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Splitting Indigenous and Northern Affairs Canada (INAC) into two departments means one will be in charge of negotiations with First Nation communities and the other will be responsible for service delivery. Presumably that means the negotiating department can focus on signing self-governing arrangements with more bands under the Indian Act.

As a result, the economic future of First Nations becomes more important. Bands under the oversight of the Indian Act should take steps toward financial self-sufficiency now, in preparation for eventual self-government.

INAC and its future incarnation (announced by the federal government in August) should act now to ensure eventual self-reliance. In June, INAC Minister Carolyn Bennett announced that Ottawa was suspending a policy that saw the department claw back federal transfer funds from self-governing First Nations that generate their own funds. The move imposed a moratorium for up to three years so Ottawa could negotiate a new fiscal framework with the Indigenous community.

The move will allow self-governing groups to keep all their transfers – including federal ones. The clawback was part of an effort by the federal government to encourage these groups to become less reliant on federal transfers. The change, however, only applies to groups with self-government agreements. For bands under the Indian Act, it’s much more complicated.

According to INAC, it won’t consider the “revenue capacity or fiscal capacity” of the First Nation receiving funds.

INAC lacks any real plan for encouraging Indian Act bands to become self-reliant – unlike self-governing bands that have federal transfers offset by the band’s revenue capacity. It’s fair to ask any community how much they can contribute toward their governments, programs and services.

A Fraser Institute study in 2016 found that one of the principal benefits of the First Nations Financial Transparency Act (a piece of legislation the federal government has stopped enforcing) was not the publication of chief and councillor salaries (despite that being very important). Rather, it’s the revelation of own-source revenue streams within indigenous communities still under the Indian Act.

Drawing upon the 2013 and 2014 audited financial statements for First Nation communities, the authors of the study revealed that these communities generated more than $3.3 billion in claimed own-source revenues.

More than 100 First Nation communities (of more than 600-plus federally recognized bands) generated more revenues than they received in federal transfers. For example, Tsuu T’ina Nation in Alberta in one fiscal year generated five times more in revenue than it received in federal transfers.

This is not a call for cutting First Nations off or for phasing out federal funding. Ottawa should recognize that Indigenous communities control only a small fraction of total lands in Canada, that much of their lands are sub-optimal in location and in nature, and that these communities still face economic hurdles created by the Indian Act. All these problems could be tackled if INAC adjusted the own-source revenue policies affecting bands under the Indian Act.

These communities should be encouraged to develop their economies and fiscal capacity. Why wait for these communities to sign self-government agreements to start thinking about their fiscal independence?

Much has been said about the benefits of political independence. We should also look at economic independence, since both dimensions of independence go hand-in-hand. Not all First Nations are at the same place in generating revenue sources. But policies should encourage their cultivation, whatever the sources.

Self-taxation is still controversial in some Indigenous communities. But taxation is a central feature of any government and creates a relationship of accountability between the governors and the governed. INAC polices should encourage self-taxation.

The default assumption is that Indigenous communities will always be poor, lack own-revenue sources and so will always be dependent on federal transfers. That’s certainly not an inspiring or dignified vision for the future.

Entrenched dependence is one of the worst legacies of the Indian Act. Ottawa should help bands under the act end it.

Joseph Quesnel is a senior fellow at the Fraser Institute.

Joseph is a Troy Media contributor. Why aren’t you?

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