Mr. Speaker, the northern residents deduction assists Canada’s northern and isolated regions draw skilled labour to their communities by providing recognition for the additional costs faced by residents of these areas.
The current zonal system of tax benefits for northern residents was established following an extensive review of the former community-based system by the 1988 Task Force on Tax Benefits for Northern and Isolated Areas.
Under the former system, eligibility was as follows: all communities north of 60ºN latitude were eligible. Communities having a population of less than 10,000 located between 55ºN latitude and 60ºN were eligible if they were over 80 kilometres by all-weather road from the city or town hall of the nearest urban centre, or they had no all-weather road. Communities having a population of less than 10,000 located south of 55ºN latitude and scoring at least 50 points for factors relating to population, access, vegetation type and climate were eligible if: they had no all-weather road and were over 80 kilometres in a straight line from the city hall or the nearest urban centre with a population of 50,000 or more; or they had an all-weather road and were more than 160 kilometres from the town or city hall of the nearest urban centre with a population of 10,000 or more, and were over 320 kilometres from the city hall of the nearest urban centre with a population of 50,000 or more.
Starting in 1988, the task force held extensive consultations across the country and concluded that determining eligibility for the tax deductions for residents of northern and isolated areas was arbitrary and divisive. Residents of neighbouring communities were being treated differently for tax purposes, even though they often shared common workplaces, services, and cultural and recreational facilities.
In October 1989, the task force recommended a zonal approach, where only communities within a “northern zone” would qualify for tax benefits. The boundaries of the northern zone were delineated with a view to ensuring that communities in the zone had similar characteristics. The task force used objective criteria to compare communities on the basis of isolation, nordicity, community characteristics and environmental factors. The task force also attempted to minimize border delineation problems by having as much separation as possible between qualifying and non-qualifying communities.
The task force recommended a northern zone and, following further consultations, an intermediate zone was added to bridge the gap between the northern zone and the less isolated areas of the country. The approach used by the task force to design the northern zone was also applied in developing the intermediate zone. The same ranking system was used and efforts were made to minimize border problems.
It was recognized that the intermediate zone, in relation to the northern zone, covers regions in which the communities are characterized as being more populated, in greater proximity and less homogeneous, thereby making the task of setting borders more challenging. Given this reality, regardless of where the borders were set, there would inevitably be communities across the country that would be disappointed with their exclusion. It was determined at the time that the final border design incorporated fair trade-offs in difficult circumstances that were deemed workable in a broad-based, national tax system.
The new system of northern benefits took effect starting in 1991.
Since the implementation of the zonal boundaries, the underlying factors used to establish them have remained constant, even in regions where populations (the most variable indicator) have changed in the following years.
