Taxation may provide revenue for self-government

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(This is part one in a series looking at taxation as a means of creating a revenue base for self-government)

As of 1994, 43 First Nations in Canada were in various stages of implementing their own taxation systems; 36 in British Columbia, five in Alberta and one each in Saskatchewan and Ontario.

This trend toward the control of taxation by First Nations in Canada is growing and it marks an important step in the evolution toward self-government.

While most taxation so far is limited to leasehold lands occupied by non-Natives, corporations (including, by some, corporations owned by Natives) and other governments, taxation is increasingly being seen as a key to creating the revenue base required for First Nations to become truly self-sufficient.

Band taxation rationale

On one hand, taxation by First Nations serves in part to help correct historic inequities. British Columbia, for example, is the only province within which the provincial and local governments levy property taxes on non-Native leaseholders on reserves. (In a technical sense these B.C. governments were not levying a "property tax" on reserve lands, but rather were levying a tax on the non-Native leaseholder with the amount calculated as if it were a property tax.)

In a majority of cases the non-Native governments were levying taxes on reserve leaseholds without providing services to those leaseholds comparable to services provided to other taxpayers in the government's jurisdiction.

Thus taxation by non-Native government was often unfair to the non-Native taxpayers who paid taxes but did not receive services. It was also unfair to the First Nation or holder of the Certificate of Possession for the leased land because the levying of property taxes without the provision of services lowers the lease price that can be charged.

This inequity was the major impetus for First Nations in British Columbia, led by Kamloops Band Chief Manny Jules, to seek amendments to the Indian act to clarify that conditionally surrendered land remain under full jurisdiction of the First Nation.

The goal was also to make it easier for First Nations to implement their own property taxation in order to finance services for those lands.

However, a second major benefit and rationale for First Nations establishing their own taxation systems is that it allows them to establish an independent revenue stream protected from the vagaries of a government funding agenda.

Especially where taxation is primarily of non-Native owned utilities or railroads where services are not required, the primary motivation in introducing taxation is to simply obtain revenue over which they have complete discretion.

While revenues are sometimes low, even a small amount for a small band is valuable because of the conditional nature of much other band funding.

Additional reasons for implementing taxation include to obtain some revenue to make up for the past taking of reserve lands, especially to other governments for roads, airports, sewage disposal plants, etc. at trivial prices.

A few First Nations are also using taxation to resolve jurisdictional disputes. This is done by sending tax bills to occupiers of disputed lands with their non-payment allowing the First Nation to force the issue into court.

While most First Nations tax activity is primarily taking place within British Columbia, there are also situations in other provinces where inequities exist.

These inequities occur where Certificate of Possession holders have leased land to non-Natives but those leaseholders pay no property taxes.

The certificate-holder receives the lease revenue but the First Nation provides basic services such as road access to the property.

Introducing property taxation by these First Nations is a fair way to obtain revenue to maintain services to leaseholders on CP lands.

Thus, while B.C. First Nations have the impetus of eliminating taxation by non-Native governments to assume their own jurisdiction ove property taxation, virtually all First Nations having lands leased to non-Natives should examine the potential for property taxation to finance services to those lands.

Much can be learned by all First Nations from experience in British Columbia.

The B.C. taxation experience

There are 194 bands with more than 1,600 reserves in British Columbia. The reserves are small and many of the occupied reserves are surrounded by areas populated by non-Natives.

Forty-five reserves are within the boundaries of municipal governments and the remaining reserves are within regional districts, hospital districts and school districts and they may be included in other kinds of special districts.

A study of tax-service relationships between reserve leasehold lands and local governments in 1986 (Property Taxation and the Provision of Services on Indians Reserves in British Columbia) concluded that:

- Overall tax revenues from reserve lands for all governments in the province were $7.6 million, less than one per cent of all property tax revenues.

- Some municipalities obtained significant revenues (Vancouver $395,000; West Vancouver $781,000; District of North Vancouver $385,000) and some others derived a significant share of their property tax revenue (Burns Lake 28.9 per cent, Duncan 15 per cent) from reserve leaseholds.

- On average only 25 per cent of the on-site services provided to other municipal taxpayers were provided to leaseholders without additional contractual relationships and payment, but some municipalities provided full services while others provided none. (On-site services include such services as fire protection, water, sewer, roads, etc.)

- There are many kinds of contractual relationships for local services (water, sewer, fire protection, road paving, etc.) between bands and municipalities. INAC was generally not a signatory to the contracts.

The federal response

While the study of tax-service relationships was underway Chief Jules an INAC developd Bill C-115, the 1988 Amendments to the Indian Act.

The amendment clarified that conditionally surrendered reserve lands (lands leased to non-Indians and called "designated lands" in the legislation) remained under Indian government jurisdiction and authorized all bands (not just those in an advanced state of development) to undertake property taxation.

INAC also set up the Indian Taxation Advisory Board and the Indian Taxation Secretariat.

Following this legislation, the Indian Taxation Advisory Board proceeded to sponsor information conference, provide informative publications, sponsor additional research and advise the minister of First Nation's readiness for assuming jurisdiction over taxation.

The Indian Taxation Secretariat reviewed bylaws and provided more technical advice.

Native issues Monthly is a Vancouver-based research report on Native affairs and issues).

(Next issue, we will look at the provincial government's response to Bill C-115 and we'll also see how B.C. First nations introduced taxation on their lands - and what it cost them to do so.)