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airdberlisNativead logo feb2021Taxation can be a difficult topic among First Nations. Leaders are often challenged to determine if they should exercise taxation authority on their reserves and territories to begin with and then – perhaps more importantly – if doing so is beneficial to their people. 

“There is no one-size-fits-all solution for First Nation communities when it comes to taxation," says Kimberly Thomas, a corporate lawyer and citizen of the Seneca Nation, Bear Clan, who is based at Six Nations of the Grand River Territory. “Every Nation has a very different idea and opinion about what is appropriate for their Nation.”

Taxation jurisdiction

Before deciding if taxation is an appropriate move, First Nations communities must first assess their taxing authority and how they will choose to exercise jurisdiction.

One way First Nations can exercise their authority to tax is through section 83 of the Indian Act.  Section 83 sets out the parameters in which a Band Council may pass a by-law for taxation. Alternatively, a First Nation can exercise authority to tax through the First Nations Fiscal Management Act (the “FMA”).The First Nations Tax Commission (the “FNTC”) is a resource for First Nations that are seeking to exercise their taxation authority through either the Indian Act or the FMA.

Thirdly, there is also the option of introducing taxation through a negotiated self-government agreement with the federal and provincial governments and/or territorial government, as applicable.

Lastly, Indigenous Nations may exercise their “inherent right” to exercise their taxation authority based on their Aboriginal and Treaty rights. Many Indigenous Nations assert that they have maintained their sovereignty over their lands, resources, economic activity; citizens; and non-citizens residing on their Territory since time immemorial. As such, they take the position that they have always had the right to exercise their taxation authority as part of their inherent right to self-government. Exercising inherent taxation authority would be done outside of the Indian Act or the FMA, and as such, the Nation must be prepared to defend its position.  

AirdBerlis Tax3To tax or not to tax

While taxation is possible through several means, perhaps the more important question is whether or not it is the right move to make. Several factors can play into the decision.  Other than jurisdictional issues, the First Nation must also assess its capacity and infrastructure to implement taxation. Further, the leadership has to determine what taxes should be levied, who should be taxed, and how much to levy. 

Says Thomas, "You have to research your tax base and see if the people you're seeking to tax have the ability to pay the tax. Then you have to decide if you're going to tax your people or only your non-registered band members such as companies operating on your land, cottage owners leasing the land, or a combination thereof. "

The decision to tax may also face logistical challenges, she adds: "There are so many unresolved land claims or ongoing disputes from proponents who are seeking to extract resources from the reserve lands or territory, whether it be oil and gas, forestry, or any number of industries. And then, First Nations have not been properly compensated for the alleged breaches of their Aboriginal and Treaty rights. So, when you've got that on one side of the equation, and then governments want First Nations to tax their citizens, that's a hard sell to the community."

Implementation

Should a First Nation decide that it wishes to implement taxation, there are several supports available. The FNTC will guide First Nations through the process, whether it wishes to use section 83 of the Indian Act or the FMA.  Further, other First Nations have utilized the services of the Municipal Taxing Authorities to help with the assessments and enforcement, while others have found success entering into contracts for services with the local taxing authority to help them with that process. Additionally, some legal experts can help communities navigate the ins and outs of tax law, as well as other First Nations who are already exercising their taxation authority through the various means available.

“I always say don't reinvent the wheel,” notes Thomas. “There are a lot of resources out there, including First Nations that already have taxation regimes in place and can share their experience.”

Certainly, she adds, there's no one taxation formula that fits all: "What may work for one First Nation may never work for another. This means that each Nation has to take a very detailed examination of their particular needs, goals, and circumstances."

Kimberly Thomas is the owner of Kimberly Thomas Professional Corporation and Affiliated Independent Counsel with Aird & Berlis LLP, a full-service business law firm serving clients across Canada. For more insight, contact Kimberly Thomas at kthomas@kimberlythomas.com or 519 445 2788.