The committee commented that this department is doing better than other departments in the area of affirmative action. The committee also encouraged the department to continue to improve upon its efforts and for other departments to follow suit. That concludes the committee's review on the Department of Finance.

Thank you, Mr. Delorey. At this time, I would like to ask the Minister if he would like to bring in any witnesses.

Mr. Chairman, yes, I would.

Does the committee agree?

Sergeant-at-Arms, would you please escort the witnesses in?

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

Thank you, Mr. Chairman. On my right, Margaret Melhorn, deputy minister for the Department of Finance. On my left, Bill Setchell, director of finance and administration. Thank you.

Thank you, Mr. Handley. General comments? Mr. Miltenberger.

Thank you, Mr. Chairman. I have a question for the Minister. Yesterday, in the House, the Minister committed to table the calculations used to arrive at the $1.25 million projected revenue for the hotel tax. I noticed in his statement he has made a point of mentioning the tax. I was wondering if he has that information available today. It would certainly aid the discussion if we could see how they arrived at that calculation. Thank you.

Thank you, Mr. Miltenberger. Mr. Handley.

Thank you, Mr. Chairman. Mr. Chairman, I have a draft of it. I would be willing to table that. I have not had a chance, since the question, to really go over it carefully, but it does outline the two methods that were used for estimating the hotel tax revenues. I would be happy to table that, if you would like, as it is. Thank you.

Mr. Miltenberger.

Thank you, Mr. Chairman. Would it be possible to have one of the pages or the Clerk's copy so that we could circulate it to the Members?

It should have been in general comments, but by the time we get to detail, there may be some questions. Thank you.

Thank you, Mr. Miltenberger. The Minister is circulating that information. General comments. Mr. Roland.

Thank you, Mr. Chairman. Mr. Chairman, as in the committee report, we are very concerned that if the work that is being done to secure more funding with Ottawa, in the form or royalty revenue sharing, does not come through in the very near future, we are going to be facing some drastic situations when it comes to budgets and reductions.

I know the Finance Minister is very positive and upbeat regarding the discussions that are going on and I think it is a good thing in that sense. I think that we need to have a bit of shoulders when it comes to reality to really look at the situation.

I am aware departments will once again start working on budgets come late summer, in preparation for fall and work again in committees. If we do not have any new funding by that time, as the Minister stated in his opening comments, there is a further increase that includes over $2 million to cover the interest costs associated with increased borrowing needs.

Overall, this budget that is being put forward is one that leaves us in a cash deficit of over $28 million, and throwing that to our accumulated debt, we are running rather close to what is at times called the debt wall.

I do not like to be all that negative, but the fact is we are going to have one situation to deal with if new funding is not found.

The Minister has introduced the hotel tax to try to help on the tourism side, but the Northwest Territories on its own, our people in the North, is over 40,000. We do not have much room when it comes to taxes. The cost of living alone is eating away at people's budgets in the North, faster than increases can come along to offset those when it comes to employees.

I have used examples of my community, the cost of living that is going up, and I know the Minister and this department have to look at taxing options. Hopefully, that is a last resort. The funding we have received from that would have its own spin-off effects if taxes were to be increased.

Right now, even though there is talk of a lot of business, I know in my community, there is one group that owns the major hotels and they are fighting to stay alive. A loss of business would not help them right now. I have yet to have a real, in-depth discussion with him. It is something I will do over the summer.

With that, Mr. Chairman, I will leave some questions to detail as we go through it. Thank you.

Mr. Handley.

Yes, Mr. Chairman, I do not think there was really a question there. If there was, I am sorry if I lost it. Thank you.

General comments. Mr. Dent.

Thank you, Mr. Chairman. I have a few questions for the Minister.

Towards the end of his opening comments, he talks about the proposed five percent sales tax on hotel rooms. He says in here, "If this tax is approved, the Department of Finance will be coming forward in the next business plan to implement the tax."

How does the Minister see this tax being approved?

Minister of Finance, Mr. Handley.

Mr. Chairman, my intention would be, as I have said before, to do consultation over the next few months to introduce legislation in our sitting in November. Assuming that the legislation is passed, the tax would come into effect the next fiscal year. Thank you.

Mr. Dent.

Thank you, Mr. Chairman. So I am to take it then, that the Minister's consultation with whomever he chooses to consult, if he happens to get a majority of those people he consults with to approve the tax, he will implement it? Is that the approval he is talking about here?

In his comments, Mr. Chairman, he said that if this tax is approved, he will come forward with it in the fall business plans, which we should see in October.

I am just wondering how we are going to assess whether or not this tax has been approved?

Mr. Handley.

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. Minister, Mr. Bell.

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.

Mr. Chairman, I will just comment to some of the main points I heard.

In terms of guarantees of what the future government might do with this tax, I cannot guarantee anything. All I can say is the Legislative Assemblies of the future are going to determine what the taxes are or are not going to be and that is the decision they will make. I cannot set up something that will give any kind of guarantees.

In terms of ideas for dollars to put into tourism, I am certainly open to any suggestions Members might have. I will take Mr. Bell up on his suggestion. If any Members have ideas of where we can get money to put into tourism without causing problems elsewhere, I am happy to hear those.

On the cost of administration, all I can tell you is in the Department of Finance, we have a total of eight people who administer all of our taxes. They administer all the taxes, do calls, enforcement and so on. That is personal income tax, corporate tax, tobacco tax, fuel tax, payroll tax, property tax, school tax, insurance tax, all the taxes. So adding this one more small tax on is not going to mean we need to add three or four more people or anything like that. Our estimate is the $100,000. It is not a big issue.

In terms of enforcement, we could spend an awful lot of money if we wanted to, chasing a few dollars that might slip through our hands. No doubt, as the Member says, there are people who cheat on their GST, who drive their cars without a license, who do all sorts of things. However, there is a limit to how much we can dedicate to enforcing, trying to get 100 percent compliance, because we will probably never reach it and we could spend an awful lot of money.

So I am not interested in having a bunch of tax police going around, checking to make sure that everybody is paying their money. I appreciate the Member's comments. We are listening to them. We will listen to what people out in the communities have to say. If there are other ways of getting money, I am open to it. Thank you.

Mr. Nitah.

Ms. Lee.

Thank you, Mr. Chairman. I would like to add another voice onto the issue of the hotel tax and try to highlight some issues that are not, hopefully, a repetition of what the Members for Frame Lake and Yellowknife South have mentioned already.

With respect to the study, the consultants report the Minister mentioned, I would like to get a copy of that and know who did it.

Also, the information item we have here, a lot of it is based on Stats Canada statistics, which I understand because we cannot always have all the studies. However, I know for a fact, I live here in Yellowknife and I talk to the hotel operators and I have given a lot of thought about what this tax means.

I understand that there are hotel taxes when we travel all over the world or even every other city in Canada. But we are not Vancouver. We are not Toronto. We are not Edmonton. We are Yellowknife and the Northwest Territories. We do not have a conference industry. We have a fledgling tourism industry that needs a lot of support. I am not sure that this should be something that we should be adding on at the moment. What I am worried about is this tax base is so tiny. We have such a tiny population already and we have so few tourism operators from whom we are going to collect this tax. I am worried about the burden we place on these operators.

For example, the owner of the Igloo Inn told me that a five percent tax would constitute all of the money he spends on his utility bills. It comes right out of their pockets. What is so strange about this tax, what is irrational about it, is a government that has an $800 million budget has to go and institute a new tax to collect, in my view at best, about $800,000.

The Department of Resources, Wildlife and Economic Development budget is almost, I believe, $75 million. If the department and the Minister are really committed to the tourism industry, and I know he is, I have heard his election platform, then I think that he should understand that all the Yellowknife MLAs are committed to a tourism strategy. We are talking about how we can help them.

The concern I have is that we are imposing this paper burden and operational burden on a small operator, especially the little bed and breakfasts, without a plan, without a commitment shown by the government. For the government in the fiscal position that it is in, it is in a deficit position, it has not come forward with any cost cutting measures first.

The department has not volunteered to take one percent out of the Department of Resources, Wildlife and Economic Development's budget to come up with a plan as to where the money for this tax would be spent. Talking to the tourism operators I understand that they are desperate for money. They are willing to bite this pill, if they could be guaranteed that they will get the kind of attention that they desire.

It seems like it is a carrot that is hung in front of them. To say, "Well if you go with this tax you are going to get the money." the Minister has made no commitment whatsoever in this House that he is interested in direct taxation so that there is an absolute 100 percent guarantee that the money will go to tourism operators.

I know that he replies to that by saying that he is committed, "I said that I am going to do it." I think that we need to see more than that.

The fad words by all Ministers lately are Regional Capacity Building. The Minister of Aboriginal Affairs has mentioned that a few times. He mentioned that in Fort Simpson. He mentioned that in his capacity as Minister of Municipal and Community Affairs. The word is mentioned in the Intergovernmental Affairs Forum and this Minister has mentioned regional capacity. That is one of the two prongs that he is going to practice in terms of a tourism strategy. But what does it mean? We have not had, as a Member, as an Assembly, any discussion about what that means. What does it mean in the tourism context? I have no idea.

I would think that if the Minister is really committed to the tourism industry, as I know he is, and if he is really committed that the only way that he could address the tourism industry is by taxing them, the least he could do is find the money within to come up with a plan that shows what the need is and where the tax would fit in. This is cart before the horse. This was a total surprise attack.

Another thing with the consultation that I have a problem with is what he means by consultation. He says he is going to implement this tax and he is not prepared to do direct taxation. He already says that he knows what he needs in the tourism industry. So what I see from this consultation is that I am just going to sell this ideal. I am going to convince everybody within the next six months that this is what is good for them. I have a real problem with the notion of consultation in that way. Thank you.

Minister of Finance.

Thank you, Mr. Chairman. First of all I will get the name of the consultant, it is a consultant out of Alberta, who has done a lot of work with Alberta on their hotel tax. But I will get it for the Member.

When we talk about Regional Capacity Building, I think as Mr. Nitah has said, we have a lot of communities in this Territory that are very poor. They do not benefit from the non-renewable resource sector that is so important to our economy. We have such an opportunity to do more with tourism. It is a way of getting money out to those communities so that they can build the ability for the people in the communities to be able to welcome tourists, to have facilities for them, to have trained people who can deal with them and operators who can help.

I hope as we do consultation that, as many of the Members who have not travelled widely in the North as possible, get a chance to come out with me or come out on their own and talk to the people in the communities. We need to support that sector of our economy. We need to diversify our economy. We need to get something to the little communities, otherwise the people there will just continue to be a drain on our whole economy where they could be self-sufficient, contributing financially to our whole economy.

We have done some great things in some areas. I can tell you that Bill Tait's initiatives in bringing Japanese tourists is a real good example. I tell you the work that the outfitters have done in the North is great. They bring $30 million a year into our economy. Unfortunately, it does not get out into the little communities in any big way.

The comment that it comes out of the hotel operators' pockets and their utility expenses is incorrect. It comes out of the pockets of the occupants of the hotels who to a large extent are tourists.

I am very committed to tourism and I want to find money to help diversify our economy and build this important piece. I think that we have a tremendously great Territory to live in and this has potential and we need to work together to make it happen. That is how we are going to get communities moving towards greater self-sufficiency.

To find it from somewhere else in the budget, it is easy to say find it from somewhere else, find it from within. But, we are stretched to the limit in the government in terms of what we are asking departments to deliver on and expecting good quality programs. We are asking this year for departments to identify $5 million more in cuts in the 2000-2001 year. They have to find another $5 million.

We cannot keep going back and asking them to find more and more, because like an elastic band, after awhile the thing just bursts. If you stretch them too much, you have no quality left at all. In future years, unless we get revenue from somewhere, whether it is federal government or from economic activity, we are going to go broke. That is just the bottom line of it. So we have to take some chances do some things that are going to generate some economy here.

This is not a surprise attack on anybody. I did bring it up in standing committee. I mentioned it in this Budget Address, even though it does not come into effect for a year, because I want to consult. When I talk about consultation then I am open to do that anyway at all, but I certainly want to talk.

Personally, I want to consult, through Finance, through Resources, Wildlife and Economic Development and so on, with as many people as possible to design the best tax possible before we implement anything. I am not out there to sell it. As I said in my opening comments, the Legislative Assembly has a chance when we bring legislation forward, to give me their approval for it or not. Depending on what they decide in November, it is not something that I am going to go out there and sell to people but I think it is a way of building out tourism economy. Thank you.

Thank you, Mr. Minister, Mr. Braden.

Thank you, Mr. Chairman. A couple of general comments. First of all on the issue of the hotel tax. Taxation, in general, is something that I think the government should always have at its disposal. It is one of the tools to help keep a stable financial regime going. One of the things that I campaigned on was, however, that I would be very leery to see a tax which comes in that increases the cost of living for Northerners and this is where I am sort of conceptually in favour of a hotel tax, things like a payroll tax, because it does generate money from outside sources in, I think, a potentially viable way. I am not at this time, though, prepared to come out in favour categorically of the hotel tax. I have stated before that I would like to see first, and overall, a tourism strategy because the Minister has stated it would be the objective to direct funds directly into the tourism industry from this tax. I would like to see the details of that strategy and how this tax could fit in as one of the potential revenue generators for it.

In that light, I am looking forward, Mr. Chairman, to the consultation that the Minister is going to have and that is already underway with the tourism industry on the overall strategy. To see how this tax could fit in.

A comment there, Mr. Chairman, but I did want to ask a question in terms of methodology. The models that the department is proposing here in this paper, and I appreciate very much getting this based on percentage, I was wondering whether the department looked at a flat rate per room as another method of collecting this kind of tax? I will stop there and see if the department can respond, Thank you, Mr. Chairman.

Mr. Handley.

Thank you, Mr. Chairman. I appreciate the Member's comments and his open mindedness to the potential of this. I appreciate that he cannot commit to it right now. In terms of the other options like a flat rate tax that has been raised by myself, as well by one of the hotel operators, that just felt that this would be easier for people to calculate, even though it is just five dollars a night or seven dollars a night per room. It would be easier than working on percentages and that is certainly something that I think we can take into consideration as we do the consultation. Thank you.

Mr. Braden.

Thank you, Mr. Chairman. I am glad to see that methodology would be something that will be looked at. There are greater mathematical minds in our midst than mine, but I did a quick bit of math here and at five dollars, given the numbers and the occupancy rates, it would suggest that $1.27 million could be raised at a five dollar flat rate. That does not include the lodges. I would like to suggest, probably, some fairly tough negotiations with the lodges because they price their services in a package and not by individual service. So I leave the hotel tax at that one.

On a sort of broader area, Mr. Chairman, the government has adopted a strategy that I am in support of, this continued spending and investing, at least this year, on a status quo basis. I also believe that if we were to engage in a bunch of dramatic cuts to spending services and investment that, given the level of activity and the demands that will be on our systems, we will be hurting ourselves if we cut back now. I think we will just have to redouble our efforts to build capacity as growth overtakes us. So I am satisfied with that strategy for now.

I am also encouraged with the contacts the Premier and the various Ministers have made in Ottawa on things, such as new investment money for highways, for economic development, for the non-renewable resource strategy, and the health program. These are encouraging. We sure hope there is going to be results, but we have had a couple of signals in the last few days or weeks that the federal government may not be all that willing to follow through with this. They pulled back on the Protected Areas Strategy commitment, on things like the Giant miners. It gives me cause to think we had better have a plan B that we should be looking at.

So my question, Mr. Chairman, is at what point is the department going to have to say, "Gee, if Ottawa does not come through with some new spending in these areas, we are going to have to start looking at those cuts." We just have to. My question though is, at what points in a time basis, on a calendar basis, will the Minister have to say, "Gee, Ottawa is not coming through. We are going to have to change our strategy." Could the Minister explore that area? Thank you, Mr. Chairman.

Mr. Handley.

Thank you, Mr. Chairman. I can assure the Member that at the same time as we are proceeding optimistically in our negotiations with the federal government, hoping that they will come through on the non-renewable resource investments we are asking them to make, we are also at the same time working internally in the departments on a worst case scenario, if we just got nothing from them and they continued to renege on some of their commitments and obligations in other areas. It is a difficult one because out of a total budget this year, I am looking at revenues of $751 million. Our ability to generate revenues and make a big difference in the North is pretty small because 80 percent of that roughly comes from the federal government. So we would have to have a horrendous demand on our people to ever be able to balance the budget.

So the worst case scenario has to be going back to the federal government to renegotiate the grant, looking at things like increasing the borrowing limit and so on. We are looking at a whole host of scenarios here at the same time, so that we are not putting all our eggs just in that one basket and not putting any thought toward the other scenario if we do not get any support at all. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Thank you, I guess I would like to return to my question. In a time sense, when given the calendars there is a federal election coming up. I think the departments have already started the planning cycle for the 2001-2002 budget year, but you know at some point along that process, will it be November of this year, will it be February of next year? The writing is going to be on the wall, some of the money will be there, some of it will not.

The question is, when is the Minister going to be taking that measure of Ottawa's largess, or lack of it, and come back to us with the good news or the bad? Thank you.

Mr. Minister.

Mr. Chairman. We are not waiting until any particular month to begin doing this. In fact, we have already begun. For example, we have served notice to the Minister of Finance that we do not believe the formula is working the way it was anticipated when it was signed and we are not getting a terribly good deal out of it.

Second, we have also given him notice that unless something changes, our borrowing limit is going to be reached within the next two years. So we have begun some of those processes, to say that, "Well if we are not getting the money through investments from the federal government, then we have got to look at some alternatives." When do we become really aggressive in doing that? We want to wait and see how our other strategy of trying to negotiate investments from the federal government and non-renewable resources proceeds a bit further before we begin the other ones with the federal government.

In terms of trying to draw more money out of Northerners, that again is something that we are doing internally, but I do not see us implementing some massive tax increases in the near future. In fact, quite the opposite might be true because of the way other provinces and other jurisdictions are lowering their tax rates.

So it is certainly a decision we have to look at within the next two years, but I could not put a month to it when we switch gears here. Thank you.

Thank you, Mr. Handley. Mr. Miltenberger, you do have 10 minutes.

Thank you, Mr. Chairman. It should actually be 19, because I only got to use 30 seconds of my first 10 minutes. However, I would like to thank the Chair for his recognition.

Mr. Chairman, I just have a question on this hotel tax. If the intent of the Minister was to run us up the flagpole, so to speak, and see who saluted, at least at this Assembly, he has definitely gotten some reaction.

I have not heard anything in my community really strongly about this either way. I do have a question though, just to my very rudimentary math on the financial implications. I recognize the Minister said this was a draft. In my questions to the Minister yesterday, I asked about when you want to look at the true cost of government, in terms of the amount of money that they spend on accommodations. It has to be more than just employees. There are health boards, school boards, other agencies, NGOs, communities that get their funding entirely from the government, not to mention all the contractors and consultants that will just add that cost into their bill to the government.

So my question to the Minister is, as they fine tune this, if these are in fact just the first cut rudimentary figures, which it appears they are, will they be sharpening their pencils in terms of their calculations?

In terms of the $1,250,000, because with that big piece of the equation missing, it will affect the bottom line in terms of potential revenues. Thank you.

Mr. Handley.

Mr. Chairman, I did commit yesterday to try to pull a more accurate estimate of how much we as a government are paying directly and indirectly.

Directly, I mentioned it was six to eight percent, it worked out from our employees traveling. But we do give contributions, grants, and so on to government boards, agencies, other groups, including aboriginal organizations and so on.

To figure out how much they really spend on accommodation, we practically have to go to everyone of them and get them to give us an estimate because we have no way of knowing exactly how they spent their money. In a contribution, they do not have to account back to us for that kind of detail. I will do that and we hope to do that as we do the consultation, but I certainly will not have that for tomorrow. Thank you.

Mr. Miltenberger.

Thank you, Mr. Chairman. I do not expect that by tomorrow. Once again, I am concerned, with my four and a half years experience with financial projections, if in fact you project $1,250,000 based on just government employees.

The reality is, for example, in Health and Social Services, there is over 60 or 70 percent of their budget right off the top. The two largest departments in government are about $175 million. The majority of their budget, right off the top, goes to the health boards and school boards. So it is a significant chunk of the government's budget.

There is going to be an upward pressure on all of their costs, so I am concerned that if the figures are not accurate, if we accept his projection through rose colored glasses and then the money is not raised, the commitment and the expectation of the tourism sector is that they are going to get a certain amount of money, $1 million a year, injected into their sector. If that does not come true, because we have not done our numbers tightly enough, then it reflects badly on us all.

I am not necessarily opposed to this. I just want to make sure that given the test of even a short period of time, that these things will stand scrutiny and that question is being asked.

So I just would assume the government is bringing forward a tax increase and would have quite tight numbers. This document is very broad and general and rudimentary from what I can see. Thank you.

Mr. Handley.

Thank you, Mr. Chairman. Because we have no history in this, we really have to work on estimates. So it is very much based on our own estimates, our own surveys, our access to Stats Canada information. That is the best information we have to work with.

We will do everything we can to be as accurate and as tight as we possibly can. I have confidence in my people in Finance, who have the expertise in these things, that they will do it very well. If anything, just to be on the safe side, then we are airing on the conservative side and we are not going out wild in terms of our projections.

I think our department can do a good job of being reasonably accurate. Thank you.

Mr. Miltenberger.

Just my final comment or suggestion would be, just for the sake of these calculations, would it be possible to consider doing an account of all the employees, health board employees, and school board employees?

You say you are on the safe side and being conservative, then even municipal employees, and factor them in and see how that changes the calculation. I just think if you do not include those, these numbers are significantly off. Thank you.

Mr. Handley.

Mr. Chairman, I guess the challenge that we have in doing that is if we take education boards, for example, not many of the education board employees, teachers, travel as part of their job. A high percentage do not. The superintendent travels, a few specialists travel, the board travels, but we would have to go to every education board, every health board, and so on, to work that out.

I think there is a misconception that government people are out there traveling all the time and all the hotels are full. That is not the case. Most employees, including board employees, are in occupations where they pretty much are in the community, not doing a lot of traveling, except for their vacation. Thank you.

Mr. Miltenberger.

Thank you, Mr. Chairman. I suppose, at this point, given the lack of data, that is an assumption, since nobody can speak one way or the other to that. The Minister, on the front page, takes some very big numbers and makes some very broad assumptions; 60 percent in the west, 'x' number here, 'x' number there. All I am suggesting is rather than leave out that big chunk of the population of the government employees, in that chunk of the government's travel budget, they should make the same kind of broad assumption to include them.

You can decide how you will, what that would be, but it is not the same. If you look at their budgets, just pick a figure for the sake of being conservative and assume, like you do here, you round things off. You take big percentages and carve them in two. Do the same, is all I am suggesting, and that is my one big criticism of this tax at this point. Just from a procedural point of view and an equation point of view, there seems to be a chunk missing.

So I am not asking you to go count every health board, I am suggesting you do the same thing you did so far. Take the big percentages, and make some assumptions. If you are going to err on the side of safety, do not overlook that portion of the budget. Thank you.

Mr. Handley.

Mr. Chairman, we will undertake to be as accurate as we can in doing this. The amount that we have included here for duty travel, the $1.5 million to $2 million, is based on actual duty travel that people have to report as government employees. When we start bringing in the board travels, it becomes more and more of an estimate.

I understand what the Member is saying and I will undertake to do the best we can, given the information that we have, to be as accurate as possible. Thank you.

Mr. Miltenberger.

Thank you. That is all, Mr. Chairman.

Mr. Dent.

Thank you, Mr. Chairman. I ran out of time just after getting into the fuel tax issue with the Minister and I asked him earlier if he would consider implementing a per litre tax that was equal to the Yukon or Nunavut as opposed to what we now have. He said, at the time, that because of our deficit situation, he did not feel it was right to commit to lower taxes equal to those in the Yukon or Nunavut. In the media over the past few days, and in responses to Members just recently in this House, since our exchange earlier, I have heard him talking about the possibility of cutting personal and corporate taxes because of cuts in Ontario and Alberta. Why would we consider cutting taxes because Alberta and Ontario have lower taxes than we do, but not because Nunavut and the Yukon have lower taxes than we do?

Minister of Finance.

Mr. Chairman, we really do have to keep in mind our competitive position with the other jurisdictions across Canada. I think the fuel tax that we collect is really quite competitive with elsewhere in the country. When I talk about the need to be competitive and the need to possibly lower taxes, I am talking about a much broader picture than that.

For example, if Alberta has a 10.5 flat tax, we have to stay competitive with Alberta in personal income tax and the same with corporate taxes. The broader cost of doing business here. It may be possible in the future, as we look at this whole issue of competitiveness with the rest of Canada, that fuel taxes could be factored in there. At this point I am not prepared to change our tax on fuel to match the effect of Nunavut's because they do not have a highway, or match the Yukon's and do that one in isolation. We have to look at the big picture and look at the competitiveness. It might be better to lower personal income tax. That may be a fairer way of doing it. That gives everyone who is working an income benefit, maybe more fair to do a tax credit increase. Those are options we have to look at. I am not closing the door to this forever I am just saying that I could not see changing the fuel tax today. Thank you.

Mr. Dent.

Thank you, Mr. Chairman. I guess I would just point out that reducing the fuel tax will have more of an impact on the cost of living on people in the smaller communities than will typically reducing the personal and corporate income taxes. Earlier today, we heard Mr. Nitah talking about the economic benefits are not being felt in other areas. This would be an opportunity to reduce the cost of living in those areas if we were to bring that tax down as opposed to the personal income tax and the corporate tax. This would impact on those hunters, trappers and fishermen who are probably not too dramatically impacted by cuts in personal income tax or corporate tax. I will leave that for another day, Mr. Chairman.

I would just like to go back to briefly comment on the proposed hotel tax. During the campaign for election, I was asked one straight forward question quite often and that was, would I support the imposition of a sales tax? Mr. Chairman, I said no. A rose by any other name is still a rose. This so-called hotel tax is nothing more than a sales tax. It may be limited in its application but what is to stop it. If a million dollars is not enough this year, what is to stop us next year? Let us add to it. Let us tax fishing licenses. Let us tax airline seats. Sooner, rather than later, I am worried that we are going to have a full blown sales tax here in the Northwest Territories.

The Minister admitted that it was a sales tax in his response to Ms. Lee, when he said this was not a tax on operators. It would come out of the pockets of the tourists. I am not convinced it will be only the tourists that he is referring to. I think he means southern tourists when he says that. As I pointed out earlier, it will also impact people from smaller communities who travel to Inuvik, Hay River, Yellowknife, to accompany their relatives who have to seek medical attention in those communities. Obviously, Mr. Handley was not asked the same question about a sales tax during the campaign, because I cannot believe that he would have agreed at the time not to bring in a sales tax and then bring this one forward.

In responding to Ms. Lee, he said that he was prepared to listen to suggestions about where we could get this money. I have to say that, Mr. Chairman, Ms. Lee is right. At the end of the day, we will find that much of the new money that we bring in with this tax, is in fact a reallocation from departments because of travel by government employees or funded agencies of this government.

Again, during the campaign, I was asked how would you get more money into the promotion of tourism? That was one of the things that I said I wanted to see. Quite clearly during the campaign, I said that I would like to see a reallocation of dollars within Resources Wildlife and Economic Development. So whether it takes a reallocation of the $7.6 million that we have in trade and investment or whether it takes some of the money that we have otherwise allocated to the Northwest Territories Development Corporation, the net amount of money that we are going to realize from this tax is not big enough to go through the hassle of setting it up. I encourage the Minister to reconsider and to invest in tourism by finding monies from within to reallocate. Thank you, Mr. Chairman.

Mr. Handley

Mr. Chairman, the only thing I could say is that there is an awful lot of speculation of where this tax is going to come from, from a lot of people. I think we need, through the consultation process, more time to do some research to figure out exactly where the tax is going to come from. I anticipate that if we are successful in our plan to invest in tourism and to have more tourists here, more will come from tourist pockets. In terms of reallocation, I cannot say much. It is easy to say that but at the same time we can only reallocate so many ways and eventually things start to break apart. Thank you, Mr. Chairman.

Thank you, Mr. Minister. General comments. Just a reminder to Members we are not allowed to flash placards or notes, which is a form of influence. Detail. On page 3-9, directorate, operation expense, total operations expense, $1,112,000.

Agreed? Treasury, operation expense, total operations expense, $7,431,000. Mr. Roland.

Thank you, Mr. Chairman. Can the Minister inform us as to what are the projections of the interest rates? In his opening comments, he referred to an increase to pay for increased borrowing costs. Is there a projection here knowing our situation?

Again, the Minister is saying that one of the other areas is going to receive our borrowing limit raised, and that will only add to this. So right now, what is the projection of the department? Thank you.

Mr. Handley

Thank you, Mr. Chairman. I will ask the deputy minister to answer that detail. Thank you.

Ms. Melhorn.

Mr. Roland.

Thank you, Mr. Chairman. What kind of an increase is this compared to previous years? Thank you.

Ms. Melhorn.

Mr. Roland.

Thank you, Mr. Chairman. So basically almost on a yearly basis we are seeing over a million dollar increase in the area of short-term borrowing. Is part of that not only due to interest rate, but because we are borrowing sooner in the fiscal year as well?

Mr. Handley

Mr. Chairman, yes, the experience in the last few years has been that we are borrowing sooner. So that does have an impact on it. Thank you.

Mr. Roland.

Thank you, Mr. Chairman. Again, that just raises, as I stated earlier in my opening comments, a concern with the borrowing we are going to have to do as a government to continue on with delivery of program services as we know them to date. We have raised concerns before of the growth, and I know with this department is mainly on the revenue side, so I will save my questions for the Financial Management Board Secretariat. Thank you.

Thank you. Treasury, operation expense, total operation expense, $7,431,000. Agreed?

Fiscal policy, operation expense, total operation expense, $735,000.