Thank you, Madam Chair. There were a number of areas that we've built the business case on for meeting with our federal counterpart, and there were areas that we also worked with our other northern jurisdictions, the Yukon and Nunavut. One of the critical areas was the adequacy argument, as we call it. That term adequacy can be defined by any number of groups to meet their definition but, in our case, it was to deal with the five percent cut to our base that happened in 1996 and to have that restored. We feel that it has been restored in all of the other jurisdictions through the CHST transfers. In our case, because CHST transfers didn't affect us the same way, the federal government came in and said we'll take it out of your base to be treating you the same as every other province. By doing that, they impacted us in a couple of ways; one, when all the reductions across Canada were happening, that further impacted us because part of our formula is based on provincial and local spending patterns. So we had that to deal with on top of the five percent reduction to us. We feel that since then, the provinces have been brought back up to the number of 1996 CHST transfers, but that hasn't had the same effect on our expenditure base, and we've put that as our argument and one of the critical areas.
One of the other arguments and one that we continue to have is on the rebasing exercise of the formula. We feel that we are not getting the appropriate response out of the federal government and just the system itself isn't working as it was designed we feel, and the rebasing measures, our tax effort on residents. The federal government takes a measurement of all of the provinces and territories and comes up with an average in a number of areas. They measure us to that and they say that they feel that we can raise so much revenue here in the Northwest Territories based on those measurements they take across the other jurisdictions and we fall short of it and we take a penalty because of it.
The last rebasing exercise happened in 1992-93. It is supposed to happen every five years, but because of the creation of Nunavut, that threw out the numbers that we had as the Government of the Northwest Territories and Nunavut didn't have any numbers to go on. So it was agreed to by all parties that we would forego the rebasing exercise and redo that, and we are now up to that stage where we will be rebased. We accept that rebasing has to happen, but when you look at the numbers of 1992-93 to the rebasing year that we have solid numbers on, I believe 2001, 2001 is the final year of that exercise where they are using the figures. Let me be correct here, 2000-2001 figures, compared to '92-93 figures. We can show that in fact the Government of the Northwest Territories over those years has increased its tax effort by increasing rates and bringing in more revenue, and in fact over that time provinces have reduced their tax efforts. So we feel that, in taking that into consideration, we should actually have closed the gap between what the federal government considers is our tax effort and what we actually bring in for revenue. We feel that we should have closed that, and by closing that gap we should see a positive outcome to the rebasing exercise but, unfortunately, that is not the case. So we continue to put our business case forward and our arguments forward and are hoping for resolution to that area.
The other factor was on the GDP ceiling. Again, that was instituted back in 1990. What that did was if there were large spending patterns in jurisdictions, that would have meant a higher increase for us, that capped us, and that significantly impacted us in past years. That is the one area we can say we have got a positive result on. The federal government has agreed to remove that ceiling in other jurisdictions through the equalization formula the provinces get, so they have treated us in the same manner there.
One of the other areas we are working on is trying to enhance the economic incentive within our formula. Right now, for every dollar we earn in the Northwest Territories through our own source revenues, we get to keep 20 cents of that dollar. We are trying to bring that number up and work with the federal government. As we see it right now, with any new revenues we are getting we are losing a lot of those revenues through the formula back to the federal government. So that was one of the other key areas we were working on with the federal Finance department. Thank you.