federation of Independent Business people. They noted that our gas tax in the Northwest Territories is higher than that in Nunavut and the Yukon. I appreciate that the Minister has committed that gasoline taxes are being maintained on a per litre basis and not on an ad valorum rate, but I would like to ask the Minister, since he had committed to coming forward with a proposal to change that in legislation or in regulation so it would no longer be an ad valorem tax, but a per litre tax, will he come forward and deal as the Canadian Federation of Independent Businesses has recommended, to reduce the rate to match that charged in the Yukon and Nunavut? Thank you, Mr. Chairman.

Minister of Finance, Mr. Handley.

Mr. Chairman, to lower the fuel tax on gasoline, and I think the Member is referring only to gasoline from 10.7 down to 6.4 percent, would cost us $1.7 million to $2 million. If we were not in a deficit situation, then it would definitely be something that we should be considering. But we are in a deficit situation as a government and I am just not sure it is wise for us to build up that debt through this kind of move and pass on the cost of it to future generations here. I have to say no. No, I would not commit today to lowering it down to the Nunavut rate or to the Yukon rate. I think we have held the line since 1997 and we will keep it that way.

I might add that off-highway use, or in communities that are off-highway, gasoline is taxed at 6.4 which is the same as the Nunavut one. So they basically have it the same as ours, except they do not have highways. At this point, no, I could not commit to lowering it. We can not afford it right now. Thank you.

Thank you, Mr. Chairman. I would also like to take this opportunity to state some of my concerns with the proposed hotel tax. I have discussed and questioned the Minister previously, but I would just like to, for his benefit, summarize most of the reasons that I have a real problem with the tax as it is proposed. I think, initially, one of the first things that comes to mind is it seems to be a directed tax to me and I think it sets us up. It sets a precedent. Certainly, this will be the first time that we have done something like this, to my knowledge. The department could tell me if I am wrong. But I think that you would have certainly have lobby groups coming out of the woodwork, suggesting that other taxes be diverted to their interest or their cause. I would say they would have as legitimate a right as tourism would to expect that a tax be diverted solely to them.

Another one of the concerns I have is that we have no guarantees, after this tax has been established, that in two years time or the next government's ten year plan, the money will not be put into some other use. Mr. Handley has assured us that he wants to build regional capacity and he wants to concentrate on marketing tourism. What about the next Finance Minister? I mean, once we have established a tax, it is difficult to go back. I think that certainly future governments can do with this money as they will. That to me is no guarantee that there is any long term future in this.

Another concern I have is the net revenue. I really think we have to look at the amount of money this government is spending on hotel rooms and not just government employees. We have to look at municipalities. We have to look at medical travel. We have to look at NGOs. We have to look at some of the aboriginal governments who get funding.

If we are just transferring money around, then I think we should save ourselves the hassle and the grief and just transfer some money to tourism from some other area. If the Minister would like, I am sure we can poll Members up and down this side of the House and ask where the money could be transferred from.

On the administrative costs, initially, when the Minister rolled this out to us, he gave us his best estimate at that time to administer the hotel tax at $250,000. I do not believe you can come back two weeks later and say, "We sharpened our pencils, it is now $100,000." I understand why the department would want to make this seem more viable, but I think they have to be realistic here. We have to look at what we really think this thing is going to cost to administer. I think dropping it by a factor of two and a half times in two weeks is not reasonable.

On enforcement, the Minister has stated in the House that he believes northern business is honest business and will certainly voluntarily remit the tax. I would agree. I think Northerners are honest. However, I think we have to be realistic about our need to enforce any kind of tax. There is going to have to be some enforcement. We are going to have to go after people who do not remit the tax and simply collect it. It will happen.

I do not think we have to be entirely pessimistic about this. However, we cannot have rose colored glasses either. There will be people who do not play by the rules. I think if we are going to do something, we have to make sure that it applies fairly and equally to everybody and that includes enforcing it.

There are people in the world who collect GST in their business and then keep it. It happens. It has happened in the Northwest Territories before, although Northerners are, for the most part, honest. So I think we have to be realistic when we talk about enforcement and add that cost in. Do we enforce the payroll tax? I do not know. I would think that in some capacity we have to.

The other thing that really strikes me as strange is the focus. We are talking about five or six dollars a night and that really does not deter any tourism. We have studies from consultants saying that a five percent tax does not have any affect at all on tourism. That is fine. I really do not imagine that five dollars a night is the big issue here. I think it is the administrative burden to business. That is the big thing for me, Mr. Chairman.

There is enough red tape for small business. It is already a struggle for people who are overwhelmed with the amount of things they have to comply with and I think adding one more tax for business to remit, in some cases, might be the straw that breaks the camel's back.

I do not want to make this about the five or six dollars that a tourist can or cannot afford, because I do not think it is about that. I think it is about administrative hassles and administrative burdens.

So again, I think if the Minister wants to put some money into tourism, I would like to see him transfer $500,000, or $1,000,000 into tourism promotion and into building regional capacity. But let us look at where we might trim some of that money, because I think when he slaps on a hotel tax and we look at the amount of money that government is taxing itself in some sort or another, whether it is through direct employees or arms of government, I think that is really all he is doing.

So if he wants to transfer the money there, I say go ahead, but not in this manner. Thank you.

Mr. Handley.