Thank you, Mr. Speaker. Mr. Speaker, as Premier Kakfwi noted yesterday, it is timely that, as Minister of Finance, I provide Members with a brief fiscal and economic update of the Northwest Territories.
I want to begin by making a few observations about our current economic situation compared with only a few years ago:
- • During the winter of 1999, the territorial unemployment rate stood at 13.7 percent. The most recent results from Statistics Canada's new monthly NWT Labour Force Survey show an unemployment rate of 8.5 percent.
- • The number of income support beneficiaries in the Northwest Territories fell 14 percent in 2000 compared with 1999. For the first three months of 2001, the number of beneficiaries was 34 percent lower than the same period in 2000.
- • The value of retail trade in the first three months of this year was more than 11 percent higher than in the same three months last year.
- • The value of wholesale trade over the same period increased 30 percent.
- • We anticipate that capital investment in the Northwest Territories this year will be about $1.1 billion, compared with $537 million in 2000.
As these figures illustrate, the Northwest Territories' economy is very healthy. Residents are working and business is growing. The prospects for continued growth are excellent. This is because the Northwest Territories is rich in natural resources -- in particular, oil and gas, hydro potential, diamonds and other minerals -- for which there is a strong demand.
We must develop these resources responsibly, ensuring sound environmental practices and sustainable development approaches. All NWT residents must realize real benefits from development, regardless of where it occurs. However, we must also recognize that without development of these resources, the economic growth that we are currently enjoying will slow dramatically. By working together we can create the right conditions for responsible development to proceed.
The regional and community impacts of development must also be anticipated, planned for, and managed. As development proceeds, there will be more than enough jobs available. There will be ample business opportunities for NWT firms. However, if we are to take advantage of these job and business opportunities, we must prepare now.
The first requirement in preparing for development is to make the investments needed to allow Northerners to receive the maximum benefits -- investments in training, in business development and management, and to minimize any negative social impacts. I am pleased to report that short-term improvements in our funding under the Formula Financing Agreement will allow us to make some of the more modest investments of this nature that were called for in Towards a Better Tomorrow and in the complementary strategies and plans we have developed since taking office. Bearing in mind that we are still waiting for confirmation of final numbers, and recognizing that other factors may impact both our revenue and expenditure estimates, we anticipate that our fiscal results from last year will show an increase in the reported annual surplus of about $60 million, while the results for this year are anticipated to be $10 million better than forecast.
These improvements in our short-term fiscal results are very welcome, and will help us address some short-term needs. However, they do not solve our long-term fiscal challenge -- the fact that this government does not have the long-term revenue capacity to meet either the growing needs of our population for essential programs and services, or the needs associated with resource development.
The February budget address outlined this government's overall fiscal strategy. We said then that the best way to control our future was to create it. We embarked on a strategy of making the investments required now to ensure our residents receive the maximum benefit from resource development. We felt that by making these investments now there would be a payback, both in terms of economic growth and social benefits. We were, and still are, prepared to borrow at reasonable and fiscally sustainable levels to finance these investments on the assumption that future development-related revenues will accrue to the government to allow it to pay this money back. However, this strategy depends on all of us working together to promote and manage responsible development, and on market conditions staying right to attract the billions of dollars of outside investment needed to make development happen.
Government departments are currently in the process of putting together the first drafts of next year's business plans based on this existing fiscal strategy. These plans will outline the continuing responses to the goals and strategies set out in Towards a Better Tomorrow, as well as the resources needed to carry them out. They will also outline the resources needed simply to keep pace with the growing demands on existing programs.
I anticipate that the needs identified will far outstrip the resources available and will even exceed what we may be prepared to finance through debt. This means that unless other sources of revenues are identified, choices must be made. These choices will be difficult, but the alternative is to hit the debt wall sooner rather than later. The simple reality is that governments need revenues to pay for programs and services. This is a fact of life for our government and will be a fact of life for future aboriginal governments when they take over a share of program and service delivery responsibility.
Mr. Speaker, the obvious source of new revenues are those which will be generated from the development of the NWT's resources. Our projections indicate that with three diamond mines, existing oil and gas activity and a Mackenzie Valley pipeline accessing the Beaufort Delta's natural gas, royalty revenues alone will average $340 million annually over the next 30 years. This forecast does not include the corporate income taxes that would also be generated.
However, northern governments have no access to royalties, and tax revenues are subject to offsets against our federal transfers, so our net fiscal benefit is limited. NWT governments must receive access to a fair share of royalties generated from the development of NWT resources.
However, there are two conditions which must be met if northern governments, both aboriginal and territorial, are to receive the fiscal benefits of development.
First, development needs to happen. No royalties or taxes will be generated in the absence of development.
Second, a transfer agreement on devolution and resource revenue sharing must be completed as soon as possible. This is the only way that Northwest Territories governments can directly access the dollars needed to deliver essential programs and services to our residents. The Memorandum of Intent endorsed in Inuvik last month at the Intergovernmental Forum is an important step in this process. The next step is for the parties to seek instructions, appoint negotiators and establish a formal negotiation process. We are optimistic that this can occur prior to the March 31, 2002 target set out in the Memorandum of Intent.
Mr. Speaker, I would now like to provide an update on two tax initiatives I spoke about in February.
In the February budget address, I announced that effective the 2003 tax year, the GNWT intended to changes its personal income tax regime from one based on tax on tax to one based on tax on income. Tax on income refers to the fact that territorial tax would be calculated as a percentage of taxable income rather than as a percentage of basic federal tax, as is now the case.
In allowing us to structure our own tax brackets, rates and credits, moving to tax on income will give the GNWT more flexibility to design our tax system to meet the needs of NWT residents. However, many of the characteristics of the existing system will not change. We will continue to use the federal definition of taxable income. The Canada Customs and Revenue Agency will still administer our income tax and NWT residents will still file only one income tax return.
In February, I also announced my intention to establish a Minister's Advisory Committee on Personal Income Taxation, to consider options open to us under the new system and make recommendations to me by the fall.
As of the 2001 tax year, all provincial governments will have moved to tax on income. The federal government, for reasons of harmonization of the national tax system and administrative simplicity, would like the entire country to be on one system.
The Honourable Paul Martin, Minister of Finance for Canada, has requested that the Northwest Territories move to tax on income effective 2001. Recognizing the strain such a move would place on our resources, Minister Martin has offered to provide the necessary technical assistance and to reimburse us for our transition costs if we move to tax on income in 2001.
I am announcing, therefore, that the time frame for implementation of tax on income will be accelerated to 2001. I intend to introduce the necessary legislation in the fall session of this Assembly.
However, in proposing the change to tax on income for 2001, I am making a number of commitments.
First, there will be no change in income tax rates as a result of this change. In moving to tax on income in 2001, we will simply convert existing personal income tax rates. Individuals will pay no more tax in 2001 than they would under the current system. We will be providing information to NWT residents to explain the change to tax on income and what it will mean for them.
Second, if the federal government lowers its income tax rates for 2002, I will bring forward the legislation necessary to amend NWT tax rates to ensure that NWT residents pay no more in NWT income tax than they would under the current system.
Third, as I committed in February, the Minister's Advisory Committee will be established as previously outlined, and directed to come forward with recommendations for change to be implemented in 2003.
Mr. Speaker, I am pleased to announce the formation of this committee. I have asked five northern residents with experience and expertise in this area to review our personal income tax system and provide me with recommendations by this fall. The committee members are Mr. Andy Wong, of Yellowknife; Mr. Barry Ashton, of Hay River; Mr. George Dimsdale, of Fort Smith; Mr. Danny Yakeleya, of Tulita; and Mr. Derek Lindsay, of Inuvik. Mr. Wong has agreed to serve as the chair of the committee. These individuals have taken on a daunting task -- to review our personal income tax system, given the flexibility provided by tax on income, and make recommendations for a made-in-the-NWT system.
Later today, at the appropriate time, I will be tabling the terms of reference for the committee.
Mr. Speaker, this government is well aware that NWT residents face a higher cost of living than in southern Canada. Although inflation here has been slightly lower than in Canada as a whole for the last few years, we know that the cost of groceries, of fuel, of travel, and of many other services and commodities have been increasing, particularly those items affected by rising fuel costs. Experts are predicting that crude oil prices will moderate by next year, but the cost of fuel is expected to stay high in the near term. We also know that, over the next year, there will be further pressures on costs. The proposed new commercial vehicle toll will impact on transportation costs. Airline fuel surcharges will add to the cost of travel.
Since 1993, the GNWT has had a cost of living tax credit as part of its personal income tax system. The credit is based on individual net income and the maximum refundable tax credit available is $645.
I am very pleased to announce that I will be introducing legislation during this session to amend the Income Tax Act to increase the cost of living tax credit. Effective the 2001 tax year, the credit will be increased at all income levels, with the maximum credit rising by $177 to $822.
We estimate that this change will reduce NWT residents' taxes by $2.7 million in 2001.
In addition, Mr. Speaker, this government will be addressing rising living costs faced by those who may not be eligible to receive the credit. Later this session, Minister of Education, Culture and Employment, the Honourable Jake Ootes, will announce some changes to income assistance benefits. The Department of Education, Culture and Employment will also be undertaking, in conjunction with the NWT Bureau of Statistics, research into food basket prices in 2002 and will be making further recommendations based on that research.
In conclusion, Mr. Speaker, I want to reiterate my optimism about the NWT economy. We have many advantages in this Territory that can provide meaningful, long-term benefits to northern residents in the form of job opportunities, business opportunities and fiscal dividends.
However, Northerners must take the steps necessary to ensure these benefits are realized. Thank you, Mr. Speaker.
-- Applause