Band business tax-exempt

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A court decision preventing Revenue Canada from charging a Manitoba band-owned business corporate tax could have far-reaching effects to other Native businesses.

In a precedent-setting decision, Tax Court of Canada Judge D.G.H. Bowman ruled the Opasquaiak Band has the same tax status as a municipality and the band owned Otineka Development Corporation Ltd. is therefore exempt from paying any corporate tax.

Otineka was appealing an order to pay $500,000 in corporate income tax on operating profits made in 1986 from managing the Otineka Shopping Centre, located on reserve land.

The decision also means many of Canada's other 600-plus bands could apply for corporate tax-free status, Otineka lawyer Joel Weinstein said.

"It's a decision with national implications."

Natives who earn income from work done on a reserve are normally not taxed, Weinstein said. But as a corporation, profits that Otineka made from managing the mall on the reserve were taxable.

By arguing that the band government was in fact a municipal government, Otineka, as a band-owned business, would be exempt because municipal owned corporations in Canada are exempt from paying corporate taxes to either federal or provincial governments.

As providers of essential social and community services, the Opasquaiak "have earned, deservedly, the reputation in Canada of being a model of self-government," Bowman wrote in his Jan. 28 decision.

The band provides services to band members in a large number of areas, including education, health care and other social services, he wrote. As such, the Opasquaiak operate like any other Canadian municipality and should be given municipal tax status under the Income Tax Act

The band, located in The Pas, 470 kilometres northwest of Winnipeg, also regulates water supplies and sewers, garbage disposal and weed and animal control. It controls public games, amusements and bee-keeping and restricts the use of slingshots and bows and arrows, Weinstein said.

The municipal label is also productive because the band is working to free itself from Indian Affairs funding, said Opasquaiak Band general manager Jim Smith. Being defined as a municipality helps reinforce that.

All monies made from band-owned businesses go towards maintaining or improving essential services, and not to individuals' pockets, he said. Infrastructure upgrade costs for road and sewer could reach $8 million and the band is not looking to Ottawa for any of it.

Bowman's decision could have ramifications for other bands in Canada, although there are few others at the same corporate level as the Opasquaiak," Weinstein said.

It might also mean that Native businesses could be exempt from paying taxes both on and off reserve, although the situation for every band in Canada would be different.