Federal Court upholds tax exempt rights

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A Federal Court of Canada justice has ruled that a Native woman who works for a reserve-based company doesn't have to pay income tax, even if she lives and works off reserve.

A decision on whether or not the federal government will appeal the June 9 decision in Schilling v. Canada won't be announced until Sept. 9 at the latest. The normal 30-day period during which a party to a lawsuit can file an appeal is extended to accommodate the summer holidays. That accounts for the extra two-month wait for Revenue Canada's decision on whether or not to appeal.

The parties agreed to use the Schilling case as a test case to decide the issue of whether a Native person who lives off reserve has the right to be tax-exempt. Rama Ojibway Rachel Schilling, the acting program director at Anishnawbe Health Toronto, was one of four people who were assessed by Revenue Canada and told to pay income tax on their earnings. Schilling resisted paying income tax because, as an Aboriginal person employed by the Six Nations reserve-based Native Leasing Services, she felt the Indian Act clearly stated she was exempt.

Federal Court of Canada Justice Karen R. Sharlow agreed.

Schilling contracted her services to Anishnawbe Health through Native Leasing Services as a way of shielding her income from taxation under Section 87 of the Indian Act.

In her ruling, the judge noted that Section 87 was designed to exempt the on-reserve personal property of Native people from taxation. She added that previous court decisions have defined income as personal property. Justice Sharlow then added new shape to the law by saying Native people have the legal right to arrange their affairs so their property is located on reserve and therefore immune from taxation.

That ruling vindicated years of activism and lobbying by Roger Obonsawin, the proprietor of Native Leasing Services.

Obonsawin was both elated and angered by the decision.

"Of course we were very satisfied with the decision, but the ruling of the court showed the government had no case," he said. "So why did they put us through four-and-a-half years of hell?"

He believes federal bureaucrats have used every dirty trick they could think of to intimidate Native people into not pushing their rights to the limit and they did it for the purely political reason that non-Native Canadians resent having to pay taxes when Native people don't.

Native leaders counter this resentment by saying their people paid their taxes (most of the land base of North American) up front by consenting to enter into treaties that allowed the European newcomers to live on their land as partners. A fundamental aspect of all treaties is that one nation will respect the other's jurisdiction by not imposing taxation over the other, they say, adding that any attempt to collect taxes is a repudiation of the original intent of the legally-binding treaty agreements.

Obonsawin, 56, said senior bureaucrats within Revenue Canada have either lost sight of the original intent of the treaties or they don't care about it.

"The deputy minister said to me, 'If we allow you to operate, every Indian in Canada is going to be tax exempt.' I asked him, 'Isn't that the way it's supposed to be?'" Obonsawin told Windspeaker.

The judge's ruling seems to back up Obonsawin's contention that Revenue Canada was willing to do anything to stop him.

"Under the principles of private international law, the location of a simple contract debt is the location of the debtor," the judge wrote. This is a subtle way of saying the arguments put forth by the government at trial flew in the face of common, internationally-accepted legal practices in that the employer, in this case Native Leasing Services. If that reserve-based company owed a debt to its employee, then the debt was located on reserve and protected from taxation by the Indian Act.

As it stands now, pending the Crown's decision to appeal, Native people who work for a comny that serves the interestsof any First Nation people and that is situated on a reserve do not have to pay income tax. Obonsawin said his company has been flooded with calls from off-reserve residents who are interested in gaining that advantage and there has already been an increase in the number of people who have registered with Native Leasing Services.

Observers have labeled Obonsawin as everything from a scam artist who was exploiting a loophole in the law for his personal gain to, as Native Women's Association of Canada President Marilyn Buffalo called him, "a true Warrior." He has his own views about the best way to protect and preserve Aboriginal rights and he has been very critical of leaders who aren't willing to fight the government for every inch. He angrily pointed out that the Assembly of First Nations did not assist him in this legal fight, which has cost his company more than $1 million, but he's not surprised.

"I'm from the old days, the days before core funding. Core funding was a response to the uproar over the 1969 White Paper, but the problem with it is there is a loss of independence. Originally, the leaders decided to adopt core funding for just five years in order to establish a base. Well, those five years have passed and now we're hearing, 'They owe us this money.' In this process the leaders really have become an arm of the government, and that means they can't fight rights issues. They have to make up their minds which masters they're going to serve," he said. "They're getting further and further away from the bread and butter issues and deeper into the area of service delivery."

The response to the court victory has given Obonsawin another cause to pursue. He took great offense to an opinion piece in the National Post the day after the decision was handed down. In that piece, writer Diane Francis called the decision "tax racism" and demanded that laws and agreements that result in special privileges to Native people should be anged. Obonsawin read the articlein the paper that champions conservative, big business causes and took note of the point that wealthy people who are served by the publication are quite ingenious in finding ways to legally avoid paying their fair share of taxes. He wondered why the paper published a story that objected so strongly to Native people doing the same thing.

"It's hate literature as far as I'm concerned," he said. "Pure hate for Indians."

He complained to the press council in Ontario and said he discovered the National Post isn't a member. Without that avenue of appeal, he said, he turned to another, which the law says is available to him.

"I wrote to the Indian Affairs minister. She has a legal responsibility to ensure that Native rights are protected. The story was a total misinterpretation of history and all that it's doing is fueling more hate towards Indians. The least the minister could do is make a public statement condemning such sentiments," he said, adding he doesn't really expect the minister to take any action because of the negative political fallout a move like that would bring.

Should the minister not react or if Revenue Canada decides to appeal the court decision, Obonsawin has a plan already in place. He has been gathering names of Native people who are willing to participate in a class action suit against the federal government that will claim damages as a result of the government's failure to actively carry out its legal obligations to Native people.

Obonsawin is convinced that Revenue Canada is playing to the Diane Francises of this country when it makes tax policy designed to undermine the treaty rights of Native people.

"We shouldn't have to prove what's already been agreed to in the treaties," he said. "They say we should be treated like everybody else. Well, we're not like everybody else. We have agreements and those agreements were hard fought."