Ng showers tax cuts on Nunavummiut

Wage-earners and businesses in Nunavut will pay less tax this year, thanks to personal and corporate income tax cuts that Kelvin Ng, Nunavut’s finance minister, announced in his budget speech this week.

The changes mean Nunavut’s income tax rates are now the lowest of all Canadian provinces and territories.

“We’re hoping that there will be a significant economic spin-off…,” Ng told reporters just before entering the legislative assembly to announce the news to the public.

In his speech, Ng said the tax reductions are aimed at attracting and retaining skilled people, making Nunavut more attractive to business, stimulating economic development, and providing additional benefits “to those in greatest need.”

Officials from the territorial department of finance told reporters that they estimate their tax relief measures will cost the government only about $6.7 million in foregone revenue.

Their projections for the 2003-3 fiscal year show they expect to take in about $10.2 million in personal income tax revenue and only $1.4 million in corporate tax revenue.

That represents only a tiny portion of the $745.4 million in revenue they expect to receive this year, most of it in transfers from the federal government.

The personal income tax cuts work like this:

• For people earning a taxable income of up to $31,700, the rate will fall from 7.2 per cent to 4 per cent;

• For those with taxable income between $31,700 and $63,400, the rate will fall from 9.9 per cent to 7 per cent;

• For those with taxable income between $63,400 and $103,000 the income tax rate will fall from 11.7 per cent to 9 per cent;

• And for those with a taxable income greater than $103,000, the income tax rate will fall from 13.05 per cent to 11.5 per cent.

But that’s not all. When Nunavummiut fill out their 2002 income tax returns next year, they’ll be able to deduct higher personal tax credits from their taxable income.

The basic personal tax credit will jump to $10,000, from $7,634. If you have a spouse or a common-law, you may deduct another $10,000, up from $6,483.

The personal tax credit for Nunavummiut over 65 will increase from $3,728 to $7,500.

Those who suffer from long-term disabilities will see their tax credit increase from $6,180 to $10,000.

The cost-of-living tax credit in Nunavut will rise to a maximum of $750, from $645.

The corporate tax cuts work like this:

• For businesses earning less than $200,000, the corporate income tax rate will fall to 4 per cent from 5 per cent;

• For businesses earning $200,000 or more, the tax rate will fall to 12 per cent from 14 per cent.

Smokers, however, will pay more tax. A pack of 25 cigarettes will go up by 75¢, or $6 a carton, as a result of a new tobacco tax hike. That works out to 3¢ a cigarette.

Until last year, territorial income tax rates were tied to federal rates — meaning that territorial tax was calculated as a certain percentage of federal tax payable.

The amount of territorial tax paid by Nunavummiut would automatically go up and down as federal tax rates went up and down.

But last year, Nunavut decided to set its own tax rates and its own tax policies. Now, Nunavut’s tax rates are based on taxpayers’ net income, not on the amount of federal tax payable.