Taxation and the First Nations Fiscal Management Act

5 minute read
25 November 2019

Indigenous rights are not only about legal or political opportunity but also practical capacity. A First Nation's capacity to govern can mean the difference between the true exercise of a right and the same right existing only on paper. The ability to charge service fees and taxes can help to build reliable and ongoing own-source revenue capacity for First Nation governments.

Since 2006, the First Nations Fiscal Management Act ("FNFMA") has been a tool for First Nation governments to generate revenue for community projects and services. The goal of the legislation is to provide First Nations with better tools to raise capital and secure investments that promote self-sufficiency and prosperity. In part, this can be achieved through the development of a system for real property taxation and collection of service fees. As of the date of this article, over 280 First Nations have opted into the FNFMA regime as part of their strategy for community growth and development.

The FNFMA expands and improves First Nation governing capacity by providing a more transparent and robust set of policy tools. In particular, section 5 of the FNFMA enables a First Nation to institute a property tax system, charge fees for the provision of services, authorize spending of local revenues, and create a system for taxpayers to represent their interests.

The FNFMA enhances the scope of First Nation authority over lands compared to the authority under section 83 of the Indian Act. Under the FNFMA, First Nation governments can:

(i) enact laws to assess the value of lands;

(ii) establish mechanisms to set tax rates based on assessed land values;

(iii) collect tax revenues to provide services on reserve;

(iv) tax business activities; and

(v) impose development cost charges.

The revenues generated from taxation can then be redistributed to the community as a whole through the provision of services or funding infrastructure projects.

First Nations can also use the FNFMA to impose fees for the provision of services on reserve. These services may include water, waste management, animal control, recreation and transportation. Unlike a tax, these revenues are not utilized to fund local services unrelated to the service fee itself. For example, a dog licence fee may be applied toward the costs of animal control and safety in the community, and a fee charged for water may be used to help offset the cost of supplying the water to each user. Service fees are often appropriate where the service provided is itself a benefit to the community.

To "opt in" under the FNFMA regime, a First Nation must submit a Band Council Resolution to the Minister of Crown-Indigenous Relations requesting to be placed on the FNFMA's Schedule. The Minister will then amend the Schedule by adding the First Nation to the list. This process, according to CIRNA, takes approximately three months.

The effect of being added to the Schedule is that the First Nation government is no longer restricted to the by-law powers under subsection 73(1)(m) and sections, 83 and 84 of the Indian Act. Instead, it can exercise the wide-ranging powers under section 5 of the FNFMA. By-laws previously enacted under section 83 of the Indian Act are then deemed to be enacted under section 5 of the FNFMA.

Through a robust taxation regime and collection of service fees, First Nation governments can establish a predictable own-source revenue stream with which to generate governance capacity. In this way, the FNFMA can be an effective complement to wider efforts of political, economic and cultural revitalization. Granted, there is no "one size fits all" approach that will be appropriate for all communities. It is important that First Nation governments understand how to use the FNFMA to advance their particular goals. Gowling WLG is available to assist in developing and establishing a tax system capable of supporting a First Nation's vision of community and empowerment.

For more information on the FNFMA or First Nation taxation powers, please contact either Cam Cameron or Joshua Shoemaker.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

Related   Indigenous Law, Tax