Proceedings of the Standing Senate Committee on
National Finance
Issue 11 - Evidence - Meeting of September 16, 2009
OTTAWA, Wednesday, September 16, 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 6:30 p.m. to give consideration to the bill.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: I call the meeting to order and welcome you to the Standing Senate Committee on National Finance.
[Translation]
This evening we will continue with our study of Bill S-227, an Act to amend the Income Tax Act and the Excise Tax Act (tax relief for Nunavik).
First, I would like to introduce our witnesses. The first witness is Professor Gérard Duhaime, Canada Research Chair in Comparative Aboriginal Conditions, Faculty of Social Sciences, Laval University.
[English]
Sitting next to Mr. Duhaime is Ms. Rita Novalinga, General Manager of La Fédération des coopératives du Nouveau-Québec. Next to her is Elaine Métras, Assistant General Manager, from the same organization.
Finally we have Mary Simon, President of the Inuit Tapiriit Kanatami. Ms. Simon is joined by John Merritt, Senior Policy Adviser for the Inuit Tapiriit Kanatami.
We have a full contingent of senators here today. This is the second day of hearings on this private member's bill initiated by Senator Watt.
We have quite a bit of background information, and the map that was distributed yesterday is very handy. It shows the area in discussion, it being the northern section of the province of Quebec. Approximately 11,600 people live in this area. The goal of the bill is to balance the purchasing power of those who live in that area, which is negatively impacted by the higher cost of goods and services as a result of the cost of transportation to get products to market. This is one proposal to rectify that.
Yesterday we heard from government witnesses who undertook to provide us with comparative figures, but that has not yet been worked out by them. There was quite a discrepancy between what Senator Watt estimated as the cost of his initiative, in both income tax and excise tax, and what the Government of Canada's representatives from the Department of Finance Canada estimated it at.
Senator Watt estimated $7 million to $8 million and the government estimated it at $15 million and $15 million for a total of $30 million. We are still trying to compare their methodology to see how they came up with their figure.
Please proceed with your presentations.
[Translation]
Gérard Duhaime, Canada Research Chair in Comparative Aboriginal Conditions, Faculty of Social Sciences, Laval University: Thank you. It is both an honour and a duty for me to be here. I was told that I had about 10 minutes for my presentation, but you know that a university professor is used to speaking for longer periods of time; thus, I will try to be concise.
I will divide my brief presentation into two parts. In the first part, I have a message to give you from the president of the Kativik Regional Government: Ms. Maggie Emudluk.
Over the past week, we had several telephone conversations about this bill. Ms. Emudluk or her representatives could not come here and she asked me to speak on behalf of the Kativik Regional Government.
Her message is simple, but before delivering it I must say that for several years, Laval University and the Kativik Regional Government have been working together to develop and maintain a statistical program for Nunavik. We have carried out several studies within the framework of this program. Some of them have already been distributed to you, more specifically on the cost of living, on the social and economic profile of the region and on the characteristics of the regional economy.
We made several studies of the differences in prices between Nunavik and other regions in Quebec, including the Lower North Shore, the Magdalen Islands and so forth.
Within the same framework, we have just carried out an exploratory study on poverty in Nunavik in an attempt to determine the scope of the problem of poverty in the north.
Together with this initiative, which is called the Nunivaat Program, we also set up a database that is available on the Internet, and in which all available statistics about Nunavik can be consulted directly, quickly and easily.
We have been working together with the Kativik Regional Government for many years. Pursuant to this agreement, Ms. Emudluk asked me to tell the committee that the Regional Government supports this bill. In the opinion of the executive and specifically of Ms. Emudluk, any bill that tries that try to lighten the financial burden of people living in Nunavik is welcome and will be supported by the Kativik Regional Government.
The Kativik Regional Government would have liked to have more information about the potential impact of the implementation of the bill; more specifically the impact on the excise tax, because as we understand, the excise tax is partly returned to Quebec and is used for financing infrastructure projects, some of which are in Nunavik.
Thus, the following question came up during these discussions: by reducing the revenue from the excise tax, will we not be giving with one hand and taking away with the other hand? This is a question, but obviously we did not have the answer; Ms. Emudluk asked me to put this question to you.
Secondly, I will speak on my own behalf. I studied the bill closely. I am familiar with the regional economy where I have worked for nearly 30 years and I can only support the principle behind this bill. However, I have some comments for the senators regarding the characteristics of the regional economy.
As I understand this bill, it would have an impact on society as a whole, or all residents. As such, this is a highly commendable approach.
Nonetheless, there is a very important characteristic that developed gradually, but that has become more prevalent over the past decades, namely, that there is a very broad income disparity in the Inuit population.
I began studying the Nunavik economy in the early 1980s. At that time, the biggest share of the total payroll in Nunavik went to non-aboriginal workers. Today, the most recent available studies show that the Inuit receive more than 50 per cent of the total wage payroll. As for the rest, perhaps 45 per cent of the total payroll as it stands today, goes either to residents or to people who are passing through and who are not aboriginal; these represent about 10 or 12 per cent of the population. Thus, there is a very wide gap in this respect.
There are also very wide disparities in the income that the Inuit in Nunavik earn through their work. In Nunavik, some people earn good wages in the public service or in organizations that can afford to pay good wages. However, there are also many people who earn very little; they are close to the minimum wage as they work for organizations that can only afford to pay them at that level.
Consequently, most Inuit workers belong to a class that in my field we call the working poor.
The exploratory studies that we just carried out show with near certainty that about 30 per cent of the Nunavik population is living below the poverty threshold. A recent study made by the Régie régionale de la santé showed that it was more like 40 per cent. We have more conservative figures, but our study was an exploratory one. Over the coming years, we will try to get more specific data. A large part of the population, between 30 and 40 per cent, is living near or below the low-income threshold.
I suggest that if we want our intervention to be effective, we will have to take these disparities into account. Rather than applying universal measures to all Nunavik residents, it would perhaps be better to work directly with the tax system and give tax breaks such as regressive refundable tax credits. In this way, those who earn more money would receive less in credits and the reverse would also apply, so that we could kill two birds with one stone: first, we could remedy the extremely high cost of living in the north, and secondly we could try, through these tax breaks, to reduce the gaps and the difference in levels among the large number of people who earn very little money and the others.
I know having studied this data, that the Quebec government currently has tax arrangements for people residing in the north. These tax arrangements cost about $10 million per year.
Of course, these measures are not very visible. They are not very high-profile or popular, especially with people who do not submit their tax returns on their own but who need help with them; people who do not quite understand the mechanics. However, the money finally ends up in their pockets. This is important. This may be less visible, but it could be more effective. I offer this suggestion, which could eventually be applied, to your committee.
Finally, I would like to say that this bill is specifically aimed at Nunavik. Some committee members already noted that other regions could also be affected by the same conditions, and I agree with that idea, especially where communities are not connected by roads. They should be able to benefit from measures of this kind. This is true for nearly all the communities in Nunavut. It is also true for many Inuvialuit communities. It is true for most communities in northern Labrador.
If this bill was amended so as to include all the people living in the Canadian Arctic who all share the same condition of a cost of living that is far higher than the cost of living in Ottawa, Quebec, Montreal or Vancouver, I would have to applaud it. Thank you.
The Chair: Thank you, Mr. Duhaime.
[English]
Next we have Mary Simon.
Mary Simon, President, Inuit Tapiriit Kanatami: Thank you, Mr. Chair, and thank you to all the other senators who are here, especially Senator Watt.
Before I get into my presentation I want to take a moment to congratulate Senator Patterson for his appointment. I think he will make an excellent senator. We have worked with you before, so we look forward to working with you in the future as well.
Inuit Tapiriit Kanatami is the national organization that represents the Inuit at the national level. We call our homeland Inuit Nunangat. It is composed of four major land claims agreement areas that stretch from the Alaska border to Labrador, the Inuvialuit region, Nunavut, Nunavik and Nunatsiavut, which is Northern Labrador.
I would like to begin by commending Senator Watt for spearheading the development of this bill. I know that Senator Watt has taken a keen interest in tax relief as an important tool of economic and social development for a number of years. It is encouraging that this bill has now arrived at this committee for closer consideration.
I note at the outset that Inuit in Canada do not enjoy a general exemption from taxation comparable to the reserve- based exemption provided under the Indian Act. The preamble to the bill appropriately recites a number of factors that argue for tax relief in Nunavik.
Among these factors are the following: extremely difficult operating conditions for Nunavik institutions and companies, and equally difficult living conditions for Nunavik households due to problems such as distance, isolation and high transportation costs; the heavy comparative tax burden on Nunavik when differences in purchasing power with Southern Canada are taken fully in account; and the recommendations for Nunavik tax relief that have been put forward in the past in various objective studies.
This bill proposes two key changes to the federal tax regime in Nunavik: First, amendments to the Income Tax Act, which would result in a dramatic increase in the value of residency deductions allowed against income for the residents of Nunavik — the new level for residents of Nunavik would be calculated as $70 for each day of residence in any calendar year; second, the abolition of the federal GST on the supply of goods and services in Nunavik and the abolition of a number of similar taxes on petroleum products and fuels.
These two features have no doubt been designed to work, in combination, so as to deliver a number of immediate and tangible benefits to the Inuit and other residents of Nunavik. A key benefit would be bringing about a basic personal income tax exemption that would position Nunavik residents to shelter roughly the same kind of real — as opposed to nominal dollar — core purchasing power as is enjoyed by Southern Canadians. Another key benefit would be a reduction in the cost of living in a region where the cost of goods and services are much higher than in Southern Canada.
In my comments to you this evening, I would not propose to offer you views on some issues surrounding the details of measures set forth in the bill, for example, whether the figure of $70 per day is the most compelling number, or what the projected cost to the federal treasury would be if the bill were enacted and implemented. I would leave those comments to those who are better versed in making those calculations.
Rather, I would propose some broad observations as to where the type of measures proposed in this bill might figure in the ongoing process of law-making and policy-making in Canada.
An initial observation is that it is entirely appropriate to use tax policy to promote fundamental economic and social objectives in Nunavik and in the other regions of Inuit Nunangat.
I appreciate that in the area of tax law, just as in the area of criminal law, there is a strong — and, in some respects, understandable — institutional bias within the federal government to make tax law as uniform as possible throughout Canada. However, three considerations give us every incentive to consider fashioning tax law for the Arctic along lines different from other parts of Canada.
The first is that the depth and durability of gaps in basic economic and social well-being separating Inuit from other Canadians are such that we must take advantage of every tool available to Parliament and government to close those gaps.
I have brought, for your use, a number of copies of an Inuit Tapiriit Kanatami, ITK, document entitled ``Inuit Statistical Profile'' that may be of some assistance to you.
Tax tools can be no less valuable than legislative tools or use of the federal spending power.
The second consideration is that we have accumulated a great deal of experience and generated a great deal of public acceptance around the proposition that we must fine-tune tax law in relation to certain categories of Canadians and certain categories of business activities in order to promote goals of social equity and economic productivity.
For example, our tax laws make distinctions between senior citizens and others, between those with dependants and others, and allow certain classes of business investments to be depreciated against their capital costs much faster than others. Our tax laws also have a number of features that encourage individuals to pursue education and learn new skills.
The third consideration favouring adapting general tax laws to the special conditions and challenges of the Inuit Nunangat is the reality that the federal Northern Residents Deductions has existed since 1987. Given that the deduction has existed for more than 20 years, it is entirely timely for Bill S-227 to raise the question of whether current federal tax treatment toward Nunavik and, by extension, other regions of Inuit Nunangat is meeting fundamental goals.
In preparing my presentation for tonight, I had the opportunity to review the excellent paper on the federal Northern Residents Deductions developed by Library of Parliament researchers in January of 2004. I have noted that the 2004 Library of Parliament paper identified five rationales for special tax treatment in northern regions: sovereignty considerations; promotion of economic development; addressing regional differences in wages and costs of living; addressing regional differences in the level of goods and services; and dealing with special hardships resulting from living in a harsh geographic environment.
All these factors are as relevant today as they were in 2004. Some, of course, such as sovereignty, have become even more visible and compelling factors in driving public policy.
There appears to be wide, sustained support in Canada for the use of tax policy and variant tax treatment of certain classes of Canadians, economic activities and regions in pursuit of legitimate and transparent public policy objectives. However, questions still arise: How ambitious or generous should these special tax treatments be? What should be the extent of their geographic reach? How long should they be in effect?
From the perspective of ITK, questions such as these should be answered with a kind of radical practicality. ``Practicality'' because we need concrete measures that bring about improvements in the day-to-day lives and hopes of communities, households and individuals; ``radical'' insofar as the accumulation of unmet economic and social problems demands boldness and imagination from all of us and a healthy impatience with the status quo.
I have on many occasions before parliamentary committees and at other public venues recited a painful litany of statistics that measure the gaps in well-being and life expectations between Inuit and other Canadians. I know that Senator Watt, on the occasion of the introduction of this bill and on many other occasions, has also offered this type of information.
I would not propose to restate that information today. I would say, however, that the special tax treatment afforded Arctic regions should be designed to make a difference — a tangible and rapid difference.
At the moment, no evidence suggests that the current federal tax approach is making that difference. Indeed, no evidence suggests that the current tax arrangements come remotely close to contributing to a measurable reduction in the problems of economic and social underdevelopment that hang over Inuit regions.
Accordingly, my first recommendation to this committee in its review of the features of this bill is to keep an open mind to the possibility that the tax regime adaptations needed to promote economic and social development in Inuit regions may have to be far greater in their conception and their reach than what we have seen in the past in order to achieve results. That is one of the key messages behind this bill.
In this regard, and without deflecting from the key features of this bill, I would point out that this committee might, at some point, wish to consider tax relief for Inuit Nunangat in the form of a refundable tax credit to each resident. A refundable tax credit calculated on a per-person basis could be of particular benefit to those with the lowest incomes and most pressing needs, particularly those households with many dependents.
My second recommendation relates to the geographic coverage of tax features set out in this bill. The problems that Senator Watt has identified for Nunavik are experienced in similar ways in the other three Inuit regions, and I would encourage the committee to explore the application of the bill to all four regions of Inuit Nunangat.
A third recommendation is that this committee explore further the comparative tax treatment of northern hunters and trappers to others who live off the land in a more conventional southern way, such as farmers and loggers.
Finally, an important feature of tax policy is that it be predictable enough to encourage companies and individuals to make economic choices and commitments with some level of security.
Therefore, I hope that any favourable changes to the tax treatment of Inuit regions would be sufficiently long- standing in their duration to allow both objective assessment as to their effectiveness and to provide needed stability to investors and households.
The Chair: Thank you very much, Ms. Simon. That was very helpful, and we understand your position.
We will now hear from Ms. Novalinga.
Rita Novalinga, General Manager, Fédération des coopératives du Nouveau-Québec: Senator Patterson, welcome. It is nice to have you aboard. I met you many years ago in Iqaluit.
The federation and the co-ops in the North are frontline workers. We deal with people every day who have to buy things that must be put on sea lifts, so my presentation will be from the perspective of an Inuk in the North.
We face challenges every day with the high cost of living in Nunavik. I am originally from Puvirnituq, a community based on the east coast of Hudson Bay. It is shown on the map that was provided to you. I am the first Inuk general manager of La Fédération des coopératives du Nouveau-Québec, FCNQ, and I have been in my position for four years.
The first two co-ops in Nunavik were formed, first, in Kangiqsualujjuaq, which is the area from where Ms. Simon originates, in 1959 and then in Puvirnituq, my home community, in 1960. By 1967, we had five co-ops that formed the federation in which I am the general manager.
We provide a wide range of services for the members. All the co-ops are independent, meaning that the federation does not manage them. In other words, many people think the federation is the head office, but in reality we serve the co-ops and their members. That is a big difference. The Inuit are our bosses, and we provide training, services and distribution.
We are the second-biggest employer in Nunavik, only after the government entities. We have about 130 employees at the federation level, based in Baie d'Urfé, and about 250 to 300 Inuit who work in the co-ops on a daily basis in the 14 communities.
Besides the affiliation of co-op associations in all of the Nunavik communities, the FCNQ also operates Art Nunavik, where all the soapstone carvings originate; Arctic Adventures, a tourism agency that provides tourism to the North; Voyages FCNQ, a travel agency; and FCNQ Petro and FCNQ Construction Inc.
We recently started a banking service two years ago service with Caisse d'économie solidaire Desjardins. We also have a sealift operation partnership with Desgagnés Transarctik Inc. Our joint company is called Taqramut Transport Inc. I wanted to inform you of these because we are a full service for the North. We have to deal with the taxation, the people and every aspect of Inuit life in the North.
The co-ops came as a result of hard work and a vision. When we think about Inuit, such as my parents, Ms. Simon's and Senator Watt's, they have put aside five cents to every dollar that they made. As a result, they had a dream, and they worked the dream. They had a vision, and, as a result, we have a multi-million dollar business today. It is a history that no one should forget.
No roads connect to Southern Quebec from Nunavik, and this is the determining factor that explains the high cost of living in Nunavik. All merchandise is transported by boat during the sealift season or by airplane year-round. We are talking about the full range of consumer goods, from food to furniture, including all construction material. This situation is not easy to handle, and we have to continually review our procedures to find the most economical way of shipping all needed merchandise to the 14 cooperatives. Let me give you a few examples.
In Nunavik, an Oasis orange juice, which is 960 millilitres, is $1.69 in Montreal. Up North, we have to pay $3.69. For a fruit drink — we have a variety of choices — that is not subsidized by Indian and Northern Affairs Canada, in the South you pay $1.89; because it is not subsidized by the government, we pay $8.19.
For butter, 454 grams, down South it is $3.49; up North, we have to pay $8.49. Kraft peanut butter — if you have children, all kids love peanut butter — 500 grams, is $3.99 in Montreal; up North it is $6.49. For everyday use items such as toilet paper, down here it is $5.99 for 24 rolls. In the North, we pay $12.99 for the same rolls that you buy down here.
As you can see from my examples, the grocery basket up North is 116 per cent more than what we pay down here in Montreal and its surrounding areas. It is very expensive to live up North.
The cheapest way to ship merchandise up North is by boat — we call it the sealift — during the summer, but the season is short. We try to ship as many goods as possible by boat in order to keep our costs as low as possible. Nevertheless, we have perishable products that have expiration dates. While some grocery products are shipped by boat, most are shipped by plane, simply because we want them fresh similar to everyone else down South. That is reflected in the high cost to the consumer.
The cost of some perishables or non-perishables, but still essential products, is presently subsidized in part through the federal Food Mail Program managed by INAC. We thank you very much for this subsidy because we would not be able to afford anything if it was not for this program. It was the FCNQ that lobbied to have this subsidy, which the North enjoys now, in the 1970s. We were originally the people who lobbied to have the lower cost of living.
However, this program is now being revisited and revised under Minister Strahl's department. We ask that subsidies be given directly to the retailers, which is us, to decrease the number of middlemen. At present, the federal government gives the contract to Canada Post. Canada Post, in turn, deals with the airline concerned and then it determines the shipping rates. These middlemen can be eliminated to lower the cost of living in the North.
Presently, in Nunavik, which is the area that is on the table, we only have one airline. With no competitors, you know what the situation is in the area as I speak. We have no say, despite the Food Mail Program.
I would like to also inform you that the federation and the co-ops are further subsidizing essential items. The following are a few examples: We need bread on a daily basis, so for 10 kilograms of flour, the real transportation cost is $8.75. However, because we are the distributors, the FCNQ charges the co-op $6.19; we lose $2.56 per unit.
Everyone uses salt. For one kilogram, the real transportation cost is $1.55. The FCNQ charges 37 cents to the co-op, for a loss of $1.18. We have this federal program, but FCNQ and the co-ops themselves are subsidizing the subsidies. It is essential that you understand that. We are lucky to have the co-ops because if it was a private company, they would charge the regular price.
For four kilograms of sugar, the real transportation cost is $3.95. The FCNQ charges $3.77 to the co-op, for a loss of 18 cents per unit. As a result, we are still losing money. Our members are convinced that with our 42-year business experience in the cooperative movement, they are more than qualified to be able to efficiently manage this subsidy.
Another area you need to be aware of is cargo benefits. As I said earlier, the government has the highest number of employees in the North and is presently giving cargo benefits to civil servants. As Mr. Duhaime said earlier, we have professionals in the North. The cargo benefit does not help to reduce the high cost of living because it creates two levels of services. First, the Food Mail Program subsidies are presently given to us, the general population. Second, the civil servants have the benefit of ordering food directly from southern businesses, which bypasses the retailers who provide services to the general public in the North.
If you were to remove this benefit, it would give retailers much-needed bulk ordering opportunities to keep costs lower. More important, it would drastically lower the amount of alcohol in the North. A case of 24 beers costs you and me, as taxpayers, $80 to ship to Kuujjuaq. It costs you and me $130 to ship the same case to Salluit, which is the northernmost community in Nunavik. Many essential items need subsidies, and I do not believe that alcohol is one of them.
One area that boggles the mind for Southern Canadians is the high cost of travel. A round trip from Montreal to my home community of Puvirnituq costs me $3,575.69. I have a seven-year-old daughter. If she and I were to travel, it would cost me $5,408.73. A round trip between Salluit, one of the northernmost communities, and Montreal costs $3,894.80. Some of you may have heard about the famous crater in Kangiqsualujjuaq, or George River, for which we have done a great deal of tourism publicity. A round trip to see that crater will cost you $3,045.29.
As the general manager of the co-op, I am sending a couple of my staff to China to shop in bulk for the co-ops because we have to find ways to save. A round trip for my staff from Montreal is $2,452.12, and China, of course, is on the other side of the world.
FCNQ also operates a division under the name of FCNQ Construction Inc. This division manages the construction of all of our cooperative buildings as well as other buildings in Nunavik. Construction costs are 50 per cent higher in Nunavik than in Montreal due to the cost of transporting and housing skilled tradespeople; a shorter construction season, resulting in higher salaries for overtime wages; cost of shipping building materials; warranties; and other related costs. You can imagine how much it costs to build.
To conclude, I hope I was able to convey to you in this brief presentation the urgency of the situation caused by the high cost of living in Nunavik. Thank you very much for giving me this opportunity to share our concerns, and, as the decision makers of Canada, we trust that in the near future you will find the best solution to improve the quality of life for my people in the North and ensure that it is similar to what every Canadian enjoys in this country that we call home.
The Chair: Ms. Novalinga, thank you very much. We will see if questions have arisen from your comments.
[Translation]
Senator Rivard: I was very impressed by the last presentation made by Ms. Novalinga. We realize that the situation in the north is not the same as in the south.
I would also like to welcome Mr. Duhaime, to whom I will address my first question.
In your social and economic profile of Nunavik for 2006, you state that the income of Nunavik residents is much lower than that of Quebec residents. Do you think that the measures proposed by Bill S-227 could have a great fiscal impact?
Mr. Duhaime: If this has to do with reducing the GST, obviously, it does not affect income directly, but it affects the burden of expenditure; certainly this could only have beneficial results.
Senator Rivard: Could an increase in tax breaks for residents have a significant impact?
Mr. Duhaime: It would have a great impact, especially if there are no limits. I did not see this in the bill, but if there is no other ceiling apart from the $70 per day, it will certainly have an immediate effect, more specifically for the less fortunate households. We hear about $20,000 and more, and currently, for instance, there are households of senior citizens who only receive the federal pension. Their entire yearly income amounts to $10,000 or $12,000, which is two or three times below the low income threshold. By applying such measures, if we could increase their income significantly, it would certainly have a great impact on the region.
Senator Rivard: At the end of your presentation, I think that you were aware of the fact that this bill has to do with Nunavik, and the Department of Finance has determined that this measure would cost about $30 million per year. If we extended this to the entire northern or arctic region, it would amount to $300 million. Thus, do you think that it will be fair to go ahead only with Bill S-227?
Mr. Duhaime: I have a clear opinion about this, and my answer is yes. Within the current constitutional arrangements in Canada, the northern regions and especially Nunavik, though this also applies to Nunavut, do not derive any direct benefit from the exploitation of natural resources. This involves very large sums of money. If the constitutional arrangements in Canada were different, a region like Nunavik could afford practically all the public services it needs, for instance if it could keep some profit from the hydro-electric projects, which is not at all the case. The same applies to Nunavut.
So long as there is no devolution whereby the territories have the same jurisdiction over natural resources as the provinces have, there will be big transfer payments.
Of course, if we compare these amounts with the money that comes out of the region, we say — my God, but this is expensive! However, if we realize how much wealth is created in those regions, the figures are completely different.
In the Northwest Territories, by opening just one mine, we are producing more than the total value of Alaska's mining production.
Great wealth is produced in those regions, but unfortunately, the regions do not have the constitutional capacity to keep this wealth so that they can pay for the services themselves.
If we said yes, it would cost $300 million. This is enormous! I suggest that this should be compared to what Canada gains by exploiting the northern regions.
Senator Rivard: Thank you, that is quite clear.
[English]
Senator Di Nino: I may have misunderstood, Mr. Duhaime. The question of the Northern Residents Deductions is a deduction on your income. When you said a moment ago that $70 a day for low-income families and seniors would be very helpful, I do not follow that discussion. One of the concerns expressed yesterday during the hearings was that that particular provision of this bill really only benefits the higher-income residents of Nunavik because it is a deduction. If you are not making much money, you would not benefit much from that. For example, seniors are at 15 per cent, or whatever amount they may be at, and I think low-income families are at about 40 or 42 per cent Senator Watt told us in his speech in the Senate. Maybe I misunderstood what you have said. Is that what you were trying to tell us?
Mr. Duhaime: In my presentation, one of the suggestions I made was to change the perspective that is adopted in the bill and to go through a refundable tax credit. That way you will be able to reach the poorest households.
Senator Di Nino: I just wanted to ensure that Mr. Duhaime was talking about something other than the provisions of this bill.
The Chair: That is correct. We understand that was a recommendation for a refundable tax credit, but that is not in the bill with which we are dealing.
Senator Banks: I am not a regular member of this committee, and I apologize, chair and colleagues, if this has already been asked and answered. If it has been answered today and I missed it, I apologize too.
Is it possible to make a distinction between the hardships that you have described that are faced by people who live in Nunavik in particular and the similar hardships that we have learned exist in other places in the three other territories to which you referred, Ms. Simon? Is it worse, different, less, more or the same? Can we reasonably extrapolate this cost and multiply it by population and say that that is what it would cost in the North, or is there a distinction to be made?
Ms. Simon: I do not have the figures, but I would say that it is roughly the same.
Senator Watt: Except in the area of Northern Labrador and Nunavik. There are three levels of taxes. In the Northwest Territories and Nunavut, they have only one tax.
Senator Banks: Can you expand on that so that we understand it clearly?
Ms. Simon: It is to do with the federal and provincial tax system. In Nunavik, we pay federal taxes, provincial taxes and the GST. In the Territories, it is the federal tax.
Senator Patterson: The government policy is no sales tax in Nunavut and the Territories. There is no provincial, territorial-level tax.
Ms. Simon: No sales tax.
Senator Banks: Is there income tax?
Ms. Simon: Yes. Inuit are all tax-paying citizens.
The Chair: Is there a territorial income tax as well as a federal income tax?
Ms. Simon: I do not know.
Senator Patterson: Yes.
The Chair: Therefore, there is no difference.
Senator Nancy Ruth: Is one filing for income tax, and it is transferred back to the territory or the region?
Senator Banks: Let me rephrase this part of the question. Everyone in Canada that I know files an income tax return or two income tax returns, depending on which province you live in. In my province, I file one income tax return, but I am paying, in that return, a federal income tax and a provincial income tax. People who live in the Northwest Territories, I believe, file one tax return, but are paying, in the process of that return, a federal income tax and a territorial income tax, leaving aside the GST — leave the GST out of it because everyone pays that. I am assuming that the people in Nunavik are also paying two taxes: a provincial tax — as opposed to a territorial tax — and a federal income tax; aside from the distinction of the differences between the various levels of taxes other than federal taxes.
I live in Alberta, and we pay Alberta income tax, but it is very low. Although it has been lower, it will not be anymore. That is part of what I am asking, and also the cost factors because the other three territories that you referred to, Ms. Simon, all have, at least in parts of them, the same transportation difficulties. No all-weather road exists to Tuktoyaktuk. When the ice roads are melted — which is now more often than used to be the case — the cost of getting a pound of butter to Tuktoyaktuk goes completely through the roof.
I am merely asking whether a particular distinction exists that is unique to Nunavik as opposed to the other four Inuit territories.
Ms. Simon: I believe there is not a difference because the cost of living is very high all across the Arctic. There are no roads into Nunavik, Nunavut or into Northern Labrador, similar to, as you say, in the Western Arctic. We rely on the same type of transportation mode, so the level of cost is comparable across the Arctic. It varies somewhat from community to community, depending on the location, but if you look across the board, it is comparable.
The Chair: Thank you for that question. It clarifies the point.
Senator Neufeld: Mr. Duhaime, you said that 30 to 40 per cent of the people actually are below the poverty line. First, let me say that I appreciate what Ms. Novalinga said. I have lived also in the North, not the same North as you live in but in Northern British Columbia. Our costs are higher than in Vancouver, so I can relate to some of this.
What is the poverty level? I believe in Canada it is $12,000. Is that what you are relating it to when you refer to people being below the poverty line?
Mr. Duhaime: This is exactly the type of question we are trying to answer these days. The main measurement of poverty in Canada is not taking into account the high prices in the North. We did an exploratory study and made an inventory of all these measurements that are performed in Canada or in the province of Quebec to try to draw the line of the poverty threshold. Our conclusion was that if we apply the similar threshold that is applied in Montreal or in Ottawa, then the statistics of poverty are higher than down South but not that high. However, it does not take into account the fact that a pound of butter is twice or three times the price of that in Montreal.
In this preliminary study, based on previous studies, we took this into account to raise the threshold and give us an idea. We were very conservative in order to avoid creating a sensationalized picture. We wanted to have the most conservative estimate based on available data. When I say 30 per cent, I am sure that is an underestimation.
We had another piece of research done by the Nunavik Regional Board of Health and Social Services that suggested it was closer to 40 per cent. In the next few years, with our group in cooperation with the Kativik Regional Government as well as the Inuvialuit Regional Corporation, we will do a special survey to try to put our finger on the real numbers.
Senator Neufeld: I appreciate what you are saying. I am not disagreeing with your rationale. I was trying to get some sense of what number you used when you said that 40 per cent of Inuit live under the poverty line. I believe those were your words. When you say 30 to 40 per cent, I would like to know what number you had in your head.
Mr. Duhaime: I can given you an example.
Senator Neufeld: Tell me $10,000, $12,000 or $15,000, whatever the number happens to be.
Mr. Duhaime: In general, in the rural areas of Quebec, we would use an income of $29,000 for a family of four. If we use this number in Nunavik, already approximately 25 per cent of people are living under this level. If we multiply this number by a factor that takes into account the high cost of living there, for example 44 per cent, then we will no longer use $29,000 but, rather, $35,000, or a similar amount.
Senator Neufeld: What number were you using in your mind when you said that 30 to 40 per cent of people live under the poverty line? Was the number then $40,000 or $30,000? That is the question I am asking you.
Mr. Duhaime: I cannot tell you, but I can forward you the study that we released with the precise number. It is around $35,000 that is more or less equal to what a person will earn in the South. It is the equivalent of about $30,000 in purchasing power.
Senator Neufeld: You said that many seniors there will live on $12,000, the Canada Pension Plan, the Old Age Pension, supplemental benefits and so on. How do they compare to that $35,000 number then?
I am confused with your numbers here. I am trying to get some sense of how you actually help the people who are at the lowest end of the scale. To me, the government has already increased the Northern Residents Deductions by 10 per cent this year. It is over $6,000 now, and every individual is allowed X amount on which they do not pay tax. That is what I am trying to get at.
The people who are making good wages are probably okay, but if you substantially increase the Northern Residents Deductions, do you really capture the people that you want to capture, or do you capture the whole population, and only in one area? I do have difficulty trying to figure out how you will manage it in just one area of Canada. I am having some trouble with that. I am not disputing the fact that the costs are astronomical — things to which I cannot relate. I am not trying to say that the costs are not high. I am trying to get at whether you really help the people if you increase it to $70 a day — that is, the people who actually need it at the low end of the scale. That is some of the difficulty that we are having as a group, trying to figure this out.
You spoke about natural resources revenue. I am not sure how it works in Quebec, but I believe it is provincial revenue not federal revenue. Probably a bit of federal revenue is in there in corporate taxes, depending on where the corporations file their taxes. If they file their taxes out of Quebec, then Quebec does not get the corporate taxes. However, the natural resources revenue would flow to the Government of Quebec rather than to the federal government. Do you agree with me there?
Mr. Duhaime: Yes.
Senator Neufeld: Senator Watt and I talked about this yesterday to a degree. Some level of involvement is needed here with the Government of Quebec about how we deal with these issues because they are actually getting the revenue, not the federal government. Would you agree? A certain portion would be going to the federal government.
The Chair: Would you like to comment on that?
Mr. Duhaime: About the situation of elder citizens, we did a special survey on that. Approximately half of them get only the federal pension plan because they did not contribute during their working life to a significant extent to the specific Quebec regime. They are the poorest. With respect to how to reach or help these people who are at the lowest level, in my mind, the best way to do that would be to use the means of the tax credit refund.
On Quebec involvement, we are reviewing with my team and other members of the Nunavik authorities the involvement of the governments in terms of effort to reduce the cost of living there. Apart from the federal effort, which is under the shape of the Food Mail Program to which Ms. Novalinga referred, you have approximately $40 million that is devoted to this very question from the Quebec government to the region in various ways and means.
Senator Neufeld: When you refer to the tax credit refund, I assume you are talking about the Northern Residents Deductions. Is that what you are saying? The seniors who make under $12,000, or less than what CPP pays, will not pay any income tax to start with. When you add the basic exemption and add on $6,000, they are not paying any tax anyway. I think this needs much more study about how to do these types of things. I am appreciative of costs that many people do not have to deal with, and people in the North do have to deal with not just in Nunavik but in other parts of the Northwest Territories and the whole north of Canada.
Ms. Novalinga, you said that the cargo benefits are for civil servants that are working. Did I hear you right? Did you say that they will get a benefit from the federal government of $80 for every case of beer that they order?
Ms. Novalinga: I did not say federal; I said civil servants, and that is to both governments. They get cargo benefits. For example, if you were hired as a teacher and sent up North, part of your package is the cargo benefits. That means you have a choice of where you want to shop. You can call on the phone, for example, IGA or any of these stores and place your order. For example, you want oranges, apples and beer. You make your order directly to that company, and they ship it up the next day.
Senator Banks: That is at no cost?
Ms. Novalinga: That is at no cost. That is your benefit if you are a teacher.
Senator Neufeld: It is no cost to the person but a cost to every other taxpayer in Canada.
Ms. Novalinga: That is what I said. I said that we taxpayers are paying for this benefit.
Senator Neufeld: I wanted to understand that a bit more.
My notes tell me that when we go to fuel taxes, no federal excise tax is charged on fuel as long as it is used for generation of electricity or for home heating. Is that right? That tax has been gone for a long time.
Maybe Senator Watt can answer this. Your bill deals with excise tax.
Senator Watt: All I know is that I am paying a highway tax when I do not have a highway. That is just an example.
Senator Neufeld: You are paying a highway tax to the provincial government?
Senator Watt: I am paying it to the federal government.
Senator Neufeld: The federal government does not have a highway tax.
Senator Watt: That is what I thought. However, that is what I have been told, that the highway tax is a federal tax.
Senator Neufeld: For heating your home, or whoever generates electricity there, they do not pay excise tax.
The Chair: We resolved this yesterday with the government officials; there is no federal highway tax on gasoline.
Senator Neufeld: That is right.
Senator Watt: Not on gasoline, no.
Senator Neufeld: It goes to general revenue.
Senator Watt: I do not want to leave the wrong impression that it is just Nunavik alone. We talked about Nunavik and the Northwest Territories.
Senator Di Nino: Ms. Simon, could you help me out with some of the statistics that we have heard? Mr. Duhaime talked about the disparity between Natives' and non-Natives' earnings. We also heard about those in the public service versus those who are not in the public service. Is the public service primarily non-Native, or is it a combination? Is there any statistic that would indicate to us what the balance is there?
Ms. Simon: To answer your first question, we have some information in the package that we gave you.
Senator Di Nino: The public cannot read that, so that is why I want to put it on the record.
Ms. Simon: This is a census that was taken in 2001. I think that is the last one for which statistics were done. If you look at the geography, for example, in Newfoundland and Labrador, the average median income for Canadian adults is $22,620, and for Inuit adults the average income is $17,809. In Quebec, the average income in 2001 was $27,125. In the Inuit communities it is $19,054. That gives you an idea of the range. That was in 2001, so I would imagine the figures have changed quite dramatically since then. The incomes are much lower for Inuit on average.
Senator Di Nino: I would like to focus on Nunavik, the area that we are talking about in this bill.
Ms. Simon: That is what I was saying. In Quebec — this is figures from 2001 — the average income was $27,125; in Nunavik, which is Inuit adults, $19,054.
Senator Di Nino: The statistic that Mr. Duhaime gave us — correct me if I am wrong — is that in Nunavik, a disparity exists between the earnings of the local Native Nunavik population versus the non-Native population, that is, those who come to work for a period of time. That is my question, as opposed to comparing earnings with other parts of Canada. I am much more interested in finding out what this difference is, and then I will ask a couple other questions.
Ms. Simon: The disparity exists for various reasons. Ms. Novalinga has identified some of those reasons. They relate to different benefits that people get when they are hired from outside of the region.
Senator Di Nino: Transportation costs, I believe.
Ms. Simon: Northern allowance is another.
Ms. Novalinga: Housing.
Ms. Simon: Yes, housing. You do not get housing if you are hired locally, whereas if you are hired from Southern Canada or elsewhere, you get housing as part of your employment package. You may pay some rent, but it varies. It is not very much, if you do pay. Then you get subsidies for everything else. Basically everything is subsidized if you are being relocated to the North as a non-Native or as a non-Aboriginal or non-Inuk.
Senator Di Nino: I do not want to be picky, but if the person who is being relocated from Quebec, Ontario or British Columbia happens to be a Native individual, one who was actually born in Nunavik, is he or she treated the same as if he or she were a native of Ontario? Would they get those benefits?
Ms. Simon: Yes, as far as I know. If you are living outside of your territory and you get hired out of your territory and relocated, I think you get the benefits. You have to be hired locally in order not to get the benefits.
Senator Di Nino: That is a very good message. For those few who are watching television at 3:00 or 4:00 in the morning, that is a good message for them to understand.
Ms. Simon: To correct myself, it also depends on who is hiring you. If you are hired by a non-profit organization and you are being relocated, you will not necessarily get those benefits. However, if you are being hired for any government agency, you generally get those benefits when you are hired outside of Nunavik.
Senator Di Nino: As well as corporations doing business in Nunavik; is that correct?
Ms. Simon: Yes, exactly.
Senator Di Nino: The proposal in this bill talks about a further deduction under the Northern Residents Deductions program of $70 a day. After hearing that, I am still not quite clear on how the vast majority of people in Nunavik will benefit from this. If 30 per cent are at that high level, you have to be talking about 40 per cent or more of the people who would not have much income left to deduct. How will this benefit those seniors that we talked about, who are making a shameful $12,000 a year, which will hardly cover the cost of their shelter? It is so minimal. It seems to me that this particular provision is not geared or intended to help those most in need in Nunavik.
Ms. Simon: I am not a tax expert, and I do not work in this field, so I prefer not to get into an analysis of what would be beneficial or not. However, as I said earlier, and as Mr. Duhaime also said, I do not want to deflect from the key features of this particular bill, although maybe at some point this committee might want to consider tax relief in the form of a refundable tax rebate or credit because it would then apply to each resident in the region, in the territory. With respect to how the $70 actually benefits each individual, I am not in a position to respond to that. You need to do some analysis and review as to how that would work. We have not done that type of work ourselves.
Senator Di Nino: That is fair enough. I am not trying to put you on the spot; I was just trying to get an opinion from you because this is an issue that is being raised on this bill.
The Chair: We are at the stage where we should hear from the sponsor of the bill. Senator Watt now has the floor. Either by giving his own comments or by asking specific questions of the witnesses, he will try to help clarify some of the points.
Senator Watt: I only want to address one issue. I do not want to leave the impression that all regions have the same problem. It is well known that transportation problems exist in all regions, but the difference lies in the fact that Nunavik residents pay sales taxes whereas there are no sales taxes in Nunavut and the Northwest Territories. I want to ensure that that is clear in everyone's mind.
The Chair: Is there a provincial sales tax?
Senator Watt: Yes, there is a provincial sales tax but no territorial tax. Everything under the federal government, such as the Northwest Territories and Nunavut, do not pay a sales tax.
The Chair: So that everyone is clear, although we understand that the provincial sales tax is a burden — and you have talked a lot about burdens — it is not in this bill, and it is not intended to be dealt with by Bill S-227.
Senator Watt: No, it is not in the bill because it comes under provincial jurisdiction. Only two regions are identical on the taxation issue; namely, Nunavik and Northern Labrador.
The Chair: Thank you. Are there any other points that you would like to clarify, Senator Watt, while we have the whole team here?
Senator Watt: I myself need to revisit the aspect of less fortunate people. Does this bill really take care of those people? I would like to do some homework in that area. We may then have amendments.
The Chair: We have a good understanding of what is in the bill and the challenges of living in the North. We need further information from the Department of Finance to clarify the significant difference in their estimated cost of this initiative and that of Senator Watt. We have not yet received that information.
We will not proceed with a clause-by-clause study of this bill until we are satisfied that we have all the evidence. If any senator would like to hear from any other witnesses, we could do that.
Senator Di Nino: We should invite the appropriate bureaucrats from the Province of Quebec to appear before us because this does impact them.
The Chair: Thank you. I will take that suggestion to the steering committee.
Senator Watt: I was recently in Montreal and was happy to be invited to a presentation by Mr. Charest to the Canadian Jewish Congress on economic investment opportunities in the North. I had an opportunity to talk to him, and he said that he will put one of his people on this file.
The Chair: We know where we are going, Senator Watt. You will discuss with the steering committee what we should do next with respect to your bill. I thank you for your initiative in this regard.
On behalf of the Standing Senate Committee on National Finance, I sincerely thank all our witnesses.
(The committee adjourned.)