Bill 6.

So is the wish of the committee that we would consider Bill 6 and Committee Report 5-15(3) concurrently first?

Thank you. I would like to ask Mr. Roland if he has opening comments.

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.

Thank you, Mr. Roland. At this time, I will ask Mr. Menicoche, as the chair of the Standing Committee on Accountability and Oversight, if he would like to provide the committee's review of this bill.

Thank you, Madam Chair. The Standing Committee on Accountability and Oversight is pleased to report on its review of Bill 6, An Act to Amend the Payroll Tax Act, 1993 and the Income Tax Act.

Committee Report 5-15(3) is a matter of record, Madam Chair, however Members of the standing committee may have additional comments on Bill 6 as we proceed here in Committee of the Whole. Thank you, Madam Chair.

Thank you, Mr. Menicoche. I would like to ask the Minister if he has witnesses he would like to bring into the Chamber.

Yes, Madam Chair, I do.

Does the committee agree?

Thank you. I will ask the Sergeant-at-Arms to escort the Minister's witnesses in.

Mr. Minister, for the record, would you introduce your witnesses, please?

Thank you, Madam Chair. To my immediate right is the deputy minister of the Department of Finance, Ms. Margaret Melhorn; to my immediate left is Ms. Rebecca Veinott from the Department of Justice; and, further to my right is Mr. Gerry Gagnon, manager of tax policy. Thank you.

Thank you, Mr. Roland. General comments on the bill? Mr. Braden.

Thank you, Madam Chair. I will speak in favour of the bill. As the committee's report noted, this is the last tax impact bill that this Assembly will deal with on the revenue initiatives in the 2004-05 budget address. It was presented to us very responsibly by the Minister in the budget when we looked at doing a number of things that were required or seemed to make good sense for us. Two things stand out for me in support of this bill, Madam Chair. One is that with our very limited ability to raise or generate a lot of our own revenues through taxes, we can only make very minor amendments in revenues compared to our overall requirements. We are a government that now spends over $1 billion, but we are within fractions of a percent of that overall impact with these tax measures, but we still have to try to make some effort, not only to the people of Canada but also to see where taxes can be fairly distributed. I think that's where this bill for me comes out on the right side. Although certainly there are some in the middle and higher income levels who are going to be losing something in a net way at the end of the year, there are more people who will gain from these tax measures than people who will lose. In that effect, Mr. Chairman, this does help people who don't have a lot of resources to get a little bit ahead of the game. Because of the impact of this, they will be left with a bit more cash in their pocket.

The other thing that causes me to want to support this is a bit on the optimistic side, but it is that continuing large-scale development will mean large numbers of non-resident workers who will be required here in the NWT. I would sure like to see a lot of them become residents in the NWT, but in reality there will not be a large resident population resulting from continuing diamond development and pipeline development. What the increases in the payroll tax will do potentially is generate many millions of dollars, tens of millions of dollars in potential revenue from the very large workforces that we anticipate coming up here.

So those essentially were my remarks, Mr. Chairman, in support of this. I have said in this assembly before and I will say it again today and I will say it again in the future that anything that is considered by this assembly that increases the cost of living or the cost of doing business has to be considered very, very carefully. I think in this case, we have done so and this bill has my support. Thank you.

Thank you, Mr. Braden. Mr. Roland, would you like to respond?

Thank you, Mr. Chairman. I would just like to thank the Member for his comments. We've covered the area fairly thoroughly and put out the information that we have on the estimates we've used. This being the third piece, it's one of the ones where we have an ability to ensure the lower income residents of the Northwest Territories don't feel the impact of the changes, and that's one of the considerations taken to this package. Any effort that we make in the sense of our own revenue sources impacts on us positively when we go to the federal government, through our tax effort in the formula situation we are in. Every little measure counts in helping our position. Thank you.

Thank you, Mr. Roland. Mr. Braden.

Mr. Chairman, if I were to put one question forward it would be to see if the Minister could give us a snapshot given that all our optimistic forecasts come to bear and we have projects like Snap Lake, like a Mackenzie River bridge, like a Mackenzie Valley pipeline come into reality. What kinds of revenues potentially could this payroll tax net for the NWT? Could you paint us a picture of that benefit?

Thank you, Mr. Braden. Mr. Roland.

Thank you, Mr. Chairman. There would be a number of factors we would have to take into consideration and look at what specific point of

time we would be looking at. For example if we used a total labour income over a 31-year span of looking at all the development, that's the building of the pipeline, the continuation of running that operation as well as our mining operations, we would look into the area of $2.5 billion being raised totally for income. You break that down into an annual income ranging of about $9 million to about $561 million, again that being total labour income. The estimates we've used, if the pipeline is to proceed, we would see a very large spike happening in about 2009. That range again is where you see the high numbers of about $561 million annually, and that being total labour income.

When you look at it and take the two percent off of that figure and that's how much we would generate on the payroll tax side. So it fluctuates. There is a spike year, but it would continue to grow from that point on. Thank you.

Thank you, Mr. Roland. Mr. Ramsay.

Thank you, Mr. Chairman. The Minister is well aware of my stand on tax initiatives. Being a new Member and only being here for six months, I don't think I have been given the opportunity, and I mentioned it during committee, that going through the draft main estimates, for all intents and purposes, was a waste of time. I don't think this government in six moths has made any clear indication to me that it's intent on cutting spending. I think that's the crux of our problem, Mr. Chairman, is our spending habits. I certainly am looking forward to the business planning process and going through that process with the Minister to try to identify some areas that I do believe this organization, the Government of the Northwest Territories, can indeed cut some spending and not have to dip into the pockets of its citizens, whether they are the high income earners or not. It costs enough to live in the Northwest Territories. I don't care what income tax bracket you are in; if you increase the cost of living here, we are going to have trouble attracting nurses, doctors, highly-skilled labour and the list goes on, Mr. Chairman. That causes me a great deal of concern.

The tax initiative looks like Robin Hood, much like the New Democratic Party platform here in the federal election, robbing from the rich and giving to the poor. It smacks of that. It's not something that I think is worthwhile doing. It just shouldn't be allowed to happen. I am going to voice my opposition to this happening. I was opposed to the other tax initiatives when they were introduced at the beginning of the year. Every time folks looked around, the government is trying to dip into people's pockets. To me, it's just the wrong thing to do and I don't understand why this government doesn't take a long, hard look and start looking at some of the sacred cows that are out there, like the size of our civil service. Mr. Chairman, every time I look around there are new positions sprouting up like mushrooms in every department in the government. You look at the newspaper on Monday, there are positions being filled left, right and centre and it has been allowed to grow unchecked, Mr. Chairman. That causes me a great deal of concern. I think we have to look at our own organization and streamline what we are doing as a government.

Another Member mentioned during a committee meeting that in 1999 the Government of the Northwest Territories, prior to division, had 3,300 employees and today we have 4,400 and we have half the territory. The budget in 1999, prior to division, was $1 billion. Today, five years later, it's $1 billion. To me, that smacks of overspending, Mr. Chairman. Like I said, I am opposed to this tax initiative. I think it's definitely the wrong thing to do and until we can take a good, hard look in the mirror and make some tough decisions on the size of our workforce and other sacred cows out there, the boards and agencies, and I know there has been some work in that regard, but to me it's just not the right thing to do no matter who has to pay it. You can sugar coat it all you want. It's the rich who are going to be paying more taxes. It doesn't matter to me, Mr. Chairman, who pays more taxes. The fact of the matter is that people that live in the Northwest Territories are paying more in taxes and that is the bottom line. This government is going into their pocket yet again without having the decency to look into their own organization first and that bothers me, Mr. Chairman. Thank you.