Thank you, Madam Chair. I do have some comments on Bill 6, An Act to Amend the Payroll Tax Act, 1993 and the Income Tax Act.
Thank you for the opportunity to present Bill 6, the government's proposed changes to the Payroll Tax Act, 1993 and the Income Tax Act.
In my budget address, I proposed an increase to the payroll tax rate from one percent to two percent effective January 1, 2005. To minimize the negative impacts of this change on lower income NWT residents, I also proposed that the personal income tax rate for the lowest bracket be decreased from 7.2 percent to 5.9 percent and the second lowest bracket be decreased from 9.9 percent to 8.6 percent also as of January 1, 2005. Furthermore, the cost of living tax credit will be increased from 1.6 percent to 2.6 percent of income up to $12,000 and the minimum credit will be increased from $250 to $350 for singles and from $500 to $700 for couples. Bill 6 will accomplish these measures.
These tax measures will be effective in 2005. Because of this, the federal Minister of National Revenue will need to be advised of the changes to the Income Tax Act before October 15th of this year so they can be administered by the Canada Revenue Agency. In order for these changes to be implemented, they must be enacted by that date.
These tax measures are part of a package of revenue and spending measures necessary to meet our target of a balanced budget by 2006-07.
The change to the payroll tax rate from one percent to two percent is expected to raise $13.9 million annually. This would be partially offset by a $3.2 million increase in the cost of living tax credit and a $7.9 million decrease in personal income tax revenues.
The interrelationship between the payroll tax, personal income tax and cost of living tax credit means that some taxpayers will benefit from the changes and some will lose. Although each taxpayer's circumstances are unique, it is expected that most of those that have a total income of less than $66,000 and those who are self-employed or receiving pension income will benefit, while non-residents and most of those in the higher tax brackets will see an increase in tax paid.
The personal income tax impacts of Bill 3 and Bill 6 will result in the Northwest Territories' highest combined marginal tax rate for 2005 being set at 43.05 percent; well below the Canadian provincial average of 45.76 percent.
The GNWT stands to generate significant payroll tax revenues from the construction phase of the proposed Mackenzie Valley pipeline and new mine development. Although some of the payroll tax gains will be offset by increased cost of living tax credit payments, the offset depends on the number of workers who make the NWT their home.
These measures are necessary for long-term fiscal stability. They will contribute to our government's balanced approach to tackling our fiscal challenges; that is, both spending reallocations and revenue initiatives. These measures, coupled with the previous two revenue initiatives enacted in March, indicate that we are not relying solely on increased federal support to address our fiscal challenges, but recognize that we must bear some of the rising cost of the programs and services that we receive.
I would be pleased to answer any questions the committee has on these two measures.