Don't have an account? Create one now

Northern Cost of Living

Living in the North is expensive. Cold, isolation and remoteness are the primary drivers of the high cost of living, with many communities accessible only by air or ship and, in the western Arctic, by ice road in winter.

Contributing to this high cost of living is the erosion in the value of the Northern Residency Tax Deduction (NRTD). Introduced by the federal government in 1987, the NRTD was intended to offset the high cost of living in the North by reducing the amount of income tax payable.

The 2016 federal budget  increased the daily maximum amount to $11 per day from the current $8.25 per day, a 33-per cent increase, for a resident living in a prescribed zone. The NRTD also includes a travel deduction based on various criteria.

While FCM strongly supports the increased daily maximum, indexing the NRTD so that it continues to increase in line with inflation is critical to the Deduction's long-term effectiveness. Without indexation, the real value of the NRTD, will once again erode over time.

The NRTD is a means to attract and retain workers with families, supporting community and economic development and its value needs to be maintained to ensure its long-term effectiveness.

Recommendations

The Government of Canada should:

  • Index the residency component of the NRTD so that the value of the Deduction increases in line with inflation;
  • Develop an updated cost-of-living assessment to set an accurate Poverty Rate for the North (PRN) to improve means testing for other tax benefits, such as the GST/HST credit and the Child Tax Credit;
  • Develop an updated cost-of-living assessment to set an accurate Poverty Rate for the North (PRN) to improve means testing for other tax benefits, such as the GST/HST credit and the Child Tax Credit;
  • Allow households with an after-tax income approaching the poverty rate to claim the additional residency amount, even if more than one member of the household applies for the basic deduction.

Resources

Page Updated: 15/06/2016