Thank you, Mr. Antoine. Item 13, tabling of documents. Item 14, notices of motion. Item 15, notices of motion for first reading of bills. Item 16, motions. The honourable Member for Great Slave, Mr. Braden.

Thank you, Mr. Speaker. I seek unanimous consent to proceed with Motion 9-14(4), on extended adjournment, that I gave notice of yesterday. Thank you, Mr. Speaker.

Thank you. The honourable Member is seeking unanimous consent to proceed with Motion 9-14(4). Are there any nays? There are no nays. You may proceed, Mr. Braden.

Thank you, Mr. Speaker.

I MOVE, seconded by the honourable Member for Weledeh, that notwithstanding Rule 4, that when this House adjourns on Wednesday, July 25, 2001, it shall be adjourned until Tuesday, October 23, 2001;

AND FURTHER, that at any time prior to October 23, 2001, if the Speaker is satisfied, after consultation with the Executive Council and Members of the Legislative Assembly, that the public interest requires that the House should meet at an earlier time during the adjournment, the Speaker may give notice and there upon the House shall meet at the time stated in such notice and shall transact its business as it has been duly adjourned to that time.

Thank you, Mr. Speaker.

Thank you, Mr. Braden. We have a motion on the floor. The motion is in order. To the motion. The honourable Member for Frame Lake, Mr. Dent.

Thank you, Mr. Speaker. Mr. Speaker,

I MOVE, seconded by the honourable Member for Nahendeh, that the motion be amended by replacing the date of Wednesday, July 25, 2001, with Tuesday, July 24, 2001.

Thank you. The motion is in order. To the motion to amend. Question has been called. All those in favour? Thank you. All those opposed? The motion is carried. To the motion as amended. Question has been called. All those in favour, please signify. Thank you. All those opposed? The motion, as amended, has been carried. Item 16, motions. Item 17, first reading of bills. Item 18, second reading of bills. Item 19, consideration in committee of the whole of bills and other matters: Ministers' Statements 1, 3, 4 and Bill 2, with Mr. Krutko in the chair.

Welcome to the committee of the whole. We have several items to deal with: Minister's Statement 1-14(4), Minister's Statement 3-14(4), Minister's Statement 4-14(4), and Bill 2. What is the wish of the committee? Mr. Dent.

Mr. Chairman, I would like to propose that we consider Bill 2.

Does the committee agree?

Agreed, so with that we will take a short break and resume with Bill 2.

-- Break

I would like to call the committee back to order. We are in committee of the whole, dealing with Bill 2, An Act to Amend the Income Tax Act. At this time, I would like to ask the Minister responsible for introducing the bill if he has any opening comments.

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.

Thank you, Mr. Handley. At this time, I would like to ask the chair of the standing committee that reviewed this bill if he has any opening comments. Mr. Roland.

Thank you, Mr. Chairman. The Standing Committee on Governance and Economic Development conducted a public review of Bill 2, An Act to Amend the Income Tax Act, on July 13, 2001. The committee would like to thank the Minister of Finance and his officials for presenting the bill. The bill would amend subsection 4.1(2) by increasing the cost of living tax credit from:

• • 1.25 percent to 1.60 percent of an individual's net income, if the individual's net income does not exceed $12,000;
• • $150 plus one percent to $192 plus 1.25 percent of the amount by which the individual's net income exceeds $12,000, if the individual's net income exceeds $12,000 but does not exceed $48,000;
• • $510 plus 0.75 percent to $642 plus one percent of the amount by which the individual's net income exceeds $48,000, if the individual's net income exceeds $48,000, but does not exceed $66,000; and
• • $645 to $822 where the individual's net income exceeds $66,000.

These proposed amendments would be effective for the 2001 and subsequent tax years.

The committee noted that the benefit to individuals in all three income levels varies only slightly between 26 percent and 28 percent. Under the current and proposed cost of living tax credit systems, it initially appears that no one group benefits significantly better or worse than persons of a different group on a percentage basis. Members were concerned that the proposed amendments would continue to favour high income earners as, in dollar terms, higher income earners will be entitled to receive a larger cost of living tax credit, albeit at a diminishing rate. The committee noted that this inequity is especially apparent when one considers that increased costs for a basic basket of essential goods affects lower income earners more as it requires a greater percentage of their income than higher income earners.

In addition, families receive no additional benefit under the current or proposed cost of living tax credit systems. The cost of living tax credit is determined solely on an individual's net income.

Furthermore, there is no additional credit for a married couple with one income earner, or a married couple with children with one income earner. Members found that families with two income earners will receive a combined cost of living tax credit which is the same as a family with one income earner, assuming the same level of net income for both families, provided that the combined net income of each family does not exceed the high income threshold of $66,000.

The committee was also concerned that the proposed amendments would continue to favour dual-income families. Committee members discovered that an anomaly occurs when the combined net income of the family does exceed $66,000. It is then possible that the two-income family could receive a larger combined cost of living tax credit than the one-income earner family, who would be capped once income reached $66,000.

After initial discussions with the Minister and his staff, the committee invited input from the public. Ms. Barbara Hood, speaking as a private individual, who also serves as the executive director of the Northwest Territories Seniors' Society, agreed with a suggestion that a $20,000 lower income threshold be established and requested that an additional one-time payment of $250 be given to the people in that bracket. This would more equitably assist pensioners, the unemployed and other low-income earners.

However, the Minister replied that there is not enough time to consider the changes for the 2001 tax year as the proposal by the Northwest Territories Seniors' Society and the committee would have to be:

• • considered by the Financial Management Board,
• • redrafted by the Department of Justice, and
• • meet the August deadline established by the Canadian Customs and Revenue Agency for changes for the 2001 tax year.

The Minister further stated that the proposed change would entail additional costs for the government and added that he would submit this suggestion to the government's Advisory Committee on Personal Income Taxation for further consideration.

A member responded that "... this government snapped its fingers and in less than a week passed a $57,000,000 supplementary appropriation, so you cannot tell me there is no money within the budget, or you are not able to do this ... if this government is serious about improving the lives of the people of the Northwest Territories, this is our opportunity to do it."

The committee gave notice that when consideration of the bill proceeds in the committee of the whole, it will introduce a motion requesting the Minister to explore fiscal options to improve the standard of living for fixed: low-income or no-income individuals and families.

Mr. Chairman, after extensive deliberation and in recognition of the short time left to incorporate this tax credit for the 2001 tax year, a motion was carried by a majority of members to report Bill 2, An Act to Amend the Income Tax Act, to the Assembly as ready for the committee of the whole. Additional comments or questions by Members may be posed as we proceed. Thank you, Mr. Chairman.

Thank you, Mr. Roland. At this time I would like to ask the Minister if he will be bringing in any witnesses.

Yes I will, Mr. Chairman.

Does the committee agree?

Sergeant-at-Arms, can you escort the witnesses in.

Mr. Minister, please introduce your witnesses for the record.

Mr. Chairman, with me are Margaret Melhorn, deputy minister of Finance and John Munroe, director of fiscal policy for the Department of Finance. Thank you,