Indigenous and Northern Affairs Committee on May 29th, 2024

[The Chair, Liberal, Patrick Weiler]

Mr. Claxton, we're running over time here. If you could just conclude, we can leave the rest for questions after.

[Allan Claxton]

First and foremost, the government must end these caps on our first nations GST tax jurisdiction on our lands. It is my understanding that the GST caps are government policy, and this committee can recommend ending that.

Thank you for the invitation to speak today.

Hísw̱ke, siám. Thank you very much.

[The Chair, Liberal, Patrick Weiler]

Thank you, Mr. Claxton.

Next I will turn the floor over to Mr. Manny Jules to provide opening remarks.

Welcome back to committee. You have five minutes for your opening remarks.

[Clarence T., Manny) Jules (Chief Commissioner, First Nations Tax Commission]

Thank you, and congratulations on your new appointment.

Good afternoon. I am Manny Jules, chief commissioner for the First Nations Tax Commission.

In 1974, I was elected as a councillor for the Tk̓emlúps Indian Band, and I served as chief from 1984 to 2000. I've been doing this now for 50 years.

Thank you for the invitation to appear before this committee.

Why are our tax powers so important?

There are many reasons, but one is particularly important. For over 100 years, the government has put us under a fiscal system that was designed to implement assimilation. Now, almost everyone acknowledges that this was wrong. Canada is committed to self-determination. Many policies have changed as a result. However, for the most part, our governance arrangements are funded through the same fiscal architecture that was used to implement assimilation. It is still a model of dependency and federal involvement in virtually every activity of our governments.

Today, for every dollar we collect on reserve, the federal and provincial governments collect seven. This must change. By change, I mean an expansion of tax powers to be exercised by first nations on an optional basis and having those new powers included in the First Nations Fiscal Management Act.

Our strategy is straightforward. For me, it originated with my father. He understood where taxes came from—investment in our economy—and that we must compete for investment with other economies. He understood our competitive disadvantage because of the Indian Act and the extreme risk aversion of the Department of Indian Affairs and the Department of Justice.

While it is true that taxes are a subset of our economy and that the stronger our economy is, the more taxes we can generate, it is also true that taxes originate from the fiscal powers a government has. While we had fiscal powers before contact and during contact, we collected taksis from people who crossed our territory and kept a share of the resources they took, and from our members to pay for infrastructure like irrigation systems and to lobby for our land rights to the King of England and the Pope in 1904.

In 1927, the Mackenzie King government passed an amendment to the Indian Act prohibiting us from raising revenues to fight for the land question. I quote Peter Kelly, who spoke for 15 minutes at this hearing: “Then the position that we...take would be this: that we are simply dependent people. Then we would have to accept from you [the government] just an act of grace, whatever you saw fit to give us.”

The loss of these fiscal powers created dependency and removed our ability and incentive to compete for investment. The result is poverty. For 50 years, I have worked to right this wrong with many first nation leaders, including those called as witnesses by your committee.

We must have the option to expand the fuel, alcohol, cannabis and tobacco sales-tax powers announced in the most recent federal budget to include sales tax on casinos and ATMs. We must also have the option to collect excise tax from these products sold on our lands. First nations have paid billions of dollars in excise tax to the federal government over the years, and it is time we received our share.

We need to remove revenue caps on revenues collected on our lands. Our tax jurisdiction must be based on our geography, on our traditional lands. Revenues must be based on our economic infrastructure, generate more taxes for all governments and implement more jurisdictions to facilitate investment at the speed of business. More investment means higher productivity and more wealth for all Canadians.

We must also receive our share of carbon taxes. We have paid them. Our communities are the least prepared to reduce the risks of climate change. We need to develop and implement the first nations resource charge so that we can receive fiscal benefits from resources and projects within our territories, like other Canadians do.

While the federal government and, hopefully, the provincial governments cede tax room to us, they would be demonstrating a practical commitment to economic reconciliation. Expanding the FMA with more fiscal powers, as I have suggested, without federal revenue sharing and caps is the best way forward for first nations and Canada.

Finally, in addition to the fiscal gap, I urge this committee to consider the export gap between indigenous people and other Canadians. Enacting policies to facilitate indigenous trade can help close this economic gap between indigenous and non-indigenous groups. In addition to more fiscal powers, indigenous economies can meaningfully strengthen, through the support of first nations communities, by increasing access to markets for first nations businesses, reducing institutional barriers to economic participation and developing tax incentives and/or special economic zones that benefit first nations.

Today, there are almost 400 first nations that are part of the FMA, because it works. I urge you to build on the most successful first nations-led legislative initiative in history, not because it is good for first nations but because it's good for all Canadians.

Thank you, Mr. Chairman.

[The Chair, Liberal, Patrick Weiler]

Thank you, Mr. Jules, for those opening remarks.

Next, I want to turn it over to Chief Derek Epp from the Tzeachten First Nation for five minutes of introductory remarks.

[Chief Derek Epp (Chief, Tzeachten First Nation, First Nations Tax Commission]

Thanks, Chair.

Good evening, everybody. I'm Chief Derek Epp of the Tzeachten First Nation, located in British Columbia. I've been chief now for eight years. I'm also the deputy chair of the First Nations Finance Authority, and I'm heavily involved in the First Nations Tax Commission's work. These institutions are what got Tzeachten to where we are today.

It's really a pleasure and an honour to participate in your study on expanding tax revenues and economic reconciliation. I love taxes. I love talking about taxes and how to expand our tax powers. Quote me. It doesn't matter. I think it's an important thing that gets any level of government, including our own, to the point where we need to be, and it really has got Tzeachten to where we need to be.

I love talking about how it's a foundation for our governments. Fortunately, for me, Manny's been doing this for 50 years, so the fact that I love taxes seems a little less weird now that he's been doing this for 50 years. He set the stage for me to be here today.

You'll understand a bit more about my tax obsession once you hear about my community, Tzeachten First Nation. We're not a big community. We don't have a massive land base. We have about 750 members and a little less than 900 acres of reserve land base.

Like many first nations in the 1990s, we really relied heavily on federal transfers to get us to where we are. We estimate that in that time, about 85% of our revenues came from federal transfers and 15% came from our own sources of revenue. In the early nineties, we worked with Manny to implement our property tax system, which is still going strong today.

At the turn of the century, we followed Manny's lead and implemented the fuel, alcohol and tobacco tax. In 2016, working with the First Nations Tax Commission, we led the design, development and implementation of the first nations property transfer tax, which has been one of our greatest sources of revenue since. In 2020, we created a licence fee for cannabis operators on our lands. Last year, we implemented our first accommodation tax.

We used all of the first nations institutional frameworks available to us. We joined the First Nations Fiscal Management Act in 2008. We used all of the services of the tax commission, the First Nations Financial Management Board and the First Nations Finance Authority. Many of you probably saw me here this week on behalf of the First Nations Finance Authority as well.

We have the most FMA laws of any community in Canada. We have more graduates from the Tulo Centre of Indigenous Economics university programs working for my nation.

We passed our land code under the framework agreement of the First Nations Land Management Act in 2006, and we have used this framework to implement our land and environment governance jurisdictions. We have used it to create more certainty for our members and investors, and to move up the speed of business. In the last 12 years, our economy has grown three times faster on average than any B.C. municipality.

In March 2020, we were the most prepared government in the face of Canada's pandemic. Our emergency plan ensured that we had reserve funds to support our members, to ensure food and health sustainability and to issue cheques to our members within one week of the announcements of the shutdowns.

We can react quickly to the changing economies. In 2021 and 2022, we reviewed and changed our land laws to adapt to the environment to ensure that we supported rental units in our community. These developments were completed in 2023 to meet the significant increase of the demand in our region. Currently, Tzeachten houses upward of 8% to 9% of Chilliwack's residents in the municipality, and we do that because we know we can.

Last year, we reversed the statistics from the 1990s. We received 15% in federal transfers, and 85% was from our own sources of revenue. We have shown what can be done by implementing our own fiscal and land jurisdictions with the support of institutions.

We need to speed up this work. Your motion to expand first nations' fiscal powers is just a start, and I fully support it. We need to have fuel, alcohol, cannabis and tobacco—also called FACT—excise taxes. We need to expand the FACT sales tax to include casino and ATM GST. We need to receive our fair share of carbon taxes. More than this, we also need to implement the first nations resource charge for first nations that have resource project opportunities.

Your motion is a first step, but we have a lot of work to do. We need to get rid of all the revenue caps on our tax revenues. The more revenues that stay with us, the better for the first nation's economy and the Canadian one. I mentioned that our community isn't big, but we do about a half a billion dollars in the local economy every year.

We need to put all these revenues into the FMA fiscal relationships so that we can determine how best to grow our economies and revenues. We need to expand the FMA and the framework agreement to support more access to long-term financing, to build better infrastructure—which we've done—to negotiate fair first nations local government service agreements, to build a modern land registry, to build more housing for our members and others, of course, and to create a system for faster additions to reserve.

My community has proven that first nations-led and first nations institution-supported jurisdictions work. I believe that our shared better future means more first nations fiscal powers, more first nations jurisdictions, more first nations institutions and more first nations economic growth.

I believe that with first nations working together and supporting each other we can achieve this. With your support for the necessary legislative changes, we can get there faster.

Thank you for your time.

[The Chair, Liberal, Patrick Weiler]

Thank you very much, Chief Epp.

I understand there's been some discussion with the interpreters. I understand, Mr. Calla, you will be able to provide those opening remarks. If you are ready, I would like to turn the floor over to you. I appreciate your patience, and hopefully we can get through it this time.

[Harold Calla]

Thank you.

Thank you for the opportunity to speak to the committee. I think this is an important study, and I'm pleased the committee is undertaking its work.

I'll start by asking a fundamental and foundational question: Does Canada accept that the Indian Act bands are governments within the federation of Canada?

If you do, then as governments, first nations are entitled to the same revenue-raising tools and powers that other orders of government have available to them as they provide services to their communities. This is a central element of self-government and a principle of UNDRIP.

First nations have already demonstrated that we can generate better and greater outcomes in delivering programs and services to our communities when we exercise fiscal powers to raise revenues, rather than being funded through federal grants. The pay-as-you-go system that we are dependent on today is so far removed from what any other level of government would accept. The status quo is holding indigenous people back from closing socio-economic gaps, reducing the cost of poverty and building economic success.

The Harvard project, in 2003, indicated that it wasn't so much where you were located or your education. It was your ability to exercise your right to self-government, within the capacity to govern yourselves through strong institutions, that supported economic activity and better communities. That's what the fiscal management act institutions provide.

All three of us have provided that service, and it provides the ability to provide the oversight and the confidence that has been built in the exercise of fiscal powers by first nations. We have the data that can demonstrate how those within the FMA have greater own-source revenues, healthier operating margins, better quality housing and better and higher levels of formal education. It's important to understand that first nations institutions have created this.

This was all created because the politicians in Ottawa in 2005 knew there was a better approach to doing things. Last year in June, when we received royal assent on the amendment to the legislation, in 78 days, you again demonstrated that you had a line of sight to the success that we were building with first nations. As Manny and others are now arguing, Canada must come to understand that seeing us as governments means ceding tax room to first nations. This means first nations will secure revenues directly rather than the current indirect method of grants, programs and pilot projects controlled by Ottawa.

It should be noted that first nations have used the FMA to demonstrate that we can make tax room more valuable when it is placed in our hands—a lot more valuable. Further, we have demonstrated that we can go much further on a dollar that we invest directly rather than when subject to grants and contributions. We get better economic returns, improved infrastructure, improved safety and harm reduction, and improved environmental risk management.

The investment improves the lives of our people and facilitates economic development for first nations and the whole of Canada. Our communities need these tools and powers to make the goals of our first nations a reality and to bring hope to our people, particularly our young people. This is true reconciliation.

Thank you.

[The Chair, Liberal, Patrick Weiler]

Thank you very much, Mr. Calla.

Again, welcome back to the committee. It's good to see you.

Knowing that we are over time, we're going to have one full round of questions.

I would like to get right into questions from members, starting with Mr. Schmale for six minutes.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Thank you, Chair.

Thank you to our witnesses. It's great to be in the same room with such powerhouses in indigenous leadership.

Chief Epp, I always thought you were a great guy except you started off with “I love taxes.” I think my heart shattered a little bit here. You hurt me on that one—that's all right.

Let's talk about the FMA. Harold talked about it just a second ago. You mentioned in your words as well about how important it is that we get this done as soon as possible. You and Mr. Claxton also mentioned about why casino, ATM and FACT taxes are a good place to start and where we go from there.

I'll open it to anyone who wants to answer.

If you want to start, Chief Epp.

[Chief Derek Epp]

I'd love to. Thank you.

That's a good question, Jamie. It's good to see you again.

To correct you, yes, I love taxes: I love my taxes.

[Some hon. members]

Oh, oh!

[Chief Derek Epp]

I think you do what you have to do—

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I'm going to strike that from the record.

[Chief Derek Epp]

It's a good question. Thanks.

You mentioned a really good point there. I think what you've seen from Tzeachten is that the increase in tax revenue streams and the increase in own-source revenue has enabled us to shift away from a dependency—I hate using that word—on federal transfers.

At the end of the day, a lot of what we're all working toward is economic self-sufficiency for our first nations communities. What that means is that we have the autonomy to develop our own programs, install our own infrastructure and work in partnership with governments, rather than depending on governments.

I think the big shift that Tzeachten has taken is that, for any of the projects we have on the go, we contribute. We contribute to all of it. For any kind of jurisdiction that we're looking at overtaking or looking at assuming, we make sure we have revenues that top up those jurisdictions, because the sad reality is that we have a lot of healing to do. We have a lot of work to address what a lot of our community needs.

What we can do with our sustainable revenue streams is much greater than what we can do with government transfers. I think we can begin to address infrastructure gaps, housing needs and program needs and really begin to heal our communities. To be quite honest, we can do it a lot better without the government. I think that's something where, with these increases in revenue streams and tax streams, we can do the work that's needed in our communities.

Thank you.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Actually, you did bring up something really important too. We've talked about solving a lot of the issues without having to go to Ottawa to ask for it back.

The last few studies we've done in committee talked about education, the loss of languages and health care issues. If we can figure this part out and get that revenue stream going directly to your communities, you all have the capacity, for the most part, to address these issues without seeing those dollars leave and go around the cotton candy machine here, and then you have to ask for it back. There's a lot more velocity in the dollars if they just stay in that community.

[Chief Derek Epp]

Exactly. I think you answered your own question.

[Voices]

Oh, oh!

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I thought I was teeing it up for you, but I appreciate it.

[Chief Derek Epp]

I think you're right, though. We're an example of that.

One of the things we were able to do through COVID was implement our own mental health program, regardless of status or non-status, to make sure that we were helping to address the mental health needs of our communities. We did that with an open box, with our own-source revenue as well, and did not depend on any government transfers for that.

It's been a successful program. We address a lot of the needs of our community through that, and it's something that we take on and that we know we need. That's one example. I can give many more, but I'd like to give our other witnesses a chance as well.

Thank you.

[Clarence T. (Manny) Jules]

With regard to the carbon and excise taxes, it's an indirect tax that all first nations pay regardless of so-called exemptions.

One community in particular, Six Nations, pays over $350 million a year in an excise tax. Every time a first nations person buys cigarettes, alcohol or gasoline on reserve, they're paying an excise tax, but we have no control over where those dollars are expended.

For the carbon tax, as I mentioned in my presentation, we've been struggling to get our share of those dollars that are collected from my community as well as many others. We get nothing. As a matter of fact, my community pays in excess of $970 million a year to the federal and provincial governments. For every dollar that is collected, the federal and provincial governments get seven.

That's the purpose of this study: to try to reverse that trend so that we're not repeating 1927 and what Mr. Calla talked about. The amendment that took place in 1927 was critical for us, because that made us forever dependent on the federal government. That was a piece of legislation that forbade us from raising money to defend our land rights but, more importantly, to build our own infrastructure, to build our own buildings. That was taken away, so from that point forward, we were dependent on somebody else.

I just love what he said, because it could be said today: “just an act of grace, whatever you saw fit to give us.” That's dependence and that's what we want to end.

We want to end that with your support and your goodwill, and not just with talk but with legislation, because without strong legislation.... That's the way to section 35 of the Canadian Constitution. The federal government opens the door, we enter it and we can have security that the jurisdiction is first nations and it's optional. This can't be forced on any community.

As I mentioned to Mr. Obed the other day, I think one of the things we have to consider in this country is how first nations, Inuit and Métis can work together to achieve true economic reconciliation within this federation.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I think Harold had his hand up, but I want to say, Mr. Claxton, that I agree. I don't know what the government's doing with the tax revenue they collect either, so thank you for that.

Harold did have his hand up. I don't know what you want to do, Chair.

[The Chair, Liberal, Patrick Weiler]

I'm afraid that is the six minutes. There might be an opportunity for our next round of questioners to ask that question of Mr. Calla if they so choose.

With that, we will go over to our second member to ask questions in this round.

Go ahead, Mr. Battiste.

[Jaime Battiste, Liberal, Sydney—Victoria, NS]

Thank you, Mr. Chair.

I'd like to start off by asking Mr. Paul a question.

First of all, I want to send my condolences to your community of Tobique. I know that you guys had some tragic losses this week, and I want to start out by sending those condolences and saying mesge'g for what has happened, which is Mi'kmaq for “I'm sorry”.

I've heard talk here about dependence, and we saw how that could be a problem when Premier Higgs cancelled the taxation agreements with the New Brunswick chiefs, which cost them $60 million to $70 million a year. In my conversations with the New Brunswick chiefs afterwards, they did mention that, if they had the ability to create their own taxation for fuel, for alcohol, for cannabis and for tobacco, that could offset some of those losses.

Mr. Paul, as someone from New Brunswick, can you talk to us a little bit about what the opportunities are under this and whether you think this could potentially be an option for a way forward that we should be exploring?

[David Paul, Deputy Chief Commissioner, First Nations Tax Commission]

Thank you, Jaime.

My name is David Paul. I'm from the Tobique First Nation in New Brunswick. I'm also deputy chief commissioner for the First Nations Tax Commission.

In 1993 I negotiated, on behalf of my community, the Tobique First Nation, the first tax agreement, which was the New Brunswick tax agreement that was recently cancelled by our current government. Under the changes that came about, thousands of people were employed, millions of dollars were generated, and own-source revenue, which was non-existent prior to that, became something. It gave us the ability to address shortages or deficiencies within our communities in areas that were not covered by government programs.

With this missing, it speaks to the problem that was mentioned by the other presenters: the need for legislation. The agreement was simply that in New Brunswick. Mind you, it held for 30 years, but it was an agreement. It could be cancelled or torn up by either party within 30 to 90 days, depending on who signed and when.

Before the moratorium was put in place, all seven of those communities began to experience own-source revenue, something that had been foreign to them in the past. They had been thoroughly and 100% dependent upon handouts from government, through government programs.

What we saw here was that, where these were controlled by our communities and accountable to our communities, that's where we saw significant change. Businesses were created. Mind you, 80¢ of every dollar leaves our communities within 24 hours. We don't have huge manufacturing. We're not involved with supplying commodities. The level of entry into the Canadian economy has been simple—a gas station, a convenience store, small businesses. This is what results from the jurisdiction or when given tax room.

Again, I speak to the importance of this being in the form of legislation and not agreements.

In order for us to experience what all Canadians enjoy, we need every facet of the tax room given to us to provide the opportunity for us to explore that so that we can generate our own-source revenue. We've been very good, over decades, at managing poverty. We became expert at it. We want to be experts at business and at managing our own governments, but until we have the jurisdiction, until we have the tax room and the legislation, the current status quo will continue, except for those who are involved with the other institutions we have in place in Canada.

Now, mind you, we have over 174 taxing first nations. That number could be larger. We have hundreds that are involved with other aspects of our other institutions. However, you can see, if you look at every community that has been involved with the institutions, that they've met with success. They have OSR, own-source revenues, to deal with deficiencies. As I said, if our jurisdiction is expanded and we are afforded every tool in the tax tool box, eventually we won't need any programs.