Thank you, Mr. Chairman. Bill 2 is an Act to Amend the Income Tax Act. It proposes to increase the NWT cost of living tax credit from its current levels, effective the 2001 tax year.
The cost of living tax credit was introduced as part of the NWT Personal Income Tax System in 1993. The credit is based on individual net income and the maximum refundable credit available is $645.
Bill 2 would increase the credit at all income levels, with the maximum credit rising to $822. On average, the credit will increase by about 27 percent. We estimate this change will reduce NWT residents' income taxes by $2.7 million in 2001.
This bill will provide NWT residents with some relief from rising costs. As I noted in the House last month, inflation here has been slightly lower than the national rate over the last few years. According to Statistics Canada, since 1992, the consumer price index increased 13.5 percent in Canada, compared to 11.2 percent in Yellowknife, the only NWT community where Statistics Canada measures price changes.
However, we know that the cost of many services and commodities are increasing. We also know that there will be further pressure on costs from initiatives, such as the proposed commercial vehicle permit fee. Members have expressed a number of concerns about the bill, asking, for example, how many residents would not have access to the credit because they do not file tax returns?
As we advised the Standing Committee on Governance and Economic Development, in 1999, the number of NWT tax filers and dependant spouses over 18 years of age actually exceed the estimated population over 18. This somewhat puzzling statistic results from the fact that the two numbers are based on different definitions of resident. Nonetheless, this provides compelling evidence that the vast majority of NWT residents file income tax returns?
Members have also expressed concern about the impact of the bill on low-income residents. The revised credit is based on the structure of the current credit, which is tied to income levels. However, the credit is based on a sliding scale, which means that lower income filers are eligible for a larger credit as a proportion of income than are higher income filers.
We should also recognize that this credit is by no means the only vehicle this government has in place to assist low-income families and individuals. The Government of the Northwest Territories provides social housing programs, income support, day care subsidies, fuel subsidies, and the NWT child benefit, to name just a few.
In fact, last month, the Honourable Jake Ootes, Minister of Education, Culture and Employment, announced that income assistance benefits would increase by $1.2 million this year. On average, the amount of money available to income support recipients for food will increase by 7.8 percent.
I fully support Members' concerns that we should be addressing the needs of low-income residents. However, there are many avenues for doing this. Furthermore, this credit is only one part of the NWT income tax system. This bill represents an effort by this government to implement, in a quick and administratively straightforward manner, a measure that will address some cost of living issues for NWT residents.
Broader issues must be addressed through a more thorough review of the income tax system, one that looks at rates and brackets as well as tax credits.
I will be bringing forward proposals for change once I have had an opportunity to review the recommendations of the Advisory Committee on Personal Income Taxation. I have also committed to reviewing these recommendations with Members before developing proposals for change.
If Bill 2 is passed by the end of July, NWT residents will see this tax relief reflected in the 2001 income tax returns they file next spring. As Members are aware, the Canada Customs and Revenue Agency, which administers the NWT personal income tax on our behalf, requires final notice of any tax change affecting the 2001 tax year by August at the latest.
Thank you, Mr. Chairman. I would be pleased to answer questions from committee members. Thank you.