Evidence of meeting #40 for Indigenous and Northern Affairs in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was process.
A recording is available from Parliament.
Conservative
NDP
Partner, Devlin Gailus Barristers and Solicitors
I can go first, if you like. I'll make it quick.
That's a huge question. What leads to overcrowding on reserves and inadequate housing is really a huge issue in itself. There are systemic problems with housing on reserves. If we go to what Dr. Le Dressay said about the First Nations Fiscal and Statistical Management Act and having better fiscal regimes on reserves, that would then lead hopefully to better accounting practices, which would then allow first nations to continue to get their housing grants every year.
One of the problems—and this was my comment earlier—is that when you have small communities with people with poor education, they don't understand reporting in the way they should. You have a lands officer somewhere else in the country who has never been to that community, doesn't have a personal relationship with them, and then says they're not going to get their grant for the next year. Then they get behind in housing, and you have generations and generations of people living in housing.
You also have substandard construction on reserves. In part, that's a regulatory gap, and in part, it can be a local contracting problem.
If you did have better fiscal management and regulation, that hopefully would mean less withholding of resources by Canada for housing, and then you would have people living in better housing conditions.
I'll leave that point there so everyone has a chance to answer.
Conservative
Director, Fiscal Realities Economists Ltd.
I'll follow up on what Chris said.
First nations don't have anywhere near the same financing tools as local governments. Local governments generally finance infrastructure through fixed sources. They have property taxes. They have money in reserve. They use development cost charges or something akin to development cost charges. Quite often they'll use private sector contributions or developer contributions, which are slightly different, and they'll use debenture financing. They'll also rely on transfers from other governments.
Without the use of the Fiscal and Statistical Management Act, first nations would have two of those and maybe three. So, as a result, they don't have anywhere near the financial capacity to pay for infrastructure that you would in the local government context. That's one thing that might benefit first nations.
The other question was more to do with some of the environmental issues. I assume this committee will be studying this. What is the environmental regime on first nations lands? Is it a combination of provincial assessment practices? It should be, of course, the federal environmental act, but how does it ultimately manifest itself within first nations lands? There are some real opportunities to create a much more seamless environmental management system on first nation lands so you don't have potential environmental issues.
Conservative
The Chair Conservative Chris Warkentin
Thank you so much.
We'll turn now to Mr. Seeback for the final five minutes of this round.
Conservative
Kyle Seeback Conservative Brampton West, ON
Thank you, Mr. Chair.
I wanted to pick up quickly on something that you were talking about, Christopher. You briefly mentioned the First Nations Fiscal and Statistical Management Act. So there are two things, right? There's also section 83, which gives the authority to levy property taxes on leasehold interests. You also have the FNFSMA—that's a lot of acronym there.
About 120 first nations are levying property taxes on reserve, I think, and 79 are participating in the FNFSMA. What are the main differences between those two regimes?
John or Christopher, either one...?
Partner, Devlin Gailus Barristers and Solicitors
It has been a while since I've looked at it—
Conservative
Kyle Seeback Conservative Brampton West, ON
I think that, in fact, Dr. Le Dressay is probably the better one to answer that question, but essentially, if you're under the FNFSMA it's a voluntary act, and you subscribe to a much more rigorous fiscal management regime, right? Under section 83, you pass your bylaw and away you go.
So the institutional framework that's in place is a more rigorous one and a more comprehensive one under the FNFSMA, and I believe the department now strongly encourages first nations who want to engage in property taxation—
Conservative
Kyle Seeback Conservative Brampton West, ON
—to go under the FNFSMA.
Mr. Le Dressay, do you want to comment on that?
Director, Fiscal Realities Economists Ltd.
I'll do it hopefully quite simply.
Under the FNFSMA, a first nation could achieve a credit rating. Under section 83 of the Indian Act, they couldn't.
Now, ask yourself why. The answer is quite simple. The Indian Act doesn't provide anywhere near the regulatory certainty that's required for anyone to give them a credit rating, whereas the FNFSMA has all those aspects in there. Once you have a credit rating, you have access to capital.
Conservative
Kyle Seeback Conservative Brampton West, ON
Again, for any of you, what do you think are the main economic benefits of a property tax regime? I think some of them are obvious, but maybe there are some that aren't quite as obvious.
Director, Fiscal Realities Economists Ltd.
Is it okay if I go first, Chris and John?
Director, Fiscal Realities Economists Ltd.
There was a recent book.... And as an economist who's not named Steven Levitt—who wrote Freakonomics—it's always good when an economist becomes famous. A couple of economists have become famous by writing a book called Why Nations Fail. They've analyzed nations all throughout the world, and they've come to one conclusion. I'll just read it to you:
To be successful, states must provide secure property rights and a strong relationship between local taxation and local services for the majority of people in society.
They have concluded, after studying nations throughout the world, that the key for successful economic development is secure property rights and good property tax systems whereby people willingly pay their taxes and receive good services in exchange. So I think property tax in the role of economic development is absolutely vital. It's the most clear connection people have between taxation and services, and those services ultimately improve their property values. So the value of property tax to improve first nation economies is quite high.
Partner, Devlin Gailus Barristers and Solicitors
I agree with everything André says.
When you're looking at economic development, there is something that's not really talked about much, and it is that a first nation that has a property taxation system, whether it be FNFSMA or section 83, can use that, particularly if they're in an urban area and have a municipality next door, to actually attract businesses by pegging a lower tax rate, for instance.
It's something that's not talked about a lot, but certainly with the clients we have, when we're talking about those sorts of things, we suggest to them that this might be a better way to attract business as well—to look at having competitive tax rates with neighbouring municipalities.
Partner, Devlin Gailus Barristers and Solicitors
I would just add one last comment, though, which is that, again, property taxation is not a panacea. Like all of the things we're talking about, part of it is only if you're blessed with a location advantage, right? We have clients who are in the hinterland. They could have a property tax bylaw and they'd only be taxing their own members and no one else, so even if they had all that security of a property regime and a tax base, it wouldn't make any difference.
I mean, even the FNGST can be a difficult sell in rural communities where there really isn't.... It's really just a cash transfer, for the most part, and even that can be difficult to sell to remote communities. So the closer you are to an urban or semi-urban centre, the more likely it is that these are going to be advantages for economic development.
Conservative
Kyle Seeback Conservative Brampton West, ON
I think you said quite clearly that for your clients, you'd recommend the FNFSMA as opposed to operating under section 83.
Conservative
The Chair Conservative Chris Warkentin
Thank you very much, Mr. Seeback.
I believe that we're going to turn back to Mr. Genest-Jourdain. My understanding is that you had a short question.
NDP
Jonathan Genest-Jourdain NDP Manicouagan, QC
Mr. Le Dressay, do you understand French well? Are you getting the interpretation?
