The Cree Nation government in the James Bay region of Quebec recently approved a draft constitution and governance agreement that – among other things – would give them the power to collect taxes.
In an interview with CBC, Bill Namagoose, the Cree Nation executive director said, “It provides security for the Cree Nation. There are no options in there for the federal government to cut back our funding. We have taxation power but no obligation to use it.”
Many indigenous communities consider tax exemption to be sacrosanct.
But other First Nations now realize that raising funds through taxation it’s essential to modern governance. Whitecap Dakota First Nation in Saskatchewan recently signed an agreement-in-principle to move towards even greater self-government. They are clear how they got there.
“We wouldn’t have the casino if we didn’t have our land code,” said Chief Darcy Bear. “We have a real property tax and a goods and services tax in our community. Like any government, we need to generate our own revenue. Getting out from under 25 percent of the Indian Act has allowed us to grow. Self-government will take us further.”
While many First Nations assume that exemption from taxes is just part of being indigenous, there’s little evidence tax exemption was conceived by the treaties. Treaty 8 is known as the “taxation treaty” because it’s the only numbered treaty that says anything about taxes, and not within the document itself.
The Indian Treaty commissioners sent a letter in 1899 to another branch of the government in which concern is expressed that the treaty would lead to taxes. The letter’s author said he assured the indigenous people that the treaty would not lead to taxes.
It’s much more likely that the broad-based tax exemption came from the federal Indian Act. Section 87 exempts property on reserves from taxes. The exemption was intended to protect the lands from seizure and protect the reserve land base.
But even if the treaties mandated tax exemption, it would still be bad policy for indigenous peoples and breed eternal dependence.
Since 1988, the Indian Act has allowed band governments to tax real property on reserves, but most often on non-aboriginal property owners on designated (conditionally surrendered) reserve lands.
Now, however, many First Nations, especially self-governing communities, tax their own members (through the First Nations Goods and Services Tax, for example).
And there’s a strong case for First Nation self-taxation.
In 2008, John Graham and Jodi Bruhn of the Institute on Governance, an Ottawa-based non-government organization, published a study called In Praise of Taxes: The Link between Taxation and Good Governance in a First Nation Context.
For Canadians who continually grumble about taxes, praising them seems downright odd. But taxation is essential for civilized life and governance. Graham and Bruhn argued the tax relationship had good governance outcomes. Political leaders and bureaucrats become more accountable to taxpaying citizens. The state becomes more focused on the prosperity of citizens, whose leaders now have a direct stake in encouraging it. Citizens become more politically engaged as they mobilize to monitor or, if need be, resist taxation levels.
Simply put, indigenous citizens would have a much bigger stake in their governance if they paid for it. They would have real control over their communities and destinies if more funds were generated on reserves. Right now, funding and service decisions are made by federal bureaucrats.
Band members would also have a more realistic sense of what services can be funded and supported if they financed those services themselves. And self-taxation would provide bands with reliable revenue sources for their priorities and community planning.
So in the interest of basic self-governance, indigenous communities should recognize that taxes are the next step towards realizing their destinies.
Joseph Quesnel is a senior fellow at the Fraser Institute.