Kent Driscoll
Northern News Services

Iqaluit (Jan 16/06) - The taxman was scrambling on Jan. 12 over a change to Iqaluit's tax status that turned out to be a mistake.

NDP candidate Bill Riddell asked Liberal MP Nancy Karetak-Lindell about a change that would require employees to pay taxes on subsidized housing during the all-candidates forum on Jan. 10. According to the Customs and Revenue Agency's website, the city was re-classified as a developed rental market.

That designation would mean residents of Iqaluit would have to pay tax on rental subsidies provided by their employer.

"This will have a devastating impact on many families in Iqaluit, and a huge impact on Iqaluit as a community. I estimate that it will take $4 million in disposable income out of Iqaluit's economy," said Riddell during the forum.

He asked Karetak-Lindell when she learned about the changes.

She answered she was surprised to learn about the status change and has since written a letter to the finance minister protesting the shift.

It turns out that the status change was a mistake.

"Iqaluit should have never been included on the list. We are looking to see what happened. Should that (change) ever happen, we would discuss it with the people, the government of Nunavut and employers," said Colette Gentes-Hawn, a spokesperson for Revenue Canada.

In the days following the all-candidates forum, employers scrambled to find out what it meant for their employees' bottom line. As written, the changes would have taken place in the 2005 tax year.

Government of Nunavut employees have had to pay more rent - beginning on Jan. 1 this year - after a change to their rental subsidy. The government re-classified Rankin Inlet, Cambridge Bay and Iqaluit as "emerging rental markets" and rent went up 15 per cent in those communities.

That raise combined with the CRA error led to many concerned phone calls to payroll people.

"This change was a surprise to us as well. Employees are asking questions. It was unusual," said Victor Tootoo, the assistant deputy minister of Finance for the government of Nunavut.

The agency held a high-level conference call - including the director general and other directors - on Jan. 12 to figure out how the error occurred.

"We are still looking at that," said Gentes-Hawn when asked how such a serious error could make it through CRA's screening process.

All CRA webpages have a marker on the bottom indicating when they were last changed. The page containing the false information was last changed on Dec. 15, 2005.

All of Nunavut - including Iqaluit - falls under the heading of places without a developed rental market, meaning that rental subsidies were exempt from taxation.

On Dec. 15, that changed on the webpage and Iqaluit was added in error to the list of developed market communities, said Gentes-Hawn. The only Northern communities considered to have a developed housing market are Yellowknife and Whitehorse.

"Please tell your readers we are very sorry. We will be sending letters to employers to let them know about the mistake," said Gentes-Hawn.

Riddell was pleased by the agency's quick response.

"It is an incredible response, everyone is panicking. It is awfully frightening. If they (CRA) backpeddle, and that is the result, that's great," said Riddell.