I will be under time.
Thank you, Mr. Chair.
I would like to thank the members of the committee for this invitation to appear before you today as a witness on the subject of northern economic development.
I would like to begin by introducing my colleagues. Sean Keenan is the Senior Chief of the Tax Policy Branch at the Department of Finance, and Elisha Ram is the Director of Economic Development, also at the Department of Finance.
Let me begin by talking about the two areas where Finance has direct responsibilities bearing on northern economic development. It would, first, be providing transfers to territorial governments, and also the design of federal tax policies. I'll start with the transfers.
Territorial governments are recipients of the three major legislative transfers administered by the departments. In total, these transfers add up to about $2.9 billion in 2009-10. This is in addition to other federal support delivered by departments such as HSRDC. So there are three transfers.
First, we have the Canada health transfer, which provides the annual funding for health care and support of the principles of the Canada Health Act.
Second, we have the Canada social transfer, which is an annual federal block transfer. That transfer is in support of post-secondary education, social assistance and social services, and programs for children.
Third, and perhaps most importantly from a territorial perspective, would be the territorial formula financing. The territorial formula financing is the largest single federal expenditure to each of the three territorial governments. In 2009-10, the TFF, as we call it, amounted to $612 million for the Yukon, $864 million for the Northwest Territories, and just over $1 billion to Nunavut. So the total is about $2.5 billion for 2009-10, and this is the primary revenue source for territorial governments.
The territorial formula financing grant is an unconditional grant from the Government of Canada that takes into account the unique circumstances in the north and the high cost of delivering programs and services. Territorial formula financing enables territorial governments to provide a range of public programs and services that are comparable to those offered by provincial governments at a comparable level of taxation.
Finally, I would mention on the transfer side that Finance Canada is also responsible for the resource revenue-sharing portion of negotiations around the devolution of natural resources to the territories.
With that on transfers, I'll turn to the department's role in designing federal tax policy.
The fundamental role of the tax system is to raise revenues necessary to fund government spending priorities in a manner that balances economic efficiency, fairness, and simplicity. In some circumstances, the tax system can also be used directly to achieve public policy objectives.
With respect to the north, the Income Tax Act contains the northern residents deduction, which is intended to assist in drawing skilled labour to northern and isolated communities by providing recognition for the additional costs faced by residents of these areas. There are, in fact, two income tax deductions available to residents of the north who live in the prescribed northern zone or the intermediate zone for at least six months: a residency reduction, which provides $8.25 per day per person in the northern zone; and a deduction for employer-paid travel expenses for any number of trips made to obtain medical services, and up to two trips per household member per year for other reasons. The residency component of the northern residents deduction was increased by 10% in 2008.
It's worth noting, too, that the Department of Finance is also responsible for the development of tax policy related to aboriginal issues more generally, for negotiating and administering tax administration agreements with aboriginal governments, and for developing negotiation mandates and for negotiating the tax elements included in comprehensive land claim and self-government agreements—and I have colleagues here who can speak to that if necessary.
My final point would be that the Department of Finance, as you know, is also responsible for providing advice to the minister in the context of the federal budget, budget 2009, tabled last January—the economic action plan. It included a wide range of measures that will benefit the north. Mr. Thompson talked about some of the skills and training initiatives. There are also infrastructure projects, northern economic development such as CanNor, and housing projects for the north. Altogether, those investments from budget 2009 are worth about $770 million.
Thank you very much. I'd be pleased to answer any questions from the committee.