Mr. Speaker, the northern residents deduction, NRD, consists of two income tax deductions that are available to residents of the north who live in the prescribed northern zone or intermediate zone: a travel deduction and a residence deduction.
The travel deduction allows taxpayers to deduct the value of up to two employer-paid vacation or family related trips per year and an unlimited number of employer-paid medical trips, the benefit of which is included in income for tax purposes, from their income for income tax purposes. Since the deduction is based on the cost of travel, any inflationary increases are effectively accommodated for under this deduction. Accordingly, since the introduction of the NRD in 1987, no changes have been made to the travel component. The budget presented in the House of Commons on February 26, 2008, proposed a 10 percent increase to the residency component in support of a comprehensive northern strategy to help the north realize its full social and economic potential. The increase in the residency component is designed to further assist in drawing skilled labour to northern and isolated communities. This measure will be effective as of January 1, 2008.
In particular, the maximum daily residency deduction will be increased from $15 to $16.50. This increase will bring the maximum annual amount of the residency deduction to $6,022.50, $16.50 multiplied by 365 days, from $5,475, $15 multiplied by 365 days, for residents of the northern zone and to $3,011.25 from $2,737.50 for residents of the intermediate zone.
When combined with the basic personal amount of $9,600 and the Canada employment credit of $1,019, a single resident of the north will be able to earn up to $16,600 tax free in 2008. For that same year, it is estimated that about 189,000 individuals will benefit from the increase. Including this increase of $10 million in additional tax relief per year, it is estimated that the NRD will reduce federal revenues by $150 million in 2008-09 and by $155 million in 2009-10.
Widespread support for this important Government of Canada initiative has been noted from northern leaders. For instance, Yellowknife Mayor Gord Van Tighem noted it was, “something we've been asking for a significant period of time…(it) will mean more spending into local economies and further reduce the cost of living”.
In addition to increasing the generosity of the residency component of the NRD, the budget presented in the House of Commons on February 26, 2008 also announces new measures that will protect and secure Canada’s sovereignty and create more economic opportunities in the north, including: $34 million over two years for geological mapping to support economic development; extension of the mineral exploration tax credit for an additional year; and $8 million over the next two years for a commercial harbour in Pangnirtung, Nunavut.
Since 2006, the government has made important investments in the north, including investments to advance social and economic development in the territories through a $300 million northern housing trust and $195 million between 2006-07 and 2008-09 in increased territorial formula financing payments.