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  SPOTLIGHT ON Aboriginal Rights - Taxation

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First Nations Tax Rules Not a Benefit
Originally Published in the Williams Lake Tribune on January 5th, 2006
(Posted on Turtle Island Native Network with Permission from the author)

By Cary Morin - Cariboo Tribal Council Treaty Society (NStQ)

When I tell people that I am of aboriginal ancestry, the responses do not vary much at all. About 15 per cent will respond by asking me if I know this and that person. Many will ask which tribe I'm from. About 10 per cent will try to bridge the cultural gap by saying they are 1/8 or 1/64 Indian from their grandparents side. However, more commonly, people will usually respond by enquiring about our taxation benefits.

To begin, I would hardly call our Indian Act section 87 tax-exempt status all that much of a benefit. Yes, our incomes are not taxed if we work on-reserve. The key here is that our incomes ARE taxed if we work off-reserve. For people making near minimum wage salaries, this does not make a difference, as people in the lowest salary brackets usually get a full or close-to-full return anyways.

For professionals on the higher salary brackets, there is no benefit either. This is because professional jobs on most reserve lands usually take the form of a job with the various levels of band administration. However, the employer-not the employee-gets the tax benefit. As I have written before, most Indian Act band governments are greatly under-funded. Therefore, management must be accountable to their communities first and leverage every dollar they can. Hence, salaries are compromised. With the taxation benefit, the employer must simply be able to deliver a salary that provides a reasonable take-home to their employee-usually a take home that is moderately comparable to what the First Nation would be receiving working off Indian Act lands. Simply put, if you believe income tax-exemption is a benefit to First Nations, then you're probably making one or both of the following two false assumptions: (1) that we are making a salary comparable to the rest of the non-aboriginal population and (2) that we are working on a reserve. As it stands now, half of the NStQ membership lives off-reserve.

One can probably safely say that it is not the First Nations band administration that reeks the benefits of this income tax exemption for on-reserve employees, but that it is Indian and Northern Affairs Canada (INAC) that sees the benefit. After all, if the Indian Act section 87 tax-exempt status were to collapse tomorrow, personnel would significantly decrease or become less efficient if INAC did not increase their funding for band employees.

As for the PST/GST exemption, First Nations pay these taxes everywhere except on-reserve. If we buy gas or cigarettes at an establishment on-reserve, then there is a benefit. However, many reserves don't have gas stations and if you have lived your life off reserve like I have most of my life, then you usually buy gas anywhere convenient. And I cannot be sure that the cigarette tax exemption is all that much of a benefit as surely it adds to the cost of on-reserve health service delivery. And even if you calculated all of these benefits on a year-end scale, assuming an aboriginal person who smokes a pack per day and gasses up every week, the actual yearly benefit would be approximately $2,000 per year. I would call this the high end number. The actual average I would guess is significantly less. Also, factor in that First Nations who work on reserve and live off reserve (because of long waiting lists for housing) typically travel longer to and from work than your typical Canadian employed worker, as many reserves are located away from urban centers.

Personally, if it came down to a decision of not having to pay taxes with a salary below market value and paying taxes with a salary comparable to the non-aboriginal population, then I would choose the latter for obvious reasons. For one, it looks better on my credit by having a higher recorded salary and, in addition, I can get a modest tax return at the end of every fiscal year.

Recently, in Vancouver, the federal and provincial governments proposed new taxation systems-also available to First Nations outside the treaty process-to replace the Indian Act section 87 tax exemption. Under their proposed system, the NStQ government could implement a First Nations GST (FNGST), PST and Personal Income Tax (PIT) to any NStQ citizen working on-reserve and collect that tax room for whatever the NStQ government may choose to do with it. Again, with band funding already severely limited, would the NStQ collecting taxes on their treaty settlement lands replace the lost benefit (i.e. tax-exemption) to the NStQ employer? I can assure you that band administrations would suffer a tremendous blow if band salaries were to get any lower-either by loss of personnel or by loss of service and delivery dollars via increased salaries. In addition, there are several valuable employees, as it stands now, who are working for the NStQ who are not members of any of the four NStQ bands, but are First Nations nonetheless and these employees may not be NStQ citizens under our proposed government. They could likely leave to work elsewhere, where the salaries are comparable to the rest of Canada. Not to mention, an FNPST or an FNGST could hurt on-reserve businesses in the short run, as the absence of tax-exemption would provide less incentive for First Nations customers. These are all issues of transition that could make or break our proposed self-government.

On top of all this, we must consider for a moment that many First Nations do not make enough to be taxed effectively anyways. Theoretically, someone who is poor requires more services than someone who is not. Hence, the tax actually becomes redundant. In many ways, it's like exchanging gifts with a stingy person. What you are receiving is less in value than what you are already giving. Sorry for being unsentimental. Hope you had a great holidays and have a happy new year.

Cary Morin
Cariboo Tribal Council Treaty Society (NStQ)
Public Relations/Communications Coordinator
Cariboo Tribal Council
17-1st Avenue S.
Williams Lake, BC
V2G 1H4
250.392-7361 (w)
250.392-6158 (f)
c.morin@nstq.org

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