With the recent implementation of the First Nations Financial Transparency Act (FNFTA), this may be an excellent opportunity to raise another issue of contention—that of First Nations taxation. If First Nations governments were to tax their reserve base and incorporate the revenues into their annual budget, band members could have a chance to experience measurable improvements in their quality of life and governance.
Over the past several years, First Nations have increasingly been afforded more opportunities to create their own independent on-reserve tax base. You can count among these opportunities real property taxation, various forms of sales and good taxes, user-fees, provincial-type taxes, and personal income taxes (which is currently exclusive to groups with a self-government agreement).
The Institute on Governance (IGO) has found that there are clear benefits to First Nations taxation, including providing funds for First Nations projects, and enhancing service delivery and economic development. Furthermore, citizen participation, transparency, accountability, and performance have also been found to increase within First Nations’ communities that possess taxation.
In a separate report, the IGO concluded, “Even for the poorest of jurisdictions, to achieve accountability, their citizens should be responsible for at least some of the costs of the services provided for them.” As a result, band members on all First Nations communities—poor or rich, big or small—should contribute a small portion to the revenue of their local government. Doing so gives them a personal, financial stake in their government’s performance, and with that stake some grounds on which to hold their government to account.
Even in terms of revenue the benefits of taxation should not be discounted for those First Nations in which their small population or land base may make taxation seem like a pointless endeavor. In many cases the collection of taxes by First Nations can be used to secure long term financing from other sources. For example, the First Nations Tax Commission – a First Nations public institution – emphasizes how First Nations can “lever their property tax revenues to access long term capital financing,” which can often be used to undertake projects or pursue other initiatives that would otherwise be unavailable or more difficult to obtain.
While the idea of First Nations taxation does not conjure up positive feelings in the minds of many First Nations people, the reality is that taxation has already begun to be embraced by many First Nations governments. Almost 35 per cent of First Nations in Canada have implemented at least one of the aforementioned types of taxation available within their reserve community. Of the thirteen provinces and territories, taxation amongst First Nations is the most popular in Manitoba, Newfoundland, Yukon, and British Columbia, where 79 per cent, 75 per cent, 69 per cent, and 48 per cent of bands have embraced some sort of taxation, respectively.
But even these numbers can be misleading: of Manitoba’s 63 bands only three collect real property taxes, while 48 bands collect a tobacco tax that doesn’t net very much revenue in comparison to real property taxes or other comprehensive sales and goods taxes. In any case, 35 per cent is not much, and demonstrates that many band members are deprived of a critical aspect of representative government and holding government to account.
Disappointingly, no comprehensive studies have been performed to calculate how much money could be raised if First Nations were to implement a comprehensive system of taxation. However, there have been some attempts to paint a partial picture. For example, in the case of Yukon First Nations, the IOG found that the implementation of sales and personal income tax was able to raise approximately eight per cent of total revenues.
In another approach, Daniel Wilson has calculated how much tax revenue Canada forgoes in personal income tax every year due to the First Nations tax exemption and found “the exemption amounts to between $84 million and $104 million in foregone revenues.” While paltry in the context of Canada as a whole with its $276 billion 2014 budget, such figures could still be beneficial were it to be raised and used by and for First Nation bands—and that is only the revenue from one of the potential methods of taxation.
When contemplating First Nations taxation it is not only the revenue raised that should be taken into consideration; it’s the dependency on band members that it creates for First Nations governments. Taxation will act to advance the self-government goals of First Nations, as well as increasing the quality of life and governance for band members, as they would be creating a mechanism to increase the accountability of their local government and politicians.