Eileen Collins
Northern News Services

Hay River (Apr 17/00) - Hay River's Mayor Jack Rowe has proposed a new flat tax that could keep the tax revenue that goes south with non-resident workers in the North for the use by the GNWT.

Taxation is now handled through an agreement with the federal government. NWT employers deduct federal income tax and the territorial tax from their employees. The federal government remits the territorial tax through transfer payments to the GNWT.

Taxes paid by people who work in the NWT by live in other provinces don't come back to the North, said Rowe. The tax they pay goes to the province in which the taxpayer resides, even though it's collected from earnings generated in the NWT.

Mayor Rowe cited the example of recently re-opened Lupin Mine. He expects that many of those workers are from the south. All of the personal taxes that are collected on behalf of the GNWT are transferred by the federal government to the provinces where the workers maintain their residences.

With the number of southern residents working in the gas and oil industry and other mines, the leakage of tax money could amount to millions of dollars.

"We end up with the situation where we lose revenue," said Rowe. "We don't have those individuals consuming products within the NWT and we're providing a fair amount of vital infrastructure for them. For example, if the road from Hay River to Yellowknife or to the end of the Ingram Trail wasn't in place and paid for by the territorial government, the mine would not be able to resupply the mine annually.

"If there wasn't air radio information like weather, airline companies would have difficulty providing quality service to and from Lupin."

Many people choose to live in southern Canada because of the lower cost of living. The lower population of the North results in, as the Mayor put it, "reducing the economy of scale" and leading to increased costs.

Rowe contends that if more people lived in the North, it would make it possible to provide more and better services at reasonable rates.

The Hay River mayor would like to see the current one per cent payroll tax replaced with a flat tax that would integrate the territorial tax and the payroll tax. He estimates it would amount to about 11 per cent that would be collected by the companies, the same way the payroll tax is now. It would be remitted to the territorial government once a month.

Rowe believes this would ensure that the revenue earned in the North is left in the NWT, effectively stopping the erosion of those tax dollars to the provinces. Under his proposal, the territorial taxation department, which now collects the payroll tax, could collect the flat tax.

He said this could also provide a further incentive for workers to relocate to the North. If the flat tax was to be implemented, workers who live in Alberta, for example, who pay the flat tax in the NWT, would have to claim their gross income less whatever tax they've paid in the NWT as earned income. They would have to pay their federal income tax and a percentage of that tax to the government of Alberta, as well. If a worker doesn't want to pay tax to Alberta in addition to paying in the NWT, they could decide to move to the NWT.

The mayor doesn't believe the flat tax is a unique idea, but is an opportunity for the GNWT to increase revenue instead of cutting services to Northerners.