Reserve Sales Taxation a Thorny Issue

Commentary, Aboriginal Futures, Frontier Centre

A story in the August 23, 2004, Winnipeg Free Press rang alarm bells in Manitoba’s aboriginal communities. Headlined “Reserve sales tax endangered,” it described negotiations between the government of Manitoba and the province’s Chiefs to allow them to collect taxes on gasoline and tobacco sold on Indian reserves. This news is generating anger not only because it jeopardizes the traditional native exemption from such levies. Many see it as another example of a lack of accountability for leaders who are abandoning the interests of their people in order to increase their already considerable power over their own people.

According to the Canada Revenue Agency, under Section 87 of the Indian Act status Indians and Indian bands do not pay federal or provincial taxes on property on a reserve or on goods and services that are purchased on or delivered to a reserve. The purpose of this exemption, which predates Confederation and most of the numbered treaties, is not to confer an economic benefit, courts have consistently held. It “is intended to preserve the entitlements of Indian people to their reserve lands, and to ensure that the use of their property on their reserve lands is not eroded by the ability of other governments to tax.”

What rankles one elder is why the rank and file on First Nations ancestry have to read about this deal in the newspaper. “Here they go again,” he commented, “forcing something on their own people without consulting with them first.” Such resentment is heightened by fears that aboriginals’ tax-free status, under attack for many years, is slipping away. The Chiefs in British Columbia who negotiated the historic Nisga’a land claim agreement tossed away the exemption, but they traded it for other significant concessions. Manitoba’s Chiefs may be giving away their people’s treaty rights for a quick cash grab.

To some extent, taxation on many of Manitoba’s First Nations is already a reality. Gasoline taxes have been a sore point. When treaty Indians presents their status cards at a reserve business, the number is entered into the computer showing that the goods purchased are tax exempt. But most native gas stations only reimburse half the exemption; the other half goes into the band coffers. No legislation ever empowered them to do this, they just take it. Band officials questioned about this usually respond, “When we finish paying off what we owe on the store, we will give everyone the full rebate.” These backdoor imposts are probably illegal.

Tobacco sales in Manitoba infringe on treaty rights even more. Almost half the price of a carton of cigarettes goes to the band office. Last year, a Chief in Nova Scotia received two bonuses from tobacco sales, one cheque for $45,000 and a second for $25,000. His total income for the year was $450,000. If his annual income were brought down to $50,000 a year, his band would not need to charge such taxes or, by doing so, break a treaty right that low-income residents of reserves depend on.

Many reserve residents say that, if their leaders want more money in their bands’ coffers, they should take pay cuts and greatly reduce the extensive and very expensive travel they seem to enjoy. Cutbacks at aboriginal regional offices would also save a lot of money. In other words, they should curb their spending if they want additional revenue to improve our First Nation communities.

One First Nation in Manitoba already requires treaty Indians from other First Nations to pay heavy property taxes when they lease land. That makes it much cheaper to reside next door in the local Rural Municipality, not a good formula for economic development.

This same band is already talking about taxing treaty Indians for all goods purchased on the reserve. Yet, according to one staff member, when band officials “want to go to the city shopping and party, they send memos around to each department calling for a meeting in the city.” Each person who makes the trip receives a travel cheque for $900 to $1,300.

At one time, money from Ottawa covered the costs of traditional municipal functions like sewer and water and garbage pickup. Now some First Nations are charging a fee for these services. One band in particular that does this also owns many businesses and is considered successful, yet they have serious money problems. Maybe before they break any treaties, they should clean up their own houses first. The people are angry over the taxation issue and it can only become worse.

Federal officials in Ottawa are trying to stall the process in Manitoba until all the legal ramifications are dealt with. They are undoubtedly aware that court rulings across the country have consistently upheld the validity of aboriginal exemptions from taxation. They have even extended them past sales taxes, to exempt natives from paying income taxes on unemployment insurance benefits, in one judgement. Leading the opposition to Ottawa’s position is John Thunder, hereditary Chief of Buffalo Point First Nation, who is a white man.

Perhaps it is inevitable that First Nations will lose their tax-exempt status, and maybe they should. But if Ottawa and the courts concur, the resolution must include accountability measures, so that Chiefs and band officials on First Nations curb their many abuses of the funds they already control. If aboriginals have to pay more, they need to be certain the money benefits their communities, not the pocketbooks of a few.