Appendix 4

Taxation

• Canadian federal legislation, first passed in 1876, sets out certain federal government obligations and regulates management of Indian reserve lands. The act has been amended several times, most recently in 1985. Among its provisions, the act requires the Minister of Indian Affairs and Northern Development to manage certain moneys belonging to First Nations and Indian lands, and to approve or disallow First Nations taxation by-laws.
  
  
• Aboriginal people are required to pay taxes, except where the personal property of an Indian or a band are situated on a reserve.
• Aboriginal people are the descendants of the original inhabitants of North America. The Canadian Constitution recognizes three groups of Aboriginal people: Indians, Métis people and Inuit. These are three separate peoples with unique heritages, languages, cultural practices and spiritual beliefs
• Tax exemption has existed since before Confederation. The courts have held that the exemption is to preserve the entitlements of Indian people to their reserve lands and to ensure that the use of their property on their reserve lands is not eroded by taxation.
• The Indian Act prevents non-Aboriginal governments from taxing the property of Status Indians on a reserve. However, section 83 of the Indian Act gives First Nations the power to impose property taxes on interests in land in the reserve, including the interest of Status Indians.
• Property tax by-laws must be reviewed by the Indian Taxation Advisory Board and approved by the Minister of Indian Affairs and Northern Development.
• The Minister of National Revenue answers specific tax questions and carries out tax laws.
• The Minister of Finance gives general direction for tax law.
• The Minister of Indian Affairs and Northern Development defines the words "Indian," "reserve" and "band" for all governments to use in tax questions.
• Under Canada's Constitution, lands reserved for Indians are within the federal government's jurisdiction.
• Federal lands are not part of the tax base from which provinces or municipalities may draw property taxes.
• Municipalities may face a net loss of property tax revenue when a reserve is created or expanded.
• Additions to Reserve (ATR) policy requires that a First Nation negotiate directly with the municipality on reasonable compensation.
• ATR policy does not require a First Nation to compensate the municipality for an unlimited time for the net loss of property taxes.