Federal tax grab threatens Iqaluit renters

SARA MINOGUE

Iqaluit residents who live in housing subsidized by their employers will face income tax increases of thousands of dollars this coming April, thanks to a surprise ruling by the Canada Revenue Agency.

The federal tax agency, in the 2005 tax forms posted on its website, has added Iqaluit to the small list of Northern communities with “developed rental markets.”

That means that people who lived in housing subsidized by their employers in 2005 could owe an extra $2,000 to $8,000 in taxes, or more, this coming April on the value of the rent that their employer pays on their behalf.

For example, this reporter lives in an apartment subsidized by this newspaper. Her apartment unit costs about $2,000 to rent per month, but she only pays $350 per month. That means that every month, her employer pays the difference of $1,650 per month.

Previously, that $19,800 in rent subsidies was considered non-taxable. Now, however, it’s considered part of her income. In this case, that income is subject to 29 per cent income tax, or $5,742.

In past years, Iqaluit was a community in a “prescribed zone,” where the federal government acknowledges that a natural housing market does not exist, and considers housing subsidies a necessary — and non-taxable — benefit for employees.

This year, Iqaluit has joined Whitehorse, Yellowknife, Fort McMurray and six other northern communities where the federal government will no longer consider rent subsidies a non-taxable benefit. Iqaluit is the only fly-in community to make the list; all the others are on the road system.

The tax change applies to virtually everyone in Iqaluit who gets a housing benefit from their employer — including Government of Nunavut workers, federal employees, city workers, and people who work for private businesses or organizations that provide housing.

Nunavut’s member of Parliament, Nancy Karetak-Lindell, was left hanging during Nunavut’s all-candidates’ forum Tuesday when New Democratic Party candidate Bill Riddell disclosed the tax change, which NDP organizers in Iqaluit were alerted to Monday.

“How come the Liberal government could have snuck that in?” Riddell asked Karetak-Lindell in front of the crowd. “Nancy, do you know how that happened?”

“I just heard about it today,” Karetak-Lindell admitted in front of a packed Parish Hall, where it was standing room only for people who came to hear the federal election candidates speak.

“I have to look into it and see on what basis this decision was made,” Karetak-Lindell later told Nunatsiaq News. “We can’t add any more costs to the already high cost of living in Iqaluit.”

The Government of Nunavut was also taken by surprise.

“We’re trying to find out what’s going on,” said Victor Tootoo, the GN’s assistant deputy minister of finance on Wednesday morning. “Nobody official informed us from the Canada Revenue Agency.”

The deputy minister of finance, Bob Vardy, planned to meet senior federal officials in Ottawa Wednesday afternoon to find out, first, if the news is accurate, and second, how the decision was made, Tootoo said.

“It would seem more pragmatic to delay the implementation of this decision, given that neither the employers nor the employees affected made arrangements to collect this tax during the 2005 tax year,” Tootoo said.

NDP candidate Riddell estimates the change could take $4 million in disposable income out of Nunavut’s economy.

“Did the people who made this decision have any idea of the impact it would have on families in Nunavut?” Riddell asks in an NDP press release issued on Tuesday evening and distributed at the candidates’ forum.

Iqaluit business owners scrambled on Wednesday morning to determine just how bad the situation might be for employees.

“This is going to be devastating for individuals and businesses in Iqaluit,” said Iqaluit businessmen Kenn Harper, adding that rising fuel costs, power rates and air fares have already dealt their own financial blows recently.

“The evil part of this is that it happened just by the stroke of a bureaucrat’s pen,” Harper said. “I think it should be reversed by the stroke of a bureaucrat’s pen, at the direction, perhaps, of a politician.”
The Canada Revenue Agency was not able to answer questions before Nunatsiaq News press-time this past Wednesday.