Legal Chronicle: First Nations and Taxes


Marie-Claude André-Grégoire * is Innu and lawyer. She agreed to be our guide to the Indian Act, making us discover through her columns the ins and outs of a law with a colonialist spirit. Marie-Claude is helping us this week to better understand the particular taxation regime for First Nations.

The question of First Nations tax exemption under the Indian Act is perhaps one of the most well-known topics in Canada, but the scope of the tax exemption is poorly understood.

A controversial subject for years, the tax exemption provisions are not intended to confer a general economic benefit on First Nations, also called Indians, let alone privileges.

In addition, the exemption from taxation is part of a complex legislative package and its scope is limited, contrary to what many believe. Indeed, this exemption is not automatic and applies only to Indians who have status under the Act.

The original objective of the tax exemption

In order to dispel misunderstanding of the tax exemption, a description of the historical context and the political principles behind the Indian Act is important.

The Royal Proclamation of 1763 expressly recognizes territorial rights for Aboriginal peoples and sets out a policy of protecting First Nations and Indian lands from colonial expansion, including land speculators. At the time of the Proclamation, the main forms of taxes are customs duties and excise duties on imported goods or property taxes.

The Treaty of Jay concluded in 1794 between the United States and England provided, inter alia, that First Nations were free to cross the border of the United States free from customs and excise duties on their property

Almost fifty years later, after several inquiries into the plight of First Nations in Canada, including the report of the Bagot Commission published in 1844, it was recommended, among other things, to promote Aboriginal education, Christianity , As well as the transition from reserves to taxable European land tenure in order to promote the civilization of Indians. The payment of taxes was then considered an important element of citizenship.

In 1850, the Act to protect the Indians in Upper Canada, against fraud, and the properties they occupied or enjoyed, from encroachment and damage, was enacted to protect First Nation lands from The invasion by the colonists.

Following the recommendation of the commissions, this legislation provides for the first time that First Nations and their reserved lands are immune from taxation and free from seizures in default of debt. At that time, taxes were levied for municipal purposes.

Following the establishment of Confederation in 1867, the federal government enacted the Indian Act (which later became the Indian Act) in 1876 without consulting First Nations. This legislation consolidates several First Nations legislation into one piece of legislation. It contains a provision requiring tax exemption and exemption from seizure of First Nations real property or movable property on a reserve. The application of this provision is restricted to those who have Indian status.

First Nations protection policy is transformed into a policy of civilization and assimilation.

The principle of exemption from taxation and seizure included in the 1876 Act remained basically the same until the Indian Act was revised in 1951 and 1985, although the federal government had the power to ” Repeal those provisions.

Since the 1985 Act, these special rules have been found in sections 87, 89 and 90 of the Indian Act.

Purpose of the tax exemption

The Supreme Court of Canada, which considered the purpose of these sections in the Mitchell decision, determines that the tax exemption and the exemption from seizure “are not intended to give Indians privileges All property they can acquire and own, no matter where they are located. Rather, their purpose is to protect the interference and interference of society in general with the property rights of Indians on their reserved lands to ensure that they are not deprived of their rights. ”

Following this principle, the Supreme Court of Canada in Williams concluded that the tax exemption is intended to protect the rights of Indians on their reserved lands and to ensure that the ability of governments to impose taxes, or that of creditors To seize, does not affect the use of their property situated on their reserved lands.

The exemption is not automatic

Briefly, section 87 of the Indian Act provides that the right to a reserve and movable property on a reserve of an Indian or a band are exempt from taxation and no Indian or band is subject To taxation in respect of any such property.

On the one hand, considering that non-status Indians, Inuit and Métis are not considered Indians under the Indian Act, they are therefore not entitled to tax exemption, thereby dissipating The preconceived idea that all Aboriginals are entitled to this exemption. On the other hand, companies are not generally considered to be Indians or a band within the meaning of the statute and, therefore, do not qualify for exemption.

In addition, there is a distinction in the application criteria for exemption from taxes and taxes. Consequently, the issue of tax exemption will be the subject of the next column.

Sales Taxes

The exemption from direct sales taxes applies when the sale of any movable property, including certain services, takes place on the reserve, regardless of the place where the property is to be used. In addition, off-reserve sales will be exempt from taxes if the goods are delivered to the reserve and only if they are “payable on delivery”.

Despite its lack of legislative value, the Revenue Canada’s Revenue Canada policy determines certain exemptions from the GST and QST for particular cases. For example, services rendered off-reserve for band management are exempt from tax. Also, in remote areas, the sale of goods by merchants near a reserve is tax exempt.

In short, for an Aboriginal person to be exempt from sales taxes, three conditions must be met. First, he must have Indian status under the Indian Act. Secondly, the property concerned must be movable property within the meaning of the same law. Finally, the location of the transaction must be on a reserve.

Therefore, if these conditions are not met, sales taxes must be paid by aboriginal peoples, just like all Canadians.

Evolution of perceptions and debates

With respect to aboriginal rights of tax exemption or levy, Canadian courts have been reluctant to recognize such an aboriginal right to First Nations.

Nevertheless, band councils have been given the authority to tax for, and to levy a tax for First Nations goods and services for, local purposes on the reserve land and the rights therein. Several band councils availed themselves of the latter tax.

First Nations consider this tax exemption to be consistent with the inherent principles of self-government. Thus, in the event of recognition, it must have an agreement on the redefinition of the tax exemption for First Nations that will respect this autonomy.


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