Tax exemptions on indigenous reserves are unfair, have no justifiable purpose and should mostly be scrapped, says a new report from a Canadian think tank.In his report for the Aristotle Foundation for Public Policy entitled, ”The Section 87 Indian Act Taxation Exemption: An Analysis,” Tom Flanagan writes, “This special privilege applying to the approximately one million registered indians in Canada has no logical foundation and serves no obvious purpose of public policy."In a press release, Flanagan says the main outcome of the tax exemptions "has been to generate resentment by the other 39 million Canadians who are required to pay taxes on income and sales.”Flanagan, a professor emeritus of political science at the University of Calgary, says the exemptions are a charged political issue.“I have been speaking to audiences in Canada about indigenous issues for decades. The topic that has always aroused the most indignation is the non-payment of taxes by registered indians on indian reserves, and whatever small benefit the tax exemption confers is not worth the antagonism caused by the feeling that the recipients are not pulling their weight.”In summary, the study finds:The original exemption of real property on indian reserves from local and provincial taxation is justified by the unique purpose of indian reserves.However, exemption of Indians from income and sales taxes is a judicial innovation never legislated by Parliament and only weakly supported by logic or history.As such, income and sales tax exemptions should be explicitly repealed by Parliament, while some of the revenue gained by such taxes could be directed to First Nations to help them develop effective institutions of self-government.Registered indians on indian reserves would thus tax themselves, as other Canadians do, to support some of the benefits derived from government, even though many other benefits would still be paid for from general tax revenues.According to Statistics Canada, Registered Indians numbered 1,040,319 at the end of 2021, of whom 493,299 lived on reserves. Under section 87 of the Indian Act, which covers property exempted from taxation, registered indians can buy tax-free products on the reserve. Employment income they earn there is also exempted.A 2017 paper co-published by the Atlantic Institute for Market Studies and the Frontier Centre for Public Policy estimated that more than $1.27 billion in taxes was exempted on sales and income made on reserves in 2014–15.Flanagan proposes that the federal government revise Section 87 of the Indian Act so that the exemption applies only to land, leaving federal income tax, sales, excise and value-added taxes, still applying to all indigenous reserves. A portion of revenue from such taxes should be returned to the First Nation after it signs a tax administration agreement. Provincial taxes would not apply because reserve lands are federal.“Registered indians on indian reserves would thus tax themselves, as other Canadians do,” he writes.“As these will be major and probably controversial changes, there will need to be a period of adjustment,” Flanagan writes, adding “multi-party support” would be “highly desirable.”Conservative Leader Pierre Poilievre has already endorsed the First Nations Resource Charge (FNRC). Developed by the First Nations Tax Commission, the FNRC proposes that First Nations that opt in would collect 50% of federal taxes paid by industrial activities on their land, with industry getting a tax credit in exchange.As of February 2022, 130 bands had adopted tax bylaws under the First Nations Fiscal Management Act of 2005, bringing in $80 million, while another 30 used section 83 of the Indian Act to collect $24 million in property taxes.In the 2020 tax year, 38 First Nations charged an equivalent of the GST on their lands and kept the revenues, while eight others put in their own sales taxes and 15 their own personal income tax. Revenues approached $60 million.Federal spending on indigenous people exceeded $27 billion in 2022 and $29 billion in 2023.A survey conducted by the University of Saskatchewan in 2012 found that 75% of non-indigenous respondents agreed that “Aboriginal people do not pay enough tax,” as 44% expressed strong agreement and 31 “somewhat" agreed. Among indigenous respondents, 46% agreed (24% strongly, 22% somewhat) and 54% disagreed (47% strongly, 7% somewhat).
Tax exemptions on indigenous reserves are unfair, have no justifiable purpose and should mostly be scrapped, says a new report from a Canadian think tank.In his report for the Aristotle Foundation for Public Policy entitled, ”The Section 87 Indian Act Taxation Exemption: An Analysis,” Tom Flanagan writes, “This special privilege applying to the approximately one million registered indians in Canada has no logical foundation and serves no obvious purpose of public policy."In a press release, Flanagan says the main outcome of the tax exemptions "has been to generate resentment by the other 39 million Canadians who are required to pay taxes on income and sales.”Flanagan, a professor emeritus of political science at the University of Calgary, says the exemptions are a charged political issue.“I have been speaking to audiences in Canada about indigenous issues for decades. The topic that has always aroused the most indignation is the non-payment of taxes by registered indians on indian reserves, and whatever small benefit the tax exemption confers is not worth the antagonism caused by the feeling that the recipients are not pulling their weight.”In summary, the study finds:The original exemption of real property on indian reserves from local and provincial taxation is justified by the unique purpose of indian reserves.However, exemption of Indians from income and sales taxes is a judicial innovation never legislated by Parliament and only weakly supported by logic or history.As such, income and sales tax exemptions should be explicitly repealed by Parliament, while some of the revenue gained by such taxes could be directed to First Nations to help them develop effective institutions of self-government.Registered indians on indian reserves would thus tax themselves, as other Canadians do, to support some of the benefits derived from government, even though many other benefits would still be paid for from general tax revenues.According to Statistics Canada, Registered Indians numbered 1,040,319 at the end of 2021, of whom 493,299 lived on reserves. Under section 87 of the Indian Act, which covers property exempted from taxation, registered indians can buy tax-free products on the reserve. Employment income they earn there is also exempted.A 2017 paper co-published by the Atlantic Institute for Market Studies and the Frontier Centre for Public Policy estimated that more than $1.27 billion in taxes was exempted on sales and income made on reserves in 2014–15.Flanagan proposes that the federal government revise Section 87 of the Indian Act so that the exemption applies only to land, leaving federal income tax, sales, excise and value-added taxes, still applying to all indigenous reserves. A portion of revenue from such taxes should be returned to the First Nation after it signs a tax administration agreement. Provincial taxes would not apply because reserve lands are federal.“Registered indians on indian reserves would thus tax themselves, as other Canadians do,” he writes.“As these will be major and probably controversial changes, there will need to be a period of adjustment,” Flanagan writes, adding “multi-party support” would be “highly desirable.”Conservative Leader Pierre Poilievre has already endorsed the First Nations Resource Charge (FNRC). Developed by the First Nations Tax Commission, the FNRC proposes that First Nations that opt in would collect 50% of federal taxes paid by industrial activities on their land, with industry getting a tax credit in exchange.As of February 2022, 130 bands had adopted tax bylaws under the First Nations Fiscal Management Act of 2005, bringing in $80 million, while another 30 used section 83 of the Indian Act to collect $24 million in property taxes.In the 2020 tax year, 38 First Nations charged an equivalent of the GST on their lands and kept the revenues, while eight others put in their own sales taxes and 15 their own personal income tax. Revenues approached $60 million.Federal spending on indigenous people exceeded $27 billion in 2022 and $29 billion in 2023.A survey conducted by the University of Saskatchewan in 2012 found that 75% of non-indigenous respondents agreed that “Aboriginal people do not pay enough tax,” as 44% expressed strong agreement and 31 “somewhat" agreed. Among indigenous respondents, 46% agreed (24% strongly, 22% somewhat) and 54% disagreed (47% strongly, 7% somewhat).
