Proceedings of the Standing Senate Committee on
National Finance
Issue 11 - Evidence - Meeting of September 15, 2009
OTTAWA, Tuesday, September 15, 2009
The Standing Senate Committee on National Finance, to which was referred Bill S-227, An Act to amend the Income Tax Act and the Excise Tax Act (tax relief for Nunavik), met this day at 9:30 a.m. to give consideration to the bill.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: This is an important meeting to start our session. I would like to welcome you all back after our summer break.
[Translation]
This morning we begin our study of Bill S-227, an Act to amend the Income Tax Act and the Excise Tax Act (tax relief for Nunavik).
[English]
This is an example of an initiative by one of our colleagues, Senator Watt, in his capacity as a senator representing the northern area of Nunavik, Northern Quebec. He has initiated Bill S-227. Our meeting will have two parts, honourable senators. In the first hour today we will hear from the sponsor, Senator Watt; in the second hour, we will hear from officials of the Department of Finance.
Joining Senator Watt on the panel this morning is Pascal Charron. From the office of the Senate Law Clerk, we are joined by our good friend, Michel Patrice, Deputy Law Clerk and Parliamentary Counsel.
[Translation]
The last member of this morning's panel is Mr. Yves Normandin, President of Arctic Consultants Inc.
[English]
As always, when we have a presentation by our panel and by those who wish to make a presentation, I would ask honourable senators to keep their questions as concise as possible and the panel to keep their responses as concise as possible so that, in the hour that we have for this panel, we can get before us as many of the issues as we possibly can on this important piece of legislation.
Senator Watt, welcome. You have the floor, sir.
Hon. Charlie Watt, sponsor of the bill: I am pleased to meet with you this morning to discuss my proposed legislation on tax relief for Nunavik, a territory that covers 507,000 square kilometres of the Arctic region of Quebec. The area has 14 isolated coastal communities and a population of 11,627 people, of whom 90 per cent are Inuit.
Those villages are not connected to each other by road or rail, and there are no roads from Quebec to this northern region. They are served year round by two collectively owned Inuit airlines and two shipping companies, which are partially owned by the Inuit. All goods must be imported by air or by sea cargo during the summer melt. Consequently, construction material, food and basic supplies are scarce and very costly.
Geographic isolation, extreme climate and high construction costs all contribute to exceptionally high living expenses in this region. According to a 2006 Laval University study authored by Gérard Duhaime, a typical food basket worth $100 in Quebec City would cost $157 in Nunavik. Statistics are not available as to how we have fared during this recession.
When Makivik Corporation and the Kativik Regional Government came before Parliament in 1998, they described Nunavik's governance and taxation situation as follows:
The Inuit of Nunavik opted in the James Bay and Northern Quebec Agreement for municipal corporation status respecting community lands as opposed to Indian type reserve status, as well as to deal with administrative issues and public services through non-ethnic regional institutions.
The residents of Nunavik, including the Inuit are full fledged taxpayers, like almost every other Canadian. Unfortunately, the tax regime, as it currently exists does not take into consideration the isolation, the climate and the high cost of living in the region which distinguishes it from other parts of Canada. As a result, residents of Nunavik are forced to bear a much heavier tax burden than their counterparts in the more southern parts of the country.
Honourable senators, since that appearance in 1998, nothing has changed.
Unlike First Nations, the Inuit have never been exempt from paying taxes. As the community struggles with the more consumer-based economy, the issue of paying taxes has become increasingly problematic for our community members. As individuals are becoming more financially aware, they recognize the disparity of their situation compared to other First Nations and other Inuit communities.
Our lands and resources have been taken by the government. Our hunting rights have been regulated by the bureaucrats in the South, yet my people still have a need to eat and to provide for their families. I am frustrated and angry when I see the despair of my own people and their inability to provide for their families — not because of laziness or lack of skill, but because they are held accountable to southern rules that do not make sense in our context.
In my community, nutritious food is often unavailable, or it is too expensive. We do not have the option of looking for sale items. Mayor Johnny Oovaut, Sr., of Quaqtaq, said they pay $4 for one litre of milk. One can of frozen juice costs between $3 and $4. A bag of potato chips costs $19. Nutritious foods like milk, cheese and eggs are often spoiled on the shelf and are either not available or not affordable.
All of our big ticket items, such as washers, dryers and furniture, must be prepaid months in advance, with additional charges for shipping. Those who can are purchasing on credit. Personal care items are a luxury and cost twice the amount that is paid in the rest of Quebec. We purchase double the amount of diapers at more than twice the cost.
The costs of purchasing typical grocery store items are beyond the reach of most families so we supplement our diet with meat and fish that we hunt ourselves. It is subsistence hunting, not recreational hunting, yet hunting expenditures are not subsidized like those of Quebec farmers.
The employed in Nunavik bear a disproportionate burden because they are often supporting more than one generation of family, as we often hear, and they are heavily taxed compared to other northern residents. Bill S-227 recognizes that tax breaks are needed to help the individual and stimulate economic opportunities in Nunavik.
I chose ``economic opportunities'' rather than ``prosperity'' because that is all it will be — an opportunity — even if this is in place.
The first part of Bill S-227 has the effect of increasing the northern residents tax deduction. This deduction was introduced in 1987 to help northern families to deal with the high cost of living. Over the past 22 years, this deduction has not changed. Also, inflation has increased dramatically during this time. Increasing the northern residents tax deduction will put more money in the pockets of Nunavik people and provide them with desperately needed purchasing power. Our purchasing power is almost nothing now.
The second part of Bill S-227 is to amend the Excise Tax Act, eliminating the GST on all goods and services. It would also eliminate other taxes on fuel, oil, natural gas, diesel and other additives for generating heat, on electricity, and on transportation other than aviation.
When you realize that taxes are based on the product that you purchase once it has reached Nunavik, you soon find out that not only have you paid three to four times the price of that item in the South, because of transportation, but you have to pay taxes on the new price as well.
The Inuit population of Nunavik does not benefit from any transportation subsidy. I am talking about individuals now; I am not talking about corporate structures, airline transportation companies or the outlets of the source. Individuals receive no benefits out of the subsidy provided by the government because it is not passed on to consumers.
This situation is upsetting, as it has created great suffering in the community. In 1970 we negotiated the collective rights of the people during the James Bay and Northern Quebec Agreement. While our traditional culture of shared resources was the norm, the situation of an individual was not an issue.
Today we are paying three levels of taxes. These taxes were designed by southern leaders for the southern Canadian wage earners with access to readily available goods and services. In the North, the people are in transition and the southern rules are killing us, placing communities and individuals in great debt.
Back in 2005, the Inuit Tapiriit Kanatami wrote to the Minister of Finance asking the government to scrap the GST in the Arctic. In their letter to the finance minister, they gave the example of a four-by-eight piece of plywood purchased in Ottawa, at Home Depot, for $22.47 with GST of $3.37. By the time the same sheet of plywood arrives in my community, it costs $140 more. Does that make sense? The goods and services tax paid by the Inuit on the sheet of plywood in Inukjuak is $21, above and beyond the basic price, almost the same cost as the wood alone when it was at Home Depot in the South.
The ideas put forward in this private member's bill are not new. They have been called for in one report or another by various academics or by the northern leadership.
For many years we have talked about closing the gap. This is one of the issues. We need to close this gap. We talked about closing the gap in the field of education. That, too, requires a closing of the gap. With regard to financial ability and purchasing power, we need to close the gap; otherwise we will not succeed. We will be a problem to the rest of the country and we will be dragging down the economic opportunity of our country. It would be a great shame if that continues.
Honourable senators, I encourage you to consider carefully the benefit of this bill for the Nunavik people. Our population is small, as I mentioned. This is a minor concession from the federal government, but it will have a huge impact for generations to come.
The Chair: Thank you, Senator Watt. We have heard you speak previously on the issue of the discrepancy in buying power in the northern communities versus the South, and this is your attempt, through this bill, to try to close that gap, as you point out.
[Translation]
With us today is Mr. Michel Patrice. Would you care to say something in your capacity of law clerk and parliamentary counsel?
[English]
Michel Patrice, Deputy Law Clerk and Parliamentary Counsel, Senate of Canada: I am here to assist the senators if you have any technical questions on the drafting of the bill.
The Chair: Thank you for being here. We appreciate that.
[Translation]
Pascal Charron, as an individual: I am also here to assist the senator.
The Chair: You have a lot of support, Senator. Will you be making a presentation, Mr. Normandin?
Yves Normandin, President, Arctic Consultants Inc.: I have prepared one, at the Senator's request.
The Chair: You may proceed.
[English]
Mr. Normandin: It is both an honour and a pleasure to be allowed to address my comments to the Senate Finance Committee. Our organization has been supplying the northern communities for over 25 years. During our very first year, we specialized in arranging the creation and the shipping of goods during the sealift season, mainly because there are only two ways of getting goods to Nunavik: either by plane — which everyone knows is costly — or by boat during a short period of time in the summer. Now the period is almost finished; the boats are coming back.
In the last 10 years we have added to our services food distribution on a year-round basis. We also provide management training and accounting services to our clients. We have a vast service that we supply, and we are aware of the increasing costs in the North.
We are well aware of the many difficulties encountered by this population to have access to goods and services at a price they can afford to pay. The public and private organizations have for a long time recognized the financial disadvantage of living in the North. They have put in place incentives and programs to recruit personnel and, afterwards, to assist their employees to maintain their standard of living while working in the North, for either short or long periods of time. The residents of Nunavik face the same cost of living without having an equal support.
We feel that the provisions of Bill S-227 would, to a certain extent, permit the population to increase their take- home income and diminish the gaps between their buying power and that of the population in the South.
We live in a world of access to many means of communication. As a result, many people in Nunavik know what is available on the market and realize what they cannot afford to buy. This state of poverty creates social problems, mainly within the young population, and they lose hope of being able to be equal to other Canadian citizens.
Putting more money in the pockets of the residents of Nunavik makes sense, but we have to move a step further. Presently, the Food Mail Program of Canada Post — which consists of subsidies for the transportation of goods, mainly perishable foods — benefits for the most part the local stores rather than the population concerned, as the economies contemplated by the program are not always transmitted to the residents. This program costs the Government of Canada over $60 million per year.
Nunavik residents have two options: either they can buy from the retail store located in the North, which belongs to a large southern group, or they can order directly from a southern retailer. If they wish to place an order directly, the residents need to deal with the technicalities of filling the order, using the right description of products and product codes. This might seem simple, but it is difficult for someone who lives far away and does not place orders or use that type of communication.
Furthermore, they have to forward the payment, which is a more difficult step, as most of them do not hold bank accounts or own bank cards or credit cards. The retailers, either in Ottawa or Montreal, ask to be paid in advance and they all use credit cards and things like that. In large communities, like maybe Kuujjuaq or places in Nunavut, it does not apply that much, but the people in small communities do not have those tools. Therefore, it is almost unreachable for the majority of the citizens of Nunavik.
The Food Mail Program needs to be revised, since the volume and variety of products being shipped has increased dramatically since the beginning. More young professionals go up North, and all year long they require fruit and vegetables, which we find on our shelves every day. They want the same things — different meats, cheese, all kinds of things. This merchandise needs to be available in the North.
The choice of Val-d'Or, Quebec, as a point of expedition by air is not adapted to the situation prevailing at the present time. We suggest the program should include Montreal as one point of expedition. Presently, the distributors must transport the goods to the transporter warehouse in Val-d'Or, then to the Canada Post's installation, from where they will be flown to the destination. That is a lot of movement for perishables like strawberries, tomatoes, eggs and things like that. It is a lot of handling with a risk of breakage and other situations.
The cost of transporting the goods from Montreal to Val-d'Or, including the fuel tax surcharge incurred by the transporter, adds up to the global cost of the goods. There is no mystery there. Every cost is added when you pay locally. Consequently, this adds to the landed cost paid by the residents of Nunavik. This again adds to their costs.
The whole process is lengthy, exposing the perishable foods to deterioration when it is sitting in the warehouse or on the tarmac, and very often the goods are delivered to the store too close to their best-before dates. Furthermore, there are so many intermediaries involved that nobody wants to take responsibility in the case of deterioration or disappearance of the goods. There are too many people involved: road transporters, airlines, warehouse facilities and things like that. If you ship something from Ottawa to Montreal, and instead of being delivered to the right depot it goes to another one, with a phone call you can get your merchandise in the same day. In the North, there is no truck. It is the airline. The plane is gone. It will be unloaded somewhere else, so if it goes to the wrong village, it sits on the tarmac there. Try to get your food back — it is almost impossible.
Finally, the rules of application are complicated and there are so many details in the classification of the food that it requires a lot of training and experience on the part of the shippers to be able to apply the correct rates. This is true. There are so many examples where chicken can be subsidized but a chicken that is partially cooked cannot be. If a retailer in the South mixes the two together, whoever ordered the food in the North loses the advantage of the Food Mail Program, because it is very clear: in the same box, you can transport only food mail merchandise accepted by them.
That is an example I like to use, having been in transport for 30 years. I remember that more than 10 years ago the government wanted to regulate the transport of dangerous goods. We all said it would not work. Now, nobody questions this anymore. A lot of effort and work was put in to find a system where you know in advance that if you ship this type of merchandise, this is the type of packaging you must use and these are the forms you must fill out.
Why can we not do that with healthy food? I do not understand. I am sure it could be done, even if we subsidized the transport of the food.
In summary, we submit to the Standing Senate Committee on National Finance that we fully adhere to the proposal and provisions of Bill S-227 and recommend that the Food Mail Program of Canada Post be updated and revised in depth. This would help the population of Nunavik to benefit fully from the provisions of this bill. We definitely must do something concerning transportation.
The Chair: Thank you very much, Mr. Normandin. I have a couple of questions of Mr. Patrice. As background information, perhaps you could help us with clause 5 of the bill. It defines ``Nunavik.'' This map that has been provided to us shows the geographic territory in Northern Quebec of the area known as Nunavik to which you wish this legislation to apply. However, the definition says,
In this Part, ``Nunavik'' has the meaning assigned to the word ``Territory'' by An Act respecting Northern villages and the Kativik Regional Government . . .
That is Province of Quebec legislation. Is it usual to have federal legislation refer to a definition that appears in a provincial act? That is my first question. Second, what is ``Kativik''?
Mr. Patrice: To answer your first question regarding reference to provincial legislation, yes, it does happen from time to time. Actually, I think that reference point does exist in terms of the regulation made pursuant to the Income Tax Act.
Another place the reference to a provincial statute exists is in the Senate itself in the electoral division for Quebec senators where it refers back to the legislative council in Quebec in 1866.
Therefore, in terms of your first question, yes, it does exist.
The Chair: Thank you.
Senator Watt: I think his question was what is Kativik.
The Chair: There is a reference to Kativik.
Senator Watt: ``Kativik'' is the literal translation of ``that is a place to meet.'' That is the translation of ``Kativik''; it means people getting together to have a discussion. In a sense, it is a regional government. It is Kativik Regional Government. It is a municipal superstructure that acts as a municipal structure, even though you have municipalities in each community.
The Chair: This is the point I am trying to get at: Is the provincial government calling this geographic region something different from what the federal statute is calling it?
Senator Watt: No.
The Chair: Kativik and Nunavik are not the same thing, is that right?
Senator Watt: No, regionally, the words were ``Kativik Region'' before we changed the name to Nunavik. The one that is implied in law is Kativik. It is not necessarily Nunavik at this point.
The Chair: I am worried about confusion here. You are defining Nunavik as something defined under the Kativik Regional Government of the Province of Quebec. Will this be clear to everyone?
Senator Watt: I think on the provincial side it is quite clear. ``Nunavik'' is the old name of the territory. ``Nunavik'' means inland; that is the translation of it.
Mr. Patrice: That was the name of the provincial legislation that gave effect to the James Bay agreement. Within that legislation there is a definition of ``territory,'' which relates to the James Bay agreement, the Northern Quebec agreement, which points out the legal description of Nunavik.
The Chair: Is there any precedent where a provincial territory within a province is given a break on federal taxes and excise taxes, or will this be a one-off situation? Can we go to some other place and say you did it for some other area?
Mr. Patrice: I do not know of such an example. Nunavik is in a particular situation because it is contained within the Province of Quebec, as opposed to Nunavut or the Northwest Territories, which are federal territories but not contained within a province. I am not aware of any other similar examples.
The Chair: Senator Watt, are you aware of any other precedents we can look to, which would be similar to this?
Senator Watt: No.
The Chair: Mr. Normandin, your company is Arctic Consultants. At the beginning of your presentation, did you suggest that you are also involved in transportation and shipping?
Mr. Normandin: Exactly. We represent many people in Nunavik to bring their merchandise up all year long, but mainly during the summer by boat.
The Chair: You hire space on boats.
Mr. Normandin: Exactly.
The Chair: Are you independent of government and for profit, hopefully?
Mr. Normandin: Yes, definitely.
The Chair: You hear so much about not for profit.
Mr. Normandin: I am there for profit. I have seen the price rising so much in the North compared to other places. Since they use the most expensive mode of transportation, which is the airline, there are fuel surcharges and so many other things at the end on the shelf that the price is unbelievable.
The Chair: Thank you; I wanted to get background before I went to honourable senators for questions.
Senator Ringuette: First, I must congratulate my colleague for this bill. I think it has been long overdue. As you said in your presentation, you have been waiting for a federal government to respond to your request since 1998.
I have been to Nunavik. I visited a local grocery store and there were tremendous costs for basic needs. If you look at bananas that you would purchase here in Ottawa for 49 cents a kilo, you would be looking at $4.90 a pound. It is a 1,000 per cent increase.
There are federal public servants working in the North in Nunavik, as there are provincial public servants working in Nunavik. Do they receive a special allowance to allow for the cost of living?
Senator Watt: Are you asking me that question?
Senator Ringuette: Yes.
Senator Watt: There has been variation over the years. On the first point that you mentioned, the federal involvement in the territory — the presence of federal bureaucrats and things of that nature — that is all we had up to the mid-1970s, around 1975, shortly after the James Bay and Northern Quebec Agreement negotiations. Then the federal government decided to leave the North, basically handing their responsibility to the provincial government.
During that time, the federal government employees were very well looked after. As my colleagues have indicated, they provided subsidies for them so their living standards would not be impacted by living in the North. They get a northern allowance, plus the subsidies that they get for their housing, their food and things of that nature.
Senator Ringuette: Are these non-income tax benefits? It is cost-of-living allowances, akin to a per diem. Therefore, there is an acknowledgement from the federal government of the high cost of living in the North, because of that particular event.
On another topic, is Nunavik facing a similar kind of youth exodus as is experienced in other parts of the country?
Senator Watt: Are you talking about suicides and things of that nature?
Senator Ringuette: Suicide rates are very well known. However, do youth tend to leave Nunavik because of the costs that are involved or do they tend to want to remain in that geographic part of Canada?
Senator Watt: First, the cost of transportation is so high that even if they want to leave the North, where will they get the money to do so? Therefore, they tend to remain. There are some people who are a little more advanced than others and have a way of furthering their education and things of that nature. Many of them, because of a shortage of housing, ended up staying in the South and trying to make a living there. Most of them do manage to get back, but there are some people also falling through the cracks.
Coming back to your point on government realizing the high cost of living in the North, I believe John Diefenbaker was the first to acknowledge that it cost much more money to live in the North than in the South. That was acknowledged and he made the movement toward recognizing that and it did happen.
Senator Ringuette: I have two other questions, Mr. Chair.
The Chair: Please put both questions on the table and we will see if we can answer them.
Senator Ringuette: It might be a technical issue, Mr. Patrice. In regard to the GST, Quebec is one of the provinces that have not harmonized. They have harmonized? How would that work? Would you need to put a bill in front of the Quebec legislature so that the entire sales tax would be taken into consideration? Or would this be an issue where the federal government would have to negotiate with the Quebec provincial government in regard to removing the GST that would be applicable?
Mr. Patrice: This bill would not address the provincial sales tax in Quebec. It is only where the federal parliament has jurisdiction, which is the GST.
Senator Ringuette: Technically, you would have to present another bill in front of the Quebec legislature.
Senator Watt: That depends on what happens to this bill. We will have to approach the provincial government also, because we need to tackle the sales tax issues and certain other matters under provincial jurisdiction and we cannot do that under this bill.
Senator Ringuette: After you we will hear from officials from the Department of Finance, and I am sure they will tell us what the cost of this bill is. Have you received any information with regard to what the financial cost would be? I am not talking about the social or the human costs of this bill, only the tax cost.
Mr. Charron: According to a study done by the economic division of the Library of Parliament calculating the northern residence tax deduction with the level of inflation for the last 22 years, it would cost the federal government $8.4 million. However, put another way, it would not cost the government anything because the people in Nunavik would stop paying unfair taxes in the amount of $8 million, which would stimulate economic activity, making our people more successful and less dependent on other assistance programs.
The government would lose some money, but in another way it would cost nothing. My point is that it would not cost any new money; it is just that old money would not go into the government's pockets.
The Chair: Could you send our clerk the reference to the study that determined the cost would be $8.4 million?
Mr. Charron: Yes, certainly.
Senator Callbeck: Thank you all for coming this morning and for your presentations on the high cost of living in Nunavik. It is certain does put you at a big disadvantage.
Senator Watt, you talked about closing the gap. I understand that Nunavik has municipal status. You spoke of closing the gap in education. Does funding for education in Nunavik come from Quebec, which receives it from the federal government through the federal transfer, or do you also get money for education from the federal government?
Senator Watt: Education is under provincial jurisdiction. Therefore, the money comes from the federal government and represents about 25 per cent of the needs for education. It is 25 per cent according to the formula that was negotiated in 1975. If it is under federal jurisdiction, it is 75 per cent; if it is provincial jurisdiction, it is 25 per cent. It is channelled through the provincial government. As a result, we still do not know whether we are getting our full entitlement of money, because it is channelled through the province.
Senator Callbeck: You get no money directly from the federal government for education?
Senator Watt: No, not for public services such as education, housing and social services. For requirements of an ethnic nature in the region for which there is no existing provincial institution, the federal government can channel the money directly.
Senator Callbeck: Through this bill you want the northern residence tax deduction increased.
Senator Watt: Yes.
Senator Callbeck: Do you not have many people who do not pay income tax?
Senator Watt: Everyone is a taxpayer. Let me be absolutely clear that the Inuit are taxpayers. We are not like First Nations. First Nations do not pay tax if they live on-reserve. We do not live on reserves; we live under fee simple title to the land.
Senator Callbeck: However, this tax deduction is made to your income tax, is it not?
Senator Watt: That is right.
Senator Callbeck: So this would be of no advantage to those who do not pay income tax?
Senator Watt: That is correct.
Senator Callbeck: Mr. Normandin, you talked about Canada Post subsidizing the program. I think you said it cost $60 million, yet it did not make any difference to the people, that the money went to the businesses and not the people. In other words, this does not affect the rates?
Mr. Normandin: Studies available to Indian Affairs show that in many cases the savings are not given back to the citizens. This program was originally set up to benefit the citizens, but we are not reaching the citizens directly. We try to reach them through the stores, and it is not really working.
Senator Callbeck: Senator Watt, you spoke about the subsidies for the shipping companies and said that you feel the subsidies are not being channelled through to the people.
Senator Watt: Yes.
Senator Di Nino: Welcome, Senator Watt. It is interesting to see you on that side of the fence.
As far as you know, no jurisdiction in Canada, other than provinces or programs for total areas, has been singled out for special tax treatments in the way that Nunavik would be; is that right? This would be the first time this would happen?
Senator Watt: As I said earlier, when John Diefenbaker was the prime minister, it was recognized that the North had to be treated differently than the rest of the country.
As for similarities with other regions, there is another region that has the same problem as Nunavik, and that is Northern Labrador, which has no road connections and gets services only by air and by boat. I am very much open to amending the bill to take that into account. I want to ensure that that is clear.
Senator Di Nino: I am not sure that it was under John Diefenbaker that the recognition was made, but certainly there is a recognition by the Government of Canada that northern regions need to be treated differently for a variety of reasons, many of which have been expressed today by yourself and the other speakers. That has been and is being done.
You are asking to take Nunavik outside of the definition of northern regions and treat it differently from the other northern regions, many of which, as you just suggested, have the same problems.
Senator Watt: Only one has the identical problem because there are only two regions that pay both federal and provincial tax. Nunavik and the Northwest Territories pay federal tax, not provincial tax, so they have to be dealt with differently. They have their unique problems, as my colleagues have mentioned, namely the mail service subsidy issue. Adjustments being made would apply not only to Nunavik but also to NWT.
Senator Di Nino: I have visited all three territories a number of times. While I have not been to Nunavik, I believe I have some understanding of what you are talking about. During my times in a variety of different towns, I discovered that the cost of living is much, much greater. I have great sympathy for you there.
In your opening remarks, you talked about economic opportunity. I fail to agree with you totally on the benefit of some of your suggestions in the sense of creating those economic opportunities. I would much prefer to discuss with you and to join with you in looking at ways of creating bigger and stronger economies in the North to allow the residents of those areas to be at a reasonably equal level with the rest of Canada. That is not the case now, and I am not sure that giving further subsidies would accomplish what you are trying to accomplish.
To pick up on what Senator Callbeck was talking about, Nunavik has a large percentage of elders. I believe 15 per cent to 20 per cent of the residents are elders. There are also other individuals who would be in a no-tax position. A report was done in 2006 — I will make it available to you should you so wish — which said that the northern resident deduction would not be of benefit to a lot of people in the northern regions, including Nunavik, because they are low- income residents and they are either not paying taxes at this time or paying very little tax at this time. The people who most need it would not benefit from that particular provision of your bill. Would you not at agree with that?
Senator Watt: Not entirely, no, simply because, for the people who are earning wages, their purchasing power is almost down to nothing right now. That is what we are confronting now — the needs of individuals. It is hard for me to explain in detail so that you can clearly understand the kind of lifestyles that we have in the North.
Mr. Normandin: I think you should mention that for everyone who pays tax, how many live under your circumstances in Kuujjuaq.
Senator Watt: Some of us have no choice but to support three to five generations in a family. You could have one or two wage earners with purchasing powers almost down to nothing. When Laval University undertook their study, the purchasing power was 49 cents instead of 90 cents. I believe it is about 90 cents here in Ottawa compared to the American side. In the North, those figures are not available today because no one has done those studies since the recession kicked in. I think my purchasing power amounts to 29 cents today in Nunavik. This varies within the communities. For example, one of the furthest communities in Nunavik might have purchasing power down to 15 cents or 10 cents; that is how bad it is.
If you can come up with something better than what I have tried to do, I welcome that. Until then, however, I will keep on pushing for the bill that I believe will have a positive impact on individual people. Governments also have a tendency to say, ``We have pumped a lot of money into that region.'' Yes, they have pumped a lot of money into the region for social, housing and educational needs. Those have been long-time problems for us, and the government is only beginning to start answering some of those issues now.
We have emphasized heavily the collective needs of the people, forgetting about the individual people who also must have purchasing power. If those individuals do not have purchasing power, what can they do? What advantage is there for them? No wonder there are a lot of young people who, rather than trying to make something of themselves, end up taking their own life. Before I left my community on Sunday, I heard a gun shot on Saturday. I was butchering the caribou that I had harvested over the weekend. Sure enough, Monday morning, another young person, 14 years of age, took their life again. That happens quite often, too often.
Senator Di Nino: Those are tragic things that we should try to do everything to stop. I appreciate the time constraints, Mr. Chair.
The Chair: We are continuing with another panel; maybe we can carry on with a couple of points. As a point of clarification, Senator Di Nino referred to low-income tax-paying people. The income tax provision of your bill would be affected by his comment but not the excise tax reduction. You are talking about the income tax aspect of it.
The second point for clarification, to stay focused on the bill here, is the reference by Mr. Normandin and Senator Watt about mail service subsidy. There is nothing in the bill about that, is that correct?
Senator Watt: That mail subsidy is another problem. We have an accumulated number of problems.
The Chair: I want honourable senators to stay focused on what we have before us here.
I have three senators who have questions and I have two minutes left. I will ask each senator to make their points and then we will go on with the next panel. This will continue tomorrow as well. Senator Watt, you will be following these hearings. It is an important piece of legislation and we want to understand it clearly.
Senator Neufeld: First, there is a $60-million subsidy in place for 11,000 people. Having listened to the testimony, I think some obvious work needs to be done on that.
Second, what provincial taxes apply in Nunavik? Do all the Quebec taxes apply?
Senator Watt: Everything.
Senator Neufeld: Are they looking at reducing some of their costs to people for whom they are responsible, namely, Quebec? You have obviously worked on this for some time. You have had discussions with government representatives. What are their feelings about working with that part of their territory?
Senator Watt: Let us get all the questions out first.
Senator Neufeld: All right. What opportunities do you see in that area that we could work on collectively to see if we can make things a little better?
The Chair: We will ask Senator Watt to come back another time to finish up on that.
Senator Mitchell: An important point has been made that this may not reach many of the people who actually need it — those who are below the poverty line. About 43 per cent of the people in your region live below the poverty line. That still leaves 57 per cent who do not. Some do pay income taxes and sales taxes, and so on.
It is interesting to me to be confronted by this idea that somehow reducing taxes would not in fact help the rest of the people if it stimulated the economy. We hear so often that reducing taxes stimulates an economy. It seems to me that you could argue that, in some sense, if we accept the prevailing argument that we hear daily in this town, that in fact reducing taxes is the best economic stimulus, it might kill two birds with one stone, as it were. It would assist the people who are getting the tax reduction and it would stimulate the economy for those who are below the poverty line and who need economic opportunity.
[Translation]
Senator Rivard: Mr. Charron, further to a question from Senator Ringuette, you stated that the tax relief program would cost in the area of $8.4 million. However, you also said that the program would not in fact cost the government anything because people would become less dependent on assistance programs.
If that is in fact what you said, I have to wonder about how useful this all is, if these actions offset one another. Could you enlighten me a little?
The Chair: Could you respond briefly?
Mr. Charron: It is a little complex, but I will attempt to answer your question.
By stimulating economic activity in Nunavik. . .
[English]
It would stimulate economic activity in Nunavik and make its people more successful and less reliant —
[Translation]
I believe that is what you were asking. . .
[English]
— on other government income-assessment programs.
[Translation]
It would be more individual, and less focussed on existing programs, and thus more cost-effective for the government and for the people as well, because of the resulting economic stimulus effect. Businesses would be able to get off the ground.
The Chair: Thank you very much.
[English]
Senator Watt, you will be following these hearings. Thank you to all of you for being here.
We have three representatives from the Department of Finance with us. You have received the various titles. We have Mr. Sean Keenan, Senior Chief, Social Tax Policy, Personal Income Tax Division, Tax Policy Branch; Isabelle Brault, Chief, Employment and Education, Personal Income Tax Division, Tax Policy Branch; and Rainer Nowak, Senior Chief, Sales Tax Division, General Operations and Border Issues.
You heard some of the questions. I think each of you was here during the first session, when this subject was introduced to us. Do you have any opening remarks, or would you like to go into questions, or would you like to reply to some of the questions that were left unanswered in the last session?
Sean Keenan, Senior Chief, Social Tax Policy, Personal Income Tax Division, Tax Policy Branch, Department of Finance Canada: We do not have any opening remarks, so we are ready to take your questions.
The Chair: Some questions were posed at the end of the last session. Are you able to reply to any of those issues? Having heard the earlier discussion, do you have any specific points you would like to react to before we go into any questions here?
Mr. Keenan: Just a clarification on our estimate of the cost of the bill. I believe one of the witnesses quoted $8.4 million. We had our own estimates of the costs for the income tax changes. The increase in the northern residents deduction we estimated to be about $15 million. On the excise tax, while it is difficult to estimate, we have a rough estimate of another $15 million, so $30 million just for the cost of the bill.
The Chair: You heard Senator Neufeld's question with respect to the province and how this relates. Can you make any comment? This is an area where citizens are paying both federal and provincial income tax. Are you able to comment at all on the possibility of a reduction in the provincial income tax? Are there any examples of that kind of activity, where the federal income tax has been dropped and there has been corresponding cooperation, or not, from the province?
Mr. Keenan: No. We have the northern residents deduction, which is a reduction in federal tax, a deduction for people who live in the northern, isolated regions, but that is pretty much the only one I can think of.
The Chair: In that particular case, would it apply to people who live in Northern Ontario, Northern Alberta, Northern British Columbia and Northern Quebec, as well as to people in the territories and Nunavut?
Mr. Keenan: The northern residents deduction does apply, yes. There is a northern zone and an intermediate zone, and they apply across the country in the North.
The Chair: Irrespective of what the province is doing, correct?
Mr. Keenan: Exactly, yes.
The Chair: Therefore, the fact that it deals only with the federal side and not with the provincial income tax aspects is not an impediment to this particular bill, is that not correct?
Mr. Keenan: It is not an impediment in the sense that it proposes to change the Income Tax Act.
Senator Neufeld: I understand this issue with the federal government with the northern residents. I live in a zone where half of that is applied in Northern British Columbia. I lived previously in Northern British Columbia, where all of it was applied, so I know the federal government deals with their own tax. The provinces deal with theirs and the provinces do not always correlate their tax reductions with what the federal government does. I understand that.
I just wanted to know if there had been any discussions between Senator Watt and the Quebec government in regards to what they would do in the province of Quebec to reduce costs for people who live in Nunavik. That was my question, actually, and I think I will get some response to that a little bit later on, maybe from Senator Watt himself.
Regarding the tax reductions, or the costs, can you give me some sense of why the Department of Finance Canada comes up with $30 million and yet the people who were sitting there were saying it would be $8.4 million? What is the discrepancy? Second, regarding the northern residents deduction, how many taxpayers would an increase in that actually affect in Nunavik?
It might be a roundabout way of saying it, but the question came up that maybe not that many people would be affected or would actually see a benefit if the deduction were increased for that one particular region. If the level of deduction were increased, how many of the 11,000 people in that area actually pay enough income tax that the deduction would kick in and be a meaningful reduction in their cost of living?
Mr. Keenan: There are two questions. I would like to answer the first one. I do not know the methodology behind how the previous witnesses came up with their study, so I could not explain how they came up with the estimate of $8.4 million. As I mentioned before, there are two components to the bill: there are the change in the Income Tax Act and the change in the Excise Tax Act. Our estimates were that each component would be $15 million. It could be that their estimate was based only on one part of the bill. Again, I cannot speak to that.
On your second question, it is difficult for us because of the data to estimate just for the specific region of Nunavik how many people of the 11,000 who live there would be affected by the increase. Our modeling is based on samples, so we need to make a rough estimate. Again, we estimate the cost to be $15 million.
Senator Neufeld: Maybe you could confirm the statement from the one presenter that there is a $60-million cost to Canada Post already for subsidization for Nunavik. Do you know that number? Can you confirm that number, or could you get back to us later on?
Mr. Keenan: Is this a question about the Food Mail Program?
Senator Neufeld: Yes. It is interesting and we have some time, chair, so I would appreciate an answer.
The Chair: We try to stay focused on what is before us. That is not in this bill. However, indirectly, we are looking for government subsidy to people in the North. If you have an answer, Senator Neufeld would be very pleased to hear it.
Mr. Keenan: I do not know about the cost of the Food Mail Program.
Senator Neufeld: We will take the $60 million as gospel.
Senator Nancy Ruth: Senator Watt has suggested that Northern Labrador is a similarly situated area of Canada. There is always a problem in tax systems to treat one section differently than another. If the Northern allowance exists, both for the intermediaries like Charlie Lake and the North, can you imagine setting apart two sections of Canada and having a special tax thing for them that would not apply across all of Northern Canada?
Mr. Keenan: The northern residents deduction was studied by a task force in the late 1980s and early 1990s, and we set up the current zonal system that we have today. The zones are determined based on a number of elements, such as nordicity, isolation and other elements. All communities that live in the full zone essentially share similar characteristics in terms of those components of what goes in. In the intermediate zone, they share other characteristics that qualify them for half of the benefit.
The question would be whether the circumstances in certain communities are different from those other areas. Currently they are similar enough that they receive the same tax treatment.
Senator Nancy Ruth: Why should they — or should they — receive different treatment? Why should this group of Northerners receive different treatment than other groups of Northerners?
When I fly North, I take a frozen roast beef with me to give to whomever I am visiting and they are extremely grateful. There is no question about food costs and other things being extraordinarily high for those who are used to Metro prices.
Why treat this group of people, many of whom may not pay income tax, differently on this? Can you see any reason to do that, if it included Northern Labrador, too?
Mr. Keenan: I do not think there is anything to suggest that the factors that have gone into putting them in the northern zone have changed dramatically so they would be different from the other communities in the northern zone.
Senator Nancy Ruth: Am I correct in remembering that the northern zone allowance has been increased in the last couple of years?
Mr. Keenan: Yes, there was a 10 per cent increase in the residency component in Budget 2008.
Senator Nancy Ruth: Is this normally done every couple of years or is an assessment done and an increase made of some percentage?
Mr. Keenan: This is the first increase since the early 1990s, when the current zonal system was put in place.
Senator Nancy Ruth: That is a great thing Mr. Harper did then.
Senator Chaput: How much money per resident per year does this 10 per cent increase that happened in 2008 amount to, approximately?
Mr. Keenan: The 10 per cent increase raised the maximum value of the northern residents deduction from $5,475 per year to $6,022, so roughly $550.
Senator Chaput: Is that per person per year?
Mr. Keenan: Yes.
The Chair: As a point of clarification, do you have the map in front of you of the region that is being discussed here, Nunavik, the northern part of Quebec? Do you have that map?
Mr. Keenan: I do have a map.
The Chair: Is all of that in the area for the northern allowance?
Mr. Keenan: Yes.
The Chair: That would be the total amount we were talking about, as for northern British Columbia that was discussed earlier?
Mr. Keenan: Yes, all of Nunavik falls into the full northern zone.
The Chair: That is only an income tax relief, is that correct?
Mr. Keenan: Yes.
The Chair: If you do not pay income tax, do you get a cheque anyway for that amount?
Mr. Keenan: The northern residents deduction is a deduction, so it reduces the measure of your income upon which the tax would be levied. If you currently did not have enough income and did not pay any tax, then the deduction would lower your income, but you would still not pay any tax.
The Chair: That goes to the point earlier that there may be many people with very low income tax obligations in any event. It is the same issue with respect to both of these programs, the northern allowance and the proposal that Senator Watt is making in this particular bill.
This bill deals with two different aspects; there is the income tax reduction and there is also an excise tax elimination. Is there an existing federal program with respect to excise tax or GST reduction for people living in the North?
Rainer Nowak, Senior Chief, Sales Tax Division, General Operations and Border Issues, Department of Finance Canada: The short answer is no. The GST applies uniformly across Canada, both in the North and in the South. The fuel excise tax is similarly applied equally to all regions in Canada.
The Chair: There is no program now of a reduction of excise tax or fuel excise tax for people living in remote areas.
Mr. Nowak: No.
Senator Neufeld: On the northern residents, it is not per tax filer, unless I am missing something; it is per household. Is that correct?
The Chair: The question is whether the northern allowance is per taxpayer or for households.
Mr. Keenan: If there are more than two adults in a household, each individual can claim a single benefit, a single daily allowance on the residency component. If only one individual is claiming it, that person can claim; but if there are more people in the household, they can claim two.
Senator Neufeld: Is there a difference between the northern part and the intermediate part? The reason I ask is that when I do my taxes, although my wife and I both work, only one of us can claim the northern living allowance. Maybe each of us can claim half of it on our tax files, but only one time, and that is made very clear to me. Are you saying that everyone who remits taxes can claim that?
The Chair: Are you suggesting that the senator should get himself a new tax adviser?
Senator Neufeld: Actually, I have a good one already. I think I am right.
Mr. Keenan: There were two different questions. The difference between the intermediate zone and the northern zone is that the intermediate zone is 50 per cent of the value of the full zone. The residency deduction is $8.25 per day per person living in the zone or $16.50 per day if only one person in the household is claiming the deduction.
Senator Neufeld: As left before, I was thinking that every tax filer could claim it, but it is only one person per household.
The Chair: That is not what the answer was. The answer was if there was one individual who was a taxpayer claiming it, he can claim for the two people living in the house.
Senator Neufeld: The full amount, the $16.50.
The Chair: If there are two taxpayers, each one claims $8.25 per day. That is how I understood your answer. Did I state that correctly?
Mr. Keenan: Yes.
The Chair: Each individual taxpayer may claim $8.25; if one taxpayer in a household where there are two wishes to claim for two, it is $16.50.
Mr. Keenan: That is correct, yes.
Senator Watt: What would happen in the case of three to five generations living in the same household? How would this apply to them? In the North, we are not talking about just a man and a wife. We are talking about from three to five generations living in one household.
Senator Chaput: The grandparents and the parents.
Mr. Keenan: If there are more than two taxpayers in the house, each individual could make a single claim, the $8.25. If there were grandparents and parents and children, and there were four adult taxpayers in that group, they could claim four individual amounts.
The Chair: Could one taxpayer claim for the three others plus himself or herself?
Mr. Keenan: Only one individual can claim the double.
The Chair: That is as far as they can go?
Mr. Keenan: Yes.
Senator Chaput: For clarification, I want to repeat this. We have the one household, and there are two grandparents, two parents and the kids. In this household, four people each could claim the amount, the $8.25?
Mr. Keenan: Yes.
Senator Chaput: So $33 in this household could be claimed?
Mr. Keenan: Yes.
The Chair: I think we are getting there. As I understand Senator Watt's bill, it was $70 per day and that would compare to the $8.25 under the existing legislation.
Mr. Keenan: Bill S-227 would add an additional amount, $70 per day.
The Chair: The government might, on a policy basis, say we can choose one or the other of these programs. I am talking hypothetically here. They are asking for a new type of program. Do you have comparative costs? How much is the cost to the government purse of the northern allowance of $8.25 per taxpayer in the Nunavik area?
You said it will be $15 million with this new program under the income tax aspect. Do you know how much the income tax aspect is under the existing program?
Mr. Keenan: I do not have a breakdown for Nunavik. For the northern residents deduction, the value of the tax expenditure is $155 million per year across the whole country.
The Chair: It is $8.25 per person, and there are 11,500 people living there. Can we assume 75 per cent are taxpayers?
Mr. Keenan: I could not make any assumptions on the cost of that today.
The Chair: I am trying to get the comparative costs.
Mr. Keenan: If I was to give you a rough estimate, you are talking about a $70 per day benefit, and that would be a $15-million cost. That is roughly five times what is currently available, which would be in the $2 million to $3 million range.
The Chair: That is a good way to go back at it.
Mr. Keenan: It is a rough estimate.
The Chair: Are there any questions flowing from that?
Senator Watt: Do you have any numbers for what it is costing the Government of Canada to collect taxes from Nunavik? That is the other side of the coin.
Mr. Keenan: Do you mean the administrative cost?
Senator Watt: Yes.
Mr. Keenan: No, I do not.
Senator Callbeck: It says in the material here that the average income in Nunavik in the year 2000 was $24,000. Do you have figures from the other parts of the North?
Mr. Keenan: I do not, sorry.
Senator Callbeck: I presume you would not have any comparisons on the cost of living, either.
It is my understanding that under the Income Tax Act someone who has a fishing or hunting business cannot write off any expenditures for equipment and so on, as farmers and fishermen can. Why is that?
Mr. Keenan: If you have an incorporated business, the expenses you incur are deducted against the revenues that you generate.
Senator Callbeck: So that is if you are an individual, but you have to be incorporated?
Mr. Keenan: If it was a business expense, yes.
Senator Callbeck: I read in this material that this is not the case in the North.
I see Senator Watt shaking his head. Can you add to this?
Senator Watt: I can certainly try. It depends on how hunting is described. Some people consider it to be a recreational activity. We cannot have this deduction when it is classified as a recreational activity rather than a commercial activity. That is the problem.
Senator Callbeck: If it is commercial, you can have the deduction?
Senator Watt: We do subsistence hunting to support ourselves, and we believe that should be treated in the same way as farming, but it is not. Lawmakers consider hunting to be a recreational activity. For that reason, subsistence hunters are classified as recreational hunters, but for us it is to make our living.
The Chair: If you transformed that into a business, you could deduct it.
Senator Watt: This is new to me. This means that we would have to produce all kinds of paperwork. That is difficult for unilingual Inuk persons. That is mind-boggling.
The Chair: I believe Senator Callbeck was asking that question to demonstrate the expense of living in the North and the different factors that apply.
Senator Di Nino: I would like you to focus this issue for me. I understand that the bill aims to carve Nunavik out from the northern region and make it its own region. Since we carved out the northern region from the rest of Canada, there should be no legal impediment to doing this; is that correct? I am not asking whether it is practical; I am just saying that under the bill Nunavik, and perhaps Northern Labrador, would be carved out of the northern region and treated separately from the rest of the northern region that is currently designated. There should be no impediment to that. If desired, that could be done, right?
Mr. Keenan: If your proposal is to change the Income Tax Act to have a new deduction for a specific area, that could be done, yes.
Senator Di Nino: Other than the northern region that was established in the early 1990s, I believe, do you know of any other specific geographic areas that are treated differently under the Income Tax Act?
Mr. Keenan: No.
Senator Di Nino: Thank you very much.
I want to return to the issue of harvesters and hunters, et cetera, because it is a major component of the northern lifestyle. I understand that unless there is a registered business, an individual who has to buy a snowmobile and other equipment in order to harvest seals, for example, for consumption by his family would not be allowed any deductions on the purchase of that equipment. Is that correct?
Mr. Keenan: Yes, that is correct.
Senator Di Nino: Is it correct that if a group of people formed a cooperative and ran it as a business, that would allow them to claim the expenses of running that business? It is just a different way of doing it.
Mr. Keenan: There would have to be income earned, so the product would have to be sold.
The Chair: Or the prospect of earning income.
Mr. Keenan: The prospect of earning income, yes.
Senator Di Nino: There could even be a loss, which would be deductible. That would be one way of getting around this. We could suggest that in our discussions with the proponent of this bill.
Mr. Nowak: It must be a business as opposed to for personal use. Whether the business is in the form of a cooperative or an individual would not affect the outcome. Forming a cooperative does not necessarily create the entitlement.
Senator Di Nino: For clarification, do you have a breakdown of Nunavik taxpayers that would indicate how many are below the poverty line?
Mr. Keenan: No, I do not have that data with me.
Senator Di Nino: Would that be available or is that confidential?
Mr. Keenan: Taxpayer information is normally confidential. We would have it only on an aggregated level.
Senator Di Nino: If that were available, it would be useful in the discussion of the benefits of this bill.
Mr. Keenan: We could see what we can put together. There is the question of confidentiality and the question of individuals who live in Nunavik and claim the northern residence deduction, and there is also the fact that the northern residence deduction can be claimed for individuals who may have filed elsewhere but lived in the region or in the North for a period greater than six months but not necessarily the whole year.
Senator Di Nino: I will put the question in a different way. There must be global data from across the country, and certainly not personal information that should not be available, that would define what segment of the population lives below the poverty line. If that were available for Nunavik, it would be useful information for us when debating this. If you could provide that to us, it would be appreciated.
The Chair: On that point, there is a discrepancy between what we heard earlier about the $8.4 million for the cost of this bill's initiative and your estimate of $15 million for the income tax portion. You indicated you do not know what the methodology was for the $8.4 million so you could not comment on it.
Could you tell us what your methodology was to arrive at $15 million? We are having difficulty seeing how you could come up to $15 million for this particular initiative. We will be having a session tomorrow evening again; could you talk to our Library of Parliament researcher and help us with respect to that $15 million between now and tomorrow afternoon? That would be helpful. We have significantly different figures here, and an important aspect of any lawmaker's decision to support or not support legislation is how much will it cost.
Senator Chaput: Mine is a question of clarification; this might have been asked previously, but I need to understand it, so I will ask again.
Mr. Keenan, I believe you told us you could not tell us how many people would be affected by this increase of the deduction. I believe you said that, but you did come up with a total cost of $30 million, $15 million and $15 million, both taxes.
Now, was the $30 million based on the total population, which is, as we were told today, approximately 11,000 people? If so, we do not know whether the 11,000 people will be benefiting from this because at least 40 per cent are below the poverty line. How did you base your $30 million estimate? Was it based on the total population of Nunavik?
Mr. Keenan: I can speak to how we would have estimated the cost of the Income Tax Act changes in the sense that we have a model that looks at income tax filers and we take a sample. We would have to put in new parameters, such as asking what if we introduced this measure and applied it across the board. How would that affect the people of Nunavik? It is a rough estimate.
With respect to how many people would be affected by that, I can go back and check and talk to the researcher and ideally provide that information to you for your meeting tomorrow. In terms of the Excise Tax Act —
Mr. Nowak: The estimate is $15 million. However, I put the caveat on it that it is a difficult estimate to make because we are basically trying to estimate the amount of consumption that occurs in Nunavik, then how much of that consumption is subject to GST, and then the value of that consumption because GST is an ad valorem tax; in other words, it applies on a percentage. Therefore, our best estimate was $15 million. Again, if you would like more detail on the methodology, I can see what I can provide.
Senator Chaput: I think we should obtain that information because there is a big difference between $30 million and $8.4 million.
The Chair: A huge difference. Our researcher has agreed to meet with Mr. Keenan and Mr. Nowak to obtain some information. That should be circulated to us tomorrow evening. I do not think it is necessary to ask you to return if you can do that and put the information down on paper. That will help us understand the situation.
Senator Callbeck: My question was based on the difference between the $8.4 million and the $30 million, so if we get clarification on that, that will be sufficient.
Senator Neufeld: With respect to the elimination of the excise tax for that area — I believe that was asked for in the bill — I guess it is pretty tough to ask you. Perhaps I should have asked Senator Watt. How much would that mean to a person who is living in one of those communities? As mentioned, there are no vehicles in most of those communities; they use snowmobiles for transportation and for hunting. How much would that amount to per person?
Senator Watt: I will have to get back to you on that because I do not want to provide just a rough estimate.
Senator Neufeld: Can you do that?
Senator Watt: Yes. One thing I would like to say as an opportunity to respond is that one aspect of the excise tax also is that we pay for highway taxes, but we have no highway.
The Chair: It is included as a tax on the gasoline?
Senator Watt: Yes. That certainly does not make sense. There are a lot of things with respect to taxation in the North that do not make sense.
The Chair: Would that be a provincial tax, Senator Watt, such as the Province of Quebec highway tax?
Senator Watt: I think it is both.
The Chair: Mr. Nowak, is there a federal transportation tax included on gasoline sold in Canada?
Mr. Nowak: Gasoline is subject to a federal excise tax of 10 cents per litre, and diesel is subject to an excise tax of 4 cents per litre. However, those taxes are not earmarked for roads or highways; they go into general revenue.
The Chair: That was my understanding. We are talking only about the federal side of things here and not the provincial side.
On Senator Neufeld's question about an estimate for the initiatives in this bill with regard to excise tax reduction, are we able to make some sort of an estimate on a per capita basis as to what that saving would be?
Mr. Nowak: As a point of clarification, when we talk about excise tax reductions, are we including the GST?
The Chair: Yes, that is in the bill.
Mr. Nowak: We have an estimate of $15 million. That figure divided by the population of Nunavik would give you a per capita estimation.
The Chair: That provides us a median. Many people would have more advantage and many less advantage.
Mr. Nowak: Yes. Again, you have to look at —
The Chair: — how many people have snowmobiles.
Mr. Nowak: Not only the level of consumption but the type of consumption. For example, basic groceries are not taxed under the GST. Therefore, lower-income families would tend to spend a greater proportion of their money on basic groceries, which are not subject to GST. We could do an average per capita calculation, but that is all it would be.
The Chair: That is as precise as you can get. Therefore, you will not have to do your research as that would be as far as we can get, by taking the $15 million and dividing it by 11,000, which would give you the per capita saving, correct?
Mr. Nowak: Yes.
Senator Mitchell: Do you have some sort of methodology to determine the stimulative impact of a tax cut and of different types of tax cuts, such as at a regional level like this? In other words, if there is a $15-million cut, what does that do when it comes from a tax cut into the economy of that particular region?
Mr. Keenan: I do not have that information with me today, and we have to work with our economic analysis people in a different branch.
Senator Mitchell: Could you also give me some idea of whether income tax cuts and excise and sales tax cuts have different impacts? There is likely not a big difference. I am sure you probably have that methodology for the cut on the national GST. I am sure there would be some formula to determine how stimulative that would be.
The Chair: We look forward to seeing that information.
Senator Callbeck: I have one comment. If this legislation goes through, it means that, federally, it is a tax-free zone except for income tax. Is that right?
Mr. Nowak: Yes.
Senator Callbeck: Thank you.
The Chair: Honourable senators, seeing no further questions, on behalf of the Standing Senate Committee on National Finance, Ms. Brault, Mr. Keenan and Mr. Nowak, thank you for appearing and helping us. We look forward to receiving further information that will help us appreciate the impact of this particular bill.
(The committee adjourned.)