Mr. Bell.

Thank you, Mr. Chairman. I know the Minister is also looking at personal income tax and revising the system. Other than the income tax credit, the northern tax credit, what about considering drastically lowering our personal income tax in order to offset some of the high costs of living here and offset some of the other realities that we may pay, such as a high payroll tax and other things? Could we look at reducing tax on individuals?

The Minister of Finance, Mr. Handley.

It does not matter whether you give it to people as a tax credit or whether you lower their income tax, it all works out to the same thing. We did say that we want to move towards a tax on income system. At the same time as we do that, that could be a good opportunity to look at completely revising our personal income tax system in the North to have something that is more designed for our northern environment, our northern situation.

I think there are many creative things we can do as we begin to look at revising the whole personal income tax system. I am not talking about raising taxes. I am talking more about creative ways of developing incentives for people to be here and continue to pay their taxes here. Thank you.

Revenues, recoveries and transfer payments, Mr. Bell.

Thank you. I just want to make one further point. To the Minister's suggestion that there is no difference between a tax credit and lower tax rates, in reality I would agree with him. At the end of the day, it is identically the same thing. I think when you look at a comparison of tax rates across the country, you look at charts and you are an employee for a large company thinking of moving to the Northwest Territories, they are looking at various regions of the country they might live in.

You always see these charts and they always compare tax rates. If there is an asterisk beside one and you go to the bottom of the ledger to figure out what it means, I think that it is different. I think people do compare the numbers. They look at a provincial tax rate of 11 percent compared to nine and they make assumptions based on that. You do not see the tax credits.

The same for the small business tax rate. We compare ourselves to Alberta tax credits on employment or infrastructure investment or any other kind of tax credit that might exist in the province. Soon it gets lost in the shuffle and just talks about the final numbers, the nine or the 11. So I think that is something we might want to look at when we talk about whether or not it is even worthwhile looking at our tax tables, because I think it probably is.

Mr. Minister.

Mr. Chairman, the only thing that I will say is I look forward to a lot of good discussions on the whole issue of developing a northern tax for our people. There are a lot of good suggestions that we can deal with. Thank you.

Revenues, recoveries and transfer payments. Mr. Roland.

Thank you, Mr. Chairman. Just in the area of revenues in the tax area, what was the impact when the federal government lowered the personal income tax rate? What was the impact on our revenues?

The Minister of Finance, Mr. Handley.

Mr. Chairman, it had about approximately a $5 million impact, but then we got about $4 million back on the grant. The net amount is roughly $1 million. Thank you.

Mr. Roland.

Thank you, Mr. Chairman. So that is identified here? The $54 million personal income tax that is identified with the reduction through the federal government and the corresponding increase through the grant of Canada of $489 million?

The Minister of Finance, Mr. Handley.

Yes, Mr. Chairman, it is taken into consideration.

Mr. Roland.

Thank you, Mr. Chairman. Again in the personal income tax area, the Minister is looking at an advisory committee and talking of delinking from the federal government. I believe at that point, we would be looking at what they call a TONI or the tax on net income. What impact would that have on the situation as we view it now?

The Minister of Finance, Mr. Handley.

Mr. Chairman, the impact that it would have would be entirely in our hands. We could move on a tax on net income and change nothing and just have it at the same rate. So it could be nothing or we could change it considerably. We would have a lot more flexibility to do things with it. We would have more flexibility in terms of the credit programs that we could put in place. It would give us more flexibility.

However, changing to a tax on income from our tax being a percentage of federal tax in itself does not change anything. We would have to make those decisions separately. The only difference is we would not be linked to the federal tax. If the federal government lowered their tax, in ours we would not necessarily lose revenue.

I think particularly as we move toward resource revenue sharing and so on and more of our own economy, then it is important to take that step. I should also mention that all of the provinces have gone to tax on income now. It is only the territories that have not. Thank you.

Mr. Roland.

Thank you, Mr. Chairman. As the Minister stated tax on income, tax on net income?

Mr. Minister.

Mr. Chairman, that is based on your taxable income. That is defined in the Income Tax Act. It is not just straight gross income. Thank you.