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Tax interest cut: Who benefits?

It is with the very best of motives that Iqaluit City Council has decided to cut the interest rate it charges on overdue property tax bills.

City councillors, at least the ones who voted for the idea, did so because they honestly believe they’re protecting small, struggling homeowners from falling too far behind on property tax payments.

They’re thinking especially about three Iqaluit families whose tax bills were allowed to go unpaid for many, many years. Not surprisingly, the city’s old monthly interest rate for unpaid taxes — which amounts to 22 per cent per annum — helped push those debts to staggering levels.

When the city threatened to seize the three properties, a highly uninformed controversy broke out, dominated by far too much emotion, and not nearly enough thinking.

In reaction, the city has been looking at ways of cutting the interest rate. They did that this week, reducing it from 22 per cent per annum to 12.8 per cent.

But in the long run, is it small, struggling homeowners who will benefit the most from the lower rates?

Probably not. The city’s latest list of overdue taxpayers shows it’s companies, not individuals, who carry the biggest unpaid tax bills.

For example, a company called Iqaluit Arctic Ltd. owes $59,000. Navigator Inn 2000 Ltd. owes $46,000, Nova Construction Ltd. owes $38,000 and Coman Arctic Ltd. owes $37,000.

As of last month, Iqaluit’s unpaid property tax bills totalled $641,381. That’s down considerably from the $1.3 million figure of a couple of years ago, but it’s still too much.

These and other unpaid debts represent cash that should be sitting in the city’s bank account. If the city can’t get its hands on that cash because others won’t pay their bills, then the city is forced to borrow money from the bank to pay its own bills.

And the city must pay interest on those short-term borrowings. That’s why the City of Iqaluit, and all other businesses and organizations, add a penalty to overdue bills. It’s to compensate them for their own interest charges.

Will the City of Iqaluit now end up subsidizing the many companies who owe the lion’s share of its overdue taxes? Only an accountant can say for sure. Will big developers — some of whom own tens of millions of dollars worth of rental property in Iqaluit — start witholding tax payments to take advantage of the lower interest rates? Only time will tell.

But it’s ironic that an action intended to help small, struggling homeowners may end up delivering its greatest benefit to affluent businesses.

In any event, there’s a better way to prevent compound interest from piling up on unpaid tax bills — and that’s to take early action. In the past, the municipality’s greatest act of cruelty was to sit and do nothing as a few unpaid tax bills were driven sky-high by compound interest, year after year after year.

If a bill is paid in the first place, the interest rate can’t be applied. Besides, even at 12.8 per cent a year, a tax bill will still double in size after six or seven years. Just do the arithmetic.

The answer is simple. If any tax bill goes unpaid for more than 12 months, that’s when the city should take aggressive action to collect. And there’s no reason why that can’t be done in a flexible and compassionate manner — as long as the debtor is willing to co-operate and to pay at least something. JB

Inuit secretariat must be watched

Unlike many First Nations people in Canada, the Inuit have always given Canada the benefit of the doubt.

Jose Kusugak, the president of Inuit Tapiriit Kanatami, pointed this out in a speech given this past Monday morning at Prime Minister Paul Martin's aboriginal summit in Ottawa.

"Canada is our Ningauk," Kusugak said, using an Inuktitut metaphor to illustrate how Inuit have adopted Canada as a kind of son-in-law.

He went on to say that Inuit, whether they live in Nunavut, Nunavik, Labrador, or the Inuvialuit settlement region, have always chosen forms of public government to realize their political aspirations. Within these regions, non-Inuit Canadians have enjoyed the full protection of the Charter of Rights, freely exercising the right to vote, the right to run for public office, and the right to freedom of expression.

"This choice determined that Inuit would be tax-paying Canadians who see themselves as 'more than First Canadians, but also Canadians First,'" Kusugak said, repeating a phrase that he often uses to explain how Inuit define their identity within Canada.

So in exercising their right to self-government within Canada, Inuit have always taken a moderate and open approach — unlike many First Nations groups, who seek narrow, aboriginal-only forms of government based on theories of political sovereignty.

This has made it fairly easy for Canada to reach agreements with Inuit on new forms of government — and for federal government officials to brag about them to the rest of the world. For example, on April 1 this year, Canadian embassies in Washington, Berlin, and other world capitals held celebrations to mark Nunavut's fifth anniversary, an event that received little notice in Nunavut itself.

But at home, Canadian Inuit have received little in return for having embraced mainstream Canadian political values.

They've watched various federal government departments devote most of their efforts - in housing, health care, social policy, economic development and infrastructure - towards First Nations people living on reserves. (This approach, incidentally, has also annoyed Métis and the huge numbers of First Nations people who don't actually live on reserves, especially those who are represented by the Congress of Aboriginal Peoples.)

While federal social housing construction programs in the Inuit regions - delivered by the Canadian Mortgage and Housing Corp. through public governments - effectively ended in 1993, the Department of Indian and Northern Affairs continued to build housing on Indian reserves. Many federal funding programs that were touted as generous responses to aboriginal concerns were intended only for First Nations living on reserves - such as a multi-million dollar fund announced several years ago to help combat fetal alcohol syndrome.

So why should Inuit embrace public government, when public government produces so little?

Nowhere is this question more relevant than in Nunavut, where about half of Canada's Inuit people now live. As we all know, Nunavut's public government has been consistently starved of the resources it needs to provide even the most basic of services, especially in housing, health care, and infrastructure.

This is why ITK has directed much of its lobbying efforts towards the creation of "Inuit-specific" policies within the federal government, and the creation of some kind of office within DIAND devoted to Inuit issues. They've even suggested that DIAND change its title to "Department of Indian and Inuit Affairs."

This week, it appears as if at least part of this demand has been met. The prime minister has announced the creation of an "Inuit secretariat" within DIAND, to be staffed by about 20 civil servants.

Kusugak and other officials at ITK have every right to congratulate themselves for a job well done. After much effort, they got their message across.

But despite all his feel-good talk, Martin has yet to announce any specific changes in federal aboriginal programs. He's simply created a new bureaucratic entity, and there is no guarantee that this "Inuit secretariat" will be given what it needs to change federal policies and practices. It's not clear who will run the new secretariat, who will work there, and what kind of relationship it will establish with Inuit organizations and the public governments that actually provide basic services to Inuit.

Canada's Inuit organizations, especially ITK, will obviously need to carefully monitor the performance of DIAND's Inuit secretariat to ensure that Martin's words are backed by concrete actions. JB

Decolonizing Nunavut's fishery

Since the late 1990s, Nunavut leaders have expended a lot of energy complaining about how badly Nunavut gets ripped off through the federal government's allocation of fishing quotas in Davis Strait and other adjacent offshore waters.

And with good reason. Turbot and shrimp harvested from Nunavut's offshore every year is worth, according to the last estimate, at least $98.5 million.

Of that, Nunavut gets a measly $9 million in wages produced by a few token jobs, and royalty money earned by selling Nunavut fishing rights to southern companies. By any standard, it's a rip-off that the people of no other province or territory would stand for.

But to bring this rip-off to an end, Nunavut must do more than simply complain to Ottawa about unfair quota allocations, important though that may be. Nunavut must also get its act together, and reinvest more of its royalty sales in Nunavut. The fledlging Baffin Fisheries Coalition, which is threatened by internal dissension and outside interests who resent the large amount of turbot quota it controls, is a reasonable start.

But Nunavut needs a long-term strategy that will one day end the practice of selling Nunavut's fishing rights to outside interests.

In the shrimp fishery, for example, Inuit birthright development corporations like Qikiqtaaluk and Makivik have been scooping up easy money for years by letting southern companies harvest their shrimp quotas. In exchange, they get a few token jobs for Inuit and royalty payments. But there's no clear accounting of where those royalty payments go.

Are they reinvested in the development of a northern fishery? Or are they simply used to cover deficits and losses incurred in other parts of their business operations?

No one knows. But the Nunavut shrimp catch is worth about $75 million a year, and Nunavut is not getting even a fraction of the economic activity that it should be getting from this valuable resource.

At the same time, the Government of Nunavut and the Nunavut legislative assembly must set clear policies on what kind of fishery Nunavut should aim for. Should Nunavut develop a capital-intensive, industrial fishery based on the purchase of a modern factory-freezer trawler? Should Nunavut develop a community-based, small-boat inshore fishery? Or some combination of the two?

There's no evidence that the GN knows what it wants. And there's no evidence that most MLAs even know what the issues are. But without clear political direction, Nunavut risks will see its opportunities go to waste.

As for the great Nunavut turbot rip-off, it began, probably, in the late 1980s and early 1990s, when the federal Department of Fisheries and Oceans began to hand out fishing rights in the southern part of Davis Strait, in waters adjacent to south-east Baffin Island.

They labelled the area Division "0B," and used its healthy turbot stocks to compensate fishermen in the Atlantic provinces for the collapse of the northern cod fishery - an environmental catastrophe that is at least partially attributable to DFO incompetence over many years.

Through the "Northern Turbot Development Program," the policy was aimed at pouring thousands of tonnes of Nunavut fish into idle fish plants in the Atlantic provinces, creating seasonal work for people left jobless by the northern cod fiasco. In the early 1990s, foreign vessels were hoovering 9,000 and 12,000 tonnes of Nunavut turbot out of Davis Strait every year and shipping it south.

After realizing the area was being over-fished, DFO reduced the total allowable catch in division 0B to 5,500 tonnes of turbot a year. Of that, Nunavut gets 27.3 per cent of the total catch. And even most of that is sold to southern interests, creating cash-flow for southern fishing companies and processing jobs for southern plant workers.

Then, in 2000, the DFO opened a brand-new area to turbot fishing — Division 0A, which starts north of 0B and stretches all the way to Ellesmere Island.

This time, the federal government did it differently. They assigned 100 per cent of the quota in 0A to Nunavut. The Nunavut Wildlife Management Board then gave it all to a new entity called the Baffin Fisheries Coalition, an 11-member organization set up as a not-for-profit corporation.

To no one's surprise, a variety of southern fishing interests are already complaining about the BFC's total control of 0A turbot quota. In its report on the Nunavut fishery, issued last week, the Senate standing committee on fisheries and oceans regurgitated many of those complaints — which resulted in a distorted set of policy recommendations that are less useful than they could have been.

At the same time, various community HTOs have been threatening to pull out of the BFC, because they believe the organization isn't serving local needs. This is why the GN should take the lead in developing clear policies for Nunavut's fishery, and making sure that communities get a strong say in developing them.

If the BFC falls apart, their are any number of predators waiting to seize Nunavut's quota, and the economic colonialism will continue. JB

Go slow on BCC smoke-ban

It is with the best of intentions that the Workers' Compensation Board for Nunavut and the Northwest Territories is imposing a near-universal ban on smoking within all workplaces in Nunavut and the Northwest Territories, effective May 1.

Their purpose is to protect workers from the well-documented health hazards posed by second-hand cigarette smoke, especially workers who make their living in bars and restaurants. Even non-smokers who work in such places have developed lung cancer and other respiratory illnesses, so it's a measure the board has every right to take.

However, in applying these regulations to the Baffin Correctional Centre, and to correctional centres in the Northwest Territories, the WCB may be creating a new workplace safety issue.

After May 1, correctional centre staff will be supervising an inmate population who will now be spending much of their day in the throes of nicotine withdrawal. There are few addictions more powerful. That's why so many people still smoke cigarettes even when they don't want to. Some people have said it's easier to withdraw from heroin than to kick the tobacco habit.

Any ex-smoker will tell you that the worst symptom of nicotine withdrawal is the intense irritability that accompanies it, especially in the first few weeks. Even the most placid people can fly into uncontrollable rages, with little provocation, when they try to quit smoking.

Many correctional inmates are fairly ordinary people who have made bad mistakes, or who have succumbed to alcohol abuse. But others are repeat violent offenders with hair-trigger tempers at the best of times.

Imagine then, the challenge to correctional centre staff that all this poses — including the potential danger. And for inmates who are trying to stay out of trouble while they do their time, the added pressure of being forced to quit smoking for most of the day will not help them keep their heads together.

To their credit, corrections officials will supply inmates with stop-smoking aids, such as nicotine patches. And all inmates will be allowed to smoke outside, which seems to be at least once a day.

We're not suggesting that correctional centre inmates be allowed to do whatever they want and whenever they want to do it. Prison is not a feel-good kind of place, and it probably shouldn't be.

But in applying the smoking ban to correctional centres, officials should proceed with caution, flexibility and a lot of common sense. JB

Less than meets the eye

Despite the ritualistic bragging contained within the numerous press releases issued by various Liberal politicans last week, Finance Minister Ralph Goodale's budget speech still contains less than meets the eye.

Yes, the Paul Martin government did create a few modest scraps of good news for Nunavut and northern Canada.

But with one or two exceptions, there's not much there.

For example, the budget contains a much-hyped $150-million increase in territorial formula financing over the next five years. Formula financing agreements are the instruments through which Ottawa supplies each of the three territories with the core funding needed to run their governments.

In Nunavut, that's where nearly all the Government of Nunavut's money comes from.

In the GN's main estimates for 2003-04, tabled in March of 2003, the Nunavut government projected that it would get $666.5 million through the formula financing agreement for that fiscal year.

So a little bit of Grade 3 arithmetic will reveal that the $150 million, spread among three territories over five years, doesn't amount to much.

Assuming that the money will be divided equally among Nunavut, the Northwest Territories, and Yukon, it amounts to only $10 million a year, per territory. This does not meet Nunavut's needs. Nunavut's annual expenditures have been rising from year to year at a much higher rate. For example, between 2002-03 and 2003-04, spending rose by about $30 million.

That's the trend in Nunavut. The amount of money that's budgeted to be spent every year is always greater than the amount of money that's expected to be received. Luckily, there are large numbers of unfilled jobs in the GN, and Nunavut has been able to use unspent salary money to cover its annual operating deficits.

But almost all of that unspent salary money has been used up over this past year, mostly on capital projects.

It's likely that the GN will cut back on capital spending in the coming year, and even think about program reductions and cuts. The extra formula financing money from Ottawa won't be enough to prevent that from happening.

If the $150 million is distributed on a per capita basis, then Nunavut will get even less.

On the other hand, the $90 million worth of spending on a "northern strategy for economic development" is more substantial. But at best, it still represents only about half of what Nunavut has been asking for.

In its December 2002 proposal for a new Nunavut economic development agreement, Nunavut's Sivummut Economic Development Group proposed the creation of a $66 million fund for Nunavut over five years — between $12 million and $13 million a year.

But split among three territories, the $90 million in economic development funding will likely give Nunavut only $6 million a year. Again, if that money is distributed per capita, Nunavut will get even less.

Another measure, which exempts municipalities from paying the GST for the next 10 years, will help Nunavut's cash-poor hamlet governments a little bit.

The announcement that carries the greatest potential for job creation over the five years is the $2.1 billion allocated for the clean-up of contaminated sites for which the federal government is responsible. This represents money that Inuit firms such as the Qikiqtaaluk Corporation, along with its joint-venture partners, could likely use to hire and train Inuit for seasonal jobs on clean-up projects.

To be fair, Ralph Goodale and other Liberal politicans are describing last week's budget as only the first step in the implementation of a long-term plan. We can only hope that their plan for Nunavut and the northern territories gets a lot richer. JB

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