Thank you, Mr. Chairman. I am here to present Bill 17, An Act to Amend the Income Tax Act. This bill is the result of our collaboration with the Department of Justice and the Canada Revenue Agency to ensure the NWT Income Tax Act remains harmonized with the federal act pursuant to the Tax Collection Agreement between the two governments.

Besides minor changes in terminology, the proposed amendments relate to the following:

1) revising definition of “adjusted income” for the

purpose of calculating territorial Child Tax Benefit;

2) Child Tax Benefit entitlements in a shared

custody situation;

3) deductions for taxable dividends as a

percentage of the grossed-up dividends;

4) deductions for corporations with foreign

investment income.

Since introducing the Universal Child Care Benefit (UCCB) in 2006 and the Registered Disability Savings Plans (RDSP) in 2008, the federal government has excluded income and repayment amounts from these sources in the calculation of the Canada Child Tax Benefit. Following other provinces and territories which have adopted a similar approach in calculating their respective provincial/territorial child benefits, Bill 17 proposes to replace the current definition of “adjusted income” with a new definition that has the same meaning as in the federal act for the purpose of calculating NWT Child Tax Benefit. Under this new definition, the NWT child benefit will not be reduced when parents receive the UCCB or income from a RDSP.

Under existing rules where two individuals share custody of a child, only one individual can receive the combined federal and territorial Child Tax Benefit for that child in a particular month.

The federal budget 2010 proposed to introduce the concept of a “shared custody” parent, and to allow each “shared custody” parent to receive one-half of the monthly Child Tax Benefit for the child. In this regard, Bill 17 proposes to introduce a similar provision respecting a “shared custody” parent, and to allow this parent to receive one-half of the monthly NWT Child Tax Benefit for the child.

Both the NWT and federal acts provide a dividend tax credit for investors receiving dividend income. Currently the territorial credit is defined as a fraction of the federal gross-up rate, and it must be changed whenever the federal gross-up rate changes. As federal corporate income tax rates will be reduced over the next three years, the federal gross-up rate will be changed as well. To avoid amending the NWT Income Tax Act every time there is a change in the federal gross-up rate, Bill 17 proposes to express the territorial credit as a percentage of the grossed-up dividend. The current credit level remains unaffected by this amended provision.

Lastly, Bill 17 proposes to amend the provision that deals with deductions for corporations with foreign investment income. A corporation that maintains a permanent establishment in the NWT can claim a foreign non-business tax credit for taxes paid to another country where it earned its non-business income. This credit, based on an allocation formula if the corporation also maintains a permanent establishment in other provinces and territories, prevents double taxation and reduces the NWT corporate income tax. Annual claims for this credit are not significant. For example, between 2006 and 2008, companies in the NWT claimed an average of $87,000 per year in the territorial foreign non-business tax credit. The federal government offers a similar credit with the intent that the corporation is required to claim the maximum amount for the federal credit first before it can claim the territorial

credit on any remaining foreign non-business tax. The amended provision ensures that the federal intent be followed, and that only taxable income that the corporation earned in Canada be included in the allocation formula mentioned earlier. Thank you.