Evidence of meeting #109 for Indigenous and Northern Affairs in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was peoples.
A video is available from Parliament.
Conservative
Martin Shields Conservative Bow River, AB
The reason I bring it up is that it seems like a limiting factor when you say it, compared with the other levels of government we have. It restricts in the sense of their capacity.
Director General, Intergovermental Tax Policy, Department of Finance
If you compare them with, let's say, provincial taxes, those would apply within, obviously, the boundaries of the province. With municipalities, similarly, they would apply within their municipal property boundaries. It's a similar type of concept there in some instances.
Conservative
Martin Shields Conservative Bow River, AB
You can tax beyond your boundaries both provincially and municipally. You can do that.
Director General, Intergovermental Tax Policy, Department of Finance
Yes, that's a fair point.
Conservative
Martin Shields Conservative Bow River, AB
Okay.
When you're talking about the funding, are you talking about taxing people or taxing on land...their ability?
Director General, Intergovermental Tax Policy, Department of Finance
The frameworks we have in place today include a first nations personal income tax, which would be analogous to the federal personal income tax regime, and the FNGST, which is analogous to the goods and services tax. There are property tax regimes that are not under our area of responsibility, but those are also applicable for interested governments.
Conservative
Martin Shields Conservative Bow River, AB
The ability for an indigenous nation to charge taxes on property within their nation is available to them.
Director General, Intergovermental Tax Policy, Department of Finance
That's right. They can access that through provisions either under the Indian Act or through the First Nations Fiscal Management Act. They're two different approaches to levying a property tax. They are available to do that—yes.
Conservative
Martin Shields Conservative Bow River, AB
Usually to do that, you have to have title for a person to be able to be taxed on that property. Can people have title to property on a nation?
Director General, Intergovermental Tax Policy, Department of Finance
It gets into the characterization of the lands, whether they're fee simple or not. It would depend on the specific instances.
Conservative
Martin Shields Conservative Bow River, AB
Are you familiar with any nations that have fee simple on their nation land?
Director General, Intergovermental Tax Policy, Department of Finance
There are definitely first nations levying a property tax on their lands. It's, again, an area outside of our expertise. I wouldn't want to provide you with the wrong details about that.
Conservative
Director General, Intergovermental Tax Policy, Department of Finance
I think what you may be referring to is the revenue-sharing mechanism. Yes, there is a mechanism that takes into account when a group is levying the FNGST. If the bulk of the revenues are coming from the taxing of non-members—so an individual who is, say, passing through reserve land and making a purchase there but they're not actually a member of the community—if the bulk of the revenues are coming from that stream of taxation, then yes, in some instances there can be a cap that kicks in. That's embedded in the formula and the agreements that we have with governments.
Conservative
The Vice-Chair Conservative Jamie Schmale
Thank you very much.
I'm sorry, Mr. Shields. I apologize. That was the end of your six minutes.
Next we go to the Liberal Party and Mr. Powlowski for six minutes, please.
Liberal
Marcus Powlowski Liberal Thunder Bay—Rainy River, ON
We're just embarking on this study. Frankly, I certainly don't know all the taxes that do and do not apply in first nations communities. I also know that, for some taxes, even if you have a status card and you're not in the community, you don't have to pay tax on certain things, but I don't know the relevant legislation as to what creates and what removes the taxes.
I know this may be fairly laborious, but can somebody run through which taxes people do and don't have to pay on first nations land—for example, like income tax?
Director General, Intergovermental Tax Policy, Department of Finance
It is complex, so it's a really fair question to ask. Section 87 of the Indian Act establishes an exemption from tax for the property—and I use the word "Indian" because that's the word used in the act—of the Indian on reserve. That section 87 exemption—and a lot of this has come from the interpretations of the courts over the years—applies to income. If you were a sole proprietor of a business generating income on reserve, that can be exempt. It also applies to the GST/HST.
Liberal
Marcus Powlowski Liberal Thunder Bay—Rainy River, ON
That is if the income is generated on reserve, but how about if you drive off reserve and you have a job off reserve? Is that then subject to tax?
Director General, Intergovermental Tax Policy, Department of Finance
That's when we get into what's called the “connecting factors test”. Essentially, we're looking at the specific situation of the taxpayer and trying to determine whether their business income is largely related to activities on reserve and connected to the reserve and, therefore, would fall under that umbrella of the section 87 exemption, or whether there are factors like, as you said, they're driving off reserve every day conducting business and it's not connected back to the reserve at all and, therefore, there's a question about whether the section 87 exemption would apply.
I don't want to put CRA colleagues on the spot, but I think that's a fair characterization. Do you want to add...? No.
These connecting factors have to be—
Liberal
Marcus Powlowski Liberal Thunder Bay—Rainy River, ON
Does that mean that every single taxpayer, when they make money, has to personally go through some hoops to show that the money was either related to living on reserve or not?
Director General, Intergovermental Tax Policy, Department of Finance
CRA, do you want to speak to the process at all?
Aliou Diarra Director, Federal, Indigenous and Quebec Affairs Division, Partnerships Directorate, Service, Innovation and Integration Branch, Canada Revenue Agency
Effectively, we have some validation processes in place at CRA to ensure the exemption nature of the revenue. We have different types of mechanisms in place to ensure that.
Liberal
Marcus Powlowski Liberal Thunder Bay—Rainy River, ON
Is this a lengthy procedure? I have headaches enough when I pay taxes. I'm thinking that if you add this other loophole, which you have to now prove is related to living on reserve, is that a burdensome thing for the applicant? You may not see it quite like the person on the other side sees it.
Director, Federal, Indigenous and Quebec Affairs Division, Partnerships Directorate, Service, Innovation and Integration Branch, Canada Revenue Agency
What is clear is that we should not underestimate the complexity of those particular situations. I don't know enough about the overall experience of all the taxpayers, but we have in place resources and people who are trained to effectively determine the eligibility of those incomes.
Liberal
Marcus Powlowski Liberal Thunder Bay—Rainy River, ON
If the person lives and makes the money on reserve, but then doesn't live on reserve, do they pay tax? I know that, in Thunder Bay, for example, there are seven or eight gas stations in Fort William First Nation, so a lot of people go over there to buy gas. I think a fair number of the people working there aren't from the community. If they're making money there, do they pay income tax or not?