National Inuit Leader Mary Simon Presentation To Senate National Finance Committee On Bill S-227 Tax Relief For Nunavik
September 16, 2009
Thank you, Senators, for the opportunity to appear today to speak to Bill S-227, thank you Senator Watt.
I just want to take a moment to congratulate Mr. Patterson for his appointment. He will make an excellent Senator. We have worked with him before, and we look forward to working with him again.
Inuit Tapiriit Kanatami is the national Inuit organization in Canada, representing the Inuit of Inuit Nunangat … the Inuit Arctic homeland composed of the four major land claims agreement areas that stretch from the Alaska border to Labrador … the Inuvialuit Region, Nunavut, Nunavik, and Nunatsiavut.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, and 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:
• 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 very heavy comparative tax burden on Nunavik when differences in purchasing power with Southern Canada are taken fully into 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 the 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, and
• 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 costs of goods and services are much higher than southern Canada.
In my comments to you this evening, I would not propose to offer you views on some issues surrounding the details of the 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 that kind of comment to those who are better versed in making those kinds of calculations.
Rather, I would propose some broad observations as to where the kind 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 the other regions of Inuit Nunangat.
I appreciate that in the area of tax law, just like 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.
There are, however, three considerations that 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 with me today, for your use, a number of copies of an ITK document entitled “Inuit Statistical Profile” that might be of some assistance to Senators. )
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 dependents 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 Inuit Nunangat is the reality that the Federal Northern Residents Deduction 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 towards Nunavik and, by extension, other regions of Inuit Nunangat, is meeting fundamental goals.
In preparing my presentation for today, I had the opportunity to review the excellent paper on the Federal Northern Residents Deduction developed by Library of Parliament researchers in January, 2004.
I have noted that the Library of Parliament’s 2004 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 of 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, and sustained, support in Canada for the use of tax policy, and variant tax treatment of certain classes of Canadians, and economic activities and regions, in pursuit of legitimate and transparent public policy objectives.
But 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, and households, and individuals.
Radical … in so far 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 Parliament 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 kind of information.
I would not propose to re-state that kind of 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, there is no evidence that the current federal tax approach is making that kind of difference.
Indeed, there is no evidence to suggest 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 that the kind of tax regime adaptations needed to promote economic and social development in Inuit regions may have to be far greater in their conception, and in 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 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 the kind of tax features set out in this Bill.
The problems that Senator Watt has identified for Nunavik are experienced in very 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 would hope that any favourable changes to the tax treatment of Inuit regions would be sufficiently long-standing in their duration so as to allow both objective assessment as to their effectiveness and to provide needed stability to investors and households.
Thank you for your attention.
Note: The Inuit Statistical Profile is available online here: