Premier says talk of First Nations tax turmoil is 'hypothetical'

Premier Blaine Higgs says he doesn't expect major disruptions when Wolastoqey tax-sharing agreements expire at the end of the month because there will be legal consequences if reserves ignore provincial tax laws.

In two interviews with CBC News, Higgs would not say what he thinks would happen Feb. 1 if bands implement their own tax laws that undercut neighbouring off-reserve businesses.

Wholesalers and distributors who supply on-reserve businesses would find themselves in legal jeopardy if they continued delivering products to a reserve refusing to comply with tax laws, he said.

"Many suppliers don't just supply on the First Nations," he told CBC's Information Morning Fredericton on Friday. "They supply the entire province. And there are provincial rules around that in terms of retail, in terms of your licence to be in the province

Earlier this week, Chief Patricia Bernard of Madawaska Maliseet First Nation said her band government plans to implement its own tax laws after the expiry of its agreement with the province on Jan. 31.

She called it "a complete and utter cutoff of revenue-sharing with the province."

Bernard said tobacco and cannabis would become "way cheaper" on the reserve in Edmundston and that will create turmoil for competing retailers. The same will happen for gasoline at a later date.

"It's going to be chaotic," she said Monday. "It's going to be confusing. Consumers are not going to know what to do, and there's not going to be any stability, and businesses are going to get frustrated."

Higgs said, however, it's unlikely that wholesalers and distributors will deliver to retailers violating provincial law.

"I won't go into the hypothetical part, because there is an obligation for any business in the province of New Brunswick to remit taxes, so for that business to operate in the province, or to be supplied within the province, the rules of the province have to be followed," he said.

"So I think it becomes an occurrence that would be very difficult for Chief Bernard to put in place. It would be very difficult for suppliers to follow that against the laws of the province."

Agreements date back to '90s

The agreements, which date back to 1994 and were last renewed in 2017, have fuelled economic growth in some Indigenous communities, particularly those with large gas retailers on reserve land near major highways.

They apply to diesel, gasoline, tobacco and sales taxes, and have also covered carbon taxes since a 2021 court ruling in favour of First Nations.

Bands charge the same provincial taxes as other businesses, which are collected by the federal government. Ottawa then transfers the provincial share to the province, as it does with all retail tax revenue.

Under the agreements, the province then remits 95 per cent of the on-reserve retail revenue to the First Nation, up to $8 million. The province remits 70 per cent of amounts beyond that.

In 2021, Higgs gave bands official notice he would terminate the agreements.

He is proposing to replace them with five-year funding deals that would see the province help pay for health, housing, social assistance and education on reserves, as long as the bands agree to firm timelines and measurable targets.

Higgs acknowledged Ottawa has talked about giving First Nations taxing power on reserves, but he pointed out there's been no federal legislation and said it wouldn't affect provincial taxation regardless.

While Bernard said her band has a sovereign right to set tax laws on its territory, Higgs repeated his view that the tax agreements have "nothing to do with traditional rights and treaties" and are purely commercial contracts.

They were put in place to avoid a tax imbalance between on-reserve and off-reserve retailers.

Unfair advantage

The premier said the amounts were small at the outset, but they've now grown to tens of millions of dollars a year, giving First Nations retailers an unfair advantage.

"If the deck is all tilted in one direction, for one business versus another, I guess success can come easily. … That's what we see here," he said.

Adding to the problem, in Higgs's view, is the federal policy that lets reserves acquire new territory, including in urban centres.

That would allow a First Nation to build a large hotel in a downtown core and recoup almost all of the provincial tax collected, he said.

"That could happen anywhere in the province. And there's no restriction on the amount. The sky's the limit. Then you get a diverging economy that now is very uncompetitive with one business versus another, and you don't have taxes going into the common good."

There have been only perfunctory negotiations on the proposed new funding agreements since 2021, Higgs said, but little progress because bands have been unwilling to discuss anything but the tax deals.

He said he won't extend those deals past Jan. 31 to allow more time for a compromise because everyone has known since April 2021 that it was happening.

Tax agreements with Mi'kmaw bands expire at the end of the year.

Mi'gmawe'l Tplu'taqnn Inc., which represents the nine Mi'kmaw First Nations, said in a statement this week that it is still looking to negotiate new deals for "greater control over taxation and resource revenues in our territory."

If the province rejects that, "we will be exploring other legal options," MTI said in a statement.

DOCUMENT | Read a letter that Minister Arlene Dunn sent to Wolastoqey chiefs in December. It and related documents were provided to CBC News: