The federal government is taking a new approach to Indigenous tax policy after extensive engagement with Indigenous partners.
On July 22, Crown-Indigenous Relations Minister Marc Miller issued a statement announcing that after assessing its existing federal tax policy approach, Canada would change its approach to phasing out Section 87 of the Indian Act as a requirement in Canada’s modern treaties.
The latest round of engagement with Indigenous partners concluded in November 2021, with feedback concerning two main points: modern treaty beneficiaries who are registered pursuant to the Indian Act should not have to exchange a tax exemption for their modern treaty rights; and Indigenous governments should not be compelled to exercise their tax jurisdiction on an arbitrary timeline.
In a press release, Miller stated that since becoming minister, he heard very clearly that the discontinuance of the section of the Indian Act, and the removal of the federal tax exemption on First Nations’ reserve lands, is a “significant” disincentive to advancing self-government. Miller went on to say it was a divisive issue within communities that have recently signed modern treaty arrangements and a material barrier to entering into them.
The tax exemption isn’t completely going away. According to Miller, it will be available for continuation in Indigenous governments’ former reserves and on other First Nations reserves in Canada for prospective and existing modern treaty beneficiaries who are registered pursuant to the Indian Act.
“Tax exemptions for First Nations property situated on reserves have existed since before Confederation to protect reserve property,” Miller stated in the press release. “These changes bring an end to the era of First Nations community members having to trade their exemption from non-Indigenous government taxation in order to advance self-determination.”
In a phone interview with the Sun, Miller said the changes, first and foremost, are about the very basic principle of self-determination.
“When you take the approach of a nation-to-nation relationship, having the federal government impose terms on which people exit the Indian Act is, in my mind, and in many people’s minds, retrograde.”
Miller said that the changes are probably one of the most important and consequential fiscal changes for communities wishing to exit the Indian Act.
“It means that, in the spirit of self-determination, the communities can choose, or not, to tax its members.”
Miller said that exemption from taxation, which was imposed for individuals in Canada toward the end of the First World War, was seen as in some cases a treaty right that existed under the Indian Act. Changing that, he said, can be multi-faceted.
“From a political dynamic, you’re asking community members whether they’d be subject to a net-zero return or a return on taxation, or be taxed something that was offensive to them and a barrier moving out of the Indian Act.”
As First Nations communities assert their sovereignty and their right to self-determination, changes to the Indian Act had to be made to keep moving forward, Miller said. He added that Indigenous governments will continue to have the choice to maintain existing tax arrangements or take up direct tax powers on their own timeline, consistent with the commitment to advance the priority of Indigenous communities to reclaim jurisdiction over tax matters and be consistent with the principle of self-determination.
The new policy will also apply to scenarios where lands that were formerly First Nations reserves cease to be “reserve land,” as part of reconciliation agreements.
“Together, these changes help remove obstacles for communities choosing to pursue self-determination, tax policy and control over their own lands, in their way out from under the Indian Act,” Miller said.
Miller acknowledged that more work is needed to move forward on the issue.
“We will work closely with interested communities to implement this change in prospective draft agreements and modify existing modern treaties.”
In the coming weeks, Miller added, the government will be contacting prospective and existing modern treaty groups to begin working with interested parties on implementing the new approach.
“The government has also begun collaborating with provincial and territorial counterparts to support their analysis on the provincial/territorial approach to addressing the Section 87 tax exemption in trilateral agreements.”
Miller told the Sun that the government’s plans for change have, in some cases, been met with surprise.
“Traditionally, financial policy has been very rigid towards Indigenous people … and so when you have consultations, people look at them — rightfully — skeptically, but it is the process of fierce advocacy within communities that is pushing us to this inevitable conclusion. I’m happy to be a part of it.”
The Sun reached out to local First Nations in Westman after Miller’s office released the press release, including Gambler First Nation and Sioux Valley Dakota Nation, but did not hear back. The Sun also made calls to the Assembly of Manitoba Chiefs and the Manitoba Framework Agreement Treaty Land Entitlement over a week ago and did not hear back.
Miranda Leybourne, Local Journalism Initiative Reporter, Brandon Sun