Thank you, Madam Chair. The Standing Committee on Accountability and Oversight conducted public reviews of Bill 2, An Act to Amend the Income Tax Act, on March 25 and 26, 2004. The committee would like to thank all the witnesses for their submissions which were made on very short notice. The committee would also like to thank the Minister and his staff for presenting the bill.
The committee was very concerned about the short amount of time allowed for the public to review and respond to this bill. Members appreciate that there were special circumstances in this case due to the recent territorial election which did not allow time for the usual opportunity to review and discuss draft business plans in advance for considering the budget. Further, the government is required to notify the federal Minister of National Revenue of changes to tax rates before April 15, 2004.
The committee wishes to put the government on notice that it will now allow short timeframes for public review to become the ordinary course of business for the 15th Assembly. The Minister acknowledged the concern and advised that he will endeavour to bring initiatives before the committee in a more timely manner in the future. Members expect the rest of Cabinet to adhere to the same standard.
Bill 2 proposes to raise the large corporate tax rate from 12 percent to 15 percent beginning with the 2004 tax year. Committee heard opposition to Bill 2 from Mr. David Connelly of the Yellowknife Chamber of Commerce, Mr. Mike Vaydik of the NWT and Nunavut Chamber of Mines, and Mr. Dave Tucker of the NWT Construction Association. All three presenters voiced concerns about the increase to the already high cost of doing business in the North and the impact it may have on the northern economy and businesses. The witnesses rightly pointed out that the business contributes a great deal to the North through jobs, training and spending. They also warn that the increase to the tax rate may encourage some businesses to rearrange their affairs in order to file some of the in income in other jurisdictions with lower tax rates.
In contrast, the committee heard support for Bill 2 from a representative of Alternatives North from Ms. Suzette Montrieul. Alternatives North does not believe the proposed tax increase is unreasonable and considers maintaining the GNWT's social programs to be more important than maintaining low tax rates. Ms. Montrieul pointed to a recent survey by the Centre for Research and Information on Canada that suggested most Canadians, including northerners, consider money for social programs like education and health care a higher priority than cutting taxes or reducing debt. Ms. Montrieul also pointed out that even with the increase to 14 percent, the NWT will still have the fifth-lowest large corporate tax rate in Canada. Further, unlike most other Canadian jurisdictions, the NWT does not have a tax on capital. As Ms. Montrieul stated, the NWT cannot hope to compete with its neighbour, Alberta, which is able to maintain lower tax rates as a result of the substantial oil and gas royalties it enjoys.
The committee finds it regrettable that the current fiscal situation has resulted in the government bringing this tax increase forward, however Members agree with Ms. Montrieul that maintaining social programs is the priority. The reality is that if corporate taxes remain at 12 percent, the GNWT will suffer a net loss as a result of the formula Canada uses to calculate its grant to the GNWT if the federal government does not change its approach in the next year. Members, therefore, believe that an increase is unavoidable.
Members wholeheartedly agree with Mr. Connelly, Mr. Vaydik and Mr. Tucker that the underlying issue is our formula financing agreement with Ottawa which is, as Mr. Vaydik stated, "ridiculous." All three witnesses offered their assistance in working with the GNWT to lobby Ottawa for a reasonable formula. The committee strongly encourages the government to take them up on this generous offer.
This concludes the committee's opening comments on Bill 2. Individual Members may have additional questions or comments as we proceed. Following the committee's review, a motion was carried to report Bill 2, An Act to Amend the Income Tax Act, to the Assembly as ready for Committee of the Whole. Thank you, Madam Chair.